DCIT 7(3)(2), MUMBAI V. PIRAMAL ENTERRISES LTD, MUMBAI

ITA 1799/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0199 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A MOHAN
• Keywords: Capital asset; Gift; Depreciation; Transfer pricing; Share purchase agreement; Opportunity of being heard; Rule of consistency; Earning of tax free income; Competent authority; Revised return; Revenue expenditure; Capital expenditure; TDS; Rule 8D
• Section: 14A; 115JB; 80IC; 80IC; 48; 13; 22; 37

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE SRI SAKTIJIT DEY, JM AND SRI S RIFAUR RAHMAN, AM . / ITA NO. 1799 / MUM/ 2016 ( / ASSESSMENT YEAR 2011 - 12 ) THE DY. COMMISSIONER OF INCOME - TAX, RANGE - 7(3)(2), ROOM NO. 669A, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. PIRAMAL ENTERPRISES LIMITED (FORMERLY KNOWN AS PIRAMAL HEALTHCARE LIMITED) PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI - 400 013 ( / APPELLANT) ( / RESPONDENT) . / PAN NO. AAACN 4538 P . / ITA NO. 850 / MUM/ 2015 ( / ASSESSMENT YEAR 2011 - 12 ) PIRAMAL ENTERPRISES LIMITED (FORMERLY KNOWN AS PIRAMAL HEALTHCARE LIMITED) PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI - 400 013 / VS. THE DY. COMMISSIONER OF INCOME - TAX, RANGE - 7(3)(2), ROOM NO. 669A, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI A MOHAN, CIT DR / RESPONDENT BY : SHRI JEHANGIR D. MISTRI, MADHUR AGRAWAL, RONAK DOSHI, ARS / DA TE OF HEARING: 1 6 .0 3 .2020 / DATE OF PRONOUNCEMENT: 27 .0 5 . 2020 2 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED / O R D E R , / PER SAKTIJIT DEY , JM : THE AFORESAID CROSS APPEALS ARISES OUT OF ASSESSMENT ORDER DATED 29.01.20 16 PASSED UNDER SECTION 143 (3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT, 1961 PERTAINING TO ASSE SSMENT YEAR 2011 - 12 PURSUANT TO DIRECTION OF THE DISPUTE RESOLUTION PANEL (DRP) - 2, MUMBAI. ITA NO. 850/MUM/2016 - A PPEAL BY THE ASSESSEE 2. IN GROUND NO. (I), THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF SOFTWARE EXPENSES AMOUNTING TO 17,38,400/ - . 3. BRIEFLY STATED FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED EXPENDITURE INCURRED TOWARDS PURCHASE OF SOFTWARE AMOUNTING TO 17,38,400/ - . AFTER CALLING FOR NECESSARY DETAILS AND VER IFYING THEM, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE EXPENDITURE INCURRED TOWARDS PURCHASE OF SOFTWARE LICENSES SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE AND DEPRECIATION AT THE APPROPRIATE RATE SHOULD NOT BE ALLOWED. THO UGH, THE ASSESSEE OBJECTED TO THE PROPOSED ACTION OF THE ASSESSING OFFICER, HOWEVER, REJECTING THE SUBMISSIONS OF THE ASSESSEE, T HE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PURCHASE OF SOFTWARE BEING A CA PITAL EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION . H OWEVER, HE ALLOWED DE PRECIATION AT THE RATE OF 25% ON SUCH EXPENDITURE. THOUGH, 3 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED THE ASSESSEE CONTESTED THE A FORESAID DISALLOWANCE BEFORE LEARNED DISPUTE RESOLUTION PANEL, HOWEVER, THE DISALLOWANCE MADE WAS SUSTAINED. SHRI J . D . MISTRY, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED, WH ILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 , THE TRIBUNAL HAS ALLOWED ASSESSEES CLAIM OF DEDUCTION AS REVENUE EXPEND ITURE. WITHOUT PREJUDICE, HE SUBMITTED , EVEN IF THE EXPENDITURE IS TREATED AS CAPITAL , SINCE , IT RELATES TO SOFTWARE , DEPRECIATION AT THE RATE OF 60% IS ALLOWABLE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING ORDE RS OF THE TRIBUNAL PASSED IN ASSESEES OWN CASE (I) ITA NO. 1257/MUM/2014 DATED 07/05/2019 FOR ASSESSMENT YEAR 2009 - 10 (II) ITA NO. 1754/MUM/2015 DATED 15.01.2 020 FOR ASSESSMENT YEAR 2010 - 11. I N ADDITIO N, THE LEARNED COUNSEL RELIED UPON VARIOUS OTHER DECISIONS AS WELL. 4. SHRI A . MOHAN , THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH, AGREED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. HOWEVER, HE RELIED UPON THE OBSERVATION S OF THE REVENUE AUTHORITIES. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. AS COULD BE SEEN, THE DISPUTED D ISALLOWANCE IS IN RESPECT OF EXPENDITURE CLAIMED TOWARDS REPAIRS COMPUTERS - ANNUAL MAINTENANCE AND REPAIRS - COMPUTERS - OTHERS . T HE ASSESSING OFFICER HAS TREATED IT AS CAPITAL EXPENDITURE ON THE REASONING THAT IT WAS TOWARDS PURCHASE OF LICENSES AND ALLOWED DEPRECIATION AT THE RATE OF 25%. HOWEVER, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN 4 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED CASE IN ASSESSMENT YEAR 2009 - 10, THE TRIBUNAL ACCEPTING ASSESSEES CLAIM HAS ALLOWED THE DEDUCTION CLA IMED AS REVENUE EXPENDITURE. THE SAME VIEW WAS REITERATED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL IN ASSESSMENT YEAR 2010 - 11 IN THE ORDER S REFERRED TO ABOVE. FACTS BEING IDENTICAL , RESPECTFULLY FOLLOWING THE DECISION S OF THE CO - ORDINATE BENCH (SUP RA), WE ALLOW ASSESSEES CLAIM OF DEDUCTION. RESULTANTLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. CONSEQUENTLY, THE DEPRECIATION ALLOWED BY THE ASSESSING OFFICER ON THE EXPENDITURE CLAIMED IS ALSO REVERSED. 6. HAVING HELD SO, FOR THE SAKE OF COMPLETENESS WE MUST OBSERVE THAT THE ASSESSEE IS BOUND TO SUCCEED WITH REGARD TO ITS ALTERNATIVE CLAIM THAT EVEN IF THE EXPEND ITURE IS TREATED AS CAPITAL, DEPRECIATION WOULD BE ALLOWABLE AT THE RATE OF 60%. AS COULD BE SEEN , WHILE DECIDING SIMILAR ISSU E IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 (SUPRA), THE TRIBUNAL HAS ALLOWED DEPRECIATION AT T HE RATE OF 60%. T HIS GROUND IS ALLOWED. 7. IN GROUND NO.(II), ASSESSEE HAS CHALLENGED DISALLOWANCE OF DEDUCTION CLAMED UNDER SECTION 35(2)(AB) OF THE ACT AMOUNTING TO 27,82,95,269/ - . 8. BRIEFLY THE FACTS ARE , THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAD CLAIMED WEIGHTED DEDUCTION UNDER SECTION 35(2 AB) OF THE ACT CALLED FOR NECESSARY DETAILS . A FTER VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT THE DEDUCTION CLAMED IS IN RESPECT OF EXPENSES INCURRED IN THE 5 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED RESEARCH AND DEVELOPMENT (R&D) UNITS LOCATED AT ENN O RE AND GOREGAON. FURTHER, HE OBSERVED , AN APPROVAL FOR R&D UNITS WAS GRANTED BY THE COMPETENT AUTHORITY UP TO 31.03.2011. FURTHER, HE OBSERVED, W HEN THE ASSESSEE WAS CALLED UPON TO FURNISH APPROVAL OF THE COMPETENT AUTHORITY IN FORM 3CM FOR CLAIMING WEIGHTED DEDUCTION , IT EXPRESSED ITS INABILITY TO FURNISH THE SAME FOR THE IMPU GNED ASSESSMENT YEAR. THUS, IN ABSENCE OF FORM 3CM, THE ASSESSING OFFICE R DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 35(2AB) OF THE ACT. THE LEARNED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE AFORESAID DECISION OF THE ASSESSING OFFICER. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED, WHILE DECIDING IDENTICAL ISSU E IN THE PRECEDING ASSESSMENT YEARS, THE TRIBUNAL HAS RESTORED BACK THE ISSUE TO THE ASSESSING OFFICER FOR PROVIDING OPPORTUNITY TO THE ASSESSEE TO FURNISH THE APPROVAL IN FROM 3CM. THUS, HE SUBMITTED , SIMILAR DIRECTION MAY BE ISSUED IN THE IMPUGNED ASSESS MENT YEAR . 10. THE LEAR NED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION AGAINST RESTORATION OF THE ISSUE TO THE ASSESSING OFFICER. 11. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS NOT RAISED ANY DOUBT ON THE INCURRING OF EXPENDITURE BY THE ASSESSEE. THEREFORE, HE HAS ALLOWED DEDUCTION UNDER SECTION 35(1)(I) OF THE ACT. HOWEVER, HE HAS DISALLOWED WEIGHTED DEDUCTION UNDER SECTION 36(2AB) OF THE ACT AT THE ENHANCED RATE ONLY BECAUSE THE ASSESSEE FAILED TO FURNISH APPROVAL OF THE COMPETE NT AUTHORITY IN FORM 3CM. NOTABLY, WHILE 6 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 [(2018) 97 TAXMAN.COM 352], THE TRIBUNAL WHILE HOLDING THAT FURNISHING OF FORM 3CM IS MANDATORY H AS HOWEVER RESTORED THE ISSUE TO THE ASSESS ING OFFICER FOR ENABLING THE ASSESSEE TO FURNISH THE APPROVAL IN FORM 3CM. IDENTICAL VIEW WAS EXPRESSED BY THE TRIBUNAL WHILE DECIDING SIMILAR ISSUE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. BEFORE US, THE LEARNED COUNSEL HAS SUBMITTED THAT THOUGH THE ASSES SEE HAD APPLIED FOR APPROVAL IN FORM 3CM , AS YET, THE COMPETENT AUTHORI TY HAS NOT GRANTED THE APPROVAL. CONSIDERING THE ABOVE AND KEEPING IN VIEW THE DECISIONS OF THE CO - ORDINATE BENCH IN ASSESSEE S OWN CASE AS REFERRED TO ABOVE, W E RESTORE THE ISSUE TO TH E FILE OF THE ASSESSING OFFICER TO ENABLE THE ASSESSEE TO FURNIS H THE APPROVAL IN FROM 3CM TO BE OBTAIN ED FROM THE COMPETENT AUTHORITY. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN GROUND NO.(III), THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF D EPRECIATION ON ADDITIONS MADE TO COMPUTER SOFTWARE CLAIMED AT THE RATE OF 60%. 13. BRIEFLY STATED FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 60% ON SOME NEWLY PURCHASE D COMPUTER SOFTWARE . ON BEING ASKED TO EXPLAIN, THE ASSESSEE SUBMITTED THAT SUCH EXPENSES WERE INCURRED MAINLY ON UPGRADATION OF T HE EXISTING SOFTWARE. R EFERRING TO RULE 5 OF THE INCOME - TAX RULES, THE ASSESSING OFFICER HELD THAT WHEN SOFTWARE IS PURCHASED A LONG WITH COMPUTER THEN IT FORMS PART OF THE COMPUTER , HENCE, ELIGIBLE FOR DEPRECIATION AT THE RATE OF 7 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED 60%. ACCORDINGLY, HE RESTRICTED IT TO 25%. THE LEARNED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE AFORESAID DECISION OF THE ASSESSING OFFICER. 14. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009 - 10, 2010 - 11(SUPRA) , THE TRIBUNAL HAS ALLOWED DEPRECATION AT 60%. 15. THE LEAR NED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATION S OF THE ASSESSING OFFICER AND LEARNED DISPUTE RESOLUTION PANEL. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD . NOTABLY, WHILE DECIDING IDENTICAL CLAIM MADE BY THE ASSESSEE IN ASSESSMENT YEAR 2009 - 10 (SUPRA), THE TRIBUNAL HAS HELD TH AT THE COMPUTER SOFTWARE PURCHASED BY THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60% . THE SAME VIEW WAS REITERATED WHILE DECIDING ASSESSEES APP EAL IN ASSESSMENT YEAR 20099 - 10. R ESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASS ESSEE S O W N CASE, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON ADDITION MADE TO COMPUTER SOFTWARE AT THE RATE OF 60%. THIS GROUND IS ALLOWED. 17. IN GROUND NO.(IV), THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE AC T READ WITH RULE 8D OF THE RULES AMOUNTING TO 2,33,84,000/ - . 8 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED 18. BRIEFLY STATED FACTS ARE, DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR THE ASSESSEE HA D EARNED EXEMPT INCOME BY WAY OF DIVI DEND AMOUNTING TO 58.27 CRORES. WHEREAS , IT HAS NOT MADE ANY DISALLOWANCE UND ER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A SHOULD NOT BE MADE. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE, SINCE, NO EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOME , NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE . R EJECTING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER PROCEEDED TO COMPUTE DISALLOWANCE UNDER SECTION 14A AT 93,23,40,000/ - REPRESENTING INTEREST EXPENDITURE UNDER RULE 8D (2)(II) OF THE RULES. WHILE CONSIDERING ASSESSEES OBJECTION ON THE ISSUE, THE LEARNED DISPUTE RESOLUTION PANEL GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO EXCL UDE INVESTMENT MADE IN DEBENTURES, GROWTH FUND AND THEREAFTER COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. AS A RESULT OF SUCH DIRECTION OF LEARNED DISPUTE RESOLUTION PANEL, THE DISALLOWANCE WAS REDUCED TO 23,38,84,000/ - . 19. THE LEARNED COUNSEL SU BMITTED, THE ASSESSEE HAD SUFFICIENT INTEREST FREE SURPLUS FUND AVAILABLE WITH IT TO TAKE CARE OF THE INVESTMENT, HENCE, NO DISALLOWANCE OF INTEREST EXPENDITURE CAN BE MADE. FURTHER, HE SUBMITTED , AS REGARDS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), ONLY THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME DURING THE YEAR CAN BE CONSIDERED AS PART OF AVERAGE VALUE OF 9 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED INVESTMENT FOR COMPUTING DISALLOWANCE. HOWEVER, THE LEARNED COUNSEL FAIRLY SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN THE P RECEDING ASSESSMENT YEARS, THE TRIBUNAL HAS CONSISTENTLY RESTORED THE ISSUE BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH CERTAIN DIRECTIONS. WITHOUT PREJUDICE, THE LEARNED COUNSEL SUBMITTED , IN SO FAR AS THE ISSUE RELATING TO AVAILABILITY OF S URPLUS INTEREST FREE FUND , ALL FACTUAL DETAILS ARE AVAILABLE ON RECORD. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, IN VIEW OF THE DIRECTIONS OF THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS, THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER . 21. WE HAVE CONSIDER ED RIVAL SUBMISSIONS AND PERUSED THE MA TERIALS ON RECORD. AS REGARDS THE DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II ) OF THE RULES , WE HAVE NOTED , BEFORE L EARNED DISPUTE RESOLUTION PANEL THE ASSESSEE HAD SPECIFICALLY SUBMITTE D THAT IT HAS SUFFICIENT INTEREST FREE FUND AVAILABLE WITH IT TO TAKE CARE OF THE INVESTMENT. THE RELEVANT FACTS AND FIGURE S RELATING TO AVAILABILITY OF SURPLUS FU ND WAS ALSO FURNISHED BEFORE LEARNED DISPUTE RESOLUTION PANEL WHICH IS EVIDENT FROM PARAGRAPH 8.3 OF LEARNED DISPUTE RESOLUTION PANELS ORDER. FURTHER, LEARNED DISPUTE RESOLUTION PANEL HAS NOT ADDRESSED THE AFORESAID CO NTENTION OF THE ASSESSEE PROPERL Y . N OW , THE LEGAL POSITION IS FAIRLY WELL SETTLED BY VARIOUS JUDICIAL PRECEDENT INCLUDING THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 AND HDFC BANK LTD. VS. DCIT (2016) 383 ITR 529 THAT IN CASE 10 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED ASSESSEE HAS SUFFICIENT INTEREST FREE SURPLUS FUNDS AVAILABLE WITH IT, NO DISALLOWANCE OF INTERES T EXPENDITURE CAN BE MADE U NDER RULE 8D(2)(II) . THE AFORESAID RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IS NOT ONLY BINDING ON THE TRIBUNAL, BUT ALSO ON DEPART MENTAL AUTHORITIES INCLUDING LEARNED DISPUTE RESOLUTION PANEL AND THE ASSESSING O FFICER. THEREFORE, IN CASE THE AFORESAID CLAIM OF THE ASSESSEE REGARDING AVAILABILITY OF SURPLUS INTEREST FREE FUNDS IS FOUND TO BE CORRECT, NO DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8(D)(2)(II) CAN BE MADE. SINCE , NEITHER THE ASSESSING OFFICER NOR LEARNED DISPUTE RESOLUTION PANEL HAVE PROPERLY APPRECIATED THE AFORESAID CONTENTION OF THE ASSESSEE AND HAVE NOT VERIFIED THE FACTUAL POSITION WITH REFERENCE TO THE FINANCIAL STATEMENT S AND ALSO CONSIDERING THE FACT THAT IN THE PRECEDING ASSESSMENT YEA R S , THE TRIBUNAL HAS RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR VERIFYING AVAILABILITY OF SURPLUS INTEREST FREE FUNDS, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY ASSESSEES CLAIM OF AVAILABILITY OF SURPLUS INTEREST FREE F UNDS AND DELETE THE DIS ALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES , IN CASE SUCH FUNDS ARE AVAILABLE . AS REGARDS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), AS HELD BY THE ITAT, DELHI SPECIAL BENCH IN THE CASE OF ACIT VS VIREET INVES TMENT PVT. LTD., (2017) 165 ITD 27, SUCH DISALLOWANCE HAS TO BE COMPUTED ONLY TAKING INTO CONSIDERATION THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR. IN OTHER WORDS, THOSE INVESTMENTS WHICH HAVE NOT YIELDED ANY EXEMPT INCOME DURING THE YEAR HAVE TO BE EXCLUDED FROM THE AVERAGE VALUE OF INVESTMENTS WHILE COMPUTING THE DISALLOWANCE UNDER 1 1 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED RULE 8D(2)(III) OF THE RULES. THIS VIEW HAS ALSO BEEN EXPRESSED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL S IN ASSESSMENT YEARS 2008 - 09, 2009 - 10 A ND 2010 - 11. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE DIRECTION OF THE TRIBUNAL AND DECIDE THE ISSUE KEEPING IN VIEW THE RATIO LAID DOWN IN THE CASE OF VIREET INVESTMENTS PVT. LTD. (SUPRA). THIS GROUND IS ALLOWED FOR STATISTICAL PURPOS ES. 22. IN GROUND NO. 5, ASSESSEE HAS CHALLENGED DISALLOWANCE OF ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES AMOUNTING TO 115,44,22,171/ - . 23. BRIEFLY THE FACTS ARE , DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITE D AN AMOUNT OF 138.55 CRORES UNDER THE HEAD ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES. AFTER CALLING FOR NECESSARY DETAILS AND EXAMINING THEM, HE FOUND THAT SUCH EXPENDITURE INCLUDED AN AMOUNT OF 22,88,44,342/ - TOWARDS KEY ACCOUNT MANAGER (KAM) EX PENSES, CUSTOMER RELATION MANAGER (CRM) EXPENSES AND GIFT ARTICLES . S EEKING EXPLANATION OF THE ASSESSEE ON ALLOWABILITY OF SUCH EXPENSES AND EXAMINING IT, THE ASSESSING OFFICER OBSERVED THAT SUCH EXPENSES ARE FOR PROVIDING GIFT AR TICLES, TRAVEL FACILITY TO THE D OCTORS FOR PROMOTING THEIR PRODUCTS. FURTHER, HE OBSERVED , A NUMBER OF SUCH EXPENSES INVOLVED CASH PAYMENT MADE TO THIRD PARTIES FO R ONWARD TRANSMISSION OF GIFT S. ALLEGING THAT PROVIDING GIFT ARTICLES TO D OCTORS IS IN VIOLATION OF PROVISIONS OF INDI AN MEDICAL COUNCIL ( PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULATIONS, 2002 , T HE ASSESSING OFFICER DISALLOWED AN AMOUNT OF 11,44,22,171/ - 12 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED BEING 50% OF THE TOTAL EXPENDITURE INCURRED. W HILE DECIDING ASSESSEES OBJECTION ON THE ISSUE, LEARNED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE DISALLOWANCE. 24. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , IDENTICAL DISALLOWANCE S WERE MADE IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009 - 1 0 AND 2010 - 11. HE SUBMITTED, WHILE DECIDING THE ISSUE, THE TRIBUNAL ALL OWED ASSESSEES CLAIM ON THE REASONING THAT FIRSTLY, THE CBDT CIRCULAR REFERRED TO BY THE ASSESSING OFFICER IS NOT RETROSPECTIVE, HENCE WOULD NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR AND SECONDLY, THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULATIONS WILL APPLY TO MEDICAL PRACTITIONERS AND NOT TO PHARMA COMPANIES. THUS, HE SUBMITTED , THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. FURTHER, THE LEARNED COUNSEL RELIED UPON A N UMBER OF OTHER DECISIONS. 25. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED DISPUTE RESOLUTION PANEL. 26. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDOUBTEDLY , THE EXPENDITURE INCURRED BY THE ASSESSEE WAS FOR PROVIDING GIFTS AND TRAVEL FACILITY T O THE D OCTORS. THE ASSESSING OFFICER HAS DISALLOWED A PART OF EXPENDITURE ON THE ALLEGATION THAT IT IS IN VIOLATION OF THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULATIONS . IN THIS CONTEXT, HE ALSO REFERRED TO CBDT CIRCULAR NO. 5/2012. IN OUR VIEW, THE STAND OF THE ASSESSING OFFICER IS 13 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED SELF CONTRADICTORY. IF HE WAS OF THE VIEW THAT THE EXPENDITURE INCURRED IS IN VIOLATION OF INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULA TIONS AS WELL AS THE CBDT CIRCULAR, HE SHOULD NOT HAVE ALLOWED 50% OF THE EXPENDITURE , THEREBY , ACCEPTING A PART OF THE EXPENSES TO BE NOT ONLY GENUINE BUT IN ACCORDANCE WITH LAW. BE THAT AS IT MAY, WE HAVE NOTED THAT IDENTICAL DISALLOWANCES WERE MADE IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEARS . W HILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2009 - 10 (SUPRA), T HE TRIBUNAL HAS ALLOWED ASSESSEES CLAIM HOLDING THAT THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULATIONS D OES NOT APPLY TO THE ASSESSEE AND FURTHER , THE CBDT CIRCULAR ALSO APPLIES PROSPECTIVELY. THE SAME VIEW WAS REITERATED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2010 - 11. RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSES SEES OWN CASE AS DISCUSSED ABOVE, WE ALLOW ASSESSEES CLAIM BY DELETING THE DISALLOWANCE OF 11,44,22,171/ - . THIS GROUND IS ALLOWED. 27. IN GROUND NO.VI, THE ASSESSEE HAS CHALLENGED REDUCTION OF DEDUCTION CLAIMED UNDER SECTION 80IC OF THE ACT IN RESPECT OF BADDI UNIT BY ALLOCATING A PART OF INTEREST AND R&D EXPENDITURE TO IT. 28. DURING THE ASSESSMENT PROCEEDINGS , TO ASCERTAIN THE CORRECTNESS OF ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF BADDI UNIT, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF EXPENDITURE ALLOCATED TO 80IC UNIT AND OTHER UNITS AS WELL AS THE PROFIT RATE EARNED BY 14 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED BOTH THE UNITS. FROM THE DETAILS FURNISHED INCLUDING THE PROFIT AND LOSS ACCOUNT OF 80IC AND OTHER UNITS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD NOT ALLOCATED ANY EXPENDITURE INCLUDING INTEREST AND R&D EXPEND ITURE TO BADDI UNIT, THEREBY HAS INFLATED THE PROFIT RATE OF THE BADDI UNIT COMPARED TO OTHER UNITS. THOUGH , THE ASSESSEE SUBMITTED THAT BADDI UNIT WAS SET UP WITH SELF - FINANCE WITHOUT UTILIZING ANY BORROWED FUND AND FURTHER, THE ENTIRE R&D EXPENDITURE WAS NOT RELATED TO THE MANUFACTURING ACTIVITY OF THE BADDI UNIT, HOWEVER , REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER ALLOCATED A PART OF INTEREST AND R&D EXPENDITURE TO BADDI UNIT , THEREBY, REDUCING THE DEDUCTION CLAIMED UNDER SECTION 80 IC OF THE ACT TO THE EXTENT OF ` 34.63 CRORES. THE LEARNED DISPUTE RESOLUTION PANEL CONFIRMED THE AFORESAID DECISION OF THE ASSESSING OFFICER WHILE DEALING WITH THE OBJECTION OF THE ASSESSEE. 29. REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES , THE LE ARNED COUNSEL SUBMITTED , NO PART OF THE BORROWED FUND WAS UTILIZED FOR SETTING UP THE BADDI UNIT, HENCE, EVEN A SMALL PORTION OF THE EXPENDITURE CANNOT BE ALLOCATED TO THE BADDI UNIT. FURTHER, HE SUBMITTED, THE R&D EXPENDITURE INCURRED BY THE ASSESS EE IS ALSO NOT IN CONNECTION WITH MANUFACTURING ACTIVITY IN BADDI UNIT. HE SUBMITTED, WHILE DECIDING IDENTICAL ISSUE IN PRECEDING ASSESSMENT YEARS, THE TRIBUNAL HAS RESTORED IT TO THE ASSESSING OFFICER F OR CONSIDERING ASSESSEES CLAIM KEEPING IN VIEW THE M AT ERIAL BROUGHT ON RECORD. THEREFORE, HE SUBMITTED, SIMILAR DIRECTIONS MAY BE ISSUED IN THE IMPUGNED ASSESSMENT YEAR. 15 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED 30. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, CONSISTENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS, ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER. 31. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD , THIS IS A RECURRING ISSUE BETWEEN THE ASSESSEE AND THE REVENUE. IN ASSESSMEN T YEAR 2008 - 09, ON IDENTICAL REASONING, THE ASSESSING OFFICER HAD ALLOCATED A PART OF THE INTEREST AND R&D EXPENDITURE TO THE BADDI UNIT, THEREBY , REDUCING THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IC OF THE ACT. WHILE DECIDING ASSESSEES APPEA L ON THE ISSUE IN ASSESSMENT YEAR 2008 - 09, THE TRIBUNAL HAS RESTORED IT TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER CONSIDERING ASSESSEES CLAIM IN THE CONTEXT OF FACTS AND MATERIALS BROUGHT ON RECORD. SAME VIEW WAS REITERATED BY THE TRIBUNAL WH ILE DECIDING THE ISSUE IN ASSESSMENT YEARS 20 09 - 10 AND 2010 - 11 AS WELL. F ACTS BEING IDENTICAL, CONSISTENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH S IMILAR DIRECTION. THE GROUND RAISED IS ALLOWED FOR STATISTICAL PURPOSES. 32. IN GROUND NO.VII, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC OF THE ACT. 33. BRIEFLY STATED FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFIC ER NOTICED THAT WHILE VERIFYING 16 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN ASSESSMENT YEAR 2008 - 09, THE ASSESSING OFFICER HAD OBSERVED THAT THE CONDITIONS OF SECTION 80IC(4) OF THE ACT HAVE BEEN VIOLATED, AS THE BADDI UNIT IS NOT A COMP LETELY NEW UNIT BUT CAME INTO EXISTENCE BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. FURTHER, IT WAS OBSERVED , BADDI UNIT HAS BEEN SET UP BY INSTALLING PLANT AND MACHINERY ALREADY USED EARLIER. THUS, ON THE AFORESAID REASONING, ASS ESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT WAS DISALLOWED. HE ALSO FOUND THAT ON IDENTICAL REASONING, ASSESSEES CLAIM OF DEDUCTION IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 WAS ALSO DISALLOWED. THUS, ADOPTING THE VERY SAME REASONING OF EARLIER ASSESSMENT YEARS, THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. THE LEARNED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE DISALLOWANCE WHILE REJECTING THE OBJECTIONS OF THE ASSESSEE ON THE ISSUE. 34. THE LEARNED COUNSEL SUBMITTED, THE ASSESSEE HAS BROUGHT ALL FACTS AND MATERIAL ON RECORD TO DEMONSTRATE THAT NONE OF THE CONDITION S UNDER SECTION 80IC(4) OF THE ACT WERE VIOLATED WHILE SETTING UP THE BADDI UNIT. HE SUBMITTED, WITHOUT VERIFYING THE FACTS AND MATERIALS ON RECORD , THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION BY SIMPLY RELYING UPON THE EARLIER ASSESSMENT ORDERS PASSED ON THE ISSUE. TO DEMONSTRATE THAT THE CONDITIONS OF SECTION 80IC(4) OF THE ACT WERE SATISFIED, THE LEARNED COUNSEL DREW OUR ATTENTION TO VARIOUS DOCUMENTARY EVIDENCES FURNISHED IN THE PAPER BOOK. FURTHER, HE SUBMITTED , WHILE DEALING WITH THE ISSUE OF DISALLOWANCE OF DEDUCTION 17 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED CLAIMED UNDER SECTION 80IC OF THE ACT IN ASSESSMENT YEAR 2008 - 09, THE TRIBUNAL HAD DELETED THE DISALLOWANCE THOUG H OF COURSE DUE TO A TECHNICAL REASON. HOWEVER, HE SUBMITTED , IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11, THE TRIBUNAL HAS DEALT WITH THE MERITS OF THE ISSUE AND ULTIMATELY CONCLUDED THAT THE ASSESSEE HAD FULLY COMPLIED WITH THE CONDITIONS OF SECTION 80I C(4) OF THE ACT, HENCE, IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IC OF THE A CT. HE SUBMITTED, THE AFORESAID DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE CLEARLY CLINCH THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THIS CONTEXT, THE LEARNED COUNSEL DR E W OUR ATTENTION TO THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE APPELLATE ORDER PASSED I N ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 . 35. T HE LEARNED DEPARTMENTAL REPRESENTATIVE THOUGH AGREED THAT IN THE PRECEDING ASSESSMENT YEARS , TRIBUNAL HAS DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE, HOWEVER, HE R ELIED ON THE OBSERVATIONS OF LEARNED DISPUTE RESOLUTION PANEL AND THE ASSESSING OFFICER. 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THIS IS FOURT H YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT BY THE ASSESSEE IN RESPECT OF BADDI UNIT. THE ASSESSMENT ORDER CLE ARLY REVEALS THAT RELYING UPON THE REASONING ON THE BASIS OF WHICH SIMILAR CLAIM WAS DISALLOWED IN ASSESSMENT YEARS 2008 - 09 TO 2010 - 11 , T HE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD FAILED TO COM PLY WITH THE CONDITIONS OF SECTION 80IC OF THE ACT AND ACCORDINGLY, DISALLOWED 18 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT . SUCH DISALLOWANCE WAS ALSO CONFIRMED BY LEAR NED DISPUTE RESOLUTION PANEL. HOWEVER, AS COULD BE SEEN , WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008 - 09 ON THE DISPUTED ISSUE , THE TRIBUNAL DELETED THE DISALLOWANCE THOUGH, OF COURSE, FOR A TECHNICAL REASON . H OWEVER, IN ASSESSMENT YEAR 2009 - 10, THE TRIBUNAL HAS DEALT WITH THE ISSUE ON MERITS. AFTER EXHAUSTI VELY DEALING WITH ALL FACTUAL ASPECT S VIS - - VIS, THE CONDITION S OF SECTION 80IC(4) OF THE ACT, THE TRIBUNAL ULTIMATELY CONCLUDED THAT THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS OF SE CTION 80IC OF THE ACT. THERE FORE, THE TRIBUNAL HELD THAT ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IC OF THE ACT . T HE SAME VIEW WAS EXPRESSED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2010 - 11 (SUPRA). THE MATERIAL FACTS ON THE BASIS OF WHICH THE TRIBUNAL CONCLUDED IN FAVOUR OF THE ASSESSEE IN PRECEDING YEARS ARE NO DIFFERENT IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE IN ASSESSMENT YEA RS 2009 - 10 AND 2010 - 11, WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IC OF THE ACT. MORE SO, BECAUSE THIS IS THE FOURTH YEAR OF CLAIM OF DED UCTION AND IN THE INITIAL YEARS THE TRIBUNAL HAS HELD THAT CONDITION S OF SUB - SECTION 4 O F SECTION 80IC OF THE ACT HAVE BEEN FULLY COM PLIED WITH BY THE ASSESSEE. ACCORDINGLY, WE ALLOW ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. THIS GROUND IS ALLOWED. 19 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED 37. IN GROUND NO. VIII, ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT OF GUARANTEE COMMISSION AMOUNTING TO ` 12,6 7 ,15,700 / - . 38. BRIEFLY STATED FACTS ARE, THE OVERSEAS ASSOCIATED ENTERPRISES (AES) OF THE ASSESSEE HAD AVAILED CERTAIN TERM LOANS AND CREDIT FACILITIES FROM FOREIGN BANKS IN THEIR RESPECTI VE COUNTRIES. IN RESPECT OF SUCH LOAN S , THE ASSESSEE HAD PROVIDED CORPORATE GUARANTEE AND HAD CHARGED GUARANTEE COMMISSION AT THE RATE OF 0.50% FROM AES. IN COURSE OF PROCEEDING BEFORE HIM, TRANSFER PRICING OFFICER AFTER VERIFYING THE DETAILS , CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY ARMS LENGTH PRICE ( ALP ) OF CORPORATE GUARANTEE COMMISSION SHOULD NOT BE DETERMINED IN LINE WITH THE APPROACH FOLLOWED IN ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 ON THE BASIS OF INFORMATION RECEIVED FROM STATE BAN K OF INDIA WITH A MARK - UP FOR RISK FACTORS. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED ADJUSTMENT AND JUSTIFIED THE ARM S LENGTH NATURE OF GUARANTEE COMMISSION CHARGED AT 0.5% , HOWEVER, REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE TRANSFER PRICING OFF ICER DETERMINED THE ALP OF GUARANTEE COMMISSION AT THE RATE OF 3% PER ANNUM , T HEREBY , SUGGESTING AN ADJUSTMENT OF ` 12,67,15,700/ - . L EARNED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER. 39. THE LEARNED SENIOR COUN SEL SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11, THE TRIBUNAL HAS HELD THAT 20 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED GUARANTEE COMMISSION CHAR GED AT 0.50% IS AT ARMS LENGTH. THUS , HE SUBMITTED , THE ADJUSTMENT MADE H AS TO BE DE LETED. 40. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATION S OF THE TRANSFER PRICING OFFICER AND DISPUTE RESOLUTION PANEL. 41. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AS NOTED ABOVE, SIMILAR NATURE OF DISPUTE AROSE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 (SUPRA). IN THE DECISION REFERRED TO ABOVE , THE TRIBUNAL HAS ACCEPTED ASSESSEES CLAIM THAT GUARANTEE COMMISSION FOR CORPORATE GUARANTEE PRO VIDED SHOULD BE CHARGED AT 0.5%. S IMILAR VIEW HAS BEEN EXPR ESSED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE ALP O F THE GUARANTEE COMMISSION FOR PROVIDING CORPORATE GUARANTEE TO THE AE S AT 0.5%. THE GROUND IS ALLOWED AS INDICATED ABOVE. 42. IN GROUND NO. IX, ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 48 OF THE ACT FOR AN AMOUNT OF ` 18,96, 00,000/ - . 43. BRIEFLY THE FACTS ARE , DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD ITS STAKE IN ONE OF ITS UNIT S VIZ . PIRAMAL DIAGNOSTIC SERVICES PVT. LTD. (PDSPL) BY ENTERING INTO A SHARE PURCHASE AGREEMENT WITH SUPER RELIG A RE LIMITED (SRL) ON 17 .07.2010. THOUGH , THE ASSESSEE OFFERED TO TAX THE GAIN 21 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DERIVED FROM SALE OF STOCK/ SHARES OF PDSPL , HOWEVER , WHILE COMPUTING CAPITAL GAIN THE ASSESSEE CLAIMED DEDUCTION OF ` 18,96,00,000/ - UNDER SECTION 48 OF THE ACT TOWARDS EXPENDITURE INCURRED IN CONNECTI ON WITH TRANSFER OF CAPITAL ASSET. ON QUERY BEING MADE BY T H E ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE WHILE FURNISHING DETAILS OF SUCH COST INCURRED SUBMITTED , TH E AMOUNT WAS PAID TO 3 (THREE) D OCTORS W HO HAD HELPED IN VARIOUS MAN NER IN NEGOTIATING THE DEAL REGARDING THE SALE OF SHARES AND THE ULTIMATE EXECUTION OF SHARE PURCHASE AGREEMENT WITH SRL . THUS, HE SUBMITTED , IN CONSIDERATION OF THE SERVICES RENDERED BY THE THREE PERSONS WHO ARE DOCTORS AND ASSOCIATED WITH THE ASSESSEES DIAGNOSTIC DIVISION, THE A MOUNTS WERE PAID AS APPROVED BY A RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. REFERRING TO THE NOTIFICATION ISSUED BY MEDICAL COUNCIL O F INDIA AMEND ING THE REGULATIONS , THE ASSESSING OFFICER HELD THAT SUCH EXPENDITURE INCURRED BY THE ASSESSEE BEING IN VIOLATION OF THE INDIAN MEDICAL COUNCIL REGULATION S IS NOT ALLOWABLE. ACCORDINGLY, HE DISALLOWED ASSESSEES CLAIM OF DEDUCTION. WHILE CONSIDERING THE OB JECTIONS OF THE ASSESSEE ON THE ISSUE, LEARNED DISPUTE RESOLUTION PANEL ACCEPTING THE DECISION OF THE ASSESSING OFFICER HELD THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED AS THE DOCTORS TO WHOM IT WAS PAID CANNOT BE HELD TO BE HAVING THE E XPERTISE IN BROK ER ING A DEAL WHICH REQUIRE S VALUATION OF SHARES. THUS, LEARNED DISPUTE RESOLUTION PANEL HELD THAT THE EXPENDITURE 22 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED INCURRED BEING NOT FULLY AND EXCLUSIV ELY CONNECTED WITH THE TRANSFER, CANNOT BE ALLOWED. 44. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE ASSESSEE WANTED TO DIVEST ITS SHARES HELD IN PDSPL, THEREFORE, WANTED TO ENTER INTO A DEAL WITH ANY INTERESTED PARTY/ ENTITY, WHICH CAN PURCHASE THE SHARES AND TAKE OVER THE DIAGNOSTIC DIVISION OF THE ASSESSEE COMPANY. TO ACHIEVE THAT OBJEC T, THE ASSESSEE ENTRUSTED THE DOCTORS WORKING / ASSOCIATED WITH THE DIAGNOSTIC DIVISION VIZ. DR. AVINASH PHADKE , DR. SUBEND H U ROY AND DR. BHAVIN JHA N KARIA TO IDENTIFY, EVALUATE AND NEGOTIATE WITH INTEREST ED PARTIES TOWARDS DIVESTING ASSESSEES STAKE IN PDSP L WHILE MAXIMIZING THE VALUE OF COMPANYS INVESTMENT. HE SUBMITTED, THE ABOVE SAID DECISION W AS ALSO APPROVED BY THE BOARD THROUGH RESOLUTION AND AS PER THE TERMS OF THE RESOLUTION , THE PAYMENT MADE TO THE CONCERNED PARTIES FOR BROKERING THE DEAL WAS ALSO FIXED. HE SUBMITTED, IN TERMS OF BOARD RESOLUTION MANDATE WAS ISSUED TO THE CONCERNED DOCTORS , WHICH THEY NOT ONLY ACCEPTED BUT ALSO TOOK ACTIVE INTEREST IN BROK ERING THE DEAL FOR AND ON BEHALF OF THE ASSESSEE, WHICH RESULT ED IN EXECUTION OF SHARE PURCHASE AGREEMENT WITH SRL. HE SUBMITTED, IN TERMS OF THE BOARD RESOLUTION , PAYMENTS WERE MADE TO THE CONCERNED PERSONS T OWARDS SERVICES RENDERED BY THEM IN SALE OF SHARES TO SRL. THUS, HE SUBMITTED , THE EXPENDITURE INCURRED BEING WHOLLY AND EXCLUSIVELY IN CONNEC TION WITH THE TRANSFER OF PDSPL TO SRL , IS ALLOWABLE AS DEDUCTION. THE LEARNED CO U NSEL SUBMITTED , WHILE THE ASSESSING OFFICER HAS COMPLETELY MISDIRECTED HIMSELF BY DISALLOWING THE EXPENDITURE ON THE WRONGFUL CONCLUSION THAT IT IS 23 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED IN VIOLATION OF INDIAN MED ICAL COUNCIL REGULATION, THE DISPUTE RE SOLUTION PANEL HAS CONFIRMED THE DISALLOWANCE WITHOUT PROPERLY EXAMINING THE MATERIALS BROUGHT ON RECORD. HE SUBMITTED , BEFORE LEARNED DISPUTE RESOLUTION PANEL, THE ASSESSEE HAD NOT ONLY FURNISHED EVIDENCE IN SUPPORT OF ITS CLAIM OF EXPENDITURE BUT H AS EVEN OFFERED TO PRODUCE THE CONCERNED DOCTORS FOR EXAMINATION TO JUSTIFY ITS CLAIM OF DEDUCTION. HE SUBMITTED , WITHOUT EXAMINING THE DOCTORS TO WHOM THE PAYMENT WAS MADE AND VERIFYING THE MATERIALS BROUGHT ON RECORD , TH E DISPUTE RESOLUTION PANEL H AS PERFUNCTOR IL Y HELD THAT THE EXPENDITURE INCURRED IS NOT WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. THUS, HE SUBMITTED, THE DEDUCTION CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. IN SUPPORT OF SUCH CONTENTION, THE LE ARNED COUNSEL RELIED UPON THE FOLLOWING DECISIONS: - CIT V. R. RAMANATHAN CHETTIAR (152 ITR 489) (MADRAS HIGH COURT) CIT V. SHANKUNTALA KANTILAL (190 ITR 56) (BOM.HC) MR. JUNE PERRETT V. ITO (298 ITR 268) (KAR. HC) CIT VS. DR. P RAJENDRAN (127 ITR 810) (KE RALA HC) 45. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, THOUGH , IT MAY BE A FACT THAT THE FACTUAL ASPECT OF THE ISSUE HAS NOT BEEN PROPER LY VERIFIED IN THE EARLIER STAGES , HOWEVER, VARIOUS ISSUES HAVE NOT BEEN PROPERLY EXPLAINED BY THE ASSESSEE EITHER. HE SUBMITTED , SINCE, THE ISSUE INVOLVES VARIOUS LO OSE ENDS WHICH NEEDS TO BE JOINED BY PROPERLY EXAMINING THE FACTS, IT MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 24 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED 46. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND IN THE LIGHT OF DECISIO NS RELIED UPON AND PERUSED THE MATERIALS ON RECORD. THERE IS NO DISPUTE REGARDING THE PRIMARY FACTS THAT THE ASSESSEE HAS SOLD ITS STAKE (SHARES) IN PDSPL , ERSTWHILE SUBSIDIARY OF THE ASSESSEE ENGAGED IN MEDICAL DIAGNOSTIC ACTIVITIES , BY ENTERING INTO A SH ARE PURCHASE AGREEMENT WITH SRL. WHILE COMPUTING CAPITAL GAIN ARISING OUT OF SUCH TRAN SACTION ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNT OF ` 18,96,00,000/ - UNDER SECTION 48 OF THE ACT TOWARDS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRANSFER. THE AFORESAID PAYMENT M ADE BY THE ASSESSEE WAS SPLIT BETWEEN THREE PERSONS , STATED TO BE DOCTORS , IN THE FOLLOWING MANNER: - (I) DR. SUBENDY ROY ` 5,58,41,125/ - (II) DR. AVINASH PHADKE ` 8,37,64,688/ - (III) DR. BHABIN JHANKARIA ` 5,00,00,000/ - 47. IT IS FURTHER RELEVANT TO OBSERVE , THE AFORESAID PAYMENTS WERE MAD E AS PER THE BOARD RESOLUTION IN THE FOLLOWING PATTER N : - DR. SUBENDHU ROY - UP TO AN AMOUNT NOT EXCEEDING 1.5% OF THE NET CONSIDERATION TO BE RECEIVED BY THE COMPANY, DR. A AVINASH PHADKE - UP TO AN AMOUNT NOT EXCEEDING 2.5% OF THE NET CONSIDERATION TO BE RECEIVED BY THE COMPANY 25 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DR. BHABIN JHANKARIA - UP TO AN AMOUNT NOT EXCEEDING ` 5,00,00,000/ - 48. TO SUBSTANTIATE THE CLAIM THAT THE AFORESAID EXPENDITURE WAS INCURRED IN CONNECTION WITH TRANSFER OF SHARES, THE L EARNED COUNSEL HAS DRAWN OUR ATTENTION TO THE MANDATE LETTER S ISSUED BY THE ASSESSEE, ACCEPTANCE LETTER S ISSUED BY T HE CONCERNED PERSONS, THE BILLS/ VOUCHER S IN SUPPORT OF PAYMENT MADE ETC. THE LEARNED COUNSEL FURTHER DREW OUR ATTENTION TO THE SUBMISSIONS F ILED ON BEHALF OF THE ASSESSEE TO SUPPORT ITS CLAIM THAT THE EXPENDITURE INCURRED WAS IN CONNECTION WITH THE TRANSFER. AS DISCUSSED EARLIER, THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CLAIM OF DEDUCTION ON THE REASONING THAT SUCH PAYMENT IS IN VIOLATI ON OF INDIAN MEDICAL COUNCIL REGULATION S . THERE CANNOT BE ANY DOUBT THAT THE AFORESAID REASONING OF THE ASSESSING OFFICER TO DISALLOW THE EXPENDITURE IS UN SUSTAINABLE . WHAT IS REQUIRED TO BE EXAMINED IN TERMS OF SECTION 48(1) OF THE ACT IS , WHETHER THE EXP ENDITURE CLAIMED IS WHOLLY AND EXCLUSIVELY IN CONNECTION W ITH THE TRANSFER. OF COURSE, LEARNED DISPUTE RESOLUTION PANEL DEVIATING FROM THE REASONING OF THE ASSESSING OFFICER H AS HELD THAT THE EXPENDITURE CANNOT BE CONSIDERED TO BE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER SINCE THE DOCTORS TO WHOM SUCH PAYMENTS WERE MADE DO NOT HAVE THE E XPERTISE TO BROKER A DEAL INVOLVING VALUATION OF SHARES. FURTHER, PRIMA FACIE IT APPEARS , WHILE COMING TO THEIR RESPECTIVE CONCLUSION S NEITH ER THE ASSESSING OF FICER NOR LEAR NED DISPUTE RESOLUTION PANEL HAS PAID MUCH ATTENTION TO THE RELEVANT FACTS WHICH ARE CRUCIAL FOR DETERMINING THE ISSUE. AS 26 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DISCUSSED EARLIER, THE ASSESSEE HAS ULTIMATELY SOLD ITS SHARES IN THE DIAGNOSTIC DIVISION PDSPL TO S RL. IT HAS NOT BEEN CLARIFIED EITHER BEFORE US OR BEFORE THE DEPARTMENTAL AUTHORITIES AS TO WHY THE ASSESSEE HAS TO AVAIL THE SERVICES OF THREE PERSONS TO ULTIMATELY CONCLUDE A DEAL WITH A SINGLE PARTY AND INCURRED SUCH HUGE EXPENDITURE. WHEN THE DEAL IS ULTIMATELY ENTERED W ITH SRL , IT IS NOT UNDERSTOOD WHY THREE PERSONS HAVE TO NEGOTIATE EITHER INDIVIDUALLY OR AS A TEAM AND WHY IT CANNOT BE DONE BY A S INGLE INDIVIDUAL. IT IS FURTHER RELEVANT TO OBSERVE , DR. AVINASH PHADKE AND DR. BHAVIN JHANKARIA WERE THE SHAREHOLDERS OF PDS PL AND WERE ALSO IN THE BOARD OF DIRECTORS. THEY ARE ALSO PARTIES TO THE SHARE PURCHASE AGREEMENT WITH SRL . T HAT BEING THE CASE , IT CERTAINLY RAISES A DOUBT REGARDING PAYMENT MADE TO THEM WHEN THEY ARE PART OF THE BOARD RESOLUTION APPROVING SUCH PAYMENT. I T IS FURTHER NECESSARY TO OBSERVE , WHAT SPECIFIC SERVICES ARE RENDERED BY THE CO NCERNED PERSONS TO BROKER THE DEAL REQUIRING SUCH HUGE PAYMENT IS NOT FORTHCOMING FROM THE FACTS ON RECORD. T HE MANDATE LETTER S ISSUED BY THE ASSESSEE TO THE CONCERNED PERSONS AND THEIR ACCEPTANCE LETTERS ARE ID ENTICALLY WORDED AND STEREOTYPE. THEY DO NOT SPECIFY THE SERVICES RENDERED BY E ACH INDIVIDUAL IN BROKERING THE DEAL WHEN ULTIMATELY THE BUYER IS THE SAME PARTY I.E. SRL. THER EFORE, THE ONUS IS VERY MUCH ON THE ASSESSEE TO ESTABLISH ON RECORD THAT THE EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER . ONE MORE ASPECT WHICH NEEDS MENTION IS THE DIFFERENCE IN THE FEE STRUCTURE WHILE MAKING PAYMENT TO THE CONCERNED PERSONS FOR THE SAME WORK . A S DIS CUSSED EARLIER, THE PAYMENT MADE TO DR. AVINASH PHADKE WAS FIXED AT 2.5% OF THE 27 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED NET CONSIDERATION AND IN RESPECT OF DR. SUBENDHU ROY IT WAS FIXED AT 1.5% OF THE NET CONSIDERING. WHEREAS, IN CASE OF DR. BHAVIN JHANKARIA IT WAS FIXED AT ` 5 CRORES. IT IS NO T DISPUTED THAT PAYMENTS HAVE BEEN MADE TO THE CONCERNED PERSONS AT T HE RATE FIXED IN THE RESOLUTION. THUS , IT CERTAINLY DEFIES LOGIC PEAKS AN ANSWER WHEN THE PARTIES ARE PERFORMED, WHEN THE CONCERNED PERSONS, AS PER THE MA NDATE LETTER ARE PERFORMING THE S AME WORK, IT CERTAINLY DEFIES LOGIC WHY THERE IS DIFFERENCE IN THEIR FEE STRUC TURE. THERE IS NO TRANSPARENCY O N THE AFORESAID FACTUAL ASPECT FROM ASSESSEE S SIDE . THE ASSESSEE HAS TO SATISFACTORILY EXPLAIN, FIRSTLY, WHEN THE DEAL HAS BEEN ULTIMATELY STRUCK WITH SRL , WHY SERVICES OF THREE PERSONS WAS REQUIRED TO BROKER SUCH DEAL AND SECONDLY, WHAT IS THE NECESSITY OF EMPLOYING THREE PERSONS FOR THE VERY SA ME WORK. FURTHER, THE ASSESSEE HAS TO EXPLAIN THE PARAMETERS ON THE BASIS OF WHICH DIFFERENT FEE STRUCTU RE WAS FIXED FOR MAKING PAYMENT TO THE CONCERNED PERSONS. ALL THESE FACTORS HAVE NOT BEEN EXPLAINED PROPERLY BY THE ASSESSEE THROUGH CREDIBLE EVIDENCE. OF COURSE, AS IT APPEARS , AFORESAID ASPECTS WERE ALSO NEITHER EXAMINED N OR ENQUIRED INTO IN EARLIER STAG ES. T HEREFORE, KEEPING IN PERSPECTIVE THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ISSUE HAS TO BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER VERIFYING ALL RELEVANT FACTS AND IF NECESSARY CONDUCTING ADEQUATE ENQUIRY TO ASCERTAIN THE TRUE NATURE AND CHARACTER OF THE EXPENDITURE CLAIM ED BY THE ASSESSEE. IF SO REQUIRED , THE ASSESSING OFFICER MAY ALSO SUMMON THE CONCERN ED PARTIES , VIZ, THE DOCTORS TO WHOM THE PAYMENTS WERE MADE AS WELL AS THE BUYER OF THE 28 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED SHARES TO ASCERTAIN THE CORRECT FACTS. THE RESULT OF ENQUIRY CONDUCTED BY THE ASSESSING OFFICER , IF ANY, SHOULD ALSO BE CONFRONTED TO THE ASSESSEE AND THE ASSESSEE MUST BE GIVE A FAIR OPPORTUNITY TO COUNTER/ EXPLAIN ANY ADV ERSE MATERIAL BROUGHT ON RECORD A S A RESULT OF SUCH ENQUIRY. T HE ASSESSING OFFICER MUST DECIDE THE ISSUE AFTER CONSIDERING ALL THE FACTS AND MATERIALS ON RECORD, SUBMISSIONS OF THE ASSESSEE AND ONLY AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. BEFORE PART ING, WE MUST OBSERVE, WE HAVE CONSCIOUSLY RESTRAIN ED OURSELVES FROM DELIBERATING ON THE DECISIONS CITED BY THE L EARNED COUNSEL FOR THE ASSESSEE SIMPLY FOR THE REASON THAT THE ISSUE HAS BEEN RESTORED BACK TO THE ASSESSING OFFICER DUE TO LACK OF PROPER ENQUI RY AND FACTUAL VERIFICATION OF THE ISSUE IN THE EARLIER STAGES . THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 49. IN GROUND NO. X, ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EXEMPTION CLAIMED IN RESPECT OF INTEREST ON TAX FREE BONDS AMOUNTING TO ` 8,25,13, 638/ - . 50. BRIEFLY STATED FACTS ARE, THE ASSESSEE HAD MADE CERTAIN INVESTMENT IN TAX FREE BON DS, INTEREST ON SUCH IS EXEMPT UNDER SE CTION 10(15) OF THE ACT. HOWEVER , IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEA R, THE ASSESSEE WRONGLY OFFERED T O TAX THE INTEREST EARNED ON SUCH BOND AMOUNTING TO ` 8,25,13,638/ - . DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE FILED REVISE COMPUTATION CLAIMING EXEMPTION OF INTEREST EARNED ON TAX FREE BOND UNDER SE CTION 10(15) OF THE ACT. HOWEVER , THE ASSESSING OFFICER REJECTED SUCH CLAIM ON THE REASONING THAT IT WAS NOT MADE THROUGH A REVISED RETURN OF INCOME . L EARNED 29 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DISPUTE RESOLUTION PANEL ALSO CONFIRMED THE AFORESAID DECISION OF THE ASSESSING OFFICER. 51. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON REC ORD. UNDISPUTEDLY, INTEREST EAR NED ON TAX FREE BOND IS EXEMPT UNDER SECTION 10(15) OF THE ACT. THOUGH, IT MAY BE A FACT THAT THE ASSESSEE HAS WRONGLY OFFERED SUCH INTERE ST INCOME TO TAX IN THE RETURN OF INCOME FILED F OR THE YEAR UNDER CONSIDERATION, H OWEVE R, IT IS EQUALLY TRUE THAT DU RING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED A REVISE D COMPUTATION CLAIMING EXEMPTION IN RESPECT OF SUCH INCOME OFFERED TO TAX. BOTH THE ASSESSING OFFICER AND LEARNED DISPUTE RE SOLUTION PANEL HAVE REJECTED ASSESSEES CLAIM ON A PURELY TECHNICAL REASON THAT ASSESSEE HAS NOT CLAIM ED SUCH EXEMPTION BY FILING REVISED RETURN OF INCOME. IN OUR VIEW, IF AN ITEM OF INCOME IS NOT TAXABLE UNDER THE PROVISIONS OF THE ACT AND CANNOT FORM PART OF THE COMPUTATION OF TOTAL INCOME , ME RELY BECAUSE THE ASSESSEE HAS MISTAKENLY OFFERED IT AS INCOME IT WILL BE FORBIDDEN FROM CL AIMING EXEMPTION A FTERWARDS DURING THE COURSE OF THE PROCEEDING. IT IS TRITE LAW , THERE CANNOT BE ANY ESTOPPEL AG AINST LAW. IT IS MORE SO IN RESPECT OF AN ITEM OF INC OME EXEMPT UNDER SECTION 10 OF THE ACT. THE ASSESSING OFFICER AS PE R THE STATUTORY MANDATE IS DUTY BOUND TO COMPUTE THE REAL AND CORRECT INCOME OF THE ASSESSEE . THOUGH, ON ONE HAND HE IS EMPOWERED TO DISALLOW ANY WRONGFUL CLAIM MADE BY THE ASSESSEE , ON THE OTHER HAND, HE IS ALSO REQUIRED TO ALLOW DEDUCTION/EXEMPTION/BENEFIT THE ASSESSEE IS LEGALLY ENTITLED T O. THEREFORE, KEEPING IN VIEW THE AFORESAID LEGAL PRINCIPLE, 30 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED DISALLOWANCE OF ASSESSEES CLAIM PURELY ON TECHNICAL REASON IS UNSUSTAINABLE. IN THIS CONTE XT, WE ARE SUPPORTED BY THE FOLLOWING DECISIONS: - (I) NATIONAL THERMAL PO WER CO. LTD. VS COMMISSIONER OF INCOME TAX ( 1998) 229 ITR 383 (SC) (II) CIT VS. PRUTHVI BR OKERS AND SHAREHOLDERS (P) LTD. (2011) 349 ITR 336 (BOM) 52. IN VIEW OF THE AFORESAID, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO FACTUALLY VERIFY ASSESSEES CLAIM AND ALLOW EXEMPTION UNDER SECTION 10(15) OF THE ACT. 53. IN GROUND NO. X I, ASSESSEE HAS CHALLENGED DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D OF THE RULES WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 54. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN , WHIL E DECIDING IDENTICAL ISSUE IN ASSESSMENT YEAR 2008 - 09, THE TRIBUNAL FOLLOWING THE DECISIONS OF THE ITAT SPECIAL BENCH DELHI IN ACIT VS. VIREET INVESTMENT P. LTD. (82 TAXMANN.COM 41 5) HAS HELD THAT NO ADJUSTMENT/ DISALLOWANCE CAN BE MADE UNDER SECTION 115JB OF THE ACT WITH REFERENCE TO SECTION 14A READ WITH RULE 8D OF THE RULES. HOWEVER, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE BOOK PROFIT IN CONSONANCE WI TH THE PROVISIONS OF SECTION 115JB OF THE ACT READ WITH EXPLANATION (1 ) (F). S IMILAR VIEW HAS BEEN EXPRESSED BY THE CO - ORDINATE BENCH WHILE DECIDING THE ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 . C ONSISTENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS, W E DIRECT THE 31 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED ASSESSING OFFICER TO COMPUTE THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT FOLLOWING THE DIRECTIONS OF THE TRIBUNAL IN THE PRECEDI NG ASSESSMENT YEARS . THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 55. IN GROUND NO. X II, ASSESSEE HAS CHALLENGED SHORT GRANT OF CREDIT OF TDS. 56. HAVING CONSIDERED RIVAL SUBMISSIONS, WE DIRECT T HE ASSESSING OFFICER TO FACTUALLY VERIFY ASSESSEES CLAIM AND ALLOW CREDIT FOR TDS IN ACCORDANCE WITH LAW. 57. IN GROUND NO. XIII, ASSESSEE HAS RAISED THE ISSUE OF MIS - CALCULATION OF DIVIDEND DISTRIBUTION TAX PAYABLE AND GRANT OF SHORT CREDIT THEREOF. 58. HAVING CONSIDERED RIVAL SUBMISSIONS, WE DIRECT THE ASSESSING OFFICER TO FACTUALLY VERIFY ASSESSEES CLAIM AND ALLOW CREDIT IN ACCORDANCE WITH LAW. 59. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1799/MUM/2016 - A PPEAL BY THE DEPARTMENT 60. THE ONLY ISSUE RAISED RELATES TO DELETION OF DISALLOWANCE UNDER SECTION 35A OF THE ACT RELATING TO SARABHAI PIRAMAL PHARMACEUTICALS LTD. (SPP L). 61. BRIEFLY STATED FACTS ARE , NOTICING THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF ` 2,42,85,715/ - BEING 1/ 1 4 TH OF ` 34,00,00 ,000/ - AS DEDUCTION UNDER SECTION 35A OF THE ACT , THE AO CALLED FOR THE NECESSARY DETAILS . AFTER VERIFYING THEM , HE 32 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED FOUND THAT THE SAID EXPENDITURE WAS INCURRED BY SP P L TOWARDS PURCHASE OF TRADEMARK FROM AMBALAL SARABHAI E NTERPRISES. FOLLOWING THE REASONIN G OF THE ASSESSING OFFICER WHILE DISALLOWING ASSESSEES CLAIM IN PRECEDING ASSESSMENT YEARS , THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM. LEARNED DRP W HILE CONSIDERING ASSESSEES OBJ ECTION ON THE DISPUTED ISSUE, FOUND THAT SIMILAR DISALLOWANCE MADE B Y THE ASSESSING OFFICER IN PRECEDING ASSESSMENT YEARS BEGINNING FROM AY 1999 - 2000 , WAS DELETED BY T HE TRIBUNAL AND FURTHER, IN THE APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE TRIBUNAL, THE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY UPHOLDING THE DECISION OF THE TRIB UNAL. CONSIDERING THE ABOVE, LEARNED DRP DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 62. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD . A S COULD BE SEEN FROM THE FACTS ON RECORD SARABH AI PIRAMAL PHARMACEUTICALS LTD. (SPPL) , SINCE MERGED WITH THE ASSESSEE , PAID AN AMOUNT OF RS.34 CRORES TO AMBALAL SARABHAI ENTERPRISES (ASE) TOWARDS PURCHASE OF TRADEMARK IN TERMS OF AGREEMENT DATED 03.10.1997. SUCH AMOUNT PAID WAS AMORTIZED IN THE BOOKS O F SPPL AND IT CLAIMED 1/14 TH OF 35 CRORES PAID TOWARDS PURCHASE OF TRADEMARK. FROM THE VERY FIRST YEAR OF CLAIM OF SUCH DEDUCTION, THE ASSESSING OFFICER CONTINUED TO DISALLOW THE EXPENDITURE CLAIMED ON THE REASONING THAT T RADEMARK DOES NOT COME WITHIN TH E PURVIEW OF SECTION 35A OF THE ACT , AS IT ONLY SPEAKS PATENTS AND COPYRIGHTS. FOLLOWING THE REASONING OF THE ASSESSING OFFICER IN THE PRECEDING ASSESSMENT YEARS, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE IN THE 33 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED IMPUGNED ASSESSMENT YEAR AS WELL . HO WEVER, AS COULD BE SEEN FROM THE FACTS ON THE RECORD , IN ALL THE PRECEDING ASSESSMENT YEARS THE TRIBUNAL HAS ALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 35A OF THE ACT AND IN RESP ECT OF SO ME OF THESE ASSESSMENT YEARS , DEPARTMENT S APPEAL S CHALLENGI NG THE DECISION OF THE TRIBUNAL HAVE BEEN DISMISSED BY THE HON'BLE JURISDICTIONAL HIGH COURT. WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 (SUPRA), THE CO - ORDINATE BENCH H AS HELD IN THE FOLLOWING MANNER: - 16. IN GROUND NO. IV, ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 2,35,81,000, PAID TO PIRAMAL ENTERPRISES LTD. (PEL). . 64. ON A CAREFUL READING OF THE AFORESAID EXTRACTED PORTION FROM THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, IT IS VERY MUCH CLEAR THAT WHILE EXAMINING THE ALLOWABILITY OF IDENTICAL DEDUCTION CLAIMED BY SPPL THE TRIBUNAL HAS ALLOWED IT CLAIM BY HOLDING THAT TRADE MARK IS NOT ALIEN TO THE PATENT RIGHT AS THERE IS A DIRECT LINK BETWEEN PATENT RIGHT AND TRADE MARK. THUS, THE A SSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 35A OF THE ACT. ALTERNATIVELY, THE TRIBUNAL ALSO HELD THAT EVEN IF THE ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 35A OF THE ACT IS NOT ALLOWABLE, STILL THE DEDUCTION CLAIMED HAS TO BE 34 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED ALLOWED UNDER SEC TION 37 OF THE ACT IN VIEW OF THE JUDGMENT OF THE APEX COURT IN ALEMBIC CHEMICALS WORKS CO. LTD. V. CIT [1988] 177 ITR 377/43 TAXMAN 312 . WHEN THE APPEAL OF THE REVENUE ON THE DISPUTED ISSUE CAME UP BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT, THE REVENUE BEING CONSCIOUS OF THE FACT THAT IF ASSESSEE'S CLAIM IS ALLOWED UNDER SECTION 37 OF THE ACT THEN THE ENTIRE AMOUNT OF RS. 34 CRORES HAS TO BE ALLOWED IN ONE - GO, THEREF ORE, THE REVENUE WOULD BE IN A DISADVANTAGEOUS POSITION, DID NOT PRESS ITS APPEAL ON THE ISSUE OF ALLOWABILITY OF CLAIM UNDER SECTION 35A OF THE ACT. THEREFORE, CONSIDERING THE FACT THAT IN THE PRECEDING ASSESSMENT YEARS ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 35A OF THE ACT HAS BEEN ALLOWED, APPLYING THE RULE OF CONSISTENCY ALSO ASSESSEE'S CLAIM OF DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE DISALLOWED. THEREFORE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE BY DIS MISSING THE GROUND RAISED BY THE REVENUE. 63. THE SAME VIEW HAS BEEN EXPRESSED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 AS WELL. FACTS BEING IDENTICAL , RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN THE PR ECEDING ASSESSMENT YEARS WE UPHO LD THE DECISION OF LEARNED DRP ON THE ISSUE. THE 35 | P A G E ITA NO S . 850 /MUM/2015 & 1799/MUM/2016 PIRAMAL ENTERPRISES LIMITED GROUND RAISED IS DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. 64. TO SUM UP , ASSESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER P RONOUNCED THROUG H CIRCULATION IN NOTICE BOARD UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES,1962 ON 27. 0 5 .2020 . SD/ - SD/ - ( / S RIFAUR RAHMAN ) ( / SAKTIJIT DEY) ( / ACCOUNTANT MEMBER) ( / JUDICIAL MEMBER ) , / MUMBAI, DATED: 27. 05 .2020 , . / SUDIP SARKAR, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, //TRUE COPY// / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI