ACIT (LTU) - 2, MUMBAI V. GLENMARK GENERICS LTD., MUMBAI

ITA 6431/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7131 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER IT (TP) A NO. 6431 , 6432 / MUM . /2016 ( ASSESSMENT YEAR : 20 1 2 13 , 2011 12 ) ASSTT. COMMISSIONER OF INCOME TAX (LARGE TAXPAYER UNIT) 2 , MUMBAI . APPELLANT V/S M/S. GLEMARK GENERICS LTD. GLENMARK HOUSE, HDO CORPORATE BLDG. WING A, B.D. SAWANT MARG CHAKALA, OPP. WESTERN EXPRESS HIGHWAY, ANDHERI (EAST) MUMBAI 400 0 99 PAN AACCG9820D . RESPONDENT REVENUE BY : SHRI ANAND MOHAN ASSESSEE BY : SHRI ANUJ KISNADWALA DATE OF HEARING 25 .0 4 .201 9 DATE OF ORDER 30.04. 2 0 19 O R D E R A FORESAID APPEAL S HA VE BEEN FILED BY THE REVENUE CHALLENGING TWO SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER (APPEALS) 56 , MUMBAI, FOR THE ASSESSMENT YEAR S 201 2 13 AND 2011 12. 2 . T HE FIRST COMMON ISSUE RAISED IN BOTH THE APPEALS RELATE TO ALLOWABILITY OF DEDUCTION CLAIMED UNDER SECTION 80IB OF THE INCOME - TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2 M/S. GLEMARK GENERICS LTD. 3 . BRIEF FACTS COMMON IN BOTH THE ASSESSMENT YEARS ARE, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF PHARMACEUTICAL PRODUCTS AND R&D ACTIVITY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN S OF INCOME UNDER NORMAL PROVISIONS AFTER CLAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT. HOWEVER, THE ASSESSEE DECLARED BOOK PROFIT UNDER SECTION 115JB OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING ASSESSEES CLAIM OF DE DUCTION UNDER SECTION 80IB OF THE ACT FOR ASSESSMENT YEAR 2011 12 IN RESPECT OF THE GOA UNIT, NOTICED THAT THE ASSESSEE HAS INCLUDED THE INCOME FROM SCRAP SALE AMOUNTING TO ` 20,67,157, AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR CLAIMING DEDUCTI ON. SIMILARLY, IN ASSESSMENT YEAR 2012 13, THE ASSESSEE HAD INCLUDED SCRAP SALE INCOME OF ` 36,16,303, FOR COMPUTING DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSING OFFICER BEING OF THE VIEW THAT INCOME FROM SCRAP SALE CANNOT BE CONSIDERED TO BE A P ART OF THE PROFIT AND GAINS FROM THE BUSINESS , DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF SUCH INCOME IN BOTH THE ASSESSMENT YEARS. THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE S BEFORE THE FIRST APPELLATE AUT HORITY. 4 . WHILE CONSIDERING ASSESSEES APPEALS ON THE DISPUTED ISSUE, THE ASSESSING OFFICER NOTICED THAT SIMILAR DISALLOWANCE MADE BY THE 3 M/S. GLEMARK GENERICS LTD. ASSESSING OFFICER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 10 WAS DELETED BY THE TRIBUNAL AND FOLLOWING THE DECI SION OF THE TRIBUNAL THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE FIRST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2010 11. CONSIDERING THE ABOVE, LEARNED COMMISSIONER (APPEALS) ALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN R ESPECT OF INCOME FROM SCRAP SALES IN BOTH THE ASSESSMENT YEARS. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE AS SESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2009 10 AND THE SAID DECISION IS SQUARELY APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF INCOME GENERATED FROM SCRAP SALES AROSE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 10. THE TRIBUNAL WHILE DECIDING THE ISSUE IN ITA NO.5515/MUM./2013, DATED 5 TH FEBRUARY 2016, HAS ALLOWED ASSESSEES CLAIM OF DEDUCTION. FO LLOWING THE AFORESAID DECISION OF THE TRIBUNAL, LEARNED COMMISSIONER (APPEALS) HAS ALSO ALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE 4 M/S. GLEMARK GENERICS LTD. ACT IN RESPECT OF SCRAP SALES IN ASSESSMENT YEAR 2010 11. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH AS REFERRED TO ABOVE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN ALLOWING ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF SCRAP SALES IN BOTH THE ASSESSMENT YEARS UNDER AP PEAL. GROUNDS ARE DISMISSED. 8 . THE NEXT COMMON ISSUE, AS RAISED IN GROUNDS NO.2 AND 3 IN BOTH THE APPEALS, RELATES TO THE DETERMINATION OF ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE. 9 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2011 12 , THE ASSESSING OFFICER NOTICED THAT ASSESSEES AE HAS TAKEN A TERM LOAN FROM ICICI BANK U.K. PLC, FRANKFURT BRANCH, FOR WHICH THE ASSESSEE HAS PROVIDED CORPORATE GUARANTEE. THE TRANSFER PRICING OFFICER OBSERVED THAT FOR PROVIDI NG SUCH CORPORATE GUARANTEE, THE ASSESSEE HAD NOT CHARGED ANY GUARANTEE FEE. THE TRANSFER PRICING OFFICER OBSERVED , IN THE PRECEDING ASSESSMENT YEAR, THE ASSESSEE HAD CHARGED GUARANTEE FEE OF 0.5% FOR SIX DAYS , WHEREAS , THE TRANSFER PRICING OFFICER HAD DET ERMINED THE GUARANTEE FEE @ 3%. NOTICING THE SAME, THE TRANSFER PRICING OFFICER FIXED THE RATE OF OF GUARANTEE COMMISSION @ 2.25% WHICH RESULTED IN AN ADJUSTMENT OF ` 5,67,67,990. THE AFORESAID ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER WAS ADDED BACK TO THE INCOME OF THE 5 M/S. GLEMARK GENERICS LTD. ASSESSEE IN THE ASSESSMENT ORDER. SIMILARLY, FOR THE ASSESSMENT YEAR 2012 13, THE TRANSFER PRICING OFFICER COMPUTED THE GUARANTEE COMMISSION @ 1.5% RESULTING IN AN ADJUSTMENT OF ` 2,84,35,598. THE ASSESSEE CHALLENGED THE AFORESAID ADDITIONS ON ACCOUNT OF CORPORATE GUARANTEE FEE BEFORE THE FIRST APPELLATE AUTHORITY. 10 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING UPON THE DECISION OF THE TRIBUNAL IN CASE OF ASSESSEES HOLD ING COMPANY VIZ. GLENMARK PHARMACEUTICALS LTD. AND THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN DCIT V/S EVEREST KENTO CYLINDERS LTD., [2015] 378 ITR 57 (BOM.) , LEARNED COMMISSIONER (APPEALS) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ARM'S LE NGTH PRICE OF THE CORPORATE GUARANTEE COMMISSION @ 0.5% PER ANNUM IN BOTH THE ASSESSMENT YEARS UNDER APPEAL. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 12 . THE LEARNED AUTHORISED REPRESENTATIVE STRONGLY SUP PORTING THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) SUBMITTED THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S GLENMARK PHARMACEUTICALS LTD., 398 ITR 439 (BOM.) FOLLOWING ITS OWN DECISION IN EVEREST KENTO CYLINDERS LTD. (SUPRA), HAS HELD THAT C ORPORATE GUARANTEE FEE OF 0.5% IS REASONABLE. HE SUBMITTED , THE AFORESAID DECISION OF THE HON'BLE 6 M/S. GLEMARK GENERICS LTD. JURISDICTIONAL HIGH COURT HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT. THUS, HE SUBMITTED , THERE IS NO REASON TO INTERFERE WITH THE DECISION OF LEARNED COMMI SSIONER (APPEALS). 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE @ 0.5% IS IN CONSONANCE WITH THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN EVEREST KENTO CYLINDERS LTD. (SUPRA). IN VARIOUS OTHER DECISIONS ALSO, DIFFERENT BENCH E S OF THE TRIBUNAL FOLLOWING THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAVE DIRECTED T HE ASSESSING OFFICER TO DETERMINE THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE COMMISSION @ 0.5%. THAT BEING THE CASE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS RAISED ARE DISMISSED IN BOTH THE APPEALS. 14 . THE LEARNE D DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT GROUNDS NO.4, 5 AND 6 IN BOTH THE APPEALS DO NOT ARISE OUT OF THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) A ND HAVE BEEN INADVERTENTLY RAISED BY THE REVENUE. 15 . IN VIEW OF THE AFORESAID, GROUNDS NO.4, 5 AND 6 I N BOTH THE APPEALS ARE DISMISSED AS NOT PRESSED. 7 M/S. GLEMARK GENERICS LTD. 16 . IN THE RESULT, APPEAL S ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN C OURT ON 30.04.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.04.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI