The Income-tax Officer, Jammu V. M/s. Sun Pharmaceuticals Industries, Jammu

ITA 312/ASR/2011

• Counselvise Citation: 31220914 RSA 2011
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH JALAN
• Assessee Lawyers: R L CHHANALIA
• Keywords: Business income; Initiation of penalty proceedings; Capital receipt
• Section: 43B; 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 345(ASR)/2010 ASSESSMENT YEAR:2004-05 PAN :AATFS9584Q M/S. SUN PHARMACEUTICALS INDUSTRIES, VS. THE INCOME TAX OFFICER, BARI BARHAMANA, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 391(ASR)/2010 ASSESSMENT YEAR:2004-05 PAN :AATFS9584Q THE INCOME TAX OFFICER, VS. M/S. SUN PHARMACEUTICA LS INDUSTRIES, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 346(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN :AATFS9584Q M/S. SUN PHARMACEUTICALS INDUSTRIES, VS. THE INCOME TAX OFFICER, BARI BARHAMANA, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 392(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN :AATFS9584Q THE INCOME TAX OFFICER, VS. M/S. SUN PHARMACEUTICA LS INDUSTRIES, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 13(ASR)/2011 ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 2 ASSESSMENT YEAR:2007-08 PAN :AATFS9584Q M/S. SUN PHARMACEUTICALS INDUSTRIES, VS. THE INCOME TAX OFFICER, BARI BARHAMANA, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 18(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AATFS9584Q THE INCOME TAX OFFICER, VS. M/S. SUN PHARMACEUTICA LS INDUSTRIES, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 129(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :AATFS9584Q M/S. SUN PHARMACEUTICALS INDUSTRIES, VS. THE INCOME TAX OFFICER, BARI BARHAMANA, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 107(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :AATFS9584Q THE INCOME TAX OFFICER, VS. M/S. SUN PHARMACEUTICA LS INDUSTRIES, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 130(ASR)/2011 ASSESSMENT YEAR:2009-10 PAN :AATFS9584Q M/S. SUN PHARMACEUTICALS INDUSTRIES, VS. THE INCOME TAX OFFICER, BARI BARHAMANA, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 312(ASR)/2011 ASSESSMENT YEAR:2009-10 ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 3 PAN :AATFS9584Q THE INCOME TAX OFFICER, VS. M/S. SUN PHARMACEUTICA LS INDUSTRIES, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SUBHASH JALAN, CA RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING:07/06/2012 DATE OF PRONOUNCEMENT:12/06/2012 ORDER PER BENCH ; THESE CROSS APPEALS - FIVE BY THE ASSESSEE AND FIV E BY THE REVENUE ARISE FROM FIVE DIFFERENT ORDERS OF THE CIT(A), JAM MU, AS PER DETAILS HEREIN BELOW: ITA NO. ASSESSMENT YEAR DATE OF CIT(A)S ORDER 345(ASR)/2010 (A) 2004-05 07.07.2010 391(ASR)/2010 (D) 2004-05 07.07.2010 346(ASR)/2010 (A) 2006-07 07.07.2010 392(ASR)/2010 (D) 2006-07 07.07.2010 13(ASR)/2011 (A) 2007-08 16.11.2010 18(ASR)/2011 (D) 2007-08 16.11.2010 129(ASR)/2011 (A) 2008-09 16.02.2011 107(ASR)/2011 (D) 2008-09 16.02.2011 ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 4 130(ASR)/2011 (A) 2009-10 23.03.2011 312(ASR)/2011 (D) 2009-10 23.03.2011 2. IN ITA NO.345(ASR)/2011, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE ARBITRA RY, NOT BASED ON PROPER EVIDENCES, WITHOUT PROPER REASONS, INVALID A ND ALSO BAD IN LAW. 2. RE:INITIAL ASSESSMENT YEAR U/S 80-IB(14)(C) READ W ITH SEC.80-IB(2)(II) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE FINDIN GS OF THE AO THAT THE INDUSTRIAL UNDERTAKING OF THE APPELLANT WA S FORMED BY THE TRANSFER OF PLANT AND MACHINERY PREVIOUSLY USED BY SPIL AND ACCORDINGLY THE CONDITIONS LAID DOWN U/S 80IB(2 )(II) HAVE NOT BEEN SATISFIED. B) THE LD.CIT(A) HAS NOT APPRECIATED THE FACTS IN THE PROPER PERSPECTIVE AND ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT, FOR THE PURPOSE OF SECTION 80-IB, THE INITIAL ASSES SMENT YEAR IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF CO MMERCIAL PRODUCTION AND NOT FROM THE DATE OF TRIAL PRODUCTI ON. 3. RE: INVOKING THE PROVISIONS OF S.80IB(13) R.W.S. 80IA(10): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) FOR THE PURPOSE OF COMPUT ING THE DEDUCTION U/S 80IB. 4. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W. S.80IA RS.14,21,110/- DUE TO PURCHASE OF MATERIALS FROM SP IL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) AND THEREBY UPHOLDING THE DISALLOWANCE OF RS.14,21,110/0 ON ACCOUNT OF PURCHA SE OF MATERIALS BY THE APPELLANT FROM SPIL. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 5 5. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W.S.8 0IA(10 RS.85,51,772/- DUE TO ALLEGED SELLING AND DISTRIBUT ION EXPENSES. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAVING ALLOWED THE ASSESSES APPEALS IN RESPECT OF GROUND NO. 5 TO 8 (AO CAN NOT TRAVEL BEYOND THE SCO PE OF ITATS DIRECTION) ERRED IN CONSIDERING RS.85,51,772 /- AS ALLEGED NON INCURRING OF SELLING AND DISTRIBUTION E XPENSES RESULTING INTO CORRESPONDING UNREASONABLE PROFITS A ND THEREBY ERRED IN DISALLOWANCE OF DEDUCTION U/S 80IB TO THAT EXTENT. 6. REG: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE INITIATI ON OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. IN ITA NO.391(ASR)/2011, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 OF RS.1,00,90,46,836/-. A) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE FIRM AT DAD RA WAS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF THE EXISTING BUSINESS OF M/S. SUN PHAMACEUTICALS INDUSTRIES LTD. B) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE ASSESSEE FIRM IS ENTITLED TO DEDUCTION U/S 80IB(4) OF THE INCOME TAX ACT ON THE PROFITS OF ITS INDUSTRIAL UNDERTAKIN G AT DADRA FOR THE UNEXPIRED PERIOD IN VIEW OF CBDT CIRCULA F.NO.1 5/5/63- IT(AI) DATED 13.12.1963. 2. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB REA D WITH SEC. 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.22,77,21 ,538/-. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S 80IB(4) OF THE ACT TO THE EXTENT OF RS.22,77,21 ,538/- ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 6 BY APPLYING THE PROVISIONS OF SECTION 80-IB(13) REA D WITH SECTION 80IA(10) OF THE ACT. 3. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST ON DELAY PAYMENTS FROM M/S. ADI TYA MEDISALES LTD. AMOUNTING TO RS.4,96,67,120/- WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 I N RESPECT OF INTEREST ON DELAYED PAYMENTS FROM M/S. ADITYA ME DISALES LTD. AGGREGATING TO RS.4,96,67,120/-. 4. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING TH E DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 O N ACCOUNT OF DISALLOWANCE OF REMUNERATION U/S 40(B) OF THE AC T AMOUNTING TO RS.15,75,55,218/-. 5. WHETHER THE LD. CIT(A) WAS RIGHT IN GRANTING HIGHER DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF DISALLOWANCE U/S 43B OF THE ACT AMOUNTING TO RS.12,92,626/-. 4. IN ITA NO.346(ASR)/2010, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE ARBITRA RY, NOT BASED ON PROPER EVIDENCES, WITHOUT PROPER REASONS, INVALID A ND ALSO BAD IN LAW. 2. RE:INITIAL ASSESSMENT YEAR U/S 80-IB(14)(C) READ W ITH SEC.80-IB(2)(II) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE FINDIN GS OF THE AO THAT THE INDUSTRIAL UNDERTAKING OF THE APPELLANT WA S FORMED BY THE TRANSFER OF PLANT AND MACHINERY PREVIOUSLY USED BY SPIL AND ACCORDINGLY THE CONDITIONS LAID DOWN U/S 80IB(2 )(II) HAVE NOT BEEN SATISFIED. B) THE LD.CIT(A) HAS NOT APPRECIATED THE FACTS IN THE PROPER PERSPECTIVE AND ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT, FOR THE PURPOSE OF SECTION 80-IB, THE INITIAL ASSES SMENT YEAR IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF CO MMERCIAL ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 7 PRODUCTION AND NOT FROM THE DATE OF TRIAL PRODUCTI ON. HOLDING THE YEAR UNDER APPEAL AS THE LAST YEAR FOR CLAIMING DEDUCTION U/S 80IB(4) OF THE ACT BEING BAD IN LAW THE CLAIM OF TH E APPELLANT TREATING THE YEAR AS THE THIRD ASSESSMENT YEAR FROM THE BEGINNING WITH THE INITIAL ASSESSMENT YEAR NEEDS TO BE ALLOWED/ACCEPTED. 3. RE: INVOKING THE PROVISIONS OF S.80IB(13) R.W.S. 80IA(10): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) FOR THE PURPOSE OF COMPUT ING THE DEDUCTION U/S 80IB. 4. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W. S.80IA RS.14,21,110/- DUE TO PURCHASE OF MATERIALS FROM SP IL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAVING ALLOWED THE ASSESSEES APPEAL IN RESPECT OF GROUND NO.3, ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) AND THEREBY GIVING THE DIRECTION TO THE AO TO MAKE THE DISALLOWANCE CORRESPONDING T O THE ADDITION MADE BY THE AO IN RESPECT OF SALES MADE BY THE SPIL TO THE APPELLANT AT THE LOWER PRICES. 5. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W.S.8 0IA(10 DUE TO ALLEGED SELLING AND DISTRIBUTION EXPENSES. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAVING ALLOWED THE ASSESSES A PPEALS IN RESPECT OF GROUND NO. 4 TO 7 REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF REFUND RECEIVED FR OM CENTRAL EXCISE DUTY PAID BY THE APPELLANT WITHOUT APPRECIAT ING THAT REFUND WAS RECEIVED AS A MATTER OF PROCEDURE AND TH AT THE SAID REFUND CANNOT BE CONSTRUED AS AN INCOME. IN ANY CA SE, SUCH REFUND IS VERY MUCH DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING AND HENCE ELIGIBLE FOR DEDUCTION US/ 80IB. 6. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPE CT OF CENTRAL EXCISE DUTY REFUND OF RS.50,12,45,460/- (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE FINDINGS OF THE AO REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF R EFUND RECEIVED OF CENTRAL EXCISE DUTY PAID BY THE APPELLA NT WITHOUT APPRECIATING THAT REFUND WAS RECEIVED AS A MATTER O F PROCEDURE ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 8 AND THAT THE SAID REFUND CANNOT BE CONSTRUED AS AN INCOME. IN ANY CASE, SUCH REFUND IS VERY MUCH DERIVED FROM T HE BUSINESS OF INDUSTRIAL UNDERTAKING AND HENCE ELIGIBLE FOR DEDUCTION U/S 80IB. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. C) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE, O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO AND CIT(A) FAILED TO APPRECIATE THAT THE CENTRAL EXCIS E DUTY REFUND IS A CAPITAL RECEIPT AS, ACCORDING TO CENTRAL GOVER NMENTS NOTIFICATIONS, THE SAID BENEFIT IS GRANTED FOR PROM OTING INDUSTRIALIZATION/SETTING UP OF THE INDUSTRIES IN T HE STATE OF JAMMU & KASHMIR. 7. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF INTEREST INCOME RS.9,39,496/-. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 80IB IN RESPECT OF AND TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANKS AND ON LOAN TO EMPLOYEES AGGREGATIN G TO RS.9,39,496/- HOLDING THEM TO BE NOT DERIVED FROM T HE INDUSTRIAL UNDERTAKING. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. 8. REG: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE INITIATI ON OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 5. IN ITA NO.392(ASR)/2010, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 9 1. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 OF RS.83,17,84,196/-. A) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE FIRM AT DAD RA WAS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF THE EXISTING BUSINESS OF M/S. SUN PHAMACEUTICALS INDUSTRIES LTD. B) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE ASSESSEE FIRM IS ENTITLED TO DEDUCTION U/S 80IB(4) OF THE INCOME TAX ACT ON THE PROFITS OF ITS INDUSTRIAL UNDERTAKIN G AT DADRA FOR THE UNEXPIRED PERIOD IN VIEW OF CBDT CIRCULA F.NO.1 5/5/63- IT(AI) DATED 13.12.1963. 2. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB REA D WITH SEC. 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.73,55,43 ,121/-. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DI SALLOWANCE MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S 80IB(4) OF THE ACT TO THE EXTENT OF RS.73,55,43,121/- BY APPLYING THE PROVISIONS OF SECTION 80-IB(13) READ WITH SECTION 80IA(10) OF THE ACT. 3. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST ON DELAY PAYMENTS FROM M/S. ADI TYA MEDISALES LTD. AMOUNTING TO RS.4,25,18,962/- WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 I N RESPECT OF INTEREST ON DELAYED PAYMENTS FROM M/S. ADITYA ME DISALES LTD. AGGREGATING TO RS.4,25,18,962/-. 4. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING TH E DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 O N ACCOUNT OF DISALLOWANCE OF REMUNERATION U/S 40(B) OF THE AC T AMOUNTING TO RS.60,82,14,815/-. 6. WHETHER THE LD. CIT(A) WAS RIGHT IN GRANTING HIGHER DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF DISALLOWANCE U/S 43B OF THE ACT AMOUNTING TO RS.12,86,748/-. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 10 6. IN ITA NO.13(ASR)/2011, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE ARBITRA RY, NOT BASED ON PROPER EVIDENCES, WITHOUT PROPER REASONS, INVALID A ND ALSO BAD IN LAW. 2. RE:INITIAL ASSESSMENT YEAR U/S 80-IB(14)(C) READ W ITH SEC.80-IB(2)(II) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN REDUCING THE DEDUCTI ON U/S 80IB(4) TO 25% OF PROFIT FROM INDUSTRIAL UNDERTAKIN G AT DADRA BY CONSIDERING THE PREVIOUS YEAR AS 6 TH YEAR OF OPERATION AS AGAINST TE ASSESSES CLAIM OF 100% DEDUCTION CONSID ERING THE PREVIOUS YEAR AS 4 TH YEAR OF OPERATION. B) THE LD.CIT(A) HAS NOT APPRECIATED THE FACTS IN THE PROPER PERSPECTIVE AND ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT, FOR THE PURPOSE OF SECTION 80-IB, THE INITIAL ASSES SMENT YEAR IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF CO MMERCIAL PRODUCTION AND NOT FROM THE DATE OF TRIAL PRODUCTI ON. HOLDING THE YEAR UNDER APPEAL AS THE 6TH YEAR FOR CLAIMING DEDUCTION U/S 80IB(4) OF THE ACT BEING BAD IN LAW THE CLAIM OF TH E APPELLANT TREATING THE YEAR AS THE 4TH ASSESSMENT YEAR FROM T HE BEGINNING WITH THE INITIAL ASSESSMENT YEAR NEEDS TO BE ALLOWE D/ACCEPTED. 3. RE: INVOKING THE PROVISIONS OF S.80IB(13) R.W.S. 80IA(10): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) FOR THE PURPOSE OF COMPUT ING THE DEDUCTION U/S 80IB. 4. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W. S.80IA RS.14,21,110/- DUE TO PURCHASE OF MATERIALS FROM SP IL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A), ERRED IN INVOKING THE PROVISIONS OF S. 80IB(13) R.W.S.80IA(10) AND THEREBY ERRED IN GIVING THE DIRE CTION TO THE AO TO ENHANCE THE DISALLOWANCE OF DEDUCTION U/S 8 0IB(4) BY RS.1,16,56,762/-CORRESPONDING TO THE ADDITION MADE BY THE AO IN RESPECT OF SALES MADE BY THE SPIL TO THE APPELLA NT AT THE LOWER PRICES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 11 5. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W.S.8 0IA(10 DUE TO ALLEGED SELLING AND DISTRIBUTION EXPENSES. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN INVOKING THE PROVI SIONS OF S.80IB(3) R.W.S.80IA(10) AND THEREBY ERRED IN GIVI NG DIRECTION TO THE AO TO MAKE THE DISALLOWANCE OF DEDUCTION U/S 80IB(4) OF RS.47,18,93,873/- CORRESPONDING TO THE DISALLOWANC E MADE BY THE AO OF SPIL IN RESPECT OF ALLEGED SELLING AND DI STRIBUTION EXPENSES INCURRED BY SPIL ON BEHALF OF THE APPELLA NT. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ENHANCING THE DISA LLOWANCE ON ACCOUNT OF ALLEGED SELLING AND DISTRIBUTION EXPENSE S INCURRED BY SPIL ON BEHALF OF THE APPELLANT BY RS.14,80,67,301 /-. 6. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF CENTRAL EXCISE DUTY REFUND OF RS.80,72,19,118/-. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE FINDINGS OF THE AO REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB IN RE SPECT OF CENTRAL EXCISE DUTY PAID BY THE APPELLANT WITHOUT A PPRECIATING THAT REFUND WAS RECEIVED AS A MATTER OF PROCEDURE AND THAT THE SAID REFUND CANNOT BE CONSTRUED AS AN INCOME . IN A NY CASE, SUCH REFUND IS VERY MUCH DERIVED FROM THE BUSINES S OF INDUSTRIAL UNDERTAKING AND HENCE ELIGIBLE FOR DED UCTION U/S 80IB. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. C) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE, O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO AND CIT(A) FAILED TO APPRECIATE THAT THE CENTRAL EXCIS E DUTY REFUND IS A CAPITAL RECEIPT AS, ACCORDING TO CENTRAL GOVER NMENTS NOTIFICATIONS, THE SAID BENEFIT IS GRANTED FOR PROM OTING INDUSTRIALIZATION/SETTING UP OF THE INDUSTRIES IN T HE STATE OF JAMMU & KASHMIR. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 12 7. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF INTEREST INCOME RS.55,461/-. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 80IB IN RESPECT OF AND TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANKS AND ON LOAN TO EMPLOYEES AGGREGATIN G TO RS.55,461/- HOLDING THEM TO BE NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. 8. REG: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE INITIATI ON OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 7. IN ITA NO.18(ASR)/2010, THE REVENUE HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 OF RS.72,88,47,291/-. A) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE FIRM AT DAD RA WAS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF THE EXISTING BUSINESS OF M/S. SUN PHAMACEUTICALS INDUSTRIES LTD. B) WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THA T THE ASSESSEE FIRM IS ENTITLED TO DEDUCTION U/S 80IB(4) OF THE INCOME TAX ACT ON THE PROFITS OF ITS INDUSTRIAL UNDERTAKIN G AT DADRA FOR THE UNEXPIRED PERIOD IN VIEW OF CBDT CIRCULA F.NO.1 5/5/63- IT(AI) DATED 13.12.1963. 2. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB REA D WITH SEC. 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.113,46,0 8,260/-. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 13 WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DI SALLOWANCE MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S 80IB(4) OF THE ACT TO THE EXTENT OF RS.113,46,08,260/- BY APPLYING THE PROVISIONS OF SECTION 80-IB(13) READ WITH SECTION 80IA(10) OF THE ACT. 3. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST ON DELAY PAYMENTS FROM M/S. ADI TYA MEDISALES LTD. AMOUNTING TO RS.11,27,33,363/- WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 I N RESPECT OF INTEREST ON DELAYED PAYMENTS FROM M/S. ADITYA ME DISALES LTD. AGGREGATING TO RS.11,27,33,363/-. 4. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING TH E DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 O N ACCOUNT OF DISALLOWANCE OF REMUNERATION U/S 40(B) OF THE AC T AMOUNTING TO RS.29,79,26,967/-. 5. WHETHER THE LD. CIT(A) WAS RIGHT IN GRANTING HI GHER DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF DISALLOWANCE U/S 43B OF THE ACT AMOUNTING TO RS.19,73,329/-. 6. APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 8. IN ITA NO.129(ASR)/2011, FOR THE ASSESSMENT YEAR 2008-09,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE ARBITRA RY, NOT BASED ON PROPER EVIDENCES, WITHOUT PROPER REASONS, INVALID A ND ALSO BAD IN LAW. 2. RE:INITIAL ASSESSMENT YEAR U/S 80-IB(14)(C) READ W ITH SEC.80-IB(2)(II) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN REDUCING THE DEDUCTI ON U/S 80IB(4) TO 25% OF PROFIT FROM INDUSTRIAL UNDERTAKIN G AT DADRA ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 14 BY CONSIDERING THE PREVIOUS YEAR AS 7 TH YEAR OF OPERATION AS AGAINST TE ASSESSES CLAIM OF 100% DEDUCTION CONSID ERING THE PREVIOUS YEAR AS 5 TH YEAR OF OPERATION. B) THE LD.CIT(A) HAS NOT APPRECIATED THE FACTS IN THE PROPER PERSPECTIVE AND ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT, FOR THE PURPOSE OF SECTION 80-IB, THE INITIAL ASSES SMENT YEAR IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF CO MMERCIAL PRODUCTION AND NOT FROM THE DATE OF TRIAL PRODUCTI ON. HOLDING THE YEAR UNDER APPEAL AS THE 7TH YEAR FOR CLAIMING DEDUCTION U/S 80IB(4) OF THE ACT BEING BAD IN LAW THE CLAIM OF TH E APPELLANT TREATING THE YEAR AS THE 5TH ASSESSMENT YEAR FROM T HE BEGINNING WITH THE INITIAL ASSESSMENT YEAR NEEDS TO BE ALLOWE D/ACCEPTED. 3. RE: INVOKING THE PROVISIONS OF S.80IB(13) R.W.S. 80IA(10): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) FOR THE PURPOSE OF COMPUT ING THE DEDUCTION U/S 80IB. 4. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W.S.8 0IA(10) DUE TO ALLEGED SELLING AND DISTRIBUTION EXPENSES . A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN INVOKING THE PROVI SIONS OF S.80IB(3) R.W.S.80IA(10) AND THEREBY ERRED IN GIVI NG DIRECTION TO THE AO TO MAKE THE DISALLOWANCE OF DEDUCTION U/S 80IB(4) OF RS.45,91,02,595/- CORRESPONDING TO THE DISALLOWANC E MADE BY THE AO OF SPIL IN RESPECT OF ALLEGED SELLING AND DI STRIBUTION EXPENSES INCURRED BY SPIL ON BEHALF OF THE APPELLA NT. 5. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF INTEREST INCOME RS.64,963/-. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 80IB IN RESPECT OF AND TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANKS AND ON LOAN TO EMPLOYEES AGGREGATIN G TO RS.64,963/- HOLDING THEM TO BE NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 15 B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. 6. REG: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE INITIATI ON OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 9. IN ITA NO.107(ASR)/2010, FOR THE ASSESSMENT YEAR 2008-09, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 ON PROFIT FROM DADRA UNIT OF ASSESSE E. . A) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE IN DUSTRIAL UNDERTAKING OF THE ASSESSEE FIRM AT DADRA WAS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF THE EXISTING BUSINESS OF M/S. SUN PHARMACEUTICALS INDUSTRIES LTD. B) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AS SESSEE FIRM IS ENTITLED TO DEDUCTION U/S 80IB(4) OF THE IN COME TAX ACT ON THE PROFITS OF ITS INDUSTRIAL UNDERTAKING AT DAD RA FOR THE UNEXPIRED PERIOD IN VIEW OF CBDT CIRCULA F.NO.15/5/ 63- IT(AI) DATED 13.12.1963. 2. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB READ W ITH SEC. 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.113,46,0 8,260/-. (A) WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S 80IB(4) OF THE ACT TO THE EXTENT OF RS.102,02,09,15 2/- BY APPLYING THE PROVISIONS OF SECTION 80-IB(13) READ W ITH SECTION 80IA(10) OF THE ACT. (B) THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT NO ROYALTY OR MANAGEMENT FEE HAS BEEN CHARGED BY M/S. SUN PHARMACEUTICAL INDUSTRIES LIMITED FROM THE ASSESSEE FIRM AND ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 16 MAJOR EXPENSES ON ACCOUNT OF SELLING AND DISTRIBUTI ON EXPENSES OF M/S. SUN PHARMACEUTICALS INDUSTRIES ARE ACTUALLY BORNE BY M/S. SUN PHARMACEUTICALS INDUSTRIES LIMITED. 3. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST ON DELAYED PAYMENTS. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 I N RESPECT OF INTEREST ON DELAYED PAYMENTS FROM M/S. ADITYA ME DISALES LTD. AGGREGATING TO RS.30,31,91,368/-. 4. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING TH E DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 O N ACCOUNT OF DISALLOWANCE OF REMUNERATION U/S 40(B) OF THE AC T AMOUNTING TO RS.40,12,76,441/-. 5. WHETHER THE LD. CIT(A) WAS RIGHT IN GRANTING HIGHER DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF DISALLOWANCE U/S 43B OF THE ACT AMOUNTING TO RS.5,37,09,230/-. 6. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB ON ACC OUNT OF CENTRAL EXCISE DUTY REFUND: A) WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING RE LIEF ON ACCOUNT OF DEDUCTION U/S 80IB ON CENTRAL EXCISE DUT Y REFUND BY RELYING UPON ORDERS OF HON'BLE HIGH COURT IF J& K, JAMMU WHICH HAS BEEN DELIVERED NOT ON MERITS OF THE ISSUE BUT HOLDING THE RECEIPT TO BE A CAPITAL RECEIPT ONLY BECAUSE TH E POLICY UNDER WHICH THE SAME WAS PAID ENVISAGED TACKLING THE UNEM PLOYMENT IN THE STATE WHICH CANNOT BE SAID TO BE A GOOD TEST FOR DECIDING WHETHER A RECEIPT IS A TRADING RECEIPT OR A CAPITAL RECEIPT. B) WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING THE JU DGMENTS OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD, WHEREIN THE HON' BLE SUPREME COURT HAD HELD SUCH RECEIPTS TO BE THE REVE NUE RECEIPTS IN AS MUCH AS IN THAT CASE PAYMENTS WERE MADE ONLY AFTER THE INDUSTRIES HAD BEEN SET UP AND PAYMENTS WERE NOT MA DE FOR PURPOSE OF SETTING UP OF INDUSTRIES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 17 C) WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT CONSIDERING THE DEC ISION IN THE CASE OF SEAHAM HARBOUR DOCK COMPANY WHICH LAYS DOWN TWO IMPORTANT TESTS FOR DETERMINING WHETHER RECEIPTS IS A TRADING RECEIPT OR A CAPITAL RECEIPT. D). WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING AND AP PLIED THE PURPOSE TEST AS LAID DOWN BY THE JUDGMENTS OF THE H ON'BLE SUPREME COURT. IN THE CASE OF ASSESSEE, THE MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF REFUND OF CENTRAL EXCISE WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER FOR PUR POSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. 8. IN ITA NO.130(ASR)/2011, FOR THE ASSESSMENT YEAR 2009-10,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE ARBITRA RY, NOT BASED ON PROPER EVIDENCES, WITHOUT PROPER REASONS, INVALID A ND ALSO BAD IN LAW. 2. RE:INITIAL ASSESSMENT YEAR U/S 80-IB(14)(C) READ W ITH SEC.80-IB(2)(II) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN REDUCING THE DEDUCTI ON U/S 80IB(4) TO 25% OF PROFIT FROM INDUSTRIAL UNDERTAKIN G AT DADRA BY CONSIDERING THE PREVIOUS YEAR AS 8 TH YEAR OF OPERATION AS AGAINST TE ASSESSES CLAIM OF 100% DEDUCTION CONSID ERING THE PREVIOUS YEAR AS 6 TH YEAR OF OPERATION. B) THE LD.CIT(A) HAS NOT APPRECIATED THE FACTS IN THE PROPER PERSPECTIVE AND ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT, FOR THE PURPOSE OF SECTION 80-IB, THE INITIAL ASSES SMENT YEAR IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF CO MMERCIAL PRODUCTION AND NOT FROM THE DATE OF TRIAL PRODUCTI ON. HOLDING THE YEAR UNDER APPEAL AS THE 8TH YEAR FOR CLAIMING DEDUCTION U/S 80IB(4) OF THE ACT BEING BAD IN LAW THE CLAIM OF TH E APPELLANT ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 18 TREATING THE YEAR AS THE 6TH ASSESSMENT YEAR FROM T HE BEGINNING WITH THE INITIAL ASSESSMENT YEAR NEEDS TO BE ALLOWE D/ACCEPTED. 3. RE: INVOKING THE PROVISIONS OF S.80IB(13) R.W.S. 80IA(10): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE INVOKING OF THE PROVISIONS OF S.80IB(13) R.W.S.80IA(10) FOR THE PURPOSE OF COMPUT ING THE DEDUCTION U/S 80IB. 4. REG: DISALLOWANCE OF DEDUCTION U/S 80IB(13) R.W.S.8 0IA(10) DUE TO ALLEGED SELLING AND DISTRIBUTION EXPENSES . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN INVOKING THE PROVI SIONS OF S.80IB(3) R.W.S.80IA(10) AND THEREBY ERRED IN GIVI NG DIRECTION TO THE AO TO MAKE THE DISALLOWANCE OF DEDUCTION U/S 80IB(4) OF RS.97,02,11,623/- CORRESPONDING TO THE DISALLOWANC E MADE BY THE AO OF SPIL IN RESPECT OF ALLEGED SELLING AND DI STRIBUTION EXPENSES INCURRED BY SPIL ON BEHALF OF THE APPELLA NT. 5. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF INTEREST INCOME RS.1,17,624/- ON LOAN TO EMPLOYEES. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 80IB IN RESPECT OF AND TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANKS AND ON LOAN TO EMPLOYEES AGGREGATIN G TO RS.1,17,624/- HOLDING THEM TO BE NOT DERIVED FROM T HE INDUSTRIAL UNDERTAKING. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. 6. REG: DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF INTEREST INCOME RS. 3,27,599/- ON BANK FDR OF JAMMU UNIT. (CORRECT AMOUNT IS RS.2,27,599/-) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 80IB IN RESPECT OF AND TO THE EXTENT OF INTEREST ON FDRS IN JAMMU AMOUNTING TO RS.2,27,599/- (WRONGLY CONSIDERE D BY THE ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 19 CIT(A) AT RS.3,27,599/-) HOLDING THEM TO BE NOT DER IVED FROM THE INDUSTRIAL UNDERTAKING. B) THE LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THAT THE SECTION 80IB GRANTS DEDUCTION IN RESPECT OF ANY PROFITS FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. 7. REG: DISALLOWANCE OF PROFIT RS.2,59,303/- ON ACCOUN T OF EXCHANGE RATE FLUCTUATION DEDUCTION U/S 10B(DADRA E OU) (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 10B IN RESPECT OF PROFIT ON ACCOUN T OF EXCHANGE RATE FLUCTUATION AMOUNTING TO RS.2,59,303/ - WITHOUT APPRECIATING THAT THE SAME IS PART OF PROF IT OF THE BUSINESS AS PROVIDED IN SECTION 10B AND THEREFORE ELIGIBLE FOR DEDUCTION. (B) THE LD. CIT(A) ERRED IN NOT GIVING THE FINDING ON THE ISSUE AS TO WHETHER THE SAID PROFIT FALLS UNDER THE HEAD INCOME FROM OTHER OTHER SOURCES OR UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION AS POINTED OUT BY THE ASSESSEE VIDE SUBMISSION DATED 14.03.2011. 8. REG: INTEREST U/S 234C ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN GIVING SPECIFIC DIRECTION TO T HE AO TO REDUCE THE INTEREST BY RS.4,152/- WHICH WAS CHARGED EXCESSIVELY BY THE AO IN THE ASSESSMENT ORDER. 9. REG: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE INITIATI ON OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 9. IN ITA NO.312(ASR)/2011, FOR THE ASSESSMENT YEAR 2009-10, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 20 1. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 ON PROFIT FROM DADRA UNIT OF ASSESSE E. . A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE I NDUSTRIAL UNDERTAKING OF THE ASSESSEE FIRM AT DADRA WAS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF THE EXISTING BUSINESS OF M/S. SUN PHARMACEUTICALS INDUSTRIES LTD. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE A SSESSEE FIRM IS ENTITLED TO DEDUCTION U/S 80IB(4) OF THE INCOME TAX ACT ON THE PROFITS OF ITS INDUSTRIAL UNDERTAKING AT DADRA FOR THE UNEXPIRED PERIOD IN VIEW OF CBDT CIRCULA F.NO.15/5/63-IT(AI) DATED 13.12.1963. 2. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB READ W ITH SEC. 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.96,75,25 ,719/-. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWAN CE MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S 80IB(4) OF TH E ACT BY APPLYING THE PROVISIONS OF SECTION 80-IB(13) REA D WITH SECTION 80IA(10) OF THE ACT. (B) THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT NO ROYALTY OR MANAGEMENT FEE HAS BEEN CHARGED BY M/S. SUN PHARMACEUTICAL INDUSTRIES LIMITED FROM THE ASSESSEE FIRM AND MAJOR EXPENSES ON ACCOUNT OF SELLING AND DISTRIBUTI ON EXPENSES OF M/S. SUN PHARMACEUTICALS INDUSTRIES ARE ACTUALLY BORNE BY M/S. SUN PHARMACEUTICALS INDUSTRIES LIMITED. 3. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST ON DELAYED PAYMENTS. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 I N RESPECT OF INTEREST ON DELAYED PAYMENTS FROM M/S. ADITYA ME DISALES LTD. AGGREGATING TO RS.48,20,32,772/-. 4. WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING TH E DISALLOWANCE U/S 80IB OF THE INCOME TAX ACT, 1961 O N ACCOUNT ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 21 OF DISALLOWANCE OF REMUNERATION U/S 40(B) OF THE AC T AMOUNTING TO RS.57,22,21,001/-. 5 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN GRANTING HIGHER DEDUCTION U /S 80IB OF THE ACT ON ACCOUNT OF DISALLOWANCE U/S 43B OF THE I.T. ACT, 1961 6. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB ON ACC OUNT OF CENTRAL EXCISE DUTY REFUND: A) WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING RE LIEF ON ACCOUNT OF DEDUCTION U/S 80IB ON CENTRAL EXCISE DUT Y REFUND BY RELYING UPON ORDERS OF HON'BLE HIGH COURT IF J& K, JAMMU WHICH HAS BEEN DELIVERED NOT ON MERITS OF THE ISSUE BUT HOLDING THE RECEIPT TO BE A CAPITAL RECEIPT ONLY BECAUSE TH E POLICY UNDER WHICH THE SAME WAS PAID ENVISAGED TACKLING THE UNEM PLOYMENT IN THE STATE WHICH CANNOT BE SAID TO BE A GOOD TEST FOR DECIDING WHETHER A RECEIPT IS A TRADING RECEIPT OR A CAPITAL RECEIPT. B) WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING THE JU DGMENTS OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD, WHEREIN THE HON' BLE SUPREME COURT HAD HELD SUCH RECEIPTS TO BE THE REVE NUE RECEIPTS IN AS MUCH AS IN THAT CASE PAYMENTS WERE MADE ONLY AFTER THE INDUSTRIES HAD BEEN SET UP AND PAYMENTS WERE NOT MA DE FOR PURPOSE OF SETTING UP OF INDUSTRIES. C) WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT CONSIDERING THE DEC ISION IN THE CASE OF SEAHAM HARBOUR DOCK COMPANY WHICH LAYS DOWN TWO IMPORTANT TESTS FOR DETERMINING WHETHER RECEIPTS IS A TRADING RECEIPT OR A CAPITAL RECEIPT. D). WHETHER THE LD. CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING AND AP PLIED THE PURPOSE TEST AS LAID DOWN BY THE JUDGMENTS OF THE H ON'BLE SUPREME COURT. IN THE CASE OF ASSESSEE, THE MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF REFUND OF CENTRAL EXCISE WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER FOR PUR POSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 22 10. FIRST OF ALL, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.345(ASR)/2010 AND REVENUES APPEAL IN ITA NO.391 (ASR)2010 FOR THE ASSESSMENT YEAR 2005-06 FOR THE ASSESSMENT YEAR 200 4-05 AS UNDER: 11. IN GROUND NO.2 OF THE ASSESSEE AND GROUND NO.1 OF THE REVENUE, THE BRIEF FACTS ARE THAT THE AO MADE A DISALLOWANCE OF DEDUCTION U/S 80IB(4) IN RESPECT OF PROFIT OF DADRA UNIT BY HOLDING TAT COND ITIONS LAID DOWN UNDER SECTION 80IB(2) OF THE ACT ARE NOT COMPLIED WITH. T HE LD. CIT(A) FOLLOWED THE ORDER OF THE ITAT, AMRITSAR BENCH, DATED 11.06. 2010 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 AND ALLOWED TH E DEDUCTION UNDER SECTION 80IB OF THE ACT. HOWEVER, HE CONSIDERED THE ASSESSMENT YEAR 2004- 05 AS 3 RD YEAR OF OPERATION INSTEAD OF ASSESSEES CLAIM OF 1 ST YEAR OF OPERATION. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE OBSERVE THAT THE ITAT, AMRITSAR BENCH, AMRITSAR IN ASSESSEES OWN CASE VIDE ITS ORDER DATED 11.06.2010 IN ITA NO. 18 4(ASR)/2009 ADJUDICATED THE IDENTICAL ISSUE AND ALLOWED DEDUCTION UNDER SEC TION 80IB OF THE ACT IN RESPECT OF DADRA UNIT BY CONSIDERING THE ASSESSMENT YEAR 2002-03 AS THE 1 ST YEAR VIDE PARA 17 TO 43.3 (PAGES 54 TO 78) IN ITS ORDER. FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE HOLD THAT DADRA UNDERT AKING IS QUALIFIED FOR DEDUCTION U/S 80IB FOR THE ASSESSMENT YEAR 2004-05 BEING THE 3 RD YEAR OF ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 23 OPERATION. ACCORDINGLY GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 13. IN GROUND NOS. 3, 4 & 5 OF THE ASSESSEE AND GR OUND NO.2 OF THE REVENUE, THE BRIEF FACTS ARE THAT THE AO BY INVOKIN G THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTION 80IA(10) OF THE ACT MADE A DISALLOWANCE OF SUM OF RS.22,77,21,538/- CONSISTING OF THE FOLLO WING: I) NON CHARGING OF ROYALTY AT 8% OF 14,15,34,443/- TURNOVER II) NON CHARGING OF MANAGEMENT FEE 1% 1,76,91,8 05/- OF TURNOVER. III) SELLING & DISTRIBUTION EXPENSES 6,84,95,2 90/- BY SPIL ON BEHALF OF ASSESSEE TOTAL: 22,77,21,538/- THESE ISSUES ARE DISCUSSED AT PAGES 70 TO 97 OF AO S ORDER. THE LD. CIT(A) DECIDED THESE ISSUES AT PARAS 8 TO 9.6 AT PAGES 1 8 TO 46 OF HIS ORDER AND CONFIRMED THE DISALLOWANCES AS UNDER: I) IN RESPECT PURCHASE OF RAW MATERIAL FROM SPIL 14,2 1,110/- II) IN RESPECT OF SELLING & DISTRIBUTION EXPENSES 85,51,772/-. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEES GRIEVANCE ARE TWO FOLDS AS ARGUED BY THE LD. AR. FIRSTLY THE INVOKING THE PROVISIONS OF SECTION 80IB(13) R.W.S 8 0IA(10) OF THE ACT, ARE FACTUALLY AND LEGALLY INCORRECT IN AS MUCH AS THERE IS NO CLOSE CONNECTION BETWEEN THE ASSESSEE AND SPIL AND NO COURSE OF B USINESS BETWEEN THEM IS ARRANGED SO AS TO PRODUCE MORE THAN THE ORDINARY P ROFITS. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 24 14.1. AS REGARDS THE DISALLOWANCE OF RS.14,21,110/- CONFIRMED BY THE LD. CIT(A) IN RESPECT OF PURCHASE OF RAW MATERIAL BY T HE ASSESSEE FROM SPIL, IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ABOVE DISALLOWANCE IS TAKEN ON THE BASIS OF CIT(A)S ORDER OF SPIL AND F URTHER APPEAL IS PENDING WITH ITAT, AHMEDABAD BENCHES. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, PLEADED THAT THE DISALLOWANCE ON THIS IS SUE SHOULD BE RESTRICTED ON THE FINAL OUTCOME IN THE CASE OF SPIL. 14.2. THE LD. DR, ON THE OTHER HAND, RELIED UPON PA RA 8.7 OF CIT(A)S ORDER AND ARGUED THAT THE ASSESSEE HAS PURCHASED CERTAIN RAW MATERIAL FROM SPIL ON LOWER PRICE THAN PRICE OF OUTSIDERS. HENCE, THE LD. DR PLEADED TO UPHOLD THE ORDER OF THE LD. CIT(A). 14.3. AFTER CONSIDERING THE FACTS AND SUBMISSIONS O F BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE LD. C IT(A) IS LIABLE TO UPHELD FOR THE REASONS THAT HE HAS FOLLOWED THE ORDER OF THE CIT(A) IN THE CASE OF SPIL WHEREIN SIMILAR DISALLOWANCE HAS BEEN CONFIRME D. HOWEVER, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE NEEDS A CONSIDERATION THAT IN THAT CASE, THE AMOUNT OF DISALLOWANCE IS VARIED BY THE ITAT AHMEDABAD BENCHES, THEN THE SAME AMOUNT WILL BE CONSIDERED IN THE CASE OF THE ASSESSEE. ACCORDINGLY GROUND NOS. 3 & 4 ARE DISMISS ED, WITH US ABOVE OBSERVATIONS. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 25 15. AS REGARDS GROUND NO.5 WITH RESPECT TO SELLING AND DISTRIBUTION EXPENSES, THE BRIEF FACTS ARE THAT THE AO HAS CONSI DERED 4.13% OF TURNOVER AS THE SELLING AND DISTRIBUTION EXPENSES, WHICH ACCORD ING TO AO SHOULD HAVE BEEN INCURRED BY THE ASSESSEE. HE HAS ARRIVED AT T HIS PERCENTAGE FROM THE RETURN OF INCOME OF SPIL AS DISCUSSED BY THE AO AT PAGES 84 TO 92 OF ASSESSEES AOS ORDER. BY APPLYING SAID PERCENTAGE AND AFTER REDUCING THE ACTUAL EXPENSES INCURRED BY THE ASSESSEE, THE AO UL TIMATELY DISALLOWED RS.6,84,95,290/-. THE LD. CIT(A) REDUCED THE SAID D ISALLOWANCE TO RS.85,51,772/- RELYING UPON THE ORDER OF THE CIT(A) AHMEDABAD BENCH IN THE CASE OF SPIL. 15.1 THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE ASSESSEE HAS INCURRED SELLING AND DISTRIBUTION EXPENSES IN TWO COMPONENTS : I) EXPENSES INCURRED DIRECTLY WHICH IS DEBITED TO SELLING AND DISTRIBUTION EXPENDITURE IN THE PROFIT & LOSS ACC OUNT. II) REMUNERATION PAID TO WORKING PARTNER (SPIL) FOR USING INTER ALIA, ITS MARKETING AND DISTRIBUTION SET UP. THE SA ME IS DEBITED TO PROFIT & LOSS ACCOUNT. 15.2 IT WAS FURTHER ARGUED BY THE LD. COUNSEL FOR T HE ASSESSEE THAT THE AO HAS CONSIDERED ONLY FIRST COMPONENT I.E. SELLING AN D DISTRIBUTION EXPENSES INCURRED BY SPIL. THE AO HAS ALTOGETHER IGNORED THE 2 ND COMPONENT I.E. PARTNERS REMUNERATION. THE LD. COUNSEL FURNISHED THE CHART TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE I.E. IF BOTH THE COMPONEN TS ARE TAKEN TOGETHER, THE PERCENTAGE OF SUCH EXPENSES IS HIGHER IN THE IMPUGN ED YEAR AT 11.89% OF ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 26 ASSESSES TURNOVER AS COMPARED TO 4.13% OF SPILS TURNOVER, WHEREAS IN THE FOLLOWING YEARS IT IS AS UNDER: ASSESSMENT YEAR IN ASSESSEES CASE IN SPILS CASE 2006-07 10.69% 6.62% 2007-08 4.40% 4.13% 2008-09 4.06% 4.25% 2009-10 4.10% 6.99% 15.3 THE LD. COUNSEL THEREFORE, ARGUED THAT THE ASS ESSEE HAS INCURRED REASONABLE EXPENSES ON SELLING AND DISTRIBUTION AS COMPARED TO EXPENSES INCURRED BY SPIL. EVEN OTHERWISE, THE LD. COUNSEL A RGUED THAT SUCH COMPARISON IS NOT FEASIBLE AS THE ASSESSEES BUSINE SS IS ONLY OF MANUFACTURING OF FORMULATIONS (MEDICINES) AND THAT ALSO FOR DOMESTIC MARKET, WHEREAS SPILS BUSINESS IS OF BULK DRUGS, F ORMULATIONS OF BOTH DOMESTIC AS WELL AS OVERSEAS MARKETS WHICH REQUIRE S TRAINING OF MEDICAL REPRESENTATIVES, OVERSEAS EXPENSES ETC. THE LD. CO UNSEL FOR THE ASSESSEE ALSO RELIED UPON THE FOLLOWING DECISIONS: I) RELIANCE ENERGY LTD. VS DCIT (2010) 40 SOT 314 (ITA T MUMBAI). II) ITO VS. LAXMI DAL MILLS (2005) 146 TAXMAN 625 (ALL) III) ITAT CHANDIGARH BENCH IN THE CASE OF ITO VS. M/S. A .K. IMPEX, PARWANOO, ITA NOS. 1323 & 1324/CHD/2010 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07, DATED 24.11.20 11 IV) ITAT CHANDIGARH BENCH, IN THE CASE OF ITO VS. M/S. GILVERT ISPAT, SOLAN (HP) IN ITA NO.345/CHD/2011 FOR THE A. Y. 2007- 08 DATED13TH MAY, 2011 ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 27 15.4 HE ALSO RELIED UPON CBDT INSTRUCTION NO.574 DA TED 27.7.1973. HE FURTHER ARGUED THAT NO DISALLOWANCE NEEDS TO BE MA DE ON ACCOUNT OF SELLING AND DISTRIBUTION EXPENSES. 15.5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE A.O. HE ARGUED THAT QUANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE IS MEAGER AS COMPARED TO THE SIZE OF ITS BUSINESS AND THE PARTN ERS REMUNERATION IS SEPARATE AND INDEPENDENT OF SELLING & DISTRIBUTION EXPENSES AND THEREFORE, SHOULD NOT BE CONSIDERED WHILE ADJUDICATING THIS IS SUE. HE ALSO RELIED UPON THE ORDER OF THE LD. CIT(A) IN THE CASE OF SPIL ESP ECIALLY PARA 26 AT PAGES 114 TO 118 OF ASSESSEES PAPER BOOK AND THEREFORE, PLEADED THAT THE DISALLOWANCE AT LEAST TO THE EXTENT WAS CONFIRMED BY THE CIT(A) IN THE CASE OF SPIL NEEDS TO BE CONFIRMED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE OBSERVE FROM THE PERUSAL OF THE ORDER OF THE ITA T, AMRITSAR BENCH, DATED 11.06.2010 PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 ON IDENTICAL FACTS AT PARA 30 TO 36 (PAGE S 63 TO 67 ) WHICH IS PLACED AT PB 186 TO 190. THE ITAT ESPECIALLY VIDE P ARA 36 HAD CONCLUDED THAT NO DISALLOWANCE U/S 80IB(13) READ WITH SECTION 80IA(10) OF THE ACT, CAN BE MADE EXCEPT DIFFERENCE OF RS.28,37,619/- AS COMP UTED BY THE ASSESSEE ITSELF, IN RESPECT OF EXCESSIVE PROFIT ON ACCOUNT O F ASSESSEES DEALINGS WITH ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 28 THE SPIL FOR BUYING RAW MATERIAL AT A CONFESSIONAL RATE, FOR TAKING SERVICES OF DISTRIBUTION NET WORK OF SPIL AS ALSO FOR TAKIN G TECHNICAL ASSISTANCE FROM SPIL INCLUDING ADVANTAGE OF USE OF BRAND. THESE F INDINGS OF ITAT IN ITS ORDER DATED 11.06.2010 ARE THERE THOUGH WAS NO SPEC IFIC AND SEPARATE DISALLOWANCE IN THE ASSESSMENT YEAR 2005-06 ON ACC OUNT OF SELLING AND DISTRIBUTION. 16.1 WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE THAT SELLING AND DISTRIBUTION EXPENSE HAS TO BE CONSIDERED WHILE TAKING BOTH THE COMPONENTS I.E. EXPENSES DIRECTLY INCURRED AND REMUNERATION PAID TO WORKING PARTNER (SPIL) FOR US ING INTER-ALIA MARKETING AND DISTRIBUTION SET UP. VIEWED FROM THIS ANGLE, TH E TOTAL PERCENTAGE OF EXPENSES DURING THE IMPUGNED YEAR IS HIGHER THAN EX PENSES OF SPIL INSPITE OF THE FACT THAT THERE IS DIFFERENCE BETWEEN NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THAT OF SPIL AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE. MOREOVER, THE BOOK RESULTS ARE DULY AUDIT ED HAS NEITHER BEEN REJECTED NOR ANY DEFICIENCY WAS FOUND BY THE LOWER AUTHORITIES. IT WAS ALSO ARGUED THERE CANNOT BE ANY ASSESSMENT OF EXPENSES ON NOTIONAL OR ASSUMPTION BASIS. AS REGARDS THE ARGUMENTS ADVANCED BY THE LD. DR THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE MEAGER AND OT HER ARGUMENTS OF THE LD. DR CANNOT BE OF ANY HELP TO THE REVENUE, WE, THEREF ORE, ARE OF THE VIEW THAT ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 29 THE DISALLOWANCE ON SELLING AND DISTRIBUTION EXPENS ES MADE BY THE AO FOR RS.6,84,95,290/- IS NOT JUSTIFIED. THEREFORE SUSTEN ANCE OF ADDITION BY LD. CIT(A) OF RS.85,51,772/- IS DIRECTED TO BE DELETED. 16.2. THEREFORE, IN VIEW OF OUR DECISION HEREINABOV E WITH RESPECT OF SELLING AND DISTRIBUTION EXPENSES, THE REMAINING DISALLOWAN CE OF EXPENSES OF ROYALTY (OF 8% OF THE TURNOVER) OF RS.14,15,34,443/ - AND MANAGEMENT FEE (OF 1% OF THE TURNOVER) OF RS.1,76,91,805/- ARE ALS O DIRECTED TO BE DELETED, AS THE SAME HAS BEEN NOTIONALLY CONSIDERED BY THE AO, WHICH IN OUR VIEW, IS INCORRECT AND NOT JUSTIFIED THUS, GROUND NO.5 OF T HE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE REVENUE IS DISMISSED. 17. AS GROUNDS NO.3 OF THE REVENUE REGARDING DISALL OWANCE OF DEDUCTION U/S 80-IB OF THE ACT IN RESPECT OF INTEREST ON DELA YED PAYMENTS FROM M/S. ADITYA MEDISALES LTD. AMOUNTING TO RS.4,96,67,120/- , IT IS OBSERVED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT, AMRI TSAR BENCH, DATED 11.06.2010 IN ITA NO.184(ASR)/2009 FOR THE ASSESSME NT YEAR 2005-06 IN ASSESSEES OWN CASE VIDE PARA 41 AT PAGES 69 TO 76 OF THE ORDER PLACED AT PAGES 192 TO 199 OF PB, WHEREIN ITAT HAS ALLOWED TH E CLAIM OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF THE SAID INTEREST FROM M/S. ADITYA MEDISALES LTD. FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL DATED 11.06.2010 THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 30 18. AS REGARDS GROUND NOS. 4 & 5 OF THE REVENUE RE GARDING GRANTING OF HIGHER DEDUCTION U/S 80IB ON ACCOUNT OF DISALLOWANC E OF REMUNERATION U/S 40(B) OF THE ACT AMOUNTING TO RS.15,75,55,218/- AND ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 43B AMOUNTING TO RS.1 2,92,626/-, IT IS OBSERVED THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT, AMRITSAR BENCH, VIDE ITS ORDER DATED 11.06.2010 IN ITA NO.18 4(ASR)/2009 IN ASSESSEES OWN CASE VIDE PARAS 37 TO 40 AT PAGES 6 7 TO 69 (PAGES 190 TO 192 PB), WHEREIN ITAT, AMRITSAR BENCH, HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE CONSEQUENTIAL HIGHER AMOUNT ELIGIBLE FOR D EDUCTION UNDER SECTION 80IB OF THE ACT. FOLLOWING THE SAID ORDER OF THE TR IBUNAL, DATED 11.06.2010, THESE GROUNDS OF THE REVENUE ARE DISMISSED. 19. AS REGARDS GROUND NO.6 OF THE ASSESSEE REGARDIN G INITIATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS CONCERNED, W E ARE OF THE CONSIDERED VIEW THAT THIS ISSUE DOES NOT ARISE FROM THE IMPUGN ED ORDER OF THE LD. CIT(A). HENCE, THIS GROUND OF THE ASSESSEE IS DISMI SSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.345(ASR)/2010 IS PARTLY ALLOWED AND THAT OF THE REVENUE IN ITA NO.39 1(ASR)/2010 IS DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 31 21. NOW WE TAKE APPEAL OF THE ASSESSEE IN ITA NO.346(ASR)/2010 AND APPEAL OF THE REVENUE IN ITA NO.392(ASR)/2010 FOR THE ASSESSMENT YEAR 2006-07. 22. AS REGARDS GROUND NO.2 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF THE REVENUE WITH RESPECT TO DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DADRA UNIT, THE FACTS IN THE PRESENT CASE ARE IDENT ICAL TO THE FACTS OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-0 5 WHICH HAS BEEN DECIDED BY US HEREINABOVE. FOLLOWING THE SAME BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80-IB OF THE ACT BY CONSIDERING THE IMPUGNED YEAR AS 5 TH YEAR OF OPERATION. THUS, GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED AND GROUND NO.1 O F THE REVENUE IS DISMISSED. 23. AS REGARDS GROUND NO.3, 4 & 5 OF THE ASSESSEE A ND GROUND NO.2 OF THE REVENUE, REGARDING INVOKING THE PROVISIONS OF SECTION 80IB(13) R.W.S. 80IA(10) AND DISALLOWANCES WITH RESPECT TO ROYALTY , MANAGEMENT FEES AND PURCHASE OF RAW MATERIAL FROM SPIL AND SELLING & D ISTRIBUTION EXPENSES, THE FACTS IN THE PRESENT GROUNDS ARE IDENTICAL TO THE F ACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, WHICH HAS BEEN DEC IDED BY US HEREINABOVE. FOLLOWING THE SAME, BEING ON IDENTICAL FACTS, THE A O IS DIRECTED TO DELETE THE DISALLOWANCE IN RESPECT OF ROYALTY, MANAGEMENT FEES AND SELLING & DISTRIBUTION EXPENSES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 32 23.1. AS REGARDS THE PURCHASE OF RAW MATERIAL FROM SPIL, THE AO IS DIRECTED TO MAKE/COMPUTE SO MUCH OF THE DISALLOWANCE AS WILL BE DECIDED BY THE ITAT, AHEMABAD BENCHES IN THE CASE OF SPIL. THUS, G ROUND NOS. 3 & 4 OF THE ASSESSEE ARE DISMISSED WITH THE ABOVE OBSERVATI ON AND GROUND NO.5 OF THE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE REVE NUE IS DISMISSED. 24. AS REGARDS GROUND NO.3 OF THE REVENUE REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DELAYED PAYMENTS FROM M/S. ADITYA MEDISALES LTD. AMOUNTING TO RS.4,25,18,962/- , THE FACTS ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2004-05 DECIDED BY US HEREINABOVE. FOLLOWING THE SAME, THE GROUND N O.3 OF THE REVENUE IS DISMISSED. 25. IN GROUND NO. 4 & 5, THE REVENUE CONTENDED REGA RDING HIGHER DEDUCTION U/S 80IB ON ACCOUNT OF DISALLOWANCE OF RE MUNERATION U/S 40(B) AMOUNTING TO RS.60,82,14,815/- AND ON ACCOUNT OF DI SALLOWANCE OF DEDUCTION U/S 43B AMOUNTING TO RS.12,86,748/- 25.1. SINCE THE FACTS RELATING TO THESE ISSUES ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE, FOLLOWING THE SAME, GROUND NOS. 4 & 5 OF THE REVENUE ARE DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 33 26. AS REGARDS GROUND NO.6 OF THE ASSESSEE RELATING TO DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF CENTRAL EXCISE DUT Y REFUND OF RS.50,12,45,460/-, THE FACTS ARE IDENTICAL TO THE F ACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREI NABOVE. FOLLOWING THE SAME, THIS GROUND OF THE ASSESSEE IS ALLOWED. 27. AS REGARDS GROUND NO.7 OF THE ASSESSEE WITH RES PECT TO THE DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF IN TEREST INCOME OF TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANK AND LOAN TO EMPLOYEES AGGREGATING TO RS.9,39,496/-, THE FACTS OF THE ISSU E IN DISPUTE BEING IDENTICAL TO THE FACTS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE DATED 11.06.2010 IN ITA NO.184(ASR)/2009 FOR THE ASSESSME NT YEAR 2005-06 PARA 41.7 PAGES 75-76 ( PB 247 -248). FOLLOWING THE SAME , THIS GROUND OF THE ASSESSEES IS DISMISSED. 28. AS REGARDS GROUND NO.8 OF THE ASSESSEE REGARDIN G INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, THIS ISSUE DO ES NOR ARISE FROM THE IMPUGNED ORDER OF THE LD. CIT(A). HENCE, THE SAME I S DISMISSED. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.346(ASR)/2010 IS PARTLY ALLOWED AND THAT OF THE REVENUE IN ITA NO.39 2(ASR)/2010 IS DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 34 30. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.13(ASR)/2011 AND APPEAL OF THE REVENUE IN ITA NO.18(ASR)/2011 FOR THE ASSESSMENT YEAR 2007-08. 31. AS REGARDS GROUND NO.2 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF THE REVENUE WITH RESPECT TO DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DADRA UNIT, THE FACTS IN THE PRESENT CASE ARE IDENT ICAL TO THE FACTS OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-0 5 WHICH HAS BEEN DECIDED BY US HEREINABOVE. FOLLOWING THE SAME BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80-IB OF THE ACT IN RESPECT OF DADRA UNIT ACCORDINGLY BY CONSIDERING TH E IMPUGNED YEAR AS 6 TH YEAR OF OPERATION. THUS, GROUND NO.2 OF THE ASSESSE E IS PARTLY ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 32. AS REGARDS GROUND NO.3, 4 & 5 OF THE ASSESSEE A ND GROUND NO.2 OF THE REVENUE REGARDING INVOKING THE PROVISIONS OF S ECTION 80IB(13) R.W.S. 80IA(10), THE DISALLOWANCE IS WITH RESPECT TO ROYAL TY, MANAGEMENT FEES AND PURCHASE OF RAW MATERIAL FROM SPIL AND SELLING & D ISTRIBUTION EXPENSES. THE FACTS IN THE PRESENT GROUNDS ARE IDENTICAL TO T HE FACTS FOR THE ASSESSMENT YEAR 2004-05, WHICH HAS BEEN DECIDED BY US HEREINAB OVE. FOLLOWING THE SAME, BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE IN RESPECT OF ROYALTY, MANAGEMENT FEES AND SELLING & DISTRIBUTION EXPENSES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 35 32.1. AS REGARDS THE PURCHASE OF RAW MATERIAL FROM SPIL, THE AO IS DIRECTED TO MAKE/COMPUTE SO MUCH OF THE DISALLOWANCE AS WILL BE DECIDED BY THE ITAT, AHEMABAD BENCH IN THE CASE OF SPIL. THUS, GRO UND NOS. 3 & 4 OF THE ASSESSEE ARE DISMISSED WITH THE ABOVE OBSERVATION AND GROUND NO.5 OF THE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE REVENUE IS DISMISSED. 33. AS REGARDS GROUND NO.3 OF THE REVENUE REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DELAYED PAYMENTS FROM M/S. ADITYA MEDISALES LTD. AMOUNTING TO RS.11,27,33,363/ -, THE FACTS ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE. FOLLOWING THE SAME, THIS GROUND OF THE REVENUE IS DISMISSED. 34. AS REGARDS GROUND NO. 4 & 5 OF THE REVENUES A PPEAL REGARDING HIGHER DEDUCTION U/S 80IB ON ACCOUNT OF DISALLOWANC E OF REMUNERATION U/S 40(B) AMOUNTING TO RS.29,79,26,967/- AND ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 43B AMOUNTING TO RS.19,73,329/- 34.1. SINCE THE FACTS RELATING TO THESE ISSUES ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE, FOLLOWING THE SAME, GROUND NOS. 4 & 5 OF THE REVENUE ARE DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 36 35. AS REGARDS GROUND NO.6 OF THE ASSESSEE RELATING TO DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF CENTRAL EXCISE DUT Y REFUND OF RS.80,72,19,118/-, THE FACTS OF THE ISSUE IN DISPUT E ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 DECIDED BY US VIDE ORDER DATED 07.06.2012 IN ITA NO.184(ASR)/2009. FOL LOWING THE SAME, THIS GROUND OF THE ASSESSEE IS ALLOWED 36. AS REGARDS GROUND NO.7 OF THE ASSESSEE WITH RES PECT TO THE DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF IN TEREST INCOME OF TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANK AND ON LOAN TO EMPLOYEES AGGREGATING TO RS.55,461/-, THE FACTS OF THE ISSUE IN DISPUTE BEING IDENTICAL TO THE FACTS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE DATED 11.06.2010 IN ITA NO.184(ASR)/2009 FOR THE ASSESSMENT YEAR 200 5-06 . FOLLOWING THE SAME, THIS GROUND OF THE ASSESSEES IS DISMISSED. 37. AS REGARDS GROUND NO.8 OF THE ASSESSEE REGARDIN G INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, THIS ISSUE DO ES NOR ARISE FROM THE IMPUGNED ORDER OF THE LD. CIT(A). HENCE, THE SAME I S DISMISSED. 38. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.13(ASR)/2011 IS PARTLY ALLOWED AND THAT OF THE REVENUE IN ITA NO.18 (ASR)/2011 IS DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 37 39. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.129(ASR)/2011 AND REVENUES APPEAL IN ITA NO.107(ASR)/2011FOR THE ASSESSMENT YEAR 2008-09. 40. AS REGARDS GROUND NO.2 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF THE REVENUE WITH RESPECT TO DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DADRA UNIT, THE FACTS IN THE PRESENT CASE ARE IDENT ICAL TO THE FACTS OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-0 5 WHICH HAS BEEN DECIDED BY US HEREINABOVE. FOLLOWING THE SAME BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80-IB OF THE ACT IN RESPECT OF DADRA UNIT ACCORDINGLY BY CONSIDERING TH E IMPUGNED YEAR AS 7 TH YEAR OF OPERATION. THUS, GROUND NO.2 OF THE ASSESSE E IS PARTLY ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 41. AS REGARDS GROUND NO.3 & 4 OF THE ASSESSEE AND GROUND NO.2 OF THE REVENUE REGARDING INVOKING THE PROVISIONS OF SECTI ON 80IB(13) R.W.S. 80IA(10), THE DISALLOWANCE IS WITH RESPECT TO ROYAL TY, MANAGEMENT FEES AND PURCHASE OF RAW MATERIAL FROM SPIL AND SELLING & D ISTRIBUTION EXPENSES. THE FACTS IN THE PRESENT GROUNDS ARE IDENTICAL TO T HE FACTS FOR THE ASSESSMENT YEAR 2004-05, WHICH HAS BEEN DECIDED BY US HEREINAB OVE. FOLLOWING THE SAME, BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE IN RESPECT OF ROYALTY, MANAGEMENT FEES AND SELLING & DISTRIBUTION EXPENSES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 38 41.1. AS REGARDS THE PURCHASE OF RAW MATERIAL FROM SPIL, THE AO IS DIRECTED TO MAKE/COMPUTE SO MUCH OF THE DISALLOWANCE AS WILL BE DECIDED BY THE ITAT, AHEMABAD BENCH IN THE CASE OF SPIL. THUS, GRO UND NO. 3 OF THE ASSESSEE IS DISMISSED AND GROUND NO. 4 OF THE ASSES SEE IS DISMISSED WITH THE ABOVE OBSERVATIONS AND GROUND NO.2 OF THE REVENUE IS DISMISSED. 42. AS REGARDS GROUND NO.3 OF THE REVENUE REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DELAYED PAYMENTS FROM M/S. ADITYA MEDISALES LTD. AMOUNTING TO RS.11,27,33,363/ -, THE FACTS ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE. FOLLOWING THE SAME, THIS GROUND OF THE REVENUE IS DISMISSED. 43. AS REGARDS GROUND NO. 4 & 5 OF THE REVENUES A PPEAL REGARDING HIGHER DEDUCTION U/S 80IB ON ACCOUNT OF DISALLOWANC E OF REMUNERATION U/S 40(B) AMOUNTING TO RS.40,12,76,441/- AND ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 43B AMOUNTING TO RS.5,37,09,230/- 43.1. SINCE THE FACTS RELATING TO THESE ISSUES ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE, FOLLOWING THE SAME, GROUND NOS. 4 & 5 OF THE REVENUE ARE DISMISSED. 44. AS REGARDS GROUND NO.6 OF THE ASSESSEE RELATING TO DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF CENTRAL EXCISE DUT Y REFUND , THE FACTS OF ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 39 THE ISSUE IN DISPUTE ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 DECIDED BY US VIDE ORDER DA TED 07.06.2012 IN ITA NO.184(ASR)/2009. FOLLOWING THE SAME, THIS GROUND O F THE ASSESSEE IS ALLOWED. 45. AS REGARDS GROUND NO.5 OF THE ASSESSEE WITH RES PECT TO THE DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF IN TEREST INCOME OF TO THE EXTENT OF INTEREST ON STATUTORY DEPOSITS, BANK AND ON LOAN TO EMPLOYEES AGGREGATING TO RS.64,963/-, THE FACTS OF THE ISSUE IN DISPUTE BEING IDENTICAL TO THE FACTS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE DATED 11.06.2010 IN ITA NO.184(ASR)/2009 FOR THE ASSESSMENT YEAR 200 5-06 . FOLLOWING THE SAME, THIS GROUND OF THE ASSESSEES IS DISMISSED. 46. AS REGARDS GROUND NO.6 OF THE ASSESSEE REGARDIN G INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, THIS ISSUE DO ES NOR ARISE FROM THE IMPUGNED ORDER OF THE LD. CIT(A). HENCE, THE SAME I S DISMISSED. 47. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 48. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA N O.130(ASR)/2011 AND REVENUES APPEAL IN ITA NO.312(ASR)/2011 FOR THE AS SESSMENT YEAR 2009- 10. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 40 49. AS REGARDS GROUND NO.2 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF THE REVENUE WITH RESPECT TO DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DADRA UNIT, THE FACTS IN THE PRESENT CASE ARE IDENT ICAL TO THE FACTS OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-0 5 WHICH HAS BEEN DECIDED BY US HEREINABOVE. FOLLOWING THE SAME BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80-IB OF THE ACT IN RESPECT OF DADRA UNIT ACCORDINGLY BY CONSIDERING TH E IMPUGNED YEAR AS 8 TH YEAR OF OPERATION. THUS, GROUND NO.2 OF THE ASSESSE E IS PARTLY ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 50. AS REGARDS GROUND NO.3 & 4 OF THE ASSESSEE AND GROUND NO.2 OF THE REVENUE REGARDING INVOKING THE PROVISIONS OF SECTI ON 80IB(13) R.W.S. 80IA(10), THE DISALLOWANCE IS WITH RESPECT TO ROYAL TY, MANAGEMENT FEES AND PURCHASE OF RAW MATERIAL FROM SPIL AND SELLING & D ISTRIBUTION EXPENSES. THE FACTS IN THE PRESENT GROUNDS ARE IDENTICAL TO T HE FACTS FOR THE ASSESSMENT YEAR 2004-05, WHICH HAS BEEN DECIDED BY US HEREINAB OVE. FOLLOWING THE SAME, BEING ON IDENTICAL FACTS, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE IN RESPECT OF ROYALTY, MANAGEMENT FEES AND SELLING & DISTRIBUTION EXPENSES. THUS, GROUND NO.3 OF THE ASSESSEE IS DISMISSED AND GROUND NO.4 OF THE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE REVENUE IS DISMISSED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 41 51. AS REGARDS GROUND NO.3 OF THE REVENUE REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF DELAYED PAYMENTS FROM M/S. ADITYA MEDISALES LTD. AMOUNTING TO RS.48,20,32,772/ -, THE FACTS ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE. FOLLOWING THE SAME, THIS GROUND OF THE REVENUE IS DISMISSED. 52. AS REGARDS GROUND NO. 4 & 5 OF THE REVENUES A PPEAL REGARDING HIGHER DEDUCTION U/S 80IB ON ACCOUNT OF DISALLOWANC E OF REMUNERATION U/S 40(B) AMOUNTING TO RS.57,22,21,001/- AND ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 43B. 52.1. SINCE THE FACTS RELATING TO THESE ISSUES ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DECIDED BY US HEREINABOVE, FOLLOWING THE SAME, GROUND NOS. 4 & 5 OF THE REVENUE ARE DISMISSED. 53. AS REGARDS GROUND NO.6 OF THE ASSESSEE RELATING TO DISALLOWANCE OF DEDUCTION U/S 80IB IN RESPECT OF CENTRAL EXCISE DUT Y REFUND, THE FACTS OF THE ISSUE IN DISPUTE ARE IDENTICAL TO THE FACTS IN ASSE SSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 DECIDED BY US VIDE ORDER DA TED 07.06.2012 IN ITA NO.184(ASR)/2009. FOLLOWING THE SAME, THIS GROUND O F THE ASSESSEE IS ALLOWED. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 42 54. AS REGARDS GROUND NOS. 5 & 6 OF THE ASSESSEE WI TH RESPECT INTEREST ON FDR AMOUNTING TO RS.3,27,599/- (CORRECT FIGURE RS.2 ,27,599/-) AND LOAN TO EMPLOYEES WITH REGARD TO DISALLOWANCE OF DEDUCTION U/S 80IB, THE FACTS OF THE ISSUES IN HAND ARE IDENTICAL TO THE FACTS DE CIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE DATED 11.06.2010 IN ITA NO.184( ASR)/2009 FOR THE ASSESSMENT YEAR 2005-06. FOLLOWING THE SAME, THE GR OUND NO.S 5 & 6 OF THE ASSESSEES ARE DISMISSED. 55. AS REGARDS GROUND NO.7 OF ASSESSEES APPEAL IS REGARDING DISALLOWANCE OF DEDUCTION U/S 10B OF RS.2,59,303/- ON ACCOUNT OF EXCHANGE RATE FLUCTUATION, IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THAT THE SAID AMOUNT RELATES TO EEFC A/C IN RESPECT OF EXPOR T TURNOVER OF THE ASSESSEE AND HAS BEEN ASSESSED AS PART OF BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. THE AO MADE DISALLOWANCE WHICH WAS UPHELD BY THE LD. CIT(A) RELYING UPON THE FOLLOWING DECISIONS: I) CIT VS. K. RAVINDRANATHAN NAIR 295 ITR 228 (SC) II) CIT VS. SHAH ORIGINALS 327 ITR 10 (BOM.) 55.1. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE ARG UED BOTH THESE DECISIONS IN RESPECT OF 80HHC. HE, THEREFORE, RELIED UPON OT HER DECISIONS WHICH GO IN FAVOUR OF THE ASSESSEE AND ARE AS UNDER: I) ITO VS. BANYAN CHEMICALS LTD. (2009) 117 ITD 376 (AHD. TRIB) ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 43 II) T.TWO INTERNATIONAL (P) LIMITED VS. ITO (2008) 122 ITD 255 (BOM. TRIB.) HE, THEREFORE, PLEADED TO ALLOW DEDUCTION ON ACCO UNT OF EXCHANGE RATE FLUCTUATION. 56. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 57. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE FACTS OF THE ASSESSEE. THE AMOUNT IN QUESTION RELATES TO EEFC WH ICH IS NOT PART OF THE EXPORT PROCEEDS. WE ARE OF THE VIEW THAT THE LD. CI T(A) HAS CORRECTLY CONFIRMED THE DISALLOWANCE. THUS, GROUND NO.7 OF T HE ASSESSEE IS DISMISSED. 58. AS REGARDS GROUND NO.8 OF THE ASSESSEE WITH RES PECT TO MISTAKE OF RS.4,152/- IN CHARGING INTEREST UNDER SECTION 234C OF THE ACT, THE AO IS DIRECTED TO CHARGE INTEREST ON THE RETURNED INCOME IN ACCORDANCE WITH LAW. THUS, GROUND NO.8 IS ALLOWED FOR STATISTICAL PURPOS ES. 59. AS REGARDS GROUND NO.9 OF THE ASSESSEE REGARDIN G INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, THIS ISSUE DO ES NOR ARISE FROM THE IMPUGNED ORDER OF THE LD. CIT(A). HENCE, THE SAME I S DISMISSED. 60. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.130(ASR)/2011 IS PARTLY ALLOWED AND THAT OF THE REVENUE IN ITA NO.31 2(ASR)/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.345,346,13,129 &130 ITA NOS.391,392,18,107 & 312 44 61. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THAT OF THE REVENUE ARE DISMISSED EXCEPT ITA NO.312 (ASR)/2011 WHICH IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH JUNE, 2012 SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12 TH JUNE, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SUN PHARMACEUTICAL INDUSTRIES, JA MMU. 2. THE ITO WARD 1(3), JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU.S 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.