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TMI Blog2023 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... ises the following grounds which are mutually exclusive, independent of and without prejudice to one another 1. On the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income-tax (Appeals) [the Ld CIT(A)] erroneously affirming the findings of the learned Assessing Officer (the Ld. AO] is unsustainable and ought to be quashed. 2. Re: Disallowance of deduction claimed under section 80-IB pertaining to Dadra Unit Rs. 6,99,78,8951/- 2.1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has grossly erred in denying the deduction u/s 80-IB in respect of the industrial undertaking set up at Dadra without appreciating that the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from any earlier date. 3. Re: Disallowance of deduction under section 80IB/80IE in respect of interest on staff advances & statutory/bank deposit (Jammu Unit 1- Rs. 1,58,611/ Jammu Unit-II - Rs. 20,770/-; Dadra Unit Rs. 2,89,353/- totaling to Rs. 5,57,601/-) - Rs. 88.867/- and Sikkim Unit Rs. 2,89,353/- totaling to Rs. 5,57,601/-) 3.1. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 of the Act without appreciating that invocation of rule 8D is not automatic and recording of satisfaction and establishing a direct nexus between the expenditure incurred and the exempt income u/s 10 is a sina qua non 5.2.Without prejudice to the above, the Ld. CIT(A) has failed to consider that the Appellant had sufficient interest free funds and that the investment in instruments producing exempt income were made out of such non-interest-bearing funds thereby making the interest disallowance under rule 8D(2)(ii) uncalled for 5.3. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that the Appellant had in fact earned net interest income and hence, there was no case for disallowance of interest expenditure under section 14A read with rule 8D. 5.4 Without prejudice to the above, the Ld. CIT(A) grossly erred in not appreciating that exempt income earning investments were made for strategic purposes in pursuance of Appellant's business objectives without any intention of earning exempt income therefrom. 5.5 Without prejudice to the above, while considering the investments in the partnership firm for the purpose of disallowance under section 14A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under clause (na) of Explanation 1 to section 115JB without appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld. CIT(A) failed to appreciate that - (i) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 7.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 7.3 The Ld. CIT(A)/Ld. AO grossly erred, on facts and in the circumstances of the case, in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80- IB for Dadra unit was denied. 4.1. Being aggrieved by the assessment order, the assessee has preferred an appeal before the Ld CIT(A) who has dismissed the relevant ground of appeal in para - 5.1 of his order and he relied upon order dated 11-06-2010 in ITA No.184/ASR/2009 of the Coordinate Bench of this Tribunal in the case of erstwhile Sun Pharmaceutical Industries [SPI], later on merged with assessee company, wherein it is held that Dadra unit had started its manufacturing activity in the Asst. Year 2002-03 and considering the same being the first year of commencement of business, requisite period of ten years eligibility has already lapsed in current year. 4.2. Aggrieved by the Appellate order, the assessee is appeal before us. At the outset of the hearing of the above appeal, Ld. Senior Counsel Sri S.N. Soparkar appearing for the assessee fairly conceded that similar issue was decided against erstwhile SPI by Co-ordinate Bench of the Tribunal in ITA No.3507/ Mum/2016 in A.Y. 2011-12, ITA No.2595/Mum/2018 for A.Y. 2012-13 and 2597/Mum/2018 for A.Y. 2013-14 (for five months). Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 11th June, 2010. 6.1. Aggrieved by the appellate order, the assessee is in appeal before us. Ld. Senior Counsel Sri S.N. Soparkar appearing for the assessee fairly conceded that similar issue was decided against the assessee by Co-ordinate Bench of the Tribunal in ITA No. 3507/ Mum/2016 in A.Y. 2011-12 in the case of erstwhile SPI which was later on merged with Assessee Company. Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribunal. 7. We have heard the rival contentions and perused the materials available on record. Identical issue has been decided against the Assessee by the Co-ordinate Bench in A.Y. 2011-12 to 2013-14 as [cited supra] and relevant portion of the said order is reproduced as follows: "... 34. We have heard the rival contention of both the parties and perused the material available on record. We found that the issue on hand is covered against the assessee by the order of the coordinate bench of Amritsar Tribunal in the own case of the assessee for AY 2004-05 followed in subsequent years being AY 2006-07 to 2010-11. The relevant finding of the coordinate bench in ITA No.2465/Mum/2014 reads as under: "23. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The Ground No. 6 in Departmental Appeal also relates to disallowance of business/conference fee and sponsorship expenses of Rs. 6,65,79,145/-. As both the grounds of appeal are interlinked with each other, they are adjudicated together. 8.1. The Ld AO at para - 7 of the assessment order has observed that the assessee has incurred various expenditure being accommodation, Business Promotion Expenses, Conference Fees aggregating to Rs. 10,10,64,882/ which are freebies and gifts paid to Doctors. The Ld. AO has referred to CBDT Circular No. 5/2012 in F.No. 225/142/2012 - ITA II, dated 1st August, 2012 wherein it is stated that expenditure incurred for providing freebies of the above nature by pharmaceutical and allied healthcare sector is inadmissible expenditure u/s. 37(1) of the Act. The above addition made by Ld. AO was partially upheld by Ld CIT(A) and held as under: "I have carefully considered the facts on records and submission of the appellant. I find that the Assessing Officer has not examined nature of expenditure in detail and he has simply disallowed the entire expenditure incurred on accommodation, business promotion and conference fees & sponsorship. As is evident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenditure on freebies given to medical professionals and their professional associations in violation of the regulation issued by the Medical Council of India which is a regulatory body constituted under Medical Council Act, 1956, will not be allowed as expenditure in view of the Explanation below section 37(1). The validity of this circular is also been upheld by the Hon'ble High Court of Himachal Pradesh vide order dated 26.12.2012 in CWP No. 10793 of 2012. Since Medical Council of India has prohibited expenditure on freebies given to the medical professional with effect from 10.12.2009, in my considered view, the Circular No. 5 of CBDT dated 01.08.2012 only reasserts the legal position and hence the expenditure on freebies will not be allowable u/s. 37(1) being an expenditure prohibited by law. Accordingly, I hold that expenditure on gifts to the extent of Rs. 7,27,99,029/- shall not be deemed to have been incurred for the purposes of business or profession and hence the disallowance to this extent is confirmed. As regards the balance expenditure on Accommodation (Lodging & Boarding) at Rs. 28,91,444/- and Conference fees and sponsorship at Rs. 84,99,194/-, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 appear to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. The Ld. Authorized Representatives have also argued that the Circular No. 5/2012 is applicable to the Doctors/Medical practitioner only but not to the companies offering gifts/freebies. This argument is not acceptable because if accepting/demanding of illegal gratification is bad, then paying of the same is also bad. This view gets support from the ratio laid down in the following cases:- CIT Vs. Kap Scan and Diagnostic Centre (P) Ltd. (2012) 344 ITR 476 (P&H) In this case, the assessee company was doing the business of CT Scan, Ultra Sound and X-rays and it had debited certain amount of expenditure on account of commission paid to the practicing doctors who referred the patients to the assessee for various tests. It was held that the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 provide that no physician shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , medical equipment, travel facilities and hospitality to be distributed to such medical practitioners, which is prohibited by Medical Council of India [MCI]. It is found that Ld. CIT(A) has confirmed the expenditure in nature of accommodation and business promotion but deleted Conference and Sponsorship expenses incurred for Doctors on the ground that same are incurred for sharing the knowledge in the medical field, which is not hit by Circular No.5/2012 and amended MCI guidelines. The Ld. CIT DR on the other hand placed reliance on the decision of the Supreme Court in the case of Apex Laboratories cited supra. 