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Income Tax Appellate Tribunal - Amritsar
Sun Pharmaceutical Industries , ... vs Assessee on 7 June, 2012

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 Pharmaceuticals 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 Pharmaceuticals Industries, Ward 1(3), Jammu. Jammu. (Appellant) (Respondent)

I.T.A. No. 13(Asr)/2011

2 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 Pharmaceuticals 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 Pharmaceuticals 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

3 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

PAN :AATFS9584Q

The Income Tax Officer, Vs. M/s. Sun Pharmaceuticals 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 five by the Revenue

arise from five different orders of the CIT(A), Jammu, 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 4 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law.

2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii)

a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was 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 assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production.

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 computing 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 SPIL. 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) and thereby upholding the disallowance of Rs.14,21,110/0 on account of purchase of materials by the appellant from SPIL.

5 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

5. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10 - Rs.85,51,772/- due to alleged selling and distribution expenses.

On the facts and in the circumstances of the case and in law, the ld. CIT(A) having allowed the assesse's appeals in respect of ground No. 5 to 8 (AO can not travel beyond the scope of ITAT's direction) erred in considering Rs.85,51,772/- as alleged non incurring of selling and distribution expenses resulting into corresponding unreasonable profits and 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 and in law, the ld. CIT(A) erred in not striking down the initiation 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 that the industrial undertaking of the assessee firm at Dadra 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 that the assessee 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 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/- 6 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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. Aditya 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 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.4,96,67,120/-.

4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act 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 arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law.

2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii)

a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was 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 assessment year is to be reckoned from the date of commencement of "commercial 7 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

production" and not from the date of trial production. 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 the 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 computing 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 SPIL. On the facts and in the circumstances of the case and in law, the ld. CIT(A) having allowed the assessee's 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 to 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.80IA(10 - due to alleged selling and distribution expenses. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) having allowed the assesse's appeals in respect of ground No. 4 to 7 regarding disallowance of deduction u/s 80IB in respect of refund received from Central Excise Duty paid by the appellant without appreciating that refund was received as a matter of procedure and that the said refund cannot be construed as an income. In any case, 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 respect of Central Excise Duty Refund of Rs.50,12,45,460/- (a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the findings of the AO regarding disallowance of deduction u/s 80IB in respect of refund received of Central Excise Duty paid by the appellant without appreciating that refund was received as a matter of procedure 8 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

and that the said refund cannot be construed as an income. In any case, such refund is very much 'derived from' the 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, on the facts and circumstances of the case and in law, the AO and CIT(A) failed to appreciate that the Central Excise Duty refund is a capital receipt as, according to Central Government's Notifications, the said benefit is granted for promoting industrialization/setting up of the industries in the 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 and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.9,39,496/- 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 and in law, the ld. CIT(A) erred in not striking down the initiation 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:

9 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 that the industrial undertaking of the assessee firm at Dadra 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 that the assessee 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 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 disallowance 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. Aditya 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 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.4,25,18,962/-.

4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act 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/-."

10 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

6. In ITA No.13(Asr)/2011, the assessee has raised following grounds of appeal:

"1. The orders of the lower authorities are arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law.

2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii)

a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in reducing the deduction u/s 80IB(4) to 25% of profit from industrial undertaking at Dadra by considering the previous year as 6th year of operation as against te assesse's claim of 100% deduction considering the previous year as 4th 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 assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. 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 the appellant treating the year as the 4th 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 computing 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 SPIL. On the facts and in the circumstances of the case and 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 direction to the AO to enhance the disallowance of deduction u/s 80IB(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 appellant at the lower prices.

11 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

5. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10 - due to alleged selling and distribution expenses. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.47,18,93,873/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant.

b) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in enhancing the disallowance on account of alleged selling and distribution expenses 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 respect of central excise duty paid by the appellant without appreciating that refund was received as a matter of procedure and that the said refund cannot be construed as an income . In any case, such refund is very much 'derived from' the 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, on the facts and circumstances of the case and in law, the AO and CIT(A) failed to appreciate that the Central Excise Duty refund is a capital receipt as, according to Central Government's Notifications, the said benefit is granted for promoting industrialization/setting up of the industries in the State of Jammu & Kashmir.

12 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating 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 and in law, the ld. CIT(A) erred in not striking down the initiation of penalty proceedings u/s 271(1)(c) of the Act."

7. In ITA No.18(Asr)/2010, the Revenue has raised following 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 that the industrial undertaking of the assessee firm at Dadra 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 that the assessee 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 with sec. 80IA(10) of the Income Tax Act, 1961 of Rs.113,46,08,260/-. 13 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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.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. Aditya 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 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.11,27,33,363/-.

4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.29,79,26,967/-.

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.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 arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law.

2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii)

a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in reducing the deduction u/s 80IB(4) to 25% of profit from industrial undertaking at Dadra 14 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

by considering the previous year as 7th year of operation as against te assesse's claim of 100% deduction considering the previous year as 5th 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 assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. 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 the appellant treating the year as the 5th 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 computing the deduction u/s 80IB.

4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.45,91,02,595/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant.

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 and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.64,963/- holding them to be not derived from the industrial undertaking.

15 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 and in law, the ld. CIT(A) erred in not striking down the initiation 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 assessee. .

a) The Ld. CIT(A) has erred in holding that the industrial 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 assessee 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 with sec. 80IA(10) of the Income Tax Act, 1961 of Rs.113,46,08,260/-.

(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.102,02,09,152/- by applying the provisions of section 80-IB(13) read 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 16 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

major expenses on account of Selling and Distribution 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 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.30,31,91,368/-.

4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act 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 account of Central Excise Duty Refund:

"a) Whether the Ld. CIT(A) was right in allowing relief on account of deduction u/s 80IB on Central Excise Duty 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 the policy under which the same was paid envisaged tackling the unemployment 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 judgments 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 revenue receipts in as much as in that case payments were made only after the industries had been set up and payments were not made for purpose of setting up of industries.

17 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

c) Whether the Ld. CIT(A) was right in facts and circumstances and in law in not considering the decision 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 applied the purpose test as laid down by the judgments of the Hon'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 purpose 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 arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law.

2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii)

a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in reducing the deduction u/s 80IB(4) to 25% of profit from industrial undertaking at Dadra by considering the previous year as 8th year of operation as against te assesse's claim of 100% deduction considering the previous year as 6th 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 assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. 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 the appellant 18 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

treating the year as the 6th 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 computing the deduction u/s 80IB.

4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.97,02,11,623/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant.

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 and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.1,17,624/- 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.

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 and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on FDRs in Jammu amounting to Rs.2,27,599/- (wrongly considered by the 19 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

CIT(A) at RS.3,27,599/-) 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.

7. Reg: Disallowance of profit Rs.2,59,303/- on account of exchange rate fluctuation deduction u/s 10B(Dadra EOU) (a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 10B in respect of profit on account of exchange rate fluctuation amounting to Rs.2,59,303/- without appreciating that the same is part of 'profit 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 and in law, the ld. CIT(A) erred in giving specific direction to the 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 and in law, the ld. CIT(A) erred in not striking down the initiation 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: 20 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

1. Regarding disallowance of deduction u/s 80IB of the Income Tax Act, 1961 on profit from Dadra unit of assessee. .

a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the industrial 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 case and in law, the Ld. CIT(A) has erred in holding that the assessee 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 with 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 disallowance made by the AO on account of deduction u/s 80IB(4) of the Act by applying the provisions of section 80-IB(13) read 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 Distribution 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 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.48,20,32,772/-.

4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account 21 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

of disallowance of remuneration u/s 40(b) of the Act 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 account of Central Excise Duty Refund:

"a) Whether the Ld. CIT(A) was right in allowing relief on account of deduction u/s 80IB on Central Excise Duty 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 the policy under which the same was paid envisaged tackling the unemployment 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 judgments 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 revenue receipts in as much as in that case payments were made only after the industries had been set up and payments were not made 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 decision 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 applied the purpose test as laid down by the judgments of the Hon'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 purpose of substantial expansion of the industry."

22 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

10. First of all, we take up appeal of the assessee in ITA

No.345(Asr)/2010 and Revenue's appeal in ITA No.391(Asr)2010 for the

assessment year 2005-06 for the assessment year 2004-05 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 conditions laid down under

section 80IB(2) of the Act are not complied with. The Ld. CIT(A) followed

the order of the ITAT, Amritsar Bench, dated 11.06.2010 in assessee's own

case for the assessment year 2005-06 and allowed the deduction under

section 80IB of the Act. However, he considered the assessment year 2004-

05 as 3rd year of operation instead of assessee's claim of 1st 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 assessee's own

case vide its order dated 11.06.2010 in ITA No. 184(Asr)/2009 adjudicated

the identical issue and allowed deduction under section 80IB of the Act in

respect of Dadra unit by considering the assessment year 2002-03 as the 1st

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 undertaking is qualified for

deduction u/s 80IB for the assessment year 2004-05 being the 3rd year of 23 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 ground No.2 of the

Revenue, the brief facts are that the AO by invoking 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 following:

i) Non charging of royalty at 8% of 14,15,34,443/- turnover

ii) Non charging of management fee 1% 1,76,91,805/- of turnover.

iii) Selling & Distribution expenses 6,84,95,290/- 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 18 to 46 of his order and

confirmed the disallowances as under:

i) In respect purchase of raw material from SPIL 14,21,110/-

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 assessee's grievance are two folds as argued by the Ld. AR. Firstly the

invoking the provisions of section 80IB(13) r.w.s 80IA(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 business' between them is

arranged so as to produce more than the ordinary profits. 24 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 the 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 further appeal is pending

with ITAT, Ahmedabad Benches. The Ld. counsel for the assessee,

therefore, pleaded that the disallowance on this issue should be restricted on

the final outcome in the case of SPIL.

14.2. The Ld. DR, on the other hand, relied upon para 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 of both the parties, we are

of the view that the disallowance made by the Ld. CIT(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 confirmed. 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 dismissed, with us above

observations.

25 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

15. As regards ground No.5 with respect to selling and distribution

expenses, the brief facts are that the AO has considered 4.13% of turnover as

the selling and distribution expenses, which according to AO should have

been incurred by the assessee. He has arrived at this percentage from the

return of income of SPIL as discussed by the AO at pages 84 to 92 of

assessee's AO's order. By applying said percentage and after reducing the

actual expenses incurred by the assessee, the AO ultimately disallowed

Rs.6,84,95,290/-. The Ld. CIT(A) reduced the said disallowance 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 the 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 account. ii) Remuneration paid to working partner (SPIL) for using inter alia, its marketing and distribution set up. The same is debited to profit & loss account.

15.2 It was further argued by the ld. counsel for the assessee that the AO

has considered only first component i.e. selling and distribution expenses

incurred by SPIL. The AO has altogether ignored the 2nd component i.e.

partner's remuneration. The Ld. counsel furnished the chart to substantiate

the claim of the assessee i.e. if both the components are taken together, the

percentage of such expenses is higher in the impugned year at 11.89% of 26 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

assesse's turnover as compared to 4.13% of SPIL's turnover, whereas in

the following years it is as under:

Assessment year In assessee's case In SPIL's 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 assessee has incurred

reasonable expenses on selling and distribution as compared to expenses

incurred by SPIL. Even otherwise, the Ld. counsel argued that such

comparison is not feasible as the assessee's business is only of

manufacturing of formulations (medicines) and that also for domestic

market, whereas SPIL's business is of bulk drugs, formulations of both

domestic as well as overseas markets which requires training of medical

representatives, overseas expenses etc. The Ld. counsel for the assessee also

relied upon the following decisions:

i) Reliance Energy Ltd. vs DCIT (2010) 40 SOT 314 (ITAT 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 24.11.2011 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

27 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

15.4 He also relied upon CBDT Instruction No.574 dated 27.7.1973. He

further argued that no disallowance needs to be made 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 partner's remuneration is

separate and independent of selling & distribution expenses and therefore,

should not be considered while adjudicating this issue. He also relied upon

the order of the Ld. CIT(A) in the case of SPIL especially para 26 at pages

114 to 118 of assessee's 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 ITAT, Amritsar Bench,

dated 11.06.2010 passed in assessee's own case for the assessment year

2005-06 on identical facts at para 30 to 36 (Pages 63 to 67 ) which is

placed at PB 186 to 190. The ITAT especially vide para 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 computed by the assessee

itself, in respect of excessive profit on account of assessee's dealings with 28 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

the SPIL for buying raw material at a confessional rate, for taking services

of distribution net work of SPIL as also for taking technical assistance from

SPIL including advantage of use of brand. These findings of ITAT in its

order dated 11.06.2010 are there though was no specific and separate

disallowance in the assessment year 2005-06 on account 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 using inter-alia marketing

and distribution set up. Viewed from this angle, the total percentage of

expenses during the impugned year is higher than expenses 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 audited 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 other arguments of the ld.

DR cannot be of any help to the Revenue, we, therefore, are of the view that 29 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

the disallowance on selling and distribution expenses made by the AO for

Rs.6,84,95,290/- is not justified. Therefore sustenance of addition by Ld.

CIT(A) of Rs.85,51,772/- is directed to be deleted.

16.2. Therefore, in view of our decision hereinabove with respect of selling

and distribution expenses, the remaining disallowance 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 also 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 the assessee is allowed and

ground No.2 of the revenue is dismissed.

17. As grounds No.3 of the Revenue regarding disallowance of deduction

u/s 80-IB of the Act in respect of interest on delayed 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, Amritsar Bench, dated

11.06.2010 in ITA No.184(Asr)/2009 for the assessment year 2005-06 in

assessee's 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 the 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. 30 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

18. As regards ground Nos. 4 & 5 of the Revenue regarding granting of

higher deduction u/s 80IB on account of disallowance 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.12,92,626/-, 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.184(Asr)/2009 in

assessee's own case vide paras 37 to 40 at pages 67 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 deduction under section

80IB of the Act. Following the said order of the Tribunal, dated 11.06.2010,

these grounds of the Revenue are dismissed.

19. As regards ground No.6 of the assessee regarding initiation of penalty

under section 271(1)(c) of the Act is concerned, we are of the considered

view that this issue does not arise from the impugned order of the ld.

CIT(A). Hence, this ground of the assessee is dismissed.

20. In the result, the appeal of the assessee in ITA No.345(Asr)/2010 is

partly allowed and that of the Revenue in ITA no.391(Asr)/2010 is

dismissed.

31 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 assessee's 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 identical to the facts of

assessee's own case for the assessment year 2004-05 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 5th year of operation. Thus, ground No.2

of the assessee is partly allowed and ground No.1 of the Revenue is

dismissed.

23. As regards ground No.3, 4 & 5 of the assessee and 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 & distribution expenses, the

facts in the present grounds are identical to the facts in assessee's own case

for the assessment year 2004-05, which has been decided by us hereinabove.

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.

32 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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, ground 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.

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 assessee's own case for the assessment year 2004-05 decided

by us hereinabove. Following the same, the ground No.3 of the Revenue is

dismissed.

25. In ground No. 4 & 5, the Revenue contended regarding higher

deduction u/s 80IB on account of disallowance of remuneration u/s 40(b)

amounting to Rs.60,82,14,815/- and on account of disallowance 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

assessee's own case for the assessment year 2004-05 decided by us

hereinabove, following the same, ground Nos. 4 & 5 of the revenue are

dismissed.

33 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

26. As regards ground No.6 of the assessee relating to disallowance of

deduction u/s 80IB in respect of Central Excise Duty Refund of

Rs.50,12,45,460/-, the facts are identical to the facts in assessee's own case

for the assessment year 2004-05 decided by us hereinabove. Following the

same, this ground of the assessee is allowed.

27. As regards ground No.7 of the assessee with respect to the

disallowance of deduction u/s 80IB in respect of interest 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 issue in dispute being

identical to the facts decided by the Tribunal in assessee's own case dated

11.06.2010 in ITA No.184(Asr)/2009 for the assessment 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 regarding initiation of penalty

proceedings u/s 271(1)(c) of the Act, this issue does nor arise from the

impugned order of the ld. CIT(A). Hence, the same is dismissed.

29. In the result, the appeal of the assessee in ITA No.346(Asr)/2010 is

partly allowed and that of the Revenue in ITA No.392(Asr)/2010 is

dismissed.

34 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 assessee's 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 identical to the facts of

assessee's own case for the assessment year 2004-05 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 the impugned year as 6th

year of operation. Thus, ground No.2 of the assessee is partly allowed and

ground No.1 of the Revenue is dismissed.

32. As regards ground No.3, 4 & 5 of the assessee and ground No.2 of

the Revenue regarding invoking the provisions of section 80IB(13) r.w.s.

80IA(10), the disallowance is with respect to royalty, management fees and

purchase of raw material from SPIL and selling & distribution expenses.

The facts in the present grounds are identical to the facts for the assessment

year 2004-05, which has been decided by us hereinabove. 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. 35 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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, ground 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 assessee's own case for the 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 Revenue's appeal regarding

higher deduction u/s 80IB on account of disallowance 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

assessee's own case for the assessment year 2004-05 decided by us

hereinabove, following the same, ground Nos. 4 & 5 of the revenue are

dismissed.

36 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

35. As regards ground No.6 of the assessee relating to disallowance of

deduction u/s 80IB in respect of Central Excise Duty Refund of

Rs.80,72,19,118/-, the facts of the issue in dispute are identical to the facts in

assessee's own case for the assessment year 2005-06 decided by us vide

order dated 07.06.2012 in ITA No.184(Asr)/2009. Following the same, this

ground of the assessee is allowed

36. As regards ground No.7 of the assessee with respect to the

disallowance of deduction u/s 80IB in respect of interest 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 assessee's own case dated 11.06.2010

in ITA No.184(Asr)/2009 for the assessment year 2005-06 . Following the

same, this ground of the assessees is dismissed.

37. As regards ground No.8 of the assessee regarding initiation of penalty

proceedings u/s 271(1)(c) of the Act, this issue does nor arise from the

impugned order of the ld. CIT(A). Hence, the same is dismissed.

38. In the result, the appeal of the assessee in ITA No.13(Asr)/2011 is

partly allowed and that of the Revenue in ITA No.18(Asr)/2011 is

dismissed.

37 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

39. Now, we take up appeal of the assessee in ITA No.129(Asr)/2011

and Revenue's appeal in ITA No.107(Asr)/2011for the assessment year

2008-09.

40. As regards ground No.2 of the assessee's 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 identical to the facts of

assessee's own case for the assessment year 2004-05 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 the impugned year as 7th

year of operation. Thus, ground No.2 of the assessee 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 section 80IB(13) r.w.s.

80IA(10), the disallowance is with respect to royalty, management fees and

purchase of raw material from SPIL and selling & distribution expenses.

The facts in the present grounds are identical to the facts for the assessment

year 2004-05, which has been decided by us hereinabove. 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. 38 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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, ground No. 3 of the

assessee is dismissed and ground No. 4 of the assessee 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 assessee's own case for the 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 Revenue's appeal regarding

higher deduction u/s 80IB on account of disallowance 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

assessee's 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 Duty Refund , the facts of 39 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

the issue in dispute are identical to the facts in assessee's own case for the

assessment year 2005-06 decided by us vide order dated 07.06.2012 in ITA

No.184(Asr)/2009. Following the same, this ground of the assessee is

allowed.

45. As regards ground No.5 of the assessee with respect to the

disallowance of deduction u/s 80IB in respect of interest 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 assessee's own case dated 11.06.2010

in ITA No.184(Asr)/2009 for the assessment year 2005-06 . Following the

same, this ground of the assessees is dismissed.

46. As regards ground No.6 of the assessee regarding initiation of penalty

proceedings u/s 271(1)(c) of the Act, this issue does nor arise from the

impugned order of the ld. CIT(A). Hence, the same is dismissed.

47. In the result, the appeal of the assessee is partly allowed and that of

the Revenue is dismissed.

48. Now, we take up appeal of the assessee in ITA No.130(Asr)/2011 and

Revenue's appeal in ITA No.312(Asr)/2011 for the assessment year 2009-

10.

40 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

49. As regards ground No.2 of the assessee's 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 identical to the facts of

assessee's own case for the assessment year 2004-05 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 the impugned year as 8th

year of operation. Thus, ground No.2 of the assessee 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 section 80IB(13) r.w.s.

80IA(10), the disallowance is with respect to royalty, management fees and

purchase of raw material from SPIL and selling & distribution expenses.

The facts in the present grounds are identical to the facts for the assessment

year 2004-05, which has been decided by us hereinabove. 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. 41 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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 assessee's own case for the 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 Revenue's appeal regarding

higher deduction u/s 80IB on account of disallowance 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

assessee's 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 Duty Refund, the facts of the

issue in dispute are identical to the facts in assessee's own case for the

assessment year 2005-06 decided by us vide order dated 07.06.2012 in ITA

No.184(Asr)/2009. Following the same, this ground of the assessee is

allowed.

42 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

54. As regards ground Nos. 5 & 6 of the assessee with 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 decided by the Tribunal in

assessee's own case dated 11.06.2010 in ITA No.184(Asr)/2009 for the

assessment year 2005-06. Following the same, the ground No.s 5 & 6 of the

assessees are dismissed.

55. As regards ground No.7 of assessee's 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 export 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 argued both these decisions

in respect of 80HHC. He, therefore, relied upon other decisions which go in

favour of the assessee and are as under:

i) ITO vs. Banyan Chemicals Ltd. (2009) 117 ITD 376 (Ahd. Trib)

43 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

ii) T.Two International (P) Limited vs. ITO (2008) 122 ITD 255 (Bom. Trib.)

He, therefore, pleaded to allow deduction on account 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 which is not part of the

export proceeds. We are of the view that the ld. CIT(A) has correctly

confirmed the disallowance. Thus, ground No.7 of the assessee is dismissed.

58. As regards ground No.8 of the assessee with respect 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 purposes.

59. As regards ground No.9 of the assessee regarding initiation of penalty

proceedings u/s 271(1)(c) of the Act, this issue does nor arise from the

impugned order of the ld. CIT(A). Hence, the same is dismissed.

60. In the result, the appeal of the assessee in ITA No.130(Asr)/2011 is

partly allowed and that of the Revenue in ITA No.312(Asr)/2011 is partly

allowed for statistical purposes.

44 ITA Nos.345,346,13,129 &130

ITA Nos.391,392,18,107 & 312

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: 12th June, 2012

/SKR/

Copy of the order forwarded to:

1. The Assessee:M/s. Sun Pharmaceutical Industries, Jammu.

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.