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TMI Blog2019 (4) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal, consisting of three or more members for which there is provision in the Act itself. Tribunal completely erred in coming to the conclusion it did, at variance with and opposed to the conclusion of the Tribunal on the earlier occasion, Enhancing the addition made on account of TP adjustments - Sales made to AE - TPO by issuing show cause notice to apply the profit-sharing method in the ratio of 50% each after considering the function, assets and the risk involved between the assessee and its AE - Assessee submitted that the AE being the owner of IPR is a very complex entity whereas the assessee being a mere contract manufacturer is a less complex entity. Therefore the assessee should be treated as the test party - whether the TPO verified the details furnished by the assessee in determining the ALP of the impugned transaction using TNMM during the assessment proceedings? - HELD THAT:- As decided in the own case of the assessee’s ITAT deleted the addition made by the TPO/AO [2017 (9) TMI 1804 - ITAT AHMEDABAD]. A query was raised from the bench to the learned counsel for the assessee who replied that all the necessary details were available with the TPO and no defect of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. [2017 (8) TMI 933 - GUJARAT HIGH COURT] Disallowance of allocated R & D expenses of partnership firm - Assessee is substantial stake holders in firm - research and development expenses incurred to the other partnership firms - HELD THAT:- The appellant company had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Since the assessee is holding 97.5% of share in the partnership firm, SPI it becomes the duty of the assessee to promote the business of the partnership firm in the capacity of the majority stake holders. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee's business or the business of the partnership firm where the assessee is a majority stake holder. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee. Finding that the assessee is having 97.5% share in the profits of the firm SPI, we do not find any merit in the disallowance made by the A.O Adjustment u/s 115JB - remuneration re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to make disallowance as per rule 8D as discussed above. Thus in order to maintain the consistency and to avoid the multiple proceeding, we are inclined to restore the issue to the file of AO to adjudicate afresh as per the direction of ITAT as discussed above. Hence the ground of appeal of the assessee is allowed for statistical purpose. Disallowance u/s 14A of the Act for computing the book profit u/s 115JB - HELD THAT:- We direct the AO accordingly to delete the addition of expenses disallowed u/s 14A while computing the book profit u/s 115JB of the Act. Hence the ground of appeal of the assessee is allowed. Addition for selling and distribution expenses incurred on behalf of SPI u/s 14A - HELD THAT:- it is equally true that a reasonable disallowance of expenditure should be made for earning the exempt income so far as the share of profit from the partnership firm SPI is concerned. We are conscious about the fact that Rule 8D is not applicable for the year under consideration but at the same time for the computation of disallowance for administrative expenditures, the formula given under Rule 8D is the most appropriate method for the computation of the disallowance. We accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated enterprises is not covered under the definition of international transaction as envisaged under sec. 92B. 2.2 Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the addition made by the Assessing Officer/TPO for benchmarking the Guarantee fees without appreciating that the Appellant giving corporate guarantee is shareholder's activity and not a service transaction. 2.3 Without prejudice to the above, the learned CIT(A) grossly erred in upholding the addition made by the Assessing Officer/TPO who has applied the yield method not being a prescribed method under the Indian Transfer Pricing provisions for benchmarking the transaction. 2.4 Without prejudice to the above, the learned CIT(A) grossly erred in rejecting the Comparable Uncontrolled Price method followed by the Appellant whereby the Appellant benchmarked the guarantee transaction @ 0.25% as commission charged by the banks for issue of guarantees obtained by the Appellant in its regular business activity and the same view is supported by case law of M/s Everest Kanto Cylinder DCIT [2015] 58 taxmann.com 254 (Bom HC). 2.5 Without prejudice to the above, on the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating the fact the full infringement loss ought to be deducted against the profits of the AE derived from the sale of Para IV products and only the profits / loss after such adjustment, if any should be split between the Appellant and the AE. 3.8 Without prejudice to the above, the learned CIT(A) grossly erred in not allowing the relief of infringement claim of ₹ 1,42,52,16,938/- given by TPO while working out the profit from the transaction for the purpose of profit split. 3.9 Without prejudice to the above, if profit split method is to be followed, the ratios of 50:50 ought to be adopted for benchmarking of sales of products. 4. Re: Addition on account of Sale of Para IV products other than Pantoprazole to Sun Pharma Global BVI and Sun Pharma Global FZE - ₹ 1,16,85,18,972/-: 4.1 The learned CIT(A) has grossly erred in upholding the order of TPO who erred in rejecting the benchmarking done by the Appellant as a contract manufacturer having regard to the functions carried, the assets deployed and risks undertaken by the Appellant in the transaction. 4.2 The learned CIT(A) has grossly erred in upholding the order of TPO who erred in classifying the sales made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to significant risks inherent in the transaction and accordingly the profit allocation for the IPR to the AE was extremely low and unjustified. 5.5. Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the order of TPO who has benchmarked the sales of Non-Para IV products in ratio of 80:20 without appreciating that Appellant is merely a contract manufacturer. 5.6. Without prejudice to the above, if profit split method is to be followed, the ratios of 50:50 ought to be adopted for benchmarking of sales of products. 6. Re: Non-allowance of weighted deduction u/s 35(2AB): 6.1. On the facts arid in the circumstances of the case the learned CIT(A) grossly erred in not allowing the claim of the Appellant of weighted deduction u/s 35(2AB) on the ground that Appellant had not claimed the deduction in the return of income without appreciating that the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted and that the Appellant can take up additional grounds at any stage during the assessment proceedings. 6.2. On the facts and in circumstances of the case, the learned CIT(A) grossly erred in denying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the amount of research and development expenditure attributable to the development of formulation drugs for the domestic market at ₹ 6343.53 lakhs against the correct amount of ₹ 2332.84 lakhs 7.5 Without prejudice to the above, similar issue has been considered by the Assessing Officer at the time of tax assessment of partnership firms SPI and SPS wherein the disallowance was restricted to ₹ 35.13 lakhs in case of SPI and Nil in case of SPS, and accordingly in the case of Appellant disallowance ought to be restricted on the same. * 7.6 Without prejudice to the above, the R&D expense should not be allocated on the basis of domestic formulation turnover as both the entities operate in different market segments with different underlying facts. 7.7 Without prejudice to the above and without accepting any disallowance of the expenses, the Assessing Officer should have restricted the disallowance towards expenses as provided u/s 14A read with Rule 8D. 7.8 Without prejudice to the above, the disallowance ought to be substantially reduced. 7.9 Without prejudice to the above, the deduction u/s. 10B ought to be increased on account of allocation of R&D exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in confirming the action of the Assessing Officer of making disallowance u/s.!4A read with rule 8D, without appreciating that: 1 The income earned by the appellant on its investment in partnership firm was not exempt and hence was not to be considered for disallowance under section 14A; 2 Section 14A was not applicable in instant case since Assessing Officer failed to Establish satisfaction as to how the claim of the Appellant was incorrect; 3 Provisions of section 14A could not be made applicable to investments which are capable of generating taxable income; 4 The Appellant had sufficient interest free funds to carry out investments and hence no borrowed funds were utilized for purpose of investments; 5 Provisions of section 14A could not be made applicable to the investments in partnership firm as they been strategic investments. 11.2 Without prejudice to the above, the learned CIT (A) grossly erred in riot rectifying the errors made by the Assessing Officer while computing the disallowance under section 14A read with rule 8D. 12. Re: Addition of expense disallowed u/s 14A for computing book profit u/s 115JB: 12.1 On the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of its business activities and it could not be termed and categorized to be directly incurred for earning the exempt income under Rule 8D; 2 The selling and distribution expenditure to be disallowed as worked out by the Assessing Officer is determined arbitrarily in the ratio of turnover and has no direct nexus towards the exempt income earned by the Appellant; 3 The CIT(A) has failed to substantiate and demonstrate its claim that the said expenditure is directly incurred by the Appellant towards earning of exempt income; 4 The said expenditure was incurred by the Appellant for the purpose of the business of the Appellant and not merely for the purposes of earning profit; 5 The provisions of section 14A could not be made applicable to investments which are capable of generating taxable income; and 6 The investment made by the Appellant in the partnership firm Is strategic in nature and not for the purpose of earning exempt income. 13.2 Without Prejudice to the above, the CIT(A) grossly erred in disallowing the selling and distribution expenses u/s. 14A without appreciating the fact that the CIT(A) himself has during the appellate proceedings enhanced the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has shifted its burden of providing financial resources to its associated enterprise to the banks. ii) It is an undisputed fact that the subsidiary company availing the loan from the bank is an associated concern of the assessee. Thus there exist an implicit guarantee which is always available to the associated enterprise. As such there was no impact on the loan provided by the bank on account of explicit guarantee provided by it. It is because the associate enterprise was capable of availing the loan facilities from the bank. There was also no benefit to the associate enterprise on account of the credit rating of the assessee. iii) There were sufficient tangible assets available with the associate enterprises, and the assessee will be liable to make the payment to the bank in the event of default by the associated enterprise. As there were sufficient tangible assets with the associate enterprise, then there was no risk upon the assessee on account of furnishing the corporate guarantee to the bank. iv) There was no economic benefit received by the assessee against the corporate guarantee provided to its associated enterprise. Thus the cost for such corporate guarantee will r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Accordingly, the Ld. AR before us prayed to restore the issue to the file of Ld.CIT(A) for fresh adjudication as per the provision of Law. 11. On the other hand, the Ld. DR did not raise any objection if the matter is restored to the file of Ld. CIT(A) for fresh adjudication as per the provision of Law. 12. Both the parties before us relied on the order of authorities below as favorable to them. 13. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee (supra), the ITAT has restored the issue for fresh adjudication to the file of the Ld.CIT(A). The relevant extract of the order is reproduced as under: "18. Before us, the ld. Senior Counsel drew our attention to the relevant findings of the Tribunal for A.Y. 2008-09 and the relevant findings read as under:- 33. Following our own findings given in A.Y. 2007-08 in ITA No. 2076 & 2067/Ahd/2013, we set aside this issue to the file of the ld. CIT(A) (to avoid any issue of limitation to give effect to ITAT order as apprehended by ld. CR) with a direction that this issue may be decided in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal, so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the IT Act itself." 13.4 In the light of the ratio decidendi above we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration on account of the infringement of the patent. ii. The assessee has earned a margin at the rate of 13.86% on the sale to AE as per the accounts of the AE whereas the AE has earned profit margin at the rate of 87.45% on sale which is representing 4186% on the cost of the drug. As per the TPO, such a huge margin is not natural considering the FAR analysis. The TPO was of the view that such huge margin has been shifted to its AE as it is located in tax heaven zone. iii. The AE has sold this drug in the US market through the company namely CARACO which is the AE of the assessee. There was the agreement between the assessee and the CARACO dated 29th January 2008 for the distribution of the drug in the USA. In such agreement there was no reference of the AE (FZE)/(BVI) of the assessee though the assessee claimed that the technology for Pantoprazole is with the AE (FZE)/(BVI). The TPO also noted that the litigation risk was to be borne by the assessee which is also supported with the annual report filed by the CARACO with US Securities and Exchange Commission (for short SEC). In the sale bills raised by the assessee to the sun global BVI/(FZE), the name of Caraco was app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows:- * Lost profits due to diminished sales because of infringement of patents * Lost profits due to the necessity of having to reduce price to compete with the infringing party * Lost profits due to overall reduction in business attributable to the need to divert resources because of infringement * Lost future profits due to depressed prices that cannot now again be raised. * Projected Lost profits for future competition with infringer because infringer established a market position." 15.8 The assessee further submitted that its AE on account of such risk had incurred a loss of ₹ 506 million USD which has been allocated over a period of 3 years as detailed under: "Without prejudice to the above even if the profit split method is sought to be applied, then in the calculation of the profitability the deduction of the payment made on account of infringement claim of USD 505 Million ought to be allowed. As per the following table it is evident that the entire profitability on account of sale of this product is wipped of on account of infringement claim: Particulars AY 08-09 AY 09-10 AY 10-11 Gross Sales 420.00 93.12 248.87 Less: Returns, Chargeb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions as detailed under: "-as a person developing the ANDA documentation-as a manufactuerer creating the entire infrastructure as per theUSFDA standards for production of the drug (creation of USDFDA approved facility- as a manufacturer getting the facility approved by USFDA- as a person whose selling and marketing network was utilized,- as a distributor who handled dispatch of the goods to US (although the bills were in the name of Sun Global, the dispatch was to Caraco Pharma Inc, USA)- SPIL which has entered into the agreement with Caraco for distribution of the product and had assumed the entire risk (in spite of the fact that risk indeed has been shared by Sun Global),- as a person engaged in finer nuances of sales and marketing, literature and documentation (Sun Global BVI does not have sufficient infrastructure of this nature)- SPIL as an ultimate risk holder (as evident from the sale and distribution agreement with Caraco filed with US SEC)- it is clear that SPIL cannot be termed as mere contract manufacturer eligible for a mere 0.75% profits while rest of the 99.25% profits are given to Sun Global BVI with reference to the total sale value. The decision arrived at in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toprazole' related costs, Sun BVI has suffered losses in the preceding years. It has claimed that during the current year, an amount of US$ 506 million has been paid to the patent owners for patent infringement in respect of sales made in the assessment years 08-09, 09-10 and 10-11. The claim of the assessee is that the entire profits generated out of the sale of this product has been wiped out on account of this payment. Since the infringement amount has been on account of pantoprazole sale which spans three years, the assessee has bifurcated the payment over three years on the basis of sales made in these years. The claim made is that if profits of the company are to be shared, the losses also should be shared by SPIL. The contention of the assessee company is closely examined. Sun BVI is being paid dominantly for the risk being carried by it and to some extent marketing functions being performed. The main risk carried by it relates to the goods return, rebates, litigation costs and damage costs in suits filed by the patent holders. Since Sun BVI has already been compensated for the risks being carried by its @ 50% of the profits on sale of this drug, no further compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord, I find that appellant company has sold pharmaceutics Is products worth ₹ 44.72 Crs to SPG BVI and worth ₹ 42.43 Crs to SPG FZE, both AEs, during the year under consideration which included sales of Pahtoprazoie at ₹ 24,67,71,030/-. The net margins have been disclosed by the appellant on these sales at 13,86% while the AEs have disclosed net margins on resale of the same products in USA at 87.45%. These facts have been clearly brought on record in the order of TPO. It has been clearly established with supporting documentary evidences that the AEs have earned huge margins on Pantoprazole resale without any value addition and accordingly aggregate residual profitarising from International Transactions was apportioned in 80:20 ratios in A.Y. 2008-09 by the CIT(A) on the basis of detailed FAR analysis. Accordingly, respectfully following the order of CIT(A)-IV, Ahmedabad, I hold that aggregate residual profit arising from sale of Pantoprazole amounting to ₹ 451,52,31,720/- has to be apportioned in the ratio of 80:20 between the appellant and the AEs and the profit pertaining to the appellant company, thus, comes to ₹ 361,21,85,376/-. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered by the lower authorities. The facts are identical to the facts considered by the Tribunal in A.Y. 2008-09 in ITA No.3297 & 3420/Ahd/2014. The relevant part of the judgment of the Tribunal read as under:- 76. SPG BVI purchased the Technology to manufacture Pantoprazole Sodium from Sun Pharma Advance Research Company Ltd. (SPARC). SPARC was incorporated on 01.03.2006 as a research company. With effect from 28.02.2007, the appellant company demerged its Innovative Research and Development business to SPARC. This is supported by the order of the Hon'ble High Court of Gujarat exhibited at pages 475 to 518 of the paper book. On 28.10.2007, SPARC sold a basket of 38 Technologies to SPG including ANDA for Pantoprazole Tablet,the consideration of which was USD 3 million for U.S. Market and USD 1.4 million for Europe Market. This is supported by the agreement for sale exhibited at pages 519 to 536 of the paper book. 77.By virtue of this agreement for sale, the Technology was purchased by SPG in the month of October, 2007 and immediately thereafter in the month of November, 2007, SPG enters into an agreement with appellant for manufacturing. Copy of supply agreement between SP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical Assistance, SPGI shall supply on a continuing basis all necessary information relating to the manufacturing of the Products, including, but not limited to product specifications, packaging and labeling practices and processes regarding the production of Products, and such other information as SPGI deems to be reasonable and necessary, From time to time, SPGI at its own expense may send a representative to visit SPIL to provide such technical knowledge as shall be mutually agreed to by SPGI and SPIL. 3.2 Intellectual Property Representation: Except for the rights expressly under the terms of the Agreement this Agreement does not transfer any intellectual property rights, specifically with respect to the Products from SPGI to SPIL. SPGI represents and warrants that, to the best of the knowledge and belief of SPI, SPIL's fulfillment of the terms of this agreement to the' manufacturing of the Products will not infringe any third party intellectual property rights. Nevertheless, in case SPIL would be or named as a formal party by reason of an infringement of third party rights for the Products, SPIL shall promptly inform SPGI thereof. SPGI shall conduct any defense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laboratory and SPGI shall accept the report thereof. In case of a disputed result by such laboratory, the Product will be tested with an independent laboratory reasonably acceptable to both parties whose result shall be binding on both parties. SPIL shall replace all non-attributable to SPIL. SPIL shall also bear & reimburse to SPGI the cost of freight and insurance for such non-conforming Products Upon SPIL's instructions, SPGI shall destroy or return to SPIL at SPIL's cost, all non-conforming Finished Products. 4.6.4 SPIL agrees to invoice and dispatch at SPGI's cost and risk, the finished products to SPGI or its nominees as specified by SPGI according to the orders placed by SPGI and instructions given by SPGI and accepted by SPIL. 5.1 SPGI Indemnification. SPGI shall indemnify and hold SPIL harmless from and against any loss, claim, damage, expense or liability, resulting from any misrepresentation, egligence, or intentional misconduct by SPGI in performing this agreement including for any claim, demand or suit alleging that the Product infringes any third party's patent, copyright, trademark, trade secret or other intellectual property right or any product li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is agreement reads as under;- No. NAME OF THE PRODUCT BULK PRODUCT (Active Ingredient) 1 Pantoprazole Sodium Delayed Release Tablets 20Mg., 40mg. Pantoprazole Sodium 2 Amifostine Inj. 500mg. Amifostine 79. Copy of Orange Book reflected title of ANDA of Pantoprazole Sodium with SPG BVI is exhibited at pages 569 & 570 of the paper book which conclusively proves that the ANDA rights were with SPG BVI. 80. Adverting to the allegations of Ld Shri Shrivastava that these arrangements by the assessee is a brutal form of tax evasion , the Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. vs. Union of India and Another reported in 341 ITR 1 has laid down the ratio : "It is the task of the court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not adopt a dissecting approach. All tax planning is not illegal or illegitimate or impermissible". 81.The Hon'ble Supreme Court further held. :- (iv)The Income-tax Act, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies as economic entities with legal independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at its powers, functions and responsibilities are governed by the law of its incorporation. Though it may be advantageous for parent and subsidiary companies to work as a group, each subsidiary will look to see whether there are separate commercial interests which should be guarded. Whether the parent company has "power" over the subsidiary depends on the facts of each case. In the case of multinationals their subsidiaries have a great deal of autonomy in the country concerned except where subsidiaries are created or used as a sham. The directors of the subsidiary under their articles are the managers of the companies. They are not to be dictated by the parent company if it is not in the interests of those companies (subsidiaries). The fact that the parent company exercises shareholder's influence on its subsidiaries cannot obliterate the decision-making power or authority of its (subsidiary's) directors. The decisive criteria is whether the parent company's management has such steering interference with the subsidiary's core activities that the subsidiary can no longer be regarded to perform those activities on the authority of its own executive directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises on an economically valid basis that approximates the division of profits that would have been anticipated and reflected in an agreement made at arm's length. See paragraphs 2.132 -2.145 for a discussion/6f how to split the combined profits. C.2 Strengths and weaknesses 2.109 The main strength of the transactional profit split method is that it can offer a solution for highly integrated operations for which a one-sided method would not be appropriate. For example, see the discussion of the appropriateness and application of profit split methods to the global trading of financial instruments between associated enterprises in Part III, Section C of the Report on the Attribution of Profits to Permanent Establishments.2 A transactional profit split method may also be found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions (e.g.contribute unique intangibles) to the transaction, because in such a case independent parties might wish to share the profits of the transaction in proportion to their respective contributions and a two-sided method might be more appropriate in these circumstances than a one-side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's length price under section 92C. 10B. (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction --[or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely:- d) profit split method, which may be applicable mainly in international transactions --[or specified domestic transactions]involving transfer or unique intangibles or in multiple international transactions [or specified domestictransactions] which are so interrelated that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction, by which i) the combined net profit of the associated enterprises arising from the international transaction --[or the specified domestic transaction] in which they are engaged, is determined; (ii) the relative contribution made by each of the associated enterprises to the earning of such combined net profit, is then evaluated on the basis of the functions performed, assets employed or to be employed and risks assumed by each enterprise and on the basis of reliabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realized by the enterprise and referred to in sub-clause(i) is established to be the same as the net profit margin referred to in sub-clause(iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction [or the specified domestic transaction]; 88. PSM is applicable when the international transaction involved transfer of unique intangibles (in the case in hand there is no such transfer from SPG BVI to SPIL), or in multiple international transaction which are so inter related that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction. This is also absent (in the case in hand as the appellant company has done only manufacturing of Pantoprazole Tablets for SPG BVI). 89. Coming to the application of TNMM, we find that the profit margin benchmark by the assessee at 21.57% on sales transactions is much higher than the margin shown by the assessee with Eli Lily. 90. The revenue authorities have comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied than the set off of each year losses has to be given for the corresponding year. The undisputed compensation being settled on the base of all yearly profits made by the AE during the exclusivity period PSM cannot be worked by divorcing the business realities. The contention of revenue that it is not concerned with the settlement which is pass event is untenable. Even if the PSM is applied the relatable losses which were so apparent by the time assessment was framed cannot be given a go by on unsustainable revenue stand. In such eventuality even the ALP offered by assesse as a contract manufacturer also will be wiped out. The PSM application may actually result in reduction of returned ALP working. Thus, considering the issues from all possible angles, the assessee has, undisputedly and as accepted by revenue, ultimately suffered losses which are not claimed in its books or tax purposes. Even the alternative application of PSM fails and would do no good to the Revenue . 92. To summarize in nutshell , by the order of the Hon'ble High Court Innovative Research and Development /division of the appellant company was demerged and given to Sun Pharma Advance Research compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee who replied that all the necessary details were available with the TPO and no defect of whatsoever was pointed out therein. Similarly, the ITAT in the earlier year because no defect was pointed out by the TPO in the details furnished by the assessee in determining the ALP using TNMM allowed the appeal of the assessee. The learned DR has also not brought anything on record contrary to the argument advanced by the learned AR of the assessee. 21.1 Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record contrary to the argument advanced by the ld. counsel for the assessee. 21.2 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above said judgment we are of the considered opinion that the view adopted by the co-ordinate bench as discussed abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of his predecessor for the assessment year 2008-09 by observing as under: "8.3.9. On careful consideration of the material available on record, it is noticed that the TPO has applied Residual Profit Split Method and accordingly determined adjusted profit from Para-IV filing drugs at ₹ 73,03,24,357/-and from generic drugs at ₹ 21,34,71,777/- (Total ₹ 94,37,96,134/-) by apportioning the profit in the ratio of 50:50 in case of Para-IV filing and 80:20 in case of generic drugs, between the appellant and its AEs. It is also noticed that the appellant has adopted same methodology as in the case of Pantoprazole in respect of sale of other formulations to its AEs by considering itself a contract manufacturer. As already discussed, the FAR analysis carried out under the similar facts and circumstances of the case in A.Y. 2008-09 by the CIT(A)-IV, Ahmedabad, revealed that the appellant has deployed substantial assets in the form of US PDA approved manufacturing setup, played a substantial rolein preparation of ANDA and drawing marketing plans in USA. The only function performed outside was to provide market support. These findings are squarely applicable to the intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re facts and modus operand!" adopted by the appellant to shift huge profits to tax havens, I enhance the income by ₹ 43,81,94,615/- by making a further adjustment to ALP of other products under Chapter IV filing drugs by apportioning the residual profit in the ratio of 80:20 between the appellant and AEs. Accordingly, the addition made by the AO/TPO on this account at ₹ 94,37,96,134/- is confirmed along with enhancement of income by ₹ 43,81,94,615/-. Thus, appellant fails on this account. I am also satisfied that the appellant has furnished inaccurate particulars of income in respect of further Upward adjustment of ₹ 43,81,94,615/- and accordingly the penalty proceedings u/s.271(1)(c) r.w. Explanation-7 are hereby initiated." 24. Being aggrieved by the order of Ld.CIT (A), the Assessee is in appeal before us. 25. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No. 1666/AHD/2016 the impugned addition was deleted by the Hon'ble ITAT vide order dated 08-09-2017. 26. On the other hand the Ld. DR filed the written submissions which are available on record. But the same has not been repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought anything on record contrary to the argument advanced by the learned AR of the assessee. 28.1 Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record contrary to the argument advanced by the ld. Counsel for the assessee. 28.2 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above-said judgment, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR and the ld. AR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune to maintain the judicial discipline and decorum. In view of the above and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed in the income tax return and no revised return was filed for the claim of such weighted deduction. 31.5 The Ld.CIT (A) also observed that the argument of the assessee is not relevant to the effect that it is not necessary to get the expenses certified by the DSIR to claim the weighted deduction as the plea of the assessee was rejected on the preliminary ground i.e. the weighted deduction was not claimed in the income tax return. 31.6 In view of the above the ld. CIT-A rejected the claim of the assessee and confirmed the order of the AO. 32. Being aggrieved by the order of the Ld.CIT (A), both the assessee and Revenue are in appeal before us. The assessee is in appeal before us against the confirmation of the disallowance of weighted deduction whereas the Revenue is in appeal before us on the ground that the DSIR did not certify the impugned expenses. 32.1 The ground of appeal no. 10 raised by the Revenue stands as under: "10. On the facts and in the circumstances of the case, learned CIT(A) erred in law and facts in directing to allow weighted deduction on the R&D expenses which was not certified by DSIR without appreciating that as per provisions of section 35(2AB), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42.A perusal of the aforementioned section clearly establishes that expenditure on scientific research is also eligible for weighted deduction. Considering the facts in totality in the light of the provision, we set aside the findings of the ld. CIT(A) and direct the A.O. to allow weighted deduction. Ground Nos. 9 & 10 are accordingly allowed." 36. As the facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the same we set aside the order of ld. CIT-A. Accordingly, we direct the AO to Allow the weighted deduction u/s 35(2AB) of the Act as claimed by the assessee. Hence the ground of appeal of the assessee is allowed. Now coming to the Revenue ground of appeal as discussed above. 37. The grievance of the Revenue in this ground of appeal is that the Ld.CIT (A) erred in directing the AO to allow the weighted deduction under section 35(2)AB of the Act in respect of the expenses which were not certified by DSIR. 37.1 Regarding this we note that the identical issue was also there in the own case of the assessee in ITA No. 1390/AHD/2016 pertaining to the AY 2009-10 which was decided vide order dated 22-12-2016 as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred stated in such Form 3CL. We further find that hon'ble jurisdictional high court's decision in CIT vs. CLARIS LIFESCIENCES Ltd. (2010) 326 ITR 251 (Gujarat) upholds this tribunal's decision in the very assessee's case observing that expenses incurred before Form 3CM approval cannot be denied for the purpose of Section 35(2AB) weighted deduction. We follow the very reasoning to opine that facts of the instant case rather go a step further wherein the appellant has only claimed those expenses which relate to the time period as approved in the Form 3CM. We accordingly hold that the assessee is very much entitled for claiming the above capital and revenue expenses incurred on in house research and development amounting to ₹ 237,77,05,310/-. The Assessing Officer had rightly held it entitled for the above weighted deduction after verifying all necessary particulars during the course of scrutiny." 37.2 We further note that the above order of the ITAT was also affirmed by the Hon'ble Gujarat High Court in the assessee's case in tax appeal no. 541 of 2017 dated 14-8-2017 wherein it was held as under: "5. Having heard Ld. Counsel for the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll strength. The ld. DR and the ld. AR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. In view of the above and respectfully following the ITAT order as discussed above, we allow the ground of appeal of the assessee and dismiss the ground of appeal of the Revenue. 39. The issue raised by the assessee in ground No. 7 is that the Ld.CIT (A) erred in confirming the order of the AO by allocating the research and development expenses incurred by it to the other partnership firms and accordingly made the disallowance of such expenses proportionately. 40. The assessee is a partner in two partnership firms namely Sun Pharma Industries and Sun Pharma Sikkim (for short SPI and SPS). Both the partnership firms were engaged in manufacturing the drugs. However, the assessee was carrying out research and development expenses for the drugs manufactured by both the firms. Accordingly, the assessee claimed the deduction for all the research and development expenses incurred by it in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit were not understated. Another related claim made by the appellant is that the expenditure incurred by it for the partnership firm is as good as its own expenditure because ultimately the appellant is going to be the major beneficiary of any profit earned by the partnership firm as a result of this R & D expenditure. 7.3.1 These claims of the appellant are to be examined in view of the different provisions of the IT Act 1961. The share of profit received by the appellant from the firm is exempt from the Income Tax. The remuneration is received from the firm is taxable under the head income from business and profession, as per the provision of clause (v) of section 23 of the IT Act 1961. But the proviso to this section says that where such remuneration or part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted. Now as per the provisions of section 40(b)(i), any payment of salary, bonus, commission or remuneration to any partner who is not a working partner is not allowed as a deduction in computation of the total income of the firm. The explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se workings have been submitted by the appellant during the course of the current appellate proceedings also and the same are being utilized for the purpose of deciding this issue. 7.5.1 The first contention of the appellant is that the partnership firm and the appellant company cater to the different sections of business with underline facts. These differences have been submitted by the appellant which have already been reproduced above. The first difference pointed out is that the partnership firm is only into production of formulation drugs for the domestic market, whereas appellant incurred R & D expenditure on bulk drug segment and formulation segment both and that too for domestic market as well as international market and regulated market. It has been submitted that the partnership firm has sold its product in domestic market only. In this regard, the appellant has also submitted the copy of Financial statement for FY 2007-08 of Sun Pharmaceutical Industries. As per this, the turnover of this firm is 1086.2 crore, which is the same figure as adopted by the Ad in his order. Besides in Clause '8' of the Notes on Financial Statement, it has been mentioned that the firm op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fellows:- Since the facts are identical in this year a/so, I respectful/y following the order of my predecessor in appellant's own case as mentioned above, hold that the R&D expenses incurred by the appellant admittedly are also pertaining to SPI/SPS and hence the same are required to be allocated in the ratio of turnover of appellant and SPI/SPS. I also agree with the views of my predecessor that the expenses incurred for Development of Formulation Drugs for domestic market are to be considered only because SPI/SPS has no business outside the country. As per the details furnished the R&D expenses for Development of Formulation drugs for domestic market are ₹ 3201.08 + 2816.97 + -194.80+ 130.68 = Rs,6343.53 lacs. Accordingly, the Assessing Officer is directed to work out the disallowance of R&D expenses out of ₹ 6343.53 lacs in the ratio of domestic turnover of SPI/SPS and SPIL i.e. appellant, after necessary verification of the figures. Thus, appellant succeeds partly in respect of Ground No. 9." 43. Being aggrieved by the order of the Ld.CIT (A), both the assessee and the Revenue are in appeal before us. The assessee is in the appeal for the allocation of R&D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee's business or the business of the partnership firm where the assessee is a majority stake holder. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee. Finding that the assessee is having 97.5% share in the profits of the firm SPI, we do not find any merit in the disallowance made by the A.O. and confirmed by the First Appellate Authority. We, accordingly, direct the A.O. to delete the addition of ₹ 5,30,29,5255/-. Ground no. 12 is accordingly allowed" 48. Regarding the Revenue appeal, the relevant finding of the ITAT in ITA 1663/AHD/2016 in its order is extracted below: "137. Similar issue has been considered and decided by us in assessee's appeal (supra) vide ground nos. 9 to 11 of that appeal. For our detailed discussion therein, ground no. 11 is dismissed." 49. As facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the finding of the Tribunal (supra), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of share of profit from the partnership is exempted from tax under section 10(2A) of the Act. There is no exemption under section 10 of the Act in respect of the remuneration received from the partnership firm. Accordingly, the AO rejected the claim of the assessee and made the addition of the remuneration while determining the book profit under section 115JB of the Act. 52. The aggrieved assessee preferred an appeal to the Ld.CIT (A) who confirmed the order of the AO by observing as under: "14. Ground No. 11 is against the action of the Assessing Officer in not considering "remuneration" received from partnership firm (SPI) as share of profit to which provisions of section 10(2A) apply for the purpose of working of book profit u/s. 115JB. This issue has been discussed by the Assessing Officer in paras-6.1.3 and 6.1.4 of the assessment order. The appellant has claimed to have received remuneration of ₹ 15,07,27,535/-from partnership firm, Sun Pharmaceutical Industries (SPI) which was deducted while working out the book profit u/s. 115JB by the appellant. On verification of the facts and material in records, the Assessing Officer held that only the share prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the appellant in A.Y. 2008-09 wherein the claim of deduction of remuneration received from the partnership firm SPI for the determination of Book Profits u/s. 115JB was denied by the revenue authorities. We find that when the matter was agitated before the Tribunal, the Tribunal also declined to interfere with the findings of the ld. CIT(A). The relevant findings of the Tribunal read as under:- 110. We have considered the facts, circumstances, relevant provisions and rival submissions,. A harmonious reading of the provisions of section 115JB of the Act reflects that in the case of a company subject to the provisions of Section 115JB of the Act has to prepare P&L statement in accordance with the provisions of part (ii) of Schedule (vi) of the Companies Act. 111. The relevant clause of Explanation 1 reads as under:- Explanation [1]- For the purposes of this section, "book profit" means the [profit] as shown in the [statement of profit and loss] for the relevant previous year prepared under sub-section (2), as increased by - (f) the amount or amounts of expenditure relatable to any income to which [section 10(other than the provisions contained in clause (38) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as discussed above, therefore respectfully following the finding of the tribunal (supra), we direct the AO accordingly. Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the Ld. AR has not brought anything on record contrary to the finding of the Ld. CIT-A. 57.1 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above-said judgment, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR and the ld. AR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. In view of the above and respectfully f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved by the order of Ld.CIT (A) the assessee is in appeal before us. 62. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No.1666/AHD/2016 the impugned issue was set aside to the AO for fresh adjudication by the Hon'ble ITAT vide order dated 08-09-2017. Accordingly the Ld.AR for the assessee requested to restore the impugned issue to the file of AO for fresh adjudication as per the provision of law. 63. On the other hand, the Ld. DR vehemently supported the order of authorities below. 64. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee's (supra), the ITAT set aside issue to the file of AO for fresh adjudication. The relevant extract of the order is reproduced as under: "87.We have considered the facts in issue carefully. The Tribunal in its order for A.Y. 2008-09 in ITA Nos. 3297 and 3420/Ahd/2014 had considered a similar issue vide ground no. 14 of that appeal and held as under:- 138. An identical issue was considered by the Bench in assessee's own case in ITA No. 1558 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine and tune with the judicial discipline and decorum. In view of the above and respectfully following the ITAT order as discussed above, the ground of appeal of the assessee is allowed for statistical purposes. 66. The issue raised by the assessee in the ground of 10 is that the Ld. CIT-A erred in treating the repairing expenditure of ₹ 16,82,791/- as capital in nature. 67. The AO during the assessment proceedings observed that the assessee had incurred ₹ 372.88 Million towards repairing expenses. The AO further found that certain expenses are not in the nature of revenue expenses but of capital in nature as detailed below: Sr. No. Location Name of the party Voucher No. Repairing expenses Amount Rs. 1 Halol EOU Mutech Engineers 313PUA0018 1,04,719/- 2 Halol EOU H 3 International 313PUA3154 4,00,000/- 3 Karkhadi Vam Services 403PUA0553 2,50,267/- 4 Karkhadi Iron Exchange Services Ltd 403PUA2126 26,520/- 5 Silvassa Soatce Engineers Mktg Pvt. Ltd. 07ePUA6828 2,38,474/- 6 Panoli A P Engineering & Fabrications 075PUA3527 11,94,050/- 7 Panoli Pradip PowerTech Pvt. Ltd., 075PUA5619 3,82,438/- Total... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence has to be treated as revenue expenditure. The Assessing Officer is directed accordingly. (b) Purchases of ₹ 4,00.OOP from H.3. International;- It is noticed that, the appellant has purchased Copeland compressor used for refrigerating and hence it is a part of refrigerator. The compressor cannot be used as an independent machine and hence the same has to be treated as revenue expenditure. The Assessing Officer is directed accordingly. (c) Purchases of ₹ 2,50,267/- from Vam Services:- It is noticed that, the appellant has purchased a low temperature heat exchanger which can becaused as an independent machine and hence the expenditure on this account has to be treated as capital expenditure. The Assessing Officer is directed accordingly. (d) Purchases of ₹ 26,520/- Iron Exchange Service Limited;- It is noticed that, the appellant has purchased rota-meter which is a part of major machine used in IMAOH line. It cannot be used as an independent machine and hence the same has to be treated as revenue expenditure. The Assessing Officer is directed accordingly. (e) Purchases of ₹ 2,38,474/- from Solace Marketing Private Ltd.:- It Is noticed that, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase cost and labour charges are treated as capital expenditure. (c) Communica Aids of ₹ 1,52,250/-:- The appellant has purchased Tata Make IOX 160 EPBAX System with 16 trunk lines and 4 E &M Circuits. The configuration of this machine itself shows that it is capable of being used as independently and a new asset has come into existence the same has to be treated as capital expenditure. (d) Purchases from Mutech Engineering & Ushail Sales and Services amounting to ₹ 2,33,734/-, ₹ 9,35,550/- and ₹ 2,05,441/-:- The appellant company has purchased Copper Busbar 1 MTR for 3000 KVA Transformer and 2 panel boards for MCC (Motor Contrl Centre). The details show that these items have been purchased to replace the electrical items damaged in fire. All these items form part of 3000 KVA Transformer and has no used independently. Therefore, the same have to be treated as revenue in nature. 94.We, accordingly, direct the A.O. to treat ₹ 13,74,725/- as revenue expenditure and the balance is confirmed as capital expenditure. The A.O. is directed to recompute the claim of depreciation as per the provisions of the law. Ground no. 19 is partly allowed. 73. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 8D amounting to ₹ 4,23,23,188/-. This issue has been discussed by the Assessing Officer in para-13 of the assessment order. The Assessing Officer noticed that the assessee company has incurred interest expenditure of ₹ 44,2S/222/- during the year under consideration. Since the company has earned exempted income of ₹ 634.29 crores from the partnership firm, the Assessing Officer invoked the provisions of section 14A read with Rule 8D and worked out consequential disallowance of a sum Of Rs,5,82,987/- out of the interest expenditure. The Assessing Officer has further disallowed a sum of ₹ 4,17,40,201/- being 0.5% of average value of investment of ₹ 834,80,40,2297- resulting into exempt income. The similar disallowance was also made in A.Y. 2008-09 and the CIT(A)-IV, Ahmedabad vide paras 25.2 to 25.3 of order dated 14.10.2014 has confirmed the disallowance made by the Assessing Officer with the direction that the remuneration which was treated as exempt income, should be excluded while computing the disallowance since the remuneration had been separately taxed as fee for usage of brand/patent/trademark. The facts and circumstances of the disallowance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative expenditures, the formula given under Rule 8D is the most appropriate method for the computation of the disallowance. We accordingly direct the A.O. to compute the disallowance so far as administrative expenditures are concerned as per Rule 8D of the ITAT Rules r.w.s. 14A of the Act. We accordingly set aside the disallowance of ₹ 27,55,18,783/- made by the First Appellate Authority and direct the A.O. to re-compute the disallowance as directed hereinabove. Ground no. 8 is allowed in part for statistical purpose. 154. The only distinguishing fact for the year under consideration is that Rule 8D in fact is applicable for the year under consideration and, therefore, we direct the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D. Ground no. 17 is treated as allowed for statistical purpose." 81. The Ld. AR before us has also not pointed out any defect in the order of the Ld. CIT-A. Thus we find there is a contradiction between the argument of the ld. AR for the assessee and in the finding of the ITAT. Admittedly the rule 8D was applicable w.e.f. AY 2008-09 as observed by the ITAT in its order as discussed abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law:- (iii) whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that adjustment made on account of disallowance u/s 14A of the Act in computation of book profit u/s 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profits? 120. Relevant findings of the Hon'ble High Court read as under:- 7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income-tax-1 v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) . A.Y. 2009-10 358 ITR 323 (Gujarat) where this court has held in paragraph Nos. 6 to 6.5 this court has observed as under: "6. So far as the fourth question is concerned, it pertains to addition of ₹ 1,14,43,0407- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal of revenue is dismissed. 121. Respectfully following the decision of the Hon'ble Jurisdictional High Court (supra), we direct the A.O. to delete the addition of expense disallowed u/s. 14A for computing book profit u/s. 115JB of the Act. 105. Respectfully following the findings of the Tribunal (supra), we direct the A.O. to delete the addition of expenses disallowed u/s. 14A for computing book profit u/s. 115JB of the Act. Our view is also fortified by the decision of the Special Bench in the case of Vireet Investment (P) Ltd. 82 taxmann.com 415. Ground no. 21 is accordingly allowed. 89. As facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the finding of the tribunal (supra), we direct the AO accordingly to delete the addition of expenses disallowed u/s 14A while computing the book profit u/s 115JB of the Act. Hence the ground of appeal of the assessee is allowed. 90. The issue raised by the assessee in the ground of 13 is that the Ld.CIT (A) erred in making the addition for selling and distribution exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment in the partnership firm. It is also true that the assessee was on a contractual obligation to look after the marketing and distribution activities of the firm SPI as per the partnership deed read along with the supplementary deed to earn remuneration from the partnership firm. However, it is equally true that a reasonable disallowance of expenditure should be made for earning the exempt income so far as the share of profit from the partnership firm SPI is concerned. We are conscious about the fact that Rule 8D is not applicable for the year under consideration but at the same time for the computation of disallowance for administrative expenditures, the formula given under Rule 8D is the most appropriate method for the computation of the disallowance. We accordingly direct the A.O. to compute the disallowance so far as administrative expenditures are concerned as per Rule 8D of the ITAT Rules r.w.s. 14A of the Act. We accordingly set aside the disallowance of ₹ 27,55,18,783/- made by the First Appellate Authority and direct the A.O. to re-compute the disallowance as directed hereinabove. Ground no. 8 is allowed in part for statistical purpose." 96. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, learned CIT(A) erred in law and facts in reducing the adjustment on account of ALP for Corporate Guarantee Fees from 2,96% to 2% since ALP for each year is assessed on the basis of risk factor of that particular year and said ALP was worked out on the basis of Country and foreign exchange risk 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in the law and facts in deleting the addition on account of price difference on sales made to Sun Pharma Indusiries, even when the assessee has not been able to controvert the finding of the AO that raw materials were being sold to related concern at a rate lower than being sold to third parties. 4. On the facts and in the circumstances of the case, the learned CIT(A) erred in the law and fads in deleting the addition weighted deduction made u/s.35(2AB) on trade mark registration charges and overseas product registration expenses of ₹ 2,17,24,945/- by holding me capital expenditure as expenditure revenue disregarding the facts of enduring benefits. 5. On the facts and in the circumstances of the case, learned CIT(A) erred in I:A and facts in deleting the addition on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of 0% OFCD. 101. The assessee in the earlier year has invested 224.93 crores in 0% optionally fully convertible debenture (OFCD) in Sun Pharma Globla Inc. BVI. The assessee claimed that it was in the nature of share capital. Therefore it was not the international transaction. However, the TPO was of the view that it is in the nature of loan until converted into the equity. Thus the transaction should be benchmarked including the interest to determine the arm's length. However, the assessee has not shown any income on this amount and also not benchmarked the investment in the TP study. Accordingly, the TPO considered the OFCD as debt and proposed the interest rate at 12-month LIBOR plus markup 414.76 to work out the ALP on such amount. 101.1 However, the assessee in reply to the notice submitted that the outstanding OFCD as on 01-04-2009 have been converted into equity shares in the year 2010-11 and filed the details as under: OFCD outstanding as on 1st April, 2009 224.93 crores OFCDs converted into equity shares on 5th March, 2010 on following terms: [Face Value of USD 1/Rs45 and Premium of USD 45/Rs.2025] The OFCDs have been converted at the rates decided under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower to re-characterize the transaction. The Hon'ble High Court of Delhi in the case of Cotton Naturals India Pvt. Ltd. 276 CTR 445 at para 17 of its order has held that Chapter X and Transfer Pricing rules do not permit the Revenue authorities to step into the shoes of the assessee and decide whether or not a transaction should not be entered. It is for the assessee to take commercial decisions and decide how to conduct and carry on its business. Actual business transactions that are legitimate cannot be restructured. A similar view was taken by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd. 345 ITR 241. 9. On identical set of facts, the Co-ordinate Bench had the occasion to consider similar issue in the case of Cadila Healthcare Ltd. in ITA No. 2430/Ahd/12 with C.O. No. 242/Ahd/12 in 146 ITR 502 wherein the first ground related to the adjustment made on account of notional interest on Optionally Convertible Debenture to Foreign Subsidiary. The Tribunal considered the following facts :- 4. During the course of assessment proceedings, Assessing Officer noticed that Assessee had subscribed to Optionally Convertible Loan of U.S. $ 27 Million issued by Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er noted that the funds were provided by the Assessee as per RBI guidelines and in the immediately next year, the entire loan given to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since the Assessee has converted the loan into equity in the immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not. granted interest free loan but invested in optionally convertible loan i with a clause of interest in case, Conversion option was not exercised and further held the Assessee's transaction with subsidiary was at arms length. Before us, the Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. In view of these facts, we find no reason to interfere with the order of CIT(A). 11. Respectfully following the findings of the Hon'ble High Court (supra) and the Co-ordinate Bench (supra), we direct the A.O, to delete the impugned additions^ Ground no. 2 is accordingly allowed." 6.4 Since the facts are identical in this year also, I respectfully following the order of Hon'ble ITAT which is binding on me, direct the A.O. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court, in applying the Transfer Pricing Provisions, the entire instrument has to be considered and the same cannot be re-characterized partly as loan and partly as equity so as to enable any transfer pricing adjustment for the same. In this regard, we rely on the decisions cited earlier, which have been appropriately followed by the Hon'ble ITAT in A.Y. 2007-08 and the decision of the Supreme Court (supra) cited by the ld. DR does not in any way justify any departure from the decision laid down in A.Y. 2007-08. 21. Adverting to ld. DR's contention that the terms of OFCDs and comparables have not been submitted, it is contended that the terms of OFCDs were duly submitted before the lower authorities in the form of Annexure B which is part of the PB. Similarly the allegation that assessee has not brought on record any comparable transactions to show that non-charging of interest was at arms- length and it got compensated by favorable terms similar to that offered by uncontrolled entities is also strongly refuted. It is contended all the relevant details and comparable were furnished as Annexure B in which it has been submitted that the conversion of OFCD into equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of Settlements v. M.R. Apparao.) 24. The Hon'ble Jurisdictional High Court of Gujarat in the case of Core Healthcare Ltd. 251 ITR 61 has observed as under:- As laid down by the apex court in the case of Ambika Prasad Mishra v. State of U.P., AIR 1980 SC 1762 ; [1980] 3 SCC 719 (page 1764 of AIR 1980 SC): "Every new discovery or/argumentative novelty cannot undo or compel econsideration of a binding precedent . . . a decision does not lose its authority 'merely because it was badly argued, inadequately considered and fallaciously reasoned' . . ." Similarly in the case of Kesho Ram and Co. v. Union of India [1989] 3 SCC 151, it is stated by the Supreme Court thus (page 160): "The binding effect of a decision of this court does not depend upon whether a particular rgument was considered or not, provided the point with reference to which the argument is advanced subsequently was actually decided in the earlier decision ..." 25. A similar view is again taken by the Hon'ble Jurisdictional High Court of Gujarat in th case of Nirma Industries Ltd. 283 ITR 402. Coming to the facts of the year under consideration, we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In response, Assessee interalia submitted that Assessee had not opted for conversion of the loan during the year and therefore it was loan for the year and as per the terms of agreement, no interest accrued to the Assessee and therefore no income was considered. The TPO did not find the contention of the Assessee acceptable. He considered the Optionally Fully Convertible loan as debt and considering the average six month Euro Libor rate for the year @ 4.48% to which he added the interest rate of 2.90 basis point as per the agreement and thereafter considered the rate of interest to be @ 7.38% and accordingly computed the interest on ₹ 108.32 Crore for 171 days at 7.38%. The aforesaid adjustment made by the TPO was considered by the Assessing Officer and the addition of ₹ 3,99,74,4267- was made to the income. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee decided the issue in favour of Assessee. 10. And the Tribunal held as under:- 7. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd against the finding of the Ld. CIT-A, and the argument advanced by the Ld. Counsel for the assessee. 107.1 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.) wherein it was held as under: "No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of appeal of the Revenue is treated as allowed for statistical purpose. 109. The issue raised by the Revenue in ground number 3 is that the Ld.CIT (A) erred in deleting the addition made by AO on account of the price difference on sales made to SPI for ₹ 3,50,78,887/-. 110. During the assessment proceedings, the AO found that the assessee had been selling the certain raw material/product to its partnership firm namely SPI at a price lower than the priced charged from third parties. As such the AO was of the view that the assessee is shifting its profit to its partnership firm being eligible for the deduction u/s 80IB of the Act. 111. On a question by AO, the assessee submitted that the difference in the rate was there in few transactions with the firm which was minor. The assessee also explained the difference in price due to the following reason: 1) There was a difference in the quality of the product sold to its related parties. The related parties were sold lower quality as compared to outside parties product. 2) The volume of transactions with related parties is insignificant as against the third parties. 3) Assessee does not have to bear inventory carrying the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT has deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "114. Since, the First Appellate Authority has followed the order of the Tribunal in ITA Nos. 1589/Ahd/2011 and 2430/Ahd/2009, therefore, we do not find any error or infirmity in the findings of the ld. CIT(A). Ground no. 3 is accordingly dismissed." 116. As facts in the case on hand are identical to the facts of the case as discussed above, therefore we are inclined not to disturb the finding of the Ld.CIT (A). Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record against the finding of the ld. CIT-A, and the argument advanced by the ld. Counsel for the assessee. 116.1 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract of the order has already been reproduced above. In the light of the ratio decidendi in the said order, we are of the considered opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products marketing and sale overseas, but they have nothing to do with scientific research or in-house R&D. Accordingly, the disallowance of weighted deduction has been upheld. However, now the Hon'ble ITAT, Ahmedabad vide order dated 10.05.2016 contained In ITA No. 1589 & 1592/AHD/2011 (A.Y. 2006-07) under the identical facts, has directed the Assessing Officer to allow the deduction u/s 35(2AB) on Trade mark registration charges and Overseas product registration charges to the appellant. Since the facts are identical in this year also, I respectfully following the order of Hon'ble ITAT, Ahmedabad in A.Y. 2006-07 which Is binding on me, h-old that the appellant in entitled to claim weighted deduction u/s 35(2AB) on Trade mark registration charges and Overseas product registration charges and hence the Assessing Officer is directed to allow the same. Thus, appellant succeeds in respect of Ground No. 7." 120. Being aggrieved by the order of Ld.CIT (A), the Revenue is in appeal before us. 121. Both the parties before us vehemently supported the order of authorities below as favorable to them. 122. We have heard the rival contentions and perused the materials available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in assessee's own case in earlier years has decided this issue in favour of the assessee and against the revenue in ITA No. 1558/Ahd/2006. The ld. D.R. could not bring any distinguishing decision in favour of the revenue. 14. We have given a thoughtful consideration to the order of the Tribunal in earlier years; we find that the Tribunal while deciding the issue in favour of the assessee has followed the decision of the Co-ordinate Bench, Mumbai in the case of USV Ltd. 54 SOT 615. Findings of the Tribunal read as under:- 24. We have carefully perused the orders of the authorities below. We find that the ld. CIT(A) has simply followed the findings of his predecessor for A.Y. 2000-01. We also find that the assessment order for A.Y. 2000-01 has been quashed by the Tribunal vide a ITA Nos. 1199 & 1279/Ahd/2006, which means that the basis for upholding the disallowance has been removed. We further find that on identical set of facts, the Mumbai Bench in the case of USV Ltd. (supra) has allowed the claim of the assessee in respect of expenditure incurred in respect of patent application. Respectfully, following the findings of the co-ordinate Bench (supra), we direct the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lunch & Refreshment Expenses Rs.5,09,964/- Brokerage for Property ₹ 31,000/- 125. On a question by the AO, the assessee submitted that lunch and refreshments expenses had been incurred on the employees exclusively working with the research & development divisions. These expenses also represent the expenses incurred for the guest, visitors, dignitaries and the other professionals visiting exclusively to the research and development center. 126. All the centers are independent units, and these do not share any common space with the manufacturing factories of the assessee. As such these expenses were representing the expenses incurred exclusively in connection with the research and development division. 127. The assessee regarding the brokerage expenses submitted that these expenses were paid to the brokers/estate agents for locating the residential units for the employees working with the research and development divisions. As such these expenditures were incurred exclusively for the purpose of the research and development divisions. 127.1 However, the AO disagreed with the submission of the assessee by observing that the expenses do not relate with the research an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/Ahd/2014. The relevant findings read as under:- 159. At the very outset, the ld. Senior Counsel for the assessee brought to our notice that these issues have been considered and decided by the Bench in favour of the assessee and against the revenue in ITA No. 2067/Ahd/2013. We find force in the contention of the ld. Senior Counsel. The Co-ordinate Bench in ITA No. 2067/Ahd/2013 has decided the impugned issues as under:- 69. Ground no.1 relates to the deletion of the disallowance of ₹ 67,620/- claimed as weighted deduction u/s. 35(2AB) of the Act on gift expenses incurred for R & D employees. 70. This issue has been decided in favour of the assessee and against the revenue by the Co-ordinate Bench in ITA No. 1592/Ahd/2011 qua ground no. 2 of that appeal. The relevant part reads as under:- Ground no. 2 relates to the weighted deduction u/s. 35(2AB) on account of gifts to R & D employees on occasion of marriage. 44. We find that an identical issues has been decided in favour of the assessee and against the revenue in the case of Claries Lifesciences Ltd. 112 ITD 307 (Ahd.) which decision has been followed by the ld. CIT(A). The said decision of the Tribunal has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscipline and decorum. Hence the ground of appeal of the Revenue is dismissed. 132. The issue raised by the Revenue in ground number 6 is that the Ld.CIT (A) erred in directing the AO to exclude the export turnover for allocating the expenses. 131A We have already decided the impugned issues against the Revenue and in favor of the assessee in the ground of appeal bearing no. 7 vide Para No.42 to 45 of this order in ITA 929/AHD/2017. Thus respectfully following the same, we do not find any reason to disturb the finding of the ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 133. The issue raised by the Revenue in ground number 7 is that the Ld.CIT (A) erred in deleting the addition on account of the provision of wealth tax for computation of book profit u/s 115JB of the Act. 133.1 The assessee while calculating book profit u/s 115JB of the Act has not added back the provision for wealth tax of ₹ 10,33,413/-. 133.2 On a question by Assessing Officer, the assessee submitted that provision for wealth tax does not fall under any of the adjustment of clause (a) to (i) of the explanation to section 115JB (2) of the Act. 133.3 Further, submitted that clause (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of book profit u/s. 115JB. We find that the order of the ld. CIT(A) was confirmed by the Tribunal in ITA Nos. 3297 & 3420/Ahd/2014 vide ground no. 5 of that appeal. The relevant findings read as under:- 167. There is no dispute that Wealth Tax Act, 1957 imposes the charge of Wealth Tax on the 'net wealth' of every individual, HUF/company as on the valuation date. While Income-tax is tax on income. Both Income-tax and Wealth Tax are governed by separate and distinct legislated laws. It is true that under the Explanation to Section 115JB of the Act, certain items have been mentioned which have to be added back for the computation of book profit. It is equally true that there is no mention of Wealth Tax provision. The provisions of the act are clear and unambiguous and require no addition/deletion of any items other than those mentioned in the provisions. We, therefore, do not find any infirmity in the findings of the ld. CIT(A). Ground no. 5 is dismissed. 130. Respectfully following the findings of the Tribunal (supra), ground no. 8 is dismissed. 138.1 As facts in the case on hand are identical to the facts of the case as discussed above, therefore we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee failed to fulfill the primary condition. Thus the claim of ₹ 1,83,99,656/-u/s 80IA(4) is disallowed. 140. Aggrieved assessee preferred an appeal to the Ld.CIT (A) who deleted the addition made by the AO by observing as under: "18. Ground No.15 is against the action of Assessing Officer in disallowing deduction u/s.80IA(4) of the Act amounting to ₹ 1,83,99,656/- in respect of power generation unit used for captive purposes. This issue has been discussed by the Assessing Officer in para-12 of the assessment order. The Assessing Officer has made the disallowance on the similar ground on which the disallowance was made in A.Y. 2008-09. The CIT(A)-IV, Ahmedabad vide para 24.2 to 24.2.4 has allowed the claim of appellant. Since the facts are identical in this year also, I respectfully following the order of CIT(A)-IV, Ahmedabad, hold that the appellant is eligible for deduction u/s.80IA(4) in respect of income of Captive Power generation unit and hence the Assessing Officer is directed to allow the same after correctly computing the income of eligible unit. Thus, appellant succeeds in respect of Ground No.15." 141. Being aggrieved by the order of Ld.CIT (A) the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). Ground no. 8 is accordingly dismissed. 126. Respectfully following the findings of the Co-ordinate Bench (supra), we decline to interfere. Ground no. 7 is dismissed." 143.1 As facts in the case on hand are identical to the facts of the case as discussed above, therefore we are inclined not to disturb the finding of the Ld.CIT (A). Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record against the finding of the ld. CIT-A, and the argument advanced by the ld. Counsel for the assessee. 143.2 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract of the order has already been reproduced above. In the light of the ratio decidendi in the said order, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR has not brought any decisions varying from simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been incurred by the assessee, for the services rendered by it to the firms. 144.5 Without prejudice to the above, the assessee also submitted that SPI has also incurred certain selling & distribution expenses amounting to ₹ 224.30 lakhs. 144.6 Without prejudice to the above, any expenses incurred to earn the remuneration would be deductible as expenses incurred in the course of carrying on the business. 145. However, the AO disagreed with the submission of the assessee by observing that it is impossible to assume that the assessee has not incurred any expenses on making such a huge sale on behalf of SPI. In the absence of detail of expenses incurred by it on behalf of SPI and perusal of other expense, personnel cost debited by assessee the following expenses directly related to assessee's function performed on behalf of SPI Selling & distribution expenses ₹ 122,29,47,629/- Salary and advance to field staff ₹ 76,91,47,335/- Total ₹ 199,20,94,983/- 145.1 These expenses divided into three concerns in their turnover ratio. The ratio of both partnership firms are 37.21 % (SPI 16.49% + SPS 20.72%) accordingly Rs, 74,11,66,808/- expenses are disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order show that the additions have been made by treating the transactions u/s. 40A(2) of the Act. In that case, we have to state that provisions of section 40A(2) are applicable only in respect of payments made to related parties mentioned therein. But the transaction before us is of credit in nature i.e. sales so provisions of section 40A(2) are not at all applicable. 27. Respectfully following the findings of the Tribunal (supra), we direct the A.O to delete the addition of ₹ 21,25,278/-. Ground no. 9 is allowed. 124. Respectfully following the same, we direct the A.O. to delete the addition of ₹ 2,75,07,070/-. Ground no. 11 is allowed. 125. Ground no. 12 relates to the disallowance of ₹ 62,15,78,070/- made u/s. 37 of expenses incurred on behalf of Sun Pharmaceutical Industries. 126 An identical issue was considered by the Bench in assessee's own case in ITA NO. 1589/Ahd/2011 and ITA No. 2430/Ahd/2009. The relevant part of ITA No. 2430/Ahd/2009 has been extracted in ground no. 11 of this appeal. For similar reasons, we direct the A.O. to delete the disallowance of ₹ 62,15,78,070/-. 133. Respectfully following the decisions of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;the Ld. CIT(A)'] is bad in law and on facts. 1. Re: Addition on account of Sale of Pantoprazole to Sun Pharma Global FZE -Rs. 94,73,729/-: 1.1 The Ld. CIT(A) has grossly erred in upholding the order of Assessing Officer ('AO'}/ Transfer Pricing Officer ('TPO') who erred in rejecting the benchmarking done by the Appellant as a contract manufacturer having regard to the functions performed, the assets deployed and risks undertaken by the Appellant in the transaction. The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in classifying the sales made by the Appellant having regard to the relevant Para of the US PDA under which the approval was sought without appreciating the fact that the US PDA Para under which the product is filed is irrelevant for the Appellant who is a contract manufacturer. The Ld. CIT(A) has grossly erred in sustaining the additions made by the TPO by recharacterizing the transaction undertaken by the appellant based on peculiar interpretation of the past & unpredictable future events. The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in arbitrary adoption of residual profit split me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT{A), has grossly erred in upholding the order of AO/TPO and further enhancing the adjustment merely by placing reliance on the order of CIT(A) for AY 2008-09 which covered Pantoprazole drug without appreciating the evidently distinguishable facts relevant for other Para IV products. 2.5 The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in arbitrary adoption of residual PSM as the same cannot be applied to the transaction under review as neither there is any transfer of unique intangibles nor multiple interrelated transactions requiring separate evaluation, 2.6 Without prejudice to the above, the Ld. CIT(A) failed to appreciate that if at all PSM is adopted as the most appropriate method, the determination of ALP had to be in accordance with Rule 10B(1)(d)(ii) on the basis of "reliable external market data" which was totally nonexistent, hence application of PSM method would fail. 2.7 Without prejudice to the above, even if PSM is to be followed, the Ld. CIT(A) has grossly erred in not appreciating that the IPR belonged to the AE, AE was exposed to significant risks (having regard to the fact that the Para IV product had inherent risk) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the AE and the AE was exposed to significant risks inherent in the transaction and accordingly the profit allocation for the IPR to the AE was extremely low and unjustified. 3.8 Without prejudice to the above, if PSM is to bo followed, the ratio of 50:50 ought to be adopted for benchmarking sale of the products. 4. Non-deduction of Remuneration received from Partnership firm for determination of Book Profits u/s 115JB - ₹ 201,23,42,044/-: 4.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the remuneration receivable from the partnership firm as an income to which the provisions of section 10 apply for the limited purpose of computing book profits u/s 115JB without appreciating that remuneration received from partnership firm is nothing but an appropriation of profit. 4.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the entire mechanism of computing book profits is based on normal commercial profits having regard to the relevant accounting framework prescribed in Companies Act and thus remuneration is eligible to be deducted for computing book profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt into creation of any new asset or any benefit of an enduring nature. 7. Disallowance of selling and distribution expenditure incurred on behalf of Sun Pharmaceutical Industries ('SPl') and Pharma Sikkim ('SPS') u/s 14A: ₹ 170,95,96,941/- 7.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in disallowing selling and distribution expenditure incurred by the Appellant u/s 14A on the ground that the said expenditure is directly incurred by the Appellant for earning exempt income without appreciating that: .1 Selling and distribution expenditure incurred by the Appellant is wholly and exclusively for the purposes and in furtherance of its business activities and in absence of any cogent evidence to the contrary, it could not be presumed to have been directly incurred for earning exempt income; .2 Remuneration received from the partnership firm is not an exempt income covered under chapter III rather a receipt which is not liable to tax in the hands of partner by virtue of interplay between provisions of section 28(v) and 40(b) since it has been indirectly charged in the hands of the partnership firm and therefore, app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and in law, the Ld. CIT(A) erred in considering the amount disallowed u/s 14A under normal provisions, as amount to be added for computing book profit u/s 115JB without appreciating that the provisions of section 115JB and section 14A are mutually exclusive, deeming provisions enacted under the Income-tax Act which are to be made operative only to the extent of the deeming fiction created therein. The Ld. CIT(A) grossly erred in importing the deeming provisions of sub-section (2) and (3) of section 14A into Explanation to section 115JB. 9.2 Without prejudice to the above, the Ld. CIT(A) erred in adding an amount of ₹ 7,16,20,195/- u/s 115JB read with section HAread with rule 8D without appreciating that: .1 In absence of direct and specific expenditure incurred for earning exempt income, no addition of the amount disallowed u/s 14A read with Rule 8D in computing book profits is warranted. .2 The Assessing Officer has mechanically invoked Rule 8D without first recording its satisfaction regarding the correctness of the claim made by the Appellant; .3 The income earned by the Appellant fro:n the partnership firm is not an exempt income covered under chapter 111 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that Department of Scientific and Industrial Research (DSIR) has already approved the entire revenue expenditure. 10.4 Without prejudice to the above, Assessing Officer has undisputedly accepted that R&D expenses are futuristic in nature, and under such circumstances, R&D expenditure incurred during the year under consideration cannot be associated to the turnover of the said assessment year for the purpose of disallowance. 10.5 Without prejudice to the above, the Assessing Officer grossly erred in allocating total R&D cost incurred by the Appellant in the ratio of domestic formulations turnover without appreciating that only cost of raw materials consumed shall be allocated between the Appellant and the partnership firm, as held by the Honorable ITAT for AY 2005-06, 2004-05 and 2002-03. 10.6 Without prejudice to the above, the Ld. CIT(A) grossly erred in not accepting the segment wise expenditure incurred by the domestic formulation department amounting to ₹ 3053.29 Lakhs and ought to have disallowed the R & D expenses only relating to the domestic formulation activity. 10.7 Without prejudice to the above, the R&D expense should not be allocated on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the working partner was obliged to provide technical and other information to partnership firm in lieu of which it was entitled to receive remuneration and hence the utilization of the capital R&D equipment for the activities of the partnership firm, if any, was only in the furtherance of its obligation under the partnership deed. 11.6 Without prejudice to the above and without accepting any disallowance of the expenses, the Ld. CIT(A) should have restricted the disallowance towards expenses as provided u/s 14A read with Rule 8D. 12. Addition on account of re-characterizing remuneration from SPI and SPS (partnership firms) as consideration for use of Trademarks, Brands etc. - ₹ 201,23,42,044/-: 12.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in upholding the recharacterization of the remuneration received from the partnership firms, which is not taxable by virtue of the proviso to section 28(v) read with section 40{b) of the Act. In doing so, the Ld. CIT(A) erred in arbitrarily re-characterizing the receipt of partner's remuneration as royalty holding it to be a consideration for use of brand name and trade mark of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year should have been considered and remuneration of ₹ 96,27,96,704/- pertaining to past years cannot be included for the purpose of computing disallowance under this ground. 12.7 Without prejudice to the above and without admitting that the remuneration amounts to royalty, the Ld. CIT(A) ought to have appreciated that in any case, the entire remuneration cannot be held to be received for permitting use of trademarks, brand name but is for a wide range of functions / services performed by the Appellant in its capacity as working partner. 13. Re: Disallowance of R&D Expense not approved by DSIR of ₹ 36,93,69,000/-: 13.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in setting aside the issue to the AO on the ground that details of the expenses have not been furnished whereas in fact the relevant details have been duly submitted to the AO as well as the Ld. CIT{A) as part of the paperback. 14. Taxability of interest on Income Tax Refund u/s 244A - ₹ 5,99,53,963/-: 14.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in upholding the addition on account of interest on in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal bearing no. 8 vide Para No. 56 & 57 of this order. Thus respectfully following the same, the ground of appeal of the assessee is dismissed. 156. The issue raised by the assessee in the ground no. 5 is that the Ld.CIT (A) erred in not allowing the deduction of ₹ 7,56,90,473/- on account of expenditure incurred for doctors towards business promotion. 156.1 The assessee has shown ₹ 2424.3 million on account of selling & distribution expenses which includes ₹ 8,41,89,667/- on account of the distribution of gifts and providing hospitality services to the doctors/ medical practitioners. 156.2 However, the AO was of the view that the said expenditure is prohibited under the guidelines issued by the medical council of India (MCI). Therefore the same is not allowable under section 37(1) of the Act. 156.3 However, the assessee submitted the breakup of ₹ 8,41,89,667/- as under: Sr.No. Particulars Amount 1. Business Promotion expenses 7,27,99,029/- 2. Conference fees & Sponsorship 84,99,194/- 3. Accommodation (lodging & Boarding) 28,91,444/- Total 8,41,89,667/- 156.4 The assessee further contended that such expenses were incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,667/- as detailed above on gift and reimbursement of lodging and boarding and conference expenses incurred / by the Doctors/medical practitioners. As is evident from the written \ submission, the business promotion expenses of ₹ 7,27,99,029/-are pertaining to the equipment provided to various medical j practitioners as gifts. Claim of indirect business gain as a result of gifts/ provided to the medical practitioners is irrelevant for alfowabifity of these expenses. The appellant has also argued that the amendment to Indian Medical Council (Professional Conduct, Etiquette & Ethics) Regulation 2002 on 10.12.2009 and CBDT Circular No. 5/2012 dated 01.08.2012 are not applicable in the case of appellant since they are applicable to the Doctors/ Medical Practitioners accepting freebies.. This argument of Ld. Authorized Representative is also not acceptable. Undisputedly, Medical Council of India has amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 with effect from 10.12.2009 prohibiting from accepting of gifts, travel facility or hospitality, from any pharmaceutical company or the health care industry by the doctors/medical professionals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses at ₹ 28,91,444/- are also deserves to be disallowed being freebies. The conference fees and sponsorship expenses since were incurred for sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of (appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines. Further they appears to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. Accordingly, the disallowance to the extent .of ₹ 84,99,194/- being conference fees and sponsorship is directed to be deleted and balance amount of disallowance is confirmed. Thus, appellant succeeds partly in respect of Ground No. 20. 159. Being aggrieved by the order of the Ld.CIT (A), both the assessee and Revenue are in appeal before us. The revenue has raised the following ground of appeal: 1. Whether on the facts and circumstances of the case and in law the Ld. C.I.T. (A) was justified in directing the AO. to the disallowance to the extent of ₹ 84,99,194/- being conference fees and sponsorship, without appreciating that the A.O, had correctly disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, we allow the ground of appeal of the assessee and dismiss the ground of appeal of the Revenue. 162. The issue raised by the assessee in the ground of 6 is that the Ld. CIT-A erred in treating the repairing expenditure of ₹ 28,93,787/- as capital in nature. 162.1 We have already decided the impugned issue in favor of the Revenue in ITA 929/AHD/2017 in the ground of appeal bearing no. 10 vide Para No. 72 & 73 of this order. Thus respectfully following the same, the ground of appeal of the assessee is dismissed. 163. The issue raised by the assessee in the ground of 7 is that the Ld.CIT (A) erred in making the addition for selling and distribution expenses amounting to ₹ 1,70,95,96,941/- incurred on behalf of SPI and SPS u/s 14A of the Act. 163.1 We have already decided the impugned issues by restoring the appeal to the file of the AO in ITA 929/AHD/2017 in the ground of appeal bearing no. 13 vide Para No. 95 & 96 of this order. Thus respectfully following the same, the ground of appeal of the assessee is allowed for statistical purpose. 164. The issue raised by the assessee in the ground of 8 is that the Ld. CIT-A erred in confirming the addition made by the AO u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the AO disregard the contention of the assessee by observing that the Ld. CIT (A) in its case for AY 2008-09 in similar facts and circumstances treated the remuneration as taxable income by holding that remuneration was nothing, but it was fee for the use of all present and future trademark/brands and technology of the partnership firms. Therefore the AO took a similar view in the year under consideration and treated the remuneration as taxable income amounting to ₹ 2,01,23,42,044/- and added to the total income of the assessee. 169. Aggrieved assessee carried the matter to Ld. CIT (A) who confirmed the order of the AO by observing as under: 21.1. As per the existing Agreement, the appellant company has permitted user of trademark/brands by SPI/SPS for a token consideration of ₹ 1/- for the period of 5 years. The Assessing Officer, in the assessment order of SPI has discussed this issue and he has valued the royalty of Jammu and Dadra plant at a substantial sum, and consequently has reworked out the eligible deduction u/s. 80IB. It has been also noticed that the SPI has not paid any management fees to the appellant I company although three of its Directors and Key ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016 for the AY 2009-10 vide order dated 08-09-2017 has deleted the addition made by the AO. Therefore there is no question for making the addition to the total income. 172. On the other hand the Ld. DR vehemently supported the order of the Lowe Authorities. 173. We have heard the rival contentions and perused the materials available on records. At the outset, we find that in the identical facts and circumstances in the own case of the assessee's (supra), the ITAT deleted the addition made by the AO. The relevant extract of the order is reproduced as under: 72.This issue was considered by the Tribunal in ITA Nos. 3297 & 3420/Ahd/2014 vide ground no. 13 of that appeal and the relevant findings of the Tribunal read as under:- 128. We have given a thoughtful consideration to the facts in issue. It is an undisputed fact that the remuneration has been paid by the firm SPI as per the partnership deed read with supplementary partnership deed. It is also an undisputed fact that the said partnership deed read with supplementary deed has not been treated as sham or unlawful deeds. The First Appellate Authority emphasized on the entire transaction as a device of tax evasion. The partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above-said judgment, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR and the ld. AR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. In view of the above and respectfully following the ITAT order as discussed above, the ground of appeal of the assessee is allowed. 174. The issue raised in the ground no. 13 is that the Ld.CIT (A) erred in not allowing the deduction of R&D expenses not approved by the DSIR amounting to ₹ 36,93,69,000/- 174.1 Assessee has shown ₹ 18959.69 lacs (16,558.41 as revenue expenditure and ₹ 2401.28 as capital expenditure excluding land & building) on account of research and development expenses in house research facility. The assessee on these expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Charges 15.Contract Labour Charges 16.Foreign Professional Fees (20.92) (88.20) (33.39) (7.93) (13.81) (204.05) (307.28) (75.10) (10.80) (0.01) (16.64) (1.71) (0.27) (230.83) (219.81) (719.61) Total expenditure for which deduction is approved by DSIR 14,599.64 174.7 Reconciliation statement for capital expenditure as under: II. Capital R & D Expenditure Particulars Amount (Rs. In lacs) Amount (Rs.in lacs) Amount of Capital R &D on which weighted deduction is claimed by the Assessee in the retutn of income 3,521.04 Less: Inadmissible capital expenditure 1.Land (1,050.79) (16.23) Less: Amount claimed @100% u/s.35(i)(iv) 1.Buiding (60.57) 16,550.01 Net Amount of Revenue R &D on which weighted deduction is claimed by the Assessee in the return of income 2,409.68 Less: Amount not considered by DSIR 1.R&D vehicle (96.63) Total expenditure for which deduction is approved by DSIR 2,313.05 174.8 The assessee also submitted that the expenditure not approved by the DSIR is also eligible for weighted deduction u/s 35(2AB) of the Act. The submission of the assessee can be categorized as under: 1) Foreign patent filing expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees during the year under consideration. The details of such expenses stand under: Sr.No. Particulars Amount 1. Staff Canteen 75.10 2. Laundry & Cleaning 10.80 3. Training Centre Expenses 0.01 4. Customer Entertainment 16.64 Total 102.55 These expenses are in the nature welfare of employees who are working in the approve R&D facility. All these facility provided by the company to it employees to retain them and for better productivity of employees. 5) The assessee has incurred the advertisement expense amounting to ₹ 1.71 lacs on which it claimed deduction u/s 35(2AB) of the Act. Such advertisement expenses paid by the Tandalja R&D unit to find out volunteers for the purpose of carrying out clinical trial which is integral part of the R&D activities. 6) The assessee has incurred expenses towards foreign professional fees amounting to ₹ 719.61 lacs. The professional fees incurred by the assessee for getting the advice relating to patents, violation or infringement on the existing patent of various pharmaceutical product. 7) The assessee has incurred contract labour charges during the year under consideration amounting to ₹ 219. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are not reported in certificate of DSIR. 3) Accordingly the AO was directed that the expense not certified by the DSIR should be examined individually whether expenses pertain to in house R&D facility. 4) The building maintenance, municipal tax paid, and rent pertaining to building exclusively used for the purpose of R&D activity are eligible for the deduction. 178. Being aggrieved by the order of the ld. CIT-A, both the assessee and Revenue are in appeal before us. The assessee is in appeal before us against the direction of the ld. CIT-A for the verification of the expenses and the Revenue is in appeal before us against the direction of the ld. CIT-A to allow the relief to the assessee after the verification of the expenses. 179. The Revenue before us has raised the following grounds of appeal: 14. Whether on the facts and circumstances of the cae and in law the Ld. C.I.T. (A) was justified in directing the A.O. to verify each and every item of the expenses not certified by D.S.I.R. included in ₹ 2046.99 lacs and then allow consequential relief without appreciating that the A.O. had correctly disallowed assessee's claim of weighted deduction u/s. 35(2AB) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances this ITAT in the case of Torrent pharmaceuticals ltd bearing ITA No. 4343 & 4356/Ahd/2007 for the AY 2002-03 vide order dated 31-01-2011 has deleted the addition made by the AO. Therefore there is no question for making the addition to the total income. 182. Both the ld. AR and the DR before us relied on the order of authorities below as favorable to them. 183. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the ld. CIT-A allowed the ground of the assessee for statistical purpose after having reliance of the order of his predecessor for the AY 2008-09. We further note that the assessee against the order of the Ld. CIT-A preferred an appeal before the Tribunal in ITA No. 3297/AHD/2014 which was decided in favor of the assessee vide order dated 16-6-2017. The relevant extract is reproduced below. 93. As demonstrated elsewhere, the IPR/ANDA rights were very much with SPG BVI who entered into an agreement with the appellant company for the manufacturing of the said drug. The application of Transactiona!- Net Margin Method is the most appropriate method in such sale transaction and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the matter before the Id. CIT(A) but without any success. While dismissing the grievance of the assessee, the Id. CIT(A) followed the findings of his predecessor given in A. Y. 2002-03 to 2004- 05. Before us, the Id. counsel for the assessee stated that the Tribunal in assessee's own case in earlier years has decided this issue in favour of the assessee and against the revenue in ITA No. 1558/Ahd/2006. The Id. D.R, could not bring any distinguishing decision in favour of the reven ue. 14. We have given a thoughtful consideration to the order of the Tribunal in earlier years; we find that the Tribunal while deciding the issue in favour of the assessee has followed the decision of the Coordinate Bench, Mumbai in the case of USV Ltd. 54 SOT 615. Findings of the Tribunal read as under:- 24. We have carefully perused the orders of the authorities below. We find that the Id. CIT(A) has simply followed the findings of his predecessor for A.Y. 2000-01. We also find that the assessment order for A. Y. 2000-01 has been quashed by the Tribunal vide a ITA Nos. 1199 & 1279/Ahd/2006, which means that the basis for upholding the disallowance has been removed. We further find that on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find force in the contention of the ld. Senior Counsel. The Co-ordinate Bench in ITA No. 2067/Ahd/2013 has decided the impugned issues as under:- 69. Ground no.1 relates to the deletion of the disallowance of ₹ 67,620/- claimed as weighted deduction u/s. 35(2AB) of the Act on gift expenses incurred for R & D employees. 70. This issue has been decided in favour of the assessee and against the revenue by the Co-ordinate Bench in ITA No. 1592/Ahd/2011 qua ground no. 2 of that appeal. The relevant part reads as under:- Ground no. 2 relates to the weighted deduction u/s. 35(2AB) on account of gifts to R & D employees on occasion of marriage. 44. We find that an identical issues has been decided in favour of the assessee and against the revenue in the case of Claries Lifesciences Ltd. 112 ITD 307 (Ahd.) which decision has been followed by the ld. CIT(A). The said decision of the Tribunal has been confirmed by the Hon'ble . A.Y. 2009-10 Jurisdictional High Court in Tax Appeal No. 383 of 2008. Now, that the decision of the First Appellate Authority is well supported by the decision of the Hon'ble Jurisdictional High Court. No interference is called for. Ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 133.92 lakhs being revenue expenditure other than building, which was considered as revenue by the assessing officer himself. These items clearly are within the purview of allowable u/s 35(2AB) of the Act as weighted deduction. The security expenses are also directly related to in-house research as proper security is required to avoid leakage and only in-house staff will have assessed to building. Accordingly, this expenditure are for preserving the research which is completed and its clinical trial is pending. As regards to the environmental issue, the assessee-company has set up an affluent plant and as is widely accepted the vegetation, i.e. trees have contained the pollution. This expenditure of gardening and plantation have been done for the perseverance of environment and this is directly related to R & D facilities. As regards to salary paid to Dr. C.Dutt amounting to ₹ 58.54 lakhs, he is in-charge of R & D Centre at Bhatt. He is the person through whom all co-ordination of technical scientists and other technical persons are carried out. The entire reporting of the research activity to the management has been taken to the Board of Directors through him only and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of AIR data/ ITS detail, the AO found that the assessee has received interest on income tax refund u/s 244A of the Act of ₹ 5,99,53,963/- for AY 2009-10 & 2011-12 vide letter dated 21-09- 2015. However, the assessee has not disclosed it in the return of income. Accordingly, assessee was sought to explain for the same. 184.2 In reply to the question of AO, the assessee filed a letter dated 22- 02-2016 by stating that it has not accounted for such income during the year under consideration. 185.3 In view of the above, the AO accordingly added the amount of ₹ 5,99,53,963/- to the total income of the assessee. 186. Aggrieved assessee carried the matter to Ld. CIT (A) who confirmed the order of the AO by observing that the assessee failed to furnish any acceptable reason against the action of the AO. 187. Being aggrieved by the order of the Ld.CIT (A) assessee is in appeal before us: 188. The Ld. AR before us conceded that the issue stands against the assessee. On the contrary the Ld. DR before relied on the order of authorities below. 189. We have heard the rival contentions of the parties and perused the materials available on record. As the issue stands aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is therefore without any blemish. Further, in view of aforementioned findings, it is not necessary to enter into this controversy. Thus, there is no merit in these appeals The implication of the fact that the assessment order passed by the Assessing Officer covers eight assessment years is to be noted. The assessment done in six assessment years is under section 153C. Assessment order is set aside only in respect of four such assessment years that too on the technical ground, noted above. The objection pertaining to the four assessment years in question does not relate to the other two assessment years, namely, 2004-05 and 2005-06. Likewise, this decision has no bearing in respect of assessment done qua assessment year 1999-2000 as well as assessment year 2006-07. The necessary consequence would be that insofar as the conclusions of the Assessing Officer in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had correctly disallowed the assesee's claim of weighted deduction u/s. 35(2AB) of the Act since the the expenses on trade mark registaration charges and overseas product registration charges were incurred by the assessee outside India and hence the same could not be considered for the purpose of allowance of weighted deduction u/s. 35(2AB) of the Act. 4. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A.O. to allow weighted deduction on expenses relating to building repairs and Muncipal Taxes amounting to ₹ 1,21,59,206/-without appreciating that the A.O. had correctly disallowed expenditure on repair to building and municipal taxes u/s. 35(2AB) of the Act since the assesee did not establish as to how expenditure on repair to building and municipal tadaes lead to improvement in R & D activitities carried on by the assessee. 5. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A. O. to allow weighted deduction at 200% on lunch and refreshment and brokerage for property without appreciating that the A.O. had correctly disallowed expenses on lu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case and in law, the Ld. C.I.T. (A) ws justified in holding that " The appellant is eligible for deduction u/s. 80IA(4) in respect of income of Captive Power Generation Unit and hence the Assessing Officer is directed to allow the same after correctly computing the income of eligible unit " without appreciating that the A.O. by relying on the provision of 80A(4) 80AB, SOB 80IA(1) of the Act had correctly disallowed assessee's claim of deduction u/s. 80IA(4) of the Act. 10. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T, (A) was justified in holding that " The appellant is eligible for deduction u/s. 80IA(4) in respect of income of Captive Power Generation Unit and hence the Assessing Officer is directed to allow the same after correctly computing the income of eligible unit", without appreciating that the assessee did not substantiate its claim with facts and figures to prove that it had included profit of the Undertaking derived from utilization of captive power Genertion Unit in the gross total income. 11. Whether On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verify each and every item of the expenses not certified by D.S.I.R. included in ₹ 2046.99 lacs and then allow consequential relief without appreciating that it was for the assesee to approach the Secretary, D.S.I.R. for reconsideration of approval of expenditure on scientific rsearch to the extent of ₹ 2046.99 lacs not considered in certificate issued by the Secretary, D.S.I.R.. for the purpose of weighted deduction u/s. 35(2AB) of the Act. 16. Whether on the facts and Circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A.O. to verify each and every item of the expenses not certified by D.S.I.R. included in ₹ 2046.99 lacs and then allow consequential relief without appreciating that in accordance with the Scheme of Section 35(2AB) of the Act, the approval of expenditure on Scientific research is the guiding factor for the A.O, to determine the allowance or otherwise of the weighted deduction u/s. 35(SAB) of the Act claimed by the assessee. 17. Whether on the facts and Circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A.O. to verify each and every item of the expenses not certified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for weighted deduction under section 35(2AB) of the Act. 196.1 The assessee in response to the notice issued by the AO explained that the word "expenditure in the nature of cost of any land or building" used in section 35(2AB) of the Act relates to the purchase of any land or building. But the expenses claimed by it are in the nature of wear & tear expenses which are not capital in nature for the land or building. Therefore the repair and maintenance charges cannot be considered as the cost of the building. These expenses were incurred for wear & tear and maintenance of the building. These expenses are not bringing the building into existence or to put to use for work. Therefore expenses are not in the nature of capital. 196.2 Repair of building expenses incurred for the building in which the research and development activity carried out. 196.3 However, the AO rejected the contention of the assessee by observing that the repair and maintenance and municipal tax expenses incurred by the assessee pertaining to the building in which R&D activities carried out. Therefore on these expenses only 100% deduction allowable not weighted deduction. 197. Aggrieved assessee preferred an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of that appeal. In ground no. 1 of the present appeal, we have extracted the relevant part of the decision of the Co- ordinate Bench. For the reasons given therein, ground no. 2 is also dismissed. 200.1 The facts of the case on hand are identical to the facts of the case as discussed above. The ld. DR has also not brought anything on record contrary to the finding of ld. CIT-A, and the argument advanced by the ld. AR for the assessee. Therefore respectfully following the same, we do not want to disturb the finding of ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 201. The issue raised by the Revenue in ground number 5 is that the Ld.CIT (A) erred in allowing the weighted deduction claimed under section 35(2AB) of the Act in respect of lunch/refreshment of expenses and brokerage of the property. 201.1 We have already decided the impugned issues against the Revenue in the ground of appeal bearing no. 5 vide Para No. 131 of this order in ITA 922/AHD/2017. Thus respectfully following the same, we are inclined not to disturb the finding of the Ld.CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement of conference fees and sponsorship fees to the medical practitioners. 206.1 At the outset, we note that we have adjudicated the issue raised by the Revenue along with ground of appeal of the assessee bearing no. 5 vide Para no. 161 of this order in ITA 1237/AHD/2017. Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 207. The interconnected issue raised by the Revenue in ground no. 14 to 17 is that the Ld.CIT (A) erred in directing the AO to allow the claim of the assessee after verifying each and every item of the expenses not certified by the DSIR. 207.1 At the outset, we note that we have adjudicated the issue raised by the Revenue along with ground of appeal of the assessee bearing no. 13 vide Para no. 183 of this order in ITA 1237/AHD/2017. Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 207.2 In the result the appeal of the Revenue is dismissed. 208. In the combined result the assessee appeal bearing Nos. 929/AHD/2017 and 1237/AHD/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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