9.1. Ld. Sr. Counsel on the other hand pointed out that the facts in the case before the Apex court were completely different. He also pointed out that in the case of Apex Laboratories, it had given costly personal gifts/benefits like Gold coins, LCD TV, Laptops, etc. to medical practitioners and thereby it had solicited favourable prescriptions at the cost of patients. The Hon'ble Supreme Court also observed that there was an 'quid pro quo' arrangement between the parties requiring the medical practitioners to prescribe the products of the company in lieu of receiving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to earning of exempt income. The Ld. AO has referred to the decision of Hon'ble Supreme Court in the case of Wallfort Shares & Brokers Ltd 310 ITR 421 and Godrej Boyce & Manufacturing Co. Ltd and observed that Rule 8D is applicable and he computed such disallowance at Rs. 81,63,728/-. The above disallowance was confirmed by CIT(A) in para 14.2 of his order observing as follows: "14.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, average value of investment resulting into exempt income is Rs. 163.06 Crs against which share capital & share application money etc. amounted to Rs. 90 Crs only (excluding revaluation capital reserve). Since investment was more than the own interest free funds available, it is clear that borrowed funds have been used for earning exempt income and hence decisions relied upon by the appellant are distinguishable on facts. Thus I am of the considered view that the interest expenditure incurred by the appellant at Rs. 12,62,902/- was also relatable to the exempt income warranting application of Rule 8D. Accordingly, disallowance made out of interest under Rule 8D at Rs. 10,978/- is confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case and provisions of the law. Thus, the ground no.5 raised by the assessee is hereby allowed for statistical purpose. 12. Ground No. 6 of the Appeal relates to disallowance of Registrar of Company and Stamp Duty charges of Rs. 30,18,600. The Ld AO at para 10 of the assessment order has observed that RoC filing fees paid for increase in share capital is capital expenditure in view of decision of Brooke Bond India Ltd Vs CIT 225 ITR 798 and Punjab State Industrial Development Corptn Ltd Vs CIT 225 ITR 792. The above addition was upheld by Ld. CIT(A) mainly relying on the findings of the Ld. AO in para 16.2 of his order. 12.1 Aggrieved against the above order, the assessee is an appeal before us. During the course of hearing, Ld. Senior Counsel appearing for the assessee argued that due to business reorganization, the assessee has made payment to Ministry of Corporate Affairs towards e-filing fees for Form 37, Form 39, Form 18, etc. It was argued that payment was in nature of statutory and has been incurred wholly and exclusively for the purpose of business, hence such expenditure needs to be allowed. On the other hand, Ld. CIT DR appearing for the Revenue relied upon f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee company, the Ld AO held that intangible assets were transferred without any cost and hence the value reflected was on account of revaluation and accordingly, no deduction for depreciation/amortization as a result of revaluation is allowed u/s. 115JB of the Act." 14.1. Aggrieved against the assessment order, the assessee preferred an appeal before Ld. CIT(A) who confirmed the order of the AO. Being aggrieved by the appellate order, the assessee is in appeal before us. For better understanding of the facts, relevant portions of the findings of the CIT(A) is reproduced as under: '.... 17.1 During the course of appellate proceedings, the Ld. Authorized Representative has submitted a detailed explanation, summarized form of which is reproduced as under:- Ground 14: Re: Disallowance of amortization of Intangibles u/s 11SJB - Rs. 15,23,97,50,000/- 1. Initial recognition of intangibles at fair value does not amount to revaluation as on 31.03.2012 1.1 The Assessing Officer all along in his assessment order has harped only on one issue that intangible assets have been revalued by the Appellant as on 01.04.2012. At para no. 11.9.1 on page no. Ill of his assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat as well as High Court of Bombay. 1.4 It appears that the Assessing Officer has failed to appreciate the distinction between revaluation and first-time recognition of intangible assets in books of accounts. In the present case, pursuant to the receipt of intangibles assets by the Appellant by virtue of the scheme of spin off, the Appellant has recognized the intangibles assets so received for the first time in its books of accounts at their respective fair values to reflect the true position of the Appellant's assets and liabilities as on 31.03.2012. This, in no way, can be considered similar to the revaluation as understood in the accounting language. The recording of intangibles in the books of accounts by the Appellant is the process of initial recognition of the assets and not revaluation of assets. 1.5 The term 'revaluation' has not been defined under the Income- tax Act, 1961, however as the term clearly indicates, it is understood that revaluation means valuing again. Numerous judicial precedents have held that if any term is not defined within the Income-tax Act, then such term shall derive its meaning either from the General Clauses Act, 1897 or the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at fair value, we also wish to draw your attention to the provisions Income-tax Act. Although the Income-tax Act per se does not contain any definition of revaluation, it still recognizes the difference between the revaluation and initial recognition of assets at fair value. In this context, we draw your honor's kind attention to the newly introduced sub-section (2B) to section 115JB of the Act which provides that - "(2B) In the case of a resulting company, where the property and the liabilities of the undertaking or undertakings being received by it are recorded at values different from values appearing in the books of account of the demerged company immediately before the demerger, any change in such value shall be ignored for the purpose of computation of book profit of the resulting company under this section." (Emphasis Supplied) 1.10 The above sub-section (2B) has been introduced vide Finance Act, 2017 to be effective from 01.04.2017. It is interesting to note that despite the presence of specific clause under Explanation 1 to section 115JB(2) providing for treatment of depreciation arising due to revaluation of assets, the Legislature has still inserted sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition and not a case of restatement of assets having existing book value, the same cannot be treated as revaluation of assets. In absence of any revaluation of assets carried out by the Appellant, there should not be any adjustment to the computation of the book profit u/s 115JB as erroneously contemplated by the Assessing Officer. Further, it is reaffirmed that the impugned action of the Assessing Officer to recharacterize the accounting of intangible assets as revaluation is ultra vires and amounts to usurping one's powers as unequivocally declared by the Hon'ble Supreme Court in case of Apollo Tyres Ltd [255 ITR 273]. It has been time and again repeatedly held by the Courts in India that the Assessing Officer has no power to disturb the profit as shown by the books of accounts other than for making the prescribed adjustments under Explanation 1 to section 115JB of the Act. Elaborative submission have been made on this point at paragraph number 5. 2. Initial recording of Intangible Assets was subject matter of AY 2012-13 and was duly accepted and allowed by the tax department 2.1 The Domestic Formulations Undertaking ("DFU") of SPIL was spun off to the Appellant, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and hence, on this very g r o u n d t h e disallowance of depreciation of intangible assets be set aside. 3. Accounting treatment is in consonance with generally accepted accounting principles 3.1 During the year under consideration, the Appellant, in respect of the intangible assets acquired by it under spin off, has charged a sum of Rs. 1523.975 crores towards depreciation of the intangible assets. 3.2 At the outset, it is stated that there is no specific accounting treatment prescribed in the Indian Accounting Standards for such kind of transactions i.e. spin off. Therefore, we try to gauge whatever guidance is available from the generally accepted accounting framework. 3.3 A due can be taken from para 8.4 of AS-12 on 'Accounting for Government Grants', which specifies that the grant related to depreciable assets are treated as deferred income which is recognized in the profit and loss statement on a systematic and rational basis over the residual life of the asset and grants related to non-depreciable assets are credited to capital reserve. For this treatment to be applied, the assets need to be initially booked at a fair value on the date of the acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t enunciate any accounting principles. The same are absolutely silent on the accounting treatments of the various profit and loss account items. Thus, Parts II and III do not lay down any scheme of computation of book profit; they deal mainly with the requirements of disclosure in the profit and loss account. There is no prohibition and no compulsion in Schedule VI in respect of any particular accounting policy, so long as following the accounting policy does not affect the disclosure of the result of the working of the company. Moreover, it is possible to comply with Parts II and III of the Schedule VI in more than one way where the assessee can adopt different acceptable accounting policies as long as he complies with the basic requirement of Schedule VI, which is to disclose correctly the result of the working of the company. As long as the method employed for accounting the income meets with the rudimentary principles of accountancy, the accounting treatment is said to be consonance with the generally accepted accounting principles. 3.8 Thus, there is nothing in the Schedule VI of the Companies Act, 1956 which prohibits the initial recognition of intangibles assets at fair va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statutory auditors of the Appellant regarding the accounting treatment followed in respect of the intangible assets. It may be noted that the 'General Instructions for preparation of Balance Sheet' in the Schedule VI of the Companies Act, 1956 requires making specific disclosure in the Balance Sheet with respect to revaluation of assets. The fact that the statutory auditors of the Appellant have not made any qualifications or expressed their reservations on the accounting treatment adopted by the Appellant in respect of the recognition of the intangible assets but instead issued a clean report proves beyond doubt that the accounting treatment accorded by the Appellant meets the general requirements laid down in the Schedule VI of the Companies Act, 1956. Further, as per the 'Framework for the preparation and presentation of Financial Statements' issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, the terms 'income' and 'expenses' are defined as follows: (a) Income is increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities being, recognized Stock Exchanges where the securities of the Appellant are listed, Registrar of Companies, Ministry of Corporate Affairs etc. Besides, the accounting treatment accorded by the Appellant is also sanctioned by the Hon'ble High Courts under the scheme of spin off of domestic formulation business from SPIL to the Appellant. Thus, the accounts so prepared by the Appellant are in compliance with the accounting framework as well as in compliance of the applicable corporate and regulatory laws. 4. Scheme of arrangement including the accounting treatment mentioned therein is duly approved bv the High Courts 4.1 The Appellant has recorded the intangible assets, received under the arrangement of spin off, at fair value in accordance with the accounting framework specified in the Scheme and further the said accounting treatment given in the Scheme is confirmed by the Hon'ble High Court of Gujarat allowing the Appellant to record the assets at fair value and making corresponding credits to the capital reserve. In this regard, it is relevant to note the provisions of paragraph 23 of AS-14 dealing with Accounting for Amalgamation, drawing inference wherefrom w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of Companies, Statutory auditors and shareholders are the only authorities to check whether accounts are in accordance with Part II and III of Schedule VI of the Companies Act 1956 and it is not open to the Income-tax authorities to vitiate from the net profit as shown in the profit and loss account except as provided in the Explanation to section 115JB of the Act. Thus, it is submitted that the Assessing Officer does not have the power to tamper with the financial statements if the financial statements are prepared in accordance with the provisions of Schedule VI of the Companies Act, 1956. 5.4 The Appellant also places reliance on decision of the Hon'bie Supreme Court decision in case of Mangalore Ganesh Beedi Works vs. CIT (Civil Appeal Nos. 10547/10548 of 2011) and various other decisions where it has been held that the taxing authorities have no jurisdiction to rewrite the arrangements. Under the taxing system, it is up to the Assessee to conduct the business in his wisdom. In this context; it is respectfully submitted that the action of the Assessing Officer to characterize and link the recording of assets at fair value to revaluation of assets and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts as per clause (g). Furthermore, the amount of depreciation (excluding the depreciation on account of revaluation) is to be inter alia reduced in terms of clause (iia) from the above figure to arrive at book profits. 6.4 It would be important to take note of the computation of book profits for MAT purposes as furnished by the Appellant under 'Schedule - MAT' of the return of income filed for AY 2013-14. The relevant computation is summarized below for ease of reference: "Profit after tax as shown in the P&L A/c. Rs. (2,188,071,659) Additions (if debited in profit and loss account) ............. ............ (g) Depreciation attributable to revaluation of assets ....... Rs. 0 (h) Others (including residuaI unadjusted items and provision for diminution in the value of any asset) Rs. 15,436,152,918 ......... .......... Deductions Others (including residual unadjusted items and the amount of deferred tax credited to P&L A/c) .... Rs. 15,344,173,610 Book Profits u/s 115JB .... Rs. (4,696,332,843)" 6.5 As can be seen from the above summary, nothing has been added against the line item 'Depreciation attributable to revaluation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the deeming provisions of an Act ought to be strictly construed and that the scope of the deeming provisions cannot be stretched. In this regard, we also rely on the following case laws which have held that the deeming provisions ought to be construed strictly: * Ajax Products Limited 55 ITR 741 (SC) * L.P. Cardoza & Ors. 227 ITR 421 (Kar.) 6.9 Based on the above submissions it is submitted that no further addition ought to be made to the book profit on account of the depreciation of the intangible assets. ..... .... .... 17.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative including the decisions relied upon by him. Undisputedly, Domestic Formulation Unit of Sun Pharmaceutical Industries Ltd., the holding company, has been spun off/transferred to the assessee company in term of Scheme of Arrangement approved by Hon'ble Bombay High Court u/s. 391 to 394 of Companies Act, 1956 vide order dated 03.05.2013 in company claim Petition No. 283 of 2013 and also by Hon'ble Gujarat High Court vide order dated 03.05.2013 in company Petition No. 31 of 2013 connected with the company Application No. 373 of 2012. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has disallowed the above sum but did not disturb the book profit for the purposes of section 115JB. Therefore, the question arises as to whether the book profit u/s. 115JB was rightly computed by the appellant or not. As a matter of fact, the value of such assets recorded by the transferor company in its books of account was very nominal resulting in to loss to the tune of Rs. 22,18,86,314/- only, but the appellant on the basis of valuation reports, enhanced the value of such assets astronomically. As per extant principles of accountancy and commercial considerations, the value has to be the same for the transferor and transferee. As per the provisions of Part-II & III of Schedule-VI of Companies Act, 1956, the Profit and Loss Account of the company has to be prepared in accordance with the Accounting Policy & Accounting Standards adopted for preparation such accounts and after following the method and rate of depreciation adopted according to such policy and standards. Under the Income-tax Act as well as Companies Act, the depreciation has to be calculated on the actual cost of the assets. Since the appellant company has not incurred any cost for acquiring the assets, in my consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement was approved by the competent courts including recording of value of assets in the books of accounts. It is an established position of law that merely because the Scheme of Arrangement has been approved by the Hon'ble High Courts, the revenue is not precluded from lifting the corporate veil. This view gets support from the ratio laid down by Hon'ble Supreme Court in the case of Marshall Sons & Co. (India) Ltd V/s ITO (1997) 223 ITR 809 (SC) wherein it was held that once the scheme of amalgamation is approved u/s 391 & 394 of Companies Act, the date specified therein has to be considered as date of transfer. However, the Income Tax Authorities are entitled to raise the issue that amalgamation itself is a device designed to evade the taxes legitimately payable by the subsidiary company. Accordingly, the arguments of Ld. AR are rejected. Therefore, I agree to views of the Assessing Officer and confirm the disallowance/addition made at Rs. 15,23,97,50,000/- on this account. Thus, Ground no. 14 is dismissed. 14.2. Against the above order of Ld. CIT(A), the assessee is in appeal before us. During the course of appellate proceedings, the Ld. Sr Counsel Sri S.N. Soparkar ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the materials available on records and given our thoughtful consideration. The Domestic Formulation Unit [DFU] of Sun Pharmaceutical Industries Ltd., the holding company, has been spunoff/ transferred to the assessee company in term of Scheme of Arrangement ('Scheme') approved by Hon'ble Bombay High Court [pages 648 to 678 of the Paper Book] under sections 391 to 394 of Companies Act, 1956 vide order dated 03.05.2013 in Company claim Petition No. 283 of 2013 and also by the Hon'ble Gujrat High Court vide order dated 03.05.2013 [pages 679 to 682 of the Paper Book] in Company Petition No. 31 of 2013 connected with the Company Application No. 373 of 2012. The assets received by the assessee company have been recorded at fair value pursuant to said Scheme. The entire objective of the above action was to enable the assessee company to focus on the domestic formulation business which significantly differed from the rest of the parent company in terms of the customer base, regulatory environment, supply chain, risks and rewards, etc. thereby resulting into significant value addition in the hands of the stakeholders. 15.1. Pursuant to the above arrangement, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The sum total of assets recorded at fair values shall be credited to Capital Reserve Account in the books of the Transferee Company. The Capital Reserve shall be available for issue of bonus shares or such other application as may be permissible under the law." 15.3. In the above circumstances, the accounting treatment adopted by the assessee company had legal force in form of sanction accorded by the High Courts and therefore cannot be disregarded. It is relevant to refer to decision of the Tribunal Kolkata Bench in the case of ITO v. Purbanchal Power Co. Ltd in ITA 201/Kol/2010 dated 17th July, 2014, wherein it is held as under: "From the above provisions of section 394A of the Companies Act, 1956, legal position enunciated in the decisions of Hon'ble Gujarat High Court in the case of Wood Polymer Ltd., in re and Bengal Hotels Pvt. Ltd. in re, supra and Vodafone Essar Gujarat Ltd., supra, evidently makes the purpose clear that if the revenue wants to object to the proposed scheme of amalgamation, it has to do so in the course of proceedings before the High Court but before the final order is passed. Whenever such objections have been raised, these have been considered on me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore cannot be altered except with the sanction of the Court even if the shareholders and the creditors acquiesce in such alteration..................." From the aforesaid ratio it is quite ostensible that, once the amalgamation scheme has been approved and sanctioned by the Court, it has a statutory force and is binding on the company and all the stake holders. Similar view has been echoed by the Hon'ble Gujrat High Court in the case of Wood Polymer Ltd. (supra), wherein Hon'ble Court has observed and held as under:- "The expression "public interest" is to be found in the second proviso and in the context of a company which, if, scheme of amalgamation is sanctioned, is likely to lose its identity by getting merged with the transferee-company. It is to be dissolved without winding up. In winding up the manner in which affairs of a company are conducted can be probed in depth; but a scheme of amalgamation which provides for merger of the transferor-company with the transferee-company, would destroy any opportunity for examination of the affairs of the transferor-company. The second proviso would provide the last opportunity to peep into the affairs of the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would otherwise arise. If such be the scheme of amalgamation and if such is the use made of the transferor-company by those controlling it, it can never be said that the affairs of the transferor-company sought to be amalgamated, created for the sole purpose of facilitating transfer of capital asset, through its medium, have not been carried on in a manner prejudicial to public interest. Public interest looms large in this background, and the machinery of judicial process is sought to be utilized for defeating public interest and the court would not lend its assistance to defeat public interest, namely, tax provision." Thus, when amalgamation scheme has been approved by the Court, it is not open for the Assessing Officer and CIT (A) to hold that amalgamation has been used by the assessee company as a tool for tax evasion. The amalgamation order passed by the High Court is a judicial order and has statutory force and in case, the department had any objection, then same should have been given before the Hon'ble High Court for which sufficient time was allowed. Now, the department cannot clamour that such an amalgamation have been used by the assessee as a tool for tax evasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J." 15.8. Thus, in light of above decision of the Hon'ble Supreme Court, it is held that the assessing officer does not have a power to tinker with the financial statements prepared in accordance with the provisions of the Companies Act and certified by the statutory auditor. The action of the Ld. AO in the present case is therefore contrary to the provisions of the law and therefore the adjustment made by the Ld AO is hereby quashed. 16. It is relevant to place on record that the Institute of Chartered Accountants of India (ICAI) had come out with a Compendium of Accounting Standards, wherein they had specifically covered the impugned scenario and clarified that the accounting treatment prescribed by the High Court/ITAT shall have legal force. Further, as pointed out by the Ld. Sr Counsel that the assets received under restructuring are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company was required to record the assets for the first time in its books of account. Pursuant to the receipt of intangible assets by the assessee company by virtue of the scheme of arrangement, the assessee company has recognized the intangible assets so received for the first time in its books of accounts at their respective Fair Values to reflect the true position of the assets and liabilities as on 31.03.2012 and such treatment is as per scheme approved by Hon'ble High Court as stated supra. 16.3. Therefore in our considered opinion, in no way, this can be considered similar to the revaluation. The recording of intangibles at Fair Value in the books of accounts by the assessee company is part of the process of initial recognition of the assets and not revaluation of existing assets held by it. The LD Sr. Counsel has correctly referred to dictionary meaning of revaluation of assets which means that 'assessing the value of something again' which is not the case of the assessee. We are in absolute agreement with the principle that for revaluation, there must be an existing ownership in first place. It is a fundamental principle that revaluation requires an existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing transfer documents of Trade Marks from SPIL to the assessee company by the virtue of the spin off approved by Hon'ble HCs. The ld. Sr. Counsel of the assessee placed all these documents [at pages 7 to 65 of the Paper Book] during course of hearing which have been perused by us. In light of this fact, we are unable to agree to the contention of the Ld. AO that there was no transfer of ownership of the assets to the assessee company. 16.6. Lastly, we observe that the assets have been acquired and recorded at fair value in A.Y. 2012-13 and the same has been accepted by the Ld. AO by way of order of scrutiny assessment order passed under section 143(3) of the Act dated 19-01-2015. Once the recording of the intangible assets at fair value have been accepted and not questioned in the relevant year being the initial year of recording i.e. A.Y. 2012-13 in the instant case, it is not open to the revenue authorities to question the same in succeeding years. 16.7. In view of the above, we set aside the findings of the lower authorities and direct the AO to delete the adjustment made by him to the book profit under section 115JB of the Act. Hence, the ground of the assessee company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is observed that assessee company has two units located at Jammu and Sikkim which are eligible for excise duty incentive as per New Industrial Policy for the States of Jammu & Kashmir and Sikkim. The entire controversy as to whether such receipts are capital receipts is considered by Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys - Vs- CIT 333 ITR 335, headnote of the judgement which reads as under: "Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Whether amounts of excise refund and interest subsidy received by industrial units in pursuance of incentives announced in terms of new industrial policy for accelerated industrial development in State of Jammu and Kashmir for creation of such industrial atmosphere and environment which would provide additional regular sources of employment to unemployed in State, were, in fact, in nature of creation of new assets of industrial atmosphere and environment, having potential of employment generation to achieve a social object and such incentives would be capital receipts in hands of such industrial units - Held, yes 18.1. It is brought to our notice that the Revenue's appeal against the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 600,15,55,635/- in respect of Sikkim Unit, without appreciating the fact that erstwhile Sun Pharma Sikkim was formed by the splitting up and reconstruction of the existing business of Sun Pharmaceutical Industries (SPI), and the condition that used machinery is less than 20% of the stipulated limit, has not been fulfilled by the assessee. 2.4 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that the claim of the appellant in respect of deduction u/s. 80IE is allowable without appreciating that in the absence of proper details and bills, it could not be ascertained as to whether plant and machinery were new and not used earlier, and without appreciating that plant and machinery transferred by Sun Pharmaceutical Industries to Sun Pharma Sikkim was used by Sun Pharmaceutical Industries prior to put to use by Sun Pharma Sikkim, and hence such plant and machinery could not be regarded as new plant and machinery. 2.5 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that the claim of deduction u/s. 80IE in respect of Sikkim Unit, is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Sun Pharma ceutical Industries Ltd. (SPIL) without appreciating the fact that expenditure related to R&D was debited only in the books of SPIL, but no allocation was made to eligible units of assessee company, as revealed during the proceedings of survey action u/s 133A, and the working of allocation of R&D activity on the basis of turnover in the ratio of 3:1 is justifiable and reasonable. 4.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.w.s. 80IA(10) in respect of research and development expenses without appreciating that R & D work requires specialised skill and knowledge, and consequently payment towards R & D activity cannot be termed as remuneration but would be termed as professional payment 5.1 On the facts and circumstances of the case and in law, the Ld CIT. (A) erred in delisting the disallowance u/s 37(1) in respect of selling and distribution expenses of Rs. 111,49,00,000/- incurred by SPLL. before amalgamation of SPS and SPI without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the assessee had fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, the Ld. C.LT. (A) erred in deleting the disallowance made on account of depreciation of solar power plant without appreciating that the assessee failed to provide evidence for receipt of assets and its handing over to the lessee before the end of the Financial Year. 7.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance made on account of depreciation of solar power plant on the basis of decision in another case, without appreciating the facts in this case, and without appreciating that the assessee had failed to controvert the findings of the AO, and failed to substantiate its claim. 8.1 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs. 81,63,728/- to Book Profit u/s, 115JB on the issue of disallowance u/s 14A. without appreciating the facts and reasons mentioned by the AO in the assessment order. 8.2 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs. 81,63,728/- to Book Profit u/s. 115JB without appreciating the fact that the said amount was disallowed u/s. 14A and hence was required to be added to the book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The relevant finding of the Coordinate Bench for AY 2012-13 reads as under: "... 8. We have heard the rival contention of both the parties and perused the materials available on record. At the outset, we find that issue on hand is covered by the order of the coordinate bench of this tribunal in the own case of the assessee for AY 2010-11 in ITA Nos. 3541/Mum/2017, where the bench vide order dated 16th May 2019 held as under: 18. Before adverting to the specific facts, we deem it appropriate to keep in mind that the assessee has moved an application under rule 46A of the Income Tax Rules, 1962 for permission to adduce additional evidence. In such application, it was contended by the assessee that the AO has issued a questionnaire on 12.11.2012 directing the assessee to file details on 29 counts. He directed the assessee to submit details of plant & machinery as on 16.1.2009 as well as on 31.3.2010 along with relevant bills chronologically arranged and grouped as appearing in accounts. The assessment order has been passed on 19.3.2013. Since it was the first year of the firm, the bills were kept at the factory at Gangtok (Sikkim) and staff was not well conversant with the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2009 and journal entry. According to the AO, transfer of assets was just 15 days prior to the issue of provisional licence to manufacture on 20.3.2009 and 46 days prior to the commercial production which created a suspicion about establishment of a new undertaking at Sikkim. The AO thereafter made reference to the production and sales of Sun Pharma prior to splitting up and reconstruction and after such establishment of assessee-firm at Sikkim. On these circumstances, he harboured a belief that the assessee-firm has been established by splitting up and reconstruction of existing business which is a violation of sub-section (3) of section 80IE of the Act. On appeal, the ld.CIT(A) has reappreciated this aspect and it was contended before the ld.CIT(A) that group was seeking its consolidated shares in the US market and to that end, it was required to secure US FDI approval which mean that unit(s) earmarked for production of export products could not be used for the purpose of domestic manufacture also. The assessee has further submitted that process of compliance with US FDI regulation is time consuming and spanned over 18 to 25 months. It demonstrated these facts before the ld.CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to an undertaking that acquires a running concern for the unexpired period of deduction. Therefore, once the undertaking remains unaffected or unchanged by subsequent change in the ownership, it cannot be said that the business of the undertaking has been reconstructed. Adverting to the facts of the appellant's case, it can be seen that the appellant had acquired the undertaking from SPI. The only change which took place is the ownership of the undertaking i.e. from SPI to SPS. Everything else remains the same. SPI had also filed an application vide letter dated 5th March 2009 (enclosed in Pages 124 & 125 of the paper book) before the Assistant Commissioner, Central Excise surrendering its Central Excise Registration for the Sikkim unit and stating that ownership of the undertaking has changed and that the capital goods purchased were never installed by SPI. There is also no dispute of the fact that the undertaking was under construction at the time when SPI sold it to the Appellant. Accordingly, the unit is transferred before commencement of undertaking. Thus from the facts on record, the irresistible conclusion is that the undertaking at Sikkim is not formed by splitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the appellant have been duly considered along with the findings AO. On perusal of the impugned order it is seen that while the AO, at the time of assessment noted that the appellant had furnished incomplete details of the addresses of suppliers to prevent verification, no such exercise was undertaken during remand proceedings when the appellant furnished the bills and vouchers for fresh verification. Test-check of the bills produced during these proceedings shows that the appellant's contention is borne out as follows: 4.2.11 After considering the submissions of the appellant and the observations of the AO in the remand report, I find that on the issue of duplicate bills the AO has not carried out any independent enquiry to establish that such bills pertained to machinery that had already been put to use prior to its installation in the appellant's unit. In my considered opinion, the mere fact that a particular piece of plant or machinery is supported by a duplicate bill, by itself does not prove that the said item is second hand or used. The appellant's contention that many a time the original bills are retained by the State Government Check Post authorities etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate the that commercial production had started. It is further stated that in the pharmaceutical industry, the initial phase of setting up of the plant involves considerable civil work including the installation of the Air Handling Unit (AHU) and that commercial production requires many other types of plant and machinery. On perusal of a copy of the said bill it is seen that same is clearly relating to civil construction work inasmuch as it details work relating to excavation, filling, steel reinforcement, masonry, plaster and water-proofing work. In its submissions the appellant has continuously been stating that work relating to the Sikkim unit was initially undertaken by SPI and that it was only at a later stage that the appellant firm was brought into existence and that the plant and machinery etc. was duly assigned to the appellant firm. That being the case, civil work would have certainly begun much prior to 2009 and the fact that M/s Yuksom Engineering Works has Issued the final bill dated 31/03/2007 can only be taken as proof for completion of the works Indicated therein and not as evidence to show commencement of commercial production as the mere existence of an outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions was already installed as on date of commencement of commercial production, it cannot be held that simply because additional units of similar machinery were installed subsequently, the appellant cannot have begun commercial production on the said date. 4.2.14 The AO has also drawn support from an impounded document issued by the Commercial Tax Division, Sikkim wherein it is mentioned that environmental liability for 2.4 crores is due from Sun Pharma Sikkim for the period October 2006 to March 2011. In this regard, the appellant has stated that the said notice was issued taking into account date of beginning of factory construction and that the appellant has only paid a fraction of the demand. From a perusal of the said document I find that it is merely a show cause which has been duly replied to by the appellant and that the document itself does reflect any adverse inference drawn by the Commercial Tax Division, Sikkim. 4.2.15 The AO has further sought to draw inference from the denial of deduction u/s 80IB(4) in the case of the sister concern Sun Pharma Industries Dadra Unit and Jammu Unit for A.Y. 2004-05 and 2005-06 to support his conclusions in the case of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguished as to how the judgments put into service by the AO, are not applicable on the facts of the present case. The ld.counsel for the assessee also relied upon the orders of the ITAT passed in the case of its sister concern viz. Jammu Unit and Dadra Unit. Appeals of these units have been decided by the ITAT Amristar as well as Mumbai Bench. These orders have been placed on record i.e. ITA No.184/ASR/2009 Asstt.Year 2005-06. 26. We have duly considered rival contentions and gone through the details. According to the AO, bills having value of Rs. 6.88 crores with regard to certain additions to plant & machinery were not furnished. Therefore, he presumed such machinery as second-hand machinery. Against his presumption, the assessee has filed an application for permission to adduce additional evidence. It was contended therein that questionnaire issued on 12.11.2012; bills were lying at factory premises in Sikkim; staff was not well conversant with income tax proceedings; they were lying in boxes; hence in a short span of time, complete details could not be submitted. Thereafter, the assessee produced complete details. The remand report was called for by the ld.CIT(A) on those de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate bench in earlier year has been reversed or set aside by the higher authorities. Thus, respectfully following the order, we find no infirmity in the findings of Ld. CIT(A). This ground no.2 raised by the revenue is hereby dismissed. 23. Ground No. 3 of the Department's appeal relates to disallowance of deduction u/s 80-IB/80-IE in respect of interest on delayed payments of Rs. 15,57,61,178/- from M/s Aditya Medisales Ltd., Baroda, and others. The AO at para 6.4.7 of the assessment order has observed that interest income cannot be said to have been 'derived from' the Industrial undertaking as held by the Hon'ble Supreme Court. Aggrieved by the Assessment Order, the assessee filed an appeal before Ld. CIT(A), whereby the Ld. CIT((A) has allowed such deduction u/s 80IB/80IE in respect of interest on delayed payments by following the decision of Hon'ble Jurisdictional High Court as well as the decision of ITAT Amritsar in the case of erstwhile firm M/s. Sun Pharma Industries (which is also merged with the assessee company). Aggrieved by the order of CIT(A), the revenue is in appeal before us. 23.1. We have heard the rival contentions and carefully perused the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are covered against the assessee by the orders of the Amritsar Tribunal passed in assessee's own cases pertaining to the financial years 2004- 05, 2006-07, 2007-08, 2008-09 and 2009-10. The relevant paras of the order passed by the Amritsar tribunal are reproduced as under:- "51. As regards ground No .3 of the Revenue, regarding disallowance of deduction under section 80- IB in respect of delayed payments from M/s Aditya Medisales Ltd. Amounting to Rs. 48,20,32,772/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed." "54. As regards ground No 5&6 of the assessee with respect to the interest on FDR amounting to Rs. 3,27,599/- (correct figure Rs. 2,27,599/-) and loan to employees with regard to disallowance of deduction u/s 80-IB, the facts of the issues In hand are identical to the facts decided by the tribunal in assessee's own case dated 11.06.210 in ITA No 184(Asr)/2009 for the assessment year 2005-06. Following the same, the ground No 5&6 of the assessee are dismissed." 24. Following the orders of the decisions of the Amritsar Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, M/s SPIL did not charge the same. Since, it has not allocated the research and development expenses of Rs. 3.01 crores to units claiming exemption u/s 80IB/IE of the Act. Accordingly, the R&D expenses of Rs. 3.01 crores are being allocated in the ratio of turnover of the respective units claiming exemption u/s 80IB/IE of the Act. Aggrieved by the order of CIT(A), the Revenue is in appeal before us. 24.1 We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we find that issue on hand is covered by the order of the Co-ordinate Bench of ITAT Mumbai and Ahmedabad for AY 2010-11 and AY 2011-12. The relevant finding of the Co-ordinate Bench for AY 2011-12 reads as under: ".....50.5 On the other hand learned AR before us submitted issue is covered in favour of the assessee by the order of the tribunal in own case of the assessee for A.Y. 2010-11 bearing ITA No. 2465/Ahd/2014 51. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by the order of the co-ordinate bench of Mumbai Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incurred by SPIL was allocated in the ratio of turnover of SPIL, SPI and SPS and part of such selling expenses was disallowed while passing the Assessment Order of SPIL. However, with effect from 31st March 2012, distribution network of SPIL was spun off and hived to assessee company, hence similar selling and distribution expenses were incurred by the assessee company instead of SPIL in year under consideration. The allocation of such expenditure and disallowance of such expenditure would consequently result into higher allocation of expenditure in SPI and SPS who are claiming deduction under Section 80-IB/80-IE. Based upon the detailed finding given in Assessment Order passed in the case of Sun Pharmaceutical Industries and Sun Pharma Sikkim for AY 2013-2014 wherein the AO of erstwhile firms had allocated Selling & Distribution expenses in their cases out of expenditure incurred by assessee company, the AO at para 6.4.4 has made disallowance of Rs. 111,49,00,000/- under Section 37 of the Act. Aggrieved by the order of AO, the assessee filed an appeal before CIT(A) whereby the Ld. CIT(A) deleted the disallowance by placing reliance upon the decision of the Co-ordinate Bench date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period from 01.09.2012 to 31.03.2013 incurred by the appellant company have already been allocated in the ratio of turnover of exempt units of erstwhile SPI/SPS and non-exempt units. On perusal of assessment orders of M/s Sun Pharmaceutical Industries and M/s Sun Pharma Sikkim for A.Y. 2013-14 (period upto 31.08.2012) copies of which are furnished by the Ld A.S., I find that the Assessing Officer in these cases has worked out proportionate selling & distribution expenses in the ratio of turnover and reduced the deduction claimed u/s 80IB by Rs. 62.56 Crs & u/s 80IE by Rs. 48.93 Crs, respectively. Thus it is clear that the selling & distribution expenses incurred by appellant upto 31.08.2012 allocated to the firms totaling to Rs. 111.49 Crs (Rs. 62.56+48.93Crs) have only been considered by the Assessing Officer for disallowance. 11.2.4. Now coming to the selling and distribution expenses incurred by the appellant company for the period from 01.04.2012 to 31.08.2012. During this period, the erstwhile firms viz. SPI and SPS were enjoying exempt income respectfully u/s. 80IB and 80IE. Keeping in view this aspect of the things, the Assessing Officer in the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as such. However, from the above mentioned order of Hon'ble jurisdictional ITAT, it is crystal clear that proportionate expenses disallowed out of selling and distribution expenses pertaining to SPI and SPS have been held to be incurred for the purpose of earning exempt income and hence are liable to be disallowed u/s. 14A. Undisputedly, the appellant company has earned exempt income from SPI and SPS totaling to Rs. 334.02 crores and claimed the same not chargeable to tax u/s. 10(2A). In view of the above, the Assessing Officer is directed to work out disallowance out of selling and distribution expenses under Rule 8D as directed by Hon'ble ITAT. Thus, appellant succeeds partly in respect of Ground No. 8. 25.1. Against the above finding of Ld. CIT(A), the Department has preferred appeal. During the course of appellate proceedings, Ld. Sr. Counsel appearing on behalf of assessee argued that as the matter is covered in favour of Assessee by the decision of Coordinate Bench in the case of SPIL as well as SPI and SPS for current year, the issue may be decided in favour of assessee. On the other hand, Ld. Sr. DR has argued that finding of AO should be restored. 26. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in case of the assessee for A.Y. 2005-06 to 2009-10 decided the issue against the Revenue. The relevant finding of the Mumbai bench for A.Y. 2010-11 reads as under: "18. Ground No II(c)&(d) pertain to deleting adjustments made on account of royalty fees and notional management fees for Jammu and Dadra units. The Amritsar Bench of the ITAT has decided the identical issues in favour of the assessee and against Revenue in assessee's own case for the assessment year 2005-06. The operative part of the order is reproduced as under:- "16.2 Therefore, in view of our decision hereinabove with respect of selling and distribution expenses, the remaining disallowance of expenses of royalty (of 8% of the turnover) of Rs. 14,15,34,442/- and management fee (of 1% of the turnover) of Rs. 1,76,91805/- are also directed to be deleted, as the same has been notionally considered by the AO which in our view, is incorrect and not justified. Thus, ground No. 5 of the assessee is allowed and ground No. 2 of the Revenue is dismissed. 19. The said decision was followed by the ITAT Amritsar in assessee's own case pertaining to the subsequent assessment years 2006-07, 2007-08, 2008-09 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to sister concerns i.e. Sun Pharmaceutical Industries and Sun Pharma Sikkim. ..................... 78. On the other hand, the learned AR before us submitted that identical disallowance was also made in AY 2008-09 and 2009-10 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/ 2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assessee. 79. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by order of this tribunal in the own case of the assessee for AY 2007-08 bearing ITA No. 2076 & 2077 /Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under: 91. Aggrieved by this finding of the ld.CIT(A) both assessee and the revenue are in appeal before us. The ld. D.R. strongly stated that since the assessee has not shown any income from remuneration from the partnership firm. The assessee was not entitled for the claim of deduction. The ld. D.R. further stated that no bifurcation have been provided by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition of Rs. 8,49,79,383/-. 51. Respectfully following the findings of the Co-ordinate Bench (supra), no disallowance should be made u/s. 37 (1) of the Act. 79.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the revenue is hereby dismissed.' 26.2. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Tehsil Kukshi, District Dhar, Madhya Pradesh was purchased by the assessee during the year under consideration and the same was leased out to Alpha Infraprop Pvt. Ltd. Accordingly, the assessee has also shown lease rental for the month of March, 2013 in the income disclosed. However, since leased assets were not put to use by the lessee during the year under consideration, the Assessing Officer proposed to disallow the depreciation and accordingly issued a show cause notice vide letter dated 08.02.2016. In response to the show cause notice, the assessee submitted a detailed explanation vide letter dated 20.12.2016 which has been reproduced by the Assessing Officer in para-8.3 of the assessment order. Since similar submission is filed in the appellate proceedings, for the sake of brevity, the same is not being reproduced here again. After considering the submission of the assessee, the Assessing Officer disallowed the depreciation claimed on Solar Power Generating System after recording his findings in para-8.4 to 8.5 of the assessment order which are reproduced as under:- .................................................................. 13.1. During the course of appellate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha Infrapop Pvt. Limited participated in the bidding process and was allotted Solar Power Project contract and in turn entered into Power Purchase Agreement with MP Power Management Company Limited (MPPMCL). Thereafter Real Gold Developers LLP had imported plant and equipment from international suppliers and they had in turn sold such assets to Assessee on 1st March, 2013. Thereafter assessee had entered into lease agreement with Alpha Infrapop for above referred asset and had claimed depreciation on such assets. It is apparent from record that Alpha Infrapop Pvt. Limited were carrying out work of various solar blocks and assets relating to such blocks were leased by assessee company along with various other group entities being Aditya Medisales Limited, Sun Petrochemicals and Unimed Technologies Limited. The depreciation claimed on such assets in year under consideration was disallowed by Assessing Officer mainly on the ground that assets were not put to use by the lessee before the end of financial year 2012-13. The claim of assessee was allowed by Ld. CIT (Appeals) following the appellate order in the case of Aditya Medisales Limited as referred supra and the order of CIT (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- on account of "SPP" on which depreciation at the rate of 80% and additional deprecation at the rate of 20% was claimed totaling to Rs. 5,32,50,000/-. This depreciation of Rs. 5,32,50,000/- was claimed at 50% because asset was not put to use for the complete years in both the cases. In this way, it is observed that facts on all vital points are common in both the cases. A perusal of the record would further show that M/s. Alpha Infrapop Pvt. Ltd. ("AIPL" for short) got a contract from MP Power Management Co. Ltd. ("MPPMCL" for short) and "MPPMCL" to install a "SPP" with a capacity of 20MW DC. A power purchase agreement was signed by "MPPMCL" and "AIPL" on 19.10.2012. M/s. Real Gold Developers LLP ("RGD" for short) had purchased the assets and made investment of Rs. 120 crores. It was required to establish 16 blocks. These assets were later on given on lease to "AIPL". According these assessees, they have purchased these assets and later on given them on lease. The break-up of solar block numbers, ownership of various parties along with their corresponding cost, has been submitted before the ld.CIT(A) in tabular form in the submissions filed by the assessee. For the facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees have failed to prove acquisition of the assets before the end of the accounting year as well as its user for the purpose of their business. The ld.AO has pointed out some discrepancies specifically, the transportation details, inspection report, installation report etc. On the other hand, the ld. CIT(A) instead of making analysis of this information observed that this very issue has been considered in the case of other assessees i.e. AMSL who is also one of the contributors to the total block of assets. The emphasis of the ld.DR was that the ld.CIT(A) has overruled the discrepancies pointed out by the AO for demonstrating the fact that assets have been acquired before the end of the accounting year, and put to use without recording any finding or rebutting the reasoning of the AO. On the other hand, the stand of the assessee was that M/s. AIPL has acquired a contract from MP Power Management Co. Ltd. for establishment of a solar power plant. It has also entered into a power purchase agreement with MPPMCL. This is a composite solar power plant consisting of 16 blocks. It was installed, and later on M/s. Real Gold Developers LLP has purchased all these assets, and these were gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grated part of total solar plant consisting of 16 blocks. If that be so, then installation of other blocks have been accepted by the department, and not challenged before the Tribunal. There is no disparity on the facts with regard to the blocks owned by the AMSL vis- à-vis of the assessee. We are of the view that there is no justification to interfere in the finding of the ld.CIT(A) in the cases of present two assessees also. Therefore, we do not find any merit in these two appeals; they are dismissed. 11. In the result, both the appeals of the Revenue are dismissed." 29.1. It is observed that claim of depreciation on assets leased to Alpha Infrapop Pvt. Limited by assessee and other group entities are identical and similar claim has been allowed by coordinate bench or not disputed in appeal in one of the entities, as discussed herein above. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in own case of assessee, we uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be any violation in the first place to attract the rigours of Explanation 1 to section 37(1) of the Act. 3.2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the said expenses have been incurred for the promotion and in furtherance of the Appellant's business activities and thus, allowable as deduction u/s 37(1) of the Act. 3.3. The Ld. CIT(A)/Ld. AO grossly erred in relying on the CBDT Circular No.: 5/2012 while disallowing the said expenditure without appreciating that the departmental circulars are not binding on the tax payer, which position has been repeatedly upheld by various judicial authorities 3.4 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not increasing the deduction under section 80-18/80-IE correspondingly on account of disallowance carried out under this said ground 4. Re: Disallowance under section 14A read with Rule 8D - Rs. 60,65,076/ 4.1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of Rs 60,65,076/- [Consisting of Rs 14,325-/ towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revalued assets is not allowable under clause (a) of Explanation 1 to section 115JB without appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld CIT(A) failed to appreciate that - (1) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 5.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/ disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 5.3 The Ld. CIT(A)/Ld. AO grossly erred, on facts and in the circumstances of the case. in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Paragraph Nos. 18 to 18.1 of this order and thereby allowed in favour of the assessee. 39. Additional Ground No. 7: Central excise refund receipt while computing book profit u/s. 115JB of the Act. This issue is considered by us at Paragraph Nos. 18.2 of this order. Respectfully following the same, this additional ground no. 7 is allowed 40. In the result, the appeal filed by the Assessee in ITA No. 1465/Ahd/2018 is partly allowed. 41. ITA No: 1522/Ahd/2018 relating to the Assessment Year 2014-15. The Grounds of Appeal raised by the Revenue reads as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee and in not confirming the additions made by the AO on these issues. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit without appreciating the facts and reasons mentioned by the AO in the assessment order. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit, without ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating the A.O's finding on the issue of period of use, and depreciation of plant and machinery used by Sun Pharma Industries & Sun Pharma Sikkim. 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IB/80IE in respect of receipt of interest of Rs. 26,98,26,600/- on delayed payments on sales, without appreciating the facts and reasons mentioned by the AO in the assessment order. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the assessee's ground on disallowance of deduction u/s 80IB/80IE in respect of receipt of interest on delayed payments on sales without appreciating the fact that the interest was not derived from manufacturing activity and deduction u/s 80IB/80IE was rightly disallowed by the AO. 4.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.ws. 80IA(10) on apportionment of research and development expenses of Rs. 7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the facts and reasons mentioned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not require any adjudication and hence dismissed. 43. Ground No. 2: Deduction u/s. 80IE in respect of Sikkim Unit. This issue is considered by us at Paragraph Nos. 22 to 22.2 of this common order in ITA No. 1521/Ahd/2018. Respectfully following the same, thus this ground no. 2 raised by the Revenue is hereby dismissed. 44. Ground No. 3: Deduction u/s. 80IB/80IE in respect of receipt of interest on delayed payment on sales. This issue is considered by us at Paragraph Nos. 23 to 23.2 of this common order. Respectfully following the same, this ground no. 3 raised by the Revenue is hereby dismissed. 45. Ground No. 4: u/s. 80IB(13)/80IE(6) r.w.s. 80IA(10) on apportionment of R & D expenses. This issue is considered by us at Paragraph Nos. 24 to 24.1 of this common order. Respectfully following the same, this ground no. 4 raised by the Revenue is hereby dismissed. 46 Ground No. 5: Disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors. This is already adjudicated in Paragraph Nos. 9 to 9.2 of this order in assessee's appeal in ITA No. 1464/Ahd/2018. Thus the disallowance made by the Assessing Officer is hereby confirmed and ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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