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TMI Blog2023 (2) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited [ 2022 (10) TMI 617 - SUPREME COURT ] Therefore, now the direction of the ld. Dispute Resolution Panel is not correct. The ld. AO is correct in disallowing the above sum. Addition in respect of purchase of raw material bisoprolol - assessee has adopted Transactional Net Margin Method but the ld. TPO applied CUP Method and obtained data from Unichem Laboratory and worked out the external CUP price ₹33,086 Per.Kg. - HELD THAT:- We find that identical issue arose in the case of the assessee for A.Y. 2009-10, 2010-11 and [ 2016 (3) TMI 1105 - ITAT MUMBAI ] wherein for order dated 31.03.2016 has upheld the applicability of CUP Method, confirming the rejecting of TNMM as the most appropriate method. The co-ordinate Bench also considered the reasonable quantity of 20kg only. In view of this, principally Co-ordinate Bench decision in respect of the assessee is required to be followed. The Co-ordinate Bench also agreed with the simple average of the prices. The Coordinate bench [ 2016 (3) TMI 1105 - ITAT MUMBAI ] in case of assessee deserves to be followed. We direct the AO/TPO to restrict the adjustment following the order of the co-ordinate bench for A.Y. 2009-10. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he coordinate bench in earlier years. Thus, we direct lower authorities to delete the disallowance of expenses on free samples. Ground no 4 is allowed. Allowability of conference expenses - HELD THAT:- We find that the issued is squarely covered against the assessee by the decision of Apex Laboratories Limited [ 2022 (2) TMI 1114 - SUPREME COURT ] Accordingly, Ground No. 5 is dismissed. - ITA No. 1525/MUM/2016 And ITA No. 1798/MUM/2016 - - - Dated:- 5-12-2022 - Shri Prashant Maharishi, AM And Shri Sandeep Singh Karhail, JM For the Assessee : Ms. AratiVissanji, Ms. Astha Shah For the Revenue : Shri. Samuel Pitta ORDER PER PRASHANT MAHARISHI, AM: 01. These are Cross appeals filed by the assessee M/s. Merck Limited [Assessee/ Appellant] as well as the DCIT Range 7/(2)/(1), Mumbai (the ld. AO) for A.Y. 2011-12 against the assessment order passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (The Act) by the ACIT, 7(2)(1), Mumbai on 25.01.2016 passed in pursuance of order passed u/s. 92C(1)(3) of the Act dated 12.01.2015 which was submitted to direction u/s. 144C(5) of the Dispute Resolution Panel-3, Mumbai (ld. DRP) dated 23.12.2015, assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal and bad-in-law. 2.4 Not upholding the grounds of the appellant while making huge transfer pricing adjustment on the basis of surmises and conjectures, assumptions and presumptions without considering the papers and documents submitted as also submissions made during the course of the Transfer Pricing/ DRP proceeding, Assessment proceedings and therefore, the Order passed is illegal and bad-in-law and therefore, the Order passed is illegal and bad-in-law and consequently, null and void. 2.5 Addition in respect of purchase of raw materials of ₹ 93,28,708/-: On the facts and in the circumstances of the case, and in law, the Learned TPO erred in proposing an adjustment of rs. 3,97,18,708 and the Hon ble DRP further erred in confirming an addition of ₹ 93,28,708 in respect of international transaction of purchase of raw materials from associated enterprise( AE ). (a) Rejection of Appellant s Most Appropriate Method The learned TPO erred in proposing and the Hon ble DRP further erred in confirming the rejection of Transactional Net Margin Method ( TNMM ) considered as the most appropriate method in terms of Section 92C(2) of the Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliability of data necessary for the application of method should be taken into account; while applying the CUP method on the basis of data sourced by the TPO under Section 133(6) of the Act without appreciating that the Appellant could not have access to such data. 3. Disallowance U/s. 14A ₹ 9,35,446/- On the facts and in the circumstances of the case, and in law, the Learned AO/ the Hon ble DRP erred in disallowing ₹ 9,35,446/- U/s. 14A of the Act read with Rule 8D, though however, it was contended that- (a) The appellant did not incur any expenditure to earn the tax free income during the year except an amount of ₹ 3 lakhs estimated by it as a proportionate salary cost of the employee of the company who devoted part of his time for making investment in Mutual Funds etc. for the appellant. (b) There was no person except the aforesaid person who devoted time for investment of surplus fund as authorized by the Board of Directors and there is no involvement of any other person except the said person in investment of surplus funds. (c) In the appellant s own case, the Hon. Tribunal has held in its Order for assessment year 2007-08 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that expenses incurred on conferences, seminars and symposium for doctors was not an offence or was not prohibited by any law. 6. Interest U/s. 234D ₹ 12,34,499: On the facts and in the circumstances of the case, and in law, the Learned AO/ the Hon ble DRP erred in charging interest U/s. 234D of ₹ 12,34,499/- as the appellant was not liable to pay the same. 7. Initiation of Penalty Proceedings U/s. 271(1)(c) of the Act: On the facts and in the circumstances of the case, and in law, the Learned TPO/AO/ the Hon ble DRP erred in initiating penalty proceedings U/s. 271(1)(c) of the Act. 8. The above grounds of appeal are distinct and separate and without prejudice to each other. 9. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted. 03. The learned AO is also aggrieved by the directions of Ld. DRP and therefore has raised following 2 grounds of appeal in ITA No. 1798/MUM/2016: 1. On the facts and in the circumstances of the case, Hon ble DRP erred in deleting the adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer pricing study report and Form No. 3CEB assessee claimed that all its international transactions are at arm s length. 07. The learned TPO examined that assessee has purchased raw materials from its associated enterprises.In A.Y. 2010-11, Transactional Net Margin Method adopted by the assessee was rejected and Comparable Uncontrolled Price Method (CUP) was applied. The differential price was applied to the quantity of raw material consumed. For this year, the TPO obtained information u/s. 133(6) of the Act from M/s. Unichem laboratories limited about the purchase rate of Bisoprolol Fumarate (BF) which was confronted to assessee on 18.11.2014. The rate of Unichem laboratory was ₹33,086 Per.Kg. and the price paid by the assessee was ₹62,211 Per.Kg. Therefore the TPO issued show caused notice to the assessee asking as to why the arm s length price of international transaction of purchase of raw material should not be determined using the CUP method and making the adjustment on account of difference on account of external CUP price available and price of international transaction. The assessee submitted a detailed reason stating that, BF is the active single ingred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the income was computed at ₹113,35,07,736/-against returned income of ₹ 105,73,75,060/-. 012. Assessee preferred the objection before the ld. Dispute Resolution Panel, Where the ld. DRP a. following its own direction for A.Y. 2010-11, upheld that CUP is the most appropriate method and further as the ld. TPO has also granted adjustment of 10% to the import price confirmed the adjustment on account of import of BF. b. On the transfer pricing adjustment with respect to technical services, the addition was deleted because of the decision of the co-ordinate bench in assessee sown case on the c. It also deleted the disallowance of ₹92,158 in respect of late payment of employees contribution towards ESIC following the decisions of Hon ble Bombay High Court in Ghadge Patil Transport Limited. d. On the issues of disallowance u/s. 14A, the order of the ld. AO was upheld. e. On the disallowance of free physician sample and sells promotion expenditure the action of the ld. TPO/AO was confirmed. 013. The directions were passed on 23.12.2015. Based on this the ld. AO passed the final assessment order 25.01.2016. Therefore, the assessee is agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. He granted a quality adjustment on 10% and thereafter made the adjustment of above sum. The ld. DRP confirmed the same. 018. The ld. Authorized Representative submitted that this issue is covered in assessee s own case by the order of the co-ordinate bench for A.Y. 2009-10 2010- 11 where the CUP Method was accepted as the most appropriate method. It was held that domestic sales made by Unichem Limited were considered as comparable. The co-ordinate bench further held that only such transaction in respect of a reasonable quantity i.e. 20kg should be taken into account. It was held that simple Arithmetic Mean should be considered. The ld. Authorized representative submitted that if the above order of co-ordinate bench is considered then the average price works out to ₹47,772 Per.Kg. and the adjustment would be reduced by ₹ 33,47,240/-. Without prejudice, the ld. AR also submitted that, assessee has purchased various raw materials from its associated enterprises, out of which only one raw material which is consisting of 55.75% of the total purchases ld. TPO adopted CUP, whereas for the other material, the ld. Transfer Pricing Officer has accepted the TNMM as the mos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the issue of distribution of free sample the assessee submitted that the disallowance in support of free sample has been deleted by the co-ordinate bench in assessee s own case for past several years and therefore same should be followed. 026. with respect to the sales promotion disallowance , ld AR referred to the note on sales promotion and details of such expenses stating that same should be allowed as this are expense incurred for the purpose of business of the assessee. 027. The ld. Departmental Representative vehemently submitted that both these issues are covered by the decision of Hon ble Supreme Court in case of Apex Laboratory Private Limited Vs. DCIT in 135 taxmann.com 286. 028. We have carefully considered the rival contentions. With respect to free samples , we do not find that same is covered against the assessee by the decision of Honourable SC or it is prohibited by MCI Guidelines. Free sample of medicines supplied to doctors is for promotion of the product of the pharmaceutical company. When a new product is launched, the doctors through the free sample provided, test marketability of new drug launched in the market, give necessary inputs regarding it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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