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TMI Blog2023 (11) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... so submitted before the Ld. CIT(A) during the impugned appellate proceedings. Furnishing of evidence of the approval obtained from the competent authority such as Department of Industries, Govt. of Himachal Pradesh for setting up of the Unit. - A license in the prescribed form to manufacture that pharmaceutical drugs was granted to the assessee on 29/03/2010 by State Drugs Controlling-Cum- Licensing Authority of Himachal Pradesh at Baddi and the said license validity period was from 29/03/2010 to 28/03/2015. Further, the assessee has also obtained Pollution Control Licence by making an application on 27/03/2010 and obtained No Objection Certificate (NOC) from Himachal Pradesh State Pollution Control Board on 07/04/2010. Apart from this, the assessee had also incurred electricity expenses for Unit-III. Apart from other expenses, this electricity expenses was also allowed as deduction by the Ld. AO. Hence, 3rd objection raised by the lower authorities also has no legs to stand. The assessee would be duly eligible for deduction u/s 80-IC of the Act in respect of Unit-III at Baddi. Sales promotion expenses of gift items, air tickets, foreign trips and hotel expenses spent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g division or not. - Matter restored back to AO - The ld. AO is directed to give a clear finding in this regard as to whether it pertains to eligible unit or not and decide the issue. - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER For the Appellant : Mr. R.S. Singhvi and Mr. Satyajeet Goel, Cas For the Respondent : Ms. Sarita Kumari, CIT- DR ORDER PER M. BALAGANESH AM: This appeal of the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-33, New Delhi, [hereinafter referred to as Ld. CIT(A) ] in Appeal No. 207/15- 16/262/16-17 dated 07/03/2018 against the order passed by Income Tax Officer, Ward-16(2), New Delhi, (hereinafter referred to as the Ld. AO ) u/s 143(3) of the Income Tax Act (hereinafter referred to as the Act ) on 26/03/2015 for the Assessment Year 2012-13. 2. The assessee has raised the following concise grounds of appeal: 1(i) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in partly upholding the disallowance to the extent of Rs. 72,36,394/- being claim of sales promotion expense in absence of any dispute with regard to genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed hereunder:- (a) The manufacturing Unit-III is located in the same premises from which the sister concern of the assessee M/s Marc India Ltd. was running its factory carrying on the same business and claiming deduction u/s 80-IC of the Act up to AY 2011-12. In the said premises owned by sister concern, the assessee had carried out the manufacturing activity and, hence, it is not eligible for deduction u/s 80-IC of the Act. From the above, it could be seen that the Ld. AO had not allowed deduction for Unit-III on the ground that the Unit has been established in the existing premises of the sister concern M/s Marc India Limited. In this regard, we find that the assessee had furnished the rent agreement dated 01/02/2010 entered into between the assessee and Marc India Limited. The copy of the said duly registered rent agreement is placed on record in pages 81 to 82 of the PB and stamp duty paid thereon. Further from the P L Account of the assessee of the eligible Unit-III, we find that the assessee had debited rent expenses of Rs. 6,06,941/-. This entire rent expenditure has been allowed as deduction by the Ld. AO. Admittedly, this rent of Rs. 6,06,941/- includes the rent paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise. Further, a license in the prescribed form to manufacture that pharmaceutical drugs was granted to the assessee on 29/03/2010 by State Drugs Controlling-Cum- Licensing Authority of Himachal Pradesh at Baddi and the said license validity period was from 29/03/2010 to 28/03/2015. This evidence is enclosed in page 91 of PB. Further, we find that office of Deputy Director of Industries, Single Window Clearance Agency, Baddi, District Salon (HP) vide its letter dated 28/03/2013 had addressed to the assessee and had duly mentioned that the date of commencement of commercial production of Unit-III to be 31/03/2010. This evidence is enclosed in page 93 of the PB. Further, the assessee has also obtained Pollution Control Licence by making an application on 27/03/2010 and obtained No Objection Certificate (NOC) from Himachal Pradesh State Pollution Control Board on 07/04/2010. The evidence in this regard are enclosed at pages 97 to 99 of the PB. Apart from this, the assessee had also incurred electricity expenses of Rs. 23,52,623/- for Unit-III. Apart from other expenses, this electricity expenses was also allowed as deduction by the Ld. AO. Hence, 3rd objection raised by the lower au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue on merits is no longer res-integra in view of the decision of the Hon ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. vs. DCIT, reported in 286 Taxman 200 (SC), wherein it was held that since acceptance of freebies by Medical Practitioners was prohibited as per Circular issued by the Medical Council of India under Medical Council of India (MCI) Regulations, 2002, gifting of such freebies by assessee pharmaceutical company to medical practitioners would also be prohibited by law and thus expenditure incurred in distribution of such freebies would not be allowed as deduction in terms of Explanation to section 37(1) of the Act. 4.2. It is not in dispute that the unit is eligible for deduction u/s 80-IC of the Act and that the said sales promotion expenditure has been incurred by the assessee only in the eligible unit. In view of the CBDT Circular No.37/2016 dated 02/11/2016, pursuant to this disallowance, the deduction u/s 80IC of the Act would automatically get enhanced and thereby making the entire issue revenue neutral. This is because the disallowance of the aforesaid expenditure would only go to increase the business profit of the assessee from the eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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