Sun Pharmaceuticals Industries Ltd., Baroda V. The ACIT., Cent.Circle-1, Baroda

ITA 1513/AHD/2007

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9498 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Retrospective amendment; Revenue expenditure
• Section: 80HHC; 133A; 14A; 115JB; 80IB; 10B; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1558 & 1676/AHD/2006 (ASSESSMENT YEAR: 2002-03) SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 V/S DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, BARODA (APPELLANT) (RESPONDENT) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, BARODA V/S SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 (APPELLANT) (RESPONDENT) ITA. NO: 1513 & 1701/AHD/2007 (ASSESSMENT YEAR: 2003-04) SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 V/S ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE- 1, BARODA (APPELLANT) (RESPONDENT) ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, BARODA V/S SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 (APPELLANT) (RESPONDENT) ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 2 ITA. NO: 1193 & 1287/AHD/2008 (ASSESSMENT YEAR: 2004-05) SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 V/S ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE- 1, BARODA (APPELLANT) (RESPONDENT) ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, BARODA V/S SUN PHARMACEUTICAL INDUSTRIES LTD. SPARC, TANDALJA, BARODA-20 (APPELLANT) (RESPONDENT) PAN: AADCS 3124 K APPELLANT BY : SHRI S.N. SOPARKAR, AR RESPONDENT BY : SHRI R.I. PATEL, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 09 -02-20 16 DATE OF PRONOUNCEMENT : 22 -02-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 1558 & 1676/AHD/2006 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE VERY SAME ORDER O F THE LD. CIT(A)-IV, AHMEDABAD DATED 31,03,2006 PERTAINING TO A.Y. 2002- 03. ITA NOS. 1513 & 1701/AHD/2007 ARE CROSS APPEALS FOR A.Y. 2003-04 AND ITA NOS. 1193 & 1285/AHD/2008 ARE CROSS APPEALS FOR A.Y. 2004-05. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 3 2. ALL THESE APPEALS WERE HEARD TOGETHER AS THEY INVOL VED COMMON ISSUES AND THEREFORE ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE FIRST TAKE UP ITA NO. 1158/AHD/2006 ASSESSEES A PPEAL FOR A.Y. 2002-03. THE 1 ST GROUND RELATES TO THE DISALLOWANCE OF UNABSORBED D EPRECIATION OF M.J. PHARMACEUTICALS LTD. FOR COMPUTING DEDUCTION U /S. 80HHC. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E CONCEDED THAT THE ISSUE SHOULD GO AGAINST THE ASSESSEE. ON SUCH CONCESSION, GROUND NO. 1 IS DISMISSED. GROUND NO. 2 RELATES TO THE INCLUSION OF EXCHANGE RATE FLUCTUATION OF RS. 32,01,000/- IN TOTAL TURNOVER FOR THE PURPOSE OF DE DUCTION U/S. 80HHC. 4. THE LD. COUNSEL BROUGHT TO OUR NOTICE THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 3289 & 3434/AHD/2003 DATED 26.03.2015. IT IS THE SAY OF THE LD. COUNSEL THAT ON IDENTICAL SET OF FACTS, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. WE HAVE CAREFULLY PERUSED THE ORDER OF THE TRIBUNAL (SUPRA). WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL A T PARA 4 ON PAGE 9 OF ITS ORDER AND AT PARA 4.2 THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE CO- ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 4 ORDINATE BENCH FOR A.Y. 1999-2000 & 2000-01 AND ALL OWED THIS GRIEVANCE IN FAVOUR OF THE ASSESSEE. 5. RESPECTFULLY, FOLLOWING THE FINDINGS OF THE CO-ORDI NATE BENCH, WE DIRECT THE A.O TO EXCLUDE THE EXCHANGE RATE FLUCTUATION FR OM THE TOTAL TURNOVER FOR THE PURPOSE OF THE DEDUCTION U/S. 80HHC. GROUND NO. 2 IS ACCORDINGLY ALLOWED. GROUND NO. 3 RELATES TO THE REDUCTION OF UNREALIZE D EXPORT PROCEEDS OF RS. 638.82 LACS FROM EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S. 80HHC. 6. THE LD. COUNSEL STATED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 WH EREIN THE ISSUE HAS BEEN SET ASIDE TO THE FILES OF THE A.O. THE LD. COU NSEL PRAYED FOR A SIMILAR DIRECTION SHOULD BE GIVEN FOR THE YEAR UNDER CONSID ERATION ALSO. THE LD. D.R. DID NOT OBJECT TO THIS. WE FIND THAT AN IDENTI CAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 1-02 AT PARA 6 ON PAGE 12 OF ITA NOS. 3289 & 3434/AHD/2003 AND AT PARA 6.3 THE TRIBUNAL HAD DIRECTED THE A.O TO APPLY THE PROVISIONS OF SECTION 155(13) OF THE ACT AND DECIDE THE ISSUE AFRESH. 7. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH, WE DIRECT THE A.O. ACCORDINGLY. GROUND NO. 3 IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 5 GROUND NO. 4 RELATES TO THE INCLUSION OF SALE OF SC RAP OF RS. 54,17,843/- IN TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION U/S. 80 HHC. 8. THE LD. COUNSEL REFERRED TO THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 AND POINTED OUT THAT A SIMILA R ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE IN ITA NOS. 3289 & 3434/AHD/2003. THE LD. D.R. COULD NOT BRING ANY D ISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 9. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY T HE TRIBUNAL IN A.Y. 2001-02 VIDE ITA NOS.3289 & 3434/AHD/2003 (SUPRA). AT PARA 5 OF ITS ORDER AND AT PARA 5.1 THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE CO- ORDINATE BENCH GIVEN IN ASSESSEES OWN CASE FOR A.Y . 1999-2000 & 2000- 01 AND AT PARA 5.2 THE TRIBUNAL HELD THAT SINCE A V IEW HAS ALREADY BEEN TAKEN ON IDENTICAL FACTS, THE A.O IS DIRECTED TO RE COMPUTE THE TURNOVER AFTER EXCLUDING SALE AMOUNT OF SCRAP. RESPECTFULLY, FOLLO WING THE DECISION OF THE CO-ORDINATE BENCH (SUPRA), WE DIRECT THE A.O ACCORD INGLY. GROUND NO. 4 IS ACCORDINGLY ALLOWED. GROUND NO. 5 RELATES TO THE REDUCTION OF THE DEDUCT ION U/S. 80HHC AS PER SECTION 80IA (9) OF THE ACT. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE A.O WHO HAS RESTRICT ED THE CLAIM FOR DEDUCTION U/S. 80HHC WHICH IS AGAINST THE FACTS OF THE CASE. WE FIND THAT THE LD. CIT(A) HAS CONSIDERED THE ISSUE AT PARA 6 O F ITS ORDER. WE ALSO FIND ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 6 THAT THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O FOLLOWING HIS OWN ORDER FOR A.Y. 2000-01. WE FIND THAT WHEN THE MATTE R TRAVELLED UP TO THE TRIBUNAL, THE TRIBUNAL IN ITA NOS. 1199 & 1279/AHD/ 2006 HAS QUASHED THE REOPENED ASSESSMENT HOLDING THAT RE-ASSESSMENT PROCEEDINGS WERE BAD IN LAW. IT IS THE SAY OF THE LD. COUNSEL THAT THE H ONBLE SUPREME COURT IN THE CASE OF MICRO LABS LTD. HAS REFERRED THE MATTER TO A LARGER BENCH SINCE THERE WAS A DISSENT BETWEEN THE HONBLE JUDGES AS O NE OF THE JUDGE FOLLOWED THE DECISION OF THE HONBLE BOMBAY HIGH CO URT GIVEN IN THE CASE OF ASSOCIATED CAPSULES PVT. LTD. 322 ITR 42. WHILE ANOTHER JUDGE FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF GREAT EASTERN EXPORTS 332 ITR 14. THE LD. COUNSEL PRAYED THAT THE MATTER MAY BE RESTORED TO THE FILES OF THE A.O TO BE DECIDED I N LINE WITH THE DECISION OF THE HONBLE SUPREME COURT. THE D.R. STRONGLY OBJEC TED TO THIS STATING THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVE NUE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ATUL I NTERMEDIATES 45 TAXMAN.COM 275 AND THE SAME SHOULD BE FOLLOWED. 11. WE FIND FORCE IN THE CONTENTION OF THE LD. D.R. AS MENTIONED ELSEWHERE SINCE THERE WAS A DISSENT BETWEEN THE HONBLE JUDGE S, THE HONBLE SUPREME COURT HAS REFERRED THE MATTER TO A LARGER B ENCH WHICH MEANS THAT ON THIS DAY, THERE IS NO DECISION OF THE HONBLE SU PREME COURT ON THIS ISSUE AND SINCE WE HAVE A DIRECT DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT (SUPRA). WE ARE BOUND BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND THEREFORE CONFIRM THE FINDINGS OF THE A.O. GROUND NO.5 IS ACCORDINGLY DISMISSED. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 7 GROUND NO. 6 RELATES TO THE ALLOCATION OF R & D EX PENSES FOR DETERMINING PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IB AND SECTIO N 10B OF THE ACT. 12. WE FIND THAT WHILE CONFIRMING THE ACTION OF THE A.O , THE LD. CIT(A) HAS FOLLOWED THE ORDER OF THE FIRST APPELLATE AUTHORITY GIVEN FOR A.Y. 2000- 01. AS MENTIONED ELSEWHERE IN GROUND NO. 5 ABOVE RE OPENED ASSESSMENT ORDER OF 2000-01 HAS BEEN QUASHED BY THE TRIBUNAL I N ITA NOS. 1199 & 1279/AHD/2006. THE VERY BASIS FOR CONFIRMING THE AC TION OF THE A.O HAS BEEN REMOVED BY THE TRIBUNAL. WE FIND THAT THE DISP UTE AROSE BECAUSE OF THE ANSWER GIVEN BY DR. T.RAJAMANNAR, SENIOR VICE P RESIDENT OF SPARC, BARODA. IN HIS STATEMENT GIVEN ON OATH U/S. 131 OF THE ACT, IT WAS ADMITTED THAT THERE IS AN INCREASE IN THE EXPENDITURE FOR R & D FROM 10 TO 15%. 13. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITT ED THAT THE QUESTION RELATED TO THE RAW MATERIALS AND NOT TO ALL THE ITE MS OF EXPENDITURE AND, THEREFORE, THE REVENUE AUTHORITIES HAVE ERRED IN GE NERALIZING THE STATEMENT OF THE SENIOR VICE PRESIDENT. WE HAVE GIVEN A THOUG HTFUL CONSIDERATION TO THE FINDINGS OF THE LOWER AUTHORITIES. WE HAVE ALSO CONSIDERED THE STATEMENT OF DR. T. RAJAMANNAR. UNDISPUTEDLY, THE QUESTION RELATED TO THE RAW MATERIALS AND NOT TO ALL THE ITEMS OF EXPENDITU RE UNDER THIS HEAD. IN OUR CONSIDERED OPINION ONE CANNOT CARRY OUT THE ALL OCATION ON THE BASIS OF PICK AND CHOOSE METHOD. WE ACCORDINGLY DIRECT THE A.O TO RESTRICT THE RE- ALLOCATION ONLY TO THE RAW MATERIAL, ASSESSEE GETS PARTIAL RELIEF. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 8 GROUND NO. 7 RELATES TO THE ALLOCATION OF SELLING AND DISTRIBUTION EXPENSES FOR DETERMINING PROFITS FOR THE DEDUCTION U/S. 80IB AND SECTION 10B OF THE ACT. 14. REFERRING TO THE DETAILED SUBMISSION MADE DURING TH E APPELLATE PROCEEDINGS, THE LD. COUNSEL STATED THAT THE ALLOCA TION OF SELLING AND DISTRIBUTION EXPENSES AS CARRIED OUT BY THE ASSESSE E SHOULD BE RESTORED FOR DETERMINING PROFITS OF THE NEW INDUSTRIAL UNDERTAKI NG U/S. 80IB AND SECTION 10B OF THE ACT. 15. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE FIND THAT THE LD. CIT(A) HAS SIMPLY FOLLOWED THE FINDING S GIVEN BY HIS PREDECESSOR IN THE APPELLATE ORDER FOR A.Y. 2000-01 . AS MENTIONED ELSEWHERE, THE REOPENED ORDER FOR A.Y. 2000-01 HAS BEEN QUASHED BY THE TRIBUNAL IN ITA NOS. 1199 & 1279/AHD/2006. FINDINGS OF THE LD. CIT(A) DO NOT SURVIVE. A PERUSAL OF THE RECORD SHOW THAT T HE ASSESSEE HAS ALLOCATED THE EXPENSES ON THE BASIS OF TURNOVER WHICH IS THE MOST PREFERRED METHOD FOR ALLOCATING SELLING AND DISTRIBUTION EXPENSES. I T IS A FALLACY TO SAY THAT BULK DRUGS ARE NOT RAW MATERIAL FOR THE FORMULATION DIVISION. ANY EXPENDITURE INCURRED FOR THE RAW MATERIALS (BULK DR UGS) HAVE TO BE CONSIDERED FOR THE FINAL PRODUCT FORMULATION. WE THEREFORE DO NOT FIND ANY ERROR IN THE ALLOCATION MADE BY THE ASSESSEE. W E ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O T O ACCEPT THE METHODOLOGY OF THE ASSESSEE. GROUND NO. 7 IS ACCORD INGLY ALLOWED. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 9 GROUND NO. 8 RELATES TO THE DISALLOWANCE OF EXPENSE S INCURRED FOR INCREASE IN SHARE CAPITAL. 16. THIS ISSUE HAS BEEN DISCUSSED BY THE A.O AT PAGE 28 ON PARA 6 OF HIS ORDER. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM U/S. 35 D OF THE ACT. IT WAS EXPLAINED THAT AN AMOUNT OF RS. 22.70 LACS WAS INCU RRED TOWARDS SHARE ISSUE EXPENSES AND ONLY 1/5 TH OF THE SAME HAS BEEN CLAIMED IN EACH ASSESSMENT YEAR U/S. 35D OF THE ACT. THE A.O. DID N OT ACCEPT THE CONTENTION OF THE ASSESSEE STATING THAT IN EARLIER YEARS ALSO, THERE WAS DISALLOWANCE WHICH WAS CONFIRMED BY THE LD. CIT(A). ADDITION OF RS. 4,54,000/- WAS MADE ON THIS ACCOUNT. 17. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA 19 OF PAGE 14 OF HIS ORDER WHEREIN HE CONFIRMED THE ACTION OF THE A.O BY FOLLOWING THE FI NDINGS GIVEN IN THE APPELLATE ORDER FOR A.Y. 2000-01. BEFORE US, THE LD . COUNSEL FOR THE ASSESSEE STATED THAT THE FIRST APPELLATE AUTHORITY HAS SIMPLY FOLLOWED THE FINDINGS GIVEN IN A.Y. 2000-01 WHICH ASSESSMENT ORD ER HAS BEEN QUASHED BY THE TRIBUNAL VIDE A ITA NOS. 1199 & 1279/AHD/200 6. PER CONTRA, THE LD. D.R. COULD NOT ADD ANYTHING NEW TO WHAT HAS ALR EADY BEEN RECORDED BY THE REVENUE AUTHORITIES. 18. WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS. UNDISPUTEDLY, THE LD. CIT(A) HAS SIMPLY FOLLOWED THE FINDINGS GIVEN I N A.Y. 2000-01. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSMENT ORDER FOR A.Y. 2000-01 HAS BEEN QUASHED BY THE TRIBUNAL VIDE A ITA NOS. 1199 & 1279 /AHD/2006. THUS, IT CAN BE SAID THAT THE VERY BASIS FOR THE CONFIRMATIO N OF THE DISALLOWANCE HAS ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 10 BEEN REMOVED THEREFORE THERE REMAINS NO REASON FOR THE DISALLOWANCE TO BE CONFIRMED. WE ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 4,54,0 00/-. GROUND NO. 8 IS ACCORDINGLY ALLOWED. GROUND NO. 9 RELATES TO THE DISALLOWANCE OF PUBLIC ISSUE EXPENSES AND AMALGAMATION EXPENSES OF RS. 18,55,500/- U/S. 35D A ND 35DD OF THE ACT. 19. THIS ISSUE HAS BEEN CONSIDERED BY THE A.O AT PARA 7 ON PAGE 29 OF HIS ORDER WHEREIN HE HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED RS. 14,33,746/- BEING PUBLIC ISSUE EXPENSES U/S. 35D OF THE ACT AND RS. 4,21,754/- AS AMALGAMATION EXPENSES U/S. 35DD OF TH E ACT. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE A.O POINTED OUT THAT RS. 4,21,754/- ACTUALLY PERTAINS TO THE EXPENDITURE INCURRED TOWAR DS INCREASE IN SHARE CAPITAL BUT THE SAME HAS BEEN WRONGLY SHOWN AS AMAL GAMATION EXPENSES. ASSESSEE FILED A DETAILED REPLY STATING THAT IT HAS INCURRED RS. 7.50 LACS TOWARDS REGISTRATION CHARGES FOR THE INCREASE IN AU THORIZED CAPITAL AND HAS ALSO INCURRED 13,55,120/- TOWARDS STAMP DUTY CHARGE S FOR AMALGAMATION OF M/S. MILMET LABORATORIES WITH EFFECT FROM 01.04.199 8. IT WAS BROUGHT TO THE NOTICE OF THE A.O THAT THESE EXPENDITURES HAVE BEEN AMORTIZED AND ONLY 1/5 TH HAS BEEN CLAIMED DURING THE YEAR UNDER CONSIDERATI ON. THE A.O. WAS OF THE FIRM BELIEF THAT THESE EXPENDITURES HAVE BEE N INCURRED FOR INCREASING THE AUTHORIZED CAPITAL AND, THEREFORE, NOT ALLOWABL E AS REVENUE EXPENDITURE. THE A.O. ACCORDINGLY MADE DISALLOWANCE OF RS. 14,33 ,746/- + 4,21,754/- TOTALING TO RS.18,55,500/-. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 11 20. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA 20 ON PAGE 14 OF HIS ORDER AND AT PARA 20.1 THE LD. CIT(A) HELD THAT SIMILAR GROUND HAS BEEN DE CIDED AGAINST THE ASSESSEE IN THE APPELLATE ORDER FOR A.Y. 2000-01 AN D ACCORDINGLY CONFIRMED THE DISALLOWANCE. BEFORE US, THE LD. COUN SEL FOR THE ASSESSEE STATED THAT THE ASSESSMENT ORDER FOR A.Y. 2000-01 H AS BEEN QUASHED BY THE TRIBUNAL. THE LD. D.R. COULD NOT BRING ANY DISTINGU ISHING FACTS IN FAVOUR OF THE REVENUE. 21. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS IN ISSUES ADMITTEDLY THE ASSESSMENT ORDER FOR A.Y. 2000-01 HAS BEEN QUAS HED BY THE TRIBUNAL VIDE A ITA NOS. 1199 & 1279/AHD/2006. THE VERY BASI S OF CONFIRMING THE DISALLOWANCE HAS BEEN REMOVED THEREFORE WE SET ASID E THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE DISALL OWANCE OF RS. 18,55,500/-. IN THE RESULT, GROUND NO. 9 IS ALLOWED . GROUND NO. 10 RELATES TO THE DISALLOWANCE OF RS. 44 ,71,906/- BEING TRADE MARK REGISTRATION CHARGES AND OVERSEAS PRODUCT REGI STRATION CHARGES. 22. THIS ISSUE HAS BEEN DISCUSSED BY THE A.O. AT LENGTH AT PARA 9 ON PAGE 31 OF HIS ORDER. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CL AIM FOR TRADE MARK REGISTRATION AND OVERSEAS PRODUCT REGISTRATION CHAR GES WHICH HAVE BEEN INCURRED FOR REGISTRATION OF DRUG PATENTS IN FOREIG N COUNTRIES. THE A.O WAS OF THE FIRM BELIEF THAT THE CLAIM OF THE ASSESSEE I S VIOLATIVE OF THE EXPLANATION TO SECTION 35(2AB)(1) OF THE ACT. THE A .O. ACCORDINGLY DISALLOWED RS. 44,71,906/-. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 12 23. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA 22 ON PAGE 16 OF HIS ORDER AND AT PARA 22.1 HE HAS SIMPLY FOLLOWED THE APPELLATE ORDER GIV EN FOR ASSESSMENT ORDER 2000-01 AND CONFIRMED THE ACTION OF THE A.O. AGGRIE VED BY THIS, THE LD. COUNSEL IS BEFORE US. AT THE VERY OUTSET, THE LD. C OUNSEL BROUGHT TO OUR NOTICE, THE ORDER OF THE TRIBUNAL BY WHICH THE ASSE SSMENT ORDER WAS QUASHED. THE LD. COUNSEL FURTHER RELIED UPON DECISI ON OF THE TRIBUNAL MUMBAI BENCHES IN THE CASE OF USV LTD. 54 SOT 615. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE ORDERS OF THE REVENUE A UTHORITIES. 24. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE FIND THAT THE LD. CIT(A) HAS SIMPLY FOLLOWED THE FINDING S OF HIS PREDECESSOR FOR A.Y. 2000-01. WE ALSO FIND THAT THE ASSESSMENT ORDE R FOR A.Y. 2000-01 HAS BEEN QUASHED BY THE TRIBUNAL VIDE A ITA NOS. 11 99 & 1279/AHD/2006, WHICH MEANS THAT THE BASIS FOR UPHOL DING THE DISALLOWANCE HAS BEEN REMOVED. WE FURTHER FIND THAT ON IDENTICAL SET OF FACTS, THE MUMBAI BENCH IN THE CASE OF USV LTD. (SU PRA) HAS ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INC URRED IN RESPECT OF PATENT APPLICATION. RESPECTFULLY, FOLLOWING THE FINDINGS O F THE CO-ORDINATE BENCH (SUPRA), WE DIRECT THE A.O TO DELETE THE DISALLOWAN CE OF RS. 44,71,906/-. GROUND NO. 10 IS ACCORDINGLY ALLOWED. GROUND NO. 11 RELATES TO THE DISALLOWANCE OF OVERRI DING COMMISSION PAID TO ASSOCIATED ENTERPRISE. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 13 25. THIS ISSUE RELATES TO THE TRANSFER PRICING ADJUSTME NT AND HENCE HAS BEEN CONSIDERED BY THE TPO IN ITS ORDER DATED 24.03.2005 MADE U/S. 92CA(3) OF THE ACT. 26. DURING THE COURSE OF TRANSFER PRICING ASSESSMENT PR OCEEDINGS, THE TPO NOTICED THAT THE ASSESSEE HAS PAID IMPORTING COMMIS SION TOWARDS ASSOCIATE ENTITY AMOUNTING TO RS. 335.63 LACS. THE ASSOCIATE ENTITY M/S. SUN PHARMA GLOBAL INC IS A SUBSIDIARY OF THE ASSESSEE COMPANY AND IS A TAX RESIDENT OF BRITISH VIRGIN ISLANDS. THE ASSESSEE CLAIMED THAT T HE ASSOCIATE ENTITY PROVIDED MARKETING AND PROMOTION TO THE ASSESSEES PRODUCTS IN THE EXPORT MARKET ON A GLOBAL BASIS. IN ITS TRANSFER PRICING S TUDY REPORT, THE ASSESSEE CONTENDED THAT THE COMMISSION PAID IS COMPARABLE TO THE COMMISSION PAID BY IT TO NON-RELATED PARTIES. IT WAS BROUGHT TO THE NOTICE OF THE TPO THAT THE WEIGHTED AVERAGE RATE OF COMMISSION WORKS OUT TO 7. 84% ON TOTAL SALES AND ON SIMILAR ARRANGEMENT IN INDIA, THE ASSESSEE H AS PAID COMMISSION @ 11% . THEREFORE THE PAYMENT IS AT ARMS LENGTH. AFT ER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE TPO OBSERVED THAT THE ASSE SSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE IN RESPECT OF ITS ARRANGEM ENTS WITH ANY OF THESE PERSONS. THE TPO ALSO OBSERVED THAT THE ASSESSEE HA D FAILED TO ESTABLISH THE ARMS LENGTH NATURE OF THE TRANSACTION UNDER THE CUP METHOD. ACCORDINGLY, THE ASSESSEE WAS ASKED TO PROVIDE THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE VARIOUS SERVICES RENDERED BY THE AE. THE ASSESSEE WAS ALSO ASKED TO PROVIDE THE DETAILS OF EXPENSES INCUR RED IN VARIOUS LOCATIONS OF THE WORLD BY THE AE TO ESTABLISH THE SERVICES RE NDERED BY THEM. THE ASSESSEE WAS ALSO ASKED TO PROVIDE THE DETAILS OF P ERSONS EMPLOYED BY THE AE ALONG WITH THEIR QUALIFICATION; THE ASSESSEE FIL ED THE NECESSARY DETAILS. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 14 THE TPO AT PARA 9 OF HIS ORDER HAD OBSERVED THAT TH E ASSESSEE FAILED TO JUSTIFY THE MARGIN OF THE SUBSIDIARY COMPANY BY COM PARING IT WITH OTHER COMPANIES INCLUDED IN SIMILAR ACTIVITIES. AT THIS J UNCTURE, WE HAVE TO STATE THAT THIS OBSERVATION OF THE TPO IS OUT OF CONTEXT AND TOTALLY IRRELEVANT BECAUSE THE ASSESSEE IS THE TESTED PARTY AND NOT IT S AE. ASSESSEE IS TRANSACTIONS HAVE TO BE CONSIDERED AT ARMS LENGTH AND NOT THE PROFITABILITY OF THE AE. THE TPO FINALLY CONCLUDED BY HOLDING THA T THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS LAID UPON IT TO DETERM INE THE ARMS LENGTH PRICE OF ITS INTERNATIONAL TRANSACTIONS. 27. ACCORDINGLY, THE ARMS LENGTH PRICE FOR THE INTERNA TIONAL TRANSACTION WAS DETERMINED AS UNDER:- (A) IN RESPECT OF OVER-RIDING COMMISSION @ 1%, NO EXPLA NATION HAS BEEN GIVEN BY THE ASSESSEE AS TO WHY THE SAID COMMISSION IS PAYABLE, PARTICULARLY IN VIEW OF THE FACT THAT ON THE SAME S ALES COMMISSION IS SEPARATELY BEING PAID TO THIRD PARTIES. HENCE, ARM S LENGTH PRICE FOR THE SAME IS DETERMINED AT NIL. (B) REGARDING COMMISSION PAID @ 3% FOR THE OWN CUSTOMER S OF THE ASSOCIATE ENTITY, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO S HOW THAT THE ASSOCIATE ENTITY PROCURED THESE CUSTOMERS FOR THE BENEFIT OF THE ASSESSEE. HENCE, ARMS LENGTH PRICE FOR THE SAME IS ALSO DETERMINED AT NIL. (C) REGARDING REIMBURSEMENT OF EXPENSES, THE AMOUNT IS ACCEPTED AS THE ARMS LENGTH PRICE. 28. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA 23 OF ITS ORDER. AFTE R ELABORATING DISCUSSING ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 15 THE FINDINGS OF THE A.O, THE LD. CIT(A) DISCUSSED T HE SUBMISSIONS MADE BY THE ASSESSEE AND AFTER CONSIDERING THE FUNCTIONS PE RFORMED BY THE AE AND AT PARA 23.09 OF HIS ORDER, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS SUBMITTED COPY OF AGREEMENT IN RELATION TO THE NATU RE OF SERVICES RENDERED BY THE AE, CERTAIN E-MAIL MESSAGES TO PROVE THE NAT URE OF TRANSACTION WHICH HAS NOT BEEN PROVED FALSE BY THE TPO. THE LD. CIT(A) AGREED THAT THE TPO IS LEGALLY AND FACTUALLY WRONG IN TREATING AS IF NO TRANSACTION HAS TAKEN PLACE. AFTER CONSIDERING THE RANGE OF COMMISS ION, THE LD. CIT(A) FINALLY WAS OF THE OPINION THAT THE COMMISSION UP T O 3% WAS REASONABLE AND AT ARM LENGTH AND REQUIRES NO ADJUSTMENT AND D IRECTED THE A.O TO DELETE THE ADDITION OF RS. 1,43,43,210/-. 29. HOWEVER, ON THE POINT OF OVERRIDING COMMISSION, TH E LD. CIT(A) WAS OF THE OPINION THAT THE OVERRIDING COMMISSION IS TO BE ALLOWED ON THE SALES MADE THROUGH AE, OVERRIDING COMMISSION IS ALSO TO B E ALLOWED ON THE SALES MADE THROUGH NON -RELATED PARTIES WHERE COMMI SSION IS PAID @ 3% AND OVERRIDING COMMISSION IS NOT TO BE ALLOWED WHER E COMMISSION IS MORE THAN 3% TO THE NON- RELATED ENTERPRISES. 30. AGGRIEVED BY THIS FINDINGS OF THE LD. CIT(A) BOTH A SSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE AS SESSEE VEHEMENTLY STATED THAT THE ACTION OF THE REVENUE AUTHORITIES IS BEYON D THE SCOPE OF THE PROVISIONS CONTAINED IN CHAPTER 10 OF THE ACT. IT I S THE SAY OF THE LD. COUNSEL THAT UNDER CHAPTER 10 THE ONLY POWER OF THE REVENUE AUTHORITIES IS TO SEE WHETHER THE INTERNATIONAL TRANSACTION ENTERE D INTO BY THE ASSESSEE ARE AT ARMS LENGTH OR NOT. THE LD. COUNSEL FURTHER STA TED THAT IT IS NOT OPEN TO ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 16 THE REVENUE AUTHORITIES UNDER CHAPTER 10 TO SEE WHE THER ANY SERVICES HAVE BEEN RENDERED BY THE AE OR NOT. THE LD. COUNSEL CON CLUDED BY SAYING THAT IF THE REVENUE AUTHORITIES ARE OF THE OPINION THAT NO SERVICES HAVE BEEN RENDERED THE DISALLOWANCE CAN BE MADE UNDER OTHER P ROVISIONS OF THE ACT. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE A.O. 31. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE TRANSFER PRICI NG ASSESSMENT ORDER. THE ASSESSEE HAS PAID COMMISSION TO ITS AE AND WE F IND THAT THE BASIS FOR THE PAYMENT OF COMMISSION HAS ALSO BEEN GIVEN TO JU STIFY IT TO BE AT ARMS LENGTH. THE TPO/A.O HAS NOWHERE DENIED THAT THE WEI GHTED AVERAGE RATE OF COMMISSION PAID BY THE ASSESSEE IS 7.84% AS AGAI NST 11% PAID TO UNRELATED PARTY. WE ALSO FIND THAT IN HIS APPELLATE ORDER, THE FIRST APPELLATE AUTHORITY HAS OBSERVED THE RATE OF COMMISSION RANGI NG FROM 0.38% TO 33.33%, THE ASSESSEES RATE IS AT 3%. WE ALSO FIND THAT NONE OF THE REVENUE AUTHORITIES BELOW HAVE BROUGHT ANY COMPARABLE CASE ON RECORD TO SHOW THAT THE PAYMENT OF COMMISSION BY THE ASSESSEE IS N OT AT ARMS LENGTH. ON THE CONTRARY, WE FIND THAT THE A.O. HAS DISALLOWED MERELY BECAUSE HE WAS OF THE OPINION THAT NO SERVICES HAVE BEEN RENDERED. THIS FINDING IS BEYOND THE PROVISIONS OF CHAPTER 10 OF THE ACT IN AS MUCH AS UNDER CHAPTER 10, THE TPO/A.O. HAS TO SEE WHETHER THE INTERNATIONAL TRANS ACTION ENTERED BY THE ASSESSEE IS AT ARMS LENGTH OR NOT. THERE ARE OTHER PROVISIONS IN THE ACT WHEREIN THE A.O. CAN TEST THE GENUINENESS OF THE TR ANSACTION BUT IN ANY CASE NOT UNDER CHAPTER 10 OF THE ACT. AS MENTIONED ELSEWHERE, NO COMPARABLE CASE HAVE BEEN BROUGHT ON RECORD WHICH C OULD JUSTIFY THAT THE PAYMENT OF 3% + 1% OVERRIDING COMMISSION IS NOT AT ARMS LENGTH, WE SET ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 17 ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ENTIRE TRANSFER PRICING ADJUSTMENT MADE BY IT. GROUND NO. 11 IS ACCORDINGLY ALLOWED. GROUND NO. 12 RELATES TO THE COMPUTATION OF DEDUCTI ON U/S. 80HHC ON THE BASIS OF BOOK PROFIT FOR COMPUTING MAT. 32. THE A.O HAS CONSIDERED THIS ISSUE AT PARA 14A ON PA GE 35 OF HIS ORDER AND AT PAGE 36, THE A.O FOLLOWED THE DECISION OF THE LD . CIT(A) GIVEN IN EARLIER YEARS. LD. CIT(A) HAS CONSIDERED THE GRIEVANCE OF T HE ASSESSEE AT PARA 25 ON PAGE 37 OF HIS ORDER WHEREIN HE HAS FOLLOWED THE FINDINGS GIVEN IN A.Y. 2001-02. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT FOR THE ASSESSMENT YEAR 2001-02, THE TRIBUNAL HAS DECIDED T HIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. WE FIND THAT THE TRIBUNAL IN ITA NO. 3289 & 3434/AHD/2003 HAS CONSIDERED AN I DENTICAL ISSUE AT PARA 1.2 OF ITS ORDER WHEREIN THE TRIBUNAL HAS FOLL OWED THE DECISION GIVEN IN ASSESSEES OWN CASE IN THE PAST FOR A.Y. 1999-20 00 IN ITA NO. 3047 & 3272/AHD/2002 WHEREIN THE CO-ORDINATE BENCH HAS FOL LOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA 327 ITR 305, BHARI INFORMATION TECH SYSTEMS (P) LTD. 340 ITR 59 3 AND SYNCOME FORMULATIONS LTD. 292 ITR 144. RESPECTFULLY, FOLLOW ING THE FINDINGS GIVEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL AND FOLLOW ING THE PAST DIRECTIONS OF THE TRIBUNAL, WE REFER THIS ISSUE BACK TO THE FI LES OF A.O TO BE DECIDED ACCORDINGLY AS PER LAW AND AS PER THE DIRECTIONS OF THE TRIBUNAL IN EARLIER ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 18 ASSESSMENT YEARS. THIS GROUND OF ASSESSEE ON THE SA ME LINES IS ACCORDINGLY ALLOWED. GROUND NO. 13 RELATES TO THE NON-ALLOWANCE OF DEDUC TION OF BOOK LOSSES OF MJPL U/S. 115JB (2) (III) OF THE ACT. 33. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E FAIRLY CONCEDED THAT THIS ISSUE MAY BE DECIDED IN FAVOUR OF THE REVENUE AND A GAINST THE ASSESSEE. ON SUCH CONCESSION, THE FINDINGS OF THE LD. CIT(A) ARE CONFIRMED, THIS GROUND IS ACCORDINGLY DISMISSED. 34. GROUND NO. 14 RELATES TO THE ADDITION OF DEFERRED T AX PROVISION U/S. 115JB OF THE ACT. ONCE AGAIN, THE LD. COUNSEL FOR THE ASS ESSEE STATED THAT DUE TO THE RETROSPECTIVE AMENDMENT BROUGHT TO IN CLAUSE (V III) OF 115JB, THIS ISSUE MAY ALSO BE DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. CONSIDERING THE RETROSPECTIVE AMENDMENT AN D ON THE BASIS OF THE CONCESSION MADE THIS GROUND IS DISMISSED. GROUND NO. 15 RELATES TO THE DISALLOWANCE OF INVEST MENT WRITTEN OFF IN MJPL FOR COMPUTING PROFITS U/S. 115JB OF THE ACT. 35. THIS ISSUE HAS BEEN DISCUSSED BY THE A.O. AT PARA 1 4.D ON PAGE 38 OF HIS ORDER WHEREIN HE HAS OBSERVED THAT THE ASSESSEE HAS ADDED BACK RS. 2,63,76,778/- BEING AMOUNT WRITTEN OFF ON ACCOUNT O F INVESTMENT IN MJPL. THE A.O. FURTHER OBSERVED THAT WHILE CALCULATING TH E PROFIT U/S. 115JB. THE ASSESSEE HAS NOT ADDED BACK THE SAID WRITE OFF WHEN THE ASSESSEE WAS ASKED ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 19 TO JUSTIFY ITS STAND, IT WAS EXPLAINED THAT IT IS A WRITE OFF AND NOT A PROVISION. A.O DID NOT ACCEPT THIS CONTENTION AND A DDED RS. 2,63,76,778/- TO THE BOOK PROFIT U/S. 115JB OF THE ACT. 36. AGGRIEVED BY WHICH THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER CONTRA, THE LD. D.R. STRONGLY SUBMITTED THAT DUE TO THE AMENDMENT BROUGH T IN SECTION 115JB, THE PROVISIONS MADE BY THE ASSESSEE CANNOT BE ALLOW ED AND HAVE TO BE ADDED BACK FOR THE COMPUTATION OF BOOK PROFIT. THE LD. D.R. STRONGLY PLACED RELIANCE ON THE DECISION IN THE CASE OF STER IPLATE PVT. LTD. 338 ITR 547 (P & H), MYSORE BEVERAGE 227 ITR 59 (KARNATAKA) . THE LD. D.R. STRONGLY CONTENDED THAT IN VIEW OF INTRODUCTION OF CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB TO BY FINANCE ACT, 2 009 ADJUSTMENT CLAIMED ON ACCOUNT OF PROVISION FOR DIMINUTION IN V ALUE OF INVESTMENT WAS NOT TENABLE. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE STRONGLY STATED THAT THE REVENUE AUTHORITIES HAVE FAILED TO APPRECIATE THE FACTS IN THE RIGHT PERSPECTIVE. IT IS THE SAY OF THE LD. COUNSEL THAT THE SAID AMENDMENT REFERRED BY THE LD. D.R. IS NOT APPLICABLE TO THE F ACTS OF THE CASE AND SIMULTANEOUSLY, THE DECISIONS RELIED UPON BY THE LD . D.R. ARE MISPLACED. 37. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS IN ISSUE. THERE IS NO DOUBT THAT THE ASSESSEE HAS WRITTEN OFF THE INVESTM ENTS MADE IN MJPL. THUS, IT CAN BE SAID WITH CERTAINTY THAT NO PROVISI ON HAS BEEN MADE AND IT IS A CASE OF WRITE OFF ONLY. THEREFORE IN OUR CONSIDER ED OPINION, THE AMENDED PROVISIONS DO NOT APPLY ON THE FACTS OF THE CASE. A CCORDINGLY, WE SET ASIDE ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 20 THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O T O DELETE RS. 2,63,76,778/- WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. GROUND NO. 15 IS ACCORDINGLY ALLOWED. GROUND NO. 16 & 18 ARE TAKEN UP TOGETHER AND BOTH R ELATES TO THE NON- ADJUDICATION OF THE GRIEVANCE OF THE ASSESSEE BY TH E LD. CIT(A). 38. WHILE DISCUSSING THE GRIEVANCE OF THE ASSESSEE AT P ARA 30.3 AND ALSO AT PARA 32.2 OF HIS ORDER, THE LD. CIT(A) HAS OBSERVED THAT THESE GROUNDS OF APPEAL ARE NOT EMANATING FROM THE ACTION OF THE A.O . HENCE, CANNOT BE ENTERTAINED AT THIS STAGE. BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE STATED THAT LEGAL ISSUES CAN BE TAKEN UP AT ANY STAGE AND THE APPELLATE AUTHORITIES ARE BOUND TO CONSIDER SUCH LEGAL ISSUES. WE FIND FO RCE IN THE CONTENTION OF THE LD. COUNSEL SINCE BOTH THESE GROUNDS RELATES TO LEGAL ISSUES RAISED BY THE ASSESSEE NOT ENTERTAINED BY THE REVENUE AUTHORITIES . IN OUR CONSIDERED OPINION, THE MATTER DESERVES TO BE DECIDED AFRESH A S THE ASSESSEE CAN TAKE UP LEGAL ISSUES AT ANY STAGE. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PRUTHVI BROKERS & SHARES PVT. LTD. 349 ITR 336. WE ACCORDIN GLY RESTORE THIS ISSUE TO THE FILES OF THE A.O. THE A.O IS DIRECTED TO DEC IDE THESE ISSUES AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE AND AS PER THE PROVISIONS OF THE LAW. GROUND NO. 17 RELATES TO THE INCLUSION OF INCOME FR OM SCRAP SALE, MISCELLANEOUS INCOME AND INTEREST ON LOANS TO EMPLO YEES FROM PROFITS COMPUTED U/S. 80IB OF THE ACT. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 21 39. IN SO FAR AS, INCLUSION OF SALE OF SCRAP IS CONCER NED, WE FIND THAT THE TRIBUNAL IN ITS ORDER IN ITA NOS. 3289 & 3434/AHD/2 003 IN ASSESSEES OWN CASE FOR A.Y. 2001-02 HAS FOLLOWED THE FINDINGS OF THE TRIBUNAL GIVEN IN A.Y. 1999-2000 & 2000-01 AND DIRECTED THE A.O TO RE-COMPUTE THE TURNOVER AFTER EXCLUDING THE SALE AMOUNT OF SCRAP. RESPECTFULLY, FOLLOWING THE FINDINGS OF THE TRIBUNAL (SUPA), WE DIRECT THE A.O TO DECIDE THE ISSUE IN LINE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN E ARLIER ASSESSMENT YEARS. IN SO FAR AS, THE ISSUE RELATING TO MISCELLANEOUS I NCOME AND INTEREST ON LOANS TO EMPLOYEES, THE A.O IS DIRECTED TO DECIDE T HE ISSUE AFRESH IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA 317 ITR 218. GROUND NO. 17 IS ACCORDI NGLY ALLOWED. 40. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ITA NO. 1676/AHD/2006 REVENUES APPEA L THE 1 ST GROUND RELATES TO THE GRANT OF DEDUCTION U/S. 80HH C AFTER EXCLUDING EXCISE DUTY AND SALES- TAX FROM TURNOVER. 41. WHILE COMPUTING THE ASSESSED INCOME, THE A.O HAS IN CLUDED EXCISE DUTY AND SALES TAX IN THE TOTAL TURNOVER FOR CALCULATING DEDUCTION U/S. 80HHC OF THE ACT. WHEN THE MATTER WAS AGITATED BEFORE THE LD . CIT(A), THE LD. CIT(A) DIRECTED THE A.O TO EXCLUDE EXCISE DUTY AND SALES TAX FROM THE TURNOVER FOLLOWING THE APPELLATE ORDER GIVEN IN A.Y . 2001-02. WE FIND THAT THE APPELLATE ORDER FOR A.Y. 2001-02 WAS CONFIRMED BY THE TRIBUNAL IN ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 22 ITA NOS. 3289 & 3434/AHD/2003. WE FIND THAT THE TRI BUNAL HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT GIVEN IN THE CASE OF LAXMI MACHINE WORKS 290 ITR 667. RESPECTFULLY, FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH WHICH IS IN LINE WITH THE DECISIO N OF THE HONBLE SUPREME COURT (SUPRA), WE CONFIRM THE FINDINGS OF L D. CIT(A), GROUND NO. 1 IS ACCORDINGLY DISMISSED. GROUND NO. 2 RELATES TO THE GRANT OF DEDUCTION U/S. 80HHC WITHOUT INCLUDING INSURANCE CLAIM IN TOTAL TURNOVER. 42. THE A.O HAS DISCUSSED THIS ISSUE AT PARA 4F ON PAGE 7 OF HIS ORDER WHEREIN HE HAS INCLUDED THE INSURANCE CLAIM AS PART OF THE TOTAL TURNOVER. THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA 11 ON PAGE 5 OF HIS ORDER AND AT PARA 11.1, THE LD. CIT(A) HAS FOLLOWED THE DECIS ION GIVEN IN EARLIER ASSESSMENT YEARS. WE FIND THAT THE TRIBUNAL IN A.Y. 2000-01 IN ITA NOS. 1400 & 1622/AHD/2003 HAS RESTORED IDENTICAL ISSUES TO THE FILES OF THE A.O QUA DIRECTIONS GIVEN IN PARA 17.5 OF ITS ORDER. RES PECTFULLY, FOLLOWING THE FINDINGS GIVEN BY THE CO-ORDINATE BENCH, WE DIRECT THE A.O TO DECIDE THE ISSUE ON THE SAME LINES. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 RELATES TO THE CONSIDERATION OF NET LEASE RENT INSTEAD OF GROSS LEASE RENT FOR COMPUTING DEDUCTION U/S. 80H HC OF THE ACT. 43. WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE FINDIN GS GIVEN IN A.Y. 2001- 02 WHICH HAS BEEN CONSIDERED BY THE TRIBUNAL IN ITA NOS. 3289 & ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 23 3434/AHD/2003. THE TRIBUNAL HAS CONSIDERED AN IDENT ICAL ISSUE AT PARA 16 OF ITS ORDER AND AT PARA 17.1, THE TRIBUNAL HAS FOL LOWED ITS OWN ORDER FOR A.Y. 2000-01 AND DISMISSED REVENUES GROUND. AS NO NEW FACTS HAVE BEEN BROUGHT BEFORE US. RESPECTFULLY, FOLLOWING THE FIND INGS OF THE CO-ORDINATE BENCH, GROUND NO. 3 IS DISMISSED. GROUND NO. 4 RELATES TO THE COMPUTATION OF DEDUCTIO N U/S. 80HHC OF THE ACT BY NETTING OF INTEREST INCOME. 44. WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS FOLL OWED THE FINDINGS OF THE LD. CIT(A) GIVEN IN A.Y. 2000-01 WHICH HAS BEEN CON FIRMED BY THE TRIBUNAL IN ITA NO. 1400 & 1622/AHD/2003. AS NO NEW DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE HAS BEEN BROUGHT BEFORE US, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH, WE CONFIRM THE FINDINGS OF THE LD. CIT(A). GROUND NO. 4 IS ACCORDINGLY DISM ISSED. GROUND NO. 5 RELATES TO THE REALLOCATION OF CORPORA TE OFFICE EXPENSES AMONGST VARIOUS UNITS FOR COMPUTING PROFITS ELIGIBL E FOR DEDUCTION U/S. 80IB. 45. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US IN ASSESS EES APPEAL (SUPRA) VIDE GROUND NO. 7 OF THAT APPEAL. FOR OUR DETAILED DISCU SSION THEREIN THIS GROUND IS DECIDED ACCORDINGLY. 46. GROUND NOS. 6 & 7 RELATES TO THE TRANSFER PRICING I SSUES. THE TRANSFER PRICING ISSUES HAVE BEEN DISCUSSED AT LENGTH BY US IN ASSESSEES APPEAL QUA ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 24 GROUND NO. 11. FOR OUR DETAILED DISCUSSION THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 8 RELATES TO THE DELETION OF DISALLOWANC E OF AMALGAMATION EXPENSES. 47. THIS ISSUE HAS TO BE DECIDED IN FAVOUR OF THE ASSES SEE AND AGAINST THE REVENUE BY FOLLOWING THE DECISIONS GIVEN IN THE CAS E OF BOMBAY DYEING & MANUFACTURING CO. LTD. 219 ITR 521, IN THE CASE OF MIHIR TEXTILES LTD. 256 ITR 528 WHICH HAVE BEEN FOLLOWED IN THE CASE OF AKME ELECTRONICS & CONTROL (P) LTD. 267 ITR 396. GROUND NO. 8 IS ACCOR DINGLY DISMISSED. 48. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ITA NO. 1513 ASSESSEES APPEAL F OR A.Y. 2003-04. GROUND NO. 1 RELATES TO THE TREATMENT OF BALANCE UN DER EEFC ACCOUNT AS PART OF TOTAL TURNOVER. 49. AN IDENTICAL ISSUE WAS DECIDED BY US IN A.Y. 2002-0 3 VIDE ITA NO. 1558/AHD/2006 QUA GROUND NO. 2 OF THAT APPEAL. RESP ECTFULLY, FOLLOWING OUR OWN DECISION, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND ALLOW THIS GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 50. GROUND NO. 2 HAS NOT BEEN PRESSED BEFORE US AND THE SAME IS DISMISSED AS NOT PRESSED. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 25 GROUND NO. 3 RELATES TO THE INCLUSION OF SALE OF SC RAP IN TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S. 80HHC. 51. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN APP EAL FOR A.Y. 2002-03 IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 17 OF THAT APP EAL. RESPECTFULLY, FOLLOWING OUR OWN DECISION GIVEN IN THAT APPEAL, TH IS GROUND IS DECIDED ACCORDINGLY. SIMILAR IS THE ISSUE TAKEN UP IN GROUN D NO. 4 AND FOR SIMILAR REASONS FOLLOWING OUR OWN ORDER GIVEN IN A.Y. 2002- 03 (SUPRA), WE DECIDE ACCORDINGLY. GROUND NO. 5 RELATES TO THE REALLOCATION OF EXPENSE S OF R & D FOR COMPUTING DEDUCTION U/S. 80IB. 52. SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 6 OF THAT APPEAL. FOR SIMILAR REASONS, W E DECIDE THIS GROUND ACCORDINGLY. GROUND NO. 6 RELATES TO THE DISALLOWANCE OF EXPENSE S FOR INCREASE IN SHARE CAPITAL. 53. THIS ISSUE IS SIMILAR TO THE ISSUE CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 8 OF THAT APPEAL. FOR SIMILAR REASONS, WE DECIDE THIS GROUND ACCORDINGLY. GROUND NO. 7 RELATES TO THE DISALLOWANCE OF PUBLIC ISSUE EXPENSES AND AMALGAMATION EXPENSES U/S. 35D & 35DD OF THE ACT. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 26 54. SIMILAR ISSUES WERE CONSIDERED BY US IN A.Y. 2002-0 3 IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 9 OF THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN THIS GROUND IS DECIDED ACCORDING LY. GROUND NO. 8 RELATES TO THE DISALLOWANCE OF TRADE M ARK REGISTRATION CHARGES AND OVERSEAS PRODUCT REGISTRATION CHARGES U/S. 35(2 AB) OF THE ACT. 55. SIMILAR ISSUE HAS BEEN DECIDED BY US IN ITA NO. 155 8/AHD/2006 QUA GROUND NO. 10 OF THAT APPEAL. FOR OUR DETAILED DISC USSION THEREIN THIS GROUND IS DECIDED ACCORDINGLY. 56. GROUND NO. 9 RELATES TO THE TRANSFER PRICING ISSUES . SIMILAR TRANSFER PRICING ADJUSTMENT HAS BEEN CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 11. FOR OUR DETAILED DISCUSSION THER EIN THIS GROUND IS DECIDED ACCORDINGLY. 57. GROUND NO. 10 IS NOT PRESSED AND IS DISMISSED AS NO T PRESSED. GROUND NO. 11 RELATES TO THE COMPUTATION OF DEDUCTI ON U/S. 80HHC ON THE BASIS OF BOOK PROFIT FOR COMPUTING MAT. 58. SIMILAR ISSUE HAS BEEN DECIDED IN ITA NO. 1558/AHD/ 2006 QUA GROUND NO. 12 OF THAT APPEAL. FOR SIMILAR REASONS, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 12 RELATES TO THE ADDITION OF DEFERRED TAX PROVISION. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 27 59. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US IN ITA NO . 1558/AHD/2006 QUA GROUND NO. 14 OF THAT APPEAL. FOR SIMILAR REASONS, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 13 IS OF GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 60. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ITA NO. 1701/AHD/2007 REVENUES APPEAL F OR A.Y. 2003-04. GROUND NO. 1 RELATES TO THE GRANT OF DEDUCTION U/S . 80HHC AFTER EXCLUDING EXCISE DUTY AND SALES-TAX FROM TURNOVER. 61. SIMILAR ISSUE HAS BEEN DECIDED IN A.Y. 2002-03 IN I TA NO. 1676/AHD/2006 QUA GROUND NO. 1 WHEREIN WE HAVE FOLL OWED THE DECISION OF THE HONBLE SUPREME COURT IN 290ITR 667. FOR OUR DETAILED DISCUSSION THEREIN GROUND NO. 1 IS DECIDED ACCORDINGLY. GROUND NO. 2 RELATES TO THE GRANT OF DEDUCTION U/S. 80HHC EXCLUDING INSURANCE CLAIM IN TOTAL TURNOVER. 62. SIMILAR ISSUE HAS BEEN DECIDED BY US IN ITA NO. 167 6/AHD/2006 VIDE GROUND NO. 2 OF THAT APPEAL. FOR SIMILAR REASONS TH IS GROUND IS DECIDED ACCORDINGLY. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 28 GROUND NO. 3 RELATES TO THE CONSIDERATION OF NET LEASE RENT INSTEAD OF GROSS LEASE RENT FOR COMPUTING DEDUCTION U/S. 80HHC. 63. SIMILAR ISSUES ARE DECIDED IN ITA NO. 1676/AHD/2006 QUA GROUND NO. 3 OF THAT APPEAL. RESPECTFULLY, FOLLOWING OUR OWN DECISI ON THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 4 RELATES TO THE GRANT OF DEDUCTION U/S. 80HHC BY NETTING INTEREST INCOME. 64. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN A.Y . 2002-03 IN ITA NO. 1676/AHD/2006 QUA GROUND NO. 4 OF THAT APPEAL. FOR SIMILAR REASONS THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 5 RELATES TO NOT TREATING THE INTER UNIT SALES AS TURNOVER FOR COMPUTING DEDUCTION/S. 80HHC OF THE ACT. 65. THIS ISSUE HAS BEEN CONSIDERED BY THE A.O AT PARA 1 1.8 ON PAGE 28 OF HIS ORDER WHEREIN THE A.O HAS OBSERVED THAT THE ASSESSE E HAS REDUCED THE AMOUNT OF RS. 689073856/- FROM THE TURNOVER WHILE C ALCULATING TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC. ASSESSEE WAS ASKED TO EXPLAIN THIS. ASSESSEE VIDE A LETTER DATED 27.12.2005 EXPLA INED THAT THE INTER UNIT SALES ARE NOT BASICALLY SALES OF THE COMPANY AS A W HOLE THE PRODUCTS MANUFACTURED BY ONE UNIT BY THE COMPANY ARE TRANSFE RRED/CAPTIVELY USED BY THE OTHER UNITS OF THE COMPANY. HENCE, THERE IS NO SALE PER SAY ACCORDINGLY THE INTER UNIT SALES SHOULD NOT BE INCL UDED IN TOTAL TURNOVER. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 29 THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O WHO PROCEEDED BY INCLUDING THE INTER UNIT SALES IN THE TOTAL TURN OVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 80HHC OF THE ACT. 66. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM. THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE VIDE G ROUND NO. 10 BEFORE HIM AT PAGE 30 OF HIS ORDER AND AFTER CONSIDERING T HE ISSUE IN DETAIL FINALLY DIRECTED THE A.O TO RECALCULATE THE DEDUCTION U/S. 80HHC AFTER EXCLUDING INTER UNIT TRANSFER OUT OF TOTAL TURNOVER. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF A.O. THE LD. COUNSEL FOR THE ASSESSEE R EITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS IN ISSUES BEFORE US. AT THE VERY OUTSET, WE HAVE TO STATE THAT NOBODY CAN DO BUSINESS WITH ITS OWN SELF MEANING THEREBY THAT A PERSON CANNOT SELL GOODS TO ITSELF. EVEN UNDER THE SALE OF GOODS ACT SUCH TRANSACTION ARE NOT CONSIDERED AS SALES. 67. THEREFORE IN OUR CONSIDERED OPINION THE INTER UNIT TRANSACTIONS CANNOT BE CONSIDERED AS SALES TO FORM PART OF THE TOTAL TURNO VER FOR THE COMPUTATION OF DEDUCTION U/S. 80HHC OF THE ACT. WE THEREFORE, DECL INE TO INTERFERE WITH THE FINDING OF LD. CIT(A). GROUND NO. 5 IS ACCORDIN GLY ALLOWED. GROUND NOS. 6, 7 & 8 PERTAIN TO THE TRANSFER PRIC ING ADJUSTMENT. 68. THIS ISSUE HAS BEEN DISCUSSED AT LENGTH BY US IN IT A NO. 1558/AHD/2006 QUA GROUND N. 11 OF THAT APPEAL AND WHICH HAS ALSO BEEN CONSIDERED IN ASSESSEES APPEAL IN ITA NO. 1513/AHD/2007 VIDE GRO UND NO. 9 (SUPRA). ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 30 FOR OUR DETAILED DISCUSSION IN ITA NO. 1558/AHD/200 6, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 9 RELATES TO THE CLAIM OF EXEMPTION TO P ANOLI AND AHMEDNAGAR UNIT U/S. 10B. 69. AN IDENTICAL ISSUE WAS CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 18 OF THAT APPEAL. FOLLOWING OUR OWN FIN DINGS THEREIN, WE DECIDE THIS GROUND ACCORDINGLY. GROUND NO. 10 RELATES TO THE DIRECTION TO THE A.O N OT TO EXCLUDE INTEREST ON OVERDUE BILLS FROM GROSS SALES FOR COMPUTATION OF DEDUCTION U/S. 80IB OF THE ACT. 70. IN OUR CONSIDERED OPINION, THIS ISSUE IS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIRMA LTD. 283 ITR 403. RESPECTFULLY, FOLLOWING THE SAME, WE DECIDE THIS IS SUE ACCORDINGLY IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 71. GROUND NO. 11 & 12 ARE OF GENERAL IN NATURE AND NEE DS NO SEPARATE ADJUDICATION. 72. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ITA NO. 1193/AHD/2008 ASSESEES APPEAL FOR A.Y. 200 4-05. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 31 73. GROUND NO. 1 IS OF GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION. GROUND NO. 2 RELATES TO THE TRANSFER PRICING ADJUS TMENTS ON ACCOUNT OF OVERRIDING COMMISSION PAID TO ASSOCIATED ENTERPRISE . 74. THIS ISSUE HAS BEEN DISCUSSED BY US IN DETAIL IN IT A NO. 1558/AHD/2006 QUA GROUND NO. 11 OF THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. 75. GROUND NO. 3 HAS NOT BEEN PRESSED AND THE SAME IS D ISMISSED AS NOT PRESSED. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF PUBLIC ISSUE EXPENSES AND AMALGAMATION EXPENSES. 76. SIMILAR ISSUES HAVE BEEN CONSIDERED BY US IN ITA NO . 1558/AHD/2006 QUA GROUND NO. 9 OF THAT APPEAL. FOR OUR DETAILED DISCU SSION THEREIN, THIS GROUND OF APPEAL IS DECIDED ACCORDINGLY. GROUND NO. 5 RELATES TO THE DISALLOWANCE OF TRAD E MARK REGISTRATION CHARGES AND OVERSEAS PRODUCT REGISTRATION CHARGES. 77. SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 10 OF THAT APPEAL. FOR THE REASONS GIVEN THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 32 GROUND NO. 6 RELATES TO THE EXCLUSION OF OTHER INCO ME FOR COMPUTING DEDUCTION U/S. 80IB OF THE ACT. 78. A SIMILAR ISSUE HAS BEEN DECIDED BY US IN ITA NO. 1 558/AHD/2006 QUA GROUND NO. 17 OF THAT APPEAL. FOR OUR DETAILED DISC USSION THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 7 RELATES TO THE REALLOCATION OF EXPENSE S OF R & D FOR COMPUTING DEDUCTION U/S. 80IB OF THE ACT. 79. SIMILAR ISSUES WERE THERE IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 6 OF THAT APPEAL. FOR THE REASONS THEREIN, THIS GROUND I S DECIDED ACCORDINGLY. GROUND NO. 8 RELATES TO THE TREATMENT OF BALANCE UN DER EEFC ACCOUNT AS PART OF TOTAL TURNOVER. 