9911796707
TMI Blog2024 (4) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties also argued them together raising similar arguments on these issues. Accordingly, for the sake of convenience and brevity, we dispose all the appeals by this consolidated order. 2. Before we advert to the grounds taken in the cross appeals, it would first be relevant to cull out the basic facts of the case and effect of law in brief in respect of certain AYs. Search u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was conducted against the IPCA Laboratories Ltd. & Others Group, on 23-12-2014 thereby triggering Section 153A of the Act. Prior to the date of search, the income-tax assessment under section (hereinafter referred to as "u/s.") 143(3) of the Act (scrutiny assessment) for AYs 2009-10 and 2010-11 stood completed on 09.05.2013 & 29.05.2014. Accordingly, the income-tax assessments for Assessment Years [AYs] 2009-10 & 2010-11 were not pending before Assessing Officer (AO) on the date of search, therefore, those years assessments didn't abate consequent to the search on 23-12-2014. As far as assessments for AYs 2011-12, 2012-13 & 2014-15 are concerned, it was undisputed that these were abated assessments. The summary of the additions/disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal and Ground No. 12 of the Revenue's appeal for AY 2010-11 4.1 These grounds relate to the several additions which were made by the AO while completing the original assessment u/s 143(3) of the Act for AYs 2009-10 & 2010-11, which were again considered and added back by the AO while framing the income tax assessments u/s 153A/143(3) of the Act. The additions in question are noted to comprise of viz., a) transfer pricing adjustments towards goods sold to AEs and interest recoverable from AEs made by the TPO u/s 92CA(3) of the Act, which was added by the AO in the original assessments for AYs 2009-10 and 2010-11; b) disallowance of deduction claimed u/s 80-IC of the Act to the extent of income derived from the sale of scrap added in original assessments u/s 143(3) for AYs 2009-10 & 2010-11; c) disallowance of balance additional deprecation in relation to new assets acquired in earlier year, disallowed in assessments u/s 143(3) for AYs 2009-10 & 2010-11; d) disallowance of ESOP expenses in original assessments u/s 143(3) for AYs 2009-10 & 2010-11 4.2 On appeal, the Ld. CIT(A) is noted to have taken into account the appellate orders, available till then, passed in the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO's predecessor had already made additions on the four (4) issues mentioned above in the original assessment u/s 143(3) for AYs 2009-10 & 2010-11, which was completed much prior to the date of search. Hence, these assessments were unabated and the fate of the addition/s made in the original assessments, constituted separate & independent proceedings, which as rightly pointed by the Ld. AR was being separately pursued both by the assessee and the Revenue as well. We thus note that the fate of the addition/s made therein had no relation with the income-tax assessments completed u/s 153A/143(3) of the Act pursuant to the search. As noted above, since AYs 2009-10 & 2010-11 were unabated assessments, the AO could disturb these completed assessments only qua the issues in relation to which incriminating material was found. Clearly, these four (4) additions were not based on any incriminating material unearthed in the course of search. Rather, the AO is noted to have followed the assessment orders passed by his predecessors and again added the disallowance/s on identical line of reasoning given by them. The Ld. CIT, DR could not controvert this factual position. Hence, in our co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 On merits of the claim, the Ld. AR submitted that the provisions of Section 115JB (6) of the Act invoked by the AO had no application to the loss incurred by SEZ Unit prior to commencement of business activity/commercial production. He submitted that, the SEZ Unit at Pritampur, Madhya Pradesh had commenced commercial production only from 29.11.2011 i.e. AY 2012-13 and onwards and thus any expenses/losses incurred by the said SEZ unit prior to commencement of business was not amenable to Section 10AA of the Act and hence the provisions of Section 115JB(6) had no application. For this, the Ld AR first invited our attention to the language used in clause (6) to Section 115JB of the Act. It is noted that clause (6) of Section 115JB provided that; the provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone. According to Ld. AR, the phrase 'any business carried on' was of importance. He submitted that, unless there is a business being carried on at the SEZ Unit, the provisions of Section 115JB (6) would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of search qua the assess qua the AY. On the given facts before us, we find that the AO has made disallowance to the computation of book profit on the basis of his interpretation of the provisions of Section 115JB (6) of the Act, without any reference to any seized material impounded in the course of search. Following the decision of Hon'ble Supreme Court (supra), we are in agreement with the Ld. AR that the impugned disallowance could not have been made in the unabated AY 2009-10, in absence of there being any incriminating material found in the course of search relating to this impugned issue. Accordingly, this legal plea of the assessee stands allowed and hence the disallowance of Rs. 5,97,86,283/- made by the AO on account of loss incurred by the SEZ Unit while computing book profit u/s 115JB of the Act is hereby directed to be deleted. Hence, Ground nos. 11 & 12 of the assessee's appeal for AY 2009-10 is allowed. 5.5 Having held so above, we are accordingly of the view that, likewise, the Additional Ground No. 1 of the assessee raising fresh claim for deduction of loss incurred at SEZ unit while computing book profit u/s 115JB of the Act in unabated AY 2010-11 cannot be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture on account of interest and in some cases on account of depreciation. Admittedly, the said expenditure was not claimed by the assessee in the return of income filed prior to search at the premises of assessee. However, consequent to search proceedings carried on the premises of assessee, notice under section 153A of the Act was served upon the assessee. In response thereto, in the return of income filed by the assessee, fresh claim of interest expenditure and depreciation on certain assets was made. The said claim was not allowed by the authorities below. The assessments for assessment years 2005-06 to 2008-09 i.e. appeals listed before us have not abated. In such cases, where the assessment has not abated, then the Hon'ble Bombay High Court (supra) has laid down that only undisclosed income and undisclosed assets detected during the course of search could be brought to tax. Applying the said ratio to the facts of the present case, we hold that the assessee is not entitled to claim any deduction on account of fresh claim i.e. on account of interest and depreciation in the respective years. Applying the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. (1) Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd dismiss this ground of the Revenue. 7. Issue 4: Expenditure by way of tax paid on ESOP added u/s 115JB of the Act Ground No. 7 of the Revenue's appeal for AY 2010-11 7.1 This ground raised by the Revenue relates to the Ld. CIT(A)'s action of deleting the addition made on account of tax of Rs. 1,60,34,723/- paid on the non-monetary perquisite granted to employee/s by way of ESOPs while computing book profit u/s 115JB of the Act. The AO is noted to have held that this tax paid for and on behalf of the employees, although a non-monetary perquisite, was in the nature of 'income-tax' and hence added the same under Explanation (1) to Section 115JB of the Act. On appeal, the Ld. CIT(A) is noted to have deleted the disallowance by following the decision rendered by this Tribunal on this issue in the case of Rashtriya Chemicals & Fertilizers Ltd Vs CIT (91 taxmann.com 104). Aggrieved by the same, the Revenue is now in appeal before us. 7.2 We have heard both the sides and perused the findings in the assessment order and the material placed before us. We find merit in the preliminary plea of the Ld. AR for the assessee that the impugned disallowance was not based on any incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted by us are as follows :- Relevant part of statement of Mr. Manoj Kumar Jain:- "Q. 9 Are you aware of any bogus purchases booked or bogus commission payments made by M/s IPCA Laboratories Ltd. Ans: Sir, I am not aware of any bogus commission made by M/s IPCA Laboratories ltd. but there is bogus purchase booked from M/s Reynolds Petro Chem Ltd. Q. 11 Please furnish the details of the transactions made with M/s Reynolds Petro Chem Ltd, along with the modes operandi followed. Ans: Sir, in case of purchase of product MAPA (Methyl Amino Propyl Amine) which is made in M/s Makers Laboratories Ltd., the adjustments are made. M/s Makers Laboratories Ltd. makes purchase from M/s Reynolds Petro Chem Ltd, at the rate which is Rs. 73/- per kg. higher than the market rate. This excess payment made to the M/s Reynolds Petro Chem Lid. is returned back to M/s IPCA Laboratories Ltd. in cash with the Knowledge of the management. M/s Reynolds Petro Chem Ltd. charges 5% commission and after deducting the same the balance amount of cash is returned back. This over invoicing is done in certain products purchased through M/s. Reynolds Petro Chem Ltd. and the excess payment made is brought bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The market price keeps on fluctuating with time. However, the difference per Kg. taken out in cash remains same." 8.2 The Ld. AR particularly pointed out to us that, each of these three (3) employees in their statements had only admitted that the over invoicing of raw materials was done through one vendor, M/s Reynolds Petro Chem Ltd who would provide inflated bills. In fact, Mr. Manoj K. Jain & Mr. Manoj S Jayawant in their answers to Q No. 11 & Q No. 12 respectively, are noted to have specifically identified one of the sister concerns, M/s Maker Laboratories Ltd which had made purchases from M/s Reynolds Petro Chem Ltd. These employees are noted to have explained the modus operandi followed for inflating the purchases. The Ld. AR accordingly emphasized on the fact that none of these employees had named the assessee to be involved in over-invoicing but had only admitted that vendor, M/s Reynolds Petro Chem Ltd would provide inflated bills, which was to M/s Maker Laboratories Ltd. According to Ld. AR therefore, the statement of these three (3) employees had no bearing whatsoever in the income-tax assessment of the assessee. 8.3 It is further noted that the AO had issued show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, in the enquiries made u/s 133(6), the AO had called for the comparative details of sales made by these five (5) vendors to the assessee company and their other customers. Based on the data obtained from these vendors, the AO is noted to have undertaken a benchmarking analysis and compared the prices at which the aforementioned vendors had made sales to the assessee and to others and also the internal rates at which the assessee made purchases of same products from other parties, apart from these five (5) vendors. According to AO, the comparative data revealed that the prices at which goods were sold to the assessee by these five (5) vendors were either higher than the prices charged from other customers or that the prices paid by assessee to other suppliers were lower. The AO thus inferred that the purchases from these five (5) vendors had been inflated and accordingly held it to be a case of over-invoicing. Although the AO is noted to have undertaken this factual exercise, but the AO is found to have ultimately discarded the same. Instead, the AO is observed to have simply applied the following uniform rates, as admitted by the employees to be the over-invoicing component i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 (11 of 1922), or under this Act. Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act." 8.7 From a bare reading of the aforesaid provision, it is noted that Section 132(4) of the Act empowers the authorized officer to examine on oath any person who is found to be in possession or control of any books of account, documents, money etc. Such a statement made by that person may thereafter be used in evidence in any proceedings under the Act. Evidence is a mode or means to prove a fact-in- issue. Statement is an oral testimony of relevant fact; and an admission of a fact-in-issue is an important piece of evidence, provided it has been voluntarily given without any inducement, promise, threat or coercion. Once a statement recorded of a person who is in possession of any valuable thing or control of books found during search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m as to whether they were aware of any bogus purchases booked by the assessee company. To this, each of the employee is noted to have made the same averment that purchases were booked from M/s Reynolds Petro Chem Ltd but these purchases were not bogus and that only over invoicing was done. The Investigating Authorities are noted to have followed up this answer with another question to explain the details of transactions made with M/s Reynolds Petro Chem Ltd and these employees are noted to have explained the same. Having perused each of these statements given by these three employees, it is evident that they had only admitted to over-invoicing being done through M/s Reynolds Petro Chem Ltd. The Ld. AR has rightly pointed out that none of these employees have named the assessee, i.e. M/s IPCA Laboratories Ltd. in their answers. Instead, while explaining the modus operandi, these employees are noted to have named M/s Maker Laboratories Ltd, which we note to be sister concern of the assessee who had made purchases from M/s Reynolds Petro Chem Ltd. It is not the Revenue's case that the assessee had made any purchases from M/s Reynolds Petro Chem Ltd. The AO instead is noted to have use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the original testimony of Shri Prashant Godha is found to be based on wrong assumption of facts, which makes it unsafe to rely on it and as discussed, the assessee has rebutted the same with evidence. Hence, we hold in aforesaid factual matrix, the AO erred to draw adverse inference in the hands of the assessee solely based on an incorrect admission made by the Director on wrong assumption of fact/mistake of fact. 8.9 As already noted above, the AO had erroneously referred to the statement of three (3) employees to justify the addition on account of over-invoicing from purchases made from vendors, M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd and M/s Farmson Pharmaceuticals Pvt Ltd. The AO, instead, is noted to have drawn this inference on his own surmises and not any incriminating material found in the course of search. Overall, therefore, we find that the entire premise on which the AO alleged over-invoicing of purchases by the assessee was fundamentally flawed and not backed by any material or evidence. Accordingly, the additions made in this regard in the hands of the assessee is untenable. 8.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benchmarking exercise conducted by the lower authorities suffered from several infirmities and was therefore unreliable. 8.11 The Ld. AR also pointed out that this benchmarking exercise undertaken by the lower authorities had no legal backing. He submitted that Chapter X of the Act contained provisions giving authority to the officers for undertaking the transfer pricing exercise in relation to international or specified domestic transactions with associated enterprises. Similarly, according to him, only if the purchases from related parties are found to be inflated then the excess portion was disallowable u/s 40A(2)(b) of the Act. The Ld. AR thus submitted that there was no provision in law, which empowered the AO to undertake comparison of different prices paid for purchases made from different unrelated independent parties. He thus contended that this entire exercise undertaken by the AO was irrelevant. The Ld. AR explained that the difference in rates amongst purchases from unrelated and independent vendors can be on account of varied reasons such as availability of quantity with them, urgency/need of the assessee, place of delivery and terms of credit, etc. He also showed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Mehul Traders and M/s Krish Enterprises. Briefly stated, the facts as noted are that, during the course of a survey action at one of the premises of the assessee, statement of one employee Mr. Bhupendra Joshi was recorded. In his statement, he is noted to have stated that, the purchases made from M/s Arihant Enterprises, M/s Rushabh Sales Corporation and M/s Regal Sales Corporation were not verifiable and thus he offered to disallow the same. Apart from the foregoing, the AO in the course of assessment came across another four (4) parties i.e. M/s Seva Enterprises, M/s Shree Ganesh Enterprises, M/s Mehul Traders and M/s Krish Enterprises, which according to AO, were flagged as hawala dealers by Maharastra State VAT Department. The AO accordingly required the assessee to explain as to why the purchases made from these parties should not be treated as bogus. The assessee, in response, explained that, Mr. Bhupendra Joshi had retracted his statement and provided his affidavit as well. The assessee further submitted the relevant invoices, ledgers, bank statements etc. to substantiate the genuineness of purchases. The AO however did not agree with the explanation furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT, DR vehemently supported the order of the AO. He submitted that the retraction affidavit furnished by Mr. Bhupendra Joshi was an after-thought and therefore ought to be discarded. He further claimed that the assessee had failed to prove the genuineness of the purchases in the course of assessment, hence the AO had rightly disallowed the same. According to him, the Ld. CIT(A) had erred in restricting the disallowance to the extent of profit element in these purchases as opposed. He urged that the entire value of purchases ought to be disallowed. 9.4 We have heard both the parties. From the facts placed before us, it is noted that, the seven (7) suppliers in question, were flagged as suspicious entities by the Maharashtra Sales Tax Department. When enquired in the course of search, the employee of the assessee, Shri Bhupendra Joshi is noted to have also admitted that the purchases from these suppliers were not genuine, although he is noted to have retracted the same. We agree in principle with the submission of the Ld. AR that an admission/ statement alone is not sufficient to justify an addition but at the same time the onus is on the assessee to support their retraction with co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, only the profit element embedded in the purchases made from bogus parties has to be brought to tax and that the entire value of purchases cannot be disallowed. In the case of PCIT vs Mohommad Haji Adam & Co (103 taxmann.com 459), the Hon'ble jurisdictional High Court has held as under:- "8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect that the eight parties from whom the purchases were allegedly made were alleged hawala dealers who had issued bogus bills totalling Rs. 1,14,92,970.00. 12. In the appellate proceedings before the first appellate authority, it was held as under :- "2.15 The facts in the present case shows that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to be engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year from such parties. This circumstantial evidence also prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the abovementioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to complete the job work of dying. As mentioned above the AO had never disputed or examined the aspect of job work receipts. Hence I am of the firm belief that the appellant had made cash purchases from other parties which were not recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see with a view to bury the litigation. Nothing has been brought before us by the Ld. DR to contradict the findings recorded by the Ld.CIT(A). The assessee's counsel has also placed reliance upon the judgment of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (supra) wherein similar issue has been decided on identical lines by the Hon'ble Bombay High Court. In our view, no intervention is required in the findings of Ld. CIT(A) and, therefore, the same is confirmed. The grounds raised by the revenue are dismissed." 15. Thus, Tribunal concurred with the view taken by the CIT(A) that the Assessing Officer had erred in disallowing the entire total purchases and adding the same to the total income of the assessee. View taken by the CIT(A) that 17.5% of the purchases be added to the total income of the assessee as the profit element was a reasonable one. It was also noted that the said percentage was accepted by the assessee with a view to close the litigation. Nothing was brought on record by the Revenue to contradict the findings recorded by the CIT(A). Tribunal had also referred to the decision of this court in CIT v. Nikunj Eximp Enterprises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical fact situation arose did not interfere with the order passed by the Tribunal and held that no substantial question of law arose from such order. It was held that merely because the suppliers had not appeared before the Assessing Officer, no conclusion could be arrived at that the purchases were not made by the assessee." 16. Today while dealing with Income-tax Appeal No. 1330 of 2017 (Pr. CIT v. Rishabhdev Technocable Ltd.) [2020] 115 taxmann.com 333 (Bom.), we have held as under: ....... 16. On thorough consideration of the matter, we do not find any error or infirmity in the finding returned by the Tribunal. No substantial question of law arises from such finding returned by the Tribunal." 9.10 The ratio laid down in the above judgments is binding upon us. We accordingly hold that only the profit element embedded in these purchases ought to be assessed to tax and that on the given facts, the disallowance of entire value of purchases was unwarranted. Coming to the issue of estimation of the profits, on the given facts and having regard to the gross profit already declared by the assessee, according to us, in the fitness of matters and fair play, profit rate of 8% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computer systems and internal servers from ACIAL which was essential to their business. The Ld. CIT(A) at Para 11.3.2 of the order for AY 2009-10 is observed to have taken note of the annual maintenance services rendered by ACIAL, which are as follows :- "9.3.2. The facts of the case of the appellant are that professional services in the nature of Annual Support Services were taken by the appellant from M/s. Allied Computers International [Asia] Ltd. The appellant has incurred expenses amounting to Rs. 67,41,600/- for these services. The nature of the services rendered by the service provider included i) Maintenance of e-Mails, includes upgrades server performance optimization, user management, ii) Maintenance of SPAM Servers and controlling of the same, (iii) Maintenance of Proxy Services for internet access which includes user management, reporting on usage, (iv) Maintenance of Gateway & Desktop, Anti-virus servers and monitoring for e-Mail and Desktops signature update, (v) Maintenance of Checkpoint firewall and RSA Security solutions for effective data protection, (vi) Maintenance of Windows & Linux Servers and managing the patches, (vii) Maintenance of Active Directory Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provided to the assessee nor was any opportunity to cross-examine him afforded to the assessee. It also not the case that the Revenue was able to show that Mr. Shirish Shah in his statement had implicated the assessee of any wrong-doing or admitted to providing accommodation entry to the assessee. Even before us, the Revenue has not brought any such statement of Shri Shirish Shah on record. Hence, in absence of this statement, which was collected at the back of the assessee, we agree with the Ld. AR that the same cannot be relied upon to justify the impugned addition, particularly when the copy was never provided to the assessee and even the opportunity to cross-examine Mr. Shah was not afforded. For this, we may gainfully refer to the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. CCE reported in (2015) 281 CTR 241 (SC). In this case, the Hon'ble Apex Court had held that, "failure to give the assessee the opportunity to cross examine witness, whose statements are relied upon, results in breach of principles of Natural Justice. It is a serious flaw which renders the order a nullity." 10.6 We also gainfully refer to the judgment of the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round Nos. 1 to 4 of the assessee's appeal and the Ground Nos. 1-3 of the Revenue's appeal for AY 2009-10 Ground Nos. 1 to 4 of the assessee's appeal and the Ground Nos. 1-3 of the Revenue's appeal for AY 2010-11 Ground Nos. 1 to 4 of the assessee's appeal and the Ground Nos. 1-3 of the Revenue's appeal for AY 2011-12 Ground Nos. 1 to 4 of the assessee's appeal and the Ground Nos. 4-6 of the Revenue's appeal for AY 2012-13 Ground Nos. 1 to 4 of the assessee's appeal and the Ground Nos. 4-5 of the Revenue's appeal for AY 2014-15 11.1 These grounds relate to the disallowance of sales promotion expenses which according to the AO fell within the ambit of 'freebies' given to doctors, in violation of the guidelines issued by Medical Council of India in December 2009 and the CBDT Circular issued in August 2012. The AO is accordingly noted to have disallowed the same in terms of Explanation to Section 37(1) of the Act. The facts of the case are that, during the course of search conducted u/s 132 of the Act on 23.12.2014, it was found that the assessee had debited several expenses under the head 'selling & marketing expenses' which inter alia comprised of gifts, travelling expenses, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fts for sales promotion 566762 566762 Total (1) 175210477 110937125 88301977 86423753 460873332 14)548282 Camp expenses (40% estimated) 24391280 18465076 21750082 21932463 86538901 15)547042 Brand Recall Local purchase (estimated) 15000000 15000000 15000000 15000000 60000000 16)547043 Brand Recall import purchase (estimated) 1302540 12197158 15738735 29238433 Total 40693820 45662234 52488817 36932463 175777332 We are submitting that we will pay full tax on the above expenses mentioned at Sr. No.1 to 13 as they are not allowable expenses and so we will disallow these expenses. These expenses will be added back in the total income of M/s. Ipca Laboratories Ltd. These expenses have direct nexus with doctors as they are in contravention to CBDT Circular No.5/2012 dated 01.08.2012 issued by Hon'ble CBDT and guidelines issued by the Medical Council of India on professional ethics No. MCI-211(1)/2009(Ethics), dt. 10.12.2009. As far as the sales promotion expenses mentioned at Sr.No. 14,15,16 which have direct nexus but exact quantum of disallowance cannot be ascertained right now. However, we will gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturns filed in response to notices issued by the AO u/s 153A of the Act for the relevant AYs in question. The AO accordingly show caused the assessee vide notice dated 01.08.2012 as to why the sales promotion expenses, which were offered to be disallowed in the course of search, should not be added back while assessing the total income. In response, the assessee is noted to have furnished the relevant details of the sales promotion expenses and submitted that these expenses were allowable in nature. The assessee further explained that, the statement given by Mr. Beli was based on a leading question put to him by the Investigating Authority to which he had answered without having any proper and correct knowledge of the position of law and the relevant facts. According to the assessee, the contemporaneous facts would show that majority of the sales promotion expenses were not incurred / paid to doctors but to their field staff and/or the sales person, and thus the statement of Mr. Beli was rebuttable. The assessee had further claimed that the regulations prescribed by IMC was neither applicable to it nor was it in the nature of 'law' in the AYs in question and therefore even if it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... score he is noted to have deleted the entire disallowance of sales promotion expenses in AYs 2009-10, 2010-11, 2011-12 & 2012-13. Aggrieved by the Ld. CIT(A)'s order, both the assessee and the Revenue are in appeal before us. 11.7 Assailing the action of the Ld. CIT(A), the Ld. CIT, DR submitted that the Hon'ble Apex Court in the case of Apex Laboratories Pvt. Ltd. vs DCIT (135 taxmann.com 286) has held that the expenditure incurred by pharmaceutical companies for supply of freebies to medical practitioners constitutes an illegal activity and is therefore required to be disallowed under Explanation 1 to Section 37(1)of the Act. He pointed out that the Hon'ble Apex Court had held the CBDT Circular No.5 of 2012 dated 01.08.2012 to be clarificatory in nature and thus contended that the same was retrospectively applicable. He accordingly urged that the action of the Ld. CIT(A) deleting the disallowances made in AYs 2009-10, 2010-11, 2011-12 & 2012-13, by holding the CBDT Circular (supra) to be applicable prospectively, be reversed. The Ld. CIT, DR further supported the order of the AO disallowing the sales promotion expenses and contended that the disallowance made by the AO be resto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that incentives or freebies given to doctors was punishable as per the Circular issued by the Medical Council of India on 14.12.2019 under the MCI Regulations 2002. The Hon'ble Apex Court held that such freebies given by pharmaceutical companies to medical practitioners was held to be prohibited by law and therefore the expenditure incurred on distribution of such freebies was not allowable as deduction in terms of Explanation (1) to Section 37(1) of the Act. While holding so, the Hon'ble Apex Court held that the CBDT Circular No. 5/2012 dated 01.08.2012 clarifying that the freebies given by pharmaceutical companies to medical practitioners was inadmissible as deduction u/s 37(1) of the Act was clarificatory in nature. The said Circular was thus held to be effective from the date of implementation of Regulation 6.8 of the 2002 MCI Regulations i.e. from 14.12.2009. 11.11 We also noted that the Hon'ble jurisdictional Bombay High Court in the case of Abbott India Ltd Vs ACIT (WP No. 685 of 2016) dated 10.02.2023, after considering the decision of Hon'ble Supreme Court in the case of Apex Laboratories (supra) explained that the ruling of the Hon'ble High Court laying down that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied health sector being prohibited under the regulations of 2002 would be inadmissible under Section 37 being prohibited by law. The Circular reads as under : ..... 25. It is, thus, clear that the Circular No.5/2012 referred to the position of the regulations of 2002 after its amendment in the year 2009 and, therefore, neither the circular nor regulation 6.8 incorporated w.e.f. 10 December 2009 would be applicable to the instant case pertaining to assessment year 2008-09. 26 It is settled that law to be applied is the one that is in force in the relevant assessment year, unless otherwise provided expressly or by necessary implication - CIT Vs. Insthmian Steamship Lines and Reliance Jute & Industries Ltd. Vs. Commissioner of Income- tax. 27 Learned Counsel for the Respondents, Mr. Suresh Kumar, placed reliance upon the case of Apex Laboratories (P) Ltd. Vs. Deputy Commissioner of Income-tax LTU4. This was a case where the assessee being a pharmaceutical company had incurred expenditure by giving freebies to the medical practitioners and accordingly, claimed exemption for the said expenditure under Section 37(1) of the Act for the assessment year 2010-11. The assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales promotion expenses incurred from 01.04.2009 to 13.12.2009 and 14.12.2009 to 31.03.2010. For the aforesaid reasons, the AO is accordingly directed to delete the disallowance of sales promotion expenses to the extent pertaining to the period 01.04.2009 to 13.12.2009. 11.14 In view of the above, we are now required to adjudicate the merits of the disallowance made by the AO out of sales promotions expenses in AY 2010-11 (14.12.2009 to 31.03.2010), 2011-12, 2012-13 & 2014-15. As noted earlier, the Hon'ble Apex Court has held that any expenditure incurred by pharmaceutical companies for the benefit of doctors, which fall within the mischief of MCI Regulations, 2009, shall not be allowable as deduction u/s 37(1) of the Act. 11.15 Having perused the Regulation 6.8.1, it is noted that a medical practitioner is refrained from availing, (a) gifts, (b) travel facilities, (c) hospitality and (d) cash or monetary grants from pharmaceutical companies. The Ld. AR further brought to our notice that, the MCI vide Notification dated 01.02.2016 has clarified that, where any gift items or courtesies having value of less than Rs. 1000/- is provided, then such would not fall within the mischief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne and testing kits, certain instruments purchased as required in medical camps. According to the AO, these medical kits like lipid profile test, sugar testing kit, thermometer, urine kits, pregnancy sticks etc., which were purchased for the camps were gifted to the doctors who attended the camp and thus held that this expenditure fell under the mischief of IMC regulations and accordingly disallowed the same in its entirety. Apart from the foregoing, the AO also noted that the assessee had incurred camp expenses, which were noted to include venue charges, payment to field staff, taxi hire charges to staffs etc. The AO had disallowed 10% of these expenses. 11.19.1 The Ld. AR showed us that, the expenses on patient education included expenses at diabetic camps, ECG Camps, BPH/BMD camps etc. and the nature of expenses primarily included testing kits, ECG rolls, needles, blankets, pamphlets for patients etc. These expenses by its very nature are noted to be for the benefit of patients and not doctors. The Ld. AR further explained that, the expenses towards thermometers, basic BP machines etc. were meant for the patients and their disease detection. He pointed out to us that, the averm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been towards doctors as well and thus restricted the disallowance to 10%. 11.20.1 Having heard the rival submissions, it is noted that the Revenue was unable to controvert the Ld. CIT(A)'s finding that the sponsorship expenses were paid to trade bodies/associations by the assessee to put up their banners and posters in their events as a measure of brand re-call. The Ld. AR also showed us the sample supporting, which was placed at Pages 214 to 215 of Paper Book. The Ld. AR has rightly pointed out to us that, the sponsorship payments made to trade bodies/associations has not been prohibited in the MCI Regulations, 2009. Hence, when these payments were not made for the benefit of any medical practitioners and were also not falling in the mischief of MCI regulations, we find force in the Ld. AR's plea that the disallowance out of such sales promotion expenses was unwarranted. Coming to the Ld. CIT(A)'s action of making disallowance at 10%, we do not countenance such action of making estimated & ad-hoc addition. It is not the case of the Ld. CIT(A) that the assessee had not provided the details of the expenses or that the books of accounts were found to be unreliable. Hence, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iz., (b) & (c), would fall under the mischief of MCI regulations and is required to be disallowed and added back u/s 37(1) of the Act. 11.22 Coming to the expenses debited under the sub-head Doctor's Meeting / Medical Awareness: The AO had noted that these expenses were in relation to attending conferences, hotel expenses & travelling expenses of doctors and thus disallowed the same in its entirety. On appeal the Ld. CIT(A) is noted to have restricted the disallowance to 10%. The Ld. AR first explained to us, the nature of these expenses. He pointed out that these expenses comprised of the costs incurred by the assessee for organizing conferences. Taking us through the details, the Ld. AR showed us that majority of the expenses debited was in relation to the cost incurred for hiring venue or booking a conference hall at a five-star hotel and making arrangements to organize these conferences. Apart from the foregoing, the assessee also incurs hotel & travelling expenses for the doctors who attend these conferences. According to Ld. AR, the hotel expenses comprised of food & refreshment, which the assessee was duty bound to provide as being organizer of the conference and thus he pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the total expenses under this head. With regard to HTC expenses, it was noted to comprise of flower & sweets valuing less than Rs. 500/- each incurred by field staff which were presented to customers / retailers / doctors. According to the AO, these expenses were gifts given to doctors on their special occasions i.e. anniversary or birthdays etc. The AO thus held that this expenditure was incurred in violation of MCI regulations Likewise, the AO disallowed the sales promotion & CRM expenses which were noted to comprise of expenses of value less than Rs. 500/- incurred by more than 4500 field staff of the assessee. According to the AO, these expenses were incurred by the field staff to maintain cordial relations with medical practitioners. He treated these expenses to be in nature of freebies and disallowed the same. On appeal, the Ld. CIT(A) is noted to have restricted the disallowance to 10% of these expenses. 11.23.1 Having heard both the parties, it is not disputed by the Revenue that the items of expenses incurred under these heads were of nominal value less than Rs. 1000/- on flowers, sweets, cup, aprons etc. The sales promotion articles which had their name & logo were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve restricted the same to 10% of the expenses. Before us, the Ld. AR argued that the pretext on which the AO made the disallowance was unjustified for the reason that the Investigating authorities had found & seized the books of accounts in the course of search and had also taken back-up of their server and thus it was incorrect to state that the details of these expenses were not made available. The Ld. AR further showed us that the assessee had 12 divisions and more than 4500 persons as field staff and therefore in light of the foregoing, the taxi hire charges incurred across the years was reasonable and not excessive. Further, to substantiate the nature of these expenses, the Ld. AR by way of an illustration has also placed the copy of email approving reimbursement of taxi conveyance of their marketing staff at Page 269 of Paper Book No. 3. Having regard to the nature of expenses and overall facts as discussed in the foregoing, we note that these expenses were incurred by sales personnel of the assessee and not paid to any doctors or medical practitioners. Accordingly, the disallowance of taxi hire charges is held to be unwarranted in the facts of this case, and we direct to del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ickets of doctors attending conference, which was disallowed u/s 37(1) of the Act and the Ld. CIT(A) is observed to have restricted the disallowance to 10%. According to us, the air ticket expenses paid for doctors directly fell under the mischief of MCI Regulations 2009 and was thus not allowable as deduction under Explanation (1) to Section 37(1) of the Act. We thus reverse the order of Ld. CIT(A) in this regard and uphold the action of AO disallowing the same in full. 11.29 In light of the our above findings, the sums disallowable out of the sales promotion expenses u/s 37(1) of the Act in AY 2010-11 (14.12.2009 to 31.03.2010), 2011-12, 2012-13 & 2014-15 are quantified as follows: - Nature of Expenses AY 2010-11 (14.12.09 - 31.03.10) AY 2011-12 AY 2012-13 AY 2014-15 Participation in Symposium/Exhibitions - Hotel Expenses Nil Nil 3,08,686 45,80,264 - Travelling Expenses Nil 49,636 6,41,230 39,14,699 Doctor Meeting/ Medical Awareness - Hotel Expenses 5,52,810 32,57,926 3,78,433 1,09,40,845 - Travelling Expenses 2,95,372 2,01,350 1,00,86,599 5,36,005 Air Ticket Expenses N.A. N.A. N.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his particular plea of the assessee is found to be acceptable. Hence, having regard to the disallowance quantified by us above, the AO is accordingly directed to appropriately attribute the disallowance of freebies to the eligible unit's u/s 80-IC of the Act and consequentially re-compute the enhanced eligible profits and allow the deduction u/s 80-IC of the Act. Needless to say, the AO shall allow an opportunity of hearing to the assessee to provide necessary computation, before undertaking this exercise. 11.32 Overall therefore, the grounds raised by the assessee in AY 2009-10 is allowed and the grounds of the Revenue is dismissed. And, the grounds raised by the assessee and Revenue in AYs 2010-11, 2011-12, 2012-13 & 2014-15 stands partly allowed. 12. Issue 9: Disallowance of ESOP expenses Ground No. 11 of the Revenue's appeal for AY 2011-12 Ground No. 14 of the Revenue's appeal for AY 2012-13 12.1 These grounds of the Revenue are against the Ld. CIT(A)'s action of deleting the disallowance of ESOP compensation expenditure made by the AO. Briefly noted, the AO, following the order of his predecessors had disallowed the same holding it to be capital in nature. On first appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer authorities. Apparently, assessee earned receipt of sale of empty containers. Undisputedly, the unit at Silvassa and Dheradun are eligible undertakings income, which is eligible for deduction under Section 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of CIT versus Sadhu forging Ltd 336 ITR 444 as well as the decision of the honourable Gujarat High Court in Tax Appeal No. 368 of 2008 December 21, 2013 an Dy. CIT v. Harjivandas Juthabhai Zaveri [2002] 258 ITR 785/ [2003] 132 Taxman 923 (Guj.) In view of this, we find that lower authorities have erred in not allowing deduction under Section 80IB and 80IC of the Act on the above sum. Accordingly, ground no.2 and 3 of the appeal is allowed." 13.3 The Ld. CIT, DR was unable to point out any change of facts or position of law in the relevant AYs. Following the above decision (supra) rendered in assessee's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decisions rendered by several judicial forums holding such subsidy received for setting-up new unit to be in nature of capital receipt not exigible to tax, the assessee had raised a fresh claim seeking exclusion of the same from the computation of income under normal provisions as well as book profit u/s 115JB of the Act. The AO however noted that this claim was not raised in the return of income filed by the assessee and accordingly rejected the same by following the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd Vs CIT (284 ITR 323). Aggrieved by this action of the AO, the assessee preferred an appeal before the Ld. CIT(A) who following the decision of Hon'ble Bombay High Court in the case of CIT Vs Pruthvi Brokers & Shareholders (349 ITR 336) admitted this fresh claim raised by the assessee in the course of assessment. The Ld. CIT(A) thereafter analyzed the nature of subsidy in light of the decisions rendered by the Hon'ble Supreme Court in the case of CIT Vs Shree Balaji Alloys Ltd (80 taxmann.com 239) and CIT Vs Ponni Sugar & Chemicals Ltd (174 Taxman 87). The Ld. CIT(A) accordingly held the excise subsidy to be in nature of capital receipt not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in ShreeBalaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct since on account of devastating earth-quake, development of the district had suffered. The Scheme envisaged that, the same was confined only with the Kutch District. Similar, being the purpose and philosophy of the Government of India, while granting excise duty exemption, we may not separately take note of the back-ground thereof. In view of these facts, the question arises is - whether the Tribunal was justified in holding that Sales Tax and Excise duty exemption enjoyed by the assessee under the said subsidy scheme, was not taxable as revenue receipt. Such and similar issue has came up before different High Courts and Supreme Court on the numerous occasions. Reference to all those judgments would be un-necessary. However, the principle that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 27. It was a case arising out of judgment of this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of such subsidies in form of remission of interest and power/electricity duty payments etc. was capital receipt not liable to tax both under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the Revenue, the Hon'ble High Court upheld the order of this Tribunal by observing as under: "26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under section 115JB of the Income-tax Act, 1961 as contended by the revenue by relying on the decision in the case of Appollo Tyres Ltd. (supra). 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under section 2(24) of Income-tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hstanding anything contained in any other provision of the Act, where in the case of an Assessee, being a company, the income- tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April,2001, is less than seven and one half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one half ten per cent. The Assessee being a company the provisions of sec. 115JB of the Act were applicable. Every assessee, being a company, shall, for the purposes of section 115JB of the Act, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). In so preparing its book of accounts including profit and loss account, the company shall adopt the same accounting policies, accounting stand and method and rates for calculating depreciation as is adopted while preparing its accounts that are laid before the company at its annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shivalik Venture (P.) Ltd. v. Dy. CIT [2015] 70 SOT 92/60 taxmann.com 314, came to the conclusions (i) the object of Minimum Alternate Tax (MAT) provisions incorporated in sec. 115JB of the Act was to bring out real profit of companies and the thrust was to find out real working results of company. (ii) Inclusion of receipt which are not in the nature of income in computation of book profits for MAT would defeat two fundamental principles, it would levy tax on receipt which was not in nature of income at all and secondly it would not result in arriving at real working results of company. Real working result could be arrived at only after excluding this receipt which had been credited to P&L a/c and not otherwise. (iii) There was a disclosure of the factum of forfeiture of share warrants amounting to Rs. 12,65,75,000/- by the Assessee in its notes on accounts vide Note No. 6 to Schedule 11 of Financial Statements for year ended 31-3-2009. Profit and loss account prepared in accordance with Part II and III of Schedule VI of Companies Act 1956, included notes on accounts thereon and accordingly in order to determine real profit of Assessee, adjustment need to be made to disclosu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in total income" for some policy reasons, the legislature, in its wisdom, has decided not to subject them to tax u/s 115JB of the Act also, except otherwise specifically provided for. Clause (ii) of Explanation 1 to sec. 115JB specifically provides that the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) is to be reduced from the Net profit, if they are credited to the Profit and Loss account. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of "income", are excluded for the purpose of computing "Book Profit", since the said receipts are exempted u/s 10 of the Act while computing total income. Thus, it is seen that the legislature seeks to maintain parity between the computation of "total income" and "book profit", in respect of exempted category of income. If the said logic is extended further, an item of receipt which does not fall under the definition of "income" at all and hence falls outside the purview of the computation provisions of Income-tax Act, cannot also be included in "book profit" u/s 115JB of the Act. Hence, we find merit in the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case also, the assessee had raised this plea for the first time before the Tribunal viz., the subsidy received under the State Industrial Scheme is capital in nature and therefore should be excluded from the book profit u/s 115JB of the Act. The Tribunal admitted this legal issue raised by the assessee and answered it in their favour. Before the Hon'ble High Court, the Revenue raised the following question for their consideration. "(ii) Whether on the facts and in the circumstances of the case the learned Tribunal erred in law in accepting the claim of deduction by the assessee towards 'Interest subsidy' and 'Power subsidy' under the aforesaid schemes by filing revised computation instead of revised return before the assessing officer for exclusion of the aforesaid receipts from the book profit under section 115 JB on the ground that the said subsidies do not constitute income under section 2(24) of the Income-tax Act, 1961?." 14.12 The Hon'ble High Court answered the question in negative and in favour of the assessee by observing as under: "28. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of the Revenue are therefore dismissed. 15. Issue 12: Additional Claim for deduction of foreign fluctuation translation reserve while computing book profit u/s 115JB of the Act Additional Ground No. 1 of the Assessee's appeal for AY 2014-15 15.1 This ground is regarding non-inclusion of foreign fluctuation translation reserve of Rs. 8,59,80,061/- while computing book profit u/s 115JB of the Act. The facts as noted by us are that, the assessee had advanced loan in foreign currency to its subsidiary in AY 2012-13. In compliance with the Accounting Standards viz., AS-11 notified by the Institute of Chartered Accountants of India, the assessee is noted to have re-stated the loans at their fair value at the year-end and the gain/loss arising on such re-statement had been credited/debited directly by way of foreign fluctuation translation reserve in the Balance Sheet. The Ld. AR pointed out that, such notional gain, which was directly credited to reserves, was not included or added while computing book profit u/s 115JB of the Act in AYs 2012-13 & 2013-14. Reason being, there was no specific adjustment prescribed in Explanation (1) to Section 115JB of the Act warranting such add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same through P&L A/c, was stated to be in compliance with AS-11 notified by the ICAI. It is also not in dispute that the shareholders at the annual general meeting approved the audited financial statements for AY 2014-15. Therefore, in light of the decision of Hon'ble Apex Court in the case of CIT Vs Apollo Tyres Ltd (255 ITR 273) only the specific additions and reductions as provided for in Explanation to Section 115JB, can be made to the net profit as declared in the audited financial statements for the relevant AY 2014-15. As rightly pointed out by the Ld. AR, there is no specific adjustment prescribed in this regard in Explanation (1) to Section 115JB of the Act. We further observe that, similar gains were credited to foreign fluctuation translation reserve on restatement of foreign currency loans in earlier AYs 2012-13 & 2013-14 and the same was not added to computation of book profit u/s 115JB of the Act by the assessee. The earlier AYs 2012-13 & 2013-14 are noted to be abated assessments. We note that, in the income-tax assessments u/s 153A/143(3) for these AYs 2012-13 & 2013-14 was completed by the same AO. The AO is noted to have accepted the computation of book profit ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
