Sun Pharma Laboratories Ltd., Mumbai V. The Dy. Commissioner of Income Tax, Circle-2(1)(1), Baroda

ITA 1465/AHD/2018

AI Insights

The case involves cross appeals by Sun Pharma Laboratories Ltd. and the DCIT against the orders of the Commissioner of Income Tax (Appeals)-2, Vadodara, concerning the assessment years 2013-14 and 2014-15. The primary issues revolved around the disallowance of deductions under sections 80-IB and 80-IE, the treatment of certain expenses as business promotion or gifts, and the application of section 14A read with Rule 8D regarding the disallowance of interest and administrative expenses. The Tribunal examined the legal and factual basis of these issues, referencing previous judgments and the specific provisions of the Income Tax Act, 1961.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114313 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 24-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 03-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Not Found
• Assessee Lawyers: Not Found
• Keywords: Capital asset; Gift; Depreciation; Additional depreciation; Earning of tax free income; Proportionate interest; Additional evidence; Fair market value; Valuation report; Scheme of amalgamation; Capital receipt; Revenue expenditure; Capital expenditure; Rule 8D; Set aside
• Section: 32; 37; 10; 143(3); 40(b); 14A; 115JB; 80IB; 37(1); 143(2); 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Sun Pharma Laboratories Ltd., Plot No. 201/B-1. Sun House, Western Express Highway, Goregaon East, Mumbai-400063 PAN: AACCS6163P Vs The DCIT, Circle-2(1)(1), Vadodara The DCIT, Circle-2(1)(1), Baroda (Appellant) Vs Sun Pharma Laboratories Ltd., Plot No. 201/B-1. Sun House, Western Express Highway, Goregaon East, Mumbai-400063 PAN: AACCS6163P (Respondent) Assessee Represented: Shri S.N. Soparkar, Sr. Adv. & Shri Parin Shah, A.R. Revenue Represented: Shri Aarsi Prasad, CIT-DR Date of hearing : 25-07-2023 Date of pronouncement : 06-10-2023 आदेश/ORDER ITA Nos: 1464 & 1465/Ahd/2018 & ITA Nos: 1521 & 1522/Ahd/2018 Assessment Years: 2013-14 & 2014-15 I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 2 PER BENCH :- These cross appeals are filed by the Assessee and the Revenue as against two appellate orders dated 27-03-2018 and 28- 03-2018 passed by the Commissioner of Income Tax (Appeals)-2, Vadodara arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the respective Assessment Years (A.Ys) 2013-14 and 2014-15. Since common issues are involved in both the cross appeals, for the sake convenience and brevity, the same are disposed by this common order. 2. First We take ITA Nos: 1464/Ahd/2018 relating to the Assessment Year 2013-14. The Grounds of Appeal raised by the Assessee reads as under: The Appellant raises the following grounds which are mutually exclusive, independent of and without prejudice to one another 1. On the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income-tax (Appeals) [the Ld CIT(A)] erroneously affirming the findings of the learned Assessing Officer (the Ld. AO] is unsustainable and ought to be quashed. 2. Re: Disallowance of deduction claimed under section 80-IB pertaining to Dadra Unit Rs.6,99,78,8951/- 2.1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has grossly erred in denying the deduction u/s 80-IB in respect of the industrial undertaking set up at Dadra without appreciating that the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from any earlier date. 3. Re: Disallowance of deduction under section 80IB/80IE in respect of interest on staff advances & statutory/bank deposit (Jammu Unit- I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 3 1- Rs.1,58,611/ Jammu Unit-II - Rs.20,770/-; Dadra Unit Rs.2,89,353/- totaling to Rs.5,57,601/-) - Rs.88.867/- and Sikkim Unit Rs. 2,89,353/- totaling to Rs. 5,57,601/-) 3.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in disallowing the interest income earned in respect of staff advances and statutory/bank deposits on the basis that the same have not been derived from the industrial undertaking without appreciating that the deduction under section 80- IB/80-IE is allowable in respect of the profits and gains derived from the specified business as opposed to profits derived from the industrial undertaking' 4. Disallowance of expenditure incurred for doctors towards business promotion and accommodation - Rs. 3,44,85,728/- 4.1. On the facts and in the circumstances of the case and in law. the Ld. CIT(A) has grossly erred in disallowing expenses allegedly incurred towards providing gifts and freebies to the doctors/medical practitioners by invoking the provisions of Indian Medical Regulations, 2002, without appreciating that the same are not applicable to pharmaceutical companies and hence, there cannot be any violation in the first place to attract the rigors of Explanation 1 to section 37(1) of the Act 4.2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the said expenses have been incurred for the promotion and in furtherance of the Appellant's business activities and thus, allowable as deduction u/s 37(1) of the Act. 4.3. The Ld. CIT(A)/Ld. AO grossly erred in relying on the CBDT Circular No. 5/2012 while disallowing the said expenditure without appreciating that the departmental circulars are not binding on the tax payer, which position has been repeatedly upheld by various judicial authorities. 4.4. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not increasing the deduction under section 80-IB/80-IE correspondingly on account of disallowance carried out under this said ground. 5. Re: Disallowance under section 14A read with Rule 8D-Rs. 81,63,728/-: I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 4 5.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of Rs. 81,63,728/-[ Consisting of Rs 10,978/- towards interest and Rs. 81,52,750/- towards administrative expenses] made by the Ld. AO u/s 14A of the Income-tax Act, 1961 (Act') read with rule 8D of the Income- tax Rules, 1962 ('Rules') in relation to earning of income exempt u/s 10 of the Act without appreciating that invocation of rule 8D is not automatic and recording of satisfaction and establishing a direct nexus between the expenditure incurred and the exempt income u/s 10 is a sina qua non 5.2.Without prejudice to the above, the Ld. CIT(A) has failed to consider that the Appellant had sufficient interest free funds and that the investment in instruments producing exempt income were made out of such non-interest-bearing funds thereby making the interest disallowance under rule 8D(2)(ii) uncalled for 5.3. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that the Appellant had in fact earned net interest income and hence, there was no case for disallowance of interest expenditure under section 14A read with rule 8D. 5.4 Without prejudice to the above, the Ld. CIT(A) grossly erred in not appreciating that exempt income earning investments were made for strategic purposes in pursuance of Appellant's business objectives without any intention of earning exempt income therefrom. 5.5 Without prejudice to the above, while considering the investments in the partnership firm for the purpose of disallowance under section 14A, only the actual investment by the Appellant ought to be considered ie the share of profit credited to the partner's capital account is to be excluded while computing the value of investment. 5.6 Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that investments from which no exempt income is earned during the year, cannot be considered while applying rule 8D 5.7. Without prejudice to the above, the Ld. CIT(A) grossly erred in confirming the computational errors committed by the Ld. AO while ascertaining the quantum of disallowance under section 14A read with rule 8D. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 5 6. Re: Disallowance of ROC & Stamp Duty Charges Rs. 30,18,600/- 6.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) and Ld. AO grossly erred in disallowing the stamp duty and filing fees paid to Registrar of Companies (ROC) amounting to Rs 30.18,600/- without appreciating that the expenditures so incurred towards conversion of the partnership firms into the corporate entity was for the benefit of the Appellant to carry on its business more effectively with increased operational efficiency. The Ld. CIT(A)/Ld. AO ought to have appreciated that by incurring the said expenditure, the same business was now carried on by the Appellant, albeit, in a different form. 6.2 The Ld. CIT(A) grossly erred in alleging the said ROC fees and stamp duty charges as capital expenditure without appreciating that the purpose for which such expenditure was incurred was revenue in nature. 6.3. The Ld. CIT(A) failed to appreciate that the stamp duty and filing fees payable to Registrar of Companies was in the nature of statutory levy and has been incurred wholly and exclusively for the purposes of business of the Appellant. 6.4 Without prejudice to the above, since ROC filing fees and stamp duty have been incurred for the 'purposes of amalgamation, deduction of the expenditure ought to be allowed in accordance with the provisions of section 35DD of the Act. 7. Re: Disallowance of amortization of Intangibles under section 115JB Rs 15,23,97,50,000/-: 7.1. The Ld. CIT(A) grossly erred, in law as well on the facts and in the circumstances of the case, in adding back the amortization of Intangibles amounting to Rs 15,23,97,50,000/- while computing book profits under section 115JB on the grounds that the depreciation on revalued assets is not allowable under clause (na) of Explanation 1 to section 115JB without appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld. CIT(A) failed to appreciate that - (i) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 6 (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 7.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 7.3 The Ld. CIT(A)/Ld. AO grossly erred, on facts and in the circumstances of the case, in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In the process, the Ld. CIT(A)/Ld. AO failed to appreciate that: (i) the ownership in respect of trademarks, being the major portion of the intangible assets, was transferred to the Appellant, (ii) in respect of patents and technical know-how etc. so recorded, the Appellant had acquired perpetual & irrevocable license to use and exploit the said patents, technical know-how etc. which constituted an asset in itself, eligible for being accounted as an intangible asset and consequently amortization was carried out. 7.4. The Ld. CIT(A) / Ld. AO grossly erred in alleging that claiming amortization of intangibles was a colourable device to make an unsustainable claim as the same amount was added back and reduced for computing book profit under section 115JB without appreciating that the addition and reduction was in accordance with the requirement of section 115JB of the Act. 3. The Ground No.1 is General in nature, which does not require any adjudication and hence dismissed. 4. The Ground No. 2 relates to Disallowance of deduction u/s. 80IB in respect of Dadra unit of Rs.6,99,78,895/-. Brief facts of the case that the assessee company was Partner in erstwhile partnership firms viz. M/s. Sun Pharmaceutical Industries [SPI] and Sun Pharma – Sikkim [SPS] having 75.5% share in each firm. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 7 These firms got amalgamated with assessee company after their conversion into the Part – IX Companies in the name of Sun Pharma Mediation Pvt. Ltd. and Sun Pharma Drugs Pvt. Ltd. The assessee company has claimed deduction u/s 80-IB of the Act with respect to industrial undertaking at plot No.259/15 at Dadra which was earlier claimed by Sun Pharmaceutical Industries. The Ld. Assessing Officer at para – 6.3.1 of Assessment Order has referred to the assessment order for A.Y. 2010-11 in the case of SPI and held that assessee is not entitled for such deduction as Dadra unit has started its manufacturing activity in the Asst Year 2002-03, which is the first year of commencement of business and ten years period of eligibility of deduction u/s 80-IB is completed in A.Y.2011-12. The Ld. AO has also observed that such unit was formed by splitting up or reconstruction of existing business, hence even on this ground, the assessee is not eligible for deduction. This observation of the AO in A.Y. 2010-11 is followed by the Ld. AO in current Asst. Year 2013-14 and entire deduction under Section 80- IB for Dadra unit was denied. 4.1. Being aggrieved by the assessment order, the assessee has preferred an appeal before the Ld CIT(A) who has dismissed the relevant ground of appeal in para – 5.1 of his order and he relied upon order dated 11-06-2010 in ITA No.184/ASR/2009 of the Co- ordinate Bench of this Tribunal in the case of erstwhile Sun Pharmaceutical Industries [SPI], later on merged with assessee company, wherein it is held that Dadra unit had started its manufacturing activity in the Asst. Year 2002-03 and considering the same being the first year of commencement of business, I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 8 requisite period of ten years eligibility has already lapsed in current year. 4.2. Aggrieved by the Appellate order, the assessee is appeal before us. At the outset of the hearing of the above appeal, Ld. Senior Counsel Sri S.N. Soparkar appearing for the assessee fairly conceded that similar issue was decided against erstwhile SPI by Co-ordinate Bench of the Tribunal in ITA No.3507/ Mum/2016 in A.Y. 2011-12, ITA No.2595/Mum/2018 for A.Y. 2012-13 and 2597/Mum/2018 for A.Y. 2013-14 (for five months). Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribunal. 5. We have given our thoughtful consideration and heard the rival contentions and perused the materials available on record including Paper Book and Case Laws relied thereon. It is seen identical issue was decided against the Assessee by the Co-ordinate Benches of the Tribunal in Asst. Years 2011-12 to 2013-14 [cited supra] relevant portion of the said order is reproduced herein below for ready reference: “...29. The next issue raised by the assessee vide ground No. 2 of its appeal is that the learned CIT(A) erred in upholding the year under consideration as 10 year of claim u/s 80IB(4) of the Act with regard to Dadra undertaking against the 8 th year claimed. 30. At the outset we find that the issue has been decided against the assessee by the coordinate bench of Amritsar Tribunal in ITA 184/ASR/2009 for A.Y. 2005-06 where the coordinate bench held the A.Y. 2002-03 as initial year of claim u/s. 80IB(4) of the Act for Dadra business undertaking instead I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 9 of initial year as A.Y. 2004-05 claimed by the assessee. The finding of the Amritsar tribunal has been followed in A.Y. 2004-05, 2006-07 to 2010-11. Therefore following the same we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal of the assessee is hereby dismissed. ” 5.1. Thus, respectfully following the orders of the co-ordinate Benches of the Tribunal in assessee’s own case, we uphold the finding of the Ld. CIT(A). Thus, the Ground no.2 raised by the assessee is hereby dismissed. 6. The Ground No. 3 relates to disallowance of deduction u/s. 80IB/80-IE in respect of interest on staff advances and statutory/ bank deposits. Brief facts is the Ld AO observed that the Assessee is not entitled for deduction under Section 80-IB/80-IE on loan to employees and bank deposits as such interest income is not income derived from industrial undertaking as held by Hon’ble Supreme Court in the case of CIT -Vs- Sterling Foods reported in 237 ITR 579 and Liberty India -Vs- CIT reported in 317 ITR 218. The above disallowance of deduction was upheld by CIT (Appeal) at para 9.2 of his order, wherein he has observed that identical issue has been decided against the erstwhile Sun Pharma, Sikkim [SPS] by CIT(Appeals)-37, Mumbai, for A.Y. 2010-11 following the order of Hon’ble ITAT in the case of Sun Pharmaceutical Industries which was also merged with assessee in ITA No.184/ASR/2009, dated 11 th June, 2010. 6.1. Aggrieved by the appellate order, the assessee is in appeal before us. Ld. Senior Counsel Sri S.N. Soparkar appearing for the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 10 assessee fairly conceded that similar issue was decided against the assessee by Co-ordinate Bench of the Tribunal in ITA No. 3507/ Mum/2016 in A.Y. 2011-12 in the case of erstwhile SPI which was later on merged with Assessee Company. Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribunal. 7. We have heard the rival contentions and perused the materials available on record. Identical issue has been decided against the Assessee by the Co-ordinate Bench in A.Y. 2011-12 to 2013-14 as [cited supra] and relevant portion of the said order is reproduced as follows: “... 34. We have heard the rival contention of both the parties and perused the material available on record. We found that the issue on hand is covered against the assessee by the order of the coordinate bench of Amritsar Tribunal in the own case of the assessee for AY 2004-05 followed in subsequent years being AY 2006-07 to 2010-11. The relevant finding of the coordinate bench in ITA No.2465/Mum/2014 reads as under: “23. Ground No IV pertains to adjustment of delayed payments, staff advances and statutory/bank. The issue regarding interest on delayed payments from customers is covered in favour of the assessee. But the issues regarding interest on staff advances and FDRs are covered against the assessee by the orders of the Amritsar Tribunal passed in assessee's own cases pertaining to the financial years 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10. The relevant paras of the order passed by the Amritsar tribunal are reproduced as under:- ''51. As - regards ground No 3 of the Revenue, regarding disallowance of deduction under section 80-16 in respect of delayed payments from M/s Aditya Medisales Ltd. Amounting to Rs.48,20,32,772/-, the facts are identical to the facts in I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 11 assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same/ this ground of the Revenue is dismissed," "54. As regards ground No 5&6 of the assessee with respect to the interest on FDR amounting to Rs. 3,27,5997- (correct figure Rs. 2,27,599/-) and loan to employees with regard to disallowance of deduction u/s 80-IB, the facts of the issues in hand are identical to the facts decided by the tribunal in assessee's own case dated 11.06.210 in ITA No 184(Asr)/2009for the assessment year 2005-06. Following the same, the ground No 5&6 of the assessee are dismissed." 24. Following the orders of the decisions of the Amritsar Tribunal in the identical issues, we allow the assessee's claim of deduction under section 80-IB of the Act in respect of interest on delayed payments in question and direct the AO to delete the additions. However, we disallow the assessee's claim of deductions in respect of interest on staff advances & statutory/bank deposits.” 34.1 Thus, respectfully following the consistent view of Amritsar tribunal in the own case of the assessee, we do not find infirmity in the finding of the learned CIT(A). Hence the ground of appeal of the assessee is hereby dismissed. “ 7.1. Thus, respectfully following the above order of the Co- ordinate Benches of the Tribunal in assessee’s own case, we uphold the finding of the learned CIT(A). Thus, the Ground no.3 raised by the assessee is hereby dismissed. 8. The Ground No. 4 relates to disallowance of expenditure incurred for Doctors towards business promotion and accommodation of Rs.3,44,85,728. The Ground No. 6 in Departmental Appeal also relates to disallowance of business/conference fee and sponsorship expenses of I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 12 Rs.6,65,79,145/-. As both the grounds of appeal are interlinked with each other, they are adjudicated together. 8.1. The Ld AO at para – 7 of the assessment order has observed that the assessee has incurred various expenditure being accommodation, Business Promotion Expenses, Conference Fees aggregating to Rs.10,10,64,882/ which are freebies and gifts paid to Doctors. The Ld. AO has referred to CBDT Circular No. 5/2012 in F.No. 225/142/2012 – ITA II, dated 1 st August, 2012 wherein it is stated that expenditure incurred for providing freebies of the above nature by pharmaceutical and allied healthcare sector is inadmissible expenditure u/s. 37(1) of the Act. The above addition made by Ld. AO was partially upheld by Ld CIT(A) and held as under: “I have carefully considered the facts on records and submission of the appellant. I find that the Assessing Officer has not examined nature of expenditure in detail and he has simply disallowed the entire expenditure incurred on accommodation, business promotion and conference fees & sponsorship. As is evident from the submission of the appellant filed before the Assessing Officer as well as before me, the accommodation expenses for boarding and lodging of the Doctors are in the nature of freebies given to the Doctors for direct benefit. Similarly, the business promotion expenses are in the nature of various equipments gifted to the medical professionals. However, the conference fees and sponsorship expenses were for the purposes of conference and seminars held in India and abroad for sharing knowledge and obtaining feedback in order to develop into product and research and development. Under the identical facts, this issue has been decided by the CIT(A) in the case of Sun Pharmaceutical Industries Ltd., A.Y. 2012-13 vide order dated 23.02.2017 contained in Appeal No. CAB/(A)- 2/351/16-17 relevant portion of which is reproduced as under:- “23.2. I have careful considered the facts on record and submission of the Ld. Authorized Representative. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 13 Admittedly, the appellant has incurred expenditure of Rs.8,41,89,667/- as detailed above on gifts and reimbursement of lodging and boarding and conference expenses incurred by the Doctors/medical practitioners. As is evident from the written submission, the business promotion expenses of Rs.7,27,99,029/- are pertaining to the equipment provided to various medical practitioners as gifts. Claim of indirect business gain as a result of gifts provided to the medical practitioners is irrelevant for allowability of these expenses. The appellant has also argued that the amendment to Indian Medical Council (Professional Conduct, Etiquette & Ethics) Regulation 2002 on 10.12.2009 and CBDT Circular No. 5/2012 dated 01.08.2012 are not applicable in the case of appellant since they are applicable to the Doctors/ Medical Practitioners accepting freebies.. This argument of Ld. Authorized Representative is also not acceptable. Undisputedly, Medical Council of India has amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 with effect from 10.12.2009 prohibiting from accepting of gifts, travel facility or hospitality, from any pharmaceutical company or the health care industry by the doctors/medical professionals. Thus regulation is issued by the statutory body created under the Act of Parliament i.e. Medical Council Act, 1956. CBDT has also issued a Circular No. 5 of 2012 in this regard stating that expenditure on freebies given to medical professionals and their professional associations in violation of the regulation issued by the Medical Council of India which is a regulatory body constituted under Medical Council Act, 1956, will not be allowed as expenditure in view of the Explanation below section 37(1). The validity of this circular is also been upheld by the Hon'ble High Court of Himachal Pradesh vide order dated 26.12.2012 in CWP No. 10793 of 2012. Since Medical Council of India has prohibited expenditure on freebies given to the medical professional with effect from 10.12.2009, in my considered view, the Circular No. 5 of CBDT dated 01.08.2012 only reasserts the legal position and hence the expenditure on freebies will not be allowable u/s. 37(1) being an expenditure prohibited by law. Accordingly, I hold that expenditure on gifts to the extent of Rs.7,27,99,029/- shall not be deemed to have been incurred for the purposes of business or profession and hence the disallowance to this extent is confirmed. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 14 As regards the balance expenditure on Accommodation (Lodging & Boarding) at Rs.28,91,444/- and Conference fees and sponsorship at Rs.84,99,194/-, the appellant has submitted that these expenses pertained to reimbur sement of accommodation expenses to the Doctors and medical practitioner during their stay to attend the conference and seminars organized in furtherance of business objections of upgrading the medical knowledge. Similarly, conference fees and sponsorship has been also stated to be reimbursement of fees for conference and seminars held in India and abroad. It has further been claimed that conference and seminars were organized to gain the knowledge by the medical practitioner which is, then shared with the appellant for improving the product quality and Research and Development. From the submission of appellant itself, it is crystal clear that the reimbursement of accommodation expenses have directly benefited the medical practitioner and Doctor and hence the same is in the nature of gift hit by Circular No. 5/2012 and amended guidelines of Medical Council of India. Accordingly, I hold that accommodation expenses at Rs.28,91,444/- are also deserves to be disallowed being freebies. The conference fees and sponsorship expenses since were incurred for sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines. Further they appears to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. Accordingly, the disallowance to the extent of Rs.84,99,194/- being conference fees and sponsorship is directed to be deleted and balance amount of disallowance is confirmed. Thus, appellant succeeds partly in respect of Ground No. 20." In view of the above, I hold that reimbursement of the accommodation expenses has directly benefited the medical practitioner and doctors and hence the same is in the nature of gift. Similarly various equipment gifted to the doctors debited under the head business promotion expenses also fall under the category of freebies. Accordingly, I further hold that accommodation expenses as well as business promotion expenses are hit by the Circular No. 5/2012 and amended guidelines of MCI. Accordingly, the action of Assessing Officer I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 15 in this regard is upheld. However, conference fees and sponsorship expenses since were incurred for sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines. Further they appear to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. The Ld. Authorized Representatives have also argued that the Circular No. 5/2012 is applicable to the Doctors/Medical practitioner only but not to the companies offering gifts/freebies. This argument is not acceptable because if accepting/demanding of illegal gratification is bad, then paying of the same is also bad. This view gets support from the ratio laid down in the following cases:- CIT Vs. Kap Scan and Diagnostic Centre (P) Ltd. (2012) 344 ITR 476 (P&H) In this case, the assessee company was doing the business of CT Scan, Ultra Sound and X-rays and it had debited certain amount of expenditure on account of commission paid to the practicing doctors who referred the patients to the assessee for various tests. It was held that the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 provide that no physician shall give, solicit, receive, or offer any gift, gratuity, commission or bonus in consideration of a return for referring any patient for medical treatment against the public policy. Accordingly, it was held that if demanding of such commission was bad, then paying of it was also equally bad and hence both were privies to a wrong. Therefore, payment of commission to private doctors was held as not allowable expenditure. CIT Vs. Pt. Vishwanath Sharma (2009) 316 ITR 419 (All.). In this case, commission paid to the Government doctors was held to be illegal gratification/bribe and hence the expenditure thereon was treated to be not allowable u/s. 37. In view of the above factual and legal position, disallowance of accommodation and business promotion expenses is confirmed and balance is directed to be deleted. Thus Ground 9 is partly allowed’ I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 16 8.2. Aggrieved by the above appellate order, both the Assessee and Revenue are in appeal before us. Ld. Senior Counsel Sri S.N. Soparkar argued that such expenditure is allowable business expenditure u/s. 37 of the Act as the assessee is aided through this expenditure in determining new scope for research and development for its products and eventually attaining better product standards. The Ld. Senior Counsel also relied upon the submissions filed before CIT (Appeals) wherein nature of such expenditure was explained in detail and drawn our attention to Ground No.4.4 wherein it was claimed that the disallowance of expenditure would lead to higher deduction u/s.80-IB/80-IE. 8.1. Per contra Ld CIT DR appearing for the Revenue supported the order passed by the lower authorities. The Ld. CIT DR has relied upon the observation of the Ld AO and contended that considering the decision Hon’ble Supreme Court in case of Apex Laboratories Limited 135 taxmann.com 286, freebies provided to Doctors cannot be allowed as revenue expenditure u/s. 37(1) of the Act. 9. We have heard the rival contentions, perused the materials available on record and given our thoughtful consideration. The assessee has claimed accommodation, business promotion and conference expenses incurred for Rs.10,10,64,882/-, which are mainly gifts and freebies to doctors. While passing the assessment order, the Ld. AO has verified the ledger account of such expenditure and found that such expenditure are freebies that include sponsorship for attending conferences, medical equipment, I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 17 travel facilities and hospitality to be distributed to such medical practitioners, which is prohibited by Medical Council of India [MCI]. It is found that Ld. CIT(A) has confirmed the expenditure in nature of accommodation and business promotion but deleted Conference and Sponsorship expenses incurred for Doctors on the ground that same are incurred for sharing the knowledge in the medical field, which is not hit by Circular No.5/2012 and amended MCI guidelines. The Ld. CIT DR on the other hand placed reliance on the decision of the Supreme Court in the case of Apex Laboratories cited supra. 9.1. Ld. Sr. Counsel on the other hand pointed out that the facts in the case before the Apex court were completely different. He also pointed out that in the case of Apex Laboratories, it had given costly personal gifts/benefits like Gold coins, LCD TV, Laptops, etc. to medical practitioners and thereby it had solicited favourable prescriptions at the cost of patients. The Hon’ble Supreme Court also observed that there was an ‘quid pro quo’ arrangement between the parties requiring the medical practitioners to prescribe the products of the company in lieu of receiving the freebies. Accordingly, the ratio of the said decision should not be made applicable in the case. Alternatively, he also submitted that in order to avoid litigation and uncertainty, Assessee Company out of abundant caution would like to NOT PRESS the ground on allowability of said expenditure for the years under consideration. Thereby the Ld. Counsel specifically requested the Bench not to make this decision binding on subsequent years and any other years as facts in every year shall vary. Ld. Senior counsel also I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 18 argued that any disallowance of such expenditure if relatable and attributable to the Undertaking eligible for deduction u/s.80IB/IE of the Act, it should be increased to that extent. 9.2. We have gone through the facts as well as the orders of the lower authorities. We find that since the Senior Counsel appearing for the assessee has not pressed this ground of appeal for the year under consideration, the Ground no.4 raised by assessee becomes infructuous and dismissed. However, this finding should not be considered as a binding precedent for all the subsequent years and it goes without saying that the assessee company has the right to bring out relevant facts so as to allow claim of expenditure u/s. 37(1) of the Act. So far as alternate claim of the assessee that it is entitled for higher deduction u/s. 80- IB/80-IE on the above disallowance is concerned, claim of assessee is allowable as per CBDT Circular No. 37 of 2016, dated 2 nd November, 2016. Thus the Ld. AO is directed to verify that if above referred expenditure is part of profit & loss account for Unit eligible for deduction under Section 80-IB/80-IE, the assessee would be entitled for higher deduction and re-computeof deduction is required to be made accordingly. Thus, Ground of Appeal no.4 raised by assessee is dismissed and relevant ground no.6 in Revenue’s appeal is allowed. 10. The Ground of Appeal No. 5 relates to disallowance under Section 14A r.w. Rule 8D for Rs.81,63,728/-. The Ld AO at para 9 of the assessment order has observed that assessee has claimed exempt income of Rs.334.02 crores being share of profit from I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 19 partnership firm and not made any disallowance u/s. 14A of the Act. The A.O has observed that assessee has debited interest expenditure of Rs.12,62,902/- in profit & loss account along with other administrative expenditure and part of such expenditure is attributable to earning of exempt income. The Ld. AO has referred to the decision of Hon’ble Supreme Court in the case of Wallfort Shares & Brokers Ltd 310 ITR 421 and Godrej Boyce & Manufacturing Co. Ltd and observed that Rule 8D is applicable and he computed such disallowance at Rs.81,63,728/-. The above disallowance was confirmed by CIT(A) in para 14.2 of his order observing as follows: “14.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, average value of investment resulting into exempt income is Rs. 163.06 Crs against which share capital & share application money etc. amounted to Rs. 90 Crs only (excluding revaluation capital reserve). Since investment was more than the own interest free funds available, it is clear that borrowed funds have been used for earning exempt income and hence decisions relied upon by the appellant are distinguishable on facts. Thus I am of the considered view that the interest expenditure incurred by the appellant at Rs. 12,62,902/- was also relatable to the exempt income warranting application of Rule 8D. Accordingly, disallowance made out of interest under Rule 8D at Rs. 10,978/- is confirmed. As regards the disallowance made at 0.5% of average value of investment on account of administrative cost, undisputedly, time and energy of the management and resources of the company have been utilized for earning huge exempt income from the partnership firms. The disallowance on this account under Rule 8D has been upheld by the Hon'ble ITAT, Ahmedabad in the case of Flagship Company of this group i.e. Sun Pharmaceutical Industries Ltd. in various years including A.Yrs. 2008-09 and 2009-10. Respectfully, following the same, disallowance on account of administrative cost under Rule 8D is also confirmed. Thus, Ground No. 11 is dismissed.” I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 20 10.1. Aggrieved by the above appellate order, the assessee is in appeal before us. During the course of hearing, the Ld. Senior Counsel appearing on behalf of assessee has vehemently argued that as evident from the audited financial statements, the assessee had sufficient interest-free funds to carry out the investments, proportionate interest disallowance u/s.14A cannot be made. The Ld. Senior Counsel further contended that the assessee has not specifically incurred any administrative expenditure in respect to the exempt income earned which is substantially from the investments in Partnership firm. Hence no disallowance under any limb of Rule 8D can be made. 10.2. On the other hand, the Ld. CIT DR relied upon the finding of the lower authorities and argued that addition made by Ld. AO deserves to be upheld and relied upon the observation of the AO. 11. We have heard the rival contentions and perused the materials available on record and given our thoughtful consideration. The Ld AO has made disallowance u/s.14A read with Rule 8D of Rs.81,63,728/- which comprises of disallowance under Rule 8D(2)(ii) for Rs.10,978/- and under Rule 8D(2)(iii) for Rs.81,52,750/-. So far as proportionate interest disallowance is concerned, the Ld Senior Counsel contended that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the Ld. CIT(A) has given adverse findings in this regard. Considering these facts, we direct the AO to verify whether the assessee has sufficient interest-free funds or not. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 21 11.1. So far as the disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, the ground no.5 raised by the assessee is hereby allowed for statistical purpose. 12. Ground No. 6 of the Appeal relates to disallowance of Registrar of Company and Stamp Duty charges of Rs.30,18,600. The Ld AO at para 10 of the assessment order has observed that RoC filing fees paid for increase in share capital is capital expenditure in view of decision of Brooke Bond India Ltd Vs CIT 225 ITR 798 and Punjab State Industrial Development Corptn Ltd Vs CIT 225 ITR 792. The above addition was upheld by Ld. CIT(A) mainly relying on the findings of the Ld. AO in para 16.2 of his order. 12.1 Aggrieved against the above order, the assessee is an appeal before us. During the course of hearing, Ld. Senior Counsel appearing for the assessee argued that due to business reorganization, the assessee has made payment to Ministry of Corporate Affairs towards e-filing fees for Form 37, Form 39, Form 18, etc. It was argued that payment was in nature of statutory and has been incurred wholly and exclusively for the purpose of business, hence such expenditure needs to be allowed. On the other hand, Ld. CIT DR appearing for the Revenue relied upon finding of lower authorities. 13. We have heard the rival contentions and perused the materials available on record. It is an undisputed fact that assessee was Partner in two Partnership Firms which were converted into I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 22 Private Limited Companies under Part–IX of the Companies Act, 1956 and both the companies were amalgamated with assessee company in the year under consideration. Due to such business re-organization, the authorized share capital of the company has been increased which is not in dispute. The expenditure incurred by the assessee is directly connected with such increase in authorized capital and such expenditure cannot be allowed in view of decision of Punjab State Industrial Development Corporation and Brooke Bond India Limited (cited supra). Thus, the addition made by the Ld.AO of Rs.30,18,600 is confirmed. This ground no. 6 raised by the of assessee is dismissed. 14. The Ground No. 7 of the Appeal relates to addition of the amortization of Intangibles of Rs.1523,97,50,000/- while computing book profits under section 115JB. The brief facts of the case are that Domestic Formulation Unit (DFU) of Sun Pharmaceutical Industries Ltd. (SPIL) has been Spun off/ transferred to the assessee company in term of Scheme of Arrangement approved by the Hon'ble High Court of Gujarat vide judgement dated 03.05.2013 under sections 391 to 394 of the Companies Act, 1956. As a result of this arrangement, certain tangible and intangible assets have been transferred from SPIL to the assessee company. On perusal of the Schedule-11 (Fixed Assets) of the Audited Account, the Ld AO noticed that Rs.15,23,97,000/= were debited by the assessee company under the head (depreciation/amortization) against the Intangible Assets of Rs.182,87,70,00,000/= for the first time in the relevant column of e-ITR. In the computation of income, the assessee company has I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 23 added back depreciation/amortization amount, but no adjustment is carried out while computing book profit under clause (iia) to Explanation 1 to section 115JB(1) of the Act. Accordingly, the assessee company was required to explain the same vide show cause notice dated 08.11.2016. Assessee’s reply was considered by the Ld AO and rejected the same by observing as follows: “13.1. In response, the assessee company submitted a detailed explanation duly reproduced in the assessment order. After considering the submission of the assessee company, the Ld AO held that intangible assets were transferred without any cost and hence the value reflected was on account of revaluation and accordingly, no deduction for depreciation/amortization as a result of revaluation is allowed u/s. 115JB of the Act.” 14.1. Aggrieved against the assessment order, the assessee preferred an appeal before Ld. CIT(A) who confirmed the order of the AO. Being aggrieved by the appellate order, the assessee is in appeal before us. For better understanding of the facts, relevant portions of the findings of the CIT(A) is reproduced as under: ‘.... 17.1 During the course of appellate proceedings, the Ld. Authorized Representative has submitted a detailed explanation, summarized form of which is reproduced as under:- Ground 14: Re: Disallowance of amortization of Intangibles u/s 11SJB - Rs. 15,23,97,50,000/- 1. Initial recognition of intangibles at fair value does not amount to revaluation as on 31.03.2012 1.1 The Assessing Officer all along in his assessment order has harped only on one issue that intangible assets have been revalued by the Appellant as on 01.04.2012. At para no. 11.9.1 on page no. Ill of his assessment order, the Assessing Officer remarked, "The said intangible assets were claimed to have been received without consideration as a result of spun off / transfer of DFU from the transferor company. i.e. SPIL and that I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 24 the said DFU along with all these intangibles were transferred to the assessee at nil value as on 31.03.2012. It was also claimed that subsequently assessee company got these intangibles revalued as on 01.04.2012. 1.2 At the outset, it is submitted that the appellant has never claimed that it has got the intangibles revealed as on 01.04.2012 as alleged by the Assessing Officer (please see underlined and bold portion above). It is stated that neither the Appellant nor SPIL has carried out any kind of revaluation in relation to the intangible assets in question. The Assessing Officer is therefore highly mistaken on facts in making such observations. The appellant further denies having carried out any revaluation exercise of intangible assets leave alone the fact of revaluing it on 01.04.2012. it is stated that neither the appellant nor SIPL has carried out any kind of revaluation in relation to the intangible assets in question. The Assessing Officer is therefore highly mistaken on facts in making such observations. In fact, since the entire action of the Assessing Officer is on mistaken facts, the same needs to be completely quashed as being based on erroneous facts. As this is a fundamental and a factual error which goes to the root of the issue disputed in question, on this score itself, the entire addition made by the Assessing Officer needs to be quashed in toto. We nevertheless make further submissions on various other aspects on a without prejudice basis and without diluting the contention of the Appellant that the entire addition is on mistaken facts and hence, needs to annulled ab initio. 1.3 It is reiterated that the Appellant has, in the previous year ended 31.3.2012 relevant to the AY 2012-2013, acquired the Domestic Formulation Undertaking (DFU) under the arrangement of spin off from its holding company, SPIL. The DFU comprised various assets including intangible assets. The intangible assets so received under the spin off arrangement were recognized for the first time by the Appellant at a value reflective of their fair value based on the express stipulation in the scheme of spin off duly approved by the Hon'ble High Court of Gujarat as well as High Court of Bombay. 1.4 It appears that the Assessing Officer has failed to appreciate the distinction between revaluation and first-time recognition of intangible assets in books of accounts. In the present case, pursuant to the receipt of intangibles assets by the Appellant by virtue of the scheme of spin off, the Appellant has recognized the intangibles assets so received for the first time in its books of I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 25 accounts at their respective fair values to reflect the true position of the Appellant's assets and liabilities as on 31.03.2012. This, in no way, can be considered similar to the revaluation as understood in the accounting language. The recording of intangibles in the books of accounts by the Appellant is the process of initial recognition of the assets and not revaluation of assets. 1.5 The term 'revaluation' has not been defined under the Income- tax Act, 1961, however as the term clearly indicates, it is understood that revaluation means valuing again. Numerous judicial precedents have held that if any term is not defined within the Income-tax Act, then such term shall derive its meaning either from the General Clauses Act, 1897 or the dictionary or as understood in the commercial sense. Since in the present case, we are dealing with the addition made for the purpose of computing the book profits, the meaning as understood in the accounting sense should prevail. 1.6 As per the Guidance Note on Terms Used in Financial Statements issued by the Institute of Chartered Accountants of India, 'revaluation reserve' has been defined as 'a reserve created on the revaluation of assets or net assets of an enterprise represented by the surplus of the estimated replacement cost or estimated values over the book values thereof.' 1.7 As per the Stroud's Judicial Dictionary, revaluation refers to the 'practice whereby company puts a new value on its fixed assets, because nominal values and real values of such assets as property and machines have changed'. 4s per Black' Law Dictionary, revaluation means 'the adjustment up of the book value of assets.' Reference is also drawn to the Oxford English Dictionary wherein revaluation has been defined as 'the action of assessing the value of something again'. 1.8 A careful reading of all the above definitions Indicate that revaluation can be undertaken only when the asset under consideration is previously recorded, valued and carried in the books of accounts. There can be no question of carrying out revaluation when the assets were acquired by the Appellant for the first time and when they were never recorded before in the books of the Appellant. In the present case, since the intangible assets are valued for the first time in Appellant's books of accounts, it is not a case of revaluation but of initial recognition. Therefore, the Assessing Officer has committed grave mistake in treating the said accounting treatment as revaluation when in fact it is fair valuation on initial recognition permissible within the Indian GAAP. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 26 1.9 Hence, in light of the above definitions and considering the principle being regularly laid down by the various appellate authorities, it could be most appropriate and logical to state that there is no revaluation carried out by the Appellant. Accordingly, there ought not to be any adjustment in computation of the book profit in terms of section 115JB. To substantiate our claim that no revaluation is carried out and that revaluation is distinct from first-time recording of the asset at fair value, we also wish to draw your attention to the provisions Income- tax Act. Although the Income-tax Act per se does not contain any definition of revaluation, it still recognizes the difference between the revaluation and initial recognition of assets at fair value. In this context, we draw your honor's kind attention to the newly introduced sub-section (2B) to section 115JB of the Act which provides that – "(2B) In the case of a resulting company, where the property and the liabilities of the undertaking or undertakings being received by it are recorded at values different from values appearing in the books of account of the demerged company immediately before the demerger, any change in such value shall be ignored for the purpose of computation of book profit of the resulting company under this section." (Emphasis Supplied) 1.10 The above sub-section (2B) has been introduced vide Finance Act, 2017 to be effective from 01.04.2017. It is interesting to note that despite the presence of specific clause under Explanation 1 to section 115JB(2) providing for treatment of depreciation arising due to revaluation of assets, the Legislature has still inserted sub-section (2B) in section 115JB to expressly provide for adjustment where the assets have been recorded by the resultant company at a value different than those recorded by the demerged company. This directly leads to an inference that the Legislature, being well conscious of the fact that the existing clause (iia) to Explanation 1 to section 115JB could not be extended to even cover the cases of initial recording of assets at fair value brought the said amendment to widen the scope of adjustments. It may also be appreciated that Legislature has employed the phrase 'recorded at values different from values appearing in the books of account' in the above sub-section (2B) in contrast to using the term 'revaluation' which only goes to prove that initial recognition at fair value and revaluation of assets are two different concepts. Insertion of said sub-section (2B) has categorically brought out this distinction and made it more glaring. The fact that sub-section (2B) has been I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 27 introduced in the Act further proves that even the law acknowledges that there is a prevalent practice of recording assets at fair value under a scheme of business reorganization which cannot be construed as 'revaluation of assets'. 1.11 To further substantiate the claim that the revaluation is different from the initial recognition of asset at fair value, reference is drawn to the fact that the provisions relating to the revaluation of assets and initial recognition, wherever applicable, are provided separately in the Accounting Standards. For instance, reference is drawn to the provisions of AS - 10 which deals with 'Accounting for Fixed Assets' wherein separate paragraphs deal with initial recognition and revaluation of asset. 1.12 Thus, a separate and distinct accounting framework provided qua recognition of assets at fair value and qua revaluation signifies that the act of recognition of the assets at fair value is different from the exercise of revaluation. It is submitted that wherever the Accounting Standards has permitted the entities to revalue the assets, it has correspondingly required that requisite amount be credited to revaluation reserves and not to capital reserve. 1.13 In light of the above, we submit that since the recording of the assets in the books of the Appellant, as proposed by the court approved scheme, is the process of initial recognition and not a case of restatement of assets having existing book value, the same cannot be treated as revaluation of assets. In absence of any revaluation of assets carried out by the Appellant, there should not be any adjustment to the computation of the book profit u/s 115JB as erroneously contemplated by the Assessing Officer. Further, it is reaffirmed that the impugned action of the Assessing Officer to re- characterize the accounting of intangible assets as revaluation is ultra vires and amounts to usurping one's powers as unequivocally declared by the Hon'ble Supreme Court in case of Apollo Tyres Ltd [255 ITR 273]. It has been time and again repeatedly held by the Courts in India that the Assessing Officer has no power to disturb the profit as shown by the books of accounts other than for making the prescribed adjustments under Explanation 1 to section 115JB of the Act. Elaborative submission have been made on this point at paragraph number 5. 2. Initial recording of Intangible Assets was subject matter of AY 2012-13 and was duly accepted and allowed by the tax department I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 28 2.1 The Domestic Formulations Undertaking ("DFU") of SPIL was spun off to the Appellant, as on the 'appointed date' being 31st March 2012, vide orders of the Hon'ble Bombay and Gujarat High Courts, on a going concern basis. Thus, the assets including the intangibles have been vested and recorded in the books of account of the Appellant as on 31.03.2012. 2.2 However, the Assessing Officer has stated in the order that the Appellant got the intangible assets subsequently revalued as on 01.04.2012 which is a sheer contradiction to the facts of the case wherein the intangible assets have been accounted at fair value as on 31.03.2012, the date of spin off itself. Thus, the relevant year to question the fair valuation of intangibles is AY 2012-13 rather than AY 2013-14. 2.3 It is brought to your honors kind attention that the assessment of the Appellant for AY 2012-13 has already been completed after considering the relevant facts and no questions have been raised pertaining to the same. It be appreciated that depreciation or amortization (hereinafter referred to as "depreciation") is a consequential claim and emanates from the gross value of intangible assets recorded in the financial statements. Further, the depreciation of intangible assets has been determined in accordance with the generally accepted accounting framework and the same has been accepted by the statutory auditors of the company. It is not the case of the Assessing Officer that depreciation claim has been challenged. Rather the Assessing Officer has sought to go back in time to the assessment year in which the intangible assets have been recorded and disregard the same which is unjustified and impermissible under the tenets of tax laws. Once the recording of the intangible assets at fair value have been accepted and not questioned in the relevant year / initial year of recording i.e. AY 2012-13 in the instant case, it is not open to the revenue authorities to question the same in any of the succeeding years merely because the Appellant has claimed depreciation of the intangible assets in the current year. 2.4 Thus, the action of the Assessing Officer is ultra vires and exceeding one's powers. The Appellant vehemently objects to the action of the Assessing Officer to disregard the initial recognition of the intangible assets at fair value in accordance with the scheme duly sanctioned by the respective High Courts because the same does not pertain to the year under consideration and hence, on this very ground the disallowance of depreciation of intangible assets be set aside. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 29 3. Accounting treatment is in consonance with generally accepted accounting principles 3.1 During the year under consideration, the Appellant, in respect of the intangible assets acquired by it under spin off, has charged a sum of Rs. 1523.975 crores towards depreciation of the intangible assets. 3.2 At the outset, it is stated that there is no specific accounting treatment prescribed in the Indian Accounting Standards for such kind of transactions i.e. spin off. Therefore, we try to gauge whatever guidance is available from the generally accepted accounting framework. 3.3 A due can be taken from para 8.4 of AS-12 on 'Accounting for Government Grants', which specifies that the grant related to depreciable assets are treated as deferred income which is recognized in the profit and loss statement on a systematic and rational basis over the residual life of the asset and grants related to non-depreciable assets are credited to capital reserve. For this treatment to be applied, the assets need to be initially booked at a fair value on the date of the acquisition. An inference can also be drawn from the purchase method of accounting for amalgamation as specified in the para 12 & 13 of AS-14, and accordingly, all the assets can be recorded at fair value. 3.4 Attention is invited to the provisions of sub-section (2) of section 115JB of the Income-tax Act, 1961 which requires that the financial statements must be prepared in accordance with the requirements of provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The moment the financial statements are in accordance with requirements of Schedule VI, the Assessing Officer cannot find faults and has to restrict himself to the adjustments prescribed under Explanation 1 to section 115JB(2) of the Act as has been judicially settled. 3.5 The Schedule VI to Companies Act 1956 lays down the general instructions for preparation of balance sheet and statement of profit and loss of a company. Part I thereto deals with the form of Balance Sheet while Part II deals with the form of statement of profit and loss. Here it is pertinent to refer to the section 211 of the Companies Act 1956 which mandates that every financial statement prepared by the company should show true and fair view of its state of affairs and of its profit and loss account. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 30 3.6 Further, the Schedule VI exclaims that the requirements of the Companies Act and / or the notified Accounting Standards will prevail over the Schedule. Therefore, a combined reading of the above provisions reveals that showing a true and fair view is an underlying principle and has overriding impact over all the accounting principles and policies. Even AS-1 bears testimony to this by stating that true and fair view is an overriding consideration in selection of an accounting policy. 3.7 From the harmonious reading of the above provisions of the Companies Act, it can be gathered that firstly, the profit & loss account must disclose the result of the working of the company during the period. It has been broadly laid out that the accounts prepared for the purpose of section 115JB have to be prepared in accordance with the Companies Act, 1956. No other condition is laid out for the preparation of the financial statements for the purpose of section 115JB. Schedule VI, Parts II and III of the Companies Act, 1956 deal with requirements of disclosure of the various items in the profit and loss account. They do not enunciate any accounting principles. The same are absolutely silent on the accounting treatments of the various profit and loss account items. Thus, Parts II and III do not lay down any scheme of computation of book profit; they deal mainly with the requirements of disclosure in the profit and loss account. There is no prohibition and no compulsion in Schedule VI in respect of any particular accounting policy, so long as following the accounting policy does not affect the disclosure of the result of the working of the company. Moreover, it is possible to comply with Parts II and III of the Schedule VI in more than one way where the assessee can adopt different acceptable accounting policies as long as he complies with the basic requirement of Schedule VI, which is to disclose correctly the result of the working of the company. As long as the method employed for accounting the income meets with the rudimentary principles of accountancy, the accounting treatment is said to be consonance with the generally accepted accounting principles. 3.8 Thus, there is nothing in the Schedule VI of the Companies Act, 1956 which prohibits the initial recognition of intangibles assets at fair value received pursuant to the scheme of business reorganization and the debiting of consequential depreciation in the profit and loss account. Appropriateness of accounting treatment accorded I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 31 3.9 With a view to disclose the true revenue earning potential of assets owned by the Appellant and keeping in mind the overriding principle of showing true and fair view of the financial statements as well as the requirements laid down by Part II and Part III to Schedule VI to the Companies Act 1956, recognizing the intangible assets at fair value is very much in accordance with the generally accepted accounting principles in India. 3.10 With respect to crediting the corresponding amount to the capital reserve, attention is invited to para 17 of AS-14 on 'Accounting for Amalgamations'. Although the above Accounting Standard specifically deals with the accounting for amalgamations which is one of the forms of business reorganization, yet it would have persuasive value for other forms of business re-organization in absence of any authoritative guidance. Accordingly, the Appellant has followed fair value accounting of assets acquired and credited the equivalent amount to capital reserve at the time of initial recognition. We wish to submit that the assets received under the scheme of spin off have been recorded at fair value based on independent valuer's report, copy of which are already submitted. Further the accounting treatment accorded by the Appellant is duly confirmed and approved by the opinion of expert on the subject. Also, the said treatment has been duly certified by independent and qualified statutory auditors of the company. The statutory auditors of the Appellant namely, M/s Deloitte Haskins and Sells is a highly reputed and a premier auditing firm in the world known for auditing. It may be noted that the statutory auditors have not given any adverse findings or qualifications which only proves that the accounting treatment was rightly accorded in the financial statements of the Appellant. The Statutory Auditors have categorically mentioned in their 'Emphasis of Matter' paragraph of their Auditor's report that their opinion is not qualified in respect of accounting treatment given pursuant to the scheme of arrangement duly sanctioned by the High Courts. 3.11 Thus, there is no adverse or negative observations / remarks made by the statutory auditors of the Appellant regarding the accounting treatment followed in respect of the intangible assets. It may be noted that the 'General Instructions for preparation of Balance Sheet' in the Schedule VI of the Companies Act, 1956 requires making specific disclosure in the Balance Sheet with respect to revaluation of assets. The fact that the statutory auditors of the Appellant have not made any qualifications or expressed their reservations on the accounting treatment adopted by the Appellant in respect of the recognition of the intangible assets but instead I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 32 issued a clean report proves beyond doubt that the accounting treatment accorded by the Appellant meets the general requirements laid down in the Schedule VI of the Companies Act, 1956. Further, as per the 'Framework for the preparation and presentation of Financial Statements' issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, the terms 'income' and 'expenses' are defined as follows: (a) Income is increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. (b) Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. 3.13 The said framework further states that 'when economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined, expenses are recognized in the statement of profit and loss on the basis of systematic and rational allocation procedures. This is often necessary in recognizing the expenses associated with the using up of assets such as plant and machinery, goodwill, patents and trademarks; in such cases, the expense is referred to as depreciation or amortization. These allocation procedures are intended to recognize expenses in the accounting periods in which the economic benefits associated with these items are consumed or expire.' 3.14 In the present case, the depreciation charge of Rs. 1523.975 crores represents estimated depletion of intangible assets based on the expected useful life of 12 years. Hence, the same amounts to 'expense' as per the aforesaid definition which is required to be debited by the Appellant to its profit and loss account in order to reflect true and fair view of the Appellants' working results. Thus, the accounting treatment adopted by the Appellant is in consonance with the framework prescribed by the Companies Act, 1956 read with the generally accepted accounting principles in India. Judicial Precedents 3.15 Reliance is placed on the following decisions: I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 33  Binani cement limited [ ITA No.239/KOL/2011]  Sterlite Industries (India) Ltd. v. Additional Commissioner of Income Tax [2006] SOT 497 (MUM.)  CIT v. Virtual Soft Systems Ltd. [2012] 341 ITR 593/205 Taxman 257/18 taxmann.com 119 (Del HC)  PCIT V. Sun Pharmaceutical Industries Ltd. [2017] 293 CTR 489 (Gujarat) Thus, the accounting treatment accorded by the Appellant is in accordance with the Indian accounting framework. Furthermore, the above accounting treatment is also duly approved by the Statutory Auditors, who are one of the reputed firms in India, the Shareholders as well as the Regulatory Authorities being, recognized Stock Exchanges where the securities of the Appellant are listed, Registrar of Companies, Ministry of Corporate Affairs etc. Besides, the accounting treatment accorded by the Appellant is also sanctioned by the Hon'ble High Courts under the scheme of spin off of domestic formulation business from SPIL to the Appellant. Thus, the accounts so prepared by the Appellant are in compliance with the accounting framework as well as in compliance of the applicable corporate and regulatory laws. 4. Scheme of arrangement including the accounting treatment mentioned therein is duly approved bv the High Courts 4.1 The Appellant has recorded the intangible assets, received under the arrangement of spin off, at fair value in accordance with the accounting framework specified in the Scheme and further the said accounting treatment given in the Scheme is confirmed by the Hon'ble High Court of Gujarat allowing the Appellant to record the assets at fair value and making corresponding credits to the capital reserve. In this regard, it is relevant to note the provisions of paragraph 23 of AS-14 dealing with Accounting for Amalgamation, drawing inference wherefrom we submit that the accounting treatment duly sanctioned by the High Court in a scheme of arrangement which has been merely given effect by the Appellant is deemed to be an appropriate accounting treatment and cannot be tampered with. More so when the accounting treatment in the case of proposed scheme of arrangement does not contradict any Accounting Standards or any express provision under any Law for the time being in force. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 34 4.2 Even otherwise, while granting its approval to the scheme of arrangement, the Hon'ble Courts of Gujarat and Bombay have expressly mentioned in their order that said scheme has binding effect on the Appellant Company. As a result, even the accounting treatment provided under the scheme of arrangement has binding force on the Appellant Company and therefore, the Appellant is obligated and has no option other than to sincerely give effect to the same. Under the circumstances, the accounting treatment adopted by the Appellant has legal force in form of the sanction accorded by the High Courts and therefore, cannot be simply disregarded. Not observing the accounting treatment as per the express terms of the scheme would amount to breach of the scheme having adverse legal and contractual implications. 5.Assessing Officer has no power to disturb duly certified and adopted books of accounts According to the mandate of section 115JB(2)(a), the Appellant company had maintained its accounts as per the provisions of Part II and Part III of Schedule VI of the Companies Act, 1956. The same was scrutinized and certified by the statutory auditors and was approved by the assessee company in its annual general meeting. As such the assessing officer has no jurisdiction thereafter to question the correctness of the accounts. Reliance is placed on the judgement of the Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 and Malaya la Manorama Co. Ltd. v. CIT [2008] 300 ITR 251/169 Taxman 471. 5.2 The above views expressed in Apollo Tyres Ltd.'s case (supra) were followed by the • Hon'ble Calcutta Court in the case of CIT v. Ispat Industries Ltd. [2008] 2 DTR 13. • The Hon'ble Bombay High Court in the case of CIT v. Adbhut Trading Co. (P.) Ltd. [2011] 338 ITR 94 (Bom.) 5.3 Hence, in view of the decision in case of Apollo Tyres Ltd.’s case (supra), it is a settled proposition that the Registrar of Companies, Statutory auditors and shareholders are the only authorities to check whether accounts are in accordance with Part II and III of Schedule VI of the Companies Act 1956 and it is not open to the Income-tax authorities to vitiate from the net profit as shown in the profit and loss account except as provided in the Explanation to section 115JB of the Act. Thus, it is submitted that the Assessing Officer does not have the power to tamper with the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 35 financial statements if the financial statements are prepared in accordance with the provisions of Schedule VI of the Companies Act, 1956. 5.4 The Appellant also places reliance on decision of the Hon'bie Supreme Court decision in case of Mangalore Ganesh Beedi Works vs. CIT (Civil Appeal Nos. 10547/10548 of 2011) and various other decisions where it has been held that the taxing authorities have no jurisdiction to rewrite the arrangements. Under the taxing system, it is up to the Assessee to conduct the business in his wisdom. In this context; it is respectfully submitted that the action of the Assessing Officer to characterize and link the recording of assets at fair value to revaluation of assets and consequently characterizing the capital reserves as revaluation reserve is beyond his jurisdiction and hence bad in law. 5.5 Accordingly, the Assessing Officer is not empowered to merely disregard the transaction per se and re-characterize as per his whims and fancies. Thus, the attempt by the Assessing Officer in the present case, to paint the transaction of initial recognition at fair value by the Appellant as a case of revaluation of intangibles is bad in law. 6. Section 115JB, being a deeming provision to be interpreted strictly 6.1 The Assessing Officer failed to appreciate that section 115JB is a deeming provision, therefore, the provisions are to be read in strict sense and that no further adjustment is required in addition to the items specified under section 115JB. The Assessing Officer erred in contending that depreciation on revalued assets is not allowable under clause (iia) to Explanation 1 to section 115JB without considering the fact that intangibles were not revalued but were recorded at fair value. 6.2 With respect to Assessing Officer's contention that only portion of depreciation of intangibles excluding that pertaining to revaluation is to be reduced in terms of clause (iia) to Explanation 1, the relevant extract of Explanation 1 is reproduced as below for sake of better understanding: "Explanation 1. —For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub- section (2), as increased by— I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 36 (a) ...; or (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC: or (c) ....; or (d) ....; or (e) ....; or (f) ....; or (g) the amount of depreciation , or (h) ....; or (i) ...; or (j) ....; or if any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and... (iia) the amount of depreciation debited to the profit and loss account excluding the depreciation on account of revaluation of assets);" 6.3 Thus, as per Explanation 1, the net profit as shown in the profit and loss account is the starting point for the purpose of determination of book profits. Further, the said amount is inter alia increased by the amount of depreciation as debited in the books of accounts as per clause (g). Furthermore, the amount of depreciation (excluding the depreciation on account of revaluation) is to be inter alia reduced in terms of clause (iia) from the above figure to arrive at book profits. 6.4 It would be important to take note of the computation of book profits for MAT purposes as furnished by the Appellant under 'Schedule - MAT' of the return of income filed for AY 2013-14. The relevant computation is summarized below for ease of reference: "Profit after tax as shown in the P&L A/c. Rs.(2,188,071,659) Additions (if debited in profit and loss account) ............. ............ (g) Depreciation attributable to revaluation of assets ....... Rs.0 (h) Others (including residuaI unadjusted items and provision for diminution in the value of any asset) Rs.15,436,152,918 ......... .......... I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 37 Deductions Others (including residual unadjusted items and the amount of deferred tax credited to P&L A/c) .... Rs. 15,344,173,610 Book Profits u/s 115JB .... Rs. (4,696,332,843)" 6.5 As can be seen from the above summary, nothing has been added against the line item 'Depreciation attributable to revaluation of assets' in computing the book profits since no revaluation of assets has been undertaken by the Appellant. /4s already submitted at great lengths in earlier part of the submissions that depreciation on intangible asset debited the books of accounts is not on account of revaluation. /4s evident, the MAT provisions as well as the aforesaid Schedule of MAT to the ITR, require only that portion of the depreciation which is arising on account of revaluation to be added back in computing book profits. As no revaluation of asset has been carried out in the current year, nothing has been added back. This is perfectly in accordance with the provisions of section 115JB of the Act. The Assessing Officer has grossly erred in alleging that the Appellant has adopted a colourable device to prefer unsustainable claim. In this regard, it is clarified that the Appellant has merely applied the provisions of the law and therefore, there cannot be any question of adopting a device leave alone it being a colourable one. 6.6 Your honour will also appreciate that the case of the Appellant is squarely covered by the decision of the Apollo Tyres Limited (supra) wherein the Hon'ble Supreme Court has held that the once the accounts are properly maintained as per the applicable framework, then in such case the tax department does not have the jurisdiction to go behind the net profit as shown in the profit and loss account except to the extent provided in section 115JB. 6.7 The Appellant, based on the approved audited accounts, has determined the book profit as per provisions of section 115JB of the Act. While computing the book profits, the Appellant had made adjustment on account of the line items explicitly specified u/s 115JB. It is submitted that the section 115JB is a deeming provision, which has been inserted by Finance Act 2000, w. e. f. 01.04.2001, wherein the Appellant being a company, is required to compute its income tax liability based on the book profits as worked out u/s 115JB of the Act. Since section 115JB being a deeming provision, therefore, the provisions are to be read in strict sense and accordingly, it is submitted that no further adjustments is required in I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 38 addition to the items specified in Explanation 1 to section 115JB(2). 6.8 It is submitted that the provisions of section 115JB have been introduced as a deeming fiction. It is respectfully submitted that the deeming provisions of an Act ought to be strictly construed and that the scope of the deeming provisions cannot be stretched. In this regard, we also rely on the following case laws which have held that the deeming provisions ought to be construed strictly: • Ajax Products Limited 55 ITR 741 (SC) • L.P. Cardoza & Ors. 227 ITR 421 (Kar.) 6.9 Based on the above submissions it is submitted that no further addition ought to be made to the book profit on account of the depreciation of the intangible assets. ..... .... .... 17.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative including the decisions relied upon by him. Undisputedly, Domestic Formulation Unit of Sun Pharmaceutical Industries Ltd., the holding company, has been spun off/transferred to the assessee company in term of Scheme of Arrangement approved by Hon'ble Bombay High Court u/s. 391 to 394 of Companies Act, 1956 vide order dated 03.05.2013 in company claim Petition No. 283 of 2013 and also by Hon'ble Gujarat High Court vide order dated 03.05.2013 in company Petition No. 31 of 2013 connected with the company Application No. 373 of 2012. As per the scheme approved by the Hon'ble High Courts all existing trademark except the trademark "Sun" and "Sun Logo" etc. pertaining to the domestic formulation have been transferred. Further, the patents, Technical Know- How, Process Know-How and other Intellectual Property Rights have been allowed to be owned & possessed by the SPIL and the appellant company has been allowed to use the same perpetually. Admittedly no consideration has been paid by the appellant company to the transferor company in respect of the above mentioned assets. However, vide para-9 of the order, Hon'ble Bombay High Court has allowed the transferor company to record the value of the assets of Domestic Formulation Undertaking transferred at the values appearing in the book of account as on the appointed date. The assessee company being the transferee company has been allowed to I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 39 record the assets at Fair Market Value in its books of account and consequential value has also been allowed to be credited in the Capital Reserve Account in the books of transferee company. As a result of above mentioned orders of Hon'ble High Court, the appellant got the assets valued vide valuation report dated 25.05.2013 issued by KPMG and another valuation report dated 24.05.2013 issued by E&Y. On the basis of these valuation reports, the appellant company had recorded value of all assets transferred in at Rs. 185,654,000,000/- including intangible assets at Rs. 182,877,000,000/- in its books of account including the Balance Sheet as on 31.03.2012 but prepared on 27.05.2013. The Fair Market Value of tangible assets was recorded at Rs.3,80,81,928/. As a result of estimation of Fair Market Value of the assets received from the transferor company without any consideration, capital reserve was created to the tune of Rs.185,654,286,282/-. 17.2.1 During the year under consideration, the appellant has debited a sum of Rs.15,34,41,73,610/- in the Profit and Loss Account being the depreciation and amortization of expenses in respect of the assets claimed to have been received from the holding company as mentioned above without any consideration. The about amount includes "depreciation and amortization expenses" at Rs. 1523,97,50,000/- on intangible assets being l/12 th of the revaluation amount. Although for the purposes of computation of income under normal provisions of Income-tax Act, the appellant has disallowed the above sum but did not disturb the book profit for the purposes of section 115JB. Therefore, the question arises as to whether the book profit u/s. 115JB was rightly computed by the appellant or not. As a matter of fact, the value of such assets recorded by the transferor company in its books of account was very nominal resulting in to loss to the tune of Rs. 22,18,86,314/- only, but the appellant on the basis of valuation reports, enhanced the value of such assets astronomically. As per extant principles of accountancy and commercial considerations, the value has to be the same for the transferor and transferee. As per the provisions of Part-II & III of Schedule-VI of Companies Act, 1956, the Profit and Loss Account of the company has to be prepared in accordance with the Accounting Policy & Accounting Standards adopted I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 40 for preparation such accounts and after following the method and rate of depreciation adopted according to such policy and standards. Under the Income-tax Act as well as Companies Act, the depreciation has to be calculated on the actual cost of the assets. Since the appellant company has not incurred any cost for acquiring the assets, in my considered view, the depreciation cannot be calculated on hypothetical values though determined by the valuers. If it is permitted, then any company can put any hypothetical figures in it books of account and claim the depreciation thereon resulting into book profit always negative and hence will avoid MAT u/s. 115JB for indefinite period. In this manner, the provisions of section 115JB will be rendered useless and this is never the intention of any legislation. Under these circumstances, I hold that the appellant has not worked out book profit as per the provisions of law. 17.2.2 During the course of appellate proceedings, the Ld. Authorized Representative has argued that since there was no initial value of the assets transferred in, the fair market value determined later on cannot be considered as revaluation of the assets. This argument of the Ld. Authorized Representative is not acceptable because the term "revaluation" always means an estimation of a fresh value different from the original one irrespective of the fact that the original value was "Zero". It is also a trite position of law that the substance over form has to be considered while deciding any issue and in substance, it is a case of revaluation of assets. Therefore, I hold that estimation of the Fair Market Value of the assets transferred in which is different from the book value recorded in the books of transferor company, has to be treated as revaluation of assets. As per Explanation-1 to section 115JB(2), the depreciation debited in the Profit and Loss Account shall first be added to the book profit and then only the depreciation debited in Profit and Loss Account excluding the depreciation on account of revaluation of assets shall have to be reduced. The Assessing Officer has accordingly worked out the book profit of appellant. 17.2. In view of the above factual & legal position, thus it is also emerged that the claim of appellant of depreciation on I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 41 assets or amortization of expenses, without incurring any actual cost or expenditure and even not by the predecessor company, certainly amounts to a colourable device in order to avoid incidence of tax u/s. 115JB. In any of the cases relied upon by the Ld. Authorized Representative, the claim was not made on hypothetical values without incurring actual cost and hence they are distinguishable on facts. It was also argued that the Scheme of Arrangement was approved by the competent courts including recording of value of assets in the books of accounts. It is an established position of law that merely because the Scheme of Arrangement has been approved by the Hon'ble High Courts, the revenue is not precluded from lifting the corporate veil. This view gets support from the ratio laid down by Hon'ble Supreme Court in the case of Marshall Sons & Co. (India) Ltd V/s ITO (1997) 223 ITR 809 (SC) wherein it was held that once the scheme of amalgamation is approved u/s 391 & 394 of Companies Act, the date specified therein has to be considered as date of transfer. However, the Income Tax Authorities are entitled to raise the issue that amalgamation itself is a device designed to evade the taxes legitimately payable by the subsidiary company. Accordingly, the arguments of Ld. AR are rejected. Therefore, I agree to views of the Assessing Officer and confirm the disallowance/addition made at Rs. 15,23,97,50,000/- on this account. Thus, Ground no. 14 is dismissed. 14.2. Against the above order of Ld. CIT(A), the assessee is in appeal before us. During the course of appellate proceedings, the Ld. Sr Counsel Sri S.N. Soparkar appearing on behalf of the assessee has vehemently argued that initial recognition of intangibles at fair value does not amount to revaluation, as revaluation means valuing again. He has referred to Guidance note on terms used in Financial statements issued by ICAI which defines “revaluation reserve” means reserve created on the revaluation of assets or net assets of an enterprise represented by the surplus of the estimated replacement cost or estimated values I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 42 over the books values thereof. Ld. Sr Counsel thus further referred to “black law dictionary” which states that “revaluation means the adjustment up of the book value of assets”. As per “Oxford English dictionary” revaluation has been defined as “action of assessing the value of something again”. On this basis, Ld. Sr Counsel argued that the Ld AO was not justified in treating depreciation on intangibles as depreciation arising on account of revaluation of assets, but the fact was that assets were recorded at Fair value for the first time on 31 st March 2012 as DFU of SPIL was spun off to the assessee company and depreciation on such amount does not mean that assessee has claimed depreciation on revalued assets. 14.3. The Ld Sr Counsel also referred to Audited annual accounts of earlier year, wherein accounting entries relevant to above assets were passed on last day of financial year and argued that then Assessing Officer has never objected to such accounting treatment. Thus the Ld Sr Counsel submitted that accounting treatment is in consonance with generally accepted Accounting principles and Scheme approved by the High Courts, hence Ld AO cannot deviate from such accounting entries. He has further argued that Section 115JB, being a deeming provision, to be interpreted strictly and as adjustment provided therein does not include any such adjustment as stated by the Assessing Officer, therefore he has no power to disturb duly certified and audited books of accounts as held by Hon'ble Supreme court in the case of Apollo Tyres Ltd 255 ITR 273. Ld Sr Counsel also relied upon submission filed before CIT(A) which was part of the appellate order. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 43 14.4. On the other hand, the Ld. CIT DR Mr. Aarsi Prasad vehemently supported the orders passed by the lower Authorities and argued that addition made by the Ld AO and confirmed by the Ld CIT[A] deserves to be sustained. 15. We have heard the rival contentions and perused the materials available on records and given our thoughtful consideration. The Domestic Formulation Unit [DFU] of Sun Pharmaceutical Industries Ltd., the holding company, has been spunoff/ transferred to the assessee company in term of Scheme of Arrangement ('Scheme') approved by Hon'ble Bombay High Court [pages 648 to 678 of the Paper Book] under sections 391 to 394 of Companies Act, 1956 vide order dated 03.05.2013 in Company claim Petition No. 283 of 2013 and also by the Hon'ble Gujrat High Court vide order dated 03.05.2013 [pages 679 to 682 of the Paper Book] in Company Petition No. 31 of 2013 connected with the Company Application No. 373 of 2012. The assets received by the assessee company have been recorded at fair value pursuant to said Scheme. The entire objective of the above action was to enable the assessee company to focus on the domestic formulation business which significantly differed from the rest of the parent company in terms of the customer base, regulatory environment, supply chain, risks and rewards, etc. thereby resulting into significant value addition in the hands of the stakeholders. 15.1. Pursuant to the above arrangement, the intangibles have been recorded by the assessee company for the first time at their value as on 31-03-2012 based on the valuation report obtained I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 44 from two independent Valuers like Earnest & Young and KPMG. The Ld AO has held that the assessee company revalued intangibles as on 01-04-2012, which is contrary to the facts as intangible assets have been accounted as on 31-03-2012 based on valuation report as on the date of spin off, thus the Ld AO misunderstood the whole transaction as revaluation of assets and failed to understand that valuation is for purpose of recording value of assets which is already with the assessee company. The AO also held that intangible assets have NOT been transferred to the assessee company, but only a perpetual and irrevocable right to use such intangibles has been granted to the assessee company ignoring the fact that intangible assets have been actually transferred as can be evidenced from Transfer Form TM-24 submitted by the assessee under the Trade Marks Act, 1999 for the durgs namely ZOLAM, PIRANULIN, TETRAFOL, NOMYGRIN, SESOLEX, SESOVAL, DERILONG, SEMIVAL, COFODIL, PULVITAB, PULZAC, VIGABRIL, NOTERAL, EPIVAL, etc which are placed in the Paper Book at pages 7 to 65. 15.2. Further under the Scheme approved by the Hon’ble High Courts which inter-alia also includes the obligation of the assessee company to record the assets acquired under the Scheme at Fair Value. Thus the assessee company has the right to record the Assets at a Fair Value in its books of accounts. The relevant extracts of the High Court Judgement (Co. petition no. 31 of 2013 connected with Company Application No. 373 of 2012) permitting the assessee company to recognize the asset at fair value is as reproduced below: I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 45 “9. Accounting by Transferor Company and the Transferee Company in respect of transfer of domestic formulations undertaking (i) Accounting treatment in the books of the Transferor Company: ....... (ii) Accounting treatment in the books of the Transferee Company: a) Upon coming into effect of this scheme and upon the arrangement becoming operative, the Transferee Company shall record the assets transferred to and vested in them pursuant to this Scheme, at the estimated fair values of the respective assets as on the Appointed date. The decision of the Board of Directors of the Transferee Company in this regard shall be final and binding b) The sum total of assets recorded at fair values shall be credited to Capital Reserve Account in the books of the Transferee Company. The Capital Reserve shall be available for issue of bonus shares or such other application as may be permissible under the law.” 15.3. In the above circumstances, the accounting treatment adopted by the assessee company had legal force in form of sanction accorded by the High Courts and therefore cannot be disregarded. It is relevant to refer to decision of the Tribunal Kolkata Bench in the case of ITO v. Purbanchal Power Co. Ltd in ITA 201/Kol/2010 dated 17 th July, 2014, wherein it is held as under: “From the above provisions of section 394A of the Companies Act, 1956, legal position enunciated in the decisions of Hon’ble Gujarat High Court in the case of Wood Polymer Ltd., in re and Bengal Hotels Pvt. Ltd. in re, I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 46 supra and Vodafone Essar Gujarat Ltd., supra, evidently makes the purpose clear that if the revenue wants to object to the proposed scheme of amalgamation, it has to do so in the course of proceedings before the High Court but before the final order is passed. Whenever such objections have been raised, these have been considered on merits by the concerned High Court and also incorporated the condition for safeguarding the interest of revenue in the very scheme. As a matter of public policy, once a scheme of amalgamation is approved by Hon’ble High Court no authority should be allowed to tinker with the scheme. In the present case of the appellant, neither the official liquidator nor the Regional Director nor Central Government raised any objection to the scheme of amalgamation. In such circumstances, we are of the view that the revenue has nothing to say at the time of approval of scheme by Hon’ble High Court in the present case.” 15.4. The above referred decision was further confirmed by the Hon'ble Calcutta High court vide judgement dated 12.07.2022 [2022] 145 taxmann.com 215. 15.5. It is also relevant to refer to the decision of the Tribunal, Delhi Bench in ITA No.170/Del/2019 vide order dated 12.03.20, in the case of Priapus Developers P. Ltd. vs ACIT, New Delhi wherein it is observed as under: “ 15. ... Hon'ble High Court had also issued notices to the Income Tax Department through Assessing Officer which was received in the office of the Assessing Officer on 18.05.2015. The Assessing Officer/ Department nowhere had objected to said Scheme at any point of time, neither in pursuance of circular issued by Ministry of Corporate Affairs nor when the notice was issued by the High Court. Thus, Scheme of Amalgamation sanction by Hon'ble High court had become final. Such an order has a binding effect upon all. Hon'ble Supreme Court in the case of J.K. (Bombay) Pvt. Ltd. (supra) held that once the scheme has been sanctioned by the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 47 Court that does not operate as mere agreement between the parties, but it becomes binding on the company, their creditors and the share holders and other statutory force. The relevant observation of the Hon'ble Apex Court reads as under: "The principle is that a scheme sanctioned by the court does not operate as a mere agreement between the parties. It becomes binding on the company, the creditors and the shareholders and has statutory force, and therefore, the joint-debtor could not invoke the principle of accord and satisfaction. By virtue of the provisions of sec. 391 of the Act, a scheme is statutorily binding even on creditors, and shareholders who dissented from or opposed to its being sanctioned. It has statutory force in that sense and therefore cannot be altered except with the sanction of the Court even if the shareholders and the creditors acquiesce in such alteration..................." From the aforesaid ratio it is quite ostensible that, once the amalgamation scheme has been approved and sanctioned by the Court, it has a statutory force and is binding on the company and all the stake holders. Similar view has been echoed by the Hon'ble Gujrat High Court in the case of Wood Polymer Ltd. (supra), wherein Hon'ble Court has observed and held as under:- "The expression "public interest" is to be found in the second proviso and in the context of a company which, if, scheme of amalgamation is sanctioned, is likely to lose its identity by getting merged with the transferee- company. It is to be dissolved without winding up. In winding up the manner in which affairs of a company are conducted can be probed in depth; but a scheme of amalgamation which provides for merger of the transferor-company with the transferee-company, would destroy any opportunity for examination of the affairs of the transferor-company. The second proviso would provide the last opportunity to peep into the affairs of the transferor company before it gets virtually extinct. The court is, therefore, charged with a duty before it finally confirms burial-cum-cremation of the transferor-company, to peep into its affairs to ascertain whether they have been carried on not only I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 48 in a manner not prejudicial to its members but in even public interest. The expression "public interest" must take its colour and content from the context in which it is used. The context in which the expression "public interest" is used should permit the court to bring out why the transferor-company came into existence, for what purpose it was set up, who were its promoter, who were controlling it, what object was sought to be achieved through creation of the transferor-company and why it is now being dissolved by merging it with another company. All these aspects will have to be examined in the context of the satisfaction of the court whether its affairs have not been carried on in a manner prejudicial to public interest. That is the colour and content of the expression "public interest" as used in section 394(1), second proviso and the facts of this case will have to be examined keeping in view the colour and content of the expression "public interest". The scheme of amalgamation must have some purpose or object to achieve. It was repeatedly inquired what purpose or object was to be achieved by a scheme of amalgamation offered for court's sanction. It was said that the property belonging to the transferor- company will be available to the transferee- company. Now, the property belonging to the transferor- company is situated in Calcutta. The transferor-company is having its factory at Billimora. The transferor-company appears to have not done any business except acquiring capital asset from its parent company of which it was a subsidiary company and got it revalued so that by the process of revaluation, the equity shareholders of the transferor-company can get large number of shares of the transferee company by the exchange ratio prescribed in the scheme of amalgamation. No apparent understandable purpose or object behind the scheme is discernible. The purpose and the only purpose appears to be to acquire capital asset of the DOC Pvt. Ltd. through the intermediary of the transferor-company which was created for that very purpose to meet the requirement of law, and in the process to defeat tax liability that would otherwise arise. If such be the scheme of amalgamation and if such is the use made of the transferor-company by those controlling it, it can never be said that the affairs of the transferor-company sought to be amalgamated, created for the sole purpose of facilitating transfer of capital asset, through its medium, have not been carried on in a I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 49 manner prejudicial to public interest. Public interest looms large in this background, and the machinery of judicial process is sought to be utilized for defeating public interest and the court would not lend its assistance to defeat public interest, namely, tax provision." Thus, when amalgamation scheme has been approved by the Court, it is not open for the Assessing Officer and CIT (A) to hold that amalgamation has been used by the assessee company as a tool for tax evasion. The amalgamation order passed by the High Court is a judicial order and has statutory force and in case, the department had any objection, then same should have been given before the Hon'ble High Court for which sufficient time was allowed. Now, the department cannot clamour that such an amalgamation have been used by the assessee as a tool for tax evasion or as colourable device. ” 15.6. In the above referred decision, Co-ordinate Bench of Delhi Tribunal had concluded the issue based on the reading of clause (j) of Explanation to section 115JB for calculation of book profit u/s. 115JB, provisions of Section 129 of the Companies Act, AS14 of the recognized accounting standard, keeping in view the fact that the revenue has not brought any tangible material to prove that the scheme is a colourable device to avoid taxes, keeping in view of the amalgamation of the companies and keeping in view of the accounting resorted by the group companies regarding the book value of investments in shares pre and post amalgamation, we hereby hold that, the appeal of the assessee on this ground is allowed. We are in conformity with the above view taken by the Co-ordinate Bench of Delhi Tribunal and in view of above discussion we are of the view that recording of the assets at fair value pursuant to scheme of arrangement and at time of initial recognition cannot be regarded as revaluation and I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 50 consequently no adjustment is required to be made to book profit. 15.7. Further, section 115JB is a deeming provision and the same is required to be interpreted strictly and that no further adjustment is required in addition to the items specified under section 115JB. The Assessing Officer has no power to tinker book results by any adjustments other than adjustments provided in explanation to Section 115JB of the Act and addition made by the AO does not fall within any ambit of adjustments. The impugned action of the Ld. AO to re-characterize the fair valuation as revaluation, is contrary to the provisions of section 115JB and also contrary to the law enshrined by the Hon’ble Supreme Court in the case of Apollo Tyres Ltd [255 ITR 273]. The Hon'ble Supreme Court in Apollo Tyres Ltd (supra) has categorically stated that where the accounts are prepared in accordance with Companies Act and certified by the Auditor, then the assessing officer should not go beyond the net profit, except to the extent specifically provided under section 115JB of the Act observing as follows: “...the assessing Officer while computing the income under Section 115-J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J." I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 51 15.8. Thus, in light of above decision of the Hon’ble Supreme Court, it is held that the assessing officer does not have a power to tinker with the financial statements prepared in accordance with the provisions of the Companies Act and certified by the statutory auditor. The action of the Ld. AO in the present case is therefore contrary to the provisions of the law and therefore the adjustment made by the Ld AO is hereby quashed. 16. It is relevant to place on record that the Institute of Chartered Accountants of India (ICAI) had come out with a Compendium of Accounting Standards, wherein they had specifically covered the impugned scenario and clarified that the accounting treatment prescribed by the High Court/ITAT shall have legal force. Further, as pointed out by the Ld. Sr Counsel that the assets received under restructuring are allowed to be recorded at fair value under various Accounting Standard namely AS-14 and AS-10 and it is a fundamental requirement that the accounts must present true and fair view. To re-iterate Paragraph 12 of AS-14, which is to be mandatorily followed by the assessee company, which permits the Transferee Company to record the assets and liabilities of the amalgamating companies, acquired under the scheme of amalgamation, at Fair Values as on the date of amalgamation. Therefore, recording of the assets received on spinoff date at fair value is also in line with the accounting framework. Furthermore, the difference was the difference between the fair market value of assets and liabilities taken over as per the book values, which has resulted in 'capital reserve' and been recorded in the books of the Assessee. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 52 16.1. Further, as we examine the issue it is also imperative to consider the relevant provisions of section 115JB pursuant to which the Ld. Assessing Officer has made an adjustment: “Explanation 1.—For the purposes of this section, "book profit" means the profit as shown in the statement of profit and loss for the relevant previous year prepared under sub-section (2), as increased by— ... (g) the amount of depreciation, ... if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss, and as reduced by,— ... (iia) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); ...” Section 115JB has laid down specific approach for computation of Book Profit. The book profit is to be computed by making adjustment to the net profit as per statement of profit and loss account of items as specifically provided for. 16.2. It is observed that as seen from above, clause (iia) to Explanation 1 to section 115 JB(1) provides for reduction from the book profit of the amount of depreciation debited to the statement of profit and loss, excluding the amount of depreciation on account of revaluation of assets. Therefore, the moot question for consideration is that Whether the assets recorded by the Assessee Company at Fair Value is in accordance with the Scheme approved by the High Court could be termed as revaluation ? Undisputedly, upon transfer, the assessee company I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 53 was required to record the assets for the first time in its books of account. Pursuant to the receipt of intangible assets by the assessee company by virtue of the scheme of arrangement, the assessee company has recognized the intangible assets so received for the first time in its books of accounts at their respective Fair Values to reflect the true position of the assets and liabilities as on 31.03.2012 and such treatment is as per scheme approved by Hon'ble High Court as stated supra. 16.3. Therefore in our considered opinion, in no way, this can be considered similar to the revaluation. The recording of intangibles at Fair Value in the books of accounts by the assessee company is part of the process of initial recognition of the assets and not revaluation of existing assets held by it. The LD Sr. Counsel has correctly referred to dictionary meaning of revaluation of assets which means that ‘assessing the value of something again’ which is not the case of the assessee. We are in absolute agreement with the principle that for revaluation, there must be an existing ownership in first place. It is a fundamental principle that revaluation requires an existing value that is sought to be revalued. In the case on hand, there was no previous ownership of the intangible assets with the assessee company, instead these assets were transferred to and acquired by the assessee company as a consequence to the Scheme of Arrangement approved by the Hon'ble High Court of Gujarat. The recording of these assets in the books of the assessee company at Fair Value is in accordance with the generally accepted accounting principles and cannot be treated as revaluation of assets. In absence of any I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 54 revaluation of assets carried out by the assessee company, there should not be any adjustment to the computation of the book profit u/s.115JB as erroneously considered by the Assessing Officer and confirmed by the Ld CIT[A]. 16.4. Further, the issue under consideration is also covered by the order of the ITAT, Delhi in case of Hespera Realty (P.) Ltd v. DCIT reported in [2020] 121 taxmann.com 80 (Delhi-Trib.). In the case before the Tribunal the assessee company had recorded assets and investments received on amalgamation at fair value, however the AO treated it to be in the nature of the revaluation and adjustment was made to book profit under clause (j) of Explanation 1 to section 115JB of the Act on sale thereof. The co-ordinate bench quashed the adjustments made by the assessee by making following significant observations: "47. We find that the Assessing Officer failed to appreciate that a "Revaluation Reserve" is created when an enterprise revalues its own assets, already acquired and recorded in its books at certain values. In other words, when an entity makes reinstatement of the book value of its existing assets, it amounts to revaluation of assets. In the instant case, the assessee has not revalued its existing asset but has only recorded the fair values of various assets and liabilities "acquired" by the assessee from the transferor/ "amalgamating companies" pursuant to the scheme of amalgamation as its "cost of acquisition" in accordance with the terms of the court- approved scheme of amalgamation and the provisions of AS14.” 16.5. We note that the intangible assets are acquired and owned by the assessee company pursuant to the approved Scheme. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 55 Furthermore, we note here that there is perpetual and irrevocable transfer of the intangible assets such as Trade Marks to the assessee company. The Bench had called for evidences showing transfer documents of Trade Marks from SPIL to the assessee company by the virtue of the spin off approved by Hon’ble HCs. The ld. Sr. Counsel of the assessee placed all these documents [at pages 7 to 65 of the Paper Book] during course of hearing which have been perused by us. In light of this fact, we are unable to agree to the contention of the Ld. AO that there was no transfer of ownership of the assets to the assessee company. 16.6. Lastly, we observe that the assets have been acquired and recorded at fair value in A.Y. 2012-13 and the same has been accepted by the Ld. AO by way of order of scrutiny assessment order passed under section 143(3) of the Act dated 19-01-2015. Once the recording of the intangible assets at fair value have been accepted and not questioned in the relevant year being the initial year of recording i.e. A.Y. 2012-13 in the instant case, it is not open to the revenue authorities to question the same in succeeding years. 16.7. In view of the above, we set aside the findings of the lower authorities and direct the AO to delete the adjustment made by him to the book profit under section 115JB of the Act. Hence, the ground of the assessee company is allowed. 17. The assessee has filed Additional Grounds of Appeal vide letter dated 26 th April, 2019 as follows: I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 56 Ground No. 8: Non-consideration of refund of central excise duty as capital receipt under normal provisions: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have treated the central excise duty refund granted pursuant to the industrial policy of the State Government as a capital receipt not taxable under the Act. Ground No. 9: Non-taxability of refund of central excise duty under MAT provisions: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have appreciated that if central excise duty refund is not taxable under normal provisions, the same ought not to be taxed under the MAT provisions.” 17.1. During the course of hearing, Ld. Sr. Counsel appearing on behalf of assessee argued that Ld. CIT(A) has granted relief on excise duty refund while dealing with grounds related to deduction under Section 80-IB/80-IE. However, Ld.CIT(A) has not adjudicated the alternate ground of appeal wherein assessee has claimed that excise duty refund is a capital receipt and not liable for tax in view of decision of Hon'ble Supreme Court in the case of Shree Balaji Alloys -Vs- CIT reported in 333 ITR 335. The Ld. Sr. Counsel has contended that additional claim being legal claim needs to be considered in view of decision of Hon'ble Supreme Court in the case of National Thermal Power Corporation 229 ITR 383 and Hon'ble Gujarat High Court in the case of Mitesh Impex 46 taxman.com 30. On the other hand, Ld. CIT-DR has contended that additional claim should not be allowed, as same was not raised in appeal filed by the Assessee. 17.2. We have heard the rival contentions and perused the records available on record. So far as admission of additional I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 57 grounds of appeal are concerned, it is observed that assessee has already taken alternate plea before CIT (Appeals) on this issue. Both the grounds of appeal are legal grounds and therefore no bar in admitting such legal grounds as held by the Hon'ble Supreme Court in NTPC case and Hon'ble Gujarat High Court in the case of Mitesh Impex [cited supra]. Thus, additional grounds of appeal raised by assessee are admitted and adjudicated herein below. 18. So far as Additional Grounds of Appeal being excise duty refund is capital receipt, it is observed that assessee company has two units located at Jammu and Sikkim which are eligible for excise duty incentive as per New Industrial Policy for the States of Jammu & Kashmir and Sikkim. The entire controversy as to whether such receipts are capital receipts is considered by Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys - Vs- CIT 333 ITR 335, headnote of the judgement which reads as under: “Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Whether amounts of excise refund and interest subsidy received by industrial units in pursuance of incentives announced in terms of new industrial policy for accelerated industrial development in State of Jammu and Kashmir for creation of such industrial atmosphere and environment which would provide additional regular sources of employment to unemployed in State, were, in fact, in nature of creation of new assets of industrial atmosphere and environment, having potential of employment generation to achieve a social object and such incentives would be capital receipts in hands of such industrial units - Held, yes 18.1. It is brought to our notice that the Revenue’s appeal against the above judgement was also dismissed by the Hon'ble Supreme Court as reported in [2017] 80 taxmann.com 239. Further the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 58 Hon'ble Gujarat High court in the case of CIT Vs Tripti Menthol Industries [2013] 35 taxmann.com 515 has followed above judgements and held that Excise duty refund is capital receipt. Similar issue was also considered by Co-ordinate Bench of Ahmedabad ITAT in the case of DCIT -Vs- Hitachi Home & Life Solution (India) Ltd 2019] 107 taxmann.com 551 wherein following above decision, Hon'ble ITAT has held that excise duty is capital receipt and application under Rule 27 of ITAT Rules filed by assessee was allowed. Respectfully following the same, refund of excise duty is held as capital receipt. Hence this Addl. Grounds of Appeal no.8 raised by the assessee is allowed. 18.2. So far as next Additional Ground is concerned, for excluding excise duty refund receipt while computing book profit u/s.115JB, we have for the detailed reasons set out in the previous paragraph held that refund of central excise duty is a capital receipt in nature, this ground of appeal relating to non-taxability of such refund under the book profit u/s 115JB of the Act is allowed consequently. Hence, this Additional Ground No.9 raised by the assessee is allowed. 19. In result, the appeal filed by the assessee ITA No. 1464/Ahd/2018 is partly allowed. 20. ITA Nos: 1521/Ahd/2018 relating to the Assessment Year 2013-14 the Grounds of Appeal raised by the Revenue reads as under: I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 59 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee and in not confirming the additions made by the AO on these issues. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs.600,15,55,635/- in respect of Sikkim Unit without appreciating the facts and reasons mentioned by the AO in the assessment order. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs.600,15,55,635/- in respect of Sikkim Unit, without appreciating the facts and reasons mentioned by the AO in the assessment order of erstwhile firm Sun Pharma Sikkim (SPS), which after its conversion into a Part IX company, has amalgamated with the assessee company. 2.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs.600,15,55,635/- in respect of Sikkim Unit, without appreciating the fact that erstwhile Sun Pharma Sikkim was formed by the splitting up and reconstruction of the existing business of Sun Pharmaceutical Industries (SPI), and the condition that used machinery is less than 20% of the stipulated limit, has not been fulfilled by the assessee. 2.4 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that the claim of the appellant in respect of deduction u/s. 80IE is allowable without appreciating that in the absence of proper details and bills, it could not be ascertained as to whether plant and machinery were new and not used earlier, and without appreciating that plant and machinery transferred by Sun Pharmaceutical Industries to Sun Pharma Sikkim was used by Sun Pharmaceutical Industries prior to put to use by Sun Pharma Sikkim, and hence such plant and machinery could not be regarded as new plant and machinery. 2.5 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that the claim of deduction u/s. 80IE in respect of Sikkim Unit, is allowable without appreciating that mere submission of journal entries generated in computer cannot be treated as an authentic document for having purchased plant and machinery and accordingly the A.O. had clearly established that Sun Pharma Sikkim was constituted by reconstruction of existing business of Sun Pharmaceutical Industries. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 60 2.6 On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of deduction u/s. 80IE is allowable without appreciating that the assessee could not substantiate its claim with verifiable and reliable documents, and failed in establishing that it had satisfied all the conditions laid down in section 80IE. and the A.O. had correctly disallowed deduction u/s 80IE of Rs.600,15,55,635/- 2.7 On the facts and circumstances of the case and in law, the Ld. CIT. (A) erred in holding that the claim of deduction u/s. 80IE is allowable without appreciating the A.O's finding on the issue of period of use, and depreciation of plant and machinery used by Sun Pharma Industries & Sun Pharma Sikkim. 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80 IB/80 IE in respect of receipt of interest of Rs.15,52.03,577/- on delayed payments on sales, without appreciating the facts and reasons mentioned by the AO in the assessment order. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the assessee's ground on disallowance of deduction u/s 80IB/80IE in respect of receipt of interest on delayed payments on sales without appreciating the fact that the interest was not derived from manufacturing activity and deduction u/s 80IB/80IE was rightly disallowed by the AO. 4.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction u/s 80IB(13)/ 80IE(6) r.w.s. 80IA(10) on apportionment of research and development expenses of Rs.1,69,05,303/- incurred by Sun Pharma ceutical Industries Ltd. (SPIL) without appreciating the facts and reasons mentioned by the AO in the assessment order. 4.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.w.s. 80IA(10) on apportionment of research and development expenses of Rs.1,69,05,303/- incurred by Sun Pharma ceutical Industries Ltd. (SPIL) without appreciating the fact that expenditure related to R&D was debited only in the books of SPIL, but no allocation was made to eligible units of assessee company, as revealed during the proceedings of survey action u/s 133A, and the working of allocation of R&D activity on the basis of turnover in the ratio of 3:1 is justifiable and reasonable. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 61 4.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 801B(13)/80IE(6) r.w.s. 80IA(10) in respect of research and development expenses without appreciating that R & D work requires specialised skill and knowledge, and consequently payment towards R & D activity cannot be termed as remuneration but would be termed as professional payment 5.1 On the facts and circumstances of the case and in law, the Ld CIT. (A) erred in delisting the disallowance u/s 37(1) in respect of selling and distribution expenses of Rs.111,49,00,000/- incurred by SPLL. before amalgamation of SPS and SPI without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the assessee had failed to demonstrate that the expenditure was wholly and exclusively for the purpose of business in terms of section 37(1) 5.2 On the facts and circumstances of the case and in law, the Ld. CIT. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses of Rs.111,49,00,000/- incurred by SPLL on behalf of erstwhile SPS and SPI before amalgamation, in which assessee was a partner, without appreciating the fact that all the sales and distribution expenses, including those pertaining to erstwhile SPT and SPS, were debited to SPIL and no allocation of these expenses was made to SPT and SPS as has been revealed during the proceedings of survey action u/s. 133A. 5.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses without appreciating that this expenditure cannot be considered as incurred for protecting assessee's interest as partner in the partnership firm SPI and SPS, and it would even then not be allowable expenditure u/s 37(1). This is without prejudice to the disallowance made u/s 14A. 5.4 Without prejudice to the above, on the facts and circumstances of the case and in law the Ld. C.I.T. (A) erred in restricting the disallowance u/s 14A and in not directing computation of the disallowance in terms of all the three limbs of Rule 8D. 6.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of Rs.6,65,79,145/- in respect of conference fees and sponsorship under the head gift and I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 62 freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order. 6.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of Rs.6,65,79,145/- in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners. 7.1 On the facts and circumstances of the case and in law, the Ld. C.IT. (A) erred in deleting the disallowance of Rs.16,55,00,000/- made on account of depreciation of solar plant without appreciating the facts and reasons mentioned by the AO in the assessment order. 7.2 On the facts and circumstances of the case and in law, the Ld. C.LT. (A) erred in deleting the disallowance made on account of depreciation of solar power plant without appreciating that the assessee failed to provide evidence for receipt of assets and its handing over to the lessee before the end of the Financial Year. 7.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance made on account of depreciation of solar power plant on the basis of decision in another case, without appreciating the facts in this case, and without appreciating that the assessee had failed to controvert the findings of the AO, and failed to substantiate its claim. 8.1 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs.81,63,728/- to Book Profit u/s, 115JB on the issue of disallowance u/s 14A. without appreciating the facts and reasons mentioned by the AO in the assessment order. 8.2 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs.81,63,728/- to Book Profit u/s. 115JB without appreciating the fact that the said amount was disallowed u/s. 14A and hence was required to be added to the book profit as per clause (f) to Explanation 1 of section 115JB(2). 21. The Ground No.1 is General in nature, which does not require any adjudication and hence dismissed. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 63 22. Ground No. 2 of the Revenue appeal relates to disallowance of deduction u/s 80IE in respect to Sikkim Unit. The AO at para 6.3.2 has after following the Assessment Order of AY 2010-11 in the case of erstwhile firm M/s Sun Pharma Sikkim which now stands merged with the assessee, has disallowed the deduction u/s. 80IE claimed by the assessee in respect of Sikkim unit mainly on the ground that such unit is formed by splitting up and reconstructing existing business and Assessee has failed to submit that it has used less than 20% of old plant of total plant and machinery installed. Aggrieved by the said order, the assessee filed an appeal before CIT(A), whereby the CIT(A) deleted the addition by following the order of his predecessor CIT(A) in the case of erstwhile firm being M/s Sun Pharma Sikkim for AY 2010-11 which has been subsequently followed for AY 2011-12 and AY 2012-13. Aggrieved by the order of CIT(A), department is in appeal before us. 22.1. We have heard the rival contentions and perused the materials available on record. The Ld. CIT DR mainly relied upon the findings of AO in the Assessment Order, whereas the Ld. Senior Counsel has relied upon the order of CIT(A) as well as the decision of Co-ordinate Bench for AY 2010-11 to 2012-13. The brief facts of the case are that one of the group concerns of the Sun Pharma Group, M/s. Sun Pharma Industries was in the process of setting up a new industrial undertaking located at Sikkim. The firm Sun Pharma Industries agreed to assign all assets and liabilities on ‘as is where is’ basis together with all capital work in progress. In pursuance thereof, the said new I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 64 undertaking was acquired by Sun Pharma Sikkim (SPS) on 05.03.2009 as a ‘going concern’ basis. The claim of deduction u/s 80IE was made for the first time by SPS in AY 2010-11. In the present case for the year under consideration the AO has solely relied upon the findings of the Assessment Order for AY 2010-11 in the case of SPS. However, such order for AY 2010-11 was not confirmed by the higher authorities. It is observed that the Co- ordinate Bench in the case of erstwhile firm SPS for AY 2010-11 (subsequently followed in 2011-12 and 2012-13) has allowed such deduction by holding as under. The relevant finding of the Co- ordinate Bench for AY 2012-13 reads as under: “... 8. We have heard the rival contention of both the parties and perused the materials available on record. At the outset, we find that issue on hand is covered by the order of the coordinate bench of this tribunal in the own case of the assessee for AY 2010-11 in ITA Nos. 3541/Mum/2017, where the bench vide order dated 16th May 2019 held as under: 18. Before adverting to the specific facts, we deem it appropriate to keep in mind that the assessee has moved an application under rule 46A of the Income Tax Rules, 1962 for permission to adduce additional evidence. In such application, it was contended by the assessee that the AO has issued a questionnaire on 12.11.2012 directing the assessee to file details on 29 counts. He directed the assessee to submit details of plant & machinery as on 16.1.2009 as well as on 31.3.2010 along with relevant bills chronologically arranged and grouped as appearing in accounts. The assessment order has been passed on 19.3.2013. Since it was the first year of the firm, the bills were kept at the factory at Gangtok (Sikkim) and staff was not well conversant with the assessment proceedings. Due to this limitation, it took more time to get bills from them. Hence, the assessee could not submit complete details in a short span of time, and therefore, sought to submit complete details. The ld.CIT(A) called for a I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 65 remand report from the AO on the admission of the additional evidences, and thereafter putting reliance upon the judgment of Hon’ble Bombay High Court in the case of Smt.Prabhavati Shah, 231 ITR 1 (Bom) allowed such application. She took the evidence sought to be placed on record by way of additional evidence. The ld.CIT(A) thereafter called for a remand report from the AO on such evidence and made analysis in order to determine whether the existing plant & machinery exceeds 20% of the old machinery in the total value of the plant & machinery. In the grounds of appeal, Revenue has nowhere raised any ground challenging permission for admission of additional evidence under Rule 46A. In order to habour a belief that the assessee-firm was formed by splitting up and reconstruction of existing business of SPI, the ld.AO has narrated first circumstances that the application for grant of licence to manufacture or for sale or for distribution of drugs bear the date of 21.2.2007; whereas as per partnership deed, the firm has come into existence on 15.1.2009. The AO assumed that unit was functioning from earlier time as a unit of SPI Dadra and Jammu. By this plea, it was contended by the assessee that the said date is taken on account of typographical error and drawing attention to the fact that both the cover letter and form no.24 to the application clearly mentioned the correct date of 21.2.009. The ld.CIT(A) verified this fact and accepted that licence was taken on 21.2.2009 and not 21.2.2007 as inferred by the AO. Thus, on re-appreciation of this fact, we are of the view that the ld.AO has taken wrong facts which goaded him to a wrong conclusion. This circumstance cannot be used as a corroborative factor for harbouring a belief that the assessee-firm was constituted after splitting up and reconstruction of existing business. 19. Next reason assigned by the AO in this regard is that Sun Pharma Sikkim was initially being set up as a unit of SPI. When SPI was denied deduction under section 80IA, Sikkim plant was ready for commercial production. The assessee firm was created on 15.1.2009. It booked cost through debit note on 5.3.2009 and journal entry. According to the AO, transfer of assets was just 15 days prior to the issue of provisional licence to manufacture on 20.3.2009 and 46 days I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 66 prior to the commercial production which created a suspicion about establishment of a new undertaking at Sikkim. The AO thereafter made reference to the production and sales of Sun Pharma prior to splitting up and reconstruction and after such establishment of assessee-firm at Sikkim. On these circumstances, he harboured a belief that the assessee-firm has been established by splitting up and reconstruction of existing business which is a violation of sub-section (3) of section 80IE of the Act. On appeal, the ld.CIT(A) has re- appreciated this aspect and it was contended before the ld.CIT(A) that group was seeking its consolidated shares in the US market and to that end, it was required to secure US FDI approval which mean that unit(s) earmarked for production of export products could not be used for the purpose of domestic manufacture also. The assessee has further submitted that process of compliance with US FDI regulation is time consuming and spanned over 18 to 25 months. It demonstrated these facts before the ld.CIT(A) which have been noted on page no.10 as under: Dadra Unit: • Date of application : May, 2008 • Date of acceptance (EOU authority): July, 2008 • Date of acceptance (US FDA authority): July, 2008 various compliances : during July 2008 to December 2009 • Date of actual export/s : January, 2010 and onwards Jammu Unit: • Date of application submitted to NSEZ; April 2009 • Date of US FDA application: April 2009 • Letter of Permission issued by the Development Commissioner NSEZ: June 2010 • Issue of license by Central Excise, Jammu: September 2010 • Commencement of production in EOU: October 2010 20. On strength of the above details, it contended that US FDI approval to Jammu unit was ultimately abandoned as, such approval was denied to other applicants. It was further submitted that production of medicine at the Jammu unit was suffered loss due to fire and accident, besides, due to general disturbances in the region of Jammu. On I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 67 analysis of the above details, the ld.CIT(A) did not concur with the view of the AO, and observed that decline in production in these units was on account of business strategy adopted by the group in Jammu and productivity was suffered due to disturbances in the area. The ld.CIT(A) thereafter made reference to the circular issued by the CBDT and took into consideration the definition of expression “industrial undertaking” and “initial year” provided in section 80IE(7) of the Act. The discussion made by the ld.CIT(A) in this regard is worth to note. It reads as under: “4.2.6 With regard to the deduction under section 80IE, it is to be noted that the same is available to an 'industrial undertaking' and the deduction is available from the Initial assessment year'. 'Initial assessment year' is defined in section 80IE(7)(i) to mean that the assessment year in which the industrial undertaking begins to manufacture or produce. It is also an equally settled position of law that deduction is qua an undertaking and not qua an assessee. Circular F No.15/5/63- IT(A-l) dated 13.12.1963 of CBDT clarified that a new industrial undertaking taken over by another assessee before the expiry of five year the successor will be entitled to the benefit of unexpired period of five years provided the undertaking is taken over as a running concern. Given that section 84 and 80IE are in parimateria, such deduction is available to an undertaking that acquires a running concern for the unexpired period of deduction. Therefore, once the undertaking remains unaffected or unchanged by subsequent change in the ownership, it cannot be said that the business of the undertaking has been reconstructed. Adverting to the facts of the appellant's case, it can be seen that the appellant had acquired the undertaking from SPI. The only change which took place is the ownership of the undertaking i.e. from SPI to SPS. Everything else remains the same. SPI had also filed an application vide letter dated 5th March 2009 (enclosed in Pages 124 & 125 of the paper book) before the Assistant Commissioner, Central Excise surrendering its Central Excise Registration for the Sikkim unit and stating that ownership of the undertaking has changed and that the capital goods purchased were never installed by SPI. There is also no dispute of the fact that the undertaking was under construction at the time when SPI sold it to the Appellant. Accordingly, the unit I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 68 is transferred before commencement of undertaking. Thus from the facts on record, the irresistible conclusion is that the undertaking at Sikkim is not formed by splitting up or reconstruction and is a new unit and therefore, is entitled to the claim of deduction under section 80-IE of the Act. 21. With the assistance of the ld. representatives, we have gone through the record carefully. The ld. counsel for the assessee submitted that identical aspects have been considered in the case of Jammu unit. He made reference to the ITAT order of Amristar Bench as well as ITAT, Mumbai Bench in the case of Dadra unit. We will be taking note of such details while taking cognizance in CIT(A)’s order in para 4.2.15. The basic question is, whether the AO is able to lay his hand on sufficient material demonstrating the fact that the assessee has been established by splitting up and reconstruction of the existing business of SPI. The circumstances considered by the AO for arriving at a conclusion that it has been formed by splitting up are not sufficient to prove the view point of the AO. A perusal of the CIT(A)’s order would indicate that the ld.CIT(A) has minutely examined each circumstance considered by the AO, and thereafter held that the AO failed to bring any specific instance which can buttress his conclusion. Thus after going through a well reasoned finding of the CIT(A) on this issue, we are of the view that the assessee firm has not been formed by splitting up and reconstruction of existing business of SPI. 22. Next circumstances assigned by the AO is that total value of plant & machinery installed in the industrial undertaking included more than 20% of old plant & machinery. 23. Brief facts with regard to the above are that total amount of plant & machinery of Rs.49.33 crores were stated to be installed by the assessee. According to the AO, the plant & machinery having value of Rs.14.98 crores represented old and second-hands machinery. To counter this plea of the AO, the assessee has filed additional evidences before the ld.CIT(A) which were taken on record and remand report was called for. These details have been noticed by the ld.CIT(A) in para 4.2.8. Thereafter, the ld.CIT(A) took into consideration reconciled statement of plant & machinery while taking note of I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 69 written submissions filed by the assessee. After a detailed examination, the ld.CIT(A) has held that the assessee has not used old plant & machinery exceeding 20%. The discussion made by the CIT(A) is worth to note. It reads as under: “4.2.10 The contentions of the appellant have been duly considered along with the findings AO. On perusal of the impugned order it is seen that while the AO, at the time of assessment noted that the appellant had furnished incomplete details of the addresses of suppliers to prevent verification, no such exercise was undertaken during remand proceedings when the appellant furnished the bills and vouchers for fresh verification. Test-check of the bills produced during these proceedings shows that the appellant's contention is borne out as follows: 4.2.11 After considering the submissions of the appellant and the observations of the AO in the remand report, I find that on the issue of duplicate bills the AO has not carried out any independent enquiry to establish that such bills pertained to machinery that had already been put to use prior to its installation in the appellant's unit. In my considered opinion, the mere fact that a particular piece of plant or machinery is supported by a duplicate bill, by itself does not prove that the said item is second hand or used. The appellant's contention that many a time the original bills are retained by the State Government Check Post authorities etc. is not without weight. The bills purchased in the prior period are seen to be pertaining to the infra structural part of the new unit and nothing has been brought on record to show that such installation was utilized prior to the commencement of commercial production by the appellant, It is also seen that in most cases where the bills are duplicate or photocopies, the appellant has made other purchases from the same parties also for which original bills are available. The availability of these original bills from the same vendors indicates that the these parties were regular entities and that transactions with them were not isolated purchases. Further there is nothing to establish that the machinery evidenced by duplicate/xerox bills was second hand, Also, in relation to the bills lost due to fire at Sikkim, it is seen that the appellant has supported the explanation with the press I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 70 clippings and FIR. The ledger accounts of the parties from whom the said assets were made interalia indicate receipt of goods through valid bills for which payments are made by cheques. No enquiry was undertaken by the AO from these suppliers. As observed earlier, to my mind, simply the fact of supporting evidence existing In the form of duplicate bills, cannot lead to the conclusion that machinery was proven as old/used. In view of these facts, it cannot be concluded that the AO's computation of the value of machinery held to be old/second hand/used is based on fact. For these reasons, I find that it is not established that proportion of old machinery in Sikkim unit exceeded the stipulation of 20% as required by the Act and so the claim of the appellant cannot be on this ground. 4.2.12 The appellant has also given detailed submissions relating to the observations made by the AO in the assessment order for the succeeding year as regards the inferences drawn from the impounded papers. In the said order, the AO has noted that a 'final bill' from M/s Uksoms Engineering impounded during the survey proceedings indicates that the building in question was completed as on 31/02/2007 and therefore it can be concluded that SPI was carrying out business from the said premises from F.Y. 2007-08. In this regard, it has been submitted by the appellant that the bill in question is only for the completion of the outward structure housing the plant at Sikkim and does not in any way indicate the that commercial production had started. It is further stated that in the pharmaceutical industry, the initial phase of setting up of the plant involves considerable civil work including the installation of the Air Handling Unit (AHU) and that commercial production requires many other types of plant and machinery. On perusal of a copy of the said bill it is seen that same is clearly relating to civil construction work inasmuch as it details work relating to excavation, filling, steel reinforcement, masonry, plaster and water-proofing work. In its submissions the appellant has continuously been stating that work relating to the Sikkim unit was initially undertaken by SPI and that it was only at a later stage that the appellant firm was brought into existence and that the plant and machinery etc. was duly assigned to the appellant firm. That being the case, civil work would have certainly begun I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 71 much prior to 2009 and the fact that M/s Yuksom Engineering Works has Issued the final bill dated 31/03/2007 can only be taken as proof for completion of the works Indicated therein and not as evidence to show commencement of commercial production as the mere existence of an outside structure cannot by itself be taken to indicate that commercial work was going on inside it. 4.2.12 The AO has further observed that the commencement certificate issued by the Dept. of Commerce & Industries, Govt. of Sikkim was issued on 14/12/2009 and from this fact inferred that the genuineness of the certificate was doubtful since while it gave the issue of date of commencement of production as 20/04/2009, it was issued 7 months later. In this regard the appellant has stated that the impounded certificate is issued by the appropriate State Govt. department and is signed by the Asst. Director of the said Apartment and is to be accepted in total, In these proceedings it has been emphasized that the date of commercial production given in the said certificate is confirmed by other records also. A perusal of the copy of the said certificate does not indicate any overwriting etc, that may be cause for any suspicion. The office address and telephone numbers of the issuing authority are clearly mentioned on the document but other than express doubt, the AO has not made any independent enquiry to bring on record any evidence to establish that the date of commencement mentioned in the said certificate was incorrect. Thus, the fact that the certificate itself is issued at a later date cannot be considered evidence of fabrication of date of commencement of commercial production particularly when such date of commencement is supported by other documents also. 4.2.13 The third aspect highlighted in A.Y. 2011-12 by the AO as giving rise to doubt, is that key components of plant and machinery including a clit mill, blister pack machine, fluid bed dryer and blender were found to be operational on dates after 20/04/2009 i.e. after the declared date of commercial production. In this regard the appellant has stated that the machines installed after 20/04/2009 were in addition to similar plant and machinery already installed and in use and therefore production could take place even before the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 72 additional machineries were installed during the period subsequent to April 2009. A perusal of the copies of papers relating to capitalisation of fixed assets impounded during survey show that the fluid bed dryer, clit mill, blister pack machine, blender, dissolution tester etc, were already installed as on 20/04/2009. Thus, in view of the fact that machinery required for these functions was already installed as on date of commencement of commercial production, it cannot be held that simply because additional units of similar machinery were installed subsequently, the appellant cannot have begun commercial production on the said date. 4.2.14 The AO has also drawn support from an impounded document issued by the Commercial Tax Division, Sikkim wherein it is mentioned that environmental liability for 2.4 crores is due from Sun Pharma Sikkim for the period October 2006 to March 2011. In this regard, the appellant has stated that the said notice was issued taking into account date of beginning of factory construction and that the appellant has only paid a fraction of the demand. From a perusal of the said document I find that it is merely a show cause which has been duly replied to by the appellant and that the document itself does reflect any adverse inference drawn by the Commercial Tax Division, Sikkim. 4.2.15 The AO has further sought to draw inference from the denial of deduction u/s 80IB(4) in the case of the sister concern Sun Pharma Industries Dadra Unit and Jammu Unit for A.Y. 2004-05 and 2005-06 to support his conclusions in the case of the appellant firm, stating that while the ITAT has decided the issue, the Department has not accepted the decision and the matter is pending adjudication before the High Court. A perusal of the orders passed by the Hon'ble ITAT in the case of SPI reveals that the Tribunal considered the issues related to disallowance of deduction u/s 80IB to SPI Jammu (on similar footing as in the present case), in detail in the orders passed for A.Y. 2005-06 (dated 11.06.2010 and 07.06.2012) and orders passed subsequently in relation to A.Yrs. 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10 (dated 12/06/2012). The aspect of notional disallowances in respect of selling and distribution expenses etc. was also duly adjudicated upon. Subsequent to the passing of the ITAT orders, the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 73 matter is pending in appeal before the High Court. To my mind the fact that further appeal is pending does not by itself lend greater solidity to the AO's conclusion. 24. The ld.CIT(A) thereafter discussed each judgment in detail which were considered by the AO for construing the meaning of old plant & machinery and how it has to infer that the assessee has used old plant & machinery. Such detailed discussion of the ld.CIT(A) is available from pages 22 to 31. Thereafter, the ld.CIT(A) concluded on this aspect as under: “4.2.18 Therefore on close study of the case laws relied on by the AO, it is seen that the judicial pronouncements actually support the facts of the appellant’s case to show that in the present case, there is no reconstruction or splitting up of an earlier existing business. The appellant's case is also further strengthened by the decisions discussed In Para 4.2.17. above. Thus the inescapable conclusion is that there is no splitting up or reconstruction in the case of the appellant during the year under consideration. The aspect of the old/used machinery less than the stipulated limit of 20% has already been found to be in favour of the appellant in the discussion from para 4.2.7 to para 4.2.15. That being so held, the aspect of notional disallowances made by the AO on account of royalty, selling and distribution expenses etc. is adjudicated upon in the following paragraphs.” 25. During the course of hearing, the ld.DR relied upon the order of the AO; on the other hand, the ld.counsel for the assessee submitted that ld.CIT(A) has considered each and every aspect and also distinguished as to how the judgments put into service by the AO, are not applicable on the facts of the present case. The ld.counsel for the assessee also relied upon the orders of the ITAT passed in the case of its sister concern viz. Jammu Unit and Dadra Unit. Appeals of these units have been decided by the ITAT Amristar as well as Mumbai Bench. These orders have been placed on record i.e. ITA No.184/ASR/2009 Asstt.Year 2005-06. 26. We have duly considered rival contentions and gone through the details. According to the AO, bills having value of Rs.6.88 crores with regard to certain additions to plant I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 74 & machinery were not furnished. Therefore, he presumed such machinery as second-hand machinery. Against his presumption, the assessee has filed an application for permission to adduce additional evidence. It was contended therein that questionnaire issued on 12.11.2012; bills were lying at factory premises in Sikkim; staff was not well conversant with income tax proceedings; they were lying in boxes; hence in a short span of time, complete details could not be submitted. Thereafter, the assessee produced complete details. The remand report was called for by the ld.CIT(A) on those details. In the remand proceedings, each bill was analysed and objection of the AO were noted. The bills have been discussed by the CIT(A) and the details are available in tabular form extracted (supra). We also have perused such details and are of the view that the defects are not substantive. They have only shown that some of the bills are photo- copies, LRs are not available etc. The ld.CIT(A) while considering these defects observed that the AO should have made an inquiry from the original suppliers and when such machineries were supplied. He did not make any inquiry rather presumed certain facts that machineries are old one. In the finding recorded by the first appellate authority extracted (supra) reveals a detailed analysis and a finding of fact that total machinery having value of Rs.14.98 crore considered by the AO as representing old was not sustainable. Therefore, after going through the detailed analysis made by the ld.CIT(A) we are of the view that Revenue failed to demonstrate that machineries exceeding 20% of the total value of the plant & machinery were old machinery. Therefore, considering the facts on this fold of grievance of the Revenue, we do not find any error in the order of the ld.CIT(A). Assessee is entitled for deduction under section 80IE of the Act. 8.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, the learned DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 75 case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed.’ 22.2. Since the eligibility of deduction was upheld in the first year of claim being AY 2010-11, the same cannot disputed in the subsequent year of claim on the same ground of ineligibility. More particularly when the AO himself has observed that there is no change in facts and circumstances of the case during the year under consideration. Before us, no material has been brought on record by the Revenue to demonstrate the above decision of Co- ordinate bench in earlier year has been reversed or set aside by the higher authorities. Thus, respectfully following the order, we find no infirmity in the findings of Ld. CIT(A). This ground no.2 raised by the revenue is hereby dismissed. 23. Ground No. 3 of the Department’s appeal relates to disallowance of deduction u/s 80-IB/80-IE in respect of interest on delayed payments of Rs.15,57,61,178/- from M/s Aditya Medisales Ltd., Baroda, and others. The AO at para 6.4.7 of the assessment order has observed that interest income cannot be said to have been 'derived from' the Industrial undertaking as held by the Hon'ble Supreme Court. Aggrieved by the Assessment Order, the assessee filed an appeal before Ld. CIT(A), whereby the Ld. CIT((A) has allowed such deduction u/s 80IB/80IE in respect of interest on delayed payments by following the decision of Hon'ble Jurisdictional High Court as well as the decision of ITAT Amritsar in the case of erstwhile firm M/s. Sun Pharma Industries I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 76 (which is also merged with the assessee company). Aggrieved by the order of CIT(A), the revenue is in appeal before us. 23.1. We have heard the rival contentions and carefully perused the materials available on record. The Ld. CIT DR Sri Aarsi Prasad has mainly relied upon the findings of the AO in the Assessment Order, whereas the Ld. Senior Counsel Sri S.N. Soparkar appearing on behalf of the assessee vehemently relied upon the order of CIT(A) as well as ITAT in the case of M/s Sun Pharma Industries, wherein the decision of Hon'ble Jurisdictional High Court is followed. It is undisputed fact that during the year under consideration, the assessee has claimed deduction u/s. 80IB/80IE in respect of interest received from M/s. Aditya Medisales Ltd. and others being interest due on overdue payments outstanding as a result of trading liability. Similar issue was decided by the Co- ordinate Bench of ITAT Amritsar in the case of erstwhile firm M/s Sun Pharma Industries (now merged with the assessee company) for AY 2005-06 to 2009-10, which was subsequently followed in AY 2010-11 and 2011-12 wherein following the decision of Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. Vs. CIT (2006) 155 Taxman 330 and decision of Hon'ble Madras High Court in the case of CIT Vs. Rane Ltd. 238 ITR 377 (Mad.) wherein it has been held that interest received by the assessee from its trade debtor towards late payment of sale consideration is not required to be excluded from the profit of industrial undertaking for the purposes of computation of deduction u/s.80IB/80IE as the same is income derived from business of I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 77 industrial undertaking. The relevant finding of the coordinate bench for AY 2011-12 reads as under: “......45. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by the order of the coordinate bench of Mumbai Tribunal in own case of the assessee for AY 2010-11 bearing ITA No. 2465/Mum/2014 where the coordinate bench by following the order of Amritsar Tribunal in own case of the assessee for AY 2005-06 to AY 2009-10 decided the issue in favour of the assessee. The relevant finding of the coordinate bench in ITA No. 2465/Mum2014 reads as under: 23. Ground No IV pertains to adjustment of delayed payments, staff advances and statutory/bank. The issue regarding interest on delayed payments from customers is covered in favour of the assessee. But the issues regarding interest on staff advances and FDRs are covered against the assessee by the orders of the Amritsar Tribunal passed in assessee's own cases pertaining to the financial years 2004- 05, 2006-07, 2007-08, 2008-09 and 2009-10. The relevant paras of the order passed by the Amritsar tribunal are reproduced as under:- "51. As regards ground No .3 of the Revenue, regarding disallowance of deduction under section 80- IB in respect of delayed payments from M/s Aditya Medisales Ltd. Amounting to Rs. 48,20,32,772/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed." "54. As regards ground No 5&6 of the assessee with respect to the interest on FDR amounting to Rs. 3,27,599/- (correct figure Rs. 2,27,599/-) and loan to employees with regard to disallowance of deduction u/s 80-IB, the facts of the issues In hand are identical to the facts decided by the tribunal in assessee's I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 78 own case dated 11.06.210 in ITA No 184(Asr)/2009 for the assessment year 2005-06. Following the same, the ground No 5&6 of the assessee are dismissed." 24. Following the orders of the decisions of the Amritsar Tribunal in the identical issues, we allow the assessee's claim of deduction under section 80-IB of the Act in respect of interest on delayed payments in question and direct the AO to delete the additions. However, we disallow the assessee's claim of deductions in respect of interest on staff advances & statutory/bank deposits.” 45.1 Thus respectfully following the consistent view of Tribunal in the own case of the assessee, we do not find any infirmity in the finding of the learned CIT(A). Hence, the ground of appeal raised by the Revenue is hereby dismissed ’ 23.2. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal, the assessee is entitled to claim deduction u/s. 80IB/80IE in respect of the interest earned on overdue payments being the debts arising from trading liability. Hence ground NO.3 raised by revenue is dismissed. 24. Ground No. 4 of Department’s appeal related to disallowance of deduction u/s 80IB/80IE in respect of R & D expenses incurred by holding company M/s. Sun Pharmaceuticals Industries Ltd. (SPIL) by allocating the same totaling to Rs.1,69,05,303/- to the eligible units in view of provisions of section 80IB(13)/80IE(6) r.w.s. 80IA(10). The AO at para 6.4.6 of his order has observed that I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 79 the assessee company does not have any R&D centre and is available only with the Sun Pharma Industries Limited [SPIL]. Thus, the R&D work is being conducted through SPIL, and the only expenses incurred towards the Research & Development charges of Rs.3.01 Crores has been debited in the profit and loss account. In the earlier years, benefits derived from such Research & Development were primarily used by the manufacturing units of erstwhile partnership firms i.e. by M/s SPI & M/s SPS and accordingly disallowances u/s 80-IB(13) read with section 80- IA(13) and disallowances u/s 80IE(6) R.W. 80IA(10) were being made in the hands of SPI & SPS respectively. Since assessee company is using the formulation/benefits, developed by R & D unit of SPIL as a matter of right, the due amount to be apportioned towards expenses should have been charged by the SPIL, but in order to inflate the profit of 80-IB and 80-IE units, M/s SPIL did not charge the same. Since, it has not allocated the research and development expenses of Rs.3.01 crores to units claiming exemption u/s 80IB/IE of the Act. Accordingly, the R&D expenses of Rs.3.01 crores are being allocated in the ratio of turnover of the respective units claiming exemption u/s 80IB/IE of the Act. Aggrieved by the order of CIT(A), the Revenue is in appeal before us. 24.1 We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we find that issue on hand is covered by the order of the Co-ordinate Bench of ITAT Mumbai and Ahmedabad for AY 2010-11 and AY I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 80 2011-12. The relevant finding of the Co-ordinate Bench for AY 2011-12 reads as under: “.....50.5 On the other hand learned AR before us submitted issue is covered in favour of the assessee by the order of the tribunal in own case of the assessee for A.Y. 2010-11 bearing ITA No. 2465/Ahd/2014 51. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by the order of the co-ordinate bench of Mumbai Tribunal in own case of the assessee for A.Y.2010-11 bearing ITA No.2465/Mum/2014. The relevant finding of the coordinate bench in ITA No. 2465/ Mum/2014 reads as under: “30. Ground No VII of the appeal pertains to adjustment in respect of R&D expenditure incurred by the working partner of the firm. The ld. CIT(A) has allowed the contention of the assessee that no disallowance is called for because clause 7-B of the partnership deed specifically provides for remuneration for technical assistance in the manufacturing activities and R&D facilities were included in the same. The Ld. CIT(A) has further based its findings on the ground that the notional disallowance on account of R&D expenses has been made by the AO on similar lines as have been made in respect of royalty, management fees and selling and distribution expenses and the said pounds were found not tenable by the Tribunal. Following the rationale behind the deletion in respect of royalty, management fees and selling and distribution expenses, by the ITAT Amritsar, we uphold the deletion made by the Ld. CIT(A) and dismiss this ground of appeal of the revenue.” 51.1 Thus, respectfully taking the consistent view of Tribunal in the own case of the assessee, we do not find I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 81 any infirmity in the finding of the learned CIT(A). Hence the ground of appeal raised by the Revenue is hereby dismissed.” Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of the Co-ordinate Bench of the Tribunal in assessee’s own case, deduction u/s 80IB/80IE in respect of R & D expenses for Rs. 1,69,05,303/- is allowed to the assessee. Hence this Ground No.4 raised by Revenue is dismissed. 25. Ground No. 5 of Department’s appeal relate to disallowance of selling and distribution expenses amounting to Rs.111,49,00,000/- While passing the Assessment Order, the Ld AO has observed that selling and distribution network of Sun Pharmaceutical Industries Limited (SPIL), a flagship company of the Group was being used for carrying out business of various concerns including Sun Pharma Industries (SPI) and Sun Pharma Sikkim (SPS). The AO has further observed that in earlier assessment years, selling and distribution expenses incurred by SPIL was allocated in the ratio of turnover of SPIL, SPI and SPS and part of such selling expenses was disallowed while passing the Assessment Order of SPIL. However, with effect from 31 st March 2012, distribution network of SPIL was spun off and hived to assessee company, hence similar selling and distribution expenses were incurred by the assessee company instead of SPIL in year under consideration. The allocation of such expenditure and disallowance of such expenditure would I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 82 consequently result into higher allocation of expenditure in SPI and SPS who are claiming deduction under Section 80-IB/80-IE. Based upon the detailed finding given in Assessment Order passed in the case of Sun Pharmaceutical Industries and Sun Pharma Sikkim for AY 2013-2014 wherein the AO of erstwhile firms had allocated Selling & Distribution expenses in their cases out of expenditure incurred by assessee company, the AO at para 6.4.4 has made disallowance of Rs.111,49,00,000/- under Section 37 of the Act. Aggrieved by the order of AO, the assessee filed an appeal before CIT(A) whereby the Ld. CIT(A) deleted the disallowance by placing reliance upon the decision of the Co-ordinate Bench dated 08.09.2017 vide ITA Nos. 1666 & 1663/Ahd/2016 A.Y. 2009-10 and directed AO to rework disallowance out of selling and distribution expenses under section 37 as directed by Hon'ble ITAT. The relevant part of such order is reproduced herein below: “... 11.2.1. The above order of the CIT(A) has been also followed in A.Y. 2011-12 and 2012-13 by the then CIT(As)-39 & 37, Mumbai, respectively, vide orders dated 24.10.16 & 30.03.17 in the case of M/s. Sun Pharma Sikkim and accordingly disallowance made was deleted. Since the facts are identical in this year also, in view of the orders of CIT(A) in earlier years as also order of ITAT, Amritsar, in the case of SPI, no disallowance out of selling and distribution expenses appears to have been made for reducing the eligible profit u/s 80IB/80IE. In fact, the A.O. has disallowed selling & distribution expenses in the ratio of turnover on the ground that the same were incurred for the purposes of business of firms also and accordingly not allowable u/s 37 to that extent. 11.2.2 As a matter of facts, selling and distribution network of Sun Pharmaceutical Industries Ltd. (SPIL), a flagship company of the group, was being used for carrying out business of various concerns including the SPI and SPS. Accordingly, in earlier years similar disallowance out of selling and distribution expenses incurred by I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 83 SPIL was made in the ratio of turnover of SPIL, SPI and SPS. As already discussed, no consequential adjustment in the cases of SPI/SPS was made for reducing the deduction claim u/s. 80IB/80IE. The disallowance made out of deduction claimed u/s. 80IB/80IE in the cases of firm viz. SPI/SPS has consistently been deleted by the Appellate Authorities. 11.2.3. Undisputedly, w.e.f. 31.03.2012, the distribution network of SPIL as a result of a Scheme of Arrangement approved by the Hon'ble High Court in respect of domestic formulation business, has been spun off and hived to the appellant company being the subsidiary of SPIL. Consequently the selling and distribution expenses have been incurred by the appellant company instead of SPIL during the year under consideration. As already discussed elsewhere, both the firm viz. M/s. SPI and M/s. SPS have also merged through Part-IX companies with the appellant w.e.f. 01.09.2012. The Ld. Authorized Representatives have vehemently argued that the selling and distribution expenses for the period from 01.09.2012 to 31.03.2013 incurred by the appellant company have already been allocated in the ratio of turnover of exempt units of erstwhile SPI/SPS and non-exempt units. On perusal of assessment orders of M/s Sun Pharmaceutical Industries and M/s Sun Pharma Sikkim for A.Y. 2013-14 (period upto 31.08.2012) copies of which are furnished by the Ld A.S., I find that the Assessing Officer in these cases has worked out proportionate selling & distribution expenses in the ratio of turnover and reduced the deduction claimed u/s 80IB by Rs.62.56 Crs & u/s 80IE by Rs.48.93 Crs, respectively. Thus it is clear that the selling & distribution expenses incurred by appellant upto 31.08.2012 allocated to the firms totaling to Rs. 111.49 Crs (Rs. 62.56+48.93Crs) have only been considered by the Assessing Officer for disallowance. 11.2.4. Now coming to the selling and distribution expenses incurred by the appellant company for the period from 01.04.2012 to 31.08.2012. During this period, the erstwhile firms viz. SPI and SPS were enjoying exempt income respectfully u/s. 80IB and 80IE. Keeping in view this aspect of the things, the Assessing Officer in the year under consideration disallowed part of selling and distribution expenses on the ground that the same were not incurred for the purposes of business of the appellant company because the selling and distribution network of the appellant company was also utilized by the above mentioned firms. The I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 84 utilization of selling and distribution network by the other entities of the group has not been disputed by the appellant and rather this factual position was strengthened from the findings emerged during the course of survey conducted u/s. 133A. However, the Ld. Authorized Representative has strongly submitted that the incurring of expenditure in order to protect the interest of majority shareholder (75.5%) in the partnership firm viz. SPI and SPS is an allowable expenditure u/s. 37. This stand has also been upheld by the Hon'ble ITAT, Ahmedabad in the case of SPIL in A.Y. 2004-05 to 2009- 10. The decision of Hon'ble jurisdictional ITAT in A.Y. 2004-05 was also followed in the appellate order dated 31.03.2016 contained in Appeal No. CAB/A-2/368/14-15(A.Y.2009-10) in the case of SPIL by me and accordingly it was held that incurring of expenditure for the purposes of protecting interest in the partnership firms which stands remunerated as share profit, cannot be considered as non- business purposes. Accordingly, respectfully following the binding decision of Hon'ble ITAT, the disallowance made out of selling and distribution expenses in the case of SPIL was deleted. However, since the income arising from the partnership firms to SPIL was exempt from taxation, the expenditure incurred out of selling and distribution expenses for earning such exempt income, was treated as direct expenditure disallowable u/s. 14A r.w.r. 8D. The findings recorded in order dated 31.03.2016 in the case of SPIL (A.Y. 2009-10) on this account are reproduced as under:- ........................................................................... 11.2.5. The above decision in the case of SPIL was agitated by the appellant-SPIL before the Hon'ble ITAT, Ahmedabad which vide order contained in ITA Nos. 1666 & 1663/Ahd/2016 A.Y. 2009- 10, dated 08.09.2017 has held as under: ........................................................................... 11.2.5.1. Since the facts are identical in this case also, selling & distribution expenses since incurred for the purposes of business cannot be disallowed as such. However, from the above mentioned order of Hon'ble jurisdictional ITAT, it is crystal clear that proportionate expenses disallowed out of selling and distribution expenses pertaining to SPI and SPS have been held to be incurred for the purpose of earning exempt income and hence are liable to be disallowed u/s. 14A. Undisputedly, the appellant company has earned exempt income from SPI and SPS totaling to Rs.334.02 crores and claimed the same not chargeable to tax u/s. 10(2A). In view of the above, the Assessing Officer is directed to work out I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 85 disallowance out of selling and distribution expenses under Rule 8D as directed by Hon'ble ITAT. Thus, appellant succeeds partly in respect of Ground No. 8. 25.1. Against the above finding of Ld. CIT(A), the Department has preferred appeal. During the course of appellate proceedings, Ld. Sr. Counsel appearing on behalf of assessee argued that as the matter is covered in favour of Assessee by the decision of Co- ordinate Bench in the case of SPIL as well as SPI and SPS for current year, the issue may be decided in favour of assessee. On the other hand, Ld. Sr. DR has argued that finding of AO should be restored. 26. We have heard the rival contentions of both the parties and perused the materials available on record. The undisputed facts of present ground of appeal are that AO has disallowed part of selling and distribution expenses after allocating such expenditure to SPI and SPS who have claimed deduction u/s 80-IB/80-IE of the Act. The identical issue and allocation of expenditure in the case of SPI and SPS for current assessment year is dealt with by Co-ordinate Bench in ITA No.1467 and 1468/Ahd/2018 wherein it is held as under: “... 24. The next issue raised by the Revenue are that the learned CIT(A) erred in deleting the disallowances of deduction u/s 80IE of the Act made on account of apportionment of selling & distribution expenses, R&D expenses, royalty expenses, managerial fee and remuneration to partner SPIL. 25. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 86 1397/Ahd/2017 for the assessment year 2012-13. Therefore, the findings given in ITA No. 1397/Ahd/2017 shall also be applicable for the year under consideration i.e. AY 2013-14. The ground of appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph nos. 12 to 12.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of appeal filed by the Revenue is hereby dismissed. ..................................................................... 41. The next issue raised by the Revenue vide ground Nos. 4 to 6 of its appeal is that the learned CIT(A) erred in deleting the allocation of notional royalty expenses, managerial fee, selling and distribution expenses to Jammu and Dadra unit by invoking the provision of section 80IB(13) r.w.s. 80IA(10) of the Act. 41.1 At the outset we find that identical allocation of notional royalty fee, managerial fee and selling distribution expenses was made by the AO by invoking the provisions of section 80IB(13) r.w.s. 80IA(10) of the Act to the eligible unit of the assessee being Jammu and Dadra unit by the AO in AY 2010-11 and the issue reached to Mumbai Tribunal in ITA No. 2465/Mum/2014 where the coordinate bench by following the order of the Amritsar tribunal in case of the assessee for A.Y. 2005-06 to 2009-10 decided the issue against the Revenue. The relevant finding of the Mumbai bench for A.Y. 2010-11 reads as under: “18. Ground No II(c)&(d) pertain to deleting adjustments made on account of royalty fees and notional management fees for Jammu and Dadra units. The Amritsar Bench of the ITAT has decided the identical issues in favour of the assessee and against Revenue in assessee's own case for the assessment year 2005-06. The operative part of the order is reproduced as under:- "16.2 Therefore, in view of our decision hereinabove with respect of selling and distribution expenses, the remaining I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 87 disallowance of expenses of royalty (of 8% of the turnover) of Rs. 14,15,34,442/- and management fee (of 1% of the turnover) of Rs.1,76,91805/- are also directed to be deleted, as the same has been notionally considered by the AO which in our view, is incorrect and not justified. Thus, ground No. 5 of the assessee is allowed and ground No. 2 of the Revenue is dismissed. 19. The said decision was followed by the ITAT Amritsar in assessee's own case pertaining to the subsequent assessment years 2006-07, 2007-08, 2008-09 and 2009-10. Following the said order, the ITAT Amritsar, in assessee's own case for the assessment year 2009-10, issued directions to the AO to delete the disallowance in respect of royalty, management fees and selling and distribution expenses. Therefore, we follow the decision of the ITAT Amritsar and dismiss ground No II(c)&(d) of appeal of the Revenue.” 41.2 Thus, respectfully following the consistent view of Amritsar & Mumbai Tribunal in the own case of the assessee for A.Y. 2005-06 to A.Y. 2010-11, we do not find infirmity in the finding of the learned CIT(A). Hence the ground of appeal raised by the Revenue is hereby dismissed. 92. The next issue raised by the Revenue vide ground Nos. 4 to 6 of its appeal are that the learned CIT(A) erred in deleting the allocation of notional royalty expenses, managerial fee, selling and distribution expenses to Jammu and Dadra unit by invoking the provision of section 80IB(13) r.w.s. 80IA(10) of the Act. 93. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 4096/Mum/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 4096/Mum/2016 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph no. 41 to 41.2 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 88 for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 26.1. It is relevant to mention that allocation of such expenditure in the hands of SPI and SPS is already deleted by coordinate bench hence there is no reason to deviate from such order. It is relevant to refer to decision of coordinate bench in the case of SPIL (whose distribution network was spun off and hived to assessee on 31 st March, 2012) in ITA No.1519/Ahd/2018 for AY 2011-12 wherein identical disallowance of expenditure is deleted. The relevant part of such order is reproduced herein below: “.... 73. The next issue raised by the Revenue in ground No. 10 of its appeal is that the learned CIT(A) erred in deleting the disallowances of selling and distribution expenses pertaining to sister concerns i.e. Sun Pharmaceutical Industries and Sun Pharma Sikkim. ..................... 78. On the other hand, the learned AR before us submitted that identical disallowance was also made in AY 2008-09 and 2009-10 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/ 2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assessee. 79. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by order of this tribunal in the own case of the assessee for AY 2007-08 bearing ITA No. 2076 & 2077 /Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under: 91. Aggrieved by this finding of the ld.CIT(A) both assessee and the revenue are in appeal before us. The ld. D.R. strongly stated I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 89 that since the assessee has not shown any income from remuneration from the partnership firm. The assessee was not entitled for the claim of deduction. The ld. D.R. further stated that no bifurcation have been provided by the assessee to show the expenses incurred for the purpose of the business of the partnership firm and for the assessee company. The D.R. concluded by saying that there is no error in the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated the claim and stated that there is no basis for allocating the expenses pro rata. The ld. counsel further stated that the First Appellate Authority further erred in disallowing the expenditure on pro rata basis only on incremental expenses. It is the say of the ld. counsel that the disallowance is unjustifiable. 92. We have carefully perused the orders of the authorities below. We have also given a thoughtful consideration to the rival submissions. There is no denying that the partnership deed has a provision for the payment of remuneration to the whole time working partner by virtue of which the assessee was entitled for the remuneration. There is also no denying that as per the provisions of section 40(b) of the act, the remuneration is payable to a whole time working partner who is an individual and the assessee is a limited company. Therefore the assessee could not have shown this remuneration as part of its computation of income. It is also a fact that the partnership firm has also not debited this remuneration to its Profit and Loss account. However, the assessee company using its network has incurred certain expenditure which according to the revenue authorities are not directly related to earning of income. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee and not for the purposes of earning profit. As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Thus, it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 90 incurred for the purposes of business. Be it assessee’s business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition of Rs. 8,49,79,383/-. 51. Respectfully following the findings of the Co-ordinate Bench (supra), no disallowance should be made u/s. 37 (1) of the Act. 79.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the revenue is hereby dismissed.’ 26.2. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 27. Ground No. 6 of Department’s appeal relates to disallowance of business/conference fee and sponsorship expenses of Rs.6,65,79,145/-. This issue is already adjudicated in Paragraph 9 to 9.2 of this order in assessee’s appeal in ITA NO.1464/Ahd/2018 and disallowance made the Ld AO is confirmed and thereby ground no.6 in Revenue’s appeal is fully allowed. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 91 28. Ground No. 7 of Department’s appeal relates to disallowance of depreciation on Solar Power Generating System at Rs.16,55,00,000/- The AO at para – 8 to 8.5 of the Assessment Order has observed that the Assessee company was unable to prove that the said machinery was in fact received by it in the month of March 2013. Further, the Assessee company was unable to furnish the evidence of receipt of these equipment from M/s Real Gold Developers LLP & evidence of delivering these equipment at the site of M/s Alpha Infraprop Pvt. Ltd (for lease of assets), before the end of the relevant financial year so as to justify its claim of depreciation on the said solar power plant. The AO further observed that lessee has started production of power in September 2013 hence no income was shown during the period under consideration. In the absence of income for which assets were purchased, the concept of put to use is not satisfied, hence the AO disallowed the Assessee’s claim for depreciation on solar power generating system for Rs.16,55,00,000/-. Aggrieved by the said order, the Assessee preferred an appeal before the CIT (Appeals) who has deleted the above addition and observing as follows: “Ground No. 10 pertains to disallowance of depreciation on Solar Power Generating System at Rs. 16,55,00,000/-. This issue has been discussed by the Assessing Officer in paras-8 to 8.5 of the assessment order. During the year, assessee has made addition of Rs.33,10,00,000/- in the fixed assets on account of Solar Plant and claimed the depreciation thereon at the prescribed rates. It is noticed by the Assessing Officer that the Solar Power Generating System being Block No. 9, 11, 12 and 13 having total capacity of 5.81 MW DC located at Survey No. 47/1/1, Tehsil Kukshi, District Dhar, Madhya Pradesh was purchased by the assessee during the year under consideration and the same was leased out to Alpha Infraprop Pvt. Ltd. Accordingly, the assessee has also shown lease rental for I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 92 the month of March, 2013 in the income disclosed. However, since leased assets were not put to use by the lessee during the year under consideration, the Assessing Officer proposed to disallow the depreciation and accordingly issued a show cause notice vide letter dated 08.02.2016. In response to the show cause notice, the assessee submitted a detailed explanation vide letter dated 20.12.2016 which has been reproduced by the Assessing Officer in para-8.3 of the assessment order. Since similar submission is filed in the appellate proceedings, for the sake of brevity, the same is not being reproduced here again. After considering the submission of the assessee, the Assessing Officer disallowed the depreciation claimed on Solar Power Generating System after recording his findings in para-8.4 to 8.5 of the assessment order which are reproduced as under:- .................................................................. 13.1. During the course of appellate proceedings, the appellant has furnished a detailed written submission, summarized form of which is reproduced as under:- ........................................................................... 13.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative including the decisions relied upon by him. Undisputedly, the solar Power Generating System was purchased and leased out by the appellant jointly with other co-owner of the group as detailed below:- In the case of first co-owner i.e. Aditya Medisales Ltd., the CIT(A)-1, Vadodara vide his order dated 12.06.2017 contained in Appeal No. CIT(A)- 1/10004/16-17(A.Y. 2013-14) has decided this issue in the favour of appellant. The findings recorded by the CIT(A)-1, Vadodara in para-8.2 to 8.4.6 of the above mentioned appellate order are reproduced as under:- ........................................................................... 13.2.1. Since the facts are identical in the case of appellant also, I respectfully following the order of CIT(A)-1, Vadodara in the case of Aditya Medisales Ltd. hold that the appellant is entitled to claim the depreciation on the Solar Power Generation Plant owned by it and leased out during the year under consideration for earning lease rentals duly assessed as business income. Accordingly, the Assessing Officer is directed to allow the depreciation to the appellant. Thus, appellant succeeds in respect of Ground No. 10. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 93 28.1. Aggrieved by the order of CIT (Appeals), the Revenue is in appeal before us. During the course of appellate hearing, the Ld CIT DR has relied upon the findings of the AO in the Assessment Order, whereas the ld. Sr. Counsel appearing for the Assessee has relied upon the order of CIT (Appeals) in the Assessee’s own case as well as in the case of first co-owner being Aditya Medisales Limited (supra). The Ld. Sr. Counsel of the Assessee has also referred to order of Hon'ble Ahmedabad ITAT in the case of M/s. Sun Petrochemicals Pvt. Limited and M/s. Unimed Technologies Limited in ITA No. 1636/Ahd/2018 and 1835/Ahd/2018. 29. We have heard the rival contentions and perused the material available on record. The facts as discussed in Assessment Order are that Madhya Pradesh Electricity Regulatory Commission (MPERC) issued a Regulation to promote generation of electricity from renewable sources of energy. Alpha Infrapop Pvt. Limited participated in the bidding process and was allotted Solar Power Project contract and in turn entered into Power Purchase Agreement with MP Power Management Company Limited (MPPMCL). Thereafter Real Gold Developers LLP had imported plant and equipment from international suppliers and they had in turn sold such assets to Assessee on 1 st March, 2013. Thereafter assessee had entered into lease agreement with Alpha Infrapop for above referred asset and had claimed depreciation on such assets. It is apparent from record that Alpha Infrapop Pvt. Limited were carrying out work of various solar blocks and assets relating to such blocks were leased by assessee company along with various other group entities being Aditya Medisales Limited, Sun I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 94 Petrochemicals and Unimed Technologies Limited. The depreciation claimed on such assets in year under consideration was disallowed by Assessing Officer mainly on the ground that assets were not put to use by the lessee before the end of financial year 2012-13. The claim of assessee was allowed by Ld. CIT (Appeals) following the appellate order in the case of Aditya Medisales Limited as referred supra and the order of CIT (Appeals) on this ground is not challenged by the Department before the Tribunal. It is found that identical disallowance made in the case of other two entities being Sun Petrochemicals Pvt. Limited and Unimed Technologies Limited was deleted by coordinate bench in ITA No. 1636/Ahd/2018 and 1835/Ahd/2018, dated 11 th May, 2020. The relevant part of such order is reproduced hereunder: “ ... 2. Revenue has taken two grounds of appeal in each case. It contained five sub-grounds, hence, grounds of appeal in both the cases are not in consonance with Rule 8 of Income Tax (Appellate Tribunal) Rules; they are descriptive and argumentative in nature. In brief, its grievance in both the appeals relates to grant of depreciation on Solar Power Plant (“SPP” for short) by the ld.CIT(A). First of all, we notice that vital points in both the cases are common. Therefore, for the facility of reference, we take up the facts from Unimed Technologies Ltd. (“UTL” for short), as this appeal has been extensively argued by ld. representatives. 3. Brief facts of the case are that Unimed Technologies Ltd. has filed its return of income electronically on 18.9.2013 declaring total income at Rs.4,45,94,808/-. The case of the assessee was selected for scrutiny assessment, and notice under section 143(2) was issued on 2.9.2014. The assessee at the relevant time was engaged in manufacturing and dealing with pharmaceutical products and also development/sale of product technologies relating to pharmaceutical formulation. On scrutiny of the accounts, it revealed to the AO that the assessee-company has I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 95 made an addition in the assets of Rs.10,65,00,000/- on account of Solar Power Plant on which depreciation at the rate of 80% and additional depreciation at the rate of 20% was claimed totaling to Rs.5,32,50,000/- under the head “Finance Lease Assets”. The facts with regard to M/s.Sun Petrochemicals P.Ltd. are that the assessee has filed its return of income on 29.9.2013 declaring total income at Rs.3,51,52,094/- under the normal provision, and book profit under section 115JB of the Act at Rs.58,14,44,436/-. The case of this assessee was also selected for scrutiny assessment and notice under section 143(2) was issued on 4.9.2014. The assessee at the relevant time was engaged in the business of manufacturing and trading of petrochemical products. This concern has also made addition of Rs.10,65,00,000/- on account of “SPP” on which depreciation at the rate of 80% and additional deprecation at the rate of 20% was claimed totaling to Rs.5,32,50,000/-. This depreciation of Rs.5,32,50,000/- was claimed at 50% because asset was not put to use for the complete years in both the cases. In this way, it is observed that facts on all vital points are common in both the cases. A perusal of the record would further show that M/s. Alpha Infrapop Pvt. Ltd. (“AIPL” for short) got a contract from MP Power Management Co. Ltd. (“MPPMCL” for short) and “MPPMCL” to install a “SPP” with a capacity of 20MW DC. A power purchase agreement was signed by “MPPMCL” and “AIPL” on 19.10.2012. M/s. Real Gold Developers LLP (“RGD” for short) had purchased the assets and made investment of Rs.120 crores. It was required to establish 16 blocks. These assets were later on given on lease to “AIPL”. According these assessees, they have purchased these assets and later on given them on lease. The break-up of solar block numbers, ownership of various parties along with their corresponding cost, has been submitted before the ld.CIT(A) in tabular form in the submissions filed by the assessee. For the facility of reference, we take note of such details, which reads as under: Owner Block No. No. of blocks Total MW DC Cost (Rs. In Crores) Aditya Medisales Ltd Block No. 14 &17 Tables of 1.33 1.85 10.50 I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 96 Block 10 Sun Petrochemicals Pvt Ltd Block No. 15 & 18 Tables of Block 10 1.33 1.87 10.65 Unimed Technologies Ltd. Block No. 16, 18 Tables of Block 10 1.33 1.87 10.65 Sun Medications Pvt Ltd (Now known as Sun Pharma Laboratories Ltd.) Block No. 9, 11, 12, 13 4 5.81 33.10 Real Gold Developers LLP Block No. 1 to 8 8 11.61 51.13 Total 16 23 116.03 4. In order to satisfy himself that assessees have acquired assets and put them for use of their business purpose, the ld.AO has called for various details, and issued a detailed questionnaire. ... ... ... 8. We have duly considered rival contentions and gone through the record carefully. Section 32 of the Income Tax Act has directed bearing on the controversy, and therefore, it is imperative upon us to take note of relevant part of this section. It reads as under: 32. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 97 9. A perusal of the above would indicate that in order to claim depreciation under section 32 of the Income Tax Act, the assessee has to demonstrate that it has owned an asset wholly or partly, and such asset has been used for the purpose of business or profession. Thus, for the purpose of controversy in hand, it is to be ascertained whether both the assessees were able to prove on record that they have acquired the assets before end of the accounting year, and such assets have been put to use for the purpose of their business. The ld.AO has issued a detailed questionnaire and called for information on more than 12 counts. Brief analysis of such information was given in a tabular form. We have taken cognizance of such analysis in para 4 of this order. According to the AO, if setting of this information is being appreciated as a whole, then it would indicate that assessees have failed to prove acquisition of the assets before the end of the accounting year as well as its user for the purpose of their business. The ld.AO has pointed out some discrepancies specifically, the transportation details, inspection report, installation report etc. On the other hand, the ld. CIT(A) instead of making analysis of this information observed that this very issue has been considered in the case of other assesees i.e. AMSL who is also one of the contributors to the total block of assets. The emphasis of the ld.DR was that the ld.CIT(A) has overruled the discrepancies pointed out by the AO for demonstrating the fact that assets have been acquired before the end of the accounting year, and put to use without recording any finding or rebutting the reasoning of the AO. On the other hand, the stand of the assessee was that M/s. AIPL has acquired a contract from MP Power Management Co. Ltd. for establishment of a solar power plant. It has also entered into a power purchase agreement with MPPMCL. This is a composite solar power plant consisting of 16 blocks. It was installed, and later on M/s. Real Gold Developers LLP has purchased all these assets, and these were given on lease to AIPL. Assessees along with three more assesses have purchased these total 16 blocks of solar power plant. In the case of Aditya Medisales Ltd., department has accepted the establishment of solar power plant and allowed the depreciation. This order of the ld.CIT(A) was not I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 98 challenged, thus, the same treatment be given to the purchase agreement and installation of SPP of the present assesses. 10. On due consideration of these facts, we are of the view that to some extent discrepancies pointed out by the AO and brought to our notice by the ld.CIT-DR do create a suspicion in our mind about the user of the assets for the purpose of business by the present assessees, but simultaneously if it is to be looked in such a manner that MP Power Management Co. Ltd. an instrumentality of Madhya Pradesh State Government, has awarded a contract for establishment of 16 blocks of solar power plant, and such blocks were established, thereafter it as sold to Real Gold Developers LLP, and RGD LLP further sold these 16 blocks in part to five concerns including the present two assessees. It is to be appreciated that if this solar power plant of 16 blocks is an integrated power plant and part of the block purchased by present two assessees cannot work independently, then it is to be treated that the plant was established. Though there is no specific discussion on this point, and there is no conclusion, but we would like to take note of the fact that as far as purchase of these assets, its user for the purpose of business has not been denied by the AO himself in the subsequent year. He has allowed the depreciation to the assessee in the next assessment year. In the present year only dispute is year of admissibility of the depreciation. On account of some technical ground, if it is denied in this year, then it will be admissible in the next year, thus, considering stand of the Revenue in the case of Aditya Medisales Ltd. where such depreciation has been allowed and accepted, more so when no finding was recorded that the part of the assets owned by the assessees could be used independently for generation of power in a phased manner. We construe that blocks of panel owned by assessees be treated as integrated part of 16 blocks purchased and installed by AIPL and not to be treated separately. In other words, part of assets owned by these two assessees be treated as integrated part of total solar plant consisting of 16 blocks. If that be so, then installation of other blocks have been accepted by the department, and not challenged before the Tribunal. There is no disparity on the facts with regard to the blocks owned by the AMSL vis- à-vis I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 99 of the assessee. We are of the view that there is no justification to interfere in the finding of the ld.CIT(A) in the cases of present two assessees also. Therefore, we do not find any merit in these two appeals; they are dismissed. 11. In the result, both the appeals of the Revenue are dismissed.” 29.1. It is observed that claim of depreciation on assets leased to Alpha Infrapop Pvt. Limited by assessee and other group entities are identical and similar claim has been allowed by coordinate bench or not disputed in appeal in one of the entities, as discussed herein above. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the Ground No.7 raised by the Revenue is hereby dismissed. 30. Ground No. 8 of Department’s appeal relates to CIT(A) erred in deleting the addition of Rs.81,63,728/- to Book Profit u/s. 115JB on the issue of disallowance u/s 14A. This issue is already dealt by us in paragraphs 16.1 to 16.5 of this order in ITA No. 1464/Ahd/2017, holding no adjustment be made in the Book Profit u/s. 115JB of the Act, thus following the same principle this Ground No.7 raised by the Revenue is hereby dismissed. 31. In the result, the Department’s appeal is partly allowed. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 100 32. ITA No: 1465/Ahd/2018 relating to the Assessment Year 2014-15. The Grounds of Appeal raised by the Assessee reads as under: The Appellant raises the following grounds, which are mutually exclusive, independent of and without prejudice to one another 1. On the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income-tax (Appeals) [the Ld CIT(A)] erroneously affirming the findings of the learned Assessing Officer [the Ld. AO'] is unsustainable and ought to be quashed 2. Re: Disallowance of deduction under section 80IB/80IE in respect of interest on overdue bills, staff advances & statutory/bank deposit - (Jammu Unit-- Rs.2,22,944/- Jammu Unit-II totaling to Rs. 6,03,658/-) Rs. 2,02,553/-; and Sikkim Unit Rs. 1,78,161/ 2.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in disallowing the interest income earned in respect of staff advances and statutory / bank deposits on the basis that the same have not been derived from the industrial undertaking without appreciating that the deduction under section 80-I8 /80-IE is allowable in respect of the profits and gains derived from the specified business as opposed to 'profits derived from the industrial undertaking 3. Re: Disallowance of expenditure incurred for doctors towards business promotion and accommodation Rs. 7,84,83,694/- 3.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in disallowing expenses allegedly incurred towards providing gifts and freebies to the doctors/ medical practitioners by invoking the provisions of Indian Medical Regulations, 2002, without appreciating that the same are not applicable to pharmaceutical companies and hence, there cannot be any violation in the first place to attract the rigours of Explanation 1 to section 37(1) of the Act. 3.2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the said expenses have been incurred for the promotion and in furtherance of the Appellant's business activities and thus, allowable as deduction u/s 37(1) of the Act. 3.3. The Ld. CIT(A)/Ld. AO grossly erred in relying on the CBDT Circular No.: 5/2012 while disallowing the said expenditure without appreciating that the departmental circulars are not binding on the tax payer, which position has been repeatedly upheld by various judicial authorities 3.4 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not increasing the deduction under section 80-18/80-IE correspondingly on account of disallowance carried out under this said ground 4. Re: Disallowance under section 14A read with Rule 8D - Rs. 60,65,076/ I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 101 4.1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of Rs 60,65,076/- [Consisting of Rs 14,325-/ towards interest and Rs 60,50,750/- towards administrative expenses] made by the Ld. AO u/s 14A of the Income-tax Act, 1961 ('Act) read with rule BD of the Income- tax Rules, 1962 (Rules) in relation to earning of income exempt u/s 10 of the Act without appreciating that invocation of rule 8D is not automatic and recording of satisfaction and establishing a direct nexus between the expenditure incurred and the exempt income u/s 10 is a sina qua non. 4.2 Without prejudice to the above, the Ld CIT(A) has failed to consider that the Appellant had sufficient interest free funds and that the investment in instruments producing exempt income were made out of such non-interest-bearing funds thereby making the interest disallowance under rule 8D(2)(i) uncalled for. 4.3. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that the Appellant had in fact earned net interest income and hence, there was no case for disallowance of interest expenditure under section 14A read with rule 8D 4.4. Without prejudice to the above, the Ld CIT(A) grossly erred in not appreciating that exempt income earning investments were made for strategic purposes in pursuance of Appellant's business objectives without any intention of earning exempt income therefrom. 4.5. Without prejudice to the above, while considering the investments in the partnership firm for the purpose of disallowance under section 14A, only the actual investment by the Appellant ought to be considered i.e. the share of profit credited to the partner's capital account is to be excluded while computing the value of investment. 4.6. Without prejudice to the above, the Ld CIT(A) ought to have appreciated that investments from which no exempt income is eamed during the year, cannot be considered while applying rule 8D 4.7 Without prejudice to the above, the Ld. CIT(A) grossly erred in confirming the computational errors committed by the Ld AO while ascertaining the quantum of disallowance under section 14A read with rule 8D 5. Re: Disallowance of amortization of Intangibles under section 115JB Rs 15,23,97,50,000/- 5.1. The Ld. CIT(A) grossly erred, in law as well on the facts and in the circumstances of the case, in adding back the amortization of Intangibles amounting to Rs 15,23,97,50,000/- while computing book profits under section 115JB on the grounds that the depreciation on revalued assets is not allowable under clause (a) of Explanation 1 to section 115JB without appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld CIT(A) failed to appreciate that - (1) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 102 (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 5.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/ disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 5.3 The Ld. CIT(A)/Ld. AO grossly erred, on facts and in the circumstances of the case. in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In the process, the Ld CIT(A)/Ld. AO failed to appreciate that: (i) the ownership in respect of trademarks, being the major portion of the intangible assets, was transferred to the Appellant: (ii) in respect of patents and technical know-how etc. so recorded, the Appellant had acquired perpetual & irrevocable license to use and exploit the said patents, technical know-how etc. which constituted an asset in itself, eligible for being accounted as an intangible asset and consequently amortization was carried out. 5.4 The Ld. CIT(A) / Ld. AO grossly erred in alleging that claiming amortization of intangibles was a colourable device to make an unsustainable claim as the same amount was added back and reduced for computing book profit under section 115JB without appreciating that the addition and reduction was in accordance with the requirement of section 115JB of the Act. 33. Ground No. 1 is general in nature, which does not require any adjudication and hence dismissed. 34. Ground No. 2: Disallowance of deduction u/s. 80IB/80IE in respect of interest on staff, advances and statutory/bank deposit. This issue is considered by us in this order at Paragraph No. 6 to 7.1 of this order in ITA No. 1464/Ahd/2018. Respectfully following the same this ground No. 2 raised by the assessee is hereby dismissed. 35. Ground No. 3: Disallowance of expenditure for doctors towards business promotion and accommodation. This issue is considered by us in ITA No. 1464/Ahd/2018 at Paragraph Nos. 9 to 9.2 of this I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 103 order. Thus the ground no. 3 raised by the assessee is hereby dismissed. 36. Ground no. 4: Disallowance u/s. 14A r.w. Rule 8D of Rs. 60,65,076/-. This issue is considered by us in ITA No. 1464/Ahd/2018 at Paragraph Nos. 10 to 11.1 of this order. Respectfully following the same, this ground no. 4 raised by the assessee is hereby set aside to the file of Assessing Officer to verify that the assessee has sufficient interest free funds or not. Thus this ground no. 4 raised by the assessee is partly allowed. 37. Ground No. 5: Disallowance of amortization of Intangibles u/s. 115JB of the Act. This issue is considered by us at Paragraph Nos. 15 to 16.6 of this order. Respectfully following the same, thus this ground no. 5 is allowed in favour of the assessee. 38. Additional Ground No. 6: Central excise duty refund. This issue is considered by us at Paragraph Nos. 18 to 18.1 of this order and thereby allowed in favour of the assessee. 39. Additional Ground No. 7: Central excise refund receipt while computing book profit u/s. 115JB of the Act. This issue is considered by us at Paragraph Nos. 18.2 of this order. Respectfully following the same, this additional ground no. 7 is allowed 40. In the result, the appeal filed by the Assessee in ITA No. 1465/Ahd/2018 is partly allowed. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 104 41. ITA No: 1522/Ahd/2018 relating to the Assessment Year 2014-15. The Grounds of Appeal raised by the Revenue reads as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee and in not confirming the additions made by the AO on these issues. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit without appreciating the facts and reasons mentioned by the AO in the assessment order. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs.1323,54,96,874/- in respect of Sikkim Unit, without appreciating the facts and reasons mentioned by the AO in the assessment order of erstwhile firm Sun Pharma Sikkim (SPS), which after its conversion into a Part IX company, has amalgamated with the assessee company. 2.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 801E of Rs.1323,54,96,874/- in respect of Sikkim Unit, without appreciating the fact that erstwhile Sun Pharma Sikkim was formed by the splitting up and reconstruction of the existing business of Sun Pharmaceutical Industries (SPI), and the condition that used machinery is less than 20% of the stipulated limit, has not been fulfilled by the assessee. 2.4. On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of the appellant in respect of deduction u/s. 80IE is allowable without appreciating that in the absence of proper details and bills, it could not be ascertained as to whether plant and machinery were new and not used earlier, and without appreciating that plant and machinery transferred by Sun Pharmaceutical Industries to Sun Pharma Sikkim was used by Sun Pharmaceutical Industries prior to put to use by Sun Pharma Sikkim, and hence such plant and machinery could not be regarded as new plant and machinery. 2.5. On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of deduction u/s. 80IE in respect of Sikkim Unit, is allowable without appreciating that mere submission of journal entries generated in computer cannot be treated as an authentic document for having purchased plant and machinery and accordingly the A.O. had clearly established that Sun Pharma Sikkim was constituted by reconstruction of existing business of Sun Pharmaceutical Industries. 26 On the facts and circumstances of the case and in law, the Ld. CIT. (A) erred in holding that the claim of deduction u/s. 80IE is allowable without appreciating that the assessee could not substantiate its claim with verifiable and reliable documents, and failed in establishing that it had satisfied all the conditions laid down in section 801E, and the A.O. had correctly disallowed deduction u/s 801E of Rs.1323,54,96,874/-.. 2.7 On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of deduction u/s: 80IE is allowable without appreciating I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 105 the A.O's finding on the issue of period of use, and depreciation of plant and machinery used by Sun Pharma Industries & Sun Pharma Sikkim. 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IB/80IE in respect of receipt of interest of Rs.26,98,26,600/- on delayed payments on sales, without appreciating the facts and reasons mentioned by the AO in the assessment order. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the assessee's ground on disallowance of deduction u/s 801B/801E in respect of receipt of interest on delayed payments on sales without appreciating the fact that the interest was not derived from manufacturing activity and deduction u/s 80IB/80IE was rightly disallowed by the AO. 4.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.ws. 80IA(10) on apportionment of research and development expenses of Rs.7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the facts and reasons mentioned by the AO in the assessment order. 4.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/801E(6) r.w.s. 80IA(10) on apportionment of research and development expenses of Rs.7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the fact that expenditure related to R&D was debited only in the books of SPIL, but no allocation was made to eligible units of assessee company, as revealed during the proceedings of survey action u/s 133A, and the working of allocation of R&D activity on the basis of turnover in the ratio of 3:1 is justifiable and reasonable. 4.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.w.s. 80IA(10) in respect of research and development expenses without appreciating that R & D work requires specialized skill and knowledge, and consequently payment towards R & D activity cannot be termed as remuneration but would be termed as professional payment. 5.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of Rs.3,20,04,946/- in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order. 5.2 On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of Rs.3,20,04,946/- in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners. 6.1 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs.60,65,076/- to Book Profit u/s. 115JB on the issue of disallowance u/s 14A, without appreciating the facts and reasons mentioned by the AO in the assessment order. 6.2 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs.60,65,076/- to Book Profit u/s. 115JB without appreciating the I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 106 fact that the said amount was disallowed u/s. 14A and hence was required to be added to the book profit as per clause (f) to Explanation 1 of section 115JB(2). 42. Ground No. 1 is general in nature, which does not require any adjudication and hence dismissed. 43. Ground No. 2: Deduction u/s. 80IE in respect of Sikkim Unit. This issue is considered by us at Paragraph Nos. 22 to 22.2 of this common order in ITA No. 1521/Ahd/2018. Respectfully following the same, thus this ground no. 2 raised by the Revenue is hereby dismissed. 44. Ground No. 3: Deduction u/s. 80IB/80IE in respect of receipt of interest on delayed payment on sales. This issue is considered by us at Paragraph Nos. 23 to 23.2 of this common order. Respectfully following the same, this ground no. 3 raised by the Revenue is hereby dismissed. 45. Ground No. 4: u/s. 80IB(13)/80IE(6) r.w.s. 80IA(10) on apportionment of R & D expenses. This issue is considered by us at Paragraph Nos. 24 to 24.1 of this common order. Respectfully following the same, this ground no. 4 raised by the Revenue is hereby dismissed. 46 Ground No. 5: Disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors. This is already adjudicated in Paragraph Nos. 9 to 9.2 of this order in assessee’s appeal in ITA No. 1464/Ahd/2018. Thus the disallowance made by the Assessing Officer is hereby confirmed and ground no. 5 is allowed in favour of the Revenue. I.T.A Nos. 1464 & 1465/Ahd/2018 & Ors A.Ys. 2013-14 & 2014-15 Page No Sun Pharma Laboratories Ltd. Vs. vs. DCIT 107 47. Ground No. 6: adjustment in book profit u/s. 115JB of the Act. This issue is considered by us at Paragraph No. 30 of this order. Respectfully following the same, this ground no. 6 raised by the Revenue is hereby dismissed. 48. In the result, the appeal filed by the Revenue in ITA No. 1522/Ahd/2018 is partly allowed. 49. In the combined result, the appeals filed both by the Assessee and the Revenue are partly allowed. Order pronounced in the open court on 06 -10-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 06/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद