AUROBINDO PHARMA LIMITED,HYDERABAD V. ACIT, CENTRAL CIRCLE-1(2), HYDERABAD

ITA 172/HYD/2023

AI Insights

The case involves Aurobindo Pharma Ltd, which appealed against the assessment order passed under sections 143(3) read with section 144C(13) of the Income Tax Act, 1961, concerning the assessment year 2019-20. The primary issues in the appeal were related to transfer pricing adjustments concerning specified domestic transactions between SEZ and non-SEZ units of the company, and disallowance of weighted deduction under section 35(2AB) and additional depreciation under section 32(iia). The Tribunal found that the Transfer Pricing Officer (TPO) had not correctly applied the Comparable Profit Method (CPM) and had cherry-picked certain products for comparison, leading to an incorrect determination of the ALP. The Tribunal also noted that the TPO had accepted the TNMM as the most appropriate method in a subsequent assessment year and directed a similar approach for the year in question.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473243 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Assessment Year: 2019-2020
• Other Referred Cases: GE Medical Systems (India) (P) Ltd vs. DCIT, CIT vs. Cadila healthcare Ltd, PCIT vs. M/s Sun pharmaceuticals industries Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B.G. REDDY; TAKING
• Keywords: Transfer pricing; Depreciation; Additional depreciation; Rule of consistency; Search and seizure
• Section: 143(3); 154; 192; 64; 13; 10AA

Judgement Text

" ITA No 172 of 2023 Aurobindo Pharma Ltd Page 1 of 18 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.172/Hyd/2023 (िनधाŊरण वषŊ/Assessment Year: 2019-20) Aurobindo Pharma Ltd Hyderabad PAN:AABCA7366H Vs. ACIT Central Circle 1(2) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri B.G. Reddy, Advocate राज̾ व Ȫारा/Revenue by:: Smt. M Narmada, CIT(DR) सुनवाई की तारीख/Date of hearing: 06/01/2025 घोषणा की तारीख/Pronouncement: 19/02/2025 आदेश/ORDER Per Vijay Pal Rao, Vice President This appeal filed by the assessee is directed against the assessment order dated, 23/01/2023 passed u/s 143(3) r.w.s. 144C(13) of the I.T. Act, 1961, in pursuant to the directions of the DRP dated 30/12/2022 for the A.Y 2019-20. 2. The assessee has raised the following grounds of appeal: “Transfer Pricing (TP) Grounds: ITA No 172 of 2023 Aurobindo Pharma Ltd Page 2 of 18 A) Adjustment in relation to material transferred from API units to SEZ units of the company & allocation of forex loss: 1. The Learned DRP/TPO/AO erred in law and on facts and circumstances of the case in making an adjustment of Rs. 35,15,85, 591 in relation to material transferred from API units (Non-SEZ Units) to SEZ units of the company and allocation of forex loss to the SEZ units. 2. The Learned DRP/TPO erred in law and on facts and circumstances of the case in rejecting the methodology adopted by the assessee consistently year-on-year and denying the range concept benefit for TP analysis. 3. The Learned DRP/TPO erred in law and on facts and circumstances of the case by making an inter-familial comparison of margins for the purpose of determining the Arms' Length price in respect of material transferred from non-SEZ units to SEZ units. 4. The Learned DRP/TPO erred in law by making a restricted interpretation of the OECD guidelines and not appreciating the principles laid out by the OECD. 5. The Learned DRP/TPO erred in law and on facts and circumstances of the case in taking into consideration only the margins of adverse variances instead of the overall profitability of the families or segments of 11.74% (after considering the 3% benefit as provided U/s 92C) which is much higher than the profitability relating to sales to third parties of 10.41%. 6. Without prejudice to the above, the Learned DRP/TPO erred in law in not considering the internal TNMM Workings furnished by the assessee that the operating profit margins of the non-SEZ units (OPM of 25.21%) was higher than that of the SEZ units (OPM of 23.31%) which clearly indicates that no excess deduction U/s 10AA has been claimed by the assessee. 7. The Learned DRP/TPO erred in law by not considering the External TNMM workings furnished by the assessee which showed that the Operating Profit Margins of the SEZ Formulation Units was within the range of that of comparable companies (OPM of 15.73% to 29.65%). ITA No 172 of 2023 Aurobindo Pharma Ltd Page 3 of 18 8. The Learned DRP/TPO erred in law and in facts and circumstances of the case by reallocating forex loss in the ratio of export turnover of the undertaking to the total export turnover of the company by not appreciating the fact that the forex loss not only pertains to export transactions but also to imports which are used in both domestic and export sales. Non-Transfer Pricing Grounds: A. On disallowance of weighted deduction U/s 35(2AB): 1. The Learned DRP/Assessing Officer erred in law and on facts and circumstances of the case in not allowing weighted deduction under section 35(2AB) of the Income Tax Act, 1961 in respect of expenditure incurred in connection with Clinical Trials/ Bio-Analytical and Bio- Equivalence studies without appreciating the legal implications of Explanation to Sec 35(2AB) of the Income Tax Act which entitles the assessee company for its claim. 2. The Learned A0, in pursuance of the directions of the DRP, erred in law and on facts and circumstances of the case in disallowing the weighted component (50%) amounting to Rs.52,59,23,674 which is incurred in relation to clinical trials- Bio Analytical and Bio Equivalence studies. 3. The Learned DRP/AO erred in law and on facts and circumstances of the case in not appreciating the fact that the Hon'ble Hyderabad ITAT, in the assessee's own case allowed the weighted deduction on Clinical Trial/Bio- Analytical/ Bio-Equivalence expenditure for the AY 2011- 12, AY 2012-13, AY 2013-14 & AY 2014-15. 4. The Learned DRP/AO erred in law and on facts and circumstances of the case in not allowing weighted deduction (50%) amounting to Rs. 210,97,28,072/- U/s 35(2AB) being the weighted deduction in relation to Research & Development (other than clinical trials Bio- Equivalence and Bio-Analytical studies) on account of absence of Form 3CL before passing the Assessment Order (Form 3CL was subsequently received). B) On disallowance of additional depreciation: 1. The Learned AO erred in facts and circumstances of the case in not deleting the disallowance pertaining to additional depreciation amounting to Rs. 27,19,777/- ITA No 172 of 2023 Aurobindo Pharma Ltd Page 4 of 18 despite directions by the Honourable DRP in this regard allowing the same as eligible expenditure. General 1. Any other ground that may be urged at the time of hearing with the previous approval of the Hon'ble Tribunal.” 3. Ground Nos.1 to 8 are regarding TP adjustments made by the TPO/AO in respect of specified domestic transactions. The assessee is in the business of manufacture and sale of API as well as generic pharmaceutical products. The assessee filed its return of income on 28/11/2019 declaring total income of Rs.1177,63,84,700/- under normal provisions and Rs.1979,75,97,126/- under MAT provisions. The assessee reported specified domestic transactions entered into between SEZ and non-SEZ Units. Accordingly, the Assessing Officer made reference u/s 92CA(1) of the I.T. Act, 1961 to the TPO for determination of Arms’ Length Price (ALP). The details of specified domestic transactions are given by the TPO as under: S.No Description Amount (Rs.) 1 Raw materials transferred from non-SEZ Units to SEZ Units 1533,93,39,771/- 2 Allocation of finance cost from other units to SEZ Units 47,71,23,891/- 3 Allocation of formulation head office salary to SEZ division on sales basis 43,04,58,802/- 4 Allocation of foreign exchange loss from other units to the eligible units of the company (SEZ Unit) 3,22,94,013/- 4. The issue before the Tribunal is restricted to T.P. adjustment in respect of Specified Domestic Transaction of raw material transfer from Non-SEZ Units to SEZ Units. The assessee ITA No 172 of 2023 Aurobindo Pharma Ltd Page 5 of 18 has benchmarked its specified domestic transactions by adopting cost + method as the most appropriate method and compared the same with the sale transactions to 3rd party. The assessee has taken up sales of non-SEZ Units of 11 families of API formulation to third party customers as well as other Non-SEZ Units and then calculated the median by taking 35th percentile and 65th percentile arrived at 20.61% of its SEZ Units in comparison to the operating profit margin of non-SEZ units at 25.21%. Therefore, the assessee claimed its specified domestic transactions in respect of sale made by non-SEZ Units to the SEZ Units at ALP being more than the comparable price. The TPO rejected the TP study analysis and benchmarking done by the assessee by taking median excluding 35% of the top and 35% of the low margin products/families on the ground that it has resulted a defective and distorted computation as some of the products are completely excluded while calculating the median. The TPO then undertaken the exercises for comparing/analyzing the transactions of each products in the same family. Thus, out of the 11 families for which the assessee has declared specified domestic transactions, the TPO has picked up transactions in respect of 6 families and then determined the ALP with a shortfall of Rs.90,04,60,000/- and proposed an adjustment in respect of the specified domestic transaction of purchase raw material. The upward adjustment was subsequently revised while passing the order u/s 154 of the Act on 25/03/2022. ITA No 172 of 2023 Aurobindo Pharma Ltd Page 6 of 18 5. Aggrieved by the order of the TPO and the consequential draft assessment order, the assessee filed its objections before the DRP and also submitted a supplementary T.P analysis study, adopting TNNM as most appropriate method and claimed that specified domestic transactions are at arms’ length even comparing with external TNNM benchmarking having median operating margin at 20.61% in comparison to the margin of the assessee at 25.21% of non-SEZ Unit. The DRP did not consider the supplementary TP analysis study filed by the assessee and confirmed the adjustment as proposed by the TPO and made in the draft assessment order. 6. Before the Tribunal, the learned AR has submitted that the assessee has provided FAR analysis and business overview of each SEZ Units in the TP study submitted before the TPO. The TPO has himself accepted the FAR analysis but only picket up certain families of the products instead of taking the entire lot of specified domestic transactions for determining the ALP. The TPO has also adopted same economic analysis of comparing the sale of the product from non-SEZ Unit to SEZ Unit and to 3rd party. The only objection of the TPO was against the assessee applied range concept i.e. 35th percentile and 65th percentile. The learned AR has submitted that as per Rule 10CA(4), when the data set consisted of 6 or more comparable items, it is mandatory to apply the range concept and multiple year data to arrive at ALP range between 35 and 65 percentiles under CPM whereas the TPO has accepted the CPM as the most ITA No 172 of 2023 Aurobindo Pharma Ltd Page 7 of 18 appropriate method but while computing the ALP, the TPO has considered net cost and net operating profit which are used in TNNM analysis. Thus, the learned AR has submitted that when the CPM is accepted as the most appropriate method for benchmarking analysis, then the TP study analysis of the assessee was in accordance with the rules and particularly, Rule 10CA. However, the assessee also submitted supplementary TP analysis by taking internal TNNM. He has submitted that the object of introduction of specified domestic transaction for determination of ALP was to ensure that excessive deduction u/s 10AA is not claimed by the SEZ Units. He has pointed out that the operating margin of non-SEZ Unit is more than the SEZ Unit which shows that the SEZ Unit of the assessee has not claimed any excessive deduction u/s 10AA of the I.T. Act, 1961. Therefore, the internal TNNM adopted by the assessee also established that the specified domestic transactions are within the arms’ length. He has further submitted that the assessee has also submitted an external TNNM to substantiate the specified domestic transaction at ALP. The study analysis was also provided to the DRP which shows that the profitability of both the SEZ and non-SEZ Unit formulation is within the range of the comparable companies having operating margin of external comparable at 20.61%. Alternatively, the learned AR has submitted that as per the supplementary transfer pricing study report, the specified domestic transactions are at Arms’ Length even by adopting external TNNM as the most appropriate method and therefore, pleaded that the Tribunal may accept the supplementary transfer ITA No 172 of 2023 Aurobindo Pharma Ltd Page 8 of 18 pricing study analysis of the assessee based on the external TNNM. He has pointed out that for the subsequent A.Y i.e. 2020- 21 the TPO accepted the external TNNM as the most appropriate method and determined the ALP. The order of the TPO is placed at page Nos. 41 to 64 of the paper Book-I. Hence the learned AR has submitted that the same methodology be adopted for the determination of the ALP for the year under consideration in respect of specified domestic transactions i.e. sale of material to SEZ unit. He has pointed out that the assessee has earned an operating margin of 25.21% from non-SEZ Unit formulation segment which is within the arms’ length in comparison to the operating margin of comparable companies operating within the same industry of manufacturing of drugs formulation. 7. The learned DR, on the other hand, submitted that the method adopted by the assessee for benchmarking its specified domestic transactions has given distorted result due to the reason that the assessee has adopted CPM as most appropriate method and compared the same with internal CPM. However, while determining the average price of comparable, the assessee has applied the median by taking 35 percentile and 65 percentile. The learned DR has submitted that the 11 transactions as taken by the assessee for determining the ALP are not of same product but these are 11 separate products of the assessee called as 11 families and therefore, taking 35 and 65 percentile of the margins of the products resulting exclusion of the 70% products in the process of determination of ALP which would represent only 30% ITA No 172 of 2023 Aurobindo Pharma Ltd Page 9 of 18 of the products. Therefore, the TPO has rightly rejected the methodology applied by the assessee for determining the ALP for benchmarking specified domestic transactions. The learned DR has relied upon the decision of the Bangalore Bench of this Tribunal in case of GE Medical Systems (India) (P) Ltd vs. DCIT in IT(TP)A Nos. 332 and 333/Bang/2011. She has also relied upon the order of the TPO and DRP. 8. We have considered the rival submissions as well as perused the relevant material available on record. The TP analysis of the assessee was rejected by the TPO. However, while determining the ALP, the TPO has also adopted cherry picking of certain products out of 11 families. It is pertinent to note that when the assessee is selling its formulation under 11 families from one unit to another unit of the assessee, then the entire lot of formulation will be considered as a basket of products and the TPO is not justified in picking only some of the products which are having low price and excluding the products which are having higher prices in comparison to the unrelated transactions of the assessee. Therefore, we find that neither methodology applied by the assessee which excludes 70% of the products while determining the ALP and benchmarking its specified domestic transactions in the TP study is acceptable as resulting a distorted outcome, nor the action of the TPO while cherry picking some of the products out of the total basket of 11 product formulations showing as 11 families of the formulation is a right approach. We further note that in the subsequent A.Y i.e. for the A.Y 2020-21, ITA No 172 of 2023 Aurobindo Pharma Ltd Page 10 of 18 the TPO himself after rejecting the TP analysis of the assessee has proceeded to conduct an independent search by applying TNNM as the most appropriate method in para 7.5 or the order dated 31/07/2023 as under: “7.5 In view of the above and also as per section 92C(3), it is relevant to hold that the data used in computation of the arm’s length price is not reliable or correct. Based on the above grounds, the TP document is proposed to be rejected and the TPO proceeds to determine arm’s length price. Since comparison is proven to be a failure as discussed in the preceding paragraphs, the TPO proceed to determine the ALP in relation to this transaction on the basis of material or information or documents available with this office by invoking section 92C(3) of the I.T. Act, 1961. Hence, the TPO proposes TNMM as MAM and conducted an independent search for comparable considering the functions of the assessee, the assets employed and the risks taken and the results of the search is given in the following paras”. 9. Further, for A.Y 2020-21, out of 11 comparable companies selected by the assessee for benchmarking its specified domestic transactions under TNNM, the TPO found 7 comparable companies having passed all the filters applied by the TPO as under: 10. However, in the final set of comparables, the TPO has taken only 2 companies from the set of 7 as accepted having passed all the filters and then added 2 more companies while S.No Name of the company Remarks of the TPO 1 Alpha Laboratories Ltd Passed all filters adopted by TPO 2 Lincoln Pharmaceuticals Ltd Passed all filters adopted by TPO 3 Bliss GVS Pharma Ltd Passed all filters adopted by TPO 4 Gland Pharma Ltd Passed all filters adopted by TPO 5 Caplin Point Laboratories Ltd Passed all filters adopted by TPO 6 Natco Pharma Ltd Passed all filters adopted by TPO 7 Concord Biotech Ltd Passed all filters adopted by TPO ITA No 172 of 2023 Aurobindo Pharma Ltd Page 11 of 18 determining the ALP for the said A.Y without going into the comparability of the companies selected by the TPO as well as rejection of the 5 of the companies which were considered as passed all the filters applied by the TPO, at the outset, we note that when the TPO himself has accepted the TNNM as most appropriate method for determining the ALP in the subsequent year, then the supplementary TP analysis submitted by the assessee ought to have been considered for the purpose of determining the ALP for the year under consideration. The assessee has furnished the list of the comparable companies in its supplementary TP analysis which is as under: Computation of net margins of formulations industry – A.Y 2019-20 S.No Company name Weighted average OR/OP 1 Western Drugs Ltd 11.58% 2 Granules India Ltd 12.81% 3 JB Chemicals & Pharmaceuticals Ltd 13.25% 4 Bharat Serums & Vaccines Ltd 13.83% 5 Porus Laboratories Pvt Ltd 15.73% 6 Jenburk Pharmaceuticals Ltd 18.67% 7 Centaur Pharmaceuticals Pvt. Ltd 20.34% 8 Labinduss Ltd 20.88% 9 Macleods Pharmaceuticals Ltd 21.20% 10 Unique Biotech Ltd 29.65% 11 Hester Biosciences Ltd 30.63% 12 Strassenburg Pharmaceuticals Ltd 32.07% 13 Stilbene Biopharma Pvt Ltd 33.82% 14 Natco Pharma Ltd 37.18% No. of companies 14 OP/OR 35th percentile 15.73% Median 20.61% 65th percentile 29.65% ITA No 172 of 2023 Aurobindo Pharma Ltd Page 12 of 18 11. Thus, the assessee has claimed that its specified domestic transactions having operating margin of 25.21% is at arm’s length in comparison to the median margin of the comparable at 20.61%. Accordingly, this issue is remanded to the record of the TPO/Assessing Officer for determination of the ALP by adopting TNNM as the most appropriate method based on the external comparables as well as international comparables of the assessee. If the operating margin of the assessee is found to be within the tolerance range of 3% of ALP, then no adjustment would be called for. Needless to say, before passing the fresh order, the assessee be given an appropriate opportunity of hearing. Grounds under Non-Transfer Pricing 12. The assessee has raised the issue of disallowance of weighted deduction u/s 35(2AB) in Ground Nos 1 to 4 of non- transfer pricing grounds. 13. We have heard the learned AR as well as the learned DR and considered the relevant material available on record. The Assessing Officer has restricted the claim of weighted deduction u/s 35(2AB) only to the extent of the expenditure incurred for in house R&D facility and denied the claim in respect of the expenditure incurred on clinical drug trials outside the inhouse facility. The details of the expenditure incurred by the assessee on R&D are given in para 5.2 of the assessment order, held as under: Nature of expense Total expenses incurred (in Rs.) Weighted Deduction @ 150% (in Rs.) Weighted deduction @ 100% in (Rs.) Total deduction claimed (in Rs.) ITA No 172 of 2023 Aurobindo Pharma Ltd Page 13 of 18 14. The deduction was restricted by the Assessing Officer in Para 5.4.4 and 5.1.5 as under: “5.1.4 Thus, the claim of the weighted deduction of Rs.790,69,55,237/-is restricted to 100% of Rs.365,59,95,521/-+ Rs.105,18,47,348/- + Rs.56,34,60,622 which comes to Rs.527,13,03,491/=-. Hence the claim of extra weighted deduction claimed to the extent of Rs.263,56,51,745/- is not considered and added back to the total income of the assessee. 5.1.5 Penalty proceedings u/s 270A of the Act will be initiated separately in the final assessment order as the assessee has under reported the income. Addition:Rs.263,56,51,745”. 15. Before the Tribunal, the learned AR of the assessee has invited our attention to the decision of the Coordinate Bench of this Tribunal in assessee’s own case for the A.Y 2017-18 in ITA No.352/Hyd/ 2023 and ITA No.321/Hyd/2023, dated 25/07/2024 wherein the Tribunal has considered an identical issue in Para 32 and 37 as under: “32. Next and last issue relates to the weighted deduction claimed by the assessee in respect of the expenditure incurred on the expenditure not quantified in the expenditure approved by the DSIR reflected in part B of form 3CL, and on clinical trials. There is no dispute that the expenditure that is Revenue expenses in house 3,69,59,95,521 5,48,39,93,282 - 5,48,39,93,282 Revenue 1,88,42,15,484 -0 - 1,88,42,15,484 Expenses – inhouse - - 1,88,42,15,484 - Revenue Expenses Clinical Expenses 1,05,18,47,348 1,57,77,71,022 - 1,57,77,71,022 Capital Expenses building and vehicles 3,23,23,418 3,23,23,418 3,23,23,418 Capital Expenses – others 56,34,60,622 84,51,90,933 - 84,51,90,933 Total 7,18,78,42,393 7,90,69,55,237 1,91,65,38,902 9,82,34,94,139 ITA No 172 of 2023 Aurobindo Pharma Ltd Page 14 of 18 not quantified in the approval by the DSIR, such an expenditure was incurred towards rates and taxes, travelling expenses of research units. Both the authorities held that for claiming weighted deduction, such an expenditure must have been approved by the prescribed authority and that no exceptions to this rule are provided in the Act. Though such an expenditure was incurred in relation to the scientific research and development, the requirement of approval by the prescribed authority is not fulfilled in this case and therefore, it is not qualified for weighted deduction, but at the same time since there is no dispute as to the incurring of such expenditure by the assessee, the said expenditure is qualified for hundred percent deduction. To the extent we approve the view taken in the impugned order. 33. Coming to the expenditure on clinical trials this issue is no longer res integra and in fact been dealt with by the Hon'ble Gujarat High Court in extenso in the case of CIT vs. Cadila healthcare Ltd (2013) taxmann.com 300 (Gujarat), and the Hon'ble court held that the clinical trials may not always be possible to be conducted in the closed laboratory or in house like facilities and are required to be conducted outside the approved facility and, therefore, the restrictive meaning suggested by the Revenue to the expenses mentioned in the explanation to the section such as a clinical drug trials and obtaining approvals from the regulatory authorities, which normally happens outside the approved R&D facility, make the explanation meaningless. 34. Learned DR submitted that this decision of the Hon'ble Gujarat High Court has not attained the finality because the Hon'ble Apex Court remanded the case to the file of the Hon'ble Gujarat High Court and therefore, the matter was sub judice before the Hon'ble High Court and that is the reason why the lower authorities are not following the decision rendered by the Tribunal in the earlier assessment years. 35. In reply, learned AR submitted that as could be seen from the order of the Hon'ble Supreme Court in special leave petition to appeal (C) No. 770/2015, dated 13/10/2015 the grievance of the Revenue was with reference to non-framing of certain questions, it was considered by the Hon'ble Apex Court and held that such questions were substantial questions of law, and thereupon referred the matter to the Hon'ble Gujarat High Court to hear the appeal on the aforesaid three questions of law, but the judgement already passed by the Hon'ble Gujarat High Court touching the aspect of allowability of weighted deduction has not been set ITA No 172 of 2023 Aurobindo Pharma Ltd Page 15 of 18 aside. He placed reliance on the decision taken by a coordinate Bench in assessee's own case for the assessment year 2013-14 and 2014-15 in ITA numbers 1772 and 1773 /Hyd/ 2017 where the Tribunal on a perusal of the decision of the Hon'ble Apex Court clarified that. 36. On a careful perusal of the record we find that the Hon'ble Gujarat High Court rendered the decision in Cadila healthcare Ltd (supra) holding that the clinical trials are not always possible to be conducted in the closed laboratory or in house like facilities and are required to be conducted outside the approved facility and if we go by the restricted interpretation resorted to by the Revenue, such an interpretation renders the explanation meaningless where the expenses for obtaining approvals from the regulatory authorities are also included in the clinical trials, because such expenses for obtaining approvals from the regulatory authorities normally happen outside the approved R&D facility. Subsequently the SLP was preferred by the Department and three issues were remanded for consideration by the Hon'ble Gujarat High Court by order dated 13/10/2015. Hon'ble Gujarat High Court, by order dated 25/2/2020 in PCIT vs. M/s Sun pharmaceuticals industries Ltd in R/Tax Appeal No. 92 of 2020, observed that in view of the decision in Cadila healthcare Ltd (supra) the issue relating to the allowability of weighted deduction under section 35(2AB) of the Act in respect of clinical trials expenses incurred outside the approved facility stood covered and on that ground did not admit such an issue for consideration. 