80. A SIMILAR ISSUE WAS THERE IN ITA N0. 1558/AHD/2006 QUA GROUND NO. 2 OF THAT APPEAL. FOR THE DETAILED REASONS GIVEN THEREIN , THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 9 RELATES TO THE INCLUSION OF SALE OF SC RAP IN TOTAL TURNOVER FOR COMPUTING OF DEDUCTION U/S. 80HHC. 81. A SIMILAR ISSUE WAS DECIDED BY US IN ITA NO. 1558/A HD/2006 QUA GROUND NO. 4 OF THAT APPEAL. FOR THE REASONS GIVEN THEREIN , WE DECIDE THIS GROUND ACCORDINGLY. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 33 GROUND NO. 11 RELATES TO THE ADDITION OF DEFERRED T AX PROVISION U/S. 115JB AND PRIOR PERIOD ADJUSTMENT FOR DEFERRED TAX. 82. AN IDENTICAL ISSUE WAS CONSIDERED BY US IN ITA NO. 1558/AHD/2006 QUA GROUND NO. 14 OF THAT APPEAL. FOR SIMILAR REASONS, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 12 RELATES TO THE ADDITION MADE ON ACCOU NT OF SALES TO SUN PHARMACEUTICAL INDUSTRIES. 83. THIS ISSUE HAS BEEN CONSIDERED BY THE A.O AT PARA 1 2 OF HIS ORDER. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED ON THE AS SESSEE AS WELL AS ITS SISTER CONCERN SUN PHARMACEUTICAL INDUSTRIES WHICH IS A PARTNERSHIP FIRM. DURING THE COURSE OF THE SURVEY OPERATIONS, IT WAS NOTICED THAT THE ASSESSEE HAS BEEN SELLING CERTAIN RAW MATERIALS /PRODUCTS TO ITS SISTER CONCERN AT A LOWER RATE THAN WAS SOLD TO THIRD PARTIES AND THERE BY DIVERTING THE PROFITS. ASSESSEE WAS ASKED TO EXPLAIN ITS STAND. ASSESSEE F ILED A DETAILED REPLY GIVING DETAILS OF RAW MATERIALS/PRODUCTS BEING SOLD TO ITS SISTER CONCERN AND TO THIRD PARTIES ALONG WITH RATES AND QUANTITY SOLD . ON ANALYSIS OF THE REPLY, THE A.O FOUND THAT THERE WERE CERTAIN RAW MATERIALS /PRODUCTS WHICH WERE BEING SOLD TO THE SISTER CONCERN AT A LOWER RATE TH AN SOLD TO THIRD PARTIES. THE A.O PROCEEDED BY COMPUTING AN ADDITION OF RS. 1 9,49,930/- ON ACCOUNT OF UNREASONABLY LOW SELLING PRICE ON SALE O F RAW MATERIALS/PRODUCTS SOLD TO ITS SISTER CONCERN. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 34 84. AGGRIEVED BY THIS, ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 85. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT IT IS NOT CLEAR UNDER WHICH PROVISION OF THE ACT ADDITIONS HAVE BEEN MADE . FURTHER THE COUNSEL STATED THAT NO 80IB DEDUCTION HAS BEEN CLAIMED BY I T WHICH COULD JUSTIFY THE ACTION OF THE A.O. PER CONTRA, THE LD. D.R. STR ONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 86. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE AGREE WITH THE CONTENTION OF THE LD. COUN SEL THAT NO SPECIFIC SECTION HAS BEEN MENTIONED IN THE ASSESSMENT ORDER FOR MAKING THE IMPUGNED ADDITIONS. A PERUSAL OF THE ASSESSMENT ORD ER SHOW THAT THE ADDITIONS HAVE BEEN MADE BY TREATING THE TRANSACTIO NS U/S. 40A(2) OF THE ACT. IN THAT CASE, WE HAVE TO STATE THAT PROVISIONS OF SECTION 40A(2) ARE APPLICABLE ONLY IN RESPECT OF PAYMENTS MADE TO RELA TED PARTIES MENTIONED THEREIN. BUT THE TRANSACTION BEFORE US IS OF CREDIT IN NATURE I.E. SALES SO PROVISIONS OF SECTION 40A(2) ARE NOT AT ALL APPLICA BLE. 87. IF THE TRANSACTIONS ARE LOOKED UPON KEEPING IN SIGH T THE PROVISIONS OF SECTION 80IB/80IA THAN THE A.O HAS NOT BROUGHT ON R ECORD ANY CLAIM U/S. 80IB OF THE ACT MADE BY THE ASSESSEE. THEREFORE THI S ADDITION IS ALSO NOT JUSTIFIABLE ON THIS COUNT. CONSIDERING THE NATURE O F TRANSACTION FROM ALL POSSIBLE ANGLES, WE FIND NO JUSTIFICATION IN THE IM PUGNED ADDITIONS MADE BY THE A.O. WE ACCORDINGLY DIRECT THE A.O TO DELETE THE ADDITION OF RS. 19,49,930/-. GROUND NO. 12 IS ACCORDINGLY ALLOWED. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 35 GROUND NO. 13 RELATES TO THE DISALLOWANCE OF EXPENS ES INCURRED ON BEHALF OF SUN PHARMACEUTICAL INDUSTRIES. 88. THIS ISSUE HAS BEEN DISCUSSED BY THE A.O AT PARA 13 OF HIS ORDER WHEREIN HE HAS MENTIONED THAT DURING THE COURSE OF SURVEY O PERATIONS. A COPY OF PARTNERSHIP DEED BETWEEN THE ASSESSEE AND SUN PHARM ACEUTICAL INDUSTRIES (SPI) WAS FOUND ALONG WITH A COPY OF SUPPLEMENTARY PARTNERSHIP DEED. THE A.O FURTHER OBSERVED THAT AS PER THE PARTNERSHIP DE ED, THE ASSESSEE WAS ENTITLED TO DRAW YEARLY REMUNERATION OF 15% OF THE NET PROFITS OF THE PARTNERSHIP FIRM. THE A.O FURTHER OBSERVED THAT THE ASSESSEE HAD RECEIVED 15% OF NET PROFITS OF SPI RS. 15,75,55,219/- AS PER THE AGREEMENT OF PARTNERSHIP. HOWEVER, THE A.O NOTICED THAT THE PART NERSHIP FIRM HAS NOT DEBITED THIS REMUNERATION PAID TO THE ASSESSEE BY T AKING RECOURSE TO THE PROVISIONS OF SECTION 40(B) WHEREIN REMUNERATION IS ALLOWED TO A WORKING PARTNER WHO IS AN INDIVIDUAL. 89. THE A.O FURTHER NOTICED THAT THOUGH THE REMUNERATIO N WAS NOT OFFERED FOR TAXATION BY THE ASSESSEE BUT IT HAS DEBITED THE EXP ENDITURE INCURRED ON BEHALF OF THE PARTNERSHIP FIRM IN ITS BOOKS OF ACCO UNT. THE A.O WAS OF THE FIRM BELIEF THAT THESE EXPENDITURES ARE NOT RELATED TO THE EARNING OF INCOME AND ACCORDINGLY DISALLOWED (A) SELLING AND DISTRI BUTION EXPENSES 25,68,21,928/- SALARY AND ALLOWANCE TO FIELD STAFF 24,12,98,724/- TOTALING TO RS. 49,81,20,652/-. THE A.O PROCEEDED BY DISALLOWIN G RS. 8,49,79,383/- BASED ON THE RATIO OF THE TOTAL TURNOVER OF THE ASS ESSEE AND THE PARTNERSHIP FIRM SPI. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 36 90. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA 26 VIDE GROUND NO. 25 BEFORE HIM. AFTER CONSIDERING THE FACTS AND THE SUB MISSIONS, THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSEE ALREADY HAD AN EXISTING SALES AND DISTRIBUTION NETWORK IN THE FORM OF C & F AGENT, ET C. THEREFORE THE ASSESSEE WAS NOT REQUIRED TO INCUR ANY ADDITIONAL/E XTRA EXPENSES FOR UNDERTAKING THE MARKETING FUNCTION FOR AND ON BEHAL F OF PARTNERSHIP FIRM. THE LD. CIT(A) FURTHER OBSERVED THAT MOST OF THE EX PENSES INCURRED BY THE ASSESSEE FOR THE SALES WERE IN THE NATURE OF FIXED EXPENSES. HOWEVER, THERE WERE SIMILAR ADDITIONAL EXPENSES INCURRED BY THE AS SESSEE FOR CARRYING OUT THE SALES FOR AND ON BEHALF OF THE PARTNERSHIP FIRM . THE LD. CIT(A) FINALLY CONCLUDED BY HOLDING THAT THE INCREMENTAL EXPENSES INCURRED BY THE ASSESSEE IN EXCESS WHAT WAS INCURRED IN THE PRECEDI NG YEAR TOWARDS THE MARKETING AND DISTRIBUTION SHOULD BE ALLOCATED AND ACCORDINGLY DIRECTED THE A.O TO RECALCULATE THE DISALLOWANCE. 91. AGGRIEVED BY THIS FINDING OF THE LD.CIT(A) BOTH ASS ESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. THE LD. D.R. STRONGLY STAT ED THAT SINCE THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM REMUNERATION FROM THE PARTNERSHIP FIRM. THE ASSESSEE WAS NOT ENTITLED FOR THE CLAIM OF DEDU CTION. THE LD. D.R. FURTHER STATED THAT NO BIFURCATION HAVE BEEN PROVID ED BY THE ASSESSEE TO SHOW THE EXPENSES INCURRED FOR THE PURPOSE OF THE B USINESS OF THE PARTNERSHIP FIRM AND FOR THE ASSESSEE COMPANY. THE D.R. CONCLUDED BY SAYING THAT THERE IS NO ERROR IN THE FINDINGS OF TH E A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CLAIM AND S TATED THAT THERE IS NO BASIS FOR ALLOCATING THE EXPENSES PRO RATA. THE LD. COUNSEL FURTHER STATED ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 37 THAT THE FIRST APPELLATE AUTHORITY FURTHER ERRED IN DISALLOWING THE EXPENDITURE ON PRO RATA BASIS ONLY ON INCREMENTAL E XPENSES. IT IS THE SAY OF THE LD. COUNSEL THAT THE DISALLOWANCE IS UNJUSTIFIA BLE. 92. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE HAVE ALSO GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THERE IS NO DENYING THAT THE PARTNERSHIP DEED HAS A PROVISION F OR THE PAYMENT OF REMUNERATION TO THE WHOLE TIME WORKING PARTNER BY V IRTUE OF WHICH THE ASSESSEE WAS ENTITLED FOR THE REMUNERATION. THERE I S 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 INDIVIDUA L AND THE ASSESSEE IS A LIMITED COMPANY. THEREFORE THE ASSESSEE COULD NOT H AVE SHOWN THIS REMUNERATION AS PART OF ITS COMPUTATION OF INCOME. IT IS ALSO A FACT THAT THE PARTNERSHIP FIRM HAS ALSO NOT DEBITED THIS REMUNERA TION TO ITS PROFIT AND LOSS ACCOUNT. HOWEVER, THE ASSESSEE COMPANY USING I TS NETWORK HAS INCURRED CERTAIN EXPENDITURE WHICH ACCORDING TO THE REVENUE AUTHORITIES ARE NOT DIRECTLY RELATED TO EARNING OF INCOME. IN OUR U NDERSTANDING OF THE LAW AN EXPENDITURE IS ALLOWABLE IF IT IS INCURRED FOR T HE 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 PART NERSHIP FIRM, THE ASSESSEE HAD ASSISTED THE PARTNERSHIP FIRM IN CARRY ING ON ITS BUSINESS BY USING ITS NETWORK FOR MARKETING THE PHARMACEUTICALS PRODUCTS SUCCESSIVELY. THUS, IT CANNOT BE SAID THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE ARE NOT FOR THE PURPOSES OF ITS BUSINESS. SINCE THE ASSESSE E IS HOLDING 95% IN THE PARTNERSHIP FIRM IT BECOMES THE DUTY OF THE ASSESSE E TO PROMOTE THE BUSINESS OF THE PARTNERSHIP FIRM, IN THE CAPACITY O F THE MAJORITY STAKE ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 38 HOLDER. INCIDENTALLY, THE REVENUE AUTHORITIES HAVE NOT BROUGHT ANYTHING ON RECORD WHICH COULD SUGGEST THAT THE EXPENDITURES HA VE NOT BEEN INCURRED FOR THE PURPOSES OF BUSINESS. BE IT ASSESSEES BUSI NESS OR THE BUSINESS OF THE PARTNERSHIP FIRM WHERE THE ASSESSEE IS A MAJORI TY STAKE HOLDER. THEREFORE, IN OUR CONSIDERED OPINION, THE EXPENDITU RES INCURRED BY THE ASSESSEE COMPANY DESERVES TO BE ALLOWED AND WE DIRE CT THE A.O TO DELETE THE ADDITION OF RS. 8,49,79,383/-. 93. IN THE RESULT, GROUND NO. 13 OF ASSESSEES APPEAL I S ALLOWED AND SIMULTANEOUSLY, GROUND NO. 14 OF REVENUES APPEAL I S DISMISSED. GROUND NO. 14 RELATES TO THE ADJUSTMENT OF BROUGHT FORWARD DEPRECIATION OF PHLOX PHARMACEUTICALS U/S. 72 WHILE COMPUTING PROFI TS OF THE BUSINESS FOR THE PURPOSE OF SECTION 80HHC. 94. IN PRINCIPLE, THE ISSUES RAISED IN THIS GROUND ARE COVERED BY GROUND NO. 11 OF ITA NO. 1558/AHD/2006. FOR OUR DETAILED DISCUSSI ON THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. 95. GROUND NO. 15 IS OF GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. ITA NO. 1287/AHD/2008 REVENUES APPEAL FOR A.Y. 2004-05. GROUND NO. 1 RELATES TO THE TRANSFER PRICING ADJUS TMENTS. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 39 96. THIS ISSUE HAS BEEN DISCUSSED AT LENGTH BY US IN IT A NO. 1558/AHD/2006 QUA GROUND NO. 11 OF THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 2 RELATES TO THE GRANT OF EXEMPTION U/S. 10B TO PANOLI AND AHMEDNAGAR UNIT . 97. THIS ISSUE HAS BEEN ACCEPTED BY THE REVENUE IN A.Y. 2002-03, THEREFORE, WE DO NOT FIND ANY MERIT IN THIS GRIEVANCE OF THE R EVENUE. FURTHER WE FIND THAT IN THE GROUNDS OF APPEAL ITSELF, THE REFERENCE GIVEN BY THE REVENUE RELATES TO THE ORDER DATED 25.07.2006 WHICH PERTAIN S TO F.Y. 2006-07 AND A.Y. 2007-08 WHEREAS WE ARE IN A.Y. 2004-05, THEREF ORE, THE SAID ORDER OF THE DEVELOPMENT COMMISSIONER IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. THEREFORE FOR THIS YEAR, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HOWEVER, THE A.O IS FREE TO TAKE A DIFFERENT VIEW IN THE RELEVANT ASSESSMENT YEAR, GRO UND NOS. 2 & 3 ARE DISMISSED. GROUND NO. 4 RELATES TO THE DELETION OF THE ADDITIO N ON ACCOUNT OF DEDUCTION U/S. 80IB. 98. THIS GROUND IS CONSEQUENTIAL TO THE ABOVE GROUND AN D IS DECIDED ACCORDINGLY. GROUND NO. 5 RELATES TO THE REALLOCATION OF R & D EXPENSES. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 40 99. THIS ISSUE HAS BEEN DISCUSSED AT LENGTH BY US IN IT A NO. 1558/AHD/2006 QUA GROUND NO. 6 OF THAT APPEAL. FOR OUR DETAILED D ISCUSSION THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 6 RELATES TO THE GRANT OF DEDUCTION U/S. 80HHC AFTER EXCLUDING EXCISE DUTY AND SALES-TAX FROM TOTAL TURNOVER. 100. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US IN ITA NO . 1676/AHD/2006 QUA GROUND NO. 1 OF THAT APPEAL. FOR SIMILAR REASON S, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 7 RELATES TO THE GRANT OF DEDUCTION U/S. 80HHC WITHOUT INCLUDING INSURANCE CLAIM IN TOTAL TURNOVER. 101. A SIMILAR ISSUE WAS CONSIDERED VIDE A GROUND NO. 9 IN ASSESSEES APPEAL FOR A.Y. 2002-03 IN ITA NO. 1558/AHD/06. FOR THE REASONS GIVEN THEREIN, THIS GROUND IS DECIDED ACCORDINGLY. GROUND NO. 8 RELATES TO THE CONSIDERATION OF NET LE ASE RENT INSTEAD OF GROSS LEASE RENT FOR COMPUTING DEDUCTION U/S. 80HHC OF TH E ACT. 102. AN IDENTICAL ISSUE WAS CONSIDERED BY US IN REVENUE S APPEAL FOR A.Y. 2002-03 IN ITA NO. 1676/AHD/2006 QUA GROUND NO. 3 O F THAT APPEAL. FOR THE REASONS GIVEN THEREIN, THIS GROUND IS DECIDED A CCORDINGLY. GROUND NO. 9 RELATES TO THE INCLUSION OF INTEREST O N OVERDUE BILLS FROM GROSS SALES FOR COMPUTING U/S. 80IB. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 41 103. AS MENTIONED ELSEWHERE, THIS ISSUE IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIRMA LTD. 283 ITR 403. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS DIS MISSED. GROUND NO. 10 RELATES TO NOT TREATING INTER UNIT SA LES AS TURNOVER FOR COMPUTING DEDUCTION U/S. 80HHC. 104. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US IN REVENU ES APPEAL FOR A.Y. 2003-04 IN ITA NO. 1701/AHD/2007 QUA GROUND NO. 5 O F THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN, THIS GROUND IS DEC IDED ACCORDINGLY. GROUND NO. 11 RELATES TO THE UNABSORBED LOSS OF AMA LGAMATING COMPANY. 105. THIS ISSUE IS PRINCIPALLY COVERED BY GROUND NO. 11 OF ITA NO. 1558/AHD/2006. WE DIRECT ACCORDINGLY. 106. GROUND NO. 12 RELATES TO THE EXCLUSION OF INCOME OF AHMEDNAGAR AND PANOLI UNITS FOR COMPUTING BOOK PROFIT U/S. 115JB. 107. THE GRIEVANCE RAISED VIDE THIS GROUND ARE CONSEQUEN TIAL TO THE GRIEVANCE TAKEN IN GROUND NO. 2 & 3 (SUPRA). FOR OU R DETAILED DISCUSSION GIVEN GROUND NO. 2 & 3 (SUPRA). THE GRIEVANCE RAISE D IN THIS GROUND IS TREATED AS CONSEQUENTIAL IN NATURE AND IS DECIDED A CCORDINGLY. ITA NOS. 1558 & 1676/A/06, 151 3 & 1701/A/07 & 1193 & 1287/AHD/08 . A.YS. 2002-03, 2003-04 & 2004- 05 42 GROUND NO. 13 RELATES TO THE ADDITION MADE ON ACCOU NT OF SALES MADE TO SUN PHARMACEUTICAL INDUSTRIES LTD. 108. THIS IS CONSEQUENTIAL TO AND IS PART OF GROUND NO. 12 TAKEN BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 1193/AHD/08 (SUPR A). FOR OUR DETAILED DISCUSSION GIVEN IN ASSESSEES APPEAL WHILE DECIDIN G GROUND NO. 12 FOR SIMILAR REASONS, THIS GROUND IS DECIDED ACCORDINGLY . GROUND NO. 14 RELATES TO THE DISALLOWANCE OF EXPENS ES INCURRED ON BEHALF OF SUN PHARMACEUTICAL INDUSTRIES LTD. 109. AS MENTIONED ELSEWHERE, THIS GROUND HAS BEEN DECIDE D WHILE DECIDING GROUND NO. 13 OF ASSESSEES APPEAL IN ITA NO. 1193/ AHD/2008. FOR OUR DETAILED REASONING GIVEN THEREIN, THIS GROUND IS DE CIDED ACCORDINGLY. 110. GROUND NOS. 15 & 16 ARE OF GENERAL IN NATURE AND NE EDS NO SEPARATE ADJUDICATION. ORDER PRONOUNCED IN OPEN COURT ON 22 - 02 - 2016. SD/- SD/- (S. K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD.