M/s Aurobindo Pharma Ltd., Hyderabad V. Addl.CIT, Range-1, Hyderabad

ITA 2073/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74575 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Transfer pricing; Double taxation relief; International transaction; Source of fund; Services rendered outside India; Permanent establishment; Bad and doubtful debts; Corroborative evidences; Revenue expenditure
• Section: 37(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1096/HYD/2011 ASSESSMENT YEAR 2005-2006 M/S. AUROBINDO PHARMA LIMITED, HYDERABAD PAN AABCA7366H VS. ADDL. CIT, RANGE-1 HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.1041/HYD/2011 ASSESSMENT YEAR 2005-2006 DCIT, CIRCLE-1(1) HYDERABAD. VS. M/S. AUROBINDO PHARMA LIMITED, HYDERABAD PAN AABCA7366H (APPELLANT) (RESPONDENT) ITA.NO.1657/HYD/2010 ASSESSMENT YEAR 2006-2007 M/S. AUROBINDO PHARMA LIMITED, HYDERABAD PAN AABCA7366H VS. ADDL. CIT, RANGE-1 HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.2073/HYD/2011 ASSESSMENT YEAR 2007-2008 M/S. AUROBINDO PHARMA LIMITED, HYDERABAD PAN AABCA7366H VS. ADDL. CIT, RANGE-1 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. PVSS PRASAD FOR REVENUE : MR. P. SOMASEKHAR REDDY DATE OF HEARING : 18.12.2013 DATE OF PRONOUNCEMENT : 31.01.2014 2 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE GROUP OF APPEALS BY ASSESSEE AND REVENUE FOR DIFFERENT ASSESSMENT YEARS. SINCE COMMON I SSUES ARE INVOLVED WE HAVE HEARD THEM TOGETHER AND DECIDED BY THIS COMMON ORDER. ITA.NO.1096/HYD/2011 A.Y. 2005-2006 (ASSESSEES APP EAL) ITA.NO.1041/HYD/2011 A.Y. 2005-2006 (REVENUES APPEAL ) 2. THE ABOVE CROSS APPEALS ARE BY ASSESSEE AND REVENUE AGAINST THE ORDER OF THE CIT(A)-III, HYDERABAD DATED 23.03.2011 FOR ASSESSMENT YEAR 2005-2006. THE ISSUE INV OLVED IN THESE APPEALS ARE WITH REFERENCE TO TRANSFER PRICING ADJUSTMENT MADE ON INTEREST RECEIVED ON LOANS GIVEN TO ASSOCIATED ENTERPRISE (IN SHORT 'AE') AND CLAIM OF BA D DEBTS. 3. WE HAVE HEARD LEARNED COUNSEL FOR THE ASSESSEE AND LEARNED D.R. AND PERUSED THE PAPER BOOKS PLACED ON RECORD ALONG WITH THE WRITTEN SUBMISSIONS. 4. BRIEFLY STATED, ASSESSEE IS A COMPANY WHICH IS ENGAGED IN MANUFACTURE OF BULK DRUGS AND PHARMACEUTIC AL FORMULATIONS. FOR THE ASSESSMENT YEAR 2005-2006 IT HAS F ILED RETURN OF INCOME ON 30.10.2005 SHOWING LOSS OF RS.64,52,14,882/- BUT ADMITTING BOOK PROFIT OF RS.51,08,78,443/-. IN THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD ADVA NCED FUNDS TO ITS ASSOCIATE CONCERNS AND HAS EARNED INTEREST. IN ORDER TO EXAMINE THE ARMS LENGTH PRICE OF SUCH INTERNATION AL TRANSACTIONS, THE A.O. MADE A REFERENCE TO TRANSFER PRIC ING OFFICER (IN SHORT 'TPO') UNDER SECTION 92CA OF THE ACT. TH E TPO 3 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. ACCEPTED OTHER TRANSACTIONS ENTERED BY THE ASSESSEE WIT H THE AES EXCEPT TRANSACTION PERTAINING TO INTEREST RECEIPTS. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE FUNDS ARE ADVA NCED TO THE SISTER CONCERNS OUT OF BORROWALS FOR THE SPECIFIC PURPOSE AND SOME OUT OF ACCRUALS FROM THE ASSESSEE'S OWN SOURCE. ASSESSEE SUBMITTED THAT IT HAS CHARGED INTEREST LINK ED TO LIBOR RATES AND GENERALLY LIBOR+ A CERTAIN PERCENTAGE POINTS WERE CONSIDERED AS INTEREST RECEIVABLE ON THE LOANS ADV ANCED WHICH IS MORE THAN THE INTEREST PAID ON SUCH LOANS. IT HAS FURNISHED VARIOUS DETAILS OF BORROWALS/OWN SOURCE AND THE RA TE ON WHICH IT HAS LENT TO ITS AES. THE LEARNED TPO, HOWEVE R, DID NOT AGREE WITH THE ASSESSEE AND HAS CONSIDERED RATE OF INTEREST AT 12% P.A. WOULD BE REASONABLE FOR ARRIVING AT THE A RMS LENGTH PRICE AND HAS PROPOSED AN ADJUSTMENT OF RS.7,62,83,59 2/-. AFTER RECEIPT OF THE SAID ORDER, THE A.O. IN CONFORMITY W ITH SUCH ORDER OF TPO MADE THE ADDITION OF RS.7,62,83,592/-. ALONG WITH THE ABOVE ISSUE, ASSESSEE CLAIMED BAD DEBT OF RS . 3 CRORES STATED TO HAVE BEEN OUTSTANDING AGAINST M/S. CITADE L AUROBINDO BIOTECH LIMITED. IT WAS SUBMITTED THAT THIS AMOUNT PERTAIN TO MATERIAL SUPPLY AND SINCE THE SAME WERE NOT RECOVERABLE, THE AMOUNT WAS WRITTEN OFF. THE A.O. DID NOT AGREE AND DISALLOWED THE CLAIM OF BAD DEBT. 5. BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDED THAT IT HAS TRANSACTIONS OF LOANS GIVEN AT ARMS LENGTH AND RELIED ON THE DRP ORDERS IN LATER YEAR I.E., A.Y. 2006- 2007 CONTESTING THE ISSUE. LEARNED CIT(A) AFTER ANALYSING THE TRANSACTIONS OF THE ASSESSEE ADOPTED THE RATE OF 9% OF LOAN GIVEN TO M/S. CITADEL AUROBINDO BIOTECH LIMITED AND AT 11% UNIFORMLY FOR OTHER LOANS BASED ON PRIME LENDING RATES OF TH OSE COUNTRIES. THE ABOVE ORDER OF THE CIT(A) RESULTED IN PART IAL 4 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. RELIEF TO THE ASSESSEE THEREBY, THE ADDITION WAS BROUGH T DOWN TO RS.4,71,83,370/-. THE CIT(A) ALSO REJECTED THE CLAIM OF BAD DEBT HOLDING THAT IT IS PREMATURE. THEREFORE, THE ASSES SEE IS AGGRIEVED ON THE ISSUE OF T.P. ADJUSTMENTS ON INTEREST RE CEIVED AND CLAIM OF BAD DEBT AND RAISED VARIOUS GROUNDS ON TH E ABOVE TWO ISSUES. THE REVENUE IS ALSO AGGRIEVED ON THE RELIEF G IVEN BY THE LEARNED CIT(A) IN THE ALP ADJUSTMENT OF INTEREST REC EIVED BY THE ASSESSEE. 6. LEARNED COUNSEL REFERRING TO THE FACTS AS PLACED ON RECORD AND PROPOSITIONS ON THE ISSUE, FAIRLY ADMITTED THAT THE ITAT IN ITA.NO.1866/HYD/2012 DATED 29.11.2003 FOR ASSESSMENT YEAR 2007-2008 HAS ACCEPTED THAT LIBOR+ C ERTAIN PERCENTAGE POINTS AS ARMS LENGTH AND RELIED ON THE ORD ERS. 7. LEARNED DR, HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND CIT(A) TO SUBMIT THAT REVENUE IS IN CROSS AP PEAL ON THE SAME ISSUE OF REDUCTION OF INTEREST GIVEN BY THE LE ARNED CIT(A). 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS. AS FAR AS THE LOANS ADVANCED AND SOURCE OF FUNDS THESE ARE THE DETAILS AS FURNISHED BY THE ASSESSEE : AUROBINDO (DATONG) BIO-PHARMA CO. LTD., CHINA : DATE AMOUNT (USD) / RS. RATE OF INTEREST RECEIVED SOURCE RATE OF INTEREST PAID 2002-03 $5,610,000 (RS.266,362,800) LIBOR+2.6% EXIM BANK LIBOR + 2.1% 2003-04 & 2003-04 $4.230,000 $6,000,000 RS.424,261,200 LIBOR+2.61% LIBOR+3.5% IOB FEDERAL BANK LIBOR+ 2% LIBOR+3.25% 2004-05 $4,5000,000 LIBOR+3.5% INTERNAL ACCRUALS --- 5 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. APL HOLDINGS INC : DATE (SIC.) AMOUNT (USD) / RS. RATE OF INTEREST RECEIVED SOURCE RATE OF INTEREST PAID 2002-03 $1,660,000 RS.78,816,800 8.65% FEDERAL BANK LIBOR + 3.25% 2003-04 $500,000 RS.15,359,200 8.65% FEDERAL BANK LIBOR+ 3.25% 2004-05 $500,000 RS.22,172,400 8.65% INTERNAL ACCRUALS --- AB FARMO QUIMICA LTD : DATE (SIC.) AMOUNT (USD) / RS. RATE OF INTEREST RECEIVED SOURCE RATE OF INTEREST PAID 2002-03 $200,000 RS.8,748,000 13.60% FEDERAL BANK LIBOR + 3.25% AUROBINDO USA INC., : DATE (SIC.) AMOUNT (USD) / RS. RATE OF INTEREST RECEIVED SOURCE RATE OF INTEREST PAID 2004-05 $2,850,000 RS.124,659,000 5.00% INTERNAL ACCRUALS -- 9. AS CAN BE SEEN FROM THE ABOVE, THE INTEREST RECEIVED WAS MORE THAN INTEREST PAID. THIS ISSUE WAS CONSIDERED BY THE COORDINATE BENCH IN THE ORDER RELIED A BOVE, WHEREIN VIDE PARAS 4.3 TO 4.8 THE ISSUE WAS DECIDED A S UNDER : 4.3 WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS. WITH REFERENCE TO PRINCIPLE THAT LABOR + SPEC IFIC PERCENTAGE POINTS IS TO BE CONSIDERED AS ALP, THERE IS NO DISPUTE AS THIS ISSUE WAS DECIDED BY VARIOUS COORDI NATE BENCHES OF TRIBUNAL IN VARIOUS CASES. FEW OF THEM A RE AS UNDER: 4.4. IN THE CASE OF SIVA INDUSTRIES & HOLDINGS LTD. 46 SOT 112 (CHENNAI) HELD THAT 6 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 'A PERUSAL OF THE ORDER OF THE TPO CLEARLY SHOWS THA T THE ASSESSEE HAD RAISED THE FUNDS BY WAY OF ISSUANCE OF 0 PER CENT OPTIONAL CONVERTIBLE PREFERENTIAL SHARES. THU S IT IS NOTICED THAT THE FUNDS RAISED BY THE ASSESSEE CO MPANY FOR GIVING THE LOAN TO INDIA TELECOM HOLDINGS LTD., MAURITIUS, WHICH IS ITS ASSOCIATED ENTERPRISES AND WHICH IS THE SUBSIDIARY COMPANY, IS OUT OF THE FUNDS OF T HE ASSESSEE COMPANY. IT IS NOT BORROWED FUNDS. THE ASSESSEE HAS GIVEN THE LOAN TO THE ASSOCIATED ENTERPRISES IN US DOLLARS. THE ASSESSEE IS ALSO RECEI VING INTEREST FROM THE ASSOCIATED ENTERPRISES IN INDIAN RUPEES. ONCE THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISES IS IN FOREIGN CURRENCY AND TH E TRANSACTION IS AN INTERNATIONAL TRANSACTION, THEN T HE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING THE COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTION. IF THIS IS SO, THEN THE DOMESTIC PRIME LENDING RATE WOULD HAVE NO APPLICABILITY AND THE INTERNATIONA L RATE FIXED BEING LIB OR WOULD COME INTO PLAY. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT LIB OR RA TE WHICH HAS TO BE CONSIDERED WHILE DETERMINING THE ARM' S LENGTH INTEREST RATE IN RESPECT OF THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISES. AS IT IS NOTICED THAT THE AVERAGE OF THE LIB OR RATE FOR 1-4 -2005 TO 31-3-2006 IS 4.42 PER CENT AND THE ASSESSEE HAS CHARGED INTEREST AT 6 PER CENT WHICH IS HIGHER THAN THE LLBOR RATE, WE ARE OF THE VIEW THAT NO ADDITION ON THIS COUNT IS LIABLE TO BE MADE IN THE HANDS OF THE ASSESS EE. IN THE CIRCUMSTANCES, THE ADDITION AS MADE BY THE ASSESSING OFFICER ON THIS COUNT IS DELETED'. 4.5. IN THE CASE OF CLT VS. TECH MAHINDRA LTD. 46 SOT 141 (MUM) TRIBUNAL HELD THAT ' WHEN THERE IS A CHOICE BETWEEN THE INTEREST RATE OF A CURRENCY OTHER THAN THE CURRENCY IN WHICH TRANSACTI ON HAS TAKEN PLACE AND THE INTEREST RATE IN RESPECT OF THE CURRENCY IN WHICH TRANSACTION HAS TAKEN PLACE, IN OUR CONSID ERED VIEW, THE LATTER SHOULD BE ADOPTED. IN SIVA INDUSTRI ES & HOLDINGS LTD.'S CASE ( SUPRA ), CO-ORDINATE BENCH WAS MAKING A CHOICE BETWEEN THE PLR (PRIME LENDING RATE IN INDIA) AND THE LIB OR (LONDON INTER BANK OFFERED RAT E). THE CO-ORDINATE BENCH HELD THAT 'ONCE THE TRANSACTIO N BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISES IS IN FOREIGN CURRENCY AND THE TRANSACTION IS AN INTERN ATIONAL TRANSACTION, THEN THE TRANSACTION WOULD HAVE TO BE L OOKED 7 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. UPON BY APPLYING THE COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTIONS', AND ACCORDINGLY PROCEED ED TO TAKE INTO ACCOUNT INTEREST RATE IN TERMS OF LLBOR B ASIS. WE HAVE ADOPTED THE SAME APPROACH BY TAKING INTO ACCOU NT THE COMMERCIAL PRINCIPLES AND PRACTICES WITH REGARD TO A US DOLLAR DENOMINATED EXTENDED CREDIT FOR ARRIVING A T THE BENCHMARK RATE, AND TAKE LIB OR AS THE BASE. ACCORDINGLY, THE LIBOR (US DOLLAR) HAS TO BE AS BENCHMARK FOR US DOLLAR TRANSACTIONS - RATHER THAN T HE RATE OF INTEREST ON DOMESTIC BORROWINGS, EVEN WHICH IS LOWER THAN THE INTEREST RATE OF 10 PER CENT TAKEN AS ALP BY THE TPO, OR, FOR THAT PURPOSE, RATE OF INTEREST O N ANY OTHER CURRENCY LOANS.' 4.6. IN THE CASE OF M/S FOUR SOFT LTD VS DCIT CIRCLE-L(3), HYDERABAD, ITA NO. 1495/HYD/2010 TRIBUNAL HELD THAT 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE DO NOT FIND A NY MERIT IN THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WE FIND THAT THE ALP IS TO BE DET ERMINED FOR THE INTERNATIONAL TRANSACTION, THAT IS, ON INTE RNATIONAL LOAN AND NOT FOR THE DOMESTIC LOAN. HENCE, THE COMPARABLE, IN RESPECT OF FOREIGN CURRENCY LOAN IN T HE INTERNATIONAL MARKET, IS TO BE LLBOR BASED WHICH IS INTERNATIONALLY RECOGNIZED AND ADOPTED. IN OUR CONSI DERED VIEW, THE DRP RIGHTLY DIRECTED THE ASSESSING OFFICER TO ADOPT THE LIB OR PLUS TOR THE PURPOSE OF TP ADJUSTM ENT. OUR VIEW IS FORTIFIED BY THE DECISION OF THE MADRAS BENCH IN THE CASE OF SIVA INDUSTRIES'. 4.7. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF TATA AUTO COMP SYSTEMS LIMITED VS. ACIT, ITAT MUMBAI, ITA NO. 7354/MUM/11(A. Y. 2007-08). 4.8. ON THE LEGAL PRINCIPLES THERE IS NO DISPUTE THAT LIBOR SPECIFIC PERCENTAGE POINTS HAS TO BE CONSIDER ED AS ALP. THERE IS ALSO NO BASIS, AS RIGHTLY OBSERVED BY TH E DRP, TO ADOPT CORPORATE BONDS RATE AT 17.26%. THERE FORE, IN PRINCIPLE WE AGREE WITH ASSESSEES CONTENTIONS THA T LIBOR + PERCENTAGE POINTS IS TO BE ACCEPTED. HOWEVE R, IT IS SEEN FROM THE DETAILS FURNISHED AT PAGE 91 OF PAPER BOOK, FEW OF LOANS PROVIDED IN AY 2003-04 AND 2004-05 IN T HE CASE OF ARUBINDO AND ARUBINDO FARMO INDUSTRIA FARMACEUTICA LDTA AND LOANS OBTAINED FROM AXIS BANK 8 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. AND FEDERAL BANK WHERE THE RATE OF INTEREST PAID WAS LIBOR +2.1% AND LIBOR +3.25%. ON THESE LOANS ASSESSEE SEEMS TO HAVE ADVANCED AT LIBOR +3% TO AURBINDO WHEREAS RATE OF INTEREST RECEIVED IN AUROB INDO FARMO INDUSTRIA FARMACEUTICA LTDA IS 13.06%. THEREFO RE, TO THE EXTENT OF ADVANCES WHICH WERE GIVEN AT A RAT E LESSER THAN THE RATE AT WHICH THOSE ARE OBTAINED, TH E AO IS DIRECTED TO EXAMINE AND IF SO, THE RATE OF INTERES T PAID SHOULD BE CONSIDERED AS ALP IN ORDER TO DETERMINE T HE INTEREST RECEIVED. WITH THESE DIRECTIONS, THIS GROUN D CONSIDERED PARTLY ALLOWED. 10. RESPECTFULLY FOLLOWING THE ABOVE, WE DIRECT THE A.O . TO EXAMINE WHETHER THE RATE OF INTEREST RECEIVED WAS AT L IBOR + PERCENTAGE POINTS. THE ADOPTION OF PRIME LENDING RATES IS NOT APPROVED IN VARIOUS COORDINATE BENCH DECISIONS. THERFORE ASSESSEE LENDING AT LIBOR PLUS RATES CAN BE CONSIDERE D AS ARMS LENGTH PROVIDED THERE IS NO OTHER EXPENDITURE ON THE BORROWED FUNDS. SINCE SOME OF THE LOANS ARE REFLECTING RATE AT ORDINARY PERCENTAGE POINTS, CONVERSION TO LIBOR PLUS IS REQUIRED. THE A.O. IS DIRECTED TO EXAMINE AND DECIDE ACCORDINGLY ON THE LOANS ADVANCED BY THE ASSESSEE COM PANY, KEEPING IN MIND DIRECTIONS IN EARLIER YEAR WHICH HAS AN EFFECT AS LOANS ARE ADVANCED IN EARLIER YEARS. AS CAN BE SEEN ASSESSEE HAS ADVANCED FUNDS TO AUROBINDO (DATAONG BIOPHARMA) AT LIBOR + 3.5% EVEN ON THE INTERNAL ACCRUALS DURING THE YEAR. THEREFORE, THAT CAN ALSO BE TAKEN AS ARMS LENGTH RATE F OR THE LOANS ADVANCED DURING THE YEAR. AO IS DIRECTED TO EXA MINE. WITH THESE DIRECTIONS, ASSESSEE'S GROUNDS ON THIS ISSU E ARE ALLOWED FOR STATISTICAL PURPOSES. CONSEQUENTLY, THERE IS NO MERIT IN THE REVENUE'S GROUNDS AND ACCORDINGLY, THEY ARE DISMISSED. 11. COMING TO THE ISSUE OF BAD DEBT, BRIEFLY STATED, THE ASSESSEE HAS CLAIMED BAD DEBT OF RS. 3 CRORES WHICH 9 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. REPRESENTS DUES FROM M/S. CITADEL AUROBINDO BIOTECH LIMIT ED STATED TO BE FOR THE SUPPLIES MADE. DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSEE EXPLAINED THE REASONS AND JU STIFIED FOR BAD DEBTS STATING THAT THE TRANSACTIONS WITH M/S. C ITADEL AUROBINDO BIOTECH LIMITED, A JOINT VENTURE COMPANY, ARE MULTIFOLD AND INCLUDE INVESTMENT IN EQUITY, RECEIVAB LES FOR SUPPLIES MADE, NON-COMPETE FEE AND CONSIDERATION FOR THE BRANDS AND ADVANCE RECOVERY. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED THAT ALL THESE TRANSACTIONS WERE INFORMED TO THE A.O. AND THE WRITTEN OFF AMOUNT OF RS. 3 CRORES WAS ONLY TOWARDS SUPPLIES MADE AND NOT TOWARDS NON-COMPETE FEE AND SALE OF BRANDS. ASSESSING OFFICER, HOWEVER, DID NOT ALL OW THE CLAIM STATING THAT ASSESSEE HAS TRANSFERRED PART OF N ON- COMPETE FEE AS LOAN AND WRITTEN OFF DURING THE YEAR A S BAD DEBT. LEARNED CIT(A), HOWEVER, ACCEPTED THAT THE AMOUNT OF RS. 3 CRORES WAS TOWARDS SUPPLIES MADE BUT DID NOT ALLOW THE AMOUNT AS HE HAS CONSIDERED THAT WRITING OFF WAS PREMATU RE. 13. LEARNED COUNSEL REITERATING THE FACTS, SUBMITTE D THAT ASSESSEE WAS JUSTIFIED IN WRITING OFF THE AMOUNT A S THE SAID COMPANY IS NOT IN THE BUSINESS AND IS NOT IN A POSITION TO REPAY THE DEBT. CONSEQUENT TO THE AMENDMENT BROUGHT IN TO THE PROVISIONS OF SECTION 36(1)(VII) OF THE I.T. ACT, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE DEBT IS WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE. LEARNED COUNSEL RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT 323 ITR 397. IT WAS SUBMITTED THAT TH E AMOUNT MAY BE ALLOWED AS BAD DEBT. 10 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 14. LEARNED DR, HOWEVER, RELIED ON THE ORDERS OF THE LEARNED CIT(A) TO SUBMIT THAT THE AMOUNT WRITTEN OFF WAS PREMATURE WHICH HAS NOT BECOME BAD. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AGREE WITH THE ASSESSEE'S CONTENTIONS THAT IT IS NOT NECE SSARY TO PROVE THAT THE DEBT HAS BECOME IRRECOVERABLE AND IS ENOUG H IF BAD DEBT IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE . THERE IS NO DISPUTE THAT THE AMOUNT CLAIMED IS TOWARDS SUPPLIES M ADE AND THE DEBTOR COMPANY IS NOT IN THE POSITION TO REPAY. THEREFORE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON' BLE SUPREME COURT IN THE CASE OF TRF LIMITED (SUPRA), WE DI RECT THE A.O. TO ALLOW THE AMOUNT AS CLAIMED. ASSESSEE'S GROUNDS ON THIS ISSUE ARE ALLOWED. 16. IN THE RESULT, ASSESSEE'S APPEAL ITA.NO.1096/HYD/2011 IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS, REVENUE'S APPEAL ITA.NO.1041/HYD/2011 IS DISMISSED. ITA.NO.1657/HYD/2010 - A.Y. 2006-2007 - (ASSESSEE'S APP EAL) 17. THIS IS AN ASSESSEE'S APPEAL FOR THE ASSESSMENT YEAR 2006-2007 AGAINST THE ORDERS OF THE ASSESSING OFFI CER READ WITH DISPUTES RESOLUTION PANEL (IN SHORT 'DRP') HYDERABAD. THE ASSESSEE HAS RAISED 8 GROUNDS. GROUNDS NO. 1 AND 8 ARE GENERAL IN NATURE AND IT DOES NOT REQUIRE ANY ADJUDICATION. 18. GROUNDS NO. 2 TO 4 PERTAIN TO THE ISSUE OF ADOPTING THE RATE OF INTEREST ON THE LOANS GIVEN TO ITS SUBSIDIARIE S UNDER THE TRANSFER PRICING PROVISIONS. THIS ISSUE IS A RECURRING IS SUE AND IN EARLIER YEARS ALSO, THE A.O./TPO ADOPTED MARKET RATE AS 11 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. ARMS LENGTH PRICE AND ACCORDINGLY, MADE ADDITION. HOWE VER, DRP AFTER EXAMINING THE ISSUE DIRECTED THE A.O. TO AD OPT PRIME LENDING RATE PLUS 2% ON VARIOUS LOANS ADVANCED BY THE ASSESSEE AND DRP ITSELF COMPUTED THE SHORTFALL IN INT EREST VIDE PARA 7.4 OF ITS ORDER DETERMINING THE T.P. ADJUSTMENT AT RS.2,23,36,518/-. ASSESSEE IS AGGRIEVED ON THE ABOVE ISSUE. 19. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE TRANSACTIONS SHOULD BE BENCHMARKED AGAINST LIBOR + CERTAIN PERCENTAGE POINTS. THE DISPUTE IS ONLY WITH REFERENCE TO PRIME LENDING RATE OF THE RESPECTIVE CO UNTRIES TO BE CONSIDERED OR LIBOR + 2% POINTS ARE TO BE CONSIDERED. CONSISTENT WITH THE VIEW TAKEN IN EARLIER YEARS IN ALL THOSE CASES WHERE ASSESSEE HAS CHARGED MORE THAN LIBOR + 2% POINTS, THE SAME SHOULD BE ACCEPTED AS ARMS LENGTH UN LESS THE BORROWALS WAS AT HIGHER PERCENTAGE POINTS. ANOTHER CASE, WHERE A BENCHMARK IS NOT DONE WITH LIBOR + 2% RATE L IKE 5 TO 13% IN SOME OF THE LOANS ADVANCED, THE SAME CAN BE BENCHMARKED AT LIBOR + CERTAIN PERCENTAGE AS IN LAS T YEAR AND IF THERE IS ANY SHORTFALL IN THE INTEREST CHARGED, T HE SAME CAN BE CONSIDERED FOR MAKING ADJUSTMENT IN T.P. PROCEED INGS. KEEPING IN VIEW THE DIRECTIONS GIVEN IN EARLIER YEARS, THIS ISSUE IS RESTORED TO THE FILE OF THE A.O. TO EXAMINE THE RATES A ND BENCHMARK WITH LIBOR + PERCENTAGE POINTS. ASSESSEE'S GROUNDS ARE CONSIDERED AS ALLOWED. 20. GROUNDS NO. 5, 6 AND 7 PERTAIN TO THE ISSUE OF DISALLOWANCE MADE UNDER SECTION 40(A)(II) BY THE A.O. ON THE REASON THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE AMOU NTS PAID TO NON-RESIDENTS . 12 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 21. BRIEFLY SATED, FACTS ARE THAT THE ASSESSEE HAS CLAIMED VARIOUS PAYMENTS TO NON-RESIDENTS WHICH ARE AS UNDER: 1. SALES COMMISSION PAID OUTSIDE INDIA RS.7,69,18,166/- 2. PRODUCT REGISTRATION AND FILING FEE PAID TO AGENCY OF FOREIGN COUNTRIES RS.3,38,11,125/- 3. PROFESSIONAL AND CONSULTANCY CHARGES RS.1,68,10,581/- TOTAL RS.12,75,39,872/- 22. ASSESSING OFFICER'S CONTENTION WAS THAT THE ISSUE OF DEDUCTION OF TAX ON PAYMENTS MADE TO NON-RESIDENT IS A DEBATABLE ISSUE AND ASSESSEE SHOULD HAVE OBTAINED A CERTIFICATE UNDER SECTION 195(2) OR IN THE ABSENCE OF SUCH CERTIFICATE, SHOULD HAVE DEDUCTED TAX AT SOURCE. SINCE PROVISIONS OF SECTION 40(A) AUTOMATICALLY COME INTO PLAY, THE A.O. DISALLOWED THE AMOUNT UNDER SECTION 40(A)(IA). THE DRP UPHELD THE VIEW OF THE A.O. 23. IT WAS THE CONTENTION THAT THESE AMOUNTS WERE PAID ABROAD FOR THE SERVICES RENDERED ABROAD AND SO TH E DEEMED PROVISIONS OF ACCRUAL IN INDIA DOES NOT ARISE. LEARNE D COUNSEL SUBMITTED THAT THEY HAVE FILED AN APPLICATION UNDER SECTION 154 TO THE DRP WHICH WAS NOT ATTENDED TO. IT WAS FURTHER SUBMITTED THAT AS FAR AS THE SALES COMMISSION IS CONCERNED, THE ITAT IN EARLIER YEARS HAS HELD THAT NO T AX IS DEDUCTIBLE ON THE AMOUNTS FOLLOWING VARIOUS CASE LAW. A S FAR AS THE FEES PAID FOR REGISTRATION AND CONSULTANCY CHARGE S, THEY DID NOT ACCRUE IN INDIA AS THE AMOUNTS ARE FOR THE SERV ICES RENDERED OUTSIDE INDIA AND THEREFORE, THEY CANNOT BE CONSIDERED AS INCOME UNDER SECTION 9(1)(VI)/9(1)(VI I). IN THIS CONTEXT, LEARNED COUNSEL RELIED ON THE JUDGMENT OF THE HONBLE 13 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. MADRAS HIGH COURT IN THE CASE OF CIT VS. AKTIENGESELLSCH AFT KUHNLE KOPP AND KAUSCH W. GERMANY REP. BY BHEL (2002) 125 TAXMAN 928 (MAD.). HE ALSO SUBMITTED THAT UNLESS T HE AMOUNT IS TAXABLE IN INDIA, THERE IS NO QUESTION OF DE DUCTING TAX AND ACCORDINGLY, PROVISIONS OF SECTION 40(A)(IA) DOE S NOT APPLY. 24. LEARNED DR ON THE OTHER HAND, RELIED ON THE ORDERS OF THE A.O. AND DRP. 25. AS FAR AS THE AMOUNT PAID AS SALES COMMISSION IS CONCERNED, THIS ISSUE HAS ALREADY BEEN DECIDED BY T HE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2 002- 2003 AND 2004-2005 IN ITA.NO.415 & 999/HYD/2007 BY ORD ER DATED 25.06.2010. THE COORDINATE BENCH HAS HELD AS UND ER : 2. . . .. . WE FIND THAT AS PER CIRCULAR 786 DATED 17.2.2000, COMMISSION PAID BY THE ASSESSEE COMPANY DIRECTLY TO NON-RESIDENT AGENTS FOR RENDERING SERVIC ES ABROAD ARE NOT LIABLE FOR DEDUCTION OF TDS UNDER SEC TION 195 OF THE ACT. ACCORDINGLY, THE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. THE CASE LA W RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF TRANSMISSION CORPORATION OF A.P. LIMITED REPORTE D IN 239 ITR 587 (SC) AND THE DECISION OF THIS TRIBUNAL IN THE CASE OF CHEMINOR DRUGS VS. ITO IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION, AS IN THIS CASE, THE ASSE SSEE MADE THE PAYMENT DIRECTLY TO THE NON-RESIDENT AGENTS FOR RENDERING SERVICES ABROAD. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE SAME IS UPHELD. 14 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 26. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT SINCE NO SERVICES ARE RENDERED IN INDIA, SALES COMMISSION CANNOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)( IA. EVEN THOUGH THERE ARE ORDERS FAVOURABLE TO THE ASSESSEE, DRP HOWEVER, DID NOT CONSIDER THE SAME. WE HAVE NO HESITAT ION IN HOLDING THAT AMOUNTS COVERED BY SALES COMMISSION ARE NOT ACCRUING OR ARISING TO THE NON-RESIDENTS IN INDIA. AC CORDINGLY, PROVISIONS OF SECTION 195 DOES NOT APPLY AND CONSEQUENTL Y, SECTION 40(A)(IA) CANNOT BE INVOKED. THE GROUNDS TO THE EXTENT OF SALES COMMISSION OF RS.7,69,18,166/- ARE ALLOWED. 27. COMING TO THE OTHER TWO ISSUES VIZ., PRODUCT REGISTRATION AND FILING FEE OF RS.3,38,11,125/- AND PROFESSIONAL AND CONSULTANCY CHARGES, THE CONTENTION WAS THAT THE PAYMENT WAS MADE FOR THE SERVICES RENDERED OUTSIDE INDIA AND T HE SAME DOES NOT REPRESENT INCOME AND HENCE, THERE IS NO NEED FOR DEDUCTION OF TAX AT SOURCE. AS SEEN FROM THE ORDER OF THE A.O., THERE IS NO DISCUSSION AT ALL ON THE NATURE OF AMOUNTS P AID AND THE DETAILS OF THE SAME. A.O. EVEN THOUGH RELIED ON VA RIOUS CASE LAW, PRIMARILY RELIED ON THE REASON THAT ASSESSEE HA S NOT OBTAINED ANY CERTIFICATE UNDER SECTION 195(2). A.O. SHOU LD HAVE EXAMINED WHETHER THE AMOUNT IS CHARGEABLE UNDER THE PROVISIONS OF INCOME TAX ACT. IF THE AMOUNT IS NOT CHARGEABL E AT ALL, QUESTION OF DEDUCTION UNDER SECTION 195 DOES NOT ARISE. WITHOUT EXAMINING THE NATURE OF THE AMOUNT AND WHETH ER THE OTHER NON-RESIDENT HAS ANY PERMANENT ESTABLISHMENT IN INDIA OR MADE AVAILABLE ANY THING IN INDIA OR RENDERED ANY SERV ICES IN INDIA, THE AMOUNT CANNOT BE CONSIDERED UNDER THE PROVISIONS OF SECTION 40(A)(IA), AS PER THE CASE LAW ON T HE SUBJECT. SINCE COMPLETE DETAILS OF THE AMOUNTS AND TO WHOM THEY ARE PAID ARE NOT FORTHCOMING ON RECORD, WE, IN THE INT EREST 15 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. OF JUSTICE, RESTORE THE ISSUE TO THE FILE OF THE A.O. T O EXAMINE THE ABOVE AMOUNTS AND CONSIDER IT AFRESH. WE MAKE IT CLE AR THAT IF THE NON-RESIDENT HAS NOT RENDERED ANY SERVICES I N INDIA, OR THE AMOUNT PAID IS NOT TAXABLE IN INDIA, PROVISIONS OF SECTION 195 DOES NOT APPLY AND DISALLOWANCE UNDER SECT ION 40(A)(IA) DOES NOT ARISE. ASSESSEES DETAILED SUBMISSION S ON LEGAL ISSUES WERE EXTRACTED IN THE NEXT APPEAL ON SIM ILAR ISSUE OF PROFESSIONAL CHARGES. THEY SHOULD ALSO BE KEPT IN MIN D. WITH THESE OBSERVATIONS, THE PAYMENTS PERTAINING TO REGISTRATION AND FILING FEE OF RS.3,38,11,125/- AND PROFESSIONAL AND CONSULTANCY CHARGES OF RS.1,68,10,581/- ARE REST ORED TO THE FILE OF THE A.O. TO EXAMINE IT AFRESH KEEPING IN MIND THE FACTS OF THE CASE AND LAW ON THE SUBJECT. GROUNDS ARE A LLOWED FOR STATISTICAL PURPOSES. 28. IN THE RESULT, APPEAL OF THE ASSESSEE ITA.NO.1657/HYD/2010 IS ALLOWED FOR STATISTICAL PURPOSES. ITA.NO.2073/HYD/2011 - A.Y. 2007-2008 - (ASSESSEES APPEAL) 29. IN THIS APPEAL, THE ASSESSEE HAS RAISED 7 GROUND S. GROUNDS NO. 1 AND 7 ARE GENERAL IN NATURE AND THEREFORE, THEY NEED NOT BE ADJUDICATED. 30. GROUND NO.2 PERTAINS TO TRANSFER PRICING ADJUSTMENT ON THE LOANS GIVEN TO ITS SUBSIDIARIES. TH IS ISSUE IS RECURRING ISSUE AND UNLIKE IN EARLIER YEAR, THE DRP DI D NOT RESTRICT THE DISALLOWANCE TO PRIME LENDING RATE +2% PE RCENTAGE POINTS AND CONFIRMED THE T.P. ORDER ADOPTING THE CORPORATE BOND AT 14% ON LOANS, ON THE REASON THAT SIMILAR ISSUES ARE PENDING BEFORE THE ITAT. CONSIDERING VARIOUS COORDINATE BENCH DECISIONS ON THE ISSUE, WE HOLD THAT LIBOR + CE RTAIN PERCENTAGE POINTS CAN BE BENCHMARKED. AS DIRECTED IN A .Y. 16 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 2006-2007, THE A.O. IS DIRECTED TO EXAMINE THE ISSUE AND ARRIVE AT THE ADDITION IF ANY TO BE MADE OVER AND ABOVE THE RATE ACCEPTED BY THE ASSESSEE WHILE PROVIDING LOANS TO THE SUBSIDIARIES. THE ISSUE IS RESTORED TO THE FILE OF THE A.O. TO EXAMINE AND DECIDE AS IN EARLIER YEARS (AS DECIDED BY IS IN PARA NO. 10 AND 19 HEREINABOVE). GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 31. GROUND NO.3 PERTAINS TO ISSUE OF DISALLOWING THE CLAIM UNDER SECTION 35D. ASSESSEE CLAIMED AN EXPENDI TURE OF RS.4,11,71,160/- AS DEDUCTION UNDER SECTION 35D ON ISS UE OF FOREIGN CURRENCY CONVERTIBLE BONDS (IN SHORT FCCB). THE SAID SUM WAS DISALLOWED BY THE A.O. ON THE REASON THAT FCCB ARE NOT ON ACCOUNT OF ANY PUBLIC ISSUE AND ONLY QUALIF IED INSTITUTIONAL INVESTORS ARE OFFERED THE BONDS. THE A.O./ DRP HAVE OPINED THAT PROVISIONS OF SECTION 35D(2)(C) DOES N OT APPLY TO THE SPECIFIC CATEGORY OF EXPENDITURE MADE BY THE ASS ESSEE AND ACCORDINGLY, THE DISALLOWANCE WAS MADE. 32. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT ASSESSEES CONTENTIONS ARE TO BE ACC EPTED. EVEN THOUGH ASSESSEE MADE CLAIM UNDER SECTION 35D, TH E CLAIM IS ALLOWABLE UNDER SECTION 37(1) AS DECIDED BY THE COORDINATE BENCH IN THE CASE OF MAHINDRA & MAHINDRA L IMITED VS. CIT 36 SOT 348. IN THAT CASE, IT WAS HELD AS UNDE R : 20.1. IN THE CASE UNDER CONSIDERATION, THE CASE OF THE REVENUE IS THAT EXPENDITURE INCURRED BY THE ASSESSE E ON ACCOUNT OF FOREIGN CURRENCY CONVERTIBLE BONDS AR E IN THE NATURE OF SHARE ISSUE EXPENSES, WHICH IS CAPITA L IN NATURE. IN THIS REGARD, THE LEARNED A.R. HAS RELIED O N THE JUDGMENT OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF SECURE METERS LTD. (SUPRA) WHEREIN IT WA S HELD THAT DEBENTURES WHEN ISSUED IS A LOAN, WHETHER IT IS CONVERTIBLE OR NON-CONVERTIBLE, DOES NOT MILI TATE 17 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. AGAINST THE NATURE OF THE DEBENTURE BEING LOAN. THEREFORE, THE EXPENDITURE INCURRED WOULD BE ADMISSIBLE AS REVENUE EXPENDITURE IN THE LIGHT OF TH E JUDGMENT OF THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. (SUPRA). SINCE THE ISSUE UNDER CONSIDERATION IS DIRECTLY COVERED BY THE JUDGMENT O F THE RAJASTHAN HIGH COURT AND THERE IS NO CONTRARY DECISION POINTED OUT BY THE REVENUE, WE RESPECTFULLY FOLLOW THE ABOVE JUDGMENT AND IN THE LIGHT OF THAT TH E CLAIM OF THE ASSESSEE IS ALLOWED. 33. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WE HOLD THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1). IT WAS SUBM ITTED THAT THE EXPENDITURE INCURRED ON ISSUE OF FCCB CAN BE ALLOWED PROPORTIONATELY AS DEFERRED REVENUE EXPENDITURE OVER THE PERIOD OF CONVERSION OF FCCB INTO EQUITY. SINCE THE I SSUE OF ALLOWANCE UNDER SECTION 37(1) WAS NOT EXAMINED BY THE A.O. WE ARE OF THE OPINION THAT THE SAME CAN BE EXAMINED AN D ASSESSEES CLAIM CAN BE ALLOWED AS REVENUE EXPENDITURE AND IN CASE, REQUIRED, FOLLOWING THE PRINCIPLES LAID DOWN BY MAD RAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT 225 ITR 802 , THE SAME CAN BE ALLOWED AS DEFERRED REVENUE EXPENDITURE OVER THE PERIOD OF CONVERSION OF FCCB INTO EQUITY. WE WERE ALS O INFORMED THAT IN A.Y. 2008-2009 THE DRP ITSELF ALLOWED THE FCCB EXPENSES AS DEFERRED EXPENDITURE. THEREFORE, THE I SSUE IS RESTORED TO THE FILE OF THE A.O. TO CONSIDER THE ISSUE A ND ALLOW ACCORDINGLY. ACCORDINGLY, GROUND NO. 3 IS ALLOWED FOR STAT ISTICAL PURPOSES. 34. GROUND NO.4 PERTAINS TO BAD DEBT CLAIM. BRIEFLY STATED, THE FACTS ARE THAT THE LD ASSESSING OFFICER D ISALLOWED RS.3,66,38,477/- REPRESENTING THE AMOUNT DUE FROM POLARI S HEALTH CARE PRIVATE LIMITED WRITTEN OFF AS BAD DEBT. TH E SAID AMOUNT CLEARLY REPRESENTS DUES FROM POLARIS HEALTH CA RE 18 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. PRIVATE LIMITED FOR SUPPLIES MADE BY THE ASSESSEE WHIC H IS EVIDENCED BY SUPPORTING EVIDENCE LIKE INVOICES, DELIVE RY CHALLAN ETC. THESE DUES ARE OUTSTANDING FOR QUITE A LONG TIME AND THE ASSESSEE IN SPITE OF ITS BEST EFFORTS COULD NOT RECOVER THE SAID DUES. CONSIDERING THE FINANCIAL POSITION OF THE DEBTO R SINCE THERE ARE NO CHANCES OF RECOVERY THE ASSESSEE HAS CHAR GED THIS AMOUNT TO PROFIT & LOSS ACCOUNT AS BAD DEBT. IN THIS CONNECTION, IT WAS SUBMITTED THAT THE DEBT WAS CREATED ON ACCOUNT OF SALES MADE BY THE ASSESSEE WHICH WERE DUL Y ACCOUNTED FOR IN THE EARLIER YEARS AND THE DEBT WAS CONT INUING IN THE BOOKS, SINCE NOT RECOVERABLE WAS WRITTEN OFF AS BAD DEBT. 35. THE ASSESSEE COMPANY RAISED OBJECTIONS AGAINST THE ABOVE ADDITION BEFORE THE HON'BLE DISPUTE RESOLUTION P ANEL (DRP). DRP VIDE THEIR ORDER DATED 26-08-2011 UPHELD TH E ADDITION MADE BY THE AO TOWARDS BAD DEBTS WRITTEN OFF. LEARNED COUNSEL SUBMITTED THAT THE DEBT IS CREATED ON ACCOUNT OF SALES MADE BY THE ASSESSEE WHICH ARE DULY ACCOUNTED FOR IN THE EARLIER YEARS AND THE DEBT IS CONTINUING IN THE B OOKS. 36. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON RECORD. FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT 323 ITR 397 (SC), WE DIRECT THE A.O. TO ALLOW THE AMOUNT AS BAD DEBT. THIS ISSUE IS ALREADY ELABORATELY DISCUSSED BY US IN PARA 14 HEREINABOVE. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE A.O. TO ALLOW THE CLAIM OF BAD DEBT. ACCORDINGLY, GROUND NO.4 OF ASSESSEE IS ALLOWED. 37. GROUND NO.5 PERTAINS TO DISALLOWANCE OF PAYMENTS MADE BY THE ASSESSEE COMPANY TO NON-RESIDENTS ON THE REA SON THAT NO TAXES WERE WITHHELD FOR THE PAYMENTS MADE TO NON - 19 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. RESIDENTS. IN THIS A.Y. THE A.O. HAS DISALLOWED VARI OUS AMOUNTS UNDER SECTION 40(A)(IA) STATING THAT ASSESSEE HAS NOT DEDUCTED TAX. THE AMOUNTS INVOLVED ARE PROFESSIONAL FEES PAID TO AN EXTENT OF RS.1,70,59,145/-. OUT OF THIS AMOUNT, THERE ARE INDIAN PARTIES, OUT OF WHICH, ASSESSEE IS CONTESTING REIMBURSEMENT OF EXPENSES OF RS.2,91,200/- PERTAINING T O SHAH ENTERPRISES AND TRANSLATION CHARGES PAID TO TRANSLATI ON BUREAU WHICH IS A GOVERNMENT CONCERN. IT SEEMS A.O. D ID NOT EXAMINE THIS ISSUE AND DRP ALSO WAS OF THE OPINION T HAT IT IS DIFFICULT TO CONCLUDE THAT THEY ARE MADE ONLY FOR THE PU RPOSE OF RENDERING SERVICES AND WERE IN THE NATURE OF REIMBURSEMEN T. IN THE ABSENCE OF EXAMINATION BY THE A.O. IT IS VERY DIF FICULT TO ESTABLISH WHETHER THE AMOUNTS ARE TO BE DISALLOWED UNDE R SECTION 40(A)(IA). THEREFORE, KEEPING IN VIEW THE FACT THAT THE PAYMENTS WERE MADE TO INDIAN PARTIES, THE ISSUE IS REM ITTED TO THE FILE OF THE A.O. TO EXAMINE WHETHER THE EXPENDITURE IS REIMBURSEMENT OF EXPENSES MADE TO SHAH ENTERPRISES. AND ON OTHER CONTENTION OF TRANSLATION BUREAU, WHETHER THE PAYME NT WAS MADE TO A GOVERNMENT CONCERN. IF THAT IS SO, THERE IS NO NEED FOR DEDUCTION TAX AND CONSEQUENTLY, DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT ARISE. IN VIEW OF THIS, AMO UNT OF RS.2,91,200/- AND RS.1,60,388/- ARE RESTORED TO THE FI LE OF THE A.O. 38. OUT OF THE PAYMENTS MADE TO FOREIGN PARTIES, THE ASSESSEES CONTENTIONS ARE AS UNDER : 31.0 DURING THE YEAR UNDER CONSIDERATION APPELLANT PAID AMOUNT OF RS. 1,65,67,307/- TOWARDS PROFESSIONAL FEE TO FOREIGN PARTIES WHO DO NOT HAVE PERMANENT ESTABLISHMENT (PE) IN INDIA WHO RENDERED SERVICES OUTSIDE THE COUNTRY AND IT IS IN CONNECTIO N WITH EXPORT BUSINESS OF THE APPELLANT AND FOR EARNING INCOME FOR THE SOURCES OUTSIDE INDIA. MOST OF THE 20 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. EXPENSES PERTAIN TO AND ARE IN CONNECTION WITH PROD UCT REGISTRATION AND FILING WHICH ARE REQUIRED FOR MARKET ING COMPANY'S PRODUCTS IN VARIOUS COUNTRIES. 32.0 THE LEARNED AO AND DRP DISALLOWED ABOVE PROFESSIONAL AND LEGAL FEES U/S 40(A)(I) STATING THAT APPELLANT SHOULD HAVE DEDUCTED TAX U/S 195 OF T HE IT ACT. THE LEARNED AO/DRP OUGHT TO HAVE APPRECIATED THAT THE PAYMENTS MADE TO NON-RESIDENTS WERE COVERE D BY THE EXCEPTION TO SEC.9 (I) (VII) (B) AND THEREFORE DID NOT REQUIRE DEDUCTION OF TAX AT SOURCE. 33.0 WE DRAW YOUR ATTENTION TO THE RULING OF THE SUPREME COURT ('SC')IN GE INDIA TECHNOLOGY CENTRE (P) LTD V CIT(2010) 7 TAXMANN.COM 18 RELATING TO SPECIAL LEAVE PETITION FILED BY A FEW COMPANIES AGAINST THE JUDGEMENT OF KARNATAKA HIGH COURT ('HC') IN THE LEADING CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (20 10) 320 ITR 209/(2009) 185 TAXMAN 313. THE SUPREME COURT (SC) OBSERVED THAT 'THE MOST IMPORTANT EXPRESSION IN SECTION 195(1) CONSISTS OF TH E WORDS CHARGEABLE UNDER THE PROVISIONS OF THE ACT. A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON- RESIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS N OT CHARGEABLE TO TAX UNDER THE IT ACT. FOR INSTANCE, WHE RE THERE IS NO OBLIGATION ON THE PART OF THE PAYER AND NO RIGHT TO RECEIVE THE SUM BY THE RECIPIENT AND THE PAYMENT DOES NOT ARISE OUT OF ANY CONTRACT OR OBLIGATION BETWEEN THE PAYER AND THE RECIPIENT BUT I S MADE VOLUNTARILY, SUCH PAYMENTS CANNOT BE REGARDED AS INCOME UNDER THE IT ACT AN OBLIGATION FOR TDS ARI SES ON SUMS THAT ARE CHARGEABLE TO TAX UNDER THE ACT. TH E APPLICATION OF SECTION 195(2) PRE SUPPOSES THAT THE PERSON RESPONSIBLE FOR MAKING PAYMENT TO THE NON- RESIDENT IS IN NO DOUBT THAT THE TAX IS PAYABLE IN RESPECT OF SOME PART OF THE AMOUNT TO BE REMITTED T O A NON-RESIDENT BUT IS NOT SURE AS WHAT SHOULD BE THE PORTION SO TAXABLE OR IS NOT SURE AS TO THE AMOUNT OF TAX TO BE DEDUCTED 'IN SUCH A SITUATION, THE SC OBSERVE D, UNDER SECTION 195(2), THE PERSON RESPONSIBLE FOR MAKING THE REMITTANCE IS REQUIRED TO MAKE AN APPLICATION TO THE CONCERNED REVENUE OFFICER REQUIRI NG THE OFFICER TO DETERMINE THE APPROPRIATE AMOUNT ON WHICH TAX IS DEDUCTIBLE. 21 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. 34.0 THE SC HELD THAT TDS OBLIGATION UNDER SECTION 195(I) (VOLUNTARY DETERMINATION BY THE PAYER) OR SECTION 195(2) (DETERMINATION BY THE REVENUE OFFICER) IS RESTRICTED TO THAT PART OF THE SUM TO BE REMITTED W HICH IS CHARGEABLE TO TAX. THE SC OBSERVED THAT APPLICATION UNDER SECTION 195(2) (BY THE PAYER) OR UNDER SECTION 195(3) (BY THE NON-RESIDENT RECIPIENT) IS ONLY A SAFEGUARD. 35.0 THE SC DECISION REFERRED TO ITS EARLIER DECISIONS IN VIJAY SHIP BREAKING CORP. 'S CASE (SUPRA ) AND ELI LILLY & CO. (INDIA) (P.) LTD. 'S CASE (SUPRA) WHEREIN IT WAS HELD THAT THE PAYER IS OBLIGED TO COMPL Y WITH THE TDS PROVISIONS ONLY IF THE REMITTANCE IS LIA BLE TO TAX IN INDIA. 36.0 THE SC OBSERVED THAT THE LANGUAGE USED IN SECTION 195( I) IS 'SUMS CHARGEABLE UNDER THE PROVISIONS OF THE ACT' AS AGAINST THE PHRASE 'ANY AMOUNT' IN OTHER TDS PROVISIONS APPLICABLE TO DOMESTIC PAYMENTS. THE SC, THEREFORE, HELD THAT SECTION 195 HAS TO BE READ IN CONFORMITY WITH THE CHARGING SECTIONS OF THE ACT. THE SC, ACCORDINGLY, REJECTED THE REVENUE'S ARGUMENT THAT TDS OBLIGATION ARISES ON EVERY PAYMEN T TO A NON-RESIDENT, AS THIS WOULD IMPLY THAT ON SIMPLY MAKING A PAYMENT TO A NON-RESIDENT, INCOME WOULD BE SAID TO ACCRUE OR ARISE IN INDIA. 37.0 THE SC HELD THAT THE ACT HAS TO BE READ AS AN INTEGRATED CODE AND THAT THE CHARGING SECTION AND MACHINERY SECTIONS OF TDS HAVE TO BE READ TOGETHER. THE SC OBSERVED THAT IF THE REVENUE'S CONTENTION WE RE TO BE ACCEPTED, IT WOULD AMOUNT TO THE PAYER DEDUCTI NG TAX ON A PAYMENT THAT IS NOT CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT, FOR WHICH THE ACT ALSO D OES NOT HAVE A MECHANISM FOR PROVIDING REFUND OF TAX TO THE PAYER, AS ONLY THE RECIPIENT NON-RESIDENT IS ENTITLE D TO THE REFUND. 38.0 THE REVENUE'S ARGUMENT THAT IT WOULD NOT BE IN A POSITION TO DETERMINE THE TAXABILITY OR OTH ERWISE OF THE PAYMENTS WAS REJECTED BY THE SE BY AGAIN REFERRING TO THE PROVISIONS OF SECTION 195 (1), WHIC H REQUIRED TDS ONLY ON THOSE SUMS THAT ARE CHARGEABLE TO TAX. THE SE ALSO OBSERVED THAT THE REVENUE CAN HAV E ACCESS TO THE DESIRED INFORMATION WHEN THE PAYERS A RE 22 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. SUBJECTED TO TAX SCRUTINY IN THE AUDIT OF THEIR TAX ABLE INCOME. IT WAS NOTED BY THE SE THAT PAYMENTS TO NON - RESIDENTS, ON WHICH THE REQUISITE TDS HAS NOT BEEN MADE, SUFFER DISALLOWANCE AND THE TAXABLE INCOME OF THE PAYERS IS INCREASED. IT WAS, THEREFORE, OBSERVE D THAT THIS PROVISION ENSURES EFFECTIVE COMPLIANCE UN DER SECTION 195 WHENEVER THE REMITTANCES ARE CHARGEABLE TO TAX. IN ADDITION, THE 'SE OBSERVED THAT BY WAY O F THE NEW SECTION 195(6) INTRODUCED FROM APRIL 1, 2008, THE PAYERS ARE NOW COMPULSORILY REQUIRED TO TRANSMIT THE INFORMATION TO THE REVENUE DEPARTMENT EVERY TIME A REMITTANCE TO A NON-RESIDENT IS MADE. THE SE CONCLUD ED THAT EVEN THOUGH THIS PROVISION DID NOT APPLY TO THE YEARS UNDER REVIEW, THERE ARE ENOUGH SAFEGUARDS AND THE REVENUE'S ARGUMENT COULD NOT BE ACCEPTED. 39.0. SINCE THE HC HAD PLACED SUBSTANTIAL RELIANCE ON THE SCS RULING IN THE CASE OF TRANSMISSIO N CORPN. OF AP LTD. (SUPRA), THE SE ALSO GAVE ITS OBSERVATIONS AND CLARIFIED ITS DECISION IN THIS CAS E. THE SC OBSERVED THAT THE SAID CASE PERTAINED TO COMPOSI TE PAYMENTS TO NON-RESIDENTS, A PART OF WHICH WAS CHARGEABLE TO TAX. THE SE NOTED THAT, IN THE SAID CAS E, THE CONCERNED PAYER WAS AWARE THAT A PART OF THE SUMS PAYABLE WAS CHARGEABLE TO TAX. THE PAYER'S CONTENTION WAS THAT SECTION 195 APPLIED TO ONLY THOSE SUMS, THE WHOLE OF WHICH WERE CHARGEABLE TO TA X AND THAT IT DID NOT APPLY TO COMPOSITE PAYMENTS, ON LY A PART OF WHICH WAS CHARGEABLE TO TAX. THE SE NOTED THAT THIS PARTICULAR CONTENTION WAS REJECTED BY THE SE A ND THE SE HAD HELD THAT SECTION 195 WOULD APPLY TO COMPOSITE PAYMENTS AS WELL, ONLY A PART OF WHICH WAS CHARGEABLE TO TAX. THE SE, THEREFORE, REJECTED THE HC 'S INTERPRETATION OF THE TRANSMISSION CORP. OF AP LTD'S CASE (SUPRA). 40.0 THE RULING OF THE SUPREME COURT IN THE SPECIAL LEAVE PETITION AGAINST THE JUDGEMENT OF KARNATAKA HIGH COURT ('HC') IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO LTD. (2010) 320 ITR 209/ (2009) 185 TAXMAN 313, WAS NOT CONSIDERED BY THE HONOURABLE PANEL 41.0 IN VIEW OF THE ABOVE SUBMISSIONS MADE THE APPELLANT COMPANY PRAYS TO THE HON'BLE TRIBUNAL TO GRANT RELIEF FOR RS 1,65,67,307/- BEING THE ADDITION 23 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. MADE BY THE LEARNED AO AND CONFIRMED BY THE DRP. 42.0 WITHOUT PREJUDICE TO OUR ABOVE SUBMISSION WE WOULD TO BRING TO THE KIND NOTICE OF HON'BLE THAT THE SERVICES OF TRANSLATION CHARGES, CLINICAL AND NON-CLIN ICAL OVERVIEWS AND PROFESSIONAL FEE FOR PATENT HISTORIES ARE USED FOR REGISTERING APPELLANT COMPANY'S VARIOUS PRODUCTS IN DIFFERENT COUNTRIES, THESE SERVICES DO NOT FALL IN THE DEFINITION OF ROYALTIES AND FEES FOR TEC HNICAL SERVICES AS PER THE CONCEPT OF MAKE AVAILABLE CLAUSE HENCE THERE IS NO REQUIREMENT OF DEDUCTION OF TAXES BEFORE MAKING THE PAYMENT . HOWEVER THE LD AO DISALLOWED THE AMOUNT ON THE GROUND THAT NO WITHHOLDING TAXES WAS DONE AND DISALLOWED THE SAME U/S 40(A)(I) (A) OF THE IT ACT.. (A) IN DY DL'I'(INTERNATIONAL TAXATION) VS PREROY AG(2010) 39 SOT 187 (MUM LTAT) IT WAS HELD THAT 'IF MAKE AVAILABLE CLAUSE EXISTS IN THE TAX TREATY STRAT EGIC CONSULTANCY SERVICES CANNOT BE TREATED AS FEES FOR TECHNICAL SERVICES' (B) MERE PROVISION OF TECHNICAL SERVICES IS NOT ENOUG H TO ATTRACT ARTICLE 12(4) (B) .IT ADDITIONALLY REQUIRES THAT THE SERVICE PROVIDER SHOULD ALSO MAKE AVAILABLE HIS TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW HOW ETC KNOWN TO THE RECIPIENT OF THE SERVICE SO AS TO EQUI P HIM TO INDEPENDENTLY PERFORM THE TECHNICAL FUNCTION HIMS ELF IN FUTURE WITHOUT THE HELP OF THE SERVICE PROVIDER. IN OTHER WORDS, PAYMENT OF CONSIDERATION WOULD BE REGARDED AS FEES FOR TECHNICAL/INCLUDED SERVICES ON LY IF THE TWIN TEST OF RENDERING SERVICES AND MAKING TECHNOLOGY AVAILABLE AT THE SAME IS SATISFIED- ANAPHARM INC RULING [2008] 305 ITR 394 405 AAR. (C) RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS REGARDING MAKE AVAILABLE CLAUSE (I) IN INVENSYS SYSTEMS INC .IN RE (2009) 317 ITR 438 (AAR) THE AAR OBSERVED THAT ON AN ANALYSIS OF NATURE OF FUN CTIONS ENUMERATED IN AGREEMENT, IT IS CLEAR THAT SERVICES PR OVIDED ARE MANAGERIAL IN NATURE AND EVEN IF THEY ARE TECHNIC AL, THEY DO NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE, ETC., WITHIN MEANING OF ARTICLE 12.4(B) OF DTAA - APPLICANT HAS NO PERMANENT ESTABLISHMENT IN INDIA AND HENCE NO WITHHO LDING TAXES NEED TO BE MADE. 24 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. (II) IN MCKINSEY AND CO INC VS ASST DIT (INTERNATION AL TAXATION) (2006) 99 ITD 549(MUM) IT WAS HELD BY THE TRIBUNAL THAT SINCE MAKE AVAILABLE TECHNOLOGY WAS NOT THERE THE SERVICES WERE NOT LIABLE TO BE TAXED IN I NDIA. (III) IN DY CL'F(INTERNATIONAL TAXATION) VS SCIENTIFIC ATLANTA INC (2010) 4ITR (TRIB) 422 MUM IT WAS HELD THA T SINCE THE SERVICES DID NOT MAKE AVAILABLE ANY TECHNOLOGY THE SERVICES WERE NOT TAXABLE IN INDIA. (D) EVEN PAYMENT MADE FOR ACCESS TO A DATABASE ON AN OVERSEAS SERVER WILL NOT ATTRACT TDS AS HELD IN DUN & BRADSTREET AAR -272 ITR 99,OUR AE IS PROVIDING STREAMING SERVICES WHICH IS FOR THE PURPOSE FOR ACCESSING THE DATABASE. THUS THE PAYMENTS MADE ARE NOT SUBJECT TO WITHHOLDING TAXES SINCE THERE IS NO MAKE AVAILABLE TECHNOLOGY AND THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA. V. PAYMENTS MADE TO RESIDENTS DISALLOWED U/S 40(A) (IA) 43.0 AN AMOUNT OF RS.2, 91,200 WAS MADE TO M/S.SHAH ENTERPRISES WHICH REPRESENTS PAYMENTS MADE TOWARDS REIMBURSEMENT OF EXPENSES ON DIFFERENT DATES. AN AMOUNT OF RS.L,60,388 WAS ALSO PAID TO TRANSLATION BUREAU. THE PAYMENT MADE TO SHAH ENTERPRISES IS PURELY REIMBURSEMENT OF EXPENSES AND HENCE TDS IS NOT APPLICABLE. SIMILARLY THE PAYMENT MADE TO TRANSLATION BUREAU TOWARDS TRANSLATION CHARGES ARE NOT SUBJECT TO TDS SINCE PAYMENT IS MADE TO A GOVERNMENT CONCERN. HENCE THE LD ASSESSING OFFICER IS NOT CORRECT IN DISALLOWING THESE PAYMENT S. 44.0 ANY OTHER GROUND WITH THE PREVIOUS APPROVAL OF THE HON'BLE TRIBUNAL. 39. AFTER CONSIDERING THE DETAILED CONTENTIONS OF THE ASSESSEE, WE ARE OF THE VIEW THAT WE CANNOT UPHOLD THE ORDER OF THE A.O. WHICH MAINLY FOCUS ON NON-OBTAINING OF TDS CERTIFICATE AND ALSO THERE IS NO CLARITY IN THE ORDER OF THE A.O. ABOUT NATURE OF PAYMENTS AND ITS TAXABILITY UNDER THE IT ACT. AS BRIEFLY STATED ABOVE, EVEN THE DRP ALSO EXPRESSED D IFFICULTY 25 ITA.NO.1096,1041,2073/H/2011 & ITA.NO.1657/HYD/2010 M/S. AUROBINDO PHARMA LTD. TO CONCLUDE WHETHER THE PAYMENTS ARE IN THE NATURE OF INC OME OR NOT. IN VIEW OF THIS, SINCE THE NATURE OF PAYMENT AND WHETHER ANY SERVICES ARE RENDERED IN INDIA OR NOT HAV E NOT BEEN EXAMINED IN DETAIL, ITEM-WISE ALONG WITH THE APPLI CABLE DTAA PROVISIONS, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO EXAMINE, AS DIRECTED IN A.Y. 2006-2007 ON THE ISSUE OF PROFESSIONAL CHARGES. ACCORDINGLY, GROUNDS NO. 5 AND 6 ARE RESTORED TO THE FILE OF THE A.O. AND ARE CONSIDERED AL LOWED FOR STATISTICAL PURPOSES. 40. IN THE RESULT, APPEAL OF THE ASSESSEE ITA.NO.2073/HYD/2011 IS ALLOWED FOR STATISTICAL PURPOSES. 41. TO SUM-UP, ITA.NO.1096/HYD/2011, ITA.NO.1657/HYD/2010 AND ITA.NO.2073/HYD/2011 OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES, AND ITA. NO. 1041/HYD/2011 OF THE REVENUE IS DISMISSED, ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATE 31 ST JANUARY, 2014 VBP/- COPY TO : 1. M/S. AUROBINDO PHARMA LIMITED, PLOT NO.2, MAITRI VIHAR, AMEERPET, HYDERABAD C/O. PRASAD & PRASAD, CHARTERED ACCOUNTANTS, FLAT NO.301, M.J. TOWERS, 8-2-698, ROAD NO.12, BANJARA HILLS, HYDERABAD 500 034. 2. ADDL. CIT, RANGE-1, HYDERABAD. 3. CIT(A)-III, HYDERABAD 4. CIT-I, HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.