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TMI Blog2023 (1) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is dismissed. Miscellaneous sales/processing charge, miscellaneous receipts eligible for computation of profits for claiming deduction u/s. 80IB - HELD THAT:- Tribunal has included miscellaneous sales, processing charges, and miscellaneous receipts for claiming deduction u/s. 80IB - A.O. has held that the assessee company has been set up for the purpose of manufacturing drugs and pharmaceuticals, section 80IB states that profits and gains derived by such industrial undertaking and the A.O. has interpreted attributable to and derived from and held that the miscellaneous receipts and processing charges are attributable to the business of the assessee company. This issue has arisen in the earlier years and that the Tribunal has decided the same in favour of the assessee. We are of the considered opinion that the identical issue has been dealt with by the Tribunal in earlier years in assessee s own case and has decided this issue in favour of the assessee. Allowable business expenditure - disallowance by relying on the CBDT Circular No. 5 of 2012 read with Explanation 1 to section 37(1) of the Act, towards expenses incurred by the assessee company for busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vised Rule 8D computation enclosed in Annexure 5, which may be taken into consideration for computing the disallowance u/s. 14A read with Rule 8D, instead of the computation offered by the assessee filed along with its return of income. We are of the considered opinion that the assessee may be given one more opportunity to furnish the details of revised computation of disallowance u/s. 14A - Therefore, this issue may be remanded back to the file of the A.O. for adjudication based on the details proposed to be filed by the assessee. Hence, this ground of appeal raised by the assessee is allowed for statistical purpose. - ITA No. 2639/Mum/2018 ITA No.2732/Mum/2018 - - - Dated:- 23-12-2022 - SHRI PRASHANT MAHARISHI , AM AND MS. KAVITHA RAJAGOPAL , JM Assessee by : Shri Hemen Chandariya Revenue by : Smt. Mahita Nair ORDER Per Kavitha Rajagopal, J. M. These are cross appeals filed by the Revenue and the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) ( ld.CIT(A) for short), National Faceless Appeal Centre ( NFAC for short) passed u/s.250 of the Income Tax Act, 1961 ( the Act'), pertaining to the Assessment Year ( A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 801B unit 3 Virgonagar Old Madras Road Banglore 560049 2004-05 Bulk drugs 10B Unit (EOU) 4 Virgonagar, Old Madras Road, Banglore - 560049 1976 Bulk drugs and formulations Non 801B unit 5 Plant no.1 A-33/2, MIDC, Patalganga 410 220, Dist. Raigad 1984 Bulk drugs and formulations Non 801B unit 6 Plant no.2 A-33/2 MIDC, Patalganga- 410 220, Dist. Raigad. 1991 Bulk drugs Non 801B unit 7 Plot No.D-7, MIDC Industrial Area, Kurkumbh, Pune 1994 Bulk drugs and formulations Non 801B unit 8 Plot No.D-7, MIDC Industrial Area, Kurkumbh, Pune 2004-05 Bulk drugs and formulations 80IB unit. (EOU) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e units and in holding that the Assessing Officer was not justified in invoking the provisions of section 801B(13) r.w. proviso to section 80LA(8) of the Act, when the assessee was under the obligation of law to adopt the 'market value'for the goods transferred to and from the 801B undertaking. (ii) On the facts and circumstances of the case and in law, the Ld. cIT(A) erred in holding that the assessee is eligible for claiming deduction of Rs.23,42,32,944/ u/s. 80IB of the Act, on the profits derived from the work/manufacturing got done through Lease and License Manufacturers(LLMs). (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that miscellaneous sales/processing charge, miscellaneous receipts of Rs.41,84,39,824/- are eligible or computation of profits for the purpose of claiming deduction u/s. 8oIB of the Income Tax Act, 1961. (iv) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing allowing the claim of the assessee on the above three grounds without appreciating the fact that appeal u/s. 260A of the Income Tax Act, 1961 has been filed by the department against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import rate based on the actual import weighted average rate/quotation and in the non availability of both, the assessee has considered the weighted average export rate. The assessee further stated that in absence of none of the rates specified above, the rate arrived at by adding the notional profit margin of 23.10% to the cost of the production as per cost audit report for the relevant year has been considered. 11. Further to this, the assessee has stated that in case of intermediates when the above market price is unavailable, then the market price derived by uniformly apportioning to the cost of the production, the actual profit/loss margin of the final bulk drug based on its market price will be considered. The A.O. has held that the consideration for transferring of goods from non 80IB units to 80IB units and vice versa does not corresponds to the market value of such goods as on the date of transfer. The A.O. has further stated that the assessee has failed to furnish the details of the market value of the said goods on the dates on which the transaction was done. The A.O. has failed to consider the assessee s contention that the assessee s system is not designed to gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grievance that the ld. CIT(A) erred in not confirming the basis adopted by the A.O. for computing 80IB deduction admissible to the eligible unit. 17. This issue has been decided against the Revenue by the Tribunal in ITA No. 6558/M/2011 for A.Y. 2009-10. The Tribunal has considered this issue at para 32 of its order wherein it has followed the finding given in A.Y. 2008-09 in ITA No. 6299/M/2010. We find that in ITA No. 6299/M/2010, the Tribunal has followed the decisions of the co-ordinate Benche in ITA No. 7412/M/05 for A.Y. 2003-04, ITA No. 4320/M/2006 for A.Y. 2004-05 and ITA No. 4321/M/2006 for A.Y. 2005-06. Respectfully following the findings of the co-ordinate Bench in assessee s own case (supra), ground No.1 of the Revenue is dismissed. 17. It is observed that this issue has been squarely covered by various decisions of the co-ordinate bench in assessee s own case for the previous years. By respectfully following the above decisions, we find no infirmity in the order of the ld. CIT(A). Hence, this ground of appeal raised by the Revenue is dismissed. 18. Ground no. 2 pertains to the deduction of Rs.23,42,32,944/- u/s. 80IB of the Act on the profits derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 on the profit derived from the work/manufacturing got done through lease and license manufacturers. 19. An identical issue was considered by the Tribunal in ITA No. 6299/M/2010 for A.Y. 2008- 09 vide ground No.2 of that appeal and has considered this issue at para 17 of its order and decided the ground against the Revenue. The facts and issue being identical, respectfully following the findings of the Tribunal (supra), ground No. 2 is dismissed. 23. From the above observations and by respectfully following the said decisions, we find no infirmity in the order of the ld. CIT(A). Accordingly, this ground of appeal raised by the Revenue is dismissed. 24. Ground no. 3 of the appeal pertains to the miscellaneous sales/processing charge, miscellaneous receipts of Rs.41,84,39,824/- eligible for computation of profits for claiming deduction u/s. 80IB of the Act. It is observed that the Tribunal has included miscellaneous sales, processing charges, and miscellaneous receipts for claiming deduction u/s. 80IB of the Act. The A.O. has held that the assessee company has been set up for the purpose of manufacturing drugs and pharmaceuticals, section 80IB st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Indian Medical Counsel (Professional Conduct, Etiquette and Ethics) Regulations, 2002 has imposed prohibition on any medical practitioner or through professional associates from accepting any gift, travel facility, hospitality, cash or monetary grant, etc. from any pharmaceutical and allied health sector industries. The ld. CIT(A) has relied on various decisions which has held that the gifts that are given by the pharmaceutical companies, is against the public policy and even if it is a genuine transaction, the same cannot be allowed as business expenditure under the provisions of section 37 of the Act. The ld. CIT(A) confirmed the addition made by the A.O., amounting to Rs.48,13,05,699/- under Explanation 1 to section 37 of the Act. 31. Having heard the rival submissions and perused the materials available on record. We are of the considered opinion that the said issue raised by the assessee is covered by the latest decision of the Hon'ble Supreme Court in the case of M/s. Apex Laboratory Pvt. Ltd. vs. DCIT vide order dated 22.02.2022 (in Special Leave Petition (Civil) No. 23207 of 2019), the relevant portion of which is reproduced below for ease of ready referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2013] (214 Taxman.com 672) t. 37. From the above observation, we find no infirmity in the order of the ld. CIT(A) in setting aside the issue to the file of the A.O. for examining the expenses claimed by the assessee and to be considered in light of the Hon'ble High Court decision is Cadila Health Care Ltd (supra), pertaining to the claim of the expenses relating to clinical trials. The assessee has raised the ground that the ld. CIT(A) has failed to give any finding on the eligibility of expenses incurred on foreign consultancy expenses, building repairs, etc. for weighted deduction u/s. 35(2AB) of the Act. In this regard, we direct the ld. CIT(A) to decide these issues raised by the assessee on merit of the case. Therefore, we remand this issue to the file of the ld. CIT(A) for the limited purpose of considering the eligibility of expenses incurred on foreign consultancy expenses, building repairs, etc. claimed by the assessee for weighted deduction u/s. 35(2AB) of the Act. Hence, this ground of appeal raised by the assessee is partly allowed. 38. The third ground of appeal raised by the assessee pertains to the disallowance of Rs.91,81,989/- u/s. 14A of the Act read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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