37. From the above it is clear that the issue has clearly been covered by the decision of the Hon'ble Gujarat Court High Court in the case of Cadila healthcare Ltd (supra), referred to and followed in the case of M/s Sun Pharmaceuticals Industries Limited (supra). A coordinate Bench of this Tribunal in assessee's own case for the assessment year 2018-19 having noticed the judicial review on this aspect, including the argument advanced in that case, and basing on CIT vs. Vegetable Products Ltd 88 ITR 192 (SC) reached a conclusion that when once the clinical trial expenses incurred outside the approved R&D facilities, were approved by the prescribed authority the assessee is entitled to claim deduction under section 35(2AB) of the Act. Respectfully following the same we hold the issue in favour of the assessee and allow weighted deduction in respect of the expenses incurred on clinical trials.” ITA No 172 of 2023 Aurobindo Pharma Ltd Page 16 of 18 16. We further note that the facts are identical for the year under consideration wherein the DSIR has approved the R&D facility and vide report dated 20/01/2023 given the details of R&D expenditure in Para-B of the said report as under: 17. Accordingly, when the issue as well as the facts are identical for the year under consideration to that of the A.Y 2017- 18, then to maintain the rule of consistency, we following the earlier order of this Tribunal and allow the claim of the assessee u/s 35(2AB) of the I.T. Act, 1961 for the entire expenditure as referred in the report of the DSIR. 18. The next issue is regarding the additional depreciation disallowed by the Assessing Officer. The learned AR has submitted that the assessee has claimed additional depreciation in respect of plant & machinery u/s 32(iia) of the I.T. Act, 1961 which was dis-allowed by the Assessing Officer in the draft assessment order by giving the reasons that it was used for less than 180 days. The learned AR has pointed out that the DRP after considering the details and reply of the assessee directed the Assessing Officer to allow the additional depreciation, however, ITA No 172 of 2023 Aurobindo Pharma Ltd Page 17 of 18 the Assessing Officer has not allowed the additional depreciation despite directions of the DRP. Thus, he has pleaded that the Tribunal may issue appropriate directions to the Assessing Officer in this regard. 19. On the other hand, the learned DR has relied upon the order of the Assessing Officer. 20. We have considered the rival submissions as well as perused the material available on record. At the outset, we note that in para 2.5.1 and 2.5.2, the DRP has dealt with this issue as under: “2.5.1 Having considered the submissions, the assessee stated that the company is having 15 manufacturing facilities for the year under consideration. Each premise is having office equipment and data processing equipment. The additions to the fixed assets are made during the year in the factory premises of the company mainly in QCD Centers. Additional Depreciation is allowed in the case of any new machinery or plant acquired and installed by an assessee engaged in the business of manufacture or production of any article or thing. The assessee has used such machinery and equipment in QCD (quality control department) centers in the factory premises. 2.5.2 In view of the above, the Panel is convinced with argument of the assessee. The Assessing Officer is directed to allow the claim of additional depreciation 32(iia)”. 21. Thus,, the DRP after considering all the relevant facts and material has accepted the claim of the assessee and directed the Assessing Officer to allow additional depreciation u/s 32(iia) of the I.T. Act, 1961. In the final assessment order, the Assessing ITA No 172 of 2023 Aurobindo Pharma Ltd Page 18 of 18 Officer has not given the effect to the directions of the DRP which is not only uncalled for but also reflects the indiscipline on the part of the Assessing Officer. Accordingly, we direct the Assessing Officer to give effect to the directions of the DRP and allow the claim of the additional depreciation as directed by the DRP. 22. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the Open Court on 19th February, 2025. Sd/- Sd/- (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 19th February 2025 Vinodan/sps Copy to: S.No Addresses 1 Aurobindo Pharma Ltd., Galaxy Towers, 2nd Floor, Plot No.1, Survey No.83/1, Hyderabad Knowledge City, Raidurg, Panmaktha, RR Dist,. Hyderabad 500032 2 Asstt. CIT, Central Circle 1(2) Aayakar Bhavan, Opp: LB Stadium, Basheerbagh, Hyderabad 500004. 3 Pr. CIT – Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "