IPCA LABORATORIES,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX- CENTRAL CIRCLE-5(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2025 Assessment Year: 2013-14, 2015-16, 2016-17, 2017-18 and 2018-19

IPCA Laboratories Limited, Deputy Commissioner of Income 48, Kandivli Industrial Estate, Tax – 5(2), Kautilya Bhavan, Vs. Kandivali West, S.O, Mumbai – Mumbai – 400051, Maharashtra. 400067, Maharashtra. PAN NO.AAACI 1220 M Appellant Respondent

ITA No.5191, 5192, 5193, 5194 and 5056/MUM/2025 Assessment Year: 2013-14, 2015-16, 2016-17, 2017-18 and 2018-19 Deputy Commissioner of IPCA Laboratories Limited, Income Tax – 5(2), Room No. 48, Kandivali Industrial Estate, 427, 4th Floor, Kautilya Vs. Kandivali West, S.O, Mumbai – Bhavan, Mumbai – 400051, 400067, Maharashtra. Maharashtra. PAN NO. AAACI 1220 M Appellant Respondent

: Shri. Madhur Agarwal a/w Shri. Assessee by Mani & Prateek Jain Revenue by : Shri Ajay Chandra, CIT DR/ Shri. Pravin Salunkhe, Sr. DR. : 05/05/2026 Date of Hearing Date of pronouncement : 23/06/2026

IPCA Laboratories Limited, IPCA Laboratories Limited, 2 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

ORDER PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

The captioned cross The captioned cross-appeals preferred by the assessee and the appeals preferred by the assessee and the Revenue arise from the consolidated Revenue arise from the consolidated order dated 12.04.2025 passed order dated 12.04.2025 passed by the learned Commissioner of Income Tax (Appeals)-56, Mumbai by the learned Commissioner of Income Tax (Appeals) by the learned Commissioner of Income Tax (Appeals) (hereinafter referred to as “the Ld. CIT(A)”) for Assessment Years (hereinafter referred to as “the Ld. CIT(A)”) for Assessment Years (hereinafter referred to as “the Ld. CIT(A)”) for Assessment Years 2013-14, 2015-16, 2016 16, 2016-17, 2017-18 and 2018 18 and 2018-19. Since the issues involved in these appeals emana issues involved in these appeals emanate from a common set of te from a common set of facts and give rise to substantially similar questions for facts and give rise to substantially similar questions for facts and give rise to substantially similar questions for adjudication, all the appeals were heard together. Accordingly, for adjudication, all the appeals were heard together. Accordingly, for adjudication, all the appeals were heard together. Accordingly, for the sake of convenience, consistency in adjudication, and to avoid the sake of convenience, consistency in adjudication, and to avoid the sake of convenience, consistency in adjudication, and to avoid repetition of facts and reasoning, the repetition of facts and reasoning, they are being disposed of by this y are being disposed of by this common and consolidated order. common and consolidated order.

2.1 We have duly considered the explanation furnished by the We have duly considered the explanation furnished by the We have duly considered the explanation furnished by the Revenue. Having regard to the circumstances brought on record, we Revenue. Having regard to the circumstances brought on record, we Revenue. Having regard to the circumstances brought on record, we

IPCA Laboratories Limited, IPCA Laboratories Limited, 3 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

are satisfied that the delay was occasioned by a bona fide and are satisfied that the delay was occasioned by a bona fide and are satisfied that the delay was occasioned by a bona fide and reasonable cause and was neither deliberate nor attributable to any reasonable cause and was neither deliberate nor attributable to a reasonable cause and was neither deliberate nor attributable to a lack of diligence. In our considered view, the Revenue has lack of diligence. In our considered view, the Revenue has lack of diligence. In our considered view, the Revenue has demonstrated sufficient cause within the meaning of the law for not demonstrated sufficient cause within the meaning of the law for not demonstrated sufficient cause within the meaning of the law for not preferring the appeals within the stipulated time. Accordingly, the preferring the appeals within the stipulated time. Accordingly, the preferring the appeals within the stipulated time. Accordingly, the delay of 54 days in filing the appeals is condoned, and the delay of 54 days in filing the appeals is condoned, and th delay of 54 days in filing the appeals is condoned, and th Revenue’s appeals are admitted for adjudication on merits. Revenue’s appeals are admitted for adjudication on merits. Revenue’s appeals are admitted for adjudication on merits.

“1. On the facts and circumstances of the Appellant's case 1. On the facts and circumstances of the Appellant's case and in law, the Ld. Assessing Officer erred in invoking the provisions of section 153A which is illegal, Assessing Officer erred in invoking the provisions of section 153A which is illegal, Assessing Officer erred in invoking the provisions of section 153A which is illegal, bad in law or otherwise void bad in law or otherwise void-ab-initio for the want of jurisdiction, on the ground initio for the want of jurisdiction, on the ground that no incriminating document/ evidence was found for the year under that no incriminating document/ evidence was found for the year und that no incriminating document/ evidence was found for the year und consideration. Disallowance of Sales & Marketing Expenses Disallowance of Sales & Marketing Expenses 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in holding the sales & marketing expenses incurred by Assessing Officer erred in holding the sales & marketing expenses incurred by Assessing Officer erred in holding the sales & marketing expenses incurred by the appellant as alleged 'freebies' to t the appellant as alleged 'freebies' to the medical practitioners, without any he medical practitioners, without any concrete material on record. concrete material on record. 3. On the facts and circumstances of the Appellant's case and in law the Ld. 3. On the facts and circumstances of the Appellant's case and in law the Ld. 3. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in relying on the statement of Shri Sharawan Beli, GM Assessing Officer erred in relying on the statement of Shri Sharawan Beli, GM Assessing Officer erred in relying on the statement of Shri Sharawan Beli, GM (Taxation) in-spite of the fact th spite of the fact that the same was not based on correct facts and at the same was not based on correct facts and cannot be applied to the appellant, as per the ground/s contained in the cannot be applied to the appellant, as per the ground/s contained in the cannot be applied to the appellant, as per the ground/s contained in the assessment or otherwise. assessment or otherwise. 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in making Assessing Officer erred in making disallowance of Rs.19,23,79,082/ disallowance of Rs.19,23,79,082/- on account of alleged freebies services provided by the appellant to the medical practitioners, of alleged freebies services provided by the appellant to the medical practitioners, of alleged freebies services provided by the appellant to the medical practitioners, as per the ground/s contained in the assessment or otherwise. as per the ground/s contained in the assessment or otherwise. as per the ground/s contained in the assessment or otherwise.

IPCA Laboratories Limited, IPCA Laboratories Limited, 4 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Over invoicing and unexplained purchases Over invoicing and unexplained purchases 5. On the facts and cir 5. On the facts and circumstances of the Appellant's case and in law the Ld. cumstances of the Appellant's case and in law the Ld. Assessing Officer erred in holding that the appellant has inflated its purchases Assessing Officer erred in holding that the appellant has inflated its purchases Assessing Officer erred in holding that the appellant has inflated its purchases CERTIFIED TRUE COPY with various parties, without any concrete material on CERTIFIED TRUE COPY with various parties, without any concrete material on CERTIFIED TRUE COPY with various parties, without any concrete material on record. 6. On the facts and circumstances of t 6. On the facts and circumstances of the Appellant's case and in law the Ld. he Appellant's case and in law the Ld. Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Joshi in-spite of the fact that the same was not based on corre spite of the fact that the same was not based on correct facts which spite of the fact that the same was not based on corre cannot be applied to the appellant and have been retracted, as per the ground/s cannot be applied to the appellant and have been retracted, as per the ground/s cannot be applied to the appellant and have been retracted, as per the ground/s contained in the assessment or otherwise. contained in the assessment or otherwise. 7. On the facts and circumstances of the Appellant's case and in law the Ld. 7. On the facts and circumstances of the Appellant's case and in law the Ld. 7. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in making disallow Assessing Officer erred in making disallowance of Rs.1,40,35,340/ ance of Rs.1,40,35,340/-on account of alleged over invoicing of Raw Material, as per the ground/s contained in the alleged over invoicing of Raw Material, as per the ground/s contained in the alleged over invoicing of Raw Material, as per the ground/s contained in the assessment or otherwise. assessment or otherwise. Transfer Pricing Adjustments Transfer Pricing Adjustments 8. On the facts and circumstances of the Appellant's case and in law the Ld. TPO 8. On the facts and circumstances of the Appellant's case and in law the Ld. TPO 8. On the facts and circumstances of the Appellant's case and in law the Ld. TPO has not given sufficient and reasonable opportunity to the appellant to comply t given sufficient and reasonable opportunity to the appellant to comply t given sufficient and reasonable opportunity to the appellant to comply with the notice of 180 and therefore the adjustments made by the TPO are with the notice of 180 and therefore the adjustments made by the TPO are with the notice of 180 and therefore the adjustments made by the TPO are contrary to facts and are baseless. contrary to facts and are baseless. 9. On the facts and circumstances of the Appellant's case and in law the Ld. 9. On the facts and circumstances of the Appellant's case and in law the L 9. On the facts and circumstances of the Appellant's case and in law the L Assessing Officer erred in making disallowance as per Para 11 of the impugned Assessing Officer erred in making disallowance as per Para 11 of the impugned Assessing Officer erred in making disallowance as per Para 11 of the impugned order, a sum of Rs.4,17,22,865/ order, a sum of Rs.4,17,22,865/- being Arm's length adjustments made by the being Arm's length adjustments made by the Ld. TPO u/s 92CA(3) of the Income Tax Act 1961 on account of purchase of raw Ld. TPO u/s 92CA(3) of the Income Tax Act 1961 on account of purchase of raw Ld. TPO u/s 92CA(3) of the Income Tax Act 1961 on account of purchase of raw materials and job work materials and job work charges paid to Exon Laboratories Pvt. Ltd., as per the charges paid to Exon Laboratories Pvt. Ltd., as per the ground/s contained in the assessment or otherwise. ground/s contained in the assessment or otherwise. 10. On the facts and circumstances of the Appellant's case and in law the Ld. 10. On the facts and circumstances of the Appellant's case and in law the Ld. 10. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in making disallowance as per Para 11 of the impugned Assessing Officer erred in making disallowance as per Para 11 of the i Assessing Officer erred in making disallowance as per Para 11 of the i order, a sum of Rs. 60,48,481/ order, a sum of Rs. 60,48,481/-being Arm's length adjustments made by the Ld. being Arm's length adjustments made by the Ld. TPO u/s 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to TPO u/s 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to TPO u/s 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to its manufacturing unit at Dehradun (Unit its manufacturing unit at Dehradun (Unit-1) eligible for deduction u/s 80IC, 1) eligible for deduction u/s 80IC, Pithampur unit (SEZ) eligible for deduction u/s 10AA, Sikkim unit eligible for t (SEZ) eligible for deduction u/s 10AA, Sikkim unit eligible for t (SEZ) eligible for deduction u/s 10AA, Sikkim unit eligible for deduction u/s. 80IE and Silvassa unit eligible for deduction u/s. 80IB, as per the deduction u/s. 80IE and Silvassa unit eligible for deduction u/s. 80IB, as per the deduction u/s. 80IE and Silvassa unit eligible for deduction u/s. 80IB, as per the ground/s contained in the assessment or otherwise ground/s contained in the assessment or otherwise 11. On the facts and circumstances of the Appellant's cas 11. On the facts and circumstances of the Appellant's case and in law the Ld. e and in law the Ld. Assessing Officer/TPO erred in rejecting Appellant's claim about applicability of Assessing Officer/TPO erred in rejecting Appellant's claim about applicability of Assessing Officer/TPO erred in rejecting Appellant's claim about applicability of TNMM as the most appropriate method for determining Arm's length price; and TNMM as the most appropriate method for determining Arm's length price; and TNMM as the most appropriate method for determining Arm's length price; and instead arbitrarily adopting CUP for computing arms's length price. The Appellant instead arbitrarily adopting CUP for computing arms's length price. The Appel instead arbitrarily adopting CUP for computing arms's length price. The Appel

IPCA Laboratories Limited, IPCA Laboratories Limited, 5 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

submits that considering the nature of business activities of Appellant and the submits that considering the nature of business activities of Appellant and the submits that considering the nature of business activities of Appellant and the validity of its claim for applicability of TNMM, the aforesaid Arm's length validity of its claim for applicability of TNMM, the aforesaid Arm's length validity of its claim for applicability of TNMM, the aforesaid Arm's length adjustment made by the TPO and confirmed by the AO, by considering CUP as adjustment made by the TPO and confirmed by the AO, by considering CUP as adjustment made by the TPO and confirmed by the AO, by considering CUP as most appropriate meth most appropriate method, be held to be unsustainable and be deleted. od, be held to be unsustainable and be deleted. 12. On the facts and circumstances of the Appellant's case and in law the 12. On the facts and circumstances of the Appellant's case and in law the 12. On the facts and circumstances of the Appellant's case and in law the appellant submits that the comparatives on which the TPO relied for making appellant submits that the comparatives on which the TPO relied for making appellant submits that the comparatives on which the TPO relied for making adjustments for the purpose of determining ALP are based on un-comparable adjustments for the purpose of determining ALP are based on adjustments for the purpose of determining ALP are based on situations and markets which have an impact on the pricing. Therefore the situations and markets which have an impact on the pricing. Therefore the situations and markets which have an impact on the pricing. Therefore the appellant has rightly followed the TNMM method for the purpose of determining appellant has rightly followed the TNMM method for the purpose of determining appellant has rightly followed the TNMM method for the purpose of determining ALP. 13. On the facts and circumstances of the Appellant's case and in law the Ld. 13. On the facts and circumstances of the Appellant's case and in law the Ld. 13. On the facts and circumstances of the Appellant's case and in law the Ld. TPO erred in considering the monthly average of rate of products sold by the red in considering the monthly average of rate of products sold by the red in considering the monthly average of rate of products sold by the appellant to non-related parties for the purpose of comparing ALP of inter unit related parties for the purpose of comparing ALP of inter unit related parties for the purpose of comparing ALP of inter unit transfers as against annual average rate of similar products. The appellant transfers as against annual average rate of similar products. The appellant transfers as against annual average rate of similar products. The appellant submits that these captive ma submits that these captive materials are used on regular basis in the production terials are used on regular basis in the production of the appellant's units while sale to non of the appellant's units while sale to non-related parties are not on regular basis. related parties are not on regular basis. Therefore the appellant had rightly considered monthly average rates. Therefore the appellant had rightly considered monthly average rates. Therefore the appellant had rightly considered monthly average rates. Other grounds 14. On the facts and circumstances 14. On the facts and circumstances of the Appellant's case and in law the Ld. of the Appellant's case and in law the Ld. Assessing Officer erred in making disallowance of Rs. 36,24,176/- being scrap Assessing Officer erred in making disallowance of Rs. 36,24,176/ Assessing Officer erred in making disallowance of Rs. 36,24,176/ sales while allowing the deduction to se appellant u/s 801B/801C/801E of the sales while allowing the deduction to se appellant u/s 801B/801C/801E of the sales while allowing the deduction to se appellant u/s 801B/801C/801E of the Income Tax Act, 1961, as per the ground/s contained in the assessment or Income Tax Act, 1961, as per the ground/s contained in the Income Tax Act, 1961, as per the ground/s contained in the otherwise. 15. On the facts and circumstances of the Appellant's case and in law the Ld. 15. On the facts and circumstances of the Appellant's case and in law the Ld. 15. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in rejecting the revised computation of income filed by the Assessing Officer erred in rejecting the revised computation of income filed by the Assessing Officer erred in rejecting the revised computation of income filed by the appellant during the assessment proceedings, as per the ground/s contained in appellant during the assessment proceedings, as per the ground/s con appellant during the assessment proceedings, as per the ground/s con the assessment or otherwise. the assessment or otherwise. 16. On the facts and circumstances of the Appellant's case and in law the Ld. 16. On the facts and circumstances of the Appellant's case and in law the Ld. 16. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in not reducing the excise duty refund amounting to Rs. Assessing Officer erred in not reducing the excise duty refund amounting to Rs. Assessing Officer erred in not reducing the excise duty refund amounting to Rs. 11,44,53,373/-while calculating the book profits as per pro while calculating the book profits as per provisions of section while calculating the book profits as per pro 115JB being capital in nature, as per the ground/s contained in the assessment 115JB being capital in nature, as per the ground/s contained in the assessment 115JB being capital in nature, as per the ground/s contained in the assessment or otherwise.” 3.1. The grounds raised by the Revenue are reproduced as under: . The grounds raised by the Revenue are reproduced as under: . The grounds raised by the Revenue are reproduced as under:-

IPCA Laboratories Limited, IPCA Laboratories Limited, 6 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

ground/s contained in the assessment oro otherwise. Over invoicing and ground/s contained in the assessment oro otherwise. Over invoicing and ground/s contained in the assessment oro otherwise. Over invoicing and unexplained purchases. unexplained purchases. 2. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has 2. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has 2. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in making disallowance of Rs.1,40,35,340/ erred in making disallowance of Rs.1,40,35,340/- on account of alleged over on account of alleged over invoicing of Raw Material, as per the ground/s contained in the assessment or invoicing of Raw Material, as per the ground/s contained in the assessment or invoicing of Raw Material, as per the ground/s contained in the assessment or otherwise. Transfer Pricing Adjustments. Pricing Adjustments. 3. Whether on the facts and circumstances of the Appellant's case and in law the 3. Whether on the facts and circumstances of the Appellant's case and in law the 3. Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in making disallowance of Rs. 36,24,176/- being scrap sales Ld. CIT(A) erred in making disallowance of Rs. 36,24,176/ Ld. CIT(A) erred in making disallowance of Rs. 36,24,176/ while allowing the deduction to the appellant u/s 80IB/80IC/80IE of the Income while allowing the deduction to the appellant u/s 80IB/80IC/80IE of the Incom while allowing the deduction to the appellant u/s 80IB/80IC/80IE of the Incom Tax Act, 1961, as per the ground/s contained in the assessment or otherwise. Tax Act, 1961, as per the ground/s contained in the assessment or otherwise. Tax Act, 1961, as per the ground/s contained in the assessment or otherwise. 4. Whether on the facts and circumstances of the Appellant's case and in law the 4. Whether on the facts and circumstances of the Appellant's case and in law the 4. Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in not reducing the excise duty refund amounting to Rs. Ld. CIT(A) erred in not reducing the excise duty refund amounting to Rs. Ld. CIT(A) erred in not reducing the excise duty refund amounting to Rs. 11,44,53,373/-while while calculating the book profits as per provisions of section calculating the book profits as per provisions of section 115JB being capital in nature, as per the ground/s contained in the assessment 115JB being capital in nature, as per the ground/s contained in the assessment 115JB being capital in nature, as per the ground/s contained in the assessment or otherwise." Grounds of appeal on TP adjustments: Grounds of appeal on TP adjustments:

5.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 5.1 "Whether on facts and circumstances of the case and in law, the 5.1 "Whether on facts and circumstances of the case and in law, the justified deleting the transfer pricing adjustment (SDT) done by the TPO justified deleting the transfer pricing adjustment (SDT) done by the TPO justified deleting the transfer pricing adjustment (SDT) done by the TPO Rs.4,17,22,865/- made on account of purchase of raw material and job work made on account of purchase of raw material and job work made on account of purchase of raw material and job work charges paid? "5.2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is "5.2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is "5.2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment (SDT) done by the TPO without justified deleting the transfer pricing adjustment (SDT) done by the TPO without justified deleting the transfer pricing adjustment (SDT) done by the TPO without appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the assesseе?" "5.3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) "5.3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) "5.3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO in determining Arm's Length Price jecting the adjustment done by TPO in determining Arm's Length Price jecting the adjustment done by TPO in determining Arm's Length Price (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the same has been done by the TPO in eartier years and has been upheld by Ld same has been done by the TPO in eartier years and has been upheld by Ld same has been done by the TPO in eartier years and has been upheld by Ld CIT(A) in its orders for AY 2008 CIT(A) in its orders for AY 2008-09 to AY 2011-12? 6.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 6.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 6.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustme (SDT) of Rs.36,92,032/- made on justified deleting the transfer pricing adjustme (SDT) of Rs.36,92,032/ justified deleting the transfer pricing adjustme (SDT) of Rs.36,92,032/ Inter unit transfer?« 6.2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 6.2. Whether on facts and circumstances of the case and in 6.2. Whether on facts and circumstances of the case and in erred in rejecting the adjustment done by TPO wherein the TPO has done the erred in rejecting the adjustment done by TPO wherein the TPO has done the erred in rejecting the adjustment done by TPO wherein the TPO has done the benchmarking of the above transactions and arrived at the ALP adjustment for benchmarking of the above transactions and arrived at the ALP adjustment for benchmarking of the above transactions and arrived at the ALP adjustment for

IPCA Laboratories Limited, IPCA Laboratories Limited, 7 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the Inter unit transfers as per provisions of section 92C of the Income Tax Act the Inter unit transfers as per provisions of section 92C of the Income Tax Act the Inter unit transfers as per provisions of section 92C of the Income Tax Act 1961?" 6.3. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 6.3. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 6.3. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the tolerance limit of 3% benefit is generally erred in not appreciating the fact that the tolerance limit of 3% benefit is generally erred in not appreciating the fact that the tolerance limit of 3% benefit is generally applied on an aggregate basis* (i.e., after considering the net effect of all applied on an aggregate basis* (i.e., after considering the net effect of all applied on an aggregate basis* (i.e., after considering the net effect of all transactions of the same category) rather than item tions of the same category) rather than item-wise as has been held by wise as has been held by Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. (2012)?" 4. Briefly stated, the facts giving rise to the present appeals are that Briefly stated, the facts giving rise to the present appeals are that Briefly stated, the facts giving rise to the present appeals are that the assessee-company is engaged company is engaged in the business of manufacturing, in the business of manufacturing, marketing and research of pharmaceutical products. For the year marketing and research of pharmaceutical products. For the year marketing and research of pharmaceutical products. For the year under consideration, the assessee filed its return of income on under consideration, the assessee filed its return of income on under consideration, the assessee filed its return of income on 29.11.2013 declaring a total income of 29.11.2013 declaring a total income of ₹1,83,50,95,960/ 1,83,50,95,960/- under the normal provisions of the In normal provisions of the Income-tax Act, 1961 (hereinafter referred tax Act, 1961 (hereinafter referred to as “the Act”) and book profit of to as “the Act”) and book profit of ₹4,62,65,58,940/ 4,62,65,58,940/- under section 115JB of the Act.

4.1 Subsequently, a search and seizure operation under section Subsequently, a search and seizure operation under section Subsequently, a search and seizure operation under section 132 of the Act was conducted in the case of the assessee on 132 of the Act was conducted in the case of the assessee on 132 of the Act was conducted in the case of the assessee on 23.12.2014. Pursuant thereto, a notice under section 153A of the 2014. Pursuant thereto, a notice under section 153A of the 2014. Pursuant thereto, a notice under section 153A of the Act dated 04.05.2016 was issued requiring the assessee to furnish Act dated 04.05.2016 was issued requiring the assessee to furnish Act dated 04.05.2016 was issued requiring the assessee to furnish its return of income. In compliance with the said notice, the its return of income. In compliance with the said notice, the its return of income. In compliance with the said notice, the assessee filed its return declaring the same income as originally assessee filed its return declaring the same income as originally assessee filed its return declaring the same income as originally returned. Thereafter, statutory notices were issued and assessment urned. Thereafter, statutory notices were issued and assessment urned. Thereafter, statutory notices were issued and assessment proceedings were carried out. The assessment came to be completed proceedings were carried out. The assessment came to be completed proceedings were carried out. The assessment came to be completed vide order dated 30.01.2018 passed under section 153A read with vide order dated 30.01.2018 passed under section 153A read with vide order dated 30.01.2018 passed under section 153A read with section 143(3) of the Act, wherein the Assessing Officer made section 143(3) of the Act, wherein the Assessing Officer made section 143(3) of the Act, wherein the Assessing Officer made

IPCA Laboratories Limited, IPCA Laboratories Limited, 8 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

certain additions and disallowances to the returned income. certain additions and disallowances to the returned income. certain additions and disallowances to the returned income. Aggrieved by the assessment order, the assessee preferred an Aggrieved by the assessment order, the assessee preferred an Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A), who granted partial relief. Being appeal before the learned CIT(A), who granted partial relief. Being appeal before the learned CIT(A), who granted partial relief. Being dissatisfied with the findings of the learned CIT(A) to the extent dissatisfied with the findings of the learned CIT(A) to the extent dissatisfied with the findings of the learned CIT(A) to the extent adverse to them, both the assessee and the Revenue have preferred adverse to them, both the assessee and the Revenue have preferred adverse to them, both the assessee and the Revenue have preferred the present cross-appeals before the Tribunal, raising the grounds appeals before the Tribunal, raising the grounds appeals before the Tribunal, raising the grounds reproduced hereinabove for our adjudication. reproduced hereinabove for our adjudication.

IPCA Laboratories Limited, IPCA Laboratories Limited, 9 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

provisions of the Act (hereinafter referred to as “eligible units”) and provisions of the Act (hereinafter referred to as “eligible units”) and provisions of the Act (hereinafter referred to as “eligible units”) and the units not entitled to such deductions (hereinafter referred to as e units not entitled to such deductions (hereinafter referred to as e units not entitled to such deductions (hereinafter referred to as “non-eligible units”) in the ratio of their respective turnovers. Since eligible units”) in the ratio of their respective turnovers. Since eligible units”) in the ratio of their respective turnovers. Since any any any disallowance disallowance disallowance attributable attributable attributable to to to the the the eligible eligible eligible units units units would would would correspondingly enhance the profits of such units and result in a correspondingly enhance the profits of such units and resu correspondingly enhance the profits of such units and resu consequential increase in the deduction available under the Act, the consequential increase in the deduction available under the Act, the consequential increase in the deduction available under the Act, the Assessing Officer did not make any effective addition in respect of Assessing Officer did not make any effective addition in respect of Assessing Officer did not make any effective addition in respect of the amount allocable to the eligible units. Consequently, only the the amount allocable to the eligible units. Consequently, only the the amount allocable to the eligible units. Consequently, only the portion attributable to the non portion attributable to the non-eligible units, amounting to ts, amounting to ₹10,69,34,270/-, was ultimately added to the total income of the , was ultimately added to the total income of the , was ultimately added to the total income of the assessee. In appeal, the learned CIT(A), following a head-wise assessee. In appeal, the learned CIT(A), following a head assessee. In appeal, the learned CIT(A), following a head examination of the impugned expenditure, held that only the examination of the impugned expenditure, held that only the examination of the impugned expenditure, held that only the expenditure incurred towards travel and hotel facil expenditure incurred towards travel and hotel facilities provided to ities provided to medical practitioners was liable to be disallowed. The learned CIT(A) medical practitioners was liable to be disallowed. The learned CIT(A) medical practitioners was liable to be disallowed. The learned CIT(A) accordingly restricted the disallowance to such expenditure and accordingly restricted the disallowance to such expenditure and accordingly restricted the disallowance to such expenditure and thereafter apportioned the same between the eligible and non- thereafter apportioned the same between the eligible and non thereafter apportioned the same between the eligible and non eligible units in the ratio of their respec eligible units in the ratio of their respective turnovers. Ultimately, tive turnovers. Ultimately, the disallowance attributable to the non the disallowance attributable to the non-eligible units alone was eligible units alone was sustained. Being aggrieved, the assessee has challenged, through sustained. Being aggrieved, the assessee has challenged, through sustained. Being aggrieved, the assessee has challenged, through Ground Nos. 2 and 3, the sustenance of the disallowance relatable Ground Nos. 2 and 3, the sustenance of the disallowance relatable Ground Nos. 2 and 3, the sustenance of the disallowance relatable to travel and hotel expenses. T to travel and hotel expenses. The Revenue, on the other hand, is he Revenue, on the other hand, is aggrieved by the relief granted by the learned CIT(A) in respect of aggrieved by the relief granted by the learned CIT(A) in respect of aggrieved by the relief granted by the learned CIT(A) in respect of the remaining categories of expenditure and has assailed the same the remaining categories of expenditure and has assailed the same the remaining categories of expenditure and has assailed the same by way of Ground No. 1 of its appeal. by way of Ground No. 1 of its appeal.

IPCA Laboratories Limited, IPCA Laboratories Limited, 10 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

7.1. The brief facts relevant to the issue under c The brief facts relevant to the issue under consideration are onsideration are that, during the course of the search and post that, during the course of the search and post-search proceedings, search proceedings, the Investigation Wing undertook an examination of the expenditure the Investigation Wing undertook an examination of the expenditure the Investigation Wing undertook an examination of the expenditure claimed by the assessee under the head “Sales Promotion and claimed by the assessee under the head “Sales Promotion and claimed by the assessee under the head “Sales Promotion and Marketing Expenses”, with particular emphasis Marketing Expenses”, with particular emphasis on expenditure allegedly incurred in relation to doctors and medical practitioners. allegedly incurred in relation to doctors and medical practitioners. allegedly incurred in relation to doctors and medical practitioners.

7.2 In the assessment order, the Assessing Officer observed that In the assessment order, the Assessing Officer observed that In the assessment order, the Assessing Officer observed that statements of Shri Sharwan Beli, an employee of the assessee- statements of Shri Sharwan Beli, an employee of the assessee statements of Shri Sharwan Beli, an employee of the assessee company, and Shri Premchand Godha, Director of the assessee- company, and Shri Premchand Godha, Director o company, and Shri Premchand Godha, Director o company, were recorded under section 132(4) of the Income-tax Act, company, were recorded under section 132(4) of the Income company, were recorded under section 132(4) of the Income 1961 during the course of the search proceedings. According to the 1961 during the course of the search proceedings. According to the 1961 during the course of the search proceedings. According to the Assessing Officer, the said statements indicated that certain Assessing Officer, the said statements indicated that certain Assessing Officer, the said statements indicated that certain categories of expenditure had a direct nexus categories of expenditure had a direct nexus with doctors and with doctors and medical practitioners and were allegedly incurred in contravention medical practitioners and were allegedly incurred in contravention medical practitioners and were allegedly incurred in contravention of (i) the Medical Council of India (Professional Conduct, Etiquette of (i) the Medical Council of India (Professional Conduct, Etiquette of (i) the Medical Council of India (Professional Conduct, Etiquette and Ethics) Regulations, 2002, (ii) the MCI Notification dated and Ethics) Regulations, 2002, (ii) the MCI Notification dated and Ethics) Regulations, 2002, (ii) the MCI Notification dated 10.12.2009, and (iii) CBDT Circular No. 10.12.2009, and (iii) CBDT Circular No. 5/2012 dated 01.08.2012. 5/2012 dated 01.08.2012. The Assessing Officer placed particular reliance upon Question No. The Assessing Officer placed particular reliance upon Question No. The Assessing Officer placed particular reliance upon Question No. 16 of the statement of Shri Sharwan Beli, wherein a detailed head- 16 of the statement of Shri Sharwan Beli, wherein a detailed head 16 of the statement of Shri Sharwan Beli, wherein a detailed head wise break-up of expenditure allegedly incurred for the benefit of up of expenditure allegedly incurred for the benefit of up of expenditure allegedly incurred for the benefit of doctors and medical practitione doctors and medical practitioners was furnished. On the basis of rs was furnished. On the basis of the said statement, the Assessing Officer inferred that the assessee the said statement, the Assessing Officer inferred that the assessee the said statement, the Assessing Officer inferred that the assessee

IPCA Laboratories Limited, IPCA Laboratories Limited, 11 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

had admitted the inadmissibility of such expenditure under section had admitted the inadmissibility of such expenditure under section had admitted the inadmissibility of such expenditure under section 37(1) of the Act.

7.3 Proceeding on the aforesaid premise, the Assessing Officer Proceeding on the aforesaid premise, the Assessing Officer Proceeding on the aforesaid premise, the Assessing Officer treated the statements recorded during the search as possessing treated the statements recorded during the search as possessing treated the statements recorded during the search as possessing significant evidentiary value and concluded that the impugned significant evidentiary value and concluded that the impugned significant evidentiary value and concluded that the impugned expenditure represented prohibited “freebies” extended to doctors expenditure represented prohibited “freebies” extended to doctors expenditure represented prohibited “freebies” extended to doctors and medical practitioners. Consequently, invoking Explanation 1 to and medical practitioners. Consequently, invoking Explanation 1 and medical practitioners. Consequently, invoking Explanation 1 section 37(1) of the Act, he held that the expenditure was not section 37(1) of the Act, he held that the expenditure was not section 37(1) of the Act, he held that the expenditure was not allowable as a deduction. allowable as a deduction.

7.4 The Assessing Officer further interpreted the MCI Regulations The Assessing Officer further interpreted the MCI Regulations The Assessing Officer further interpreted the MCI Regulations and CBDT Circular No. 5/2012 to mean that pharmaceutical and CBDT Circular No. 5/2012 to mean that pharmaceutical and CBDT Circular No. 5/2012 to mean that pharmaceutical companies were prohibited from extending companies were prohibited from extending gifts, travel facilities, gifts, travel facilities, hospitality, sponsorships and other similar benefits to medical hospitality, sponsorships and other similar benefits to medical hospitality, sponsorships and other similar benefits to medical practitioners. Applying this interpretation, he disallowed various practitioners. Applying this interpretation, he disallowed various practitioners. Applying this interpretation, he disallowed various categories of expenditure claimed by the assessee, inter alia, categories of expenditure claimed by the assessee, inter alia, categories of expenditure claimed by the assessee, inter alia, expenditure on Patient Education/Det expenditure on Patient Education/Detection Camps, Doctors’ ection Camps, Doctors’ Meetings and Medical Awareness Programmes, Participation in Meetings and Medical Awareness Programmes, Participation in Meetings and Medical Awareness Programmes, Participation in Symposiums and Exhibition Stalls, Sponsorship Expenses, Brand Symposiums and Exhibition Stalls, Sponsorship Expenses, Brand Symposiums and Exhibition Stalls, Sponsorship Expenses, Brand Recall Purchases (Local and Imported), Other Sales Promotion Recall Purchases (Local and Imported), Other Sales Promotion Recall Purchases (Local and Imported), Other Sales Promotion Expenses, Camp Expenses, Journals and Periodicals, Taxi Hire Expenses, Camp Expenses, Journals and Periodicals, Expenses, Camp Expenses, Journals and Periodicals, Charges and Field Printing Expenses. Charges and Field Printing Expenses.

IPCA Laboratories Limited, IPCA Laboratories Limited, 12 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

7.5 On the basis of the above reasoning, the Assessing Officer On the basis of the above reasoning, the Assessing Officer On the basis of the above reasoning, the Assessing Officer quantified the aggregate disallowance at ₹19,23,79,082/ quantified the aggregate disallowance at 19,23,79,082/- for Assessment Year 2013 Assessment Year 2013-14. Thereafter, a proportionate amount of 14. Thereafter, a proportionate amount of ₹8,54,44,812/-, attri , attributable to units eligible for deduction under butable to units eligible for deduction under sections 80-IB/80-IC of the Act, was excluded from the effective IC of the Act, was excluded from the effective IC of the Act, was excluded from the effective addition, as such disallowance would merely result in a addition, as such disallowance would merely result in a addition, as such disallowance would merely result in a corresponding enhancement of the eligible deduction. Accordingly, corresponding enhancement of the eligible deduction. Accordingly, corresponding enhancement of the eligible deduction. Accordingly, the the Assessing Assessing Officer Officer u ultimately ltimately made made a a net net addition addition of of ₹10,69,34,270/- to the total income of the assessee under section to the total income of the assessee under section to the total income of the assessee under section 37(1) of the Act.

7.6 In the first appellate order, ld. CIT(A) observed that identical appellate order, ld. CIT(A) observed that identical appellate order, ld. CIT(A) observed that identical disallowances arising from the same search action in assessee’s disallowances arising from the same search action in assessee’s disallowances arising from the same search action in assessee’s own case for AYs 2009 se for AYs 2009-10 to 2014-15 had already been adjudicated 15 had already been adjudicated by the ITAT, Mumbai vide order dated 08.04.2024 in ITA Nos. 879 by the ITAT, Mumbai vide order dated 08.04.2024 in ITA Nos. 879 by the ITAT, Mumbai vide order dated 08.04.2024 in ITA Nos. 879 to 883/M/2021. The ld. CIT (A) noted that the facts involved during to 883/M/2021. The ld. CIT (A) noted that the facts involved during to 883/M/2021. The ld. CIT (A) noted that the facts involved during the year under consideration were identical to the facts before the the year under consideration were identical to the facts before the year under consideration were identical to the facts before Tribunal in earlier years and therefore the findings of the Tribunal Tribunal in earlier years and therefore the findings of the Tribunal Tribunal in earlier years and therefore the findings of the Tribunal were directly applicable to the present year. were directly applicable to the present year. The ld. CIT(A) further The ld. CIT(A) further observed that the ITAT, while considering the judgment of the observed that the ITAT, while considering the judgment of the observed that the ITAT, while considering the judgment of the Hon’ble Supreme Court in Apex Laboratories Ltd. v. DCIT (supra), Hon’ble Supreme Court in Apex Laboratories Ltd. v. D Hon’ble Supreme Court in Apex Laboratories Ltd. v. D had held that only expenditure in the nature of gifts, travel had held that only expenditure in the nature of gifts, travel had held that only expenditure in the nature of gifts, travel facilities, hospitality and monetary grants provided to doctors would facilities, hospitality and monetary grants provided to doctors would facilities, hospitality and monetary grants provided to doctors would fall within the ambit of prohibited freebies under Regulation 6.8.1 of fall within the ambit of prohibited freebies under Regulation 6.8.1 of fall within the ambit of prohibited freebies under Regulation 6.8.1 of

IPCA Laboratories Limited, IPCA Laboratories Limited, 13 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the MCI Regulations. the MCI Regulations. The ld CIT(A) in its order further stated that s order further stated that the Tribunal had also taken note of the MCI Notification dated the Tribunal had also taken note of the MCI Notification dated the Tribunal had also taken note of the MCI Notification dated 01.02.2016 clarifying that low value brand recall items below 01.02.2016 clarifying that low value brand recall items below 01.02.2016 clarifying that low value brand recall items below Rs.1,000/- would not fall within the mischief of the MCI would not fall within the mischief of the MCI would not fall within the mischief of the MCI Regulations. The Ld. CIT(A) also noted that th The Ld. CIT(A) also noted that the Tribunal had e Tribunal had accepted the assessee’s contention that being a pharmaceutical accepted the assessee’s contention that being a pharmaceutical accepted the assessee’s contention that being a pharmaceutical company, the assessee was prohibited from advertising its products company, the assessee was prohibited from advertising its products company, the assessee was prohibited from advertising its products through conventional media and therefore was required to create through conventional media and therefore was required to create through conventional media and therefore was required to create awareness through conferences, exhibitions, sem awareness through conferences, exhibitions, seminars, camps and inars, camps and awareness programmes. Accordingly, expenditure incurred for awareness programmes. Accordingly, expenditure incurred for awareness programmes. Accordingly, expenditure incurred for organizing such activities was held to be in the nature of legitimate organizing such activities was held to be in the nature of legitimate organizing such activities was held to be in the nature of legitimate business promotion expenditure and outside the scope of CBDT business promotion expenditure and outside the scope of CBDT business promotion expenditure and outside the scope of CBDT Circular No. 5/2012. Circular No. 5/2012. Further, ld. CIT(A) observed that journals and d that journals and periodicals distributed for dissemination of medical knowledge and periodicals distributed for dissemination of medical knowledge and periodicals distributed for dissemination of medical knowledge and product awareness could not be treated as gifts or freebies to product awareness could not be treated as gifts or freebies to product awareness could not be treated as gifts or freebies to doctors. Similarly, brand recall items such as pens, calendars, pen doctors. Similarly, brand recall items such as pens, calendars, pen doctors. Similarly, brand recall items such as pens, calendars, pen stands, etc. of small value were held stands, etc. of small value were held to be allowable business to be allowable business expenditure and not prohibited freebies under the MCI Regulations. expenditure and not prohibited freebies under the MCI Regulations. expenditure and not prohibited freebies under the MCI Regulations.

7.7 However, the Ld. CIT(A) noted that expenditure incurred However, the Ld. CIT(A) noted that expenditure incurred However, the Ld. CIT(A) noted that expenditure incurred towards travel facilities, hotel accommodation and similar direct towards travel facilities, hotel accommodation and similar direct towards travel facilities, hotel accommodation and similar direct benefits provided to doctors would be benefits provided to doctors would be hit by the MCI Regulations hit by the MCI Regulations and therefore liable for disallowance under section 37(1) of the Act. and therefore liable for disallowance under section 37(1) of the Act. and therefore liable for disallowance under section 37(1) of the Act. Following the findings of Following the findings of the ITAT in assessee’s own case for earlier in assessee’s own case for earlier

IPCA Laboratories Limited, IPCA Laboratories Limited, 14 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

years, the ld. CIT(A) examined the allowability of expenditure head- years, the ld. CIT(A) examined the allowability of expenditure head years, the ld. CIT(A) examined the allowability of expenditure head wise and granted relief/disallowance accordingly. relief/disallowance accordingly. relief/disallowance accordingly. The relevant finding of the Ld. CIT(A) is reproduced as under: finding of the Ld. CIT(A) is reproduced as under:-

“8.5. I have also considered that the decision of Hon’ble Mumbai Tribunal in the 8.5. I have also considered that the decision of Hon’ble Mumbai Tribunal in the 8.5. I have also considered that the decision of Hon’ble Mumbai Tribunal in the case of the assessee for other assessment years of the block period involving case of the assessee for other assessment years of the block period involving case of the assessee for other assessment years of the block period involving identical issue. In the above order, ITAT has analysed the MCI circular along with identical issue. In the above order, ITAT has analysed the MCI circular along with identical issue. In the above order, ITAT has analysed the MCI circular along with the decision of Apex Court in the case of Apex Laboratories Ltd. wherein it has the decision of Apex Court in the case of Apex Laboratories Ltd. wherein it has the decision of Apex Court in the case of Apex Laboratories Ltd. wherein it has been held that the Regulation 6.8.1 prescribes that a medical practitioner is been held that the Regulation 6.8.1 prescribes that a medical practitioner is been held that the Regulation 6.8.1 prescribes that a medical practitioner is refrained from availing, (a) gifts, (b) travel facilities, (c) hospitality and (d) cash or availing, (a) gifts, (b) travel facilities, (c) hospitality and (d) cash or availing, (a) gifts, (b) travel facilities, (c) hospitality and (d) cash or monetary grants from pharmaceutical companies. ITAT also noted that the MCI monetary grants from pharmaceutical companies. ITAT also noted that the MCI monetary grants from pharmaceutical companies. ITAT also noted that the MCI vide Notification dated 01.02.2016 has clarified that, where any gift items or vide Notification dated 01.02.2016 has clarified that, where any gift items or vide Notification dated 01.02.2016 has clarified that, where any gift items or courtesies having value o courtesies having value of less than Rs.1000/- is provided, then such would not is provided, then such would not fall within the mischief of MCI Regulations, 2009. ITAT also accepted the assesse fall within the mischief of MCI Regulations, 2009. ITAT also accepted the assesse fall within the mischief of MCI Regulations, 2009. ITAT also accepted the assesse submission that the assessee company is entitled to create awareness of its submission that the assessee company is entitled to create awareness of its submission that the assessee company is entitled to create awareness of its products by participating in exhibitions an products by participating in exhibitions and organizing conferences and therefore d organizing conferences and therefore the expenditure incurred for organizing the same would not fall within the ambit the expenditure incurred for organizing the same would not fall within the ambit the expenditure incurred for organizing the same would not fall within the ambit of CBDT Circular No.5/2012 read with MCI Regulations 2009. Likewise, any of CBDT Circular No.5/2012 read with MCI Regulations 2009. Likewise, any of CBDT Circular No.5/2012 read with MCI Regulations 2009. Likewise, any journals or periodicals printed and shared with customers, distributors or medical journals or periodicals printed and shared with customers, dist journals or periodicals printed and shared with customers, dist practitioners to make them aware about the research behind manufacture of any practitioners to make them aware about the research behind manufacture of any practitioners to make them aware about the research behind manufacture of any new medication or its uses or effects in any particular disease also cannot be new medication or its uses or effects in any particular disease also cannot be new medication or its uses or effects in any particular disease also cannot be termed as ‘gifts’ given to doctors. However, the expenses, if any, incurred on termed as ‘gifts’ given to doctors. However, the expenses, if any, incurred on termed as ‘gifts’ given to doctors. However, the expenses, if any, incurred on travel and hotel accommodation of the doctors to attend these exhibitions or travel and hotel accommodation of the doctors to attend these exhibitions or travel and hotel accommodation of the doctors to attend these exhibitions or conferences would however be hit by the rigors of MCI Regulations, 2009. conferences would however be hit by the rigors of MCI Regulations, 2009. conferences would however be hit by the rigors of MCI Regulations, 2009. 8.6 Having discussed as above, it is noted that each head wise expenses have 8.6 Having discussed as above, it is noted that each head wise expenses have 8.6 Having discussed as above, it is noted that each head wise expenses have been considered by ITAT in th been considered by ITAT in their order. It is noted that the nature and head of eir order. It is noted that the nature and head of expense incurred by the assesse in the current year have remained same as expense incurred by the assesse in the current year have remained same as expense incurred by the assesse in the current year have remained same as compared to the earlier period dealt with by the ITAT. I have gone through the compared to the earlier period dealt with by the ITAT. I have gone through the compared to the earlier period dealt with by the ITAT. I have gone through the submission of the assesse and order of ITAT. I rely submission of the assesse and order of ITAT. I rely upon the findings and upon the findings and decision of ITAT and do not find any reason to deviate from the same. The decision of ITAT and do not find any reason to deviate from the same. The decision of ITAT and do not find any reason to deviate from the same. The decision for each head wise expense is tabulated as under : decision for each head wise expense is tabulated as under :- Sr. Account Head Amount of Decision No. Disallowance 1. Patient Patient Education Education 12,32,10,338/- Relying upon the ITAT order at para Relying upon the ITAT order at para /Detection Camp 11.19, AO is directed to delete the 11.19, AO is directed to delete the Camp expenses 46,16,269 disallowance.

IPCA Laboratories Limited, IPCA Laboratories Limited, 15 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Awareness 11.22, the registration / conference 11.22, the registration / conference expenses is directed to be allowed directed to be allowed whereas whereas expenses expenses incurred incurred on on travel and hotel expense, the same travel and hotel expense, the same have benefitted the doctors and have benefitted the doctors and would fall under the ambit of MCI would fall under the ambit of MCI circular. As per the submission of the As per the submission of the assesse, it has incurred an amount assesse, it has incurred an amount of Rs. 53,08,903/- on account of of Rs. 53,08,903/ hotel and travel expenses which hotel and travel expenses which would not be admissible u/s 37(1) would not be admissible u/s 37(1) of the Act. The same is directed to of the Act. The same is directed to be be confirmed confirmed and and remaining remaining disallowance is deleted. disallowance is deleted. 3. Participation Participation in in 1,86,30,115 Relying upon the ITAT order at para Relying upon the ITAT order at para Symposium Stall 11.21, 11.21, the the payments payments made made to to institutions/trade institutions/trade bodies bodies for for registration registration is is directed directed to to be be allowed whereas expenses incurred allowed whereas expenses incurred on travel and hotel expense, the on travel and hotel expense, the same have benefitted the doctors same have benefitted the doctors and would fall under the ambit of and would fall under the ambit MCI circular. As per the submission of the As per the submission of the assesse, it has incurred an amount assesse, it has incurred an amount of Rs. 1,72,09,115/- on account of of Rs. 1,72,09,115/ hotel and travel expenses which hotel and travel expenses which would not be admissible u/s 37(1) would not be admissible u/s 37(1) of the Act. The same is directed to of the Act. The same is directed to be be confirmed confirmed and and remaining remaining disallowance ce is is deleted. deleted. 4 4 Sponsorship Sponsorship Expenses Expenses 1,41,271 1,41,271 Relying upon the ITAT order at para Relying upon the ITAT order at para 11.20, AO is directed to delete the 11.20, AO is directed to delete the disallowance. 4. Sponsorship Expenses Sponsorship Expenses 1,41,271 Relying upon the ITAT order at Relying upon the ITAT order at para11.20, AO is directed to delete para11.20, AO is directed to delete the disallowance. the disallowance. 5. Brand Brand Recall Recall Local Local 3,74,58,637 Relying upon the ITAT order at para Relying upon the ITAT order at para Purchases 11.23, AO is directed to delete the 11.23, AO is directed to delete the disallowance. 6. Brand Brand Recall Recall Import Import 1,21,97,158 Relying upon the ITAT order at para Relying upon the ITAT order at para Purchases 11.23, AO is directed to delete the 11.23, AO is directed to delete the disallowance.

IPCA Laboratories Limited, IPCA Laboratories Limited, 16 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

7.9 It was further submitted that the statement of Shri Shrawan further submitted that the statement of Shri Shrawan further submitted that the statement of Shri Shrawan Beli, employee of the assessee company, recorded during the course Beli, employee of the assessee company, recorded during the course Beli, employee of the assessee company, recorded during the course

IPCA Laboratories Limited, IPCA Laboratories Limited, 17 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

of search was made under pressure and on the basis of a prima of search was made under pressure and on the basis of a prima of search was made under pressure and on the basis of a prima facie understanding of CBDT Circular No. 5/2012 and the MCI facie understanding of CBDT Circular No. 5/2012 and the MCI facie understanding of CBDT Circular No. 5/2012 and the MCI Regulations. Shri Shrawan Beli was neither directly involved in the ulations. Shri Shrawan Beli was neither directly involved in the ulations. Shri Shrawan Beli was neither directly involved in the execution of the marketing activities nor aware of the exact nature execution of the marketing activities nor aware of the exact nature execution of the marketing activities nor aware of the exact nature and character of the expenditure incurred by the appellant and character of the expenditure incurred by the appellant and character of the expenditure incurred by the appellant company. The statement recorded during search therefore merely company. The statement recorded during search therefore merely company. The statement recorded during search therefore merely reflected an opinion and not any factual admission based on eflected an opinion and not any factual admission based on eflected an opinion and not any factual admission based on verification of records. It was merely presumed that certain verification of records. It was merely presumed that certain verification of records. It was merely presumed that certain expenditure may fall within the ambit of the MCI Regulations expenditure may fall within the ambit of the MCI Regulations expenditure may fall within the ambit of the MCI Regulations without examining the actual purpose and business nature of such without examining the actual purpose and business nature of such without examining the actual purpose and business nature of such expenditure. The statement was not supported by any seized e. The statement was not supported by any seized e. The statement was not supported by any seized material or incriminating evidence and was based only on an material or incriminating evidence and was based only on an material or incriminating evidence and was based only on an incorrect interpretation of law. Accordingly, the same could not incorrect interpretation of law. Accordingly, the same could not incorrect interpretation of law. Accordingly, the same could not have been relied upon by the lower authorities for making the have been relied upon by the lower authorities for making the have been relied upon by the lower authorities for making the impugned disallowanc impugned disallowance.

7.10 It was submitted that the statement recorded during search submitted that the statement recorded during search submitted that the statement recorded during search was subsequently retracted while filing the return of income under was subsequently retracted while filing the return of income under was subsequently retracted while filing the return of income under section 153A of the Act. Upon obtaining proper legal and section 153A of the Act. Upon obtaining proper legal and section 153A of the Act. Upon obtaining proper legal and professional advice after conclusion of the search proceedings, the professional advice after conclusion of the search proceedings, professional advice after conclusion of the search proceedings, assessee realised that the surrender made during search was legally realised that the surrender made during search was legally realised that the surrender made during search was legally unsustainable and based on an incorrect understanding of section unsustainable and based on an incorrect understanding of section unsustainable and based on an incorrect understanding of section 37(1), CBDT Circular No. 5/2012 and the MCI Regulations. The 37(1), CBDT Circular No. 5/2012 and the MCI Regulations. The 37(1), CBDT Circular No. 5/2012 and the MCI Regulations. The appellant therefore withdrew the earlier admission and claimed the appellant therefore withdrew the earlier admission and cla appellant therefore withdrew the earlier admission and cla

IPCA Laboratories Limited, IPCA Laboratories Limited, 18 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

expenditure as allowable business expenditure. Further, on merits expenditure as allowable business expenditure. Further, on merits expenditure as allowable business expenditure. Further, on merits also, the lower authorities have erred in applying the provisions of also, the lower authorities have erred in applying the provisions of also, the lower authorities have erred in applying the provisions of the MCI Regulations and CBDT Circular No. 5/2012 to the entire the MCI Regulations and CBDT Circular No. 5/2012 to the entire the MCI Regulations and CBDT Circular No. 5/2012 to the entire sales and marketing expenditure incurred by the appellant. sales and marketing expenditure incurred by the a sales and marketing expenditure incurred by the a Regulation 6.8.1 of the MCI Regulations prohibits only specified Regulation 6.8.1 of the MCI Regulations prohibits only specified Regulation 6.8.1 of the MCI Regulations prohibits only specified categories such as gifts, travel facilities, hospitality and monetary categories such as gifts, travel facilities, hospitality and monetary categories such as gifts, travel facilities, hospitality and monetary grants provided to medical practitioners and does not prohibit all grants provided to medical practitioners and does not prohibit all grants provided to medical practitioners and does not prohibit all forms of sales promotion expenditure incurre forms of sales promotion expenditure incurred by pharmaceutical d by pharmaceutical companies.

7.11 It was submitted that the assessee It was submitted that the assessee is engaged in the is engaged in the pharmaceutical business and is legally prohibited from advertising pharmaceutical business and is legally prohibited from advertising pharmaceutical business and is legally prohibited from advertising its products through public media such as television, newspapers its products through public media such as television, newspapers its products through public media such as television, newspapers and print advertisements. Conseque and print advertisements. Consequently, the assessee assessee was required to create awareness regarding its products through conferences, to create awareness regarding its products through conferences, to create awareness regarding its products through conferences, seminars, exhibitions, awareness programmes and medical camps. seminars, exhibitions, awareness programmes and medical camps. seminars, exhibitions, awareness programmes and medical camps. The expenditure incurred on such activities is wholly and The expenditure incurred on such activities is wholly and The expenditure incurred on such activities is wholly and exclusively for the purpose of business exclusively for the purpose of business and represents legitimate and represents legitimate business promotion expenditure incurred during the ordinary business promotion expenditure incurred during the ordinary business promotion expenditure incurred during the ordinary course of business.

7.12 It was submitted that expenditure incurred on conferences, submitted that expenditure incurred on conferences, submitted that expenditure incurred on conferences, seminars, seminars, seminars, awareness awareness awareness programmes programmes programmes and and and exhibitions exhibitions exhibitions was was was for for for dissemination of medical know dissemination of medical knowledge, product awareness and ledge, product awareness and interaction with medical professionals and therefore cannot be interaction with medical professionals and therefore cannot be interaction with medical professionals and therefore cannot be

IPCA Laboratories Limited, IPCA Laboratories Limited, 19 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

equated with prohibited freebies. The MCI Regulations merely equated with prohibited freebies. The MCI Regulations merely equated with prohibited freebies. The MCI Regulations merely prohibit doctors from accepting certain personal benefits and do not prohibit doctors from accepting certain personal benefits and do not prohibit doctors from accepting certain personal benefits and do not prohibit pharmaceutical companies prohibit pharmaceutical companies from conducting professional or from conducting professional or educational programmes for product awareness and dissemination educational programmes for product awareness and dissemination educational programmes for product awareness and dissemination of scientific information. of scientific information.

7.13 It was submitted that s It was submitted that similarly, expenditure incurred on imilarly, expenditure incurred on journals, medical literature, periodicals and printed material journals, medical literature, periodicals and printed material journals, medical literature, periodicals and printed material distributed to doctors and medical practitioners was incurred only distributed to doctors and medical practitioners was incurred only distributed to doctors and medical practitioners was incurred only for dissemination of information relating to research, efficacy and for dissemination of information relating to research, efficacy and for dissemination of information relating to research, efficacy and therapeutic usage of med therapeutic usage of medicines manufactured by the appellant. icines manufactured by the appellant. Such expenditure forms part of normal sales promotion and Such expenditure forms part of normal sales promotion and Such expenditure forms part of normal sales promotion and awareness activities and cannot be regarded as gifts or prohibited awareness activities and cannot be regarded as gifts or prohibited awareness activities and cannot be regarded as gifts or prohibited freebies under the MCI Regulations. freebies under the MCI Regulations.

7.14 In respect of brand recall expenditure, the In respect of brand recall expenditure, the assesse assessee submitted that items such as pens, calendars, pen stands, paper weights and that items such as pens, calendars, pen stands, paper weights and that items such as pens, calendars, pen stands, paper weights and similar articles merely contained the logo or brand name of the similar articles merely contained the logo or brand name of the similar articles merely contained the logo or brand name of the appellant company and were distributed solely for the purpose of appellant company and were distributed solely for the purpose of appellant company and were distributed solely for the purpose of maintaining product visibility and brand recall. maintaining product visibility and brand recall. Such items were of Such items were of nominal value, generally below Rs.1,000/ nominal value, generally below Rs.1,000/-, and therefore cannot be , and therefore cannot be treated as prohibited gifts or freebies within the meaning of treated as prohibited gifts or freebies within the meaning of treated as prohibited gifts or freebies within the meaning of Regulation 6.8.1 of the MCI Regulations. Regulation 6.8.1 of the MCI Regulations. In this regard, reliance is In this regard, reliance is placed placed upon upon the the MCI MCI Notification Notification dated dated 01.02.2016 01.02.2016 and and Government clarification dated 16.03.2022 wherein it has been Government clarification dated 16.03.2022 wherein it has been Government clarification dated 16.03.2022 wherein it has been

IPCA Laboratories Limited, IPCA Laboratories Limited, 20 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

clarified that modest brand recall items below Rs.1,000/- would not clarified that modest brand recall items below Rs.1,000/ clarified that modest brand recall items below Rs.1,000/ fall within the scope of prohibited freebies. Reliance was also placed fall within the scope of prohibited freebies. Reliance fall within the scope of prohibited freebies. Reliance upon the decision of upon the decision of Himalaya Drug Company v. DCIT any v. DCIT(supra) wherein similar low wherein similar low-value promotional items were held to be value promotional items were held to be allowable business expenditure. allowable business expenditure. The reliance placed by the revenue The reliance placed by the revenue authorities upon the decision of the Hon’ble Supreme Court in Apex authorities upon the decision of the Hon’ble Supreme Court in authorities upon the decision of the Hon’ble Supreme Court in Laboratories Pvt. Ltd. v. DCIT Laboratories Pvt. Ltd. v. DCIT (supra) is wholly misplaced. In the wholly misplaced. In the said case, the assessee had admittedly distributed expensive said case, the assessee had admittedly distributed expensive said case, the assessee had admittedly distributed expensive freebies such as gold coins, televisions and costly personal benefits freebies such as gold coins, televisions and costly personal benefits freebies such as gold coins, televisions and costly personal benefits to doctors, whereas in the present case the expenditure pertains to to doctors, whereas in the present case the expenditure pertains to to doctors, whereas in the present case the expenditure pertains to routine business promotion, semi routine business promotion, seminars, awareness programmes and nars, awareness programmes and nominal brand recall items incurred during the ordinary course of nominal brand recall items incurred during the ordinary course of nominal brand recall items incurred during the ordinary course of business. Accordingly, the ratio of the aforesaid decision is clearly business. Accordingly, the ratio of the aforesaid decision is clearly business. Accordingly, the ratio of the aforesaid decision is clearly distinguishable on facts. distinguishable on facts.

7.15 The assessee submitted that unless the department first submitted that unless the department first submitted that unless the department first establishes that the expenditure falls specifically within the stablishes that the expenditure falls specifically within the stablishes that the expenditure falls specifically within the prohibited categories contemplated under Regulation 6.8.1 of the prohibited categories contemplated under Regulation 6.8.1 of the prohibited categories contemplated under Regulation 6.8.1 of the MCI Regulations, no disallowance under Explanation 1 to section MCI Regulations, no disallowance under Explanation 1 to section MCI Regulations, no disallowance under Explanation 1 to section 37(1) can be made. The impugned expenditure represents genuine 37(1) can be made. The impugned expenditure represents genuine 37(1) can be made. The impugned expenditure represents genuine business expenditure incurred wholly and exclusively for the siness expenditure incurred wholly and exclusively for the siness expenditure incurred wholly and exclusively for the purpose of business and is therefore allowable under section 37(1) purpose of business and is therefore allowable under section 37(1) purpose of business and is therefore allowable under section 37(1) of the Act.

IPCA Laboratories Limited, IPCA Laboratories Limited, 21 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

7.16 It was further submitted was further submitted that the impugned issue is squarely that the impugned issue is squarely covered in favour of the covered in favour of the assessee by the order of the ITAT, Mumbai he ITAT, Mumbai in appellant’s own case for AYs 2009 in appellant’s own case for AYs 2009-10 to 2014-15 arising from the 15 arising from the very same search proceedings. The Tribunal vide consolidated very same search proceedings. The Tribunal vide consolidated very same search proceedings. The Tribunal vide consolidated order dated 08.04.2024 passed in ITA Nos. 879 to 883/Mum/2021 order dated 08.04.2024 passed in ITA Nos. 879 to 883/Mum/2021 order dated 08.04.2024 passed in ITA Nos. 879 to 883/Mum/2021 has extensively examined the nature of sales and marketing has extensively examined the nature of sales an has extensively examined the nature of sales an expenditure, applicability of the MCI Regulations and CBDT expenditure, applicability of the MCI Regulations and CBDT expenditure, applicability of the MCI Regulations and CBDT Circular No. 5/2012, as well as the evidentiary value of statements Circular No. 5/2012, as well as the evidentiary value of statements Circular No. 5/2012, as well as the evidentiary value of statements recorded during search proceedings (Copy placed at page nos. 1- recorded during search proceedings (Copy placed at page nos. 1 recorded during search proceedings (Copy placed at page nos. 1 112 of the paper book). 112 of the paper book).

7.17. We have heard the rival We have heard the rival submissions, perused the orders of submissions, perused the orders of the authorities below and carefully examined the material placed on the authorities below and carefully examined the material placed on the authorities below and carefully examined the material placed on record. The controversy before us pertains to the disallowance of The controversy before us pertains to the disallowance of The controversy before us pertains to the disallowance of sales promotion and marketing expenditure allegedly incurred by sales promotion and marketing expenditure allegedly incurred by sales promotion and marketing expenditure allegedly incurred by the assessee in contravention of the Medical Council of India (MCI) the assessee in contravention of the Medical Council of India (MCI) the assessee in contravention of the Medical Council of India (MCI) Regulations and consequently held to be inadmissible under Regulations and consequently held to be inadmissible under Regulations and consequently held to be inadmissible under Explanation 1 to section 37(1) of the Act. ation 1 to section 37(1) of the Act.

7.18 The Assessing Officer proceeded to make the impugned The Assessing Officer proceeded to make the impugned The Assessing Officer proceeded to make the impugned disallowance principally on the basis of statements recorded during disallowance principally on the basis of statements recorded during disallowance principally on the basis of statements recorded during the course of search proceedings and on the premise that the the course of search proceedings and on the premise that the the course of search proceedings and on the premise that the expenditure represented prohibit expenditure represented prohibited freebies provided to medical ed freebies provided to medical practitioners. The learned CIT(A), however, upon a detailed practitioners. The learned CIT(A), however, upon a detailed practitioners. The learned CIT(A), however, upon a detailed examination of the nature of the expenditure and after taking note examination of the nature of the expenditure and after taking note examination of the nature of the expenditure and after taking note

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of the decision of the Coordinate Bench of the Tribunal in the of the decision of the Coordinate Bench of the Tribunal in the of the decision of the Coordinate Bench of the Tribunal in the assessee’s own case for the earlie assessee’s own case for the earlier assessment years arising out of r assessment years arising out of the very same search proceedings, granted substantial relief and the very same search proceedings, granted substantial relief and the very same search proceedings, granted substantial relief and sustained disallowance only in respect of expenditure relatable to sustained disallowance only in respect of expenditure relatable to sustained disallowance only in respect of expenditure relatable to travel and hotel facilities provided to doctors. travel and hotel facilities provided to doctors.

7.19 We find that the issue is no longer We find that the issue is no longer res integra. The Coordinate res integra. The Coordinate Bench of the Tribunal, while adjudicating identical additions in the Bench of the Tribunal, while adjudicating identical additions in the Bench of the Tribunal, while adjudicating identical additions in the assessee’s own case for Assessment Years 2009 assessee’s own case for Assessment Years 2009-10 to 2014 10 to 2014-15 vide consolidated order dated 08.04.2024 in ITA Nos. 879 to consolidated order dated 08.04.2024 in ITA Nos. 879 to consolidated order dated 08.04.2024 in ITA Nos. 879 to 883/Mum/2021, undertook an exhaustive e 883/Mum/2021, undertook an exhaustive examination of the scope xamination of the scope of Regulation 6.8.1 of the MCI Regulations, CBDT Circular No. 5 of of Regulation 6.8.1 of the MCI Regulations, CBDT Circular No. 5 of of Regulation 6.8.1 of the MCI Regulations, CBDT Circular No. 5 of 2012, and the law laid down by the Hon’ble Supreme Court in Apex 2012, and the law laid down by the Hon’ble Supreme Court in 2012, and the law laid down by the Hon’ble Supreme Court in Laboratories Pvt. Ltd. v. DCIT Laboratories Pvt. Ltd. v. DCIT (supra). After analysing the nature of . After analysing the nature of each category of expenditure, each category of expenditure, the Tribunal held that only those the Tribunal held that only those expenditures which directly confer prohibited benefits upon medical expenditures which directly confer prohibited benefits upon medical expenditures which directly confer prohibited benefits upon medical practitioners, such as gifts, travel facilities, hospitality or monetary practitioners, such as gifts, travel facilities, hospitality or monetary practitioners, such as gifts, travel facilities, hospitality or monetary grants, would attract the mischief of Explanation 1 to section 37(1) grants, would attract the mischief of Explanation 1 to section 37(1) grants, would attract the mischief of Explanation 1 to section 37(1) of the Act.

7.20 The Tribunal further held that expenditure incurred on patient The Tribunal further held that expenditure incurred on patient The Tribunal further held that expenditure incurred on patient education programmes, medical awareness camps, symposiums, education programmes, medical awareness camps, symposiums, education programmes, medical awareness camps, symposiums, exhibitions, journals, periodicals, sponsorship of professional exhibitions, journals, periodicals, sponsorship of professional exhibitions, journals, periodicals, sponsorship of professional events, field printing materials, taxi hire charges incurred by sales events, field printing materials, taxi hire charges incurred by s events, field printing materials, taxi hire charges incurred by s personnel, and nominal brand recall items distributed in the personnel, and nominal brand recall items distributed in the personnel, and nominal brand recall items distributed in the

IPCA Laboratories Limited, IPCA Laboratories Limited, 23 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

ordinary course of business do not partake the character of ordinary course of business do not partake the character of ordinary course of business do not partake the character of prohibited freebies. At the same time, expenditure incurred towards prohibited freebies. At the same time, expenditure incurred towards prohibited freebies. At the same time, expenditure incurred towards travel facilities, hotel accommodation and similar hospitality travel facilities, hotel accommodation and similar hospitality travel facilities, hotel accommodation and similar hospitality extended to medical practitioners was held to be hit by the MCI extended to medical practitioners was held to be hit by the MCI extended to medical practitioners was held to be hit by the MCI Regulations and therefore liable for disallowance. Regulations and therefore liable for disallowance. The relevant part The relevant part of the ITAT order is reproduced as of the ITAT order is reproduced as under:-

“11.10We have heard both the parties and perused the material as well as “11.10We have heard both the parties and perused the material as well as “11.10We have heard both the parties and perused the material as well as the written submissions placed before us. Before adverting to the facts of ritten submissions placed before us. Before adverting to the facts of ritten submissions placed before us. Before adverting to the facts of the case, let us first examine the prevailing legal position on this subject. It the case, let us first examine the prevailing legal position on this subject. It the case, let us first examine the prevailing legal position on this subject. It is noted that the Hon’ble Supreme Court in the case of Apex Laboratories is noted that the Hon’ble Supreme Court in the case of Apex Laboratories is noted that the Hon’ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. vs DCIT (442 ITR 1) ha Pvt. Ltd. vs DCIT (442 ITR 1) has held that incentives or freebies given to s held that incentives or freebies given to doctors was punishable as per the Circular issued by the Medical Council doctors was punishable as per the Circular issued by the Medical Council doctors was punishable as per the Circular issued by the Medical Council of India on 14.12.2019 under the MCI Regulations 2002. The Hon’ble Apex of India on 14.12.2019 under the MCI Regulations 2002. The Hon’ble Apex of India on 14.12.2019 under the MCI Regulations 2002. The Hon’ble Apex Court held that such freebies given by pharmaceutical companies to Court held that such freebies given by pharmaceutical companies to Court held that such freebies given by pharmaceutical companies to medical practitioners was held to be prohibited by law and therefore the medical practitioners was held to be prohibited by law and therefore the medical practitioners was held to be prohibited by law and therefore the expenditure incurred on distribution of such freebies was not allowable as expenditure incurred on distribution of such freebies was not allowable as expenditure incurred on distribution of such freebies was not allowable as deduction in terms of Explanation (1) to Section 37(1) of the Act. While deduction in terms of Explanation (1) to Section 37(1) of the Act. While deduction in terms of Explanation (1) to Section 37(1) of the Act. While holding so, the Hon’ble Apex Court holding so, the Hon’ble Apex Court held that the CBDT Circular No. held that the CBDT Circular No. 5/2012 dated 01.08.2012 clarifying that the freebies given by 5/2012 dated 01.08.2012 clarifying that the freebies given by 5/2012 dated 01.08.2012 clarifying that the freebies given by pharmaceutical companies to medical practitioners was inadmissible as pharmaceutical companies to medical practitioners was inadmissible as pharmaceutical companies to medical practitioners was inadmissible as deduction u/s 37(1) of the Act was clarificatory in nature. The said deduction u/s 37(1) of the Act was clarificatory in nature. The said deduction u/s 37(1) of the Act was clarificatory in nature. The said Circular was thus held Circular was thus held to be effective from the date of implementation of to be effective from the date of implementation of Regulation 6.8 of the 2002 MCI Regulations i.e. from 14.12.2009. Regulation 6.8 of the 2002 MCI Regulations i.e. from 14.12.2009. Regulation 6.8 of the 2002 MCI Regulations i.e. from 14.12.2009. 11.11We also noted that the Hon’ble jurisdictional Bombay High Court in 11.11We also noted that the Hon’ble jurisdictional Bombay High Court in 11.11We also noted that the Hon’ble jurisdictional Bombay High Court in the case of Abbott India Ltd Vs ACIT (WP No. 685 of 2016) dated the case of Abbott India Ltd Vs ACIT (WP No. 685 of 2016) dated the case of Abbott India Ltd Vs ACIT (WP No. 685 of 2016) dated 10.02.2023, after considering the decision of Hon’ble Supreme Court in the 2.2023, after considering the decision of Hon’ble Supreme Court in the 2.2023, after considering the decision of Hon’ble Supreme Court in the case of Apex Laboratories (supra) explained that the ruling of the Hon’ble case of Apex Laboratories (supra) explained that the ruling of the Hon’ble case of Apex Laboratories (supra) explained that the ruling of the Hon’ble High Court laying down that the CBDT Circular No.5/2012 is indeed High Court laying down that the CBDT Circular No.5/2012 is indeed High Court laying down that the CBDT Circular No.5/2012 is indeed clarificatory in nature, but the same is onl clarificatory in nature, but the same is only effective retrospectively from y effective retrospectively from the date of implementation of Regulation 6.8 of 2002 Regulations, i.e. 14th the date of implementation of Regulation 6.8 of 2002 Regulations, i.e. 14th the date of implementation of Regulation 6.8 of 2002 Regulations, i.e. 14th December 2009. The Hon’ble High Court is noted to have thus held that, December 2009. The Hon’ble High Court is noted to have thus held that, December 2009. The Hon’ble High Court is noted to have thus held that, the expenditure incurred on freebies given to doctors, prior to 14th the expenditure incurred on freebies given to doctors, prior to 14th the expenditure incurred on freebies given to doctors, prior to 14th December 2009, was not hit by the rigors of CBDT Circular No.5/2012 r 2009, was not hit by the rigors of CBDT Circular No.5/2012 r 2009, was not hit by the rigors of CBDT Circular No.5/2012 read with MCI regulations dated 14th December 2009, and was thus read with MCI regulations dated 14th December 2009, and was thus read with MCI regulations dated 14th December 2009, and was thus allowable business expenditure. The relevant findings as noted by us are allowable business expenditure. The relevant findings as noted by us are allowable business expenditure. The relevant findings as noted by us are as under

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11.12 Having regard to the above position of la 11.12 Having regard to the above position of law, we thus hold that the w, we thus hold that the CBDT Circular No. 5/2012 read with MCI Regulations, 2009 did not apply CBDT Circular No. 5/2012 read with MCI Regulations, 2009 did not apply CBDT Circular No. 5/2012 read with MCI Regulations, 2009 did not apply to the sales promotion expenses incurred by the assessee in FY 2008 to the sales promotion expenses incurred by the assessee in FY 2008 to the sales promotion expenses incurred by the assessee in FY 2008-09 relevant to AY 2009 relevant to AY 2009-10. It is accordingly held that the sales promotion 10. It is accordingly held that the sales promotion expenses disallow expenses disallowed by the AO in this AY 2009 ed by the AO in this AY 2009-10 by invoking Explanation (1) to Section 37(1) of the Act was unjustified. Explanation (1) to Section 37(1) of the Act was unjustified. Explanation (1) to Section 37(1) of the Act was unjustified. Thus, the entire disallowance is held to be unsustainable and is directed Thus, the entire disallowance is held to be unsustainable and is directed Thus, the entire disallowance is held to be unsustainable and is directed to be deleted. 11.13 Now coming to AY 2010 11.13 Now coming to AY 2010-11, as noted above, the CBDT Circu 11, as noted above, the CBDT Circular No. 5/2012 read with MCI Regulations, 2009 is effective only from 5/2012 read with MCI Regulations, 2009 is effective only from 5/2012 read with MCI Regulations, 2009 is effective only from 14.12.2009. Accordingly, any sales promotion expenses incurred prior to 14.12.2009. Accordingly, any sales promotion expenses incurred prior to 14.12.2009. Accordingly, any sales promotion expenses incurred prior to the said date, irrespective whether it included any freebies given to doctors the said date, irrespective whether it included any freebies given to doctors the said date, irrespective whether it included any freebies given to doctors or not, cannot be said to be prohibi or not, cannot be said to be prohibited by law and hence cannot be ted by law and hence cannot be disallowed u/s 37(1) of the Act. Before us, the Ld. AR of the assessee has disallowed u/s 37(1) of the Act. Before us, the Ld. AR of the assessee has disallowed u/s 37(1) of the Act. Before us, the Ld. AR of the assessee has provided the break provided the break-up of the sales promotion expenses incurred from up of the sales promotion expenses incurred from 01.04.2009 to 13.12.2009 and 14.12.2009 to 31.03.2010. For the 01.04.2009 to 13.12.2009 and 14.12.2009 to 31.03.2010. For the 01.04.2009 to 13.12.2009 and 14.12.2009 to 31.03.2010. For the aforesaid reasons, aforesaid reasons, the AO is accordingly directed to delete the the AO is accordingly directed to delete the disallowance of sales promotion expenses to the extent pertaining to the disallowance of sales promotion expenses to the extent pertaining to the disallowance of sales promotion expenses to the extent pertaining to the period 01.04.2009 to 13.12.2009. period 01.04.2009 to 13.12.2009. 11.14 In view of the above, we are now required to adjudicate the merits of 11.14 In view of the above, we are now required to adjudicate the merits of 11.14 In view of the above, we are now required to adjudicate the merits of the disallowance made by the the disallowance made by the AO out of sales promotions expenses in AY AO out of sales promotions expenses in AY 2010-11 (14.12.2009 to 31.03.2010), 2011 11 (14.12.2009 to 31.03.2010), 2011-12, 2012 13 & 2014 12, 2012 13 & 2014-15. As noted earlier, the Hon’ble Apex Court has held that any expenditure noted earlier, the Hon’ble Apex Court has held that any expenditure noted earlier, the Hon’ble Apex Court has held that any expenditure incurred by pharmaceutical companies for the benefit of doctors, which fall incurred by pharmaceutical companies for the benefit of doctors, which fall incurred by pharmaceutical companies for the benefit of doctors, which fall within the mischief of MCI Regulations, 2009, shall not be allowable as hin the mischief of MCI Regulations, 2009, shall not be allowable as hin the mischief of MCI Regulations, 2009, shall not be allowable as deduction u/s 37(1) of the Act. deduction u/s 37(1) of the Act. 11.15 Having perused the Regulation 6.8.1, it is noted that a medical 11.15 Having perused the Regulation 6.8.1, it is noted that a medical 11.15 Having perused the Regulation 6.8.1, it is noted that a medical practitioner is refrained from availing, (a) gifts, (b) travel facilities, (c) practitioner is refrained from availing, (a) gifts, (b) travel facilities, (c) practitioner is refrained from availing, (a) gifts, (b) travel facilities, (c) hospitality and (d) cash or monetary grants from pharmaceutical hospitality and (d) cash or monetary grants from pharmaceutical hospitality and (d) cash or monetary grants from pharmaceutical companies. The Ld. AR further brought to our notice that, the MCI vide companies. The Ld. AR further brought to our notice that, the MCI vide companies. The Ld. AR further brought to our notice that, the MCI vide Notification dated 01.02.2016 has clarified that, where any gift items or Notification dated 01.02.2016 has clarified that, where any gift items or Notification dated 01.02.2016 has clarified that, where any gift items or courtesies having value of less than Rs.1000/ courtesies having value of less than Rs.1000/- is provided, then such is provided, then such would not fall within the mischief of MCI Regulations, 2009. The relevant would not fall within the mischief of MCI Regulations, 2009. The relevant would not fall within the mischief of MCI Regulations, 2009. The relevant extract of the Notification, found placed at Pages 239 extract of the Notification, found placed at Pages 239 extract of the Notification, found placed at Pages 239-245 of Paper Book reads as under: reads as under:- “6.4 Companies may occasionally provide modest, appropriate “6.4 Companies may occasionally provide modest, appropriate “6.4 Companies may occasionally provide modest, appropriate brand rec brand recall items/ brand reminders, which are customary all items/ brand reminders, which are customary business courtesies and are reasonable in value and frequency. business courtesies and are reasonable in value and frequency. business courtesies and are reasonable in value and frequency. However, the value of such brand recalls items/ brand reminders However, the value of such brand recalls items/ brand reminders However, the value of such brand recalls items/ brand reminders shall not exceed INR 1,000 (Rupees One Thousand). Companies shall not exceed INR 1,000 (Rupees One Thousand). Companies shall not exceed INR 1,000 (Rupees One Thousand). Companies

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shall maintain proper shall maintain proper documentation with respect to expense documentation with respect to expense incurred on such brand reminders.” incurred on such brand reminders.” 11.16 The Ld. AR also brought to our notice that this Tribunal at Bangalore 11.16 The Ld. AR also brought to our notice that this Tribunal at Bangalore 11.16 The Ld. AR also brought to our notice that this Tribunal at Bangalore in the case of Himalaya Drug Company Vs CIT (124 taxmann.com 252) in the case of Himalaya Drug Company Vs CIT (124 taxmann.com 252) in the case of Himalaya Drug Company Vs CIT (124 taxmann.com 252) has taken cognizance of the above MCI N has taken cognizance of the above MCI Notification. The Tribunal is noted otification. The Tribunal is noted to have deleted the estimated disallowance made by the AO out of sales to have deleted the estimated disallowance made by the AO out of sales to have deleted the estimated disallowance made by the AO out of sales promotion expenses by observing that gifts having value less than promotion expenses by observing that gifts having value less than promotion expenses by observing that gifts having value less than Rs.1000/- would not fall under the mischief of MCI regulations 2009. would not fall under the mischief of MCI regulations 2009. would not fall under the mischief of MCI regulations 2009. 11.17 The Ld. AR has also rightly pointed out that, being a pharmaceutical 11.17 The Ld. AR has also rightly pointed out that, being a pharmaceutical 11.17 The Ld. AR has also rightly pointed out that, being a pharmaceutical company, the assessee cannot advertise its products. However, the company, the assessee cannot advertise its products. However, the company, the assessee cannot advertise its products. However, the assessee is entitled to create awareness of its products by participating in assessee is entitled to create awareness of its products by participating in assessee is entitled to create awareness of its products by participating in exhibitions and organizing conferences exhibitions and organizing conferences and therefore the expenditure and therefore the expenditure incurred for organizing the same would not fall within the ambit of CBDT incurred for organizing the same would not fall within the ambit of CBDT incurred for organizing the same would not fall within the ambit of CBDT Circular No.5/2012 read with MCI Regulations 2009. Likewise, any Circular No.5/2012 read with MCI Regulations 2009. Likewise, any Circular No.5/2012 read with MCI Regulations 2009. Likewise, any journals or periodicals printed and shared with customers, distributors or journals or periodicals printed and shared with customers, distributors or journals or periodicals printed and shared with customers, distributors or medical practitioners to make them aware about the research behind medical practitioners to make them aware about the research behind titioners to make them aware about the research behind manufacture of any new medication or its uses or effects in any particular manufacture of any new medication or its uses or effects in any particular manufacture of any new medication or its uses or effects in any particular disease also cannot be termed as ‘gifts’ given to doctors. However, the disease also cannot be termed as ‘gifts’ given to doctors. However, the disease also cannot be termed as ‘gifts’ given to doctors. However, the expenses, if any, incurred on travel and hotel accommo expenses, if any, incurred on travel and hotel accommo expenses, if any, incurred on travel and hotel accommodation of the doctors to attend these exhibitions or conferences would however be hit by doctors to attend these exhibitions or conferences would however be hit by doctors to attend these exhibitions or conferences would however be hit by the rigors of MCI Regulations, 2009. the rigors of MCI Regulations, 2009. 11.18 In light of the above understanding of the position of law and MCI 11.18 In light of the above understanding of the position of law and MCI 11.18 In light of the above understanding of the position of law and MCI Regulations, 2009, we now proceed to examine the head Regulations, 2009, we now proceed to examine the head Regulations, 2009, we now proceed to examine the head-wise nature of sales promotion expenses claimed by the assessee and ascertain as to the sales promotion expenses claimed by the assessee and ascertain as to the sales promotion expenses claimed by the assessee and ascertain as to the quantum of expenses, if any, which qualifies as ‘freebies’ given to doctors quantum of expenses, if any, which qualifies as ‘freebies’ given to doctors quantum of expenses, if any, which qualifies as ‘freebies’ given to doctors and thus disallowable under Section 37(1) of the Act.” and thus disallowable under Section 37(1) of the Act.” 11.19 We first take up sub 11.19 We first take up sub-heads: Expenses on Patient Detection / ses on Patient Detection / Education Camp & Camp expenses. The AO is noted to have observed that Education Camp & Camp expenses. The AO is noted to have observed that Education Camp & Camp expenses. The AO is noted to have observed that the expenses debited under this sub the expenses debited under this sub-head majorly comprised of medicine head majorly comprised of medicine and testing kits, certain instruments purchased as required in medical and testing kits, certain instruments purchased as required in medical and testing kits, certain instruments purchased as required in medical camps. According camps. According to the AO, these medical kits like lipid profile test, sugar to the AO, these medical kits like lipid profile test, sugar testing kit, thermometer, urine kits, pregnancy sticks etc., which were testing kit, thermometer, urine kits, pregnancy sticks etc., which were testing kit, thermometer, urine kits, pregnancy sticks etc., which were purchased for the camps were gifted to the doctors who attended the camp purchased for the camps were gifted to the doctors who attended the camp purchased for the camps were gifted to the doctors who attended the camp and thus held that this expenditure fell under the and thus held that this expenditure fell under the and thus held that this expenditure fell under the mischief of IMC regulations and accordingly disallowed the same in its entirety. Apart from regulations and accordingly disallowed the same in its entirety. Apart from regulations and accordingly disallowed the same in its entirety. Apart from the foregoing, the AO also noted that the assessee had incurred camp the foregoing, the AO also noted that the assessee had incurred camp the foregoing, the AO also noted that the assessee had incurred camp expenses, which were noted to include venue charges, payment to field expenses, which were noted to include venue charges, payment to field expenses, which were noted to include venue charges, payment to field staff, taxi hire charges staff, taxi hire charges to staffs etc. The AO had disallowed 10% of these to staffs etc. The AO had disallowed 10% of these expenses.

IPCA Laboratories Limited, IPCA Laboratories Limited, 26 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.19.1 The Ld. AR showed us that, the expenses on patient education 11.19.1 The Ld. AR showed us that, the expenses on patient education 11.19.1 The Ld. AR showed us that, the expenses on patient education included expenses at diabetic camps, ECG Camps, BPH/BMD camps etc. included expenses at diabetic camps, ECG Camps, BPH/BMD camps etc. included expenses at diabetic camps, ECG Camps, BPH/BMD camps etc. and the nature of expenses primarily included testing kits, and the nature of expenses primarily included testing kits, and the nature of expenses primarily included testing kits, ECG rolls, needles, blankets, pamphlets for patients etc. These expenses by its very needles, blankets, pamphlets for patients etc. These expenses by its very needles, blankets, pamphlets for patients etc. These expenses by its very nature are noted to be for the benefit of patients and not doctors. The Ld. nature are noted to be for the benefit of patients and not doctors. The Ld. nature are noted to be for the benefit of patients and not doctors. The Ld. AR further explained that, the expenses towards thermometers, basic BP AR further explained that, the expenses towards thermometers, basic BP AR further explained that, the expenses towards thermometers, basic BP machines etc. were mean machines etc. were meant for the patients and their disease detection. He t for the patients and their disease detection. He pointed out to us that, the averment made by the AO that these pointed out to us that, the averment made by the AO that these pointed out to us that, the averment made by the AO that these equipment’s would have been gifted to doctors later on, was on pure equipment’s would have been gifted to doctors later on, was on pure equipment’s would have been gifted to doctors later on, was on pure surmise and conjecture and not based on any material or evidence found surmise and conjecture and not based on any material or evidence found surmise and conjecture and not based on any material or evidence found in course of search. He showed us that, the cost of these medical course of search. He showed us that, the cost of these medical course of search. He showed us that, the cost of these medical equipment’s were minimal, if considered item equipment’s were minimal, if considered item-wise, and the shelf life of wise, and the shelf life of these medical equipment’s when used tirelessly in the camps was very these medical equipment’s when used tirelessly in the camps was very these medical equipment’s when used tirelessly in the camps was very low and accordingly these were usually either disca low and accordingly these were usually either discarded on completion of rded on completion of camp or shifted out by the field staff to other camps. Hence, these medical camp or shifted out by the field staff to other camps. Hence, these medical camp or shifted out by the field staff to other camps. Hence, these medical equipment’s were also meant for the benefit of patients and not the doctors equipment’s were also meant for the benefit of patients and not the doctors equipment’s were also meant for the benefit of patients and not the doctors as wrongly presumed by the AO. The Ld. AR also brought to our notice as wrongly presumed by the AO. The Ld. AR also brought to our notice as wrongly presumed by the AO. The Ld. AR also brought to our notice that, the med that, the medical practitioners attending the camps were engaged in ical practitioners attending the camps were engaged in professional basis and professional fees were separately paid to them for professional basis and professional fees were separately paid to them for professional basis and professional fees were separately paid to them for attending patients. attending patients. 11.19.2 We note that, the Ld. CIT(A) had examined the details of these 11.19.2 We note that, the Ld. CIT(A) had examined the details of these 11.19.2 We note that, the Ld. CIT(A) had examined the details of these expenses and recorded a finding of f expenses and recorded a finding of fact that the expenses on Patient act that the expenses on Patient Detection were incurred for the benefit of patients and not the doctors and Detection were incurred for the benefit of patients and not the doctors and Detection were incurred for the benefit of patients and not the doctors and thus deleted the same. Likewise, camp expenses were examined by the thus deleted the same. Likewise, camp expenses were examined by the thus deleted the same. Likewise, camp expenses were examined by the Ld. CIT(A) and was noted to have been paid to various camps and Ld. CIT(A) and was noted to have been paid to various camps and Ld. CIT(A) and was noted to have been paid to various camps and included expens included expenses incurred for travelling & refreshments of field staff or es incurred for travelling & refreshments of field staff or patients and thus was not related to doctors. patients and thus was not related to doctors. 11.19.3 Before us, the Ld. DR was unable to point out any specific defect 11.19.3 Before us, the Ld. DR was unable to point out any specific defect 11.19.3 Before us, the Ld. DR was unable to point out any specific defect in the above submissions of the Ld. AR as well as the findings of Ld. in the above submissions of the Ld. AR as well as the findings of Ld. in the above submissions of the Ld. AR as well as the findings of Ld. CIT(A). We thus do not see any reason to interfere with the Ld. CIT(A)’s . We thus do not see any reason to interfere with the Ld. CIT(A)’s . We thus do not see any reason to interfere with the Ld. CIT(A)’s action of deleting the disallowance made by the AO out of Expenses on action of deleting the disallowance made by the AO out of Expenses on action of deleting the disallowance made by the AO out of Expenses on Patient Detection / Education Camp & Camp expenses. Patient Detection / Education Camp & Camp expenses. Patient Detection / Education Camp & Camp expenses. 11.20 We now come to Sponsorship Expenses. The AO is noted to have 11.20 We now come to Sponsorship Expenses. The AO is noted to have 11.20 We now come to Sponsorship Expenses. The AO is noted to have held that these expenses were for the benefit of doctors and thus held that these expenses were for the benefit of doctors and thus held that these expenses were for the benefit of doctors and thus disallowed the same in full. It is observed that, there were no specific disallowed the same in full. It is observed that, there were no specific disallowed the same in full. It is observed that, there were no specific reasons assigned by the AO for arriving at such conclusion. On appeal, the reasons assigned by the AO for arriving at such conclusion. On appeal, the reasons assigned by the AO for arriving at such conclusion. On appeal, the Ld. CIT(A) is noted to have examined the d Ld. CIT(A) is noted to have examined the details of these expenses and he etails of these expenses and he found that these payments were made to trade associations for sponsoring found that these payments were made to trade associations for sponsoring found that these payments were made to trade associations for sponsoring their events as a measure of brand awareness by the asessee and not to their events as a measure of brand awareness by the asessee and not to their events as a measure of brand awareness by the asessee and not to any medical practitioners. Although the Ld. CIT(A) in principle held that any medical practitioners. Although the Ld. CIT(A) in principle held that any medical practitioners. Although the Ld. CIT(A) in principle held that these sponsorship expenses did not constitute ‘freebies’ to doctors, but out sponsorship expenses did not constitute ‘freebies’ to doctors, but out sponsorship expenses did not constitute ‘freebies’ to doctors, but out of abundant caution, he is noted to have subjectively assumed that certain of abundant caution, he is noted to have subjectively assumed that certain of abundant caution, he is noted to have subjectively assumed that certain

IPCA Laboratories Limited, IPCA Laboratories Limited, 27 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

portion of the expenses may have been towards doctors as well and thus portion of the expenses may have been towards doctors as well and thus portion of the expenses may have been towards doctors as well and thus restricted the disallowance to 10%. restricted the disallowance to 10%. 11.20.1 Having heard the rival submissions, it is noted that the Revenue 20.1 Having heard the rival submissions, it is noted that the Revenue 20.1 Having heard the rival submissions, it is noted that the Revenue was unable to controvert the Ld. CIT(A)’s finding that the sponsorship was unable to controvert the Ld. CIT(A)’s finding that the sponsorship was unable to controvert the Ld. CIT(A)’s finding that the sponsorship expenses were paid to trade bodies/associations by the assessee to put expenses were paid to trade bodies/associations by the assessee to put expenses were paid to trade bodies/associations by the assessee to put up their banners and posters in their events up their banners and posters in their events as a measure of brand re as a measure of brand re-call. The Ld. AR also showed us the sample supporting, which was placed at The Ld. AR also showed us the sample supporting, which was placed at The Ld. AR also showed us the sample supporting, which was placed at Pages 214 to 215 of Paper Book. The Ld. AR has rightly pointed out to us Pages 214 to 215 of Paper Book. The Ld. AR has rightly pointed out to us Pages 214 to 215 of Paper Book. The Ld. AR has rightly pointed out to us that, the sponsorship payments made to trade bodies/associations has that, the sponsorship payments made to trade bodies/associations has that, the sponsorship payments made to trade bodies/associations has not been proh not been prohibited in the MCI Regulations, 2009. Hence, when these ibited in the MCI Regulations, 2009. Hence, when these payments were not made for the benefit of any medical practitioners and payments were not made for the benefit of any medical practitioners and payments were not made for the benefit of any medical practitioners and were also not falling in the mischief of MCI regulations, we find force in the were also not falling in the mischief of MCI regulations, we find force in the were also not falling in the mischief of MCI regulations, we find force in the Ld. AR’s plea that the disallowance out of such sa Ld. AR’s plea that the disallowance out of such sales promotion expenses les promotion expenses was unwarranted. Coming to the Ld. CIT(A)’s action of making was unwarranted. Coming to the Ld. CIT(A)’s action of making was unwarranted. Coming to the Ld. CIT(A)’s action of making disallowance at 10%, we do not countenance such action of making disallowance at 10%, we do not countenance such action of making disallowance at 10%, we do not countenance such action of making estimated & ad estimated & ad-hoc addition. It is not the case of the Ld. CIT(A) that the hoc addition. It is not the case of the Ld. CIT(A) that the assessee had not provided the de assessee had not provided the details of the expenses or that the books of tails of the expenses or that the books of accounts were found to be unreliable. Hence, without rejecting the books of accounts were found to be unreliable. Hence, without rejecting the books of accounts were found to be unreliable. Hence, without rejecting the books of accounts or pointing out any defect / omission in the details filed by the accounts or pointing out any defect / omission in the details filed by the accounts or pointing out any defect / omission in the details filed by the assessee, the Ld. CIT(A) was unjustified in making estimated d assessee, the Ld. CIT(A) was unjustified in making estimated d assessee, the Ld. CIT(A) was unjustified in making estimated disallowance of 10%. The Ld. AR has shown us that complete details of expenses were of 10%. The Ld. AR has shown us that complete details of expenses were of 10%. The Ld. AR has shown us that complete details of expenses were found & seized by the Investigating authorities, which were available on found & seized by the Investigating authorities, which were available on found & seized by the Investigating authorities, which were available on the server. It was not the case of any of the lower authorities that any the server. It was not the case of any of the lower authorities that any the server. It was not the case of any of the lower authorities that any specific item of expense de specific item of expense debited under Sponsorship Expenses was found to bited under Sponsorship Expenses was found to have been paid to or for the benefit of doctors. Overall, therefore, we hold have been paid to or for the benefit of doctors. Overall, therefore, we hold have been paid to or for the benefit of doctors. Overall, therefore, we hold that the sponsorship expenses not having been incurred for the benefit of that the sponsorship expenses not having been incurred for the benefit of that the sponsorship expenses not having been incurred for the benefit of doctors but to create brand awareness about the assessee co doctors but to create brand awareness about the assessee co doctors but to create brand awareness about the assessee company was allowable as deduction u/s 37(1) of the Act. The AO is accordingly directed allowable as deduction u/s 37(1) of the Act. The AO is accordingly directed allowable as deduction u/s 37(1) of the Act. The AO is accordingly directed to delete the disallowance made on this count. to delete the disallowance made on this count. 11.21 We now examine the expenses debited under the sub 11.21 We now examine the expenses debited under the sub 11.21 We now examine the expenses debited under the sub-head Participation in Symposiums / Exhibitions: The AO had noted th Participation in Symposiums / Exhibitions: The AO had noted th Participation in Symposiums / Exhibitions: The AO had noted that the expenses under this head majorly comprised of payments to organizers for expenses under this head majorly comprised of payments to organizers for expenses under this head majorly comprised of payments to organizers for hiring & erection of stalls at their symposiums, registration charges, hotel hiring & erection of stalls at their symposiums, registration charges, hotel hiring & erection of stalls at their symposiums, registration charges, hotel expenses & travelling expenses and disallowed the entire amount as expenses & travelling expenses and disallowed the entire amount as expenses & travelling expenses and disallowed the entire amount as ‘freebies’ to doctors. The Ld. C ‘freebies’ to doctors. The Ld. CIT(A) however noted that these expenses IT(A) however noted that these expenses were paid to institutions and not doctors and thus deleted the same. were paid to institutions and not doctors and thus deleted the same. were paid to institutions and not doctors and thus deleted the same. Having heard the rival submissions and upon examining the facts placed Having heard the rival submissions and upon examining the facts placed Having heard the rival submissions and upon examining the facts placed before us, it is noted that the payments made by the assessee can be before us, it is noted that the payments made by the assessee can be before us, it is noted that the payments made by the assessee can be categorized ized ized into into into three three three categories categories categories viz., viz., viz., (a) (a) (a) payments payments payments made made made to to to institutions/trade bodies for registration, hiring of stall, designing and institutions/trade bodies for registration, hiring of stall, designing and institutions/trade bodies for registration, hiring of stall, designing and erecting their stalls, (b) hotel expenses and (c) travelling expenses. erecting their stalls, (b) hotel expenses and (c) travelling expenses. erecting their stalls, (b) hotel expenses and (c) travelling expenses. According to us, there is no such bar under the MCI regu According to us, there is no such bar under the MCI regu According to us, there is no such bar under the MCI regulations preventing the assessee from registering themselves at different symposiums, hiring the assessee from registering themselves at different symposiums, hiring the assessee from registering themselves at different symposiums, hiring

IPCA Laboratories Limited, IPCA Laboratories Limited, 28 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

& erecting stalls etc. The Ld. AR showed us that these expenses were paid & erecting stalls etc. The Ld. AR showed us that these expenses were paid & erecting stalls etc. The Ld. AR showed us that these expenses were paid to institutions / trade bodies. We agree with the Ld. CIT(A) that these to institutions / trade bodies. We agree with the Ld. CIT(A) that these to institutions / trade bodies. We agree with the Ld. CIT(A) that these expenses did not r expenses did not result in any benefit to the medical practitioners and thus esult in any benefit to the medical practitioners and thus could not be disallowed u/s 37 of the Act. With regard to hotel & travelling could not be disallowed u/s 37 of the Act. With regard to hotel & travelling could not be disallowed u/s 37 of the Act. With regard to hotel & travelling expenses, we find that these expenses comprised of refreshments provided expenses, we find that these expenses comprised of refreshments provided expenses, we find that these expenses comprised of refreshments provided to doctors at hotels and their local conveyance to doctors at hotels and their local conveyance to attend the symposiums. to attend the symposiums. These expenses indeed benefitted the doctors and would tantamount to These expenses indeed benefitted the doctors and would tantamount to These expenses indeed benefitted the doctors and would tantamount to availing hospitality from a pharmaceutical company. According to us availing hospitality from a pharmaceutical company. According to us availing hospitality from a pharmaceutical company. According to us therefore, these expenses viz., (b) & (c), would fall under the mischief of therefore, these expenses viz., (b) & (c), would fall under the mischief of therefore, these expenses viz., (b) & (c), would fall under the mischief of MCI regulations MCI regulations and is required to be disallowed and added back u/s and is required to be disallowed and added back u/s 37(1) of the Act. 37(1) of the Act. 11.22 Coming to the expenses debited under the sub 11.22 Coming to the expenses debited under the sub 11.22 Coming to the expenses debited under the sub-head Doctor’s Meeting / Medical Awareness: The AO had noted that these expenses Meeting / Medical Awareness: The AO had noted that these expenses Meeting / Medical Awareness: The AO had noted that these expenses were in relation to attending conferences, hotel expens were in relation to attending conferences, hotel expens were in relation to attending conferences, hotel expenses & travelling expenses of doctors and thus disallowed the same in its entirety. On expenses of doctors and thus disallowed the same in its entirety. On expenses of doctors and thus disallowed the same in its entirety. On appeal the Ld. CIT(A) is noted to have restricted the disallowance to 10%. appeal the Ld. CIT(A) is noted to have restricted the disallowance to 10%. appeal the Ld. CIT(A) is noted to have restricted the disallowance to 10%. The Ld. AR first explained to us, the nature of these expenses. He pointed The Ld. AR first explained to us, the nature of these expenses. He pointed The Ld. AR first explained to us, the nature of these expenses. He pointed out that these expens out that these expenses comprised of the costs incurred by the assessee es comprised of the costs incurred by the assessee for organizing conferences. Taking us through the details, the Ld. AR for organizing conferences. Taking us through the details, the Ld. AR for organizing conferences. Taking us through the details, the Ld. AR showed us that majority of the expenses debited was in relation to the cost showed us that majority of the expenses debited was in relation to the cost showed us that majority of the expenses debited was in relation to the cost incurred for hiring venue or booking a conference hall at a incurred for hiring venue or booking a conference hall at a incurred for hiring venue or booking a conference hall at a five-star hotel and making arrangements to organize these conferences. Apart from the and making arrangements to organize these conferences. Apart from the and making arrangements to organize these conferences. Apart from the foregoing, the assessee also incurs hotel & travelling expenses for the foregoing, the assessee also incurs hotel & travelling expenses for the foregoing, the assessee also incurs hotel & travelling expenses for the doctors who attend these conferences. According to Ld. AR, the hotel doctors who attend these conferences. According to Ld. AR, the hotel doctors who attend these conferences. According to Ld. AR, the hotel expenses comprised of food & expenses comprised of food & refreshment, which the assessee was duty refreshment, which the assessee was duty bound to provide as being organizer of the conference and thus he prayed bound to provide as being organizer of the conference and thus he prayed bound to provide as being organizer of the conference and thus he prayed that these expenses should not be viewed adversely. As far as the that these expenses should not be viewed adversely. As far as the that these expenses should not be viewed adversely. As far as the travelling expenses, the Ld. AR submitted that the doctors who were travelling expenses, the Ld. AR submitted that the doctors who were travelling expenses, the Ld. AR submitted that the doctors who were attending conferences were required to be provided with conveyance so ng conferences were required to be provided with conveyance so ng conferences were required to be provided with conveyance so that they would reach the venue timely and ensure smooth execution of the that they would reach the venue timely and ensure smooth execution of the that they would reach the venue timely and ensure smooth execution of the conferences. The Ld. AR thus urged that even these travelling expenses fell conferences. The Ld. AR thus urged that even these travelling expenses fell conferences. The Ld. AR thus urged that even these travelling expenses fell outside the ambit of MCI Regulations, 2009. outside the ambit of MCI Regulations, 2009. 11.22.1 Upon examination of the facts placed before us, it is noted that the 11.22.1 Upon examination of the facts placed before us, it is noted that the 11.22.1 Upon examination of the facts placed before us, it is noted that the expenditure incurred for organizing the conference i.e. hiring of venue & expenditure incurred for organizing the conference i.e. hiring of venue & expenditure incurred for organizing the conference i.e. hiring of venue & making arrangements etc. cannot be said to be in nature of ‘freebies’ given making arrangements etc. cannot be said to be in nature of ‘freebies’ given making arrangements etc. cannot be said to be in nature of ‘freebies’ given to the doctors. Understandab to the doctors. Understandably, the assessee, being a pharmaceutical ly, the assessee, being a pharmaceutical company is required to organize such conferences to educate the delegates company is required to organize such conferences to educate the delegates company is required to organize such conferences to educate the delegates about their products and also obtain their feedback. Hence, the registration about their products and also obtain their feedback. Hence, the registration about their products and also obtain their feedback. Hence, the registration / conference expenses paid for organizing such events for their / conference expenses paid for organizing such events for their / conference expenses paid for organizing such events for their brand awareness and dissemination of information and research, cannot be said awareness and dissemination of information and research, cannot be said awareness and dissemination of information and research, cannot be said to constitute ‘freebies’ to medical practitioners and thus is held allowable to constitute ‘freebies’ to medical practitioners and thus is held allowable to constitute ‘freebies’ to medical practitioners and thus is held allowable u/s 37(1) of the Act. As far as hotel & travelling expenses are concerned, u/s 37(1) of the Act. As far as hotel & travelling expenses are concerned, u/s 37(1) of the Act. As far as hotel & travelling expenses are concerned, we find that these expense we find that these expenses comprised of refreshments provided to doctors s comprised of refreshments provided to doctors

IPCA Laboratories Limited, IPCA Laboratories Limited, 29 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

who were the delegates at the conferences and reimbursement of their who were the delegates at the conferences and reimbursement of their who were the delegates at the conferences and reimbursement of their travelling expenses. As noted earlier, these expenses indeed benefitted the travelling expenses. As noted earlier, these expenses indeed benefitted the travelling expenses. As noted earlier, these expenses indeed benefitted the doctors doctors doctors and and and would would would tantamount tantamount tantamount to to to availing availing availing hospitality hospitality hospitality from from from a a a pharmaceutical company. According to us therefore, only the hotel & rmaceutical company. According to us therefore, only the hotel & rmaceutical company. According to us therefore, only the hotel & travelling expenses fell within the ambit of MCI regulations and directed to travelling expenses fell within the ambit of MCI regulations and directed to travelling expenses fell within the ambit of MCI regulations and directed to be disallowed and added back u/s 37(1) of the Act. be disallowed and added back u/s 37(1) of the Act. 11.23 We now take up the Brand Recall Purchases, HTC Expenses, 11.23 We now take up the Brand Recall Purchases, HTC Expenses, 11.23 We now take up the Brand Recall Purchases, HTC Expenses, CRM Expenses and Sales Promotion & Other Sales Promotion Expenses Expenses and Sales Promotion & Other Sales Promotion Expenses Expenses and Sales Promotion & Other Sales Promotion Expenses together. Briefly stated, the AO noted that the brand re together. Briefly stated, the AO noted that the brand re together. Briefly stated, the AO noted that the brand re-call purchases included procurement of customized items such as clock, cup, cookware included procurement of customized items such as clock, cup, cookware included procurement of customized items such as clock, cup, cookware etc. The assessee had explained that these sales etc. The assessee had explained that these sales promotion articles which promotion articles which had their name & logo were given to customers, retailers, stockiest and had their name & logo were given to customers, retailers, stockiest and had their name & logo were given to customers, retailers, stockiest and distributors as a part of their advertisement strategy. The AO however distributors as a part of their advertisement strategy. The AO however distributors as a part of their advertisement strategy. The AO however noted that certain items purchased included paper weight, utility pouch, noted that certain items purchased included paper weight, utility pouch, noted that certain items purchased included paper weight, utility pouch, calling bell, apron etc. which were generally used by doctors and hence he apron etc. which were generally used by doctors and hence he apron etc. which were generally used by doctors and hence he held that it cannot be denied with certainty that some of these items were held that it cannot be denied with certainty that some of these items were held that it cannot be denied with certainty that some of these items were also sent to doctors. The AO accordingly estimated disallowance of 10% of also sent to doctors. The AO accordingly estimated disallowance of 10% of also sent to doctors. The AO accordingly estimated disallowance of 10% of the total expenses under this head. With regar the total expenses under this head. With regard to HTC expenses, it was d to HTC expenses, it was noted to comprise of flower & sweets valuing less than Rs.500/ noted to comprise of flower & sweets valuing less than Rs.500/ noted to comprise of flower & sweets valuing less than Rs.500/- each incurred by field staff which were presented to customers / retailers / incurred by field staff which were presented to customers / retailers / incurred by field staff which were presented to customers / retailers / doctors. According to the AO, these expenses were gifts given to doctors on doctors. According to the AO, these expenses were gifts given to doctors on doctors. According to the AO, these expenses were gifts given to doctors on their special occasions i.e. anniversary or birthdays etc. The AO thus held occasions i.e. anniversary or birthdays etc. The AO thus held occasions i.e. anniversary or birthdays etc. The AO thus held that this expenditure was incurred in violation of MCI regulations Likewise, that this expenditure was incurred in violation of MCI regulations Likewise, that this expenditure was incurred in violation of MCI regulations Likewise, the AO disallowed the sales promotion & CRM expenses which were noted the AO disallowed the sales promotion & CRM expenses which were noted the AO disallowed the sales promotion & CRM expenses which were noted to comprise of expenses of value less than Rs. to comprise of expenses of value less than Rs.500/- incurred by more than incurred by more than 4500 field staff of the assessee. According to the AO, these expenses were 4500 field staff of the assessee. According to the AO, these expenses were 4500 field staff of the assessee. According to the AO, these expenses were incurred by the field staff to maintain cordial relations with medical incurred by the field staff to maintain cordial relations with medical incurred by the field staff to maintain cordial relations with medical practitioners. He treated these expenses to be in nature of freebies and practitioners. He treated these expenses to be in nature of freebies and practitioners. He treated these expenses to be in nature of freebies and disallowed the same. On appeal, the Ld. CIT(A) is noted to have restricted d the same. On appeal, the Ld. CIT(A) is noted to have restricted d the same. On appeal, the Ld. CIT(A) is noted to have restricted the disallowance to 10% of these expenses. the disallowance to 10% of these expenses. 11.23.1 Having heard both the parties, it is not disputed by the 11.23.1 Having heard both the parties, it is not disputed by the 11.23.1 Having heard both the parties, it is not disputed by the Revenue that the items of expenses incurred under these heads Revenue that the items of expenses incurred under these heads Revenue that the items of expenses incurred under these heads were of nominal valu were of nominal value less than Rs.1000/- on flowers, sweets, cup, on flowers, sweets, cup, aprons etc. The sales promotion articles which had their name & aprons etc. The sales promotion articles which had their name & aprons etc. The sales promotion articles which had their name & logo were given to customers, retailers, stockiest and distributors as logo were given to customers, retailers, stockiest and distributors as logo were given to customers, retailers, stockiest and distributors as a part of their brand awareness strategy. Likewise, flowers and a part of their brand awareness strategy. Likewise, flowers and a part of their brand awareness strategy. Likewise, flowers and sweets of sweets of nominal value would also be given by field staff on nominal value would also be given by field staff on special occasions to their customer / stockiest / distributors. Also, special occasions to their customer / stockiest / distributors. Also, special occasions to their customer / stockiest / distributors. Also, some of these items were used by field staff to be given to doctors in some of these items were used by field staff to be given to doctors in some of these items were used by field staff to be given to doctors in the course of their visits. As noted in Para 11.15 above, the MCI the course of their visits. As noted in Para 11.15 above, the M the course of their visits. As noted in Para 11.15 above, the M Notification dated 01.02.2016 has excluded nominal gifts valuing Notification dated 01.02.2016 has excluded nominal gifts valuing Notification dated 01.02.2016 has excluded nominal gifts valuing Rs.1000/ Rs.1000/- and less from the mischief of MCI Regulations, 2009. and less from the mischief of MCI Regulations, 2009. This was also clarified by a public notice issued by Government of This was also clarified by a public notice issued by Government of This was also clarified by a public notice issued by Government of

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India dated 16.03.2022. In light of the foregoing and following the India dated 16.03.2022. In light of the foregoing and foll India dated 16.03.2022. In light of the foregoing and foll decision of this Tribunal at Bangalore in the case of Himalaya Drug decision of this Tribunal at Bangalore in the case of Himalaya Drug decision of this Tribunal at Bangalore in the case of Himalaya Drug Company (supra), as discussed earlier, the disallowance made by Company (supra), as discussed earlier, the disallowance made by Company (supra), as discussed earlier, the disallowance made by the AO out of these sub the AO out of these sub-heads of sales promotion expenses is held heads of sales promotion expenses is held to be unsustainable and is thus directed to be deleted. to be unsustainable and is thus directed to be d to be unsustainable and is thus directed to be d 11.24 With regard to sub 11.24 With regard to sub-head ‘Journals & Periodicals’, it is noted that head ‘Journals & Periodicals’, it is noted that these expenses were incurred for researching & printing literature or these expenses were incurred for researching & printing literature or these expenses were incurred for researching & printing literature or purchasing journals regarding the products and its related uses/effects. purchasing journals regarding the products and its related uses/effects. purchasing journals regarding the products and its related uses/effects. As noted earlier, these expenses As noted earlier, these expenses do not result in any benefit or gifts given do not result in any benefit or gifts given to the doctors. We thus agree with the following findings of Ld. CIT(A) to the doctors. We thus agree with the following findings of Ld. CIT(A) to the doctors. We thus agree with the following findings of Ld. CIT(A) recorded in AY 2011 recorded in AY 2011-12 deleting the disallowance made by the AO on 12 deleting the disallowance made by the AO on account of expenses incurred under this sub account of expenses incurred under this sub-head. 11.25 Now we examine t 11.25 Now we examine the sub-head ‘Taxi Hire Charges’. It is noted that head ‘Taxi Hire Charges’. It is noted that these expenses related to the reimbursements of local taxi / conveyance these expenses related to the reimbursements of local taxi / conveyance these expenses related to the reimbursements of local taxi / conveyance expenses incurred by the sales employees / staff on their outstation visits. expenses incurred by the sales employees / staff on their outstation visits. expenses incurred by the sales employees / staff on their outstation visits. The AO is observed to have disallowed and added the same The AO is observed to have disallowed and added the same The AO is observed to have disallowed and added the same on the ground that the details were not made available. The Ld. CIT(A) is noted to have that the details were not made available. The Ld. CIT(A) is noted to have that the details were not made available. The Ld. CIT(A) is noted to have restricted the same to 10% of the expenses. Before us, the Ld. AR argued restricted the same to 10% of the expenses. Before us, the Ld. AR argued restricted the same to 10% of the expenses. Before us, the Ld. AR argued that the pretext on which the AO made the disallowance was unjustified that the pretext on which the AO made the disallowance was unjustified that the pretext on which the AO made the disallowance was unjustified for the reason that the for the reason that the Investigating authorities had found & seized the Investigating authorities had found & seized the books of accounts in the course of search and had also taken back books of accounts in the course of search and had also taken back books of accounts in the course of search and had also taken back-up of their server and thus it was incorrect to state that the details of these their server and thus it was incorrect to state that the details of these their server and thus it was incorrect to state that the details of these expenses were not made available. The Ld. AR further showed u expenses were not made available. The Ld. AR further showed u expenses were not made available. The Ld. AR further showed us that the assessee had 12 divisions and more than 4500 persons as field staff and assessee had 12 divisions and more than 4500 persons as field staff and assessee had 12 divisions and more than 4500 persons as field staff and therefore in light of the foregoing, the taxi hire charges incurred across the therefore in light of the foregoing, the taxi hire charges incurred across the therefore in light of the foregoing, the taxi hire charges incurred across the years was reasonable and not excessive. Further, to substantiate the years was reasonable and not excessive. Further, to substantiate the years was reasonable and not excessive. Further, to substantiate the nature of these expenses, nature of these expenses, the Ld. AR by way of an illustration has also the Ld. AR by way of an illustration has also placed the copy of email approving reimbursement of taxi conveyance of placed the copy of email approving reimbursement of taxi conveyance of placed the copy of email approving reimbursement of taxi conveyance of their marketing staff at Page 269 of Paper Book No. 3. Having regard to their marketing staff at Page 269 of Paper Book No. 3. Having regard to their marketing staff at Page 269 of Paper Book No. 3. Having regard to the nature of expenses and overall facts as discussed in the foreg the nature of expenses and overall facts as discussed in the foreg the nature of expenses and overall facts as discussed in the foregoing, we note that these expenses were incurred by sales personnel of the assessee note that these expenses were incurred by sales personnel of the assessee note that these expenses were incurred by sales personnel of the assessee and not paid to any doctors or medical practitioners. Accordingly, the and not paid to any doctors or medical practitioners. Accordingly, the and not paid to any doctors or medical practitioners. Accordingly, the disallowance of taxi hire charges is held to be unwarranted in the facts of disallowance of taxi hire charges is held to be unwarranted in the facts of disallowance of taxi hire charges is held to be unwarranted in the facts of this case, and we direct t this case, and we direct to delete the same in all AYs. 11.26 As far as the sub 11.26 As far as the sub-head ‘Field Printing Expenses’ is concerned, it is head ‘Field Printing Expenses’ is concerned, it is noted that these expenses included printing of files, folders for the field noted that these expenses included printing of files, folders for the field noted that these expenses included printing of files, folders for the field staff and pads for the doctors to make noting’s or prescribe drugs when staff and pads for the doctors to make noting’s or prescribe drugs when staff and pads for the doctors to make noting’s or prescribe drugs when attending camps. The AO is noted to have disallowed these expenses ending camps. The AO is noted to have disallowed these expenses ending camps. The AO is noted to have disallowed these expenses holding it to have been incurred for the benefit of doctors, which was holding it to have been incurred for the benefit of doctors, which was holding it to have been incurred for the benefit of doctors, which was deleted by the Ld. CIT(A). Before us, the Ld. AR has placed sample copies deleted by the Ld. CIT(A). Before us, the Ld. AR has placed sample copies deleted by the Ld. CIT(A). Before us, the Ld. AR has placed sample copies of invoices at Pages 250 of invoices at Pages 250-253, 267-268 of Paper Book No. 3 to evidence the Book No. 3 to evidence the nature of printing charges incurred by the assessee. Having perused the nature of printing charges incurred by the assessee. Having perused the nature of printing charges incurred by the assessee. Having perused the

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same, we note that these expenses related to printing of files, folders, pads same, we note that these expenses related to printing of files, folders, pads same, we note that these expenses related to printing of files, folders, pads and pens which were understandably to be used by the field staff and and pens which were understandably to be used by the field staff and and pens which were understandably to be used by the field staff and also the doctors who were attending camps. Going by the nature of these octors who were attending camps. Going by the nature of these octors who were attending camps. Going by the nature of these expenses, it cannot be termed as ‘freebies’ given to doctors and hence we expenses, it cannot be termed as ‘freebies’ given to doctors and hence we expenses, it cannot be termed as ‘freebies’ given to doctors and hence we uphold the order of Ld. CIT(A) deleting the same. uphold the order of Ld. CIT(A) deleting the same. 11.27 The next sub 11.27 The next sub-head for our consideration is ‘Trade Relation Expen head for our consideration is ‘Trade Relation Expenses & Gifts for Sales Promotion’. Briefly noted, these expenses are noted to & Gifts for Sales Promotion’. Briefly noted, these expenses are noted to & Gifts for Sales Promotion’. Briefly noted, these expenses are noted to cover the cost of articles / gifts purchased by field staff to be distributed to cover the cost of articles / gifts purchased by field staff to be distributed to cover the cost of articles / gifts purchased by field staff to be distributed to wholesalers / stockiest / business partners etc. The assessee is noted to wholesalers / stockiest / business partners etc. The assessee is noted to wholesalers / stockiest / business partners etc. The assessee is noted to have placed sample suppo have placed sample supporting’s at Page Nos. 270 to 279 of Paper Book rting’s at Page Nos. 270 to 279 of Paper Book No. 3. It is observed that, the AO had disallowed these expenses under No. 3. It is observed that, the AO had disallowed these expenses under No. 3. It is observed that, the AO had disallowed these expenses under erroneous understanding that these were given to doctors. On appeal, the erroneous understanding that these were given to doctors. On appeal, the erroneous understanding that these were given to doctors. On appeal, the Ld. CIT(A) in AY 2014 Ld. CIT(A) in AY 2014-15 is noted to have deleted the addition by 15 is noted to have deleted the addition by observing as under : observing as under :- ….. 11.27.1 The Ld. CIT, DR appearing for the Revenue was unable to dislodge 11.27.1 The Ld. CIT, DR appearing for the Revenue was unable to dislodge 11.27.1 The Ld. CIT, DR appearing for the Revenue was unable to dislodge the above findings of the Ld. CIT(A) in light of the details placed by the the above findings of the Ld. CIT(A) in light of the details placed by the the above findings of the Ld. CIT(A) in light of the details placed by the assessee in the paper book. We accordingly uphold the order of Ld. CIT(A) assessee in the paper book. We accordingly uphold the order of Ld. CIT(A) assessee in the paper book. We accordingly uphold the order of Ld. CIT(A) deleting the same. the same. 11.28 The last sub 11.28 The last sub-head is ‘Air Ticket Expenses’. In some of the AYs, the head is ‘Air Ticket Expenses’. In some of the AYs, the AO is also noted to have identified expenses incurred on air tickets of AO is also noted to have identified expenses incurred on air tickets of AO is also noted to have identified expenses incurred on air tickets of doctors attending conference, which was disallowed u/s 37(1) of the Act doctors attending conference, which was disallowed u/s 37(1) of the Act doctors attending conference, which was disallowed u/s 37(1) of the Act and the Ld. CIT(A) is obser and the Ld. CIT(A) is observed to have restricted the disallowance to 10%. ved to have restricted the disallowance to 10%. According to us, the air ticket expenses paid for doctors directly fell under According to us, the air ticket expenses paid for doctors directly fell under According to us, the air ticket expenses paid for doctors directly fell under the mischief of MCI Regulations 2009 and was thus not allowable as the mischief of MCI Regulations 2009 and was thus not allowable as the mischief of MCI Regulations 2009 and was thus not allowable as deduction under Explanation (1) to Section 37(1) of the Act. We deduction under Explanation (1) to Section 37(1) of the Act. We deduction under Explanation (1) to Section 37(1) of the Act. We thus reverse the order of Ld. CIT(A) in this regard and uphold the action of AO reverse the order of Ld. CIT(A) in this regard and uphold the action of AO reverse the order of Ld. CIT(A) in this regard and uphold the action of AO disallowing the same in full. disallowing the same in full. 28. It is submitted that the facts involved during the year under consideration It is submitted that the facts involved during the year under consideration It is submitted that the facts involved during the year under consideration are identical to those adjudicated by the Hon’ble Tribunal in earlier years. The are identical to those adjudicated by the Hon’ble Tribunal in ear are identical to those adjudicated by the Hon’ble Tribunal in ear nature of expenditure, heads of disallowance, basis adopted by the Ld. AO for nature of expenditure, heads of disallowance, basis adopted by the Ld. AO for nature of expenditure, heads of disallowance, basis adopted by the Ld. AO for making the disallowance and even the statements relied upon by the department making the disallowance and even the statements relied upon by the department making the disallowance and even the statements relied upon by the department arise from the very same search proceedings. Accordingly, the issue stands fully arise from the very same search proceedings. Accordingly, the issue stands fully arise from the very same search proceedings. Accordingly, the issue stands fully covered by the earlier order of the Hon’ble Tribunal in appellant’s own case. ered by the earlier order of the Hon’ble Tribunal in appellant’s own case. ered by the earlier order of the Hon’ble Tribunal in appellant’s own case. 29. In view of the aforesaid facts and binding decision of the Hon’ble ITAT in In view of the aforesaid facts and binding decision of the Hon’ble ITAT in In view of the aforesaid facts and binding decision of the Hon’ble ITAT in appellant’s own case on identical facts and circumstances, it is submitted that appellant’s own case on identical facts and circumstances, it is submitted that appellant’s own case on identical facts and circumstances, it is submitted that the principle of consistency as well as judicial discipline requires that the same the principle of consistency as well as judicial discipline requires that the same the principle of consistency as well as judicial discipline requires that the same view be followed during the year under consideration also. Thus, it is humbly uring the year under consideration also. Thus, it is humbly uring the year under consideration also. Thus, it is humbly prayed that the disallowance deleted by the ld. CIT(A) are correct and the order of prayed that the disallowance deleted by the ld. CIT(A) are correct and the order of prayed that the disallowance deleted by the ld. CIT(A) are correct and the order of

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ld. CIT(A) may kindly be upheld to that extent and the grounds raised by the ld. CIT(A) may kindly be upheld to that extent and the grounds raised by the ld. CIT(A) may kindly be upheld to that extent and the grounds raised by the revenue on this issue may kindly be revenue on this issue may kindly be dismissed.” 7.21 The learned CIT(A), while adjudicating the present year, has The learned CIT(A), while adjudicating the present year, has The learned CIT(A), while adjudicating the present year, has faithfully followed the aforesaid binding precedent. A perusal of the faithfully followed the aforesaid binding precedent. A perusal of the faithfully followed the aforesaid binding precedent. A perusal of the impugned order demonstrates that each category of expenditure impugned order demonstrates that each category of expenditure impugned order demonstrates that each category of expenditure has been examined head has been examined head-wise and the relief has been granted s been granted strictly in conformity with the findings recorded by the Coordinate strictly in conformity with the findings recorded by the Coordinate strictly in conformity with the findings recorded by the Coordinate Bench. The relevant findings of the learned CIT(A) reveal that no Bench. The relevant findings of the learned CIT(A) reveal that no Bench. The relevant findings of the learned CIT(A) reveal that no departure has been made from the ratio laid down by the Tribunal departure has been made from the ratio laid down by the Tribunal departure has been made from the ratio laid down by the Tribunal in the assessee’s own case. in the assessee’s own case.

7.22 Before us, the learned Departmental Representative was , the learned Departmental Representative was , the learned Departmental Representative was unable to point out any distinguishing feature in the facts of the unable to point out any distinguishing feature in the facts of the unable to point out any distinguishing feature in the facts of the year under consideration vis year under consideration vis-à-vis the facts considered by the vis the facts considered by the Tribunal in the earlier years. No material has been brought on Tribunal in the earlier years. No material has been brought on Tribunal in the earlier years. No material has been brought on record to demonstrate either a change in the factual matrix or a rate either a change in the factual matrix or a rate either a change in the factual matrix or a change in the legal position warranting a departure from the view change in the legal position warranting a departure from the view change in the legal position warranting a departure from the view consistently consistently consistently adopted adopted adopted by by by the the the Coordinate Coordinate Coordinate Bench. Bench. Bench. In In In such such such circumstances, the principles of judicial discipline and consistency circumstances, the principles of judicial discipline and consistency circumstances, the principles of judicial discipline and consistency require us to follow the earlier decision rendered in the assessee’s w the earlier decision rendered in the assessee’s w the earlier decision rendered in the assessee’s own case on identical facts. own case on identical facts.

7.23 It is a settled proposition that where a fundamental aspect It is a settled proposition that where a fundamental aspect It is a settled proposition that where a fundamental aspect permeating through different assessment years has been found as a permeating through different assessment years has been found as a permeating through different assessment years has been found as a fact one way or the other and the position con fact one way or the other and the position continues to remain tinues to remain

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unchanged, consistency in approach ought to be maintained unless unchanged, consistency in approach ought to be maintained unless unchanged, consistency in approach ought to be maintained unless there exist compelling reasons to take a different view. No such there exist compelling reasons to take a different view. No such there exist compelling reasons to take a different view. No such reason has been demonstrated before us. reason has been demonstrated before us.

7.24 Accordingly, Accordingly, Accordingly, respectfully respectfully respectfully following following following the the the decision decision decision of of of the the the Coordinate Bench in the assessee’s own case for the preceding te Bench in the assessee’s own case for the preceding te Bench in the assessee’s own case for the preceding assessment years, we find no infirmity in the order of the learned assessment years, we find no infirmity in the order of the learned assessment years, we find no infirmity in the order of the learned CIT(A) in granting relief in respect of the expenditure held to be CIT(A) in granting relief in respect of the expenditure held to be CIT(A) in granting relief in respect of the expenditure held to be outside the ambit of the MCI Regulations while sustaining the outside the ambit of the MCI Regulations while sustaining the outside the ambit of the MCI Regulations while sustaining the disallowance relating to travel and hotel facilities provided to owance relating to travel and hotel facilities provided to owance relating to travel and hotel facilities provided to medical practitioners. medical practitioners. We, therefore, uphold the findings of the We, therefore, uphold the findings of the learned CIT(A) on the issue under consideration. Consequently, learned CIT(A) on the issue under consideration. Consequently, learned CIT(A) on the issue under consideration. Consequently, Ground Nos. 2 and 3 raised by the assessee and Ground No. 1 Ground Nos. 2 and 3 raised by the assessee and Ground No. 1 Ground Nos. 2 and 3 raised by the assessee and Ground No. 1 raised by the Revenue stand dismissed. the Revenue stand dismissed.

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Chemicals Pvt. Ltd., Anuh Pharma Ltd., Calyx Chemicals Pvt. Ltd., Chemicals Pvt. Ltd., Anuh Pharma Ltd., Calyx Chemicals Pvt. Ltd., Chemicals Pvt. Ltd., Anuh Pharma Ltd., Calyx Chemicals Pvt. Ltd., Mehta API Pvt. Ltd. and Farmsons Ltd. Mehta API Pvt. Ltd. and Farmsons Ltd.

8.1 The facts relevant to the issue u The facts relevant to the issue under consideration are that, nder consideration are that, during the course of a search and seizure operation conducted during the course of a search and seizure operation conducted during the course of a search and seizure operation conducted under section 132 of the Act, cash amounting to ₹1,17,00,000/- under section 132 of the Act, cash amounting to under section 132 of the Act, cash amounting to was found and seized from the residential premises of Shri Prem was found and seized from the residential premises of Shri Prem was found and seized from the residential premises of Shri Prem Chand Godha, Shri Prashant Godha and S Chand Godha, Shri Prashant Godha and Shri Pranay Godha hri Pranay Godha situated at Flat Nos. 1701/1702, Oberoi Sky Heights, Lokhandwala situated at Flat Nos. 1701/1702, Oberoi Sky Heights, Lokhandwala situated at Flat Nos. 1701/1702, Oberoi Sky Heights, Lokhandwala Complex, Andheri (West), Mumbai. Complex, Andheri (West), Mumbai. During the course of the search During the course of the search proceedings, Shri Prashant Godha, Director of the assessee- proceedings, Shri Prashant Godha, Director of the assessee proceedings, Shri Prashant Godha, Director of the assessee company, in his statement recorded under section 132(4) of the Act, company, in his statement recorded under section 1 company, in his statement recorded under section 1 stated that the aforesaid cash had been generated from the alleged stated that the aforesaid cash had been generated from the alleged stated that the aforesaid cash had been generated from the alleged inflation of purchase prices of certain pharmaceutical raw materials inflation of purchase prices of certain pharmaceutical raw materials inflation of purchase prices of certain pharmaceutical raw materials procured by the assessee procured by the assessee-group. The Assessing Officer noted that group. The Assessing Officer noted that the said statement was subsequently r the said statement was subsequently reiterated by certain directors eiterated by certain directors and officials of the group, who allegedly disclosed that such over- and officials of the group, who allegedly disclosed that such over and officials of the group, who allegedly disclosed that such over invoicing or inflation of purchases was carried out through an invoicing or inflation of purchases was carried out through an invoicing or inflation of purchases was carried out through an intermediary concern, namely, M/s Reynolds Petro Chems Limited. intermediary concern, namely, M/s Reynolds Petro Chems Limited. intermediary concern, namely, M/s Reynolds Petro Chems Limited. The Assessing Officer further o The Assessing Officer further observed that the Chief Financial bserved that the Chief Financial Officer of the group furnished details of the alleged over-invoicing Officer of the group furnished details of the alleged over Officer of the group furnished details of the alleged over and stated that one of the group concerns, namely, M/s Makers and stated that one of the group concerns, namely, M/s Makers and stated that one of the group concerns, namely, M/s Makers Laboratories Limited, had allegedly undertaken over-invoicing in Laboratories Limited, had allegedly undertaken over Laboratories Limited, had allegedly undertaken over respect of the following ra respect of the following raw materials:-

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Sr. Name of the Raw Material Name of the Raw Material Over-Invoicing/Kg Amount of Over Amount of Over- No. invoicing (in Rs. invoicing (in Rs. 1. Meta-Chigo Aniline (MCA) Chigo Aniline (MCA) Rs.30/- 1,23,21,900/- 2. Paracetamol Rs. 10/- 3,58,76,350/- 3. Erythromycin Estolate Erythromycin Estolate Rs. 200/- 1,73,45,000/- Total 6,55,43,250/- 6,55,43,250/

8.2 The Assessing Officer also placed reliance upon the statement of The Assessing Officer also placed reliance upon the statement of The Assessing Officer also placed reliance upon the statement of Shri Jagdish Chandra Somani, Director of M/s Reynolds Petro Shri Jagdish Chandra Somani, Director of M/s Reynolds Petro Shri Jagdish Chandra Somani, Director of M/s Reynolds Petro Chems Limited, recorded during survey proceedings conducted Chems Limited, recorded during survey proceedings conducted Chems Limited, recorded during survey proceedings conducted under section 133A of the Act on 16.04.2015. under section 133A of the Act on 16.04.2015. According to the According to the Assessing Officer, Shri Somani admitted that M/s Reynolds Petro Assessing Officer, Shri Somani admitted that M/s Reynolds Petro Assessing Officer, Shri Somani admitted that M/s Reynolds Petro Chems Limited procured raw materials from the regular suppliers of Chems Limited procured raw materials from the regular suppliers of Chems Limited procured raw materials from the regular suppliers of the group concerns, inflated the purchase prices and thereafter the group concerns, inflated the purchase prices and thereafter the group concerns, inflated the purchase prices and thereafter supplied the same to the concerned entities. supplied the same to the concerned entities. It was further alleged It was further alleged that the inflated component was subsequently returned in cash that the inflated component was subsequently returned in cash that the inflated component was subsequently returned in cash after retention of a nominal commission of 5%. after retention of a nominal commission of 5%. A substantial part of A substantial part of the Assessing Officer’s reasoning rested upon the seizure of cash of the Assessing Officer’s reasoning rested upon the seizure of cash of the Assessing Officer’s reasoning rested upon the seizure of cash of ₹1.17 crores from the residence of Shri Prashant Godha. According from the residence of Shri Prashant Godha. According from the residence of Shri Prashant Godha. According to the Assessing Officer, Shri Prashant Godha had admitted in his to the Assessing Officer, Shri Prashant Godha had admitted in his to the Assessing Officer, Shri Prashant Godha had admitted in his statement that the said cash represented proceeds generated statement that the said cash represented proceeds generated statement that the said cash represented proceeds generated through over-invoicing of purchases undertaken by the assessee invoicing of purchases undertaken by the assessee- invoicing of purchases undertaken by the assessee company. The Assessing Officer further relied upon statements Assessing Officer further relied upon statements Assessing Officer further relied upon statements recorded from various employees and key managerial personnel, recorded from various employees and key managerial personnel, recorded from various employees and key managerial personnel, namely Shri Manoj Kumar Jain, Shri Manoj Jayawant, Shri Peter namely Shri Manoj Kumar Jain, Shri Manoj Jayawant, Shri Peter namely Shri Manoj Kumar Jain, Shri Manoj Jayawant, Shri Peter

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Fernandes and Shri Ajit Jain. According to the Assessing Officer, Fernandes and Shri Ajit Jain. According to the Assessing Officer, Fernandes and Shri Ajit Jain. According to the Assessing Officer, these individuals acknowledged that certain purchases were acknowledged that certain purchases were acknowledged that certain purchases were inflated and that the excess amounts were allegedly routed back in inflated and that the excess amounts were allegedly routed back in inflated and that the excess amounts were allegedly routed back in cash through M/s Reynolds Petro Chems Limited cash through M/s Reynolds Petro Chems Limited. . The ld. AO also relied on the statements of the key persons of M/s Reynolds Petro the statements of the key persons of M/s Reynolds Petro the statements of the key persons of M/s Reynolds Petro Chems Limited, whe Chems Limited, wherein the alleged modus operandi relating to rein the alleged modus operandi relating to over-invoicing and circulation of cash was stated to have been invoicing and circulation of cash was stated to have been invoicing and circulation of cash was stated to have been explained. The Assessing Officer treated such statements as explained. The Assessing Officer treated such statements as explained. The Assessing Officer treated such statements as corroborative evidence supporting the allegation against the corroborative evidence supporting the allegation against the corroborative evidence supporting the allegation against the assessee. Apart from the sta Apart from the statements recorded during the course of tements recorded during the course of search and survey proceedings, the Assessing Officer also sought to search and survey proceedings, the Assessing Officer also sought to search and survey proceedings, the Assessing Officer also sought to substantiate the allegation of over substantiate the allegation of over-invoicing by comparing the rates invoicing by comparing the rates at which the assessee had purchased raw materials from certain at which the assessee had purchased raw materials from certain at which the assessee had purchased raw materials from certain suppliers with the rates charged by those suppliers to other rates charged by those suppliers to other purchasers. Based on information obtained under section 133(6) of purchasers. Based on information obtained under section 133(6) of purchasers. Based on information obtained under section 133(6) of the Act and certain internal comparative analyses, the Assessing the Act and certain internal comparative analyses, the Assessing the Act and certain internal comparative analyses, the Assessing Officer concluded that the assessee had paid purchase prices Officer concluded that the assessee had paid purchase prices Officer concluded that the assessee had paid purchase prices substantially higher substantially higher than prevailing market rates and had than prevailing market rates and had consequently incurred inflated purchase expenditure. consequently incurred inflated purchase expenditure. consequently incurred inflated purchase expenditure.

8.3 On the basis of the aforesaid material, the Assessing Officer On the basis of the aforesaid material, the Assessing Officer On the basis of the aforesaid material, the Assessing Officer issued a show-cause notice requiring the assessee to explain why cause notice requiring the assessee to explain why cause notice requiring the assessee to explain why an addition on account of alleged o an addition on account of alleged over-invoicing of purchases invoicing of purchases should not be made. In response, the assessee furnished retraction should not be made. In response, the assessee furnished retraction should not be made. In response, the assessee furnished retraction

IPCA Laboratories Limited, IPCA Laboratories Limited, 37 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

affidavits and statements from the concerned directors and officials, affidavits and statements from the concerned directors and officials, affidavits and statements from the concerned directors and officials, categorically denying that any over categorically denying that any over-invoicing had been undertaken invoicing had been undertaken by the assessee-company. T company. The assessee also contested the factual he assessee also contested the factual and legal basis of the allegations and legal basis of the allegations leveled by the Revenue. by the Revenue.

8.4 The Assessing Officer, however, was not persuaded by the The Assessing Officer, however, was not persuaded by the The Assessing Officer, however, was not persuaded by the explanation offered by the assessee. Relying upon the statements explanation offered by the assessee. Relying upon the statements explanation offered by the assessee. Relying upon the statements recorded during search and post recorded during search and post-search proceedings, the alleged search proceedings, the alleged modus operandi involving M/s Reynolds Petro Chems Limited, and modus operandi involving M/s Reynolds Petro Chems Limited, and modus operandi involving M/s Reynolds Petro Chems Limited, and the comparative analysis of purchase rates, he concluded that the comparative analysis of purchase rates, he concluded that the comparative analysis of purchase rates, he concluded that purchases of raw materials had been inflated in the books of the purchases of raw materials had been inflated in the books of the purchases of raw materials had been inflated in the books of the assessee-company. Accordingly, he company. Accordingly, he quantified the alleged over quantified the alleged over- invoicing at ₹1,40,35,340/ 1,40,35,340/- and held the same to be liable for and held the same to be liable for disallowance as under: as under:-

Sr. Name of the Raw Name of the Buyer Quantity Over Total No Material in Kg Invoicing/Kg Invoicing/Kg amount of (in Rs.) over invoicing 1. Meta-Chloro Aniline IPCA Lab. Limited 119953 Rs.30/ Rs.30/- 3598590 (MCA) 2. Paracetamol IPCA Lab. Limited 553175 Rs.10/- Rs.10/ 5531750 Erythromycin IPCA Lab. Limited 24525 Rs.200/- Rs.200/ 4905000 Estolate Total 1,40,35,340

8.5 The Assessing Officer ultimately observed that since the The Assessing Officer ultimately observed that since the The Assessing Officer ultimately observed that since the source of the cash seized during the search was allegedly traceable source of the cash seized during the search was allegedly traceable source of the cash seized during the search was allegedly traceable to the assessee-company and the same had, according to him, been company and the same had, according to him, been company and the same had, according to him, been

IPCA Laboratories Limited, IPCA Laboratories Limited, 38 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

admitted admitted during during the the search, search, post-search post search and and assessment assessment proceedings, an addition of , an addition of ₹1,40,35,340/- was required to be made was required to be made substantively substantively substantively in in in the the the hands hands hands of of of the the the assessee-company. assessee assessee Simultaneously, an equivalent amount was added on a protective Simultaneously, an equivalent amount was added on a protective Simultaneously, an equivalent amount was added on a protective basis in the hands of Shri Prashant Godha, being the person from basis in the hands of Shri Prashant Godha, being the person from basis in the hands of Shri Prashant Godha, being the person from whose possession the whose possession the cash of ₹1.17 crores had been found and had been found and seized during the course of the search proceedings. seized during the course of the search proceedings.

8.6 On further appeal the On further appeal the ld. CIT(A) noted that the identical ld. CIT(A) noted that the identical addition on this issue was also made in earlier years based on the addition on this issue was also made in earlier years based on the addition on this issue was also made in earlier years based on the search findings and further that this issue has been dealt with by search findings and further that this issue has been dealt with by search findings and further that this issue has been dealt with by the Hon’ble ITAT vide its order dated 08.04.2024. After considering the Hon’ble ITAT vide its order dated 08.04.2024. After considering the Hon’ble ITAT vide its order dated 08.04.2024. After considering the entire factual matrix and following the decision of the Hon’ble l matrix and following the decision of the Hon’ble l matrix and following the decision of the Hon’ble ITAT in assessee’s own case on identical facts, ld. CIT(A) has deleted ITAT in assessee’s own case on identical facts, ld. CIT(A) has deleted ITAT in assessee’s own case on identical facts, ld. CIT(A) has deleted the addition made by the ld. AO on account of over invoicing. The the addition made by the ld. AO on account of over invoicing. the addition made by the ld. AO on account of over invoicing. Ld. CIT(A) deleted the disallowance observing as under:- Ld. CIT(A) deleted the disallowance observing as under: Ld. CIT(A) deleted the disallowance observing as under:

“9.5. During the course of appellate proceedings, the assessee submitted that the g the course of appellate proceedings, the assessee submitted that the g the course of appellate proceedings, the assessee submitted that the disallowance made by the AO in the assessment order is purely based on the disallowance made by the AO in the assessment order is purely based on the disallowance made by the AO in the assessment order is purely based on the statements recorded of various persons during the course of search. Further, the statements recorded of various persons during the course of search. Further, the statements recorded of various persons during the course of search. Further, the assessee also submitted that assessee also submitted that apart from the statements, no incriminating apart from the statements, no incriminating material found during the course of search which could lead to a conclusion that material found during the course of search which could lead to a conclusion that material found during the course of search which could lead to a conclusion that the assessee has indulged into over invoicing while purchasing the raw the assessee has indulged into over invoicing while purchasing the raw the assessee has indulged into over invoicing while purchasing the raw materials. 9.6 Further, the assessee also submitted that Sh 9.6 Further, the assessee also submitted that Shri Prashant Godha has ri Prashant Godha has submitted his clarification letter before the investigation wing letter dated submitted his clarification letter before the investigation wing letter dated submitted his clarification letter before the investigation wing letter dated 27.11.2015 stating the sum of Rs. 1.17 crores which was found at the residence 27.11.2015 stating the sum of Rs. 1.17 crores which was found at the residence 27.11.2015 stating the sum of Rs. 1.17 crores which was found at the residence of Shri Prashant Godha was his own income was eventually offered by him in his of Shri Prashant Godha was his own income was eventually offered by him in hi of Shri Prashant Godha was his own income was eventually offered by him in hi return of income for AY 2015 return of income for AY 2015-16. The assessee also submitted that Shri Prashant 16. The assessee also submitted that Shri Prashant Godha has filed affidavit for retraction of the statement dated 23.12.2014. It is Godha has filed affidavit for retraction of the statement dated 23.12.2014. It is Godha has filed affidavit for retraction of the statement dated 23.12.2014. It is observed that the said income was duly accepted by the revenue in the case of observed that the said income was duly accepted by the revenue in the case of observed that the said income was duly accepted by the revenue in the case of

IPCA Laboratories Limited, IPCA Laboratories Limited, 39 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Shri Prashant Godha. The assesse in its submission also submitted that the Godha. The assesse in its submission also submitted that the Godha. The assesse in its submission also submitted that the reasons for the time laps in filling the retraction affidavit. reasons for the time laps in filling the retraction affidavit. 9.7 Further, with regards to the statement recorded of various employees (as 9.7 Further, with regards to the statement recorded of various employees (as 9.7 Further, with regards to the statement recorded of various employees (as referred above), the assessee submitted that all the th referred above), the assessee submitted that all the three employees have ree employees have subsequently filed affidavit for retraction of the statement. Accordingly, the subsequently filed affidavit for retraction of the statement. Accordingly, the subsequently filed affidavit for retraction of the statement. Accordingly, the assessee submitted given by all the three employees is not binding on the assessee submitted given by all the three employees is not binding on the assessee submitted given by all the three employees is not binding on the assessee and has not evidentiary value. assessee and has not evidentiary value. 9.8 Further, the assessee in its submission 9.8 Further, the assessee in its submission has stressed on the fact that has stressed on the fact that employees themselves have stated that purchases has been made from M/s. employees themselves have stated that purchases has been made from M/s. employees themselves have stated that purchases has been made from M/s. Reynolds Petro Chem Ltd in the books of M/s. Makers Laboratories Limited, the Reynolds Petro Chem Ltd in the books of M/s. Makers Laboratories Limited, the Reynolds Petro Chem Ltd in the books of M/s. Makers Laboratories Limited, the sister concern of the assessee company. Here, it is also important to note that the sister concern of the assessee company. Here, it is also important to note sister concern of the assessee company. Here, it is also important to note corresponding addition on account of purchases made from M/s. Reynolds Petro corresponding addition on account of purchases made from M/s. Reynolds Petro corresponding addition on account of purchases made from M/s. Reynolds Petro Chem Ltd. has already been disallowed in the case of M/s. Maker Laboratories Chem Ltd. has already been disallowed in the case of M/s. Maker Laboratories Chem Ltd. has already been disallowed in the case of M/s. Maker Laboratories Ltd. by the department in various year to the tune of Rs. 2.18 Crs. which is much Ltd. by the department in various year to the tune of Rs. 2.18 Crs. which is much Ltd. by the department in various year to the tune of Rs. 2.18 Crs. which is much more than cash found at the residence of the promoter. ash found at the residence of the promoter. 9.9 Further, with regards to the statement recorded of the key person M/s. 9.9 Further, with regards to the statement recorded of the key person M/s. 9.9 Further, with regards to the statement recorded of the key person M/s. Reynolds Petro Chem Ltd (Shri Jagdish Chandra Somani ) wherein he has Reynolds Petro Chem Ltd (Shri Jagdish Chandra Somani ) wherein he has Reynolds Petro Chem Ltd (Shri Jagdish Chandra Somani ) wherein he has accepted on oath that assessee is engaged in purchasing raw materials by over accepted on oath that assessee is engaged in purchasing raw materia accepted on oath that assessee is engaged in purchasing raw materia invoicing, It is observed that such statement was never confronted with the invoicing, It is observed that such statement was never confronted with the invoicing, It is observed that such statement was never confronted with the assessee during the course of assessment proceedings. Further, it is also assessee during the course of assessment proceedings. Further, it is also assessee during the course of assessment proceedings. Further, it is also observed that the modus operandi used for providing the over invoicing/ inflated observed that the modus operandi used for providing the over invoicing/ inflated observed that the modus operandi used for providing the over invoicing/ inflated purchases was never linked by the AO with the case of the assessee . never linked by the AO with the case of the assessee . never linked by the AO with the case of the assessee . 9.10 It is also observed that the assessee has not purchased any materials from 9.10 It is also observed that the assessee has not purchased any materials from 9.10 It is also observed that the assessee has not purchased any materials from M/s. Reynolds Petro Chem Ltd. as can be perused from the assessment order. M/s. Reynolds Petro Chem Ltd. as can be perused from the assessment order. M/s. Reynolds Petro Chem Ltd. as can be perused from the assessment order. Further, AO has nowhere able to link the purc Further, AO has nowhere able to link the purchases of the assessee with M/s. hases of the assessee with M/s. Reynolds Petro Chem Ltd. Also, none of the companies from whom the materials Reynolds Petro Chem Ltd. Also, none of the companies from whom the materials Reynolds Petro Chem Ltd. Also, none of the companies from whom the materials have been purchased has confirmed of paying any commission to M/s. M/s. have been purchased has confirmed of paying any commission to M/s. M/s. have been purchased has confirmed of paying any commission to M/s. M/s. Reynolds Petro Chem Ltd. Reynolds Petro Chem Ltd. 9.11 The assesse has stated that identical additi 9.11 The assesse has stated that identical addition were made in earlier years on were made in earlier years on account of the same search findings and the matter went upto ITAT. The on account of the same search findings and the matter went upto ITAT. The on account of the same search findings and the matter went upto ITAT. The Tribunal has observed that the assessee has not made purchases from M/s. Tribunal has observed that the assessee has not made purchases from M/s. Tribunal has observed that the assessee has not made purchases from M/s. Reynolds Petro Chem Ltd. Further, the Tribunal has observed the peculiar fact Reynolds Petro Chem Ltd. Further, the Tribunal has observed the peculiar fact Reynolds Petro Chem Ltd. Further, the Tribunal has observed the peculiar fact that that only M/s Maker Laboratories Ltd had conducted transactions with M/s hat that only M/s Maker Laboratories Ltd had conducted transactions with M/s hat that only M/s Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference on account of over-invoicing in the hands of M/s Maker Laboratories Ltd. Further, invoicing in the hands of M/s Maker Laboratories Ltd. Further, invoicing in the hands of M/s Maker Laboratories Ltd. Further, the Tribunal also ob the Tribunal also observed that Shri Prashant Godha was also an erstwhile served that Shri Prashant Godha was also an erstwhile Director of M/s Maker Laboratories Ltd and that he had remitted his office only a Director of M/s Maker Laboratories Ltd and that he had remitted his office only a Director of M/s Maker Laboratories Ltd and that he had remitted his office only a few months prior to the date of search. Therefore, even if the statement of Mr. few months prior to the date of search. Therefore, even if the statement of Mr. few months prior to the date of search. Therefore, even if the statement of Mr. Godha was to be taken at face value, i.e Godha was to be taken at face value, i.e. the cash found on him was generated . the cash found on him was generated from over-invoicing, then he has mistakenly named the assessee instead of M/s invoicing, then he has mistakenly named the assessee instead of M/s invoicing, then he has mistakenly named the assessee instead of M/s Maker Laboratories Ltd in his statement. Maker Laboratories Ltd in his statement.

IPCA Laboratories Limited, IPCA Laboratories Limited, 40 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

9.12 Further, the appellant has explained that the comparison done by the AO is 9.12 Further, the appellant has explained that the comparison done by the AO is 9.12 Further, the appellant has explained that the comparison done by the AO is faulty wherein he has pick and choose the transactions to suit his contentions. has pick and choose the transactions to suit his contentions. has pick and choose the transactions to suit his contentions. Accordingly, the appellant stated that the disallowance made by the AO is not Accordingly, the appellant stated that the disallowance made by the AO is not Accordingly, the appellant stated that the disallowance made by the AO is not correct. 9.13 I have considered the facts of the case and submission of the appellant. I 9.13 I have considered the facts of the case and submission of the appellant. I 9.13 I have considered the facts of the case and submission of the appellant. I find that identical issue h find that identical issue has been dealt with by the Tribunal vide order dated as been dealt with by the Tribunal vide order dated 08.04.2024 (surpa) wherein all the necessary facts have been considered and the 08.04.2024 (surpa) wherein all the necessary facts have been considered and the 08.04.2024 (surpa) wherein all the necessary facts have been considered and the disallowance has been deleted. The relevant portion of the order reads as under:- disallowance has been deleted. The relevant portion of the order reads as under: disallowance has been deleted. The relevant portion of the order reads as under: “8.6 We have heard both the parties and pe “8.6 We have heard both the parties and perused the relevant statements and rused the relevant statements and retraction affidavits and also the other material placed on our record. The main retraction affidavits and also the other material placed on our record. The main retraction affidavits and also the other material placed on our record. The main thrust of the Revenue’s argument was that the addition made by the AO on thrust of the Revenue’s argument was that the addition made by the AO on thrust of the Revenue’s argument was that the addition made by the AO on account of over invoicing was justified as it was made on the basis account of over invoicing was justified as it was made on the basis account of over invoicing was justified as it was made on the basis of statements given by the three employees in the course of search u/s 132(4) of the Act, which given by the three employees in the course of search u/s 132(4) of the Act, which given by the three employees in the course of search u/s 132(4) of the Act, which is an important piece of evidence in itself and that their subsequent retraction, is an important piece of evidence in itself and that their subsequent retraction, is an important piece of evidence in itself and that their subsequent retraction, being an afterthought, was of no relevance. In order to adjudicate this conten being an afterthought, was of no relevance. In order to adjudicate this conten being an afterthought, was of no relevance. In order to adjudicate this contention, it is first relevant to examine the extant provisions of Section 132(4) of the Act, it is first relevant to examine the extant provisions of Section 132(4) of the Act, it is first relevant to examine the extant provisions of Section 132(4) of the Act, which reads as follows: which reads as follows: ………………… 8.7 From a bare reading of the aforesaid provision, it is noted that Section 132(4) 8.7 From a bare reading of the aforesaid provision, it is noted that Section 132(4) 8.7 From a bare reading of the aforesaid provision, it is noted that Section 132(4) of the Act empowers the authorized officer to exa of the Act empowers the authorized officer to examine on oath any person who is mine on oath any person who is found to be in possession or control of any books of account, documents, money to be in possession or control of any books of account, documents, money to be in possession or control of any books of account, documents, money etc. Such a statement made by that person may thereafter be used in evidence in etc. Such a statement made by that person may thereafter be used in evidence in etc. Such a statement made by that person may thereafter be used in evidence in any proceedings under the Act. Evidence is a mode or means to prov any proceedings under the Act. Evidence is a mode or means to prov any proceedings under the Act. Evidence is a mode or means to prove a fact-in- issue. Statement is an oral testimony of relevant fact; and an admission of a fact issue. Statement is an oral testimony of relevant fact; and an admission of a fact issue. Statement is an oral testimony of relevant fact; and an admission of a fact- in-issue is an important piece of evidence, provided it has been voluntarily given issue is an important piece of evidence, provided it has been voluntarily given issue is an important piece of evidence, provided it has been voluntarily given without any inducement, promise, threat or coercion. Once a statement recorde without any inducement, promise, threat or coercion. Once a statement recorde without any inducement, promise, threat or coercion. Once a statement recorded of a person who is in possession of any valuable thing or control of books found a person who is in possession of any valuable thing or control of books found a person who is in possession of any valuable thing or control of books found during search then it can be used as evidence in any proceedings under the Act during search then it can be used as evidence in any proceedings under the Act during search then it can be used as evidence in any proceedings under the Act and the presumption would be that it has been given by that person voluntarily. and the presumption would be that it has been given by that person voluntarily. and the presumption would be that it has been given by that person voluntarily. The burden to prove that the statement was incorrect based on mistake of fact or The burden to prove that the statement was incorrect based on mistake of fact or prove that the statement was incorrect based on mistake of fact or that it was not voluntarily obtained, but due to threat, coercion, promise etc., is that it was not voluntarily obtained, but due to threat, coercion, promise etc., is that it was not voluntarily obtained, but due to threat, coercion, promise etc., is upon the maker of statement. In this context, the Hon'ble Apex Court in the case of upon the maker of statement. In this context, the Hon'ble Apex Court in the case of upon the maker of statement. In this context, the Hon'ble Apex Court in the case of Pullengole Rubber Pro Pullengole Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) has held that duce Co. Ltd. v. State of Kerala (91 ITR 18) has held that although an admission is an extremely important piece of evidence but it cannot although an admission is an extremely important piece of evidence but it cannot although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made be said that it is conclusive. It was held that, it is open to the assessee who made be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is the admission to show that it is incorrect based on mistake of fact. An oral incorrect based on mistake of fact. An oral statement on a relevant fact is a piece of evidence, and the weight to be attached statement on a relevant fact is a piece of evidence, and the weight to be attached statement on a relevant fact is a piece of evidence, and the weight to be attached to it must depend on the factual circumstances in which it was made. It is open for to it must depend on the factual circumstances in which it was made. It is open for to it must depend on the factual circumstances in which it was made. It is open for the assessee to show the contents/facts stat the assessee to show the contents/facts stated therein to be erroneous or untrue, ed therein to be erroneous or untrue, based on mistake of fact. Hence, the position which emerges is that a statement based on mistake of fact. Hence, the position which emerges is that a statement based on mistake of fact. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by the assessee is able to show that the facts admitted by him was purely based on him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he wrong assumption of facts and able to adduce evidence/material to show that he wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So, when an admission u/s 132(4) of the Act was wrong on the facts he admitted. So, when an admission u/s 132(4) of the Act was wrong on the facts he admitted. So, when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross has been retracted on the aforesaid reasons, then the AO should cross has been retracted on the aforesaid reasons, then the AO should cross-examine

IPCA Laboratories Limited, IPCA Laboratories Limited, 41 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the person again to ascertain the correct facts. The AO ought to conduct proper the person again to ascertain the correct facts. The AO ought to conduct proper the person again to ascertain the correct facts. The AO ought to conduct proper investigation into the affairs of the assessee and gather corroborative material investigation into the affairs of the assessee and gather corroborative material investigation into the affairs of the assessee and gather corroborative material which would negate such retraction and prove that the facts admitted originally is which would negate such retraction and prove that the facts admitted originally is which would negate such retraction and prove that the facts admitted originally is correct and thus retraction can be discarded. t and thus retraction can be discarded. 8.8 In view of the above position of law, we now proceed to examine the facts on 8.8 In view of the above position of law, we now proceed to examine the facts on 8.8 In view of the above position of law, we now proceed to examine the facts on the present case. It is noted that the impugned addition on account of over the present case. It is noted that the impugned addition on account of over the present case. It is noted that the impugned addition on account of over- invoicing emanated from the statement of Mr. Prashant Godha. He is noted to invoicing emanated from the statement of Mr. Prashant Godha. He is noted to invoicing emanated from the statement of Mr. Prashant Godha. He is noted to have admitted in his st have admitted in his statement that the cash found in his possession was atement that the cash found in his possession was generated out of overinvoicing and that these proceeds belonged to the assessee generated out of overinvoicing and that these proceeds belonged to the assessee generated out of overinvoicing and that these proceeds belonged to the assessee- company. Based on his statement, the Investigating Authorities are noted to have company. Based on his statement, the Investigating Authorities are noted to have company. Based on his statement, the Investigating Authorities are noted to have enquired into the source/party from whom such enquired into the source/party from whom such over-invoicing was done. As noted invoicing was done. As noted from the statements of the three (3) employees extracted above, the Investigating from the statements of the three (3) employees extracted above, the Investigating from the statements of the three (3) employees extracted above, the Investigating Authorities had questioned them as to whether they were aware of any bogus Authorities had questioned them as to whether they were aware of any bogus Authorities had questioned them as to whether they were aware of any bogus purchases booked by the assessee company. To this, each of the e purchases booked by the assessee company. To this, each of the e purchases booked by the assessee company. To this, each of the employee is noted to have made the same averment that purchases were booked from M/s noted to have made the same averment that purchases were booked from M/s noted to have made the same averment that purchases were booked from M/s Reynolds Petro Chem Ltd but these purchases were not bogus and that only over Reynolds Petro Chem Ltd but these purchases were not bogus and that only over Reynolds Petro Chem Ltd but these purchases were not bogus and that only over invoicing was done. The Investigating Authorities are noted to have followed up invoicing was done. The Investigating Authorities are noted to have followed up invoicing was done. The Investigating Authorities are noted to have followed up this answer wi this answer with another question to explain the details of transactions made with th another question to explain the details of transactions made with M/s Reynolds Petro Chem Ltd and these employees are noted to have explained M/s Reynolds Petro Chem Ltd and these employees are noted to have explained M/s Reynolds Petro Chem Ltd and these employees are noted to have explained the same. Having perused each of these statements given by these three the same. Having perused each of these statements given by these three the same. Having perused each of these statements given by these three employees, it is evident that they had o employees, it is evident that they had only admitted to over nly admitted to over-invoicing being done through M/s Reynolds Petro Chem Ltd. The Ld. AR has rightly pointed out that through M/s Reynolds Petro Chem Ltd. The Ld. AR has rightly pointed out that through M/s Reynolds Petro Chem Ltd. The Ld. AR has rightly pointed out that none of these employees have named the assessee, i.e. M/s IPCA Laboratories none of these employees have named the assessee, i.e. M/s IPCA Laboratories none of these employees have named the assessee, i.e. M/s IPCA Laboratories Ltd. in their answers. Instead, while explaining the modus op Ltd. in their answers. Instead, while explaining the modus op Ltd. in their answers. Instead, while explaining the modus operandi, these employees are noted to have named M/s Maker Laboratories Ltd, which we note employees are noted to have named M/s Maker Laboratories Ltd, which we note employees are noted to have named M/s Maker Laboratories Ltd, which we note to be sister concern of the assessee who had made purchases from M/s Reynolds to be sister concern of the assessee who had made purchases from M/s Reynolds to be sister concern of the assessee who had made purchases from M/s Reynolds Petro Chem Ltd. It is not the Revenue’s case that the assessee had made any Petro Chem Ltd. It is not the Revenue’s case that the assessee had made any Petro Chem Ltd. It is not the Revenue’s case that the assessee had made any purchases from M/s Reynolds Petro Chem Ltd. The AO instead is noted to have om M/s Reynolds Petro Chem Ltd. The AO instead is noted to have om M/s Reynolds Petro Chem Ltd. The AO instead is noted to have used these statements to allege that purchases made from other vendors, namely, used these statements to allege that purchases made from other vendors, namely, used these statements to allege that purchases made from other vendors, namely, M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Calyx Chemicals and Pharmaceuticals Ltd and M/s Farmson Pharmaceuticals Pvt Ltd and M/s Farmson Pharmaceuticals Pvt Ltd were also subjected to over Ltd were also subjected to over-invoicing. Upon query by this Bench on this invoicing. Upon query by this Bench on this aspect, the Ld. AR confirmed that there were no purchases made by the assessee aspect, the Ld. AR confirmed that there were no purchases made by the assessee aspect, the Ld. AR confirmed that there were no purchases made by the assessee from M/s M/s Reynolds Petro Chem Ltd and this admitted factu from M/s M/s Reynolds Petro Chem Ltd and this admitted factu from M/s M/s Reynolds Petro Chem Ltd and this admitted factual position was not controverted by the Revenue. The Ld. AR brought to our notice that only M/s not controverted by the Revenue. The Ld. AR brought to our notice that only M/s not controverted by the Revenue. The Ld. AR brought to our notice that only M/s Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference on account of Chem Ltd, and that the AO had already drawn adverse inference on account of Chem Ltd, and that the AO had already drawn adverse inference on account of overinvoicing in the hands of M/s Maker Laboratories Ltd. The Ld. AR also ing in the hands of M/s Maker Laboratories Ltd. The Ld. AR also ing in the hands of M/s Maker Laboratories Ltd. The Ld. AR also brought to our notice that Shri Prashant Godha was also an erstwhile Director of brought to our notice that Shri Prashant Godha was also an erstwhile Director of brought to our notice that Shri Prashant Godha was also an erstwhile Director of M/s Maker Laboratories Ltd and that he had remitted his office only a few M/s Maker Laboratories Ltd and that he had remitted his office only a few M/s Maker Laboratories Ltd and that he had remitted his office only a few months prior to the date of search. months prior to the date of search. The Ld. AR has therefore rightly suggested that The Ld. AR has therefore rightly suggested that even if the statement of Mr. Godha was to be taken at face value, i.e. the cash even if the statement of Mr. Godha was to be taken at face value, i.e. the cash even if the statement of Mr. Godha was to be taken at face value, i.e. the cash found on him was generated from over found on him was generated from over-invoicing, then he has mistakenly named invoicing, then he has mistakenly named the assessee instead of M/s Maker Laboratories Ltd the assessee instead of M/s Maker Laboratories Ltd in his statement. Having in his statement. Having regard to these facts and evidences brought on record, we find force in the regard to these facts and evidences brought on record, we find force in the regard to these facts and evidences brought on record, we find force in the submissions of the Ld. AR that the statement given by Shri Prashant Godha that submissions of the Ld. AR that the statement given by Shri Prashant Godha that submissions of the Ld. AR that the statement given by Shri Prashant Godha that the cash found from his possession belonged to the assessee, which it had the cash found from his possession belonged to the assessee, which it had the cash found from his possession belonged to the assessee, which it had generated from over nerated from over-invoicing, was based on mistaken understanding of fact and invoicing, was based on mistaken understanding of fact and that his testimony was factually incorrect. This is also found to be corroborated by that his testimony was factually incorrect. This is also found to be corroborated by that his testimony was factually incorrect. This is also found to be corroborated by

IPCA Laboratories Limited, IPCA Laboratories Limited, 42 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the fact that Shri Prashant Godha had backed his retraction affidavit by offering the fact that Shri Prashant Godha had backed his retraction affidavit by offering the fact that Shri Prashant Godha had backed his retraction affidavit by offering the cash found in his possession to tax as his own unaccounted income and the nd in his possession to tax as his own unaccounted income and the nd in his possession to tax as his own unaccounted income and the Revenue is also noted to have accepted the said offer and assessed it to tax in his Revenue is also noted to have accepted the said offer and assessed it to tax in his Revenue is also noted to have accepted the said offer and assessed it to tax in his hands. The contemporaneous facts showed that assessee hands. The contemporaneous facts showed that assessee-company had not made company had not made any purchases from M/s Reynolds any purchases from M/s Reynolds Petro Chem Ltd, which was found to be Petro Chem Ltd, which was found to be engaged in giving inflated invoices. Moreover, the Revenue had already made engaged in giving inflated invoices. Moreover, the Revenue had already made engaged in giving inflated invoices. Moreover, the Revenue had already made additions on account of over additions on account of over-invoicing in hands of M/s Maker Laboratories Ltd in invoicing in hands of M/s Maker Laboratories Ltd in relation to the purchases from M/s Reynolds Petro Chem Ltd. relation to the purchases from M/s Reynolds Petro Chem Ltd. relation to the purchases from M/s Reynolds Petro Chem Ltd. Also, the cash found from the possession of Shri Prashant Godha had been ultimately assessed as his from the possession of Shri Prashant Godha had been ultimately assessed as his from the possession of Shri Prashant Godha had been ultimately assessed as his own undisclosed income. Considering the entire gamut of facts therefore, the own undisclosed income. Considering the entire gamut of facts therefore, the own undisclosed income. Considering the entire gamut of facts therefore, the original testimony of Shri Prashant Godha is found to be based on wrong original testimony of Shri Prashant Godha is found to be based on wrong original testimony of Shri Prashant Godha is found to be based on wrong assumption of facts, which makes it unsafe to rely on it and as discussed, the ion of facts, which makes it unsafe to rely on it and as discussed, the ion of facts, which makes it unsafe to rely on it and as discussed, the assessee has rebutted the same with evidence. Hence, we hold in aforesaid assessee has rebutted the same with evidence. Hence, we hold in aforesaid assessee has rebutted the same with evidence. Hence, we hold in aforesaid factual matrix, the AO erred to draw adverse inference in the hands of the factual matrix, the AO erred to draw adverse inference in the hands of the factual matrix, the AO erred to draw adverse inference in the hands of the assessee solely based on an incorre assessee solely based on an incorrect admission made by the Director on wrong ct admission made by the Director on wrong assumption of fact/mistake of fact. assumption of fact/mistake of fact. 8.9 As already noted above, the AO had erroneously referred to the statement of 8.9 As already noted above, the AO had erroneously referred to the statement of 8.9 As already noted above, the AO had erroneously referred to the statement of three (3) employees to justify the addition on account of over three (3) employees to justify the addition on account of over three (3) employees to justify the addition on account of over-invoicing from purchases made purchases made from vendors, M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma from vendors, M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd and Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd and Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd and M/s Farmson Pharmaceuticals Pvt Ltd. The AO, instead, is noted to have drawn M/s Farmson Pharmaceuticals Pvt Ltd. The AO, instead, is noted to have drawn M/s Farmson Pharmaceuticals Pvt Ltd. The AO, instead, is noted to have drawn this inference on his own surmises and not a this inference on his own surmises and not any incriminating material found in ny incriminating material found in the course of search. Overall, therefore, we find that the entire premise on which the course of search. Overall, therefore, we find that the entire premise on which the course of search. Overall, therefore, we find that the entire premise on which the AO alleged over the AO alleged over-invoicing of purchases by the assessee was fundamentally invoicing of purchases by the assessee was fundamentally flawed and not backed by any material or evidence. Accordingl flawed and not backed by any material or evidence. Accordingl flawed and not backed by any material or evidence. Accordingly, the additions made in this regard in the hands of the assessee is untenable.” made in this regard in the hands of the assessee is untenable.” made in this regard in the hands of the assessee is untenable.” 9.14 In light of the above decision and considering that factual position of the 9.14 In light of the above decision and considering that factual position of the 9.14 In light of the above decision and considering that factual position of the current year are identical to the facts of the assessment years which has been current year are identical to the facts of the assessment years which has been current year are identical to the facts of the assessment years which has been dealt by the Tribunal, the AO is directed to follow the decision of the ITAT. ibunal, the AO is directed to follow the decision of the ITAT. ibunal, the AO is directed to follow the decision of the ITAT. Accordingly, the addition made by the AO amounting to Rs.1,40,35,340 is should Accordingly, the addition made by the AO amounting to Rs.1,40,35,340 is should Accordingly, the addition made by the AO amounting to Rs.1,40,35,340 is should be deleted. Accordingly, ground no. 5,6 & 7 are allowed.” be deleted. Accordingly, ground no. 5,6 & 7 are allowed.” 8.7 Before us the ld counsel submitted that Before us the ld counsel submitted that the above is the above issue is directly covered by the order passed by the Hon’ble ITAT (supra) for directly covered by the order passed by the Hon’ble ITAT (supra) directly covered by the order passed by the Hon’ble ITAT (supra) earlier years wherein the findings of the search were considered & earlier years wherein the findings of the search were considered & earlier years wherein the findings of the search were considered & disallowance was deleted. Considering the above decision, it was disallowance was deleted. Considering the above decision, it disallowance was deleted. Considering the above decision, it submitted that the entire addition made by the ld. AO is solely submitted that the entire addition made by the l submitted that the entire addition made by the l based on statements recorded during the course of search based on statements recorded during the course of search based on statements recorded during the course of search proceedings and not on the basis of any incriminating material proceedings and not on the basis of any incriminating material proceedings and not on the basis of any incriminating material

IPCA Laboratories Limited, IPCA Laboratories Limited, 43 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

found during search. No loose papers, documents or any found during search. No loose papers, documents or any found during search. No loose papers, documents or any corroborative material was found which could establish that the corroborative material was found which could establish that the corroborative material was found which could establish that the assessee was indulged in over ssessee was indulged in over-invoicing of purchases. The invoicing of purchases. The impugned addition is therefore unsustainable in law. impugned addition is therefore unsustainable in law. impugned addition is therefore unsustainable in law. 8.8 It was submitted that ld. AO has heavily relied upon the cash submitted that ld. AO has heavily relied upon the cash submitted that ld. AO has heavily relied upon the cash of Rs.1.17 crores found from the residence of Shri Prashant Godha. found from the residence of Shri Prashant Godha. found from the residence of Shri Prashant Godha. However, Shri Prashant Godha has subsequently clarified by way of However, Shri Prashant Godha has subsequently clarified by way of However, Shri Prashant Godha has subsequently clarified by way of affidavit that the said cash belonged to him in his personal capacity affidavit that the said cash belonged to him in his personal capacity affidavit that the said cash belonged to him in his personal capacity and did not pertain to the appellant company. It was specifically and did not pertain to the appellant company. It was specifically and did not pertain to the appellant company. It was specifically clarified that the statement recorded during search was incorrectly ified that the statement recorded during search was incorrectly ified that the statement recorded during search was incorrectly recorded and the words linking the cash with the appellant recorded and the words linking the cash with the appellant recorded and the words linking the cash with the appellant company were wrongly incorporated. It company were wrongly incorporated. It was further submitted that further submitted that Shri Prashant Godha has already offered the said amount to tax in Shri Prashant Godha has already offered the said amount to tax in Shri Prashant Godha has already offered the said amount to tax in his individual return of income and the same has been accepted by s individual return of income and the same has been accepted by s individual return of income and the same has been accepted by the department in his assessment order. Once the revenue has the department in his assessment order. Once the revenue has the department in his assessment order. Once the revenue has accepted the amount as undisclosed income in the hands of Shri accepted the amount as undisclosed income in the hands of Shri accepted the amount as undisclosed income in the hands of Shri Prashant Godha, the department cannot simultaneously allege that Prashant Godha, the department cannot simultaneously allege that Prashant Godha, the department cannot simultaneously allege that the same amount represented income generated through over same amount represented income generated through over same amount represented income generated through over- invoicing by the assessee company. invoicing by the assessee company. 8.9 Further, it was also submitted that provisions of section 292C provisions of section 292C of the Act, wherein any cash found during search is presumed to of the Act, wherein any cash found during search is presumed to of the Act, wherein any cash found during search is presumed to belong to the person from whose po belong to the person from whose possession it is found. In the ssession it is found. In the present case, Shri Prashant Godha has himself accepted ownership present case, Shri Prashant Godha has himself accepted ownership present case, Shri Prashant Godha has himself accepted ownership

IPCA Laboratories Limited, IPCA Laboratories Limited, 44 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

of the cash and paid taxes thereon. Hence, no adverse inference of the cash and paid taxes thereon. Hence, no adverse inference of the cash and paid taxes thereon. Hence, no adverse inference could have been drawn against the appellant company. could have been drawn against the appellant company. could have been drawn against the appellant company. 8.10 Further, it was was submitted that statements of employees ts of employees namely Shri Manoj Kumar Jain, Shri Manoj Jayawant and Shri namely Shri Manoj Kumar Jain, Shri Manoj Jayawant and Shri namely Shri Manoj Kumar Jain, Shri Manoj Jayawant and Shri Peter Fernandes, relied upon by the ld. AO, were subsequently Peter Fernandes, relied upon by the ld. AO, were subsequently Peter Fernandes, relied upon by the ld. AO, were subsequently retracted through detailed affidavits. In the said affidavits, all the retracted through detailed affidavits. In the said affidavits, all the retracted through detailed affidavits. In the said affidavits, all the employees categorically clarified that they had employees categorically clarified that they had never admitted any never admitted any over-invoicing by the assessee invoicing by the assessee company and that the statements company and that the statements were either incorrectly recorded or signed without understanding were either incorrectly recorded or signed without understanding were either incorrectly recorded or signed without understanding the contents thereof. It the contents thereof. It was submitted that none of the employees submitted that none of the employees had any personal knowledge regarding allege had any personal knowledge regarding alleged cash circulation or d cash circulation or accounting adjustments. Their role was confined to purchase- accounting adjustments. Their role was confined to purchase accounting adjustments. Their role was confined to purchase related functions and they had merely provided details of products related functions and they had merely provided details of products related functions and they had merely provided details of products and suppliers to the investigation team. Thus, the statements relied and suppliers to the investigation team. Thus, the statements relied and suppliers to the investigation team. Thus, the statements relied upon by the ld. AO lacked evidentiary upon by the ld. AO lacked evidentiary value and could not form the value and could not form the sole basis for making addition. sole basis for making addition. 8.11 It was pointed out that after the retraction affidavits were pointed out that after the retraction affidavits were pointed out that after the retraction affidavits were placed on record, it was incumbent upon the ld. AO to conduct placed on record, it was incumbent upon the ld. AO to conduct placed on record, it was incumbent upon the ld. AO to conduct proper enquiry and cross proper enquiry and cross-examination of the concerned persons. examination of the concerned persons. However, ver, ver, no no no such exercise such exercise such exercise was was was undertaken. undertaken. undertaken. The The The ld. ld. ld. AO AO AO mechanically disregarded the retractions without bringing any mechanically disregarded the retractions without bringing any mechanically disregarded the retractions without bringing any independent corroborative material on record. Such action is independent corroborative material on record. Such action is independent corroborative material on record. Such action is contrary to settled principles of law. contrary to settled principles of law.

IPCA Laboratories Limited, IPCA Laboratories Limited, 45 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

8.12 Further, it was was also submitted that even also submitted that even the original statements relied upon by the ld. AO pertain to alleged transactions statements relied upon by the ld. AO pertain to alleged transactions statements relied upon by the ld. AO pertain to alleged transactions involving group concern M/s Makers Laboratories Ltd. and M/s involving group concern M/s Makers Laboratories Ltd. and M/s involving group concern M/s Makers Laboratories Ltd. and M/s Reynolds Petro Chem Ltd. The assesseecompany has admittedly not Reynolds Petro Chem Ltd. The assesseecompany has admittedly not Reynolds Petro Chem Ltd. The assesseecompany has admittedly not made any purchases from M/s Reynolds Petro Chem Ltd. Therefore, made any purchases from M/s Reynolds Petro Chem made any purchases from M/s Reynolds Petro Chem the very foundation of the addition made in the appellant’s case is the very foundation of the addition made in the appellant’s case is the very foundation of the addition made in the appellant’s case is factually incorrect. It is pertinent to submit that additions on factually incorrect. It is pertinent to submit that additions on factually incorrect. It is pertinent to submit that additions on account of alleged over account of alleged over-invoicing relating to purchases from M/s invoicing relating to purchases from M/s Reynolds Petro Chem Ltd. have already been Reynolds Petro Chem Ltd. have already been made in the hands of made in the hands of group concern M/s Makers Laboratories Ltd. Therefore, the same group concern M/s Makers Laboratories Ltd. Therefore, the same group concern M/s Makers Laboratories Ltd. Therefore, the same alleged transaction cannot again be used to make addition in the alleged transaction cannot again be used to make addition in the alleged transaction cannot again be used to make addition in the hands of the assessee company. The ld. AO has further relied upon hands of the assessee company. The ld. AO has further relied upon hands of the assessee company. The ld. AO has further relied upon the statement of Shri Jagdish Chandra So the statement of Shri Jagdish Chandra Somani of M/s Reynolds mani of M/s Reynolds Petro Chem Ltd. However, the said statement was never supplied to Petro Chem Ltd. However, the said statement was never supplied to Petro Chem Ltd. However, the said statement was never supplied to the assesseeduring assessment proceedings and no opportunity of the assesseeduring assessment proceedings and no opportunity of the assesseeduring assessment proceedings and no opportunity of cross-examination was provided despite specific request. Reliance examination was provided despite specific request. Reliance examination was provided despite specific request. Reliance on such third-party statement without g party statement without granting opportunity of ranting opportunity of cross-examination is in gross violation of principles of natural examination is in gross violation of principles of natural examination is in gross violation of principles of natural justice and therefore the same cannot be relied upon. Moreover, justice and therefore the same cannot be relied upon. Moreover, justice and therefore the same cannot be relied upon. Moreover, averments made by Shri Somani would be applicable only where averments made by Shri Somani would be applicable only where averments made by Shri Somani would be applicable only where the transaction is made directly with M/s. the transaction is made directly with M/s. Reynolds Petro Chem Reynolds Petro Chem Ltd., which is not the case here. Ltd., which is not the case here.

IPCA Laboratories Limited, IPCA Laboratories Limited, 46 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

8.13 It was submitted that there is no evidence on record to submitted that there is no evidence on record to submitted that there is no evidence on record to demonstrate that the appellant had received any cash back from demonstrate that the appellant had received any cash back from demonstrate that the appellant had received any cash back from suppliers or that any amount had moved outside the books of suppliers or that any amount had moved outside the books of suppliers or that any amount had moved outside the books of account. No supplier has confirmed making any cash payment to account. No supplier has confirmed making any cash payment to account. No supplier has confirmed making any cash payment to the appellant company the appellant company. The addition has thus been made merely on . The addition has thus been made merely on presumptions and assumptions without any corroborative evidence. presumptions and assumptions without any corroborative evidence. presumptions and assumptions without any corroborative evidence. 8.14 Further, with regards to the addition made by the ld. AO by Further, with regards to the addition made by the ld. AO by Further, with regards to the addition made by the ld. AO by comparing purchase prices charged by suppliers to the assessee comparing purchase prices charged by suppliers to the assessee comparing purchase prices charged by suppliers to the assessee with prices charged to third parties, it is submitted that the entire d to third parties, it is submitted that the entire d to third parties, it is submitted that the entire comparison exercise undertaken by the ld. AO is fundamentally comparison exercise undertaken by the ld. AO is fundamentally comparison exercise undertaken by the ld. AO is fundamentally flawed and based on selective data. The ld. AO has picked only few flawed and based on selective data. The ld. AO has picked only few flawed and based on selective data. The ld. AO has picked only few isolated transactions while ignoring the complete set of transactions isolated transactions while ignoring the complete set of transactions isolated transactions while ignoring the complete set of transactions entered into during the year. The working of total transactions vis ed into during the year. The working of total transactions vis ed into during the year. The working of total transactions vis- à-vis the transaction considered by AO is placed at pa vis the transaction considered by AO is placed at pa vis the transaction considered by AO is placed at page no. 292 to 312 of the paper book. 312 of the paper book. 8.15 It was further submitted that prices of pharmaceutical raw further submitted that prices of pharmaceutical raw further submitted that prices of pharmaceutical raw materials vary depending upon qualit materials vary depending upon quality, quantity, delivery terms, y, quantity, delivery terms, packaging cost, transportation cost, urgency of requirement, market packaging cost, transportation cost, urgency of requirement, market packaging cost, transportation cost, urgency of requirement, market conditions and contractual terms. Therefore, isolated comparison of conditions and contractual terms. Therefore, isolated comparison of conditions and contractual terms. Therefore, isolated comparison of rates without considering commercial and functional differences rates without considering commercial and functional differences rates without considering commercial and functional differences cannot lead to inference of cannot lead to inference of over-invoicing. The assessee had also invoicing. The assessee had also demonstrated before the authorities below that in several instances demonstrated before the authorities below that in several instances demonstrated before the authorities below that in several instances the rates charged to the appellant were in fact comparable or lower the rates charged to the appellant were in fact comparable or lower the rates charged to the appellant were in fact comparable or lower

IPCA Laboratories Limited, IPCA Laboratories Limited, 47 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

than the rates charged to other parties. The working of the same is than the rates charged to other parties. The working of th than the rates charged to other parties. The working of th enclosed at page no. 313 to age no. 313 to 320 of the paper book. However, such 320 of the paper book. However, such favourable data has been completely ignored by the ld. AO while favourable data has been completely ignored by the ld. AO while favourable data has been completely ignored by the ld. AO while framing the assessment. It framing the assessment. It was further submitted that the ld. AO further submitted that the ld. AO himself ultimately did not make addition based on the alleged price himself ultimately did not make addition based on the alleged price himself ultimately did not make addition based on the alleged price comparison analysis, but instead made addition solely on the basis son analysis, but instead made addition solely on the basis son analysis, but instead made addition solely on the basis of figures mentioned in the statements recorded during search of figures mentioned in the statements recorded during search of figures mentioned in the statements recorded during search proceedings. This itself establishes that the comparison exercise proceedings. This itself establishes that the comparison exercise proceedings. This itself establishes that the comparison exercise undertaken by the ld. AO had no independent evidentiary value. undertaken by the ld. AO had no independent evidentiary value. undertaken by the ld. AO had no independent evidentiary value. 8.16 In view of the above facts, judicial precedents and order of the In view of the above facts, judicial precedents and order of the In view of the above facts, judicial precedents and order of the ITAT in appellant’s own case on identical issue, it was submitted ITAT in appellant’s own case on identical issue, it ITAT in appellant’s own case on identical issue, it that the impugned addition made by the ld. AO is wholly unjustified that the impugned addition made by the ld. AO is wholly unjustified that the impugned addition made by the ld. AO is wholly unjustified and liable to be deleted in entirety. and liable to be deleted in entirety.

8.17 We have carefully considered the rival submissions, perused fully considered the rival submissions, perused fully considered the rival submissions, perused the orders of the authorities below and examined the material the orders of the authorities below and examined the material the orders of the authorities below and examined the material available on record. The sole grievance raised by the Revenue in The sole grievance raised by the Revenue in Ground No. 2 pertains to the deletion of the addition of Ground No. 2 pertains to the deletion of the addition of Ground No. 2 pertains to the deletion of the addition of ₹1,40,35,340/- made by made by the Assessing Officer on account of alleged the Assessing Officer on account of alleged invoicing of purchases of pharmaceutical raw materials. over-invoicing of purchases of pharmaceutical raw materials. invoicing of purchases of pharmaceutical raw materials.

8.18 The foundation of the impugned addition rests upon the The foundation of the impugned addition rests upon the The foundation of the impugned addition rests upon the search proceedings conducted in the case of the assessee-group, search proceedings conducted in the case of the assessee search proceedings conducted in the case of the assessee

IPCA Laboratories Limited, IPCA Laboratories Limited, 48 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

during which cash amounting during which cash amounting to ₹1.17 crores was found and seized was found and seized from the residential premises of Shri Prashant Godha and other from the residential premises of Shri Prashant Godha and other from the residential premises of Shri Prashant Godha and other family members. The Assessing Officer proceeded on the premise family members. The Assessing Officer proceeded on the premise family members. The Assessing Officer proceeded on the premise that the said cash represented proceeds generated through alleged that the said cash represented proceeds generated through alleged that the said cash represented proceeds generated through alleged inflation of purchase pric inflation of purchase prices of raw materials procured by the es of raw materials procured by the assessee-company. Reliance was principally placed upon the company. Reliance was principally placed upon the company. Reliance was principally placed upon the statements recorded under section 132(4) of the Act from Shri statements recorded under section 132(4) of the Act from Shri statements recorded under section 132(4) of the Act from Shri Prashant Godha, certain employees and officials of the assessee- Prashant Godha, certain employees and officials of the assessee Prashant Godha, certain employees and officials of the assessee group, as well as the statement of group, as well as the statement of Shri Jagdish Chandra Somani of Shri Jagdish Chandra Somani of M/s Reynolds Petro Chem Ltd., wherein the alleged modus operandi M/s Reynolds Petro Chem Ltd., wherein the alleged modus operandi M/s Reynolds Petro Chem Ltd., wherein the alleged modus operandi of over-invoicing and cash circulation was stated to have been invoicing and cash circulation was stated to have been invoicing and cash circulation was stated to have been explained. Based on the aforesaid statements, coupled with certain Based on the aforesaid statements, coupled with certain Based on the aforesaid statements, coupled with certain comparative analyses of purcha comparative analyses of purchase prices obtained from suppliers, se prices obtained from suppliers, the Assessing Officer concluded that purchases made by the the Assessing Officer concluded that purchases made by the the Assessing Officer concluded that purchases made by the assessee from certain vendors, namely, M/s Sarna Chemicals Pvt. assessee from certain vendors, namely, M/s Sarna Chemicals Pvt. assessee from certain vendors, namely, M/s Sarna Chemicals Pvt. Ltd., M/s Anuh Pharma Ltd., M/s Calyx Chemicals Pvt. Ltd., M/s Ltd., M/s Anuh Pharma Ltd., M/s Calyx Chemicals Pvt. Ltd., M/s Ltd., M/s Anuh Pharma Ltd., M/s Calyx Chemicals Pvt. Ltd., M/s Mehta API Pvt. Ltd. and M/s Farmson Mehta API Pvt. Ltd. and M/s Farmsons Ltd., were inflated and that s Ltd., were inflated and that excess amounts were ultimately routed back in cash. Accordingly, excess amounts were ultimately routed back in cash. Accordingly, excess amounts were ultimately routed back in cash. Accordingly, the Assessing Officer made an addition of the Assessing Officer made an addition of ₹1,40,35,340/ 1,40,35,340/- for the year under consideration. year under consideration.

8.19 The learned CIT(A), however, deleted the addition by following The learned CIT(A), however, deleted the addition by following The learned CIT(A), however, deleted the addition by following the decision of the Coordinate Bench of the Tribunal in the he decision of the Coordinate Bench of the Tribunal in the he decision of the Coordinate Bench of the Tribunal in the assessee’s own case for earlier assessment years arising out of the assessee’s own case for earlier assessment years arising out of the assessee’s own case for earlier assessment years arising out of the

IPCA Laboratories Limited, IPCA Laboratories Limited, 49 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

very same search proceedings. The learned CIT(A) recorded a very same search proceedings. The learned CIT(A) recorded a very same search proceedings. The learned CIT(A) recorded a categorical finding that, apart from the statements relied upon by categorical finding that, apart from the statements relied upon by categorical finding that, apart from the statements relied upon by the Assessing Officer, no incriminating material whatsoever was e Assessing Officer, no incriminating material whatsoever was e Assessing Officer, no incriminating material whatsoever was unearthed during the course of search to establish that the unearthed during the course of search to establish that the unearthed during the course of search to establish that the assessee had indulged in over assessee had indulged in over-invoicing of purchases or had invoicing of purchases or had received any cash back from suppliers. received any cash back from suppliers. 8.20 Upon careful consideration of Upon careful consideration of the record, we find ourselves in the record, we find ourselves in agreement with the conclusion reached by the learned CIT(A). It is agreement with the conclusion reached by the learned CIT(A). It is agreement with the conclusion reached by the learned CIT(A). It is an undisputed position that the very issue arising from the same an undisputed position that the very issue arising from the same an undisputed position that the very issue arising from the same search action had come up for consideration before the Coordinate search action had come up for consideration before the Coordinate search action had come up for consideration before the Coordinate Bench of the Tribunal in Bench of the Tribunal in the assessee’s own case for earlier years. the assessee’s own case for earlier years. After an elaborate examination of the statements, retraction After an elaborate examination of the statements, retraction After an elaborate examination of the statements, retraction affidavits and surrounding facts, the Tribunal vide order dated affidavits and surrounding facts, the Tribunal vide order dated affidavits and surrounding facts, the Tribunal vide order dated 08.04.2024 held that the entire premise of the alleged over- 08.04.2024 held that the entire premise of the alleged over 08.04.2024 held that the entire premise of the alleged over invoicing was fundamentally invoicing was fundamentally flawed and unsupported by any cogent flawed and unsupported by any cogent material or evidence. The Tribunal further found that the material or evidence. The Tribunal further found that the material or evidence. The Tribunal further found that the statements relied upon by the Revenue primarily related to statements relied upon by the Revenue primarily related to statements relied upon by the Revenue primarily related to transactions undertaken by M/s Makers Laboratories Ltd., a group transactions undertaken by M/s Makers Laboratories Ltd., a group transactions undertaken by M/s Makers Laboratories Ltd., a group concern, with M/s Reynolds Petro Chem concern, with M/s Reynolds Petro Chem Ltd., and not to purchases Ltd., and not to purchases made by the present assessee. made by the present assessee. 8.21 Significantly, the Tribunal recorded a finding that the Significantly, the Tribunal recorded a finding that the Significantly, the Tribunal recorded a finding that the assessee-company had admittedly not made any purchases from company had admittedly not made any purchases from company had admittedly not made any purchases from M/s Reynolds Petro Chem Ltd., which was the entity alleged to be M/s Reynolds Petro Chem Ltd., which was the entity alleged to be M/s Reynolds Petro Chem Ltd., which was the entity alleged to be

IPCA Laboratories Limited, IPCA Laboratories Limited, 50 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

involved in providing inflated invoices. The Revenue has not providing inflated invoices. The Revenue has not providing inflated invoices. The Revenue has not brought any material before us to demonstrate that the aforesaid brought any material before us to demonstrate that the aforesaid brought any material before us to demonstrate that the aforesaid finding of fact has either been reversed or shown to be erroneous. finding of fact has either been reversed or shown to be erroneous. finding of fact has either been reversed or shown to be erroneous. We also find merit in the observation of the learned CIT(A) that the We also find merit in the observation of the learned CIT(A) that the We also find merit in the observation of the learned CIT(A) that the cash of ₹1.17 crores crores recovered during the course of search was recovered during the course of search was subsequently offered to tax by Shri Prashant Godha in his subsequently offered to tax by Shri Prashant Godha in his subsequently offered to tax by Shri Prashant Godha in his individual capacity and the same stood accepted and assessed by individual capacity and the same stood accepted and assessed by individual capacity and the same stood accepted and assessed by the Department in his hands. Once the Revenue itself has accepted the Department in his hands. Once the Revenue itself has accepted the Department in his hands. Once the Revenue itself has accepted the said amount as undisclosed income of Shri Prashant Godha, it ount as undisclosed income of Shri Prashant Godha, it ount as undisclosed income of Shri Prashant Godha, it would be legally incongruous to simultaneously attribute the very would be legally incongruous to simultaneously attribute the very would be legally incongruous to simultaneously attribute the very same amount to the assessee same amount to the assessee-company as alleged proceeds of over company as alleged proceeds of over- invoiced purchases, in the absence of any independent evidence invoiced purchases, in the absence of any independent evidence invoiced purchases, in the absence of any independent evidence establishing such nexus. ing such nexus.

8.22 Another significant circumstance which cannot be overlooked Another significant circumstance which cannot be overlooked Another significant circumstance which cannot be overlooked is that the statements of the directors and employees, heavily relied is that the statements of the directors and employees, heavily relied is that the statements of the directors and employees, heavily relied upon by the Assessing Officer, were subsequently retracted. Once upon by the Assessing Officer, were subsequently retracted. Once upon by the Assessing Officer, were subsequently retracted. Once such retractions were placed on record, such retractions were placed on record, it became incumbent upon it became incumbent upon the Assessing Officer to undertake an independent enquiry and the Assessing Officer to undertake an independent enquiry and the Assessing Officer to undertake an independent enquiry and bring on record corroborative evidence substantiating the original bring on record corroborative evidence substantiating the original bring on record corroborative evidence substantiating the original admissions. However, no such exercise appears to have been admissions. However, no such exercise appears to have been admissions. However, no such exercise appears to have been undertaken. The addition has ultimately bee undertaken. The addition has ultimately been sustained solely on n sustained solely on the basis of statements without any supporting documentary the basis of statements without any supporting documentary the basis of statements without any supporting documentary evidence.

IPCA Laboratories Limited, IPCA Laboratories Limited, 51 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

8.23 It is now well settled that although a statement recorded It is now well settled that although a statement recorded It is now well settled that although a statement recorded under section 132(4) of the Act constitutes a relevant piece of under section 132(4) of the Act constitutes a relevant piece of under section 132(4) of the Act constitutes a relevant piece of evidence, it cannot, by itself, be reg evidence, it cannot, by itself, be regarded as conclusive proof of an arded as conclusive proof of an addition, particularly when the statement stands retracted and is addition, particularly when the statement stands retracted and is addition, particularly when the statement stands retracted and is not not not supported supported supported by by by independent independent independent corroborative corroborative corroborative material. material. material. An An An admission, however significant, cannot override established facts admission, however significant, cannot override established facts admission, however significant, cannot override established facts and surrounding circumstances demons and surrounding circumstances demonstrating that the admission trating that the admission was made under a mistaken understanding of facts. The law is was made under a mistaken understanding of facts. The law is was made under a mistaken understanding of facts. The law is equally settled that a statement recorded during search, bereft of equally settled that a statement recorded during search, bereft of equally settled that a statement recorded during search, bereft of supporting incriminating material, cannot automatically justify an supporting incriminating material, cannot automatically justify an supporting incriminating material, cannot automatically justify an addition. In this regard, the obse addition. In this regard, the observations of the Hon’ble Delhi High rvations of the Hon’ble Delhi High Court in (CIT) v. Harjeev Aggarwal (CIT) v. Harjeev Aggarwal (2016) 290 CTR 263 (2016) 290 CTR 263 (Del) or [2016] 70 taxmann.com 95 (Delhi) [2016] 70 taxmann.com 95 (Delhi) lend support to the lend support to the proposition that a statement by itself does not constitute proposition that a statement by itself does not constitute proposition that a statement by itself does not constitute incriminating material unless corroborated by incriminating material unless corroborated by tangible evidence. tangible evidence.

8.24 Further, the material on record demonstrates that purchases Further, the material on record demonstrates that purchases Further, the material on record demonstrates that purchases from M/s Reynolds Petro Chem Ltd. were reflected in the books of from M/s Reynolds Petro Chem Ltd. were reflected in the books of from M/s Reynolds Petro Chem Ltd. were reflected in the books of M/s Makers Laboratories Ltd., an associate concern, and M/s Makers Laboratories Ltd., an associate concern, and M/s Makers Laboratories Ltd., an associate concern, and corresponding additions on account of alleged corresponding additions on account of alleged over over-invoicing had already been considered in the hands of that concern. In these already been considered in the hands of that concern. In these already been considered in the hands of that concern. In these circumstances, attributing the same alleged transaction to the circumstances, attributing the same alleged transaction to the circumstances, attributing the same alleged transaction to the assessee-company without any direct evidence linking it thereto company without any direct evidence linking it thereto company without any direct evidence linking it thereto would amount to proceeding on mere conjectures would amount to proceeding on mere conjectures and surmises. and surmises.

IPCA Laboratories Limited, IPCA Laboratories Limited, 52 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

8.25 The Revenue has not pointed out any distinguishing feature in The Revenue has not pointed out any distinguishing feature in The Revenue has not pointed out any distinguishing feature in the facts of the year under consideration vis the facts of the year under consideration vis-à à-vis the facts examined by the Coordinate Bench in the earlier years. Nor has any examined by the Coordinate Bench in the earlier years. Nor has any examined by the Coordinate Bench in the earlier years. Nor has any fresh material been brought on record warranti fresh material been brought on record warranting a departure from ng a departure from the view already taken. In such circumstances, judicial discipline the view already taken. In such circumstances, judicial discipline the view already taken. In such circumstances, judicial discipline and the principle of consistency require us to follow the earlier and the principle of consistency require us to follow the earlier and the principle of consistency require us to follow the earlier decision rendered in the assessee’s own case on identical facts. decision rendered in the assessee’s own case on identical facts. decision rendered in the assessee’s own case on identical facts.

8.26 Accordingly, we find no infirmity Accordingly, we find no infirmity in the order of the learned in the order of the learned CIT(A) deleting the addition. We therefore uphold the impugned CIT(A) deleting the addition. We therefore uphold the impugned CIT(A) deleting the addition. We therefore uphold the impugned order on this issue and dismiss Ground No. 2 raised by the order on this issue and dismiss Ground No. 2 raised by the order on this issue and dismiss Ground No. 2 raised by the Revenue.

9.1 The Assessing Officer, while framing the assessment, held that The Assessing Officer, while framing the assessment, held that The Assessing Officer, while framing the assessment, held that the receipts arising from the sale of scrap and empty containers the receipts arising from the sale of scrap and empty containers the receipts arising from the sale of scrap and empty containers could not be regarded as profits “derived from” the eligible could not be regarded as profits “derived from” the eligible could not be regarded as profits “derived from” the eligible industrial undertakings for the purposes of sections 80-IB, 80-IC industrial undertakings for the purposes of sections 80 industrial undertakings for the purposes of sections 80 and 80-IE of the Act. According to the Assessing Officer, such IE of the Act. According to the Assessing Officer, such IE of the Act. According to the Assessing Officer, such receipts were merely incidental in nature and lacked the requisite receipts were merely incidental in nature and lacked the requisite receipts were merely incidental in nature and lacked the requisite

IPCA Laboratories Limited, IPCA Laboratories Limited, 53 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

direct nexus with the manufacturing activities carried on by the direct nexus with the manufacturing activities carried on by the direct nexus with the manufacturing activities carried on by the eligible units. Proceeding on this premise, he excluded the receipts eligible units. Proceeding on this premise, he excluded the re eligible units. Proceeding on this premise, he excluded the re from sale of scrap and empty containers from the eligible profits from sale of scrap and empty containers from the eligible profits from sale of scrap and empty containers from the eligible profits and consequently denied deduction thereon in respect of the and consequently denied deduction thereon in respect of the and consequently denied deduction thereon in respect of the Dehradun Unit-I, Pipariya Unit and Sikkim Unit. I, Pipariya Unit and Sikkim Unit.

9.2 In appeal, the learned CIT(A) examined the nature of the In appeal, the learned CIT(A) examined the nature of the In appeal, the learned CIT(A) examined the nature of the receipts and noted that the scrap income had arisen from the sale oted that the scrap income had arisen from the sale oted that the scrap income had arisen from the sale of of of empty empty empty containers containers containers generated generated generated during during during the the the course course course of of of the the the manufacturing process undertaken by the eligible industrial units. manufacturing process undertaken by the eligible industrial units. manufacturing process undertaken by the eligible industrial units. The learned CIT(A) further observed that an identical controversy The learned CIT(A) further observed that an identical controversy The learned CIT(A) further observed that an identical controversy had arisen in the assessee’s own case for earlier assessment years e assessee’s own case for earlier assessment years e assessee’s own case for earlier assessment years and had been conclusively decided in favour of the assessee by the and had been conclusively decided in favour of the assessee by the and had been conclusively decided in favour of the assessee by the Coordinate Bench of the Tribunal. Coordinate Bench of the Tribunal. The relevant finding of ld CIT(A) The relevant finding of ld CIT(A) is reproduced as under: as under:-

“13. In the assessment order passed, AO has h “13. In the assessment order passed, AO has held that sale of scrap/containers eld that sale of scrap/containers do not constitute turnover derived from the eligible undertaking. The AO do not constitute turnover derived from the eligible undertaking. The AO do not constitute turnover derived from the eligible undertaking. The AO accordingly held the profit from sale of scrap to be ineligible for deduction u/s 80- accordingly held the profit from sale of scrap to be ineligible for deduction u/s 80 accordingly held the profit from sale of scrap to be ineligible for deduction u/s 80 IC, 80IB & 80IE of the Act. Based on such findings, the AO has denied the IC, 80IB & 80IE of the Act. Based on such findings, the AO has d IC, 80IB & 80IE of the Act. Based on such findings, the AO has d deduction of Rs. 4,98,964/ deduction of Rs. 4,98,964/- (16,63,214*30%) u/s 80IC in Dehradun Unit (16,63,214*30%) u/s 80IC in Dehradun Unit-1, Rs.24,22,372/- u/s 80IC, Rs.7,02,840/ u/s 80IC, Rs.7,02,840/- (23,42,801*30%) from 80IB in Pipariya (23,42,801*30%) from 80IB in Pipariya Unit and Rs.6,21,915/ Unit and Rs.6,21,915/- from 80IE in Sikkim Unit on account of receipts from sale from 80IE in Sikkim Unit on account of receipts from sale of scrap. 13.1 During the course of appellate proceedings, assesse has explained that it During the course of appellate proceedings, assesse has explained that it During the course of appellate proceedings, assesse has explained that it has earned scrap income through sale of empty container which was generated has earned scrap income through sale of empty container which was generated has earned scrap income through sale of empty container which was generated during the production process in the particular unit. Thus, the same is directly during the production process in the particular unit. Thus, the same is directly during the production process in the particular unit. Thus, the same is directly attributable to the busin attributable to the business of the undertaking and therefore, is allowable under ess of the undertaking and therefore, is allowable under the law. 13.2 To buttress its claim, the assessee has relied on the decision Mumbai 13.2 To buttress its claim, the assessee has relied on the decision Mumbai 13.2 To buttress its claim, the assessee has relied on the decision Mumbai tribunal in its own case for other years (supra) wherein the identical issue was tribunal in its own case for other years (supra) wherein the identical issue was tribunal in its own case for other years (supra) wherein the identical issue was

IPCA Laboratories Limited, IPCA Laboratories Limited, 54 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

discussed as decided in the favou discussed as decided in the favour of the assessee. The relevant part of the r of the assessee. The relevant part of the tribunal’s order is reproduced as under : tribunal’s order is reproduced as under :- “13.1 These grounds of the Revenue are against the Ld. CIT(A)’s action of “13.1 These grounds of the Revenue are against the Ld. CIT(A)’s action of “13.1 These grounds of the Revenue are against the Ld. CIT(A)’s action of reversing the AO’s action of not considering the profit derived from sale of reversing the AO’s action of not considering the profit derived from sale of reversing the AO’s action of not considering the profit derived from sale of scrap as eligible scrap as eligible profit of industrial undertaking u/s 80IC of the Act. Briefly profit of industrial undertaking u/s 80IC of the Act. Briefly noted, the AO following the identical line of reasoning set out by his noted, the AO following the identical line of reasoning set out by his noted, the AO following the identical line of reasoning set out by his predecessors held that the sale of scrap does not constitute turnover and is predecessors held that the sale of scrap does not constitute turnover and is predecessors held that the sale of scrap does not constitute turnover and is not derived from the eligible undertaking. The not derived from the eligible undertaking. The AO accordingly held the AO accordingly held the profit from sale of scrap to be ineligible for deduction u/s 80 profit from sale of scrap to be ineligible for deduction u/s 80 profit from sale of scrap to be ineligible for deduction u/s 80-IC of the Act. Likewise, on appeal, the Ld. CIT(A) is noted to have deleted this Likewise, on appeal, the Ld. CIT(A) is noted to have deleted this Likewise, on appeal, the Ld. CIT(A) is noted to have deleted this disallowance by following the order passed by this Tribunal in assessee’s disallowance by following the order passed by this Tribunal in assessee’s disallowance by following the order passed by this Tribunal in assessee’s own case in ITA No.3597/Mum/2016 for AY 2009 ITA No.3597/Mum/2016 for AY 2009-10 dated 29.08.2022. 10 dated 29.08.2022. The Revenue is now in appeal before us. The Revenue is now in appeal before us. 13.2 Heard both the parties. It is noted that the impugned issue stands 13.2 Heard both the parties. It is noted that the impugned issue stands 13.2 Heard both the parties. It is noted that the impugned issue stands squarely covered in favour of the assessee by the decision rendered by squarely covered in favour of the assessee by the decision rendered by squarely covered in favour of the assessee by the decision rendered by this Tribunal in th this Tribunal in their common order passed in assessee’s own case for AYs eir common order passed in assessee’s own case for AYs 2008-09 & 2009 09 & 2009-10. The relevant findings of the Tribunal is noted to be as 10. The relevant findings of the Tribunal is noted to be as under :- “We have carefully considered the rival contention and perused the orders “We have carefully considered the rival contention and perused the orders “We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently, asses of the lower authorities. Apparently, assessee earned receipt of sale of see earned receipt of sale of empty containers. Undisputedly, the unit at Silvassa and Dheradun are empty containers. Undisputedly, the unit at Silvassa and Dheradun are empty containers. Undisputedly, the unit at Silvassa and Dheradun are eligible undertakings income, which is eligible for deduction under Section eligible undertakings income, which is eligible for deduction under Section eligible undertakings income, which is eligible for deduction under Section 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible of profit and gains derived by undertaking from eligible of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether business. It cannot said that sale of empty containers is altogether business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is different business of the assessee. We further held that this issue is different business of the assessee. We further held that this issue is squarely covered in favour of the assessee by the decision squarely covered in favour of the assessee by the decision squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of CIT versus Sadhu forging Ltd 336 ITR 444 as Delhi High Court in case of CIT versus Sadhu forging Ltd 336 ITR 444 as Delhi High Court in case of CIT versus Sadhu forging Ltd 336 ITR 444 as well as the decision of the honourable Gujarat High Court in Tax Appeal well as the decision of the honourable Gujarat High Court in Tax Appeal well as the decision of the honourable Gujarat High Court in Tax Appeal No. 368 of 2008 December 21, 2013 an Dy. CIT v. HarjivandasJuthabhai No. 368 of 2008 December 21, 2013 an Dy. CIT v. HarjivandasJuthabhai No. 368 of 2008 December 21, 2013 an Dy. CIT v. HarjivandasJuthabhai Zaveri [2002] 258 ITR 785/ [2 Zaveri [2002] 258 ITR 785/ [2003] 132 Taxman 923 (Guj.) In view of this, 003] 132 Taxman 923 (Guj.) In view of this, we find that lower authorities have erred in not allowing deduction under we find that lower authorities have erred in not allowing deduction under we find that lower authorities have erred in not allowing deduction under Section 80IB and 80IC of the Act on the above sum. Accordingly, ground Section 80IB and 80IC of the Act on the above sum. Accordingly, ground Section 80IB and 80IC of the Act on the above sum. Accordingly, ground no.2 and 3 of the appeal is allowed. “ no.2 and 3 of the appeal is allowed. “ 13.3 The Ld. CIT, DR was una 13.3 The Ld. CIT, DR was unable to point out any change of facts or ble to point out any change of facts or position of law in the relevant AYs. Following the above decision (supra) position of law in the relevant AYs. Following the above decision (supra) position of law in the relevant AYs. Following the above decision (supra) rendered in assessee’s own case, we have no hesitation in upholding the rendered in assessee’s own case, we have no hesitation in upholding the rendered in assessee’s own case, we have no hesitation in upholding the order of Ld. CIT(A) deleting this impugned addition. These grounds of order of Ld. CIT(A) deleting this impugned addition. These grounds of order of Ld. CIT(A) deleting this impugned addition. These grounds of the Revenue are therefore dismissed.” Revenue are therefore dismissed.” 13.3 I have considered the facts of the case and decision of the Tribunal. It is 13.3 I have considered the facts of the case and decision of the Tribunal. It is 13.3 I have considered the facts of the case and decision of the Tribunal. It is observed that facts of the present case in hand are identical to the one as decided observed that facts of the present case in hand are identical to the one as decided observed that facts of the present case in hand are identical to the one as decided

IPCA Laboratories Limited, IPCA Laboratories Limited, 55 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

by the Hon’ble Tribunal in the assessee’s own case f by the Hon’ble Tribunal in the assessee’s own case for earlier years. Therefore, or earlier years. Therefore, following the said decision of the tribunal, the deduction u/s 80IB, 80IC & 80IE following the said decision of the tribunal, the deduction u/s 80IB, 80IC & 80IE following the said decision of the tribunal, the deduction u/s 80IB, 80IC & 80IE on sale of scrap is allowed. Accordingly, on sale of scrap is allowed. Accordingly, ground no. 14 is allowed.” ground no. 14 is allowed.” 9.3 Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that the impugned receipts represent income generated from the sale of impugned receipts represent income generated from the sale of impugned receipts represent income generated from the sale of empty containers and scrap arising during the manufacturing empty containers and scrap arising during the manufacturing empty containers and scrap arising during the manufacturing process of the eligible undertakings. It was contended that such process of the eligible undertakings. It was contended that such process of the eligible undertakings. It was contended that such receipts are intrinsically connected with, and directly attributable receipts are intrinsically connected with, and directly attributable receipts are intrinsically connected with, and directly attributable to, the manufacturing activities carried on by the eligible units and to, the manufacturing activities carried on by the eligible units and to, the manufacturing activities carried on by the eligible units and therefore form part of the profits and gains derived from the eligible therefore form part of the profits and gains derived from the eligible therefore form part of the profits and gains derived from the eligible business. It was further submitted that the issue is no longer res business. It was further submitted that the issue is no longer res business. It was further submitted that the issue is no longer res integra and stands squarely covered by the decision of the integra and stands squarely covered by the decis integra and stands squarely covered by the decis Coordinate Bench in the assessee’s own case for earlier assessment Coordinate Bench in the assessee’s own case for earlier assessment Coordinate Bench in the assessee’s own case for earlier assessment years, which has subsequently been followed by the learned CIT(A). years, which has subsequently been followed by the learned CIT(A). years, which has subsequently been followed by the learned CIT(A). 9.4 The learned Departmental Representative relied upon the The learned Departmental Representative relied upon the The learned Departmental Representative relied upon the reasoning adopted by the Assessing Officer and placed reliance reasoning adopted by the Assessing Officer and plac reasoning adopted by the Assessing Officer and plac upon judicial precedents to contend that the expression “derived upon judicial precedents to contend that the expression “derived upon judicial precedents to contend that the expression “derived from” from” from” requires requires requires a a a direct direct direct and and and immediate immediate immediate nexus nexus nexus with with with the the the manufacturing activity and that receipts from sale of scrap do not manufacturing activity and that receipts from sale of scrap do not manufacturing activity and that receipts from sale of scrap do not satisfy such test. 9.5 We have heard the rival submissions We have heard the rival submissions and perused the material and perused the material available on record. We find that the learned CIT(A) has granted available on record. We find that the learned CIT(A) has granted available on record. We find that the learned CIT(A) has granted relief by faithfully following the decision of the Coordinate Bench of relief by faithfully following the decision of the Coordinate Bench of relief by faithfully following the decision of the Coordinate Bench of the Tribunal rendered in the assessee’s own case on an identical the Tribunal rendered in the assessee’s own case on an identical the Tribunal rendered in the assessee’s own case on an identical

IPCA Laboratories Limited, IPCA Laboratories Limited, 56 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

issue. The Tribunal, after ex issue. The Tribunal, after examining the nature of the receipts, had amining the nature of the receipts, had categorically held that the sale of empty containers and scrap categorically held that the sale of empty containers and scrap categorically held that the sale of empty containers and scrap generated during the manufacturing process forms an integral part generated during the manufacturing process forms an integral part generated during the manufacturing process forms an integral part of the business operations of the eligible undertaking and that the of the business operations of the eligible undertaking and that the of the business operations of the eligible undertaking and that the profits arising therefrom qualify for deduction under the relevant refrom qualify for deduction under the relevant refrom qualify for deduction under the relevant provisions of the Act

9.6 It is noteworthy that the Revenue has not brought on record It is noteworthy that the Revenue has not brought on record It is noteworthy that the Revenue has not brought on record any material demonstrating a change either in the factual matrix or any material demonstrating a change either in the factual matrix or any material demonstrating a change either in the factual matrix or in the legal position prevailing during the year under consideration. in the legal position prevailing during the year under in the legal position prevailing during the year under Nor has any distinguishing feature been pointed out which would Nor has any distinguishing feature been pointed out which would Nor has any distinguishing feature been pointed out which would justify taking a view different from that consistently adopted in the justify taking a view different from that consistently adopted in the justify taking a view different from that consistently adopted in the assessee’s own case. In the absence of any such distinguishing assessee’s own case. In the absence of any such distinguishing assessee’s own case. In the absence of any such distinguishing circumstance, the principles of judicial di circumstance, the principles of judicial discipline and consistency scipline and consistency require that the view already taken by the Coordinate Bench be require that the view already taken by the Coordinate Bench be require that the view already taken by the Coordinate Bench be followed.

9.7 Accordingly, respectfully following the binding precedent Accordingly, respectfully following the binding precedent Accordingly, respectfully following the binding precedent rendered in the assessee’s own case for the earlier assessment rendered in the assessee’s own case for the earlier assessment rendered in the assessee’s own case for the earlier assessment years, we find no infirmity in th years, we find no infirmity in the order of the learned CIT(A) e order of the learned CIT(A) allowing deduction under sections 80 allowing deduction under sections 80-IB, 80-IC and 80 IC and 80-IE of the Act in respect of profits arising from the sale of scrap/empty containers in respect of profits arising from the sale of scrap/empty containers in respect of profits arising from the sale of scrap/empty containers generated during the manufacturing process. generated during the manufacturing process. We, therefore, uphold We, therefore, uphold the order of the learn the order of the learned CIT(A) on this issue. Consequently, Ground ed CIT(A) on this issue. Consequently, Ground No. 3 raised by the Revenue stands dismissed. No. 3 raised by the Revenue stands dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 57 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

10.1 The facts, in brief, are that the assessee had established an The facts, in brief, are that the assessee had established an The facts, in brief, are that the assessee had established an industrial undertaking in the State of Sikkim and commenced industrial undertaking in the State of Sikkim and commenced industrial undertaking in the State of Sikkim and commenced commercial commercial commercial production production production with with with effect effect effect from from from 01.07.2011. 01.07.2011. 01.07.2011. The The The undertaking was eligible for incentives under the North East ng was eligible for incentives under the North East ng was eligible for incentives under the North East Industrial and Investment Promotion Policy, 2007 (NEIIPP), a Industrial and Investment Promotion Policy, 2007 (NEIIPP), a Industrial and Investment Promotion Policy, 2007 (NEIIPP), a scheme formulated by the Government of India with the avowed scheme formulated by the Government of India with the avowed scheme formulated by the Government of India with the avowed objective of accelerating industrialisation, generating employment objective of accelerating industrialisation, generating employment objective of accelerating industrialisation, generating employment and promoting economic development in the industrially backward conomic development in the industrially backward conomic development in the industrially backward North-Eastern region, including the State of Sikkim. Eastern region, including the State of Sikkim.

10.2 Pursuant to the aforesaid policy, the assessee received excise Pursuant to the aforesaid policy, the assessee received excise Pursuant to the aforesaid policy, the assessee received excise duty refund aggregating to ₹11,44,53,373/- during the year under duty refund aggregating to during the year under consideration. The sa consideration. The said amount was initially credited to the Profit id amount was initially credited to the Profit and Loss Account and offered to tax in the return of income and Loss Account and offered to tax in the return of income and Loss Account and offered to tax in the return of income originally filed. Subsequently, relying upon judicial precedents originally filed. Subsequently, relying upon judicial precedents originally filed. Subsequently, relying upon judicial precedents

IPCA Laboratories Limited, IPCA Laboratories Limited, 58 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

holding such incentives to be capital receipts, the assessee holding such incentives to be capital receipts, the assessee holding such incentives to be capital receipts, the assessee furnished a revised com furnished a revised computation of income along with a revised putation of income along with a revised audit report in Form No. 10CCB and claimed that the excise duty audit report in Form No. 10CCB and claimed that the excise duty audit report in Form No. 10CCB and claimed that the excise duty refund was a capital receipt not chargeable to tax. Consequentially, refund was a capital receipt not chargeable to tax. Consequentially, refund was a capital receipt not chargeable to tax. Consequentially, the assessee also sought exclusion of the said amount while the assessee also sought exclusion of the said amount while the assessee also sought exclusion of the said amount while computing book profit u computing book profit under section 115JB of the Act. nder section 115JB of the Act. 10.3 The assessee made this claim of treating receipt of the excise The assessee made this claim of treating receipt of the excise The assessee made this claim of treating receipt of the excise refund as capital receipt during the course of the assessment refund as capital receipt during the course of the assessment refund as capital receipt during the course of the assessment proceeding relying on the judgment of Hon’ble Supreme Court in proceeding relying on the judgment of Hon’ble Supreme Court in proceeding relying on the judgment of Hon’ble Supreme Court in the case of CIT vs. Goetze Goetze (India) Ltd.

10.4 The Assessing Officer declined to entertain the revised claim The Assessing Officer declined to entertain the revised claim The Assessing Officer declined to entertain the revised claim on the ground that the same had not been made through a revised on the ground that the same had not been made through a revised on the ground that the same had not been made through a revised return filed under section 139(5) of the Act. Placing reliance upon return filed under section 139(5) of the Act. Placing reliance upon return filed under section 139(5) of the Act. Placing reliance upon the decision of the Hon’ble Supreme Court in the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. Goetze (India) Ltd. v. CIT, the Assessing Officer held that a fresh claim could not be the Assessing Officer held that a fresh claim could not be the Assessing Officer held that a fresh claim could not be entertained otherwise than by way of a revised return. The entertained otherwise than by way of a revised return. The entertained otherwise than by way of a revised return. The Assessing Officer further rejected the assessee’s contention on Assessing Officer further rejected the assessee’s contention on Assessing Officer further rejected the assessee’s contention on merits and continued to treat the excise duty merits and continued to treat the excise duty refund as revenue refund as revenue receipt liable to tax. He also declined to exclude the said amount receipt liable to tax. He also declined to exclude the said amount receipt liable to tax. He also declined to exclude the said amount while computing book profit under section 115JB of the Act. while computing book profit under section 115JB of the Act. while computing book profit under section 115JB of the Act. 10.5 During the appellate proceedings before ld. CIT(A During the appellate proceedings before ld. CIT(A During the appellate proceedings before ld. CIT(A the assessee raised the above claim contending that the raised the above claim contending that the excise duty refund excise duty refund

IPCA Laboratories Limited, IPCA Laboratories Limited, 59 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

received under the North East Industrial and Investment Promotion received under the North East Industrial and Investment Promotion received under the North East Industrial and Investment Promotion Policy (NEIIPP), 2007 was a capital receipt and therefore not Policy (NEIIPP), 2007 was a capital receipt and therefore not Policy (NEIIPP), 2007 was a capital receipt and therefore not chargeable to tax. The assessee also claimed that the said receipt chargeable to tax. The assessee also claimed that the said receipt chargeable to tax. The assessee also claimed that the said receipt was liable to be excluded while computing was liable to be excluded while computing book profit u/s 115JB of book profit u/s 115JB of the Act. The assessee requested to adjudicate the said claim. the Act. The assessee requested to adjudicate the said claim. the Act. The assessee requested to adjudicate the said claim.

10.6 The learned CIT(A) first examined the preliminary objection he learned CIT(A) first examined the preliminary objection he learned CIT(A) first examined the preliminary objection regarding maintainability of the revised claim. Relying upon the regarding maintainability of the revised claim. Relying upon the regarding maintainability of the revised claim. Relying upon the judgment of the Hon’ble Bombay High Court in CIT v. Pruthvi CIT v. Pruthvi judgment of the Hon’ble Bombay High Co Brokers & Shareholders Pvt. Ltd. Brokers & Shareholders Pvt. Ltd. [(2012) 349 ITR 336] [(2012) 349 ITR 336], the learned CIT(A) held that although an Assessing Officer may not learned CIT(A) held that although an Assessing Officer may not learned CIT(A) held that although an Assessing Officer may not have the jurisdiction to entertain a fresh claim otherwise than have the jurisdiction to entertain a fresh claim otherwise than have the jurisdiction to entertain a fresh claim otherwise than through a revised return, the appellate authorities possess plenary through a revised return, the appellate authorities possess plenary through a revised return, the appellate authorities possess plenary powers to admit and adjudicate such claims. The revised claim was, powers to admit and adjudicate such claims. The revised powers to admit and adjudicate such claims. The revised therefore, held to be maintainable at the appellate stage. therefore, held to be maintainable at the appellate stage. therefore, held to be maintainable at the appellate stage.

10.7 On merits, the learned CIT(A) noted that an identical issue had On merits, the learned CIT(A) noted that an identical issue had On merits, the learned CIT(A) noted that an identical issue had already been examined by the Coordinate Bench of the Tribunal in already been examined by the Coordinate Bench of the Tribunal in already been examined by the Coordinate Bench of the Tribunal in the assessee’s own case for Assessment Years 2012-13 and 2014- the assessee’s own case for Assessment Years 2012 the assessee’s own case for Assessment Years 2012 15. After considering the purpose and object of the NEIIPP Scheme, 15. After considering the purpose and object of the NEIIPP Scheme, 15. After considering the purpose and object of the NEIIPP Scheme, the Tribunal had held that the excise duty refund constituted a the Tribunal had held that the excise duty refund constituted a the Tribunal had held that the excise duty refund constituted a capital receipt and was therefore not chargeable to tax. The capital receipt and was therefore not chargeable to tax. The capital receipt and was therefore not chargeable to tax. The Tribunal had further held that once such receipt was found to be Tribunal had further held that once such receipt was f Tribunal had further held that once such receipt was f capital in nature and outside the ambit of income, the same could capital in nature and outside the ambit of income, the same could capital in nature and outside the ambit of income, the same could

IPCA Laboratories Limited, IPCA Laboratories Limited, 60 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

not form part of the book profit computed under section 115JB of not form part of the book profit computed under section 115JB of not form part of the book profit computed under section 115JB of the Act.

10.8 Following the aforesaid binding precedent, the learned CIT(A) Following the aforesaid binding precedent, the learned CIT(A) Following the aforesaid binding precedent, the learned CIT(A) concluded concluded concluded that that that the the the excise excise excise duty duty duty refund refund refund amounting to Rs.11,44,53,373/- received by the assessee was a capital receipt received by the assessee was a capital receipt received by the assessee was a capital receipt and accordingly directed its exclusion from both the computation of and accordingly directed its exclusion from both the computation of and accordingly directed its exclusion from both the computation of taxable income under the normal provisions and the computation of taxable income under the normal provisions and the computation of taxable income under the normal provisions and the computation of book profit under section 115JB of the Act. book profit under section 115JB of the Act. The relevant finding of The relevant finding of the Ld. CIT(A) is reproduced as under: the Ld. CIT(A) is reproduced as under:-

“14.3 I have gone through the submission of the case. In the submission, the 14.3 I have gone through the submission of the case. In the submission, the 14.3 I have gone through the submission of the case. In the submission, the asseesee has made the said claim before me, by way of these grounds. To asseesee has made the said claim before me, by way of these grounds. To asseesee has made the said claim before me, by way of these grounds. To support its claim the assessee has relied support its claim the assessee has relied on various decision including the on various decision including the landmark judgment of Bombay High Court in the case of CIT vs. Prithvi Brokers landmark judgment of Bombay High Court in the case of CIT vs. Prithvi Brokers landmark judgment of Bombay High Court in the case of CIT vs. Prithvi Brokers and Shareholders reported in 349 ITR 336 (2012) wherein it was held that the and Shareholders reported in 349 ITR 336 (2012) wherein it was held that the and Shareholders reported in 349 ITR 336 (2012) wherein it was held that the assessing officer does not have power to entertain into the new claim which was assessing officer does not have power to entertain into the new cla assessing officer does not have power to entertain into the new cla claimed without filing revised return of income under section 139(5) of the Act claimed without filing revised return of income under section 139(5) of the Act claimed without filing revised return of income under section 139(5) of the Act however, the appellate authority, has power to entertain into the new claimed however, the appellate authority, has power to entertain into the new claimed however, the appellate authority, has power to entertain into the new claimed which was claimed through revised computation of income even though revised which was claimed through revised computation of income even though revised which was claimed through revised computation of income even though revised return of income was not filed. income was not filed. 14.4 Further, with regards to the merits of the deduction, the assessee submitted 14.4 Further, with regards to the merits of the deduction, the assessee submitted 14.4 Further, with regards to the merits of the deduction, the assessee submitted that North East Region of the country was industrially backward due to their that North East Region of the country was industrially backward due to their that North East Region of the country was industrially backward due to their isolated location from the rest of the country. In order to attract investment and isolated location from the rest of the country. In order to attract invest isolated location from the rest of the country. In order to attract invest improve industrialisation, a North East Industrial Policy, 1997 was announced by improve industrialisation, a North East Industrial Policy, 1997 was announced by improve industrialisation, a North East Industrial Policy, 1997 was announced by the Government. However, State of Sikkim was not included in the said policy. the Government. However, State of Sikkim was not included in the said policy. the Government. However, State of Sikkim was not included in the said policy. Subsequently, a new policy under the name of North East Industrial and Subsequently, a new policy under the name of North East Industrial and Subsequently, a new policy under the name of North East Industrial and Investment Promotion Policy (NEIIPP) was introduced by the Ministry of Commerce ion Policy (NEIIPP) was introduced by the Ministry of Commerce ion Policy (NEIIPP) was introduced by the Ministry of Commerce and Industry dated 01.04.2007 wherein the state of Sikkim was included. The and Industry dated 01.04.2007 wherein the state of Sikkim was included. The and Industry dated 01.04.2007 wherein the state of Sikkim was included. The copy of the scheme was also placed page nos.468 copy of the scheme was also placed page nos.468-473 of the paper book filed by 473 of the paper book filed by the assessee during the appellate proc the assessee during the appellate proceedings. The assessee in its submission eedings. The assessee in its submission pointed out that in the said policy, all the new units who establish their new unit pointed out that in the said policy, all the new units who establish their new unit pointed out that in the said policy, all the new units who establish their new unit and start production after 01.04.2007 would be eligible for subsidy in the nature and start production after 01.04.2007 would be eligible for subsidy in the nature and start production after 01.04.2007 would be eligible for subsidy in the nature of exemption from excise duty for a period of ten of exemption from excise duty for a period of ten years. The main focus of the said years. The main focus of the said policy was purely to attract investment in industries in the north east region of policy was purely to attract investment in industries in the north east region of policy was purely to attract investment in industries in the north east region of the country which was backward at that relevant point of time. the country which was backward at that relevant point of time. the country which was backward at that relevant point of time.

IPCA Laboratories Limited, IPCA Laboratories Limited, 61 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

14.5 The assessee further submitted that such receipt are capital in nature, in 14.5 The assessee further submitted that such receipt are capital in nature, 14.5 The assessee further submitted that such receipt are capital in nature, this regard, the assessee has made reliance on the decision of Hon’ble Supreme this regard, the assessee has made reliance on the decision of Hon’ble Supreme this regard, the assessee has made reliance on the decision of Hon’ble Supreme Court in the case of Sahney Steel and Press Words Ltd. vs CIT [228 ITR Court in the case of Sahney Steel and Press Words Ltd. vs CIT [228 ITR Court in the case of Sahney Steel and Press Words Ltd. vs CIT [228 ITR 253](1997). In the said decision, the Supreme Court held that the object or 253](1997). In the said decision, the Supreme Court held that the object or 253](1997). In the said decision, the Supreme Court held that the object or purpose for which the subsi purpose for which the subsidy is given that is determinative of its character in the dy is given that is determinative of its character in the assessee’s hands. Similarly, the assessee has also placed reliance on other assessee’s hands. Similarly, the assessee has also placed reliance on other assessee’s hands. Similarly, the assessee has also placed reliance on other decisions including the decision of Supreme Court in another case of CIT vs. decisions including the decision of Supreme Court in another case of CIT vs. decisions including the decision of Supreme Court in another case of CIT vs. Shree Balaji Alloys reported in 287 CTR 459 d Shree Balaji Alloys reported in 287 CTR 459 dated 19.04.2016. The assessee ated 19.04.2016. The assessee pointed out that facts involved in the decision of The Shree Balaji Alloys (supra) pointed out that facts involved in the decision of The Shree Balaji Alloys (supra) pointed out that facts involved in the decision of The Shree Balaji Alloys (supra) are identical to the assessee’s case as the subsidy in the case of Shree Balaji are identical to the assessee’s case as the subsidy in the case of Shree Balaji are identical to the assessee’s case as the subsidy in the case of Shree Balaji Alloys was also received pursuant to intention of the Government to industrialize Alloys was also received pursuant to intention of the Governmen Alloys was also received pursuant to intention of the Governmen the backward area. 14.6 Further, the assessee also pointed out that that AO has himself allowed the 14.6 Further, the assessee also pointed out that that AO has himself allowed the 14.6 Further, the assessee also pointed out that that AO has himself allowed the claim of excise duty being capital in the nature, in the assessment order passed claim of excise duty being capital in the nature, in the assessment order passed claim of excise duty being capital in the nature, in the assessment order passed for AY 2015-16, since the same was claimed in return of 16, since the same was claimed in return of income itself. income itself. 14.7 In addition to the above, the assessee also claimed that the said receipts 14.7 In addition to the above, the assessee also claimed that the said receipts 14.7 In addition to the above, the assessee also claimed that the said receipts being capital in nature should also be reduced from the books profits u/s 11t5JB being capital in nature should also be reduced from the books profits u/s 11t5JB being capital in nature should also be reduced from the books profits u/s 11t5JB of the Act. To buttress its claim, assessee has placed reliance on various of the Act. To buttress its claim, assessee has placed reliance on various of the Act. To buttress its claim, assessee has placed reliance on various decisions including the decision of Hon’ble Kolkata High Court in the case of Pr. sions including the decision of Hon’ble Kolkata High Court in the case of Pr. sions including the decision of Hon’ble Kolkata High Court in the case of Pr. CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 and also the decision of Hon’ble Bombay High Court in the case of Jurisdictional and also the decision of Hon’ble Bombay High Court in the case of Jurisdictional and also the decision of Hon’ble Bombay High Court in the case of Jurisdictional Tribunal in the case of Tribunal in the case of ACIT vs. JSW Steel Ltd. reported in 112 taxmann.com 55 ACIT vs. JSW Steel Ltd. reported in 112 taxmann.com 55 (2019). 14.8 Further, the assessee has pointed out that the identical issue has been dealt 14.8 Further, the assessee has pointed out that the identical issue has been dealt 14.8 Further, the assessee has pointed out that the identical issue has been dealt by Tribunal vide order dated 08.04.2024(supra) wherein the revised computation by Tribunal vide order dated 08.04.2024(supra) wherein the revised computation by Tribunal vide order dated 08.04.2024(supra) wherein the revised computation filed by the assessee for AY 2 filed by the assessee for AY 2012-13 and 2014-15 was accepted by the Hon’ble 15 was accepted by the Hon’ble Tribunal and subsidy received by the appellant was held to be capital in nature Tribunal and subsidy received by the appellant was held to be capital in nature Tribunal and subsidy received by the appellant was held to be capital in nature which was to be reduced from income under the normal provisions as well as which was to be reduced from income under the normal provisions as well as which was to be reduced from income under the normal provisions as well as book profits u/s 115JB. book profits u/s 115JB. 14.9 I have considered that f 14.9 I have considered that facts of the case, submission made by assessee acts of the case, submission made by assessee during the appellate proceeding. I have also considered the facts involved in the during the appellate proceeding. I have also considered the facts involved in the during the appellate proceeding. I have also considered the facts involved in the assessee’s own case for AY 2012 assessee’s own case for AY 2012-13 & 2014-15 which has been decided by the 15 which has been decided by the Tribunal. It is a settled position the AO cannot cons Tribunal. It is a settled position the AO cannot considered any additional claim idered any additional claim made by the assessee otherwise then by way of filling the revised return. made by the assessee otherwise then by way of filling the revised return. made by the assessee otherwise then by way of filling the revised return. However, in light of the above decision, it is also a noted position that such However, in light of the above decision, it is also a noted position that such However, in light of the above decision, it is also a noted position that such additional claims can be accepted by the appellate authorities. Accordingly, the additional claims can be accepted by the appellate authorities. Accordingly additional claims can be accepted by the appellate authorities. Accordingly claim made by the assessee in its revised computation filed before the AO can be claim made by the assessee in its revised computation filed before the AO can be claim made by the assessee in its revised computation filed before the AO can be accepted at this appellate stage. Further with regards to the nature of such accepted at this appellate stage. Further with regards to the nature of such accepted at this appellate stage. Further with regards to the nature of such receipts, I find that the Hon’ble tribunal has decided this issue in the favour of the receipts, I find that the Hon’ble tribunal has decided this issue in the favour of the receipts, I find that the Hon’ble tribunal has decided this issue in the favour of the assessee for AY 2012 see for AY 2012-13 & 2014- 15 wherein the additional claim was made by 15 wherein the additional claim was made by the assessee by way of filling the revised computation before the AO. The the assessee by way of filling the revised computation before the AO. the assessee by way of filling the revised computation before the AO. relevant portion of the order reads as under: relevant portion of the order reads as under:-

IPCA Laboratories Limited, IPCA Laboratories Limited, 62 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

“14.4 We have considered the rival submissions of both the parti “14.4 We have considered the rival submissions of both the parti “14.4 We have considered the rival submissions of both the parties. From the facts as discussed in the foregoing, it can be safely inferred that the the facts as discussed in the foregoing, it can be safely inferred that the the facts as discussed in the foregoing, it can be safely inferred that the subsidy was granted to the assessee for setting up new unit in the State of subsidy was granted to the assessee for setting up new unit in the State of subsidy was granted to the assessee for setting up new unit in the State of Sikkim. The Hon'ble Supreme Court in the case of Chaphalkar Brothers Sikkim. The Hon'ble Supreme Court in the case of Chaphalkar Brothers Sikkim. The Hon'ble Supreme Court in the case of Chaphalkar Brothers (400 ITR 279) has held tha (400 ITR 279) has held that the subsidies granted under Government t the subsidies granted under Government Industrial Scheme to accelerate industrial development and generate Industrial Scheme to accelerate industrial development and generate Industrial Scheme to accelerate industrial development and generate employment is capital in nature. The relevant extracts of the judgment are employment is capital in nature. The relevant extracts of the judgment are employment is capital in nature. The relevant extracts of the judgment are as follows: ………………… ………………… 14.5 The above decision of the Hon'ble Supreme Cour 14.5 The above decision of the Hon'ble Supreme Cour 14.5 The above decision of the Hon'ble Supreme Court has been followed by the jurisdictional Hon'ble Bombay High Court in the case of Pr. CIT Vs by the jurisdictional Hon'ble Bombay High Court in the case of Pr. CIT Vs by the jurisdictional Hon'ble Bombay High Court in the case of Pr. CIT Vs Welspun Steel Ltd (264 Taxman 252). In the decided case also, the Hon’ble Welspun Steel Ltd (264 Taxman 252). In the decided case also, the Hon’ble Welspun Steel Ltd (264 Taxman 252). In the decided case also, the Hon’ble Court held that, where the incentive under the Industrial Scheme is given Court held that, where the incentive under the Industrial Scheme is given Court held that, where the incentive under the Industrial Scheme is given only to new un only to new units and units which have undergone an expansion, then the its and units which have undergone an expansion, then the real purpose of such incentive has to be seen as a capital subsidy and real purpose of such incentive has to be seen as a capital subsidy and real purpose of such incentive has to be seen as a capital subsidy and therefore should be regarded as a capital receipt and not a revenue therefore should be regarded as a capital receipt and not a revenue therefore should be regarded as a capital receipt and not a revenue receipt. The relevant findings of the Hon’ble High Court ar receipt. The relevant findings of the Hon’ble High Court ar receipt. The relevant findings of the Hon’ble High Court are noted to be as follows :- …………………………… …………………………… 14.6 Following the ratio laid down in the judgements (supra), we see no 14.6 Following the ratio laid down in the judgements (supra), we see no 14.6 Following the ratio laid down in the judgements (supra), we see no reason to interfere with the Ld. CIT(A)’s findings hold that the excise reason to interfere with the Ld. CIT(A)’s findings hold that the excise reason to interfere with the Ld. CIT(A)’s findings hold that the excise subsidy received by the assessee was in the nature of capital receipt no subsidy received by the assessee was in the nature of capital receipt no subsidy received by the assessee was in the nature of capital receipt not liable to tax, as the object of granting subsidy was to encourage setting up liable to tax, as the object of granting subsidy was to encourage setting up liable to tax, as the object of granting subsidy was to encourage setting up new industries for industrial growth of industrially non new industries for industrial growth of industrially non new industries for industrial growth of industrially non-developed area. 14.7 We now come to the issue relating to treatment of these subsidies 14.7 We now come to the issue relating to treatment of these subsidies 14.7 We now come to the issue relating to treatment of these subsidies while computing book profit u/s while computing book profit u/s 115JB. It is noted that, in the context of 115JB. It is noted that, in the context of similar State Industrial Scheme, the Hon'ble Calcutta High Court in the similar State Industrial Scheme, the Hon'ble Calcutta High Court in the similar State Industrial Scheme, the Hon'ble Calcutta High Court in the case of Ankit Metal and Power Ltd. (416 ITR 591) has held that, the case of Ankit Metal and Power Ltd. (416 ITR 591) has held that, the case of Ankit Metal and Power Ltd. (416 ITR 591) has held that, the subsidies received for setting up new industry is not in the nature of subsidies received for setting up new industry is not in the nature of subsidies received for setting up new industry is not in the nature of income, and therefore cannot be deemed as income, for the purposes of come, and therefore cannot be deemed as income, for the purposes of come, and therefore cannot be deemed as income, for the purposes of computing book profit u/s 115JB of the Act. In the decided case, the computing book profit u/s 115JB of the Act. In the decided case, the computing book profit u/s 115JB of the Act. In the decided case, the assessee had received interest subsidy under the WB Incentive Scheme, assessee had received interest subsidy under the WB Incentive Scheme, assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive 2000 and power subsidy under the Power Intensive 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form of remission of assessee claimed that receipt of such subsidies in form of remission of assessee claimed that receipt of such subsidies in form of remission of interest and power/electricity duty payments etc. was capital receipt not interest and power/electricity duty payments etc. was capital receipt not interest and power/electricity duty payments etc. was capital receipt not liable to tax b liable to tax both under the normal computational provisions as well as oth under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in book profit u/s 115JB of the Act. The Tribunal answered the issue in book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the Revenue, the Hon'ble High Court favour of the assessee. On appeal by the Revenue, the Hon'ble High Court favour of the assessee. On appeal by the Revenue, the Hon'ble High Court upheld the order of this Tribunal by observing as under: upheld the order of this Tribunal by observing as under: upheld the order of this Tribunal by observing as under:

IPCA Laboratories Limited, IPCA Laboratories Limited, 63 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

……………………………………… ……………………………………… 14.8 We also rely on the decision of the coordinate bench of this Tribunal 14.8 We also rely on the decision of the coordinate bench of this Tribunal 14.8 We also rely on the decision of the coordinate bench of this Tribunal in the case of Sicpa India (P.) Ltd. Vs DCIT (80 taxmann.com 87) involving in the case of Sicpa India (P.) Ltd. Vs DCIT (80 taxmann.com 87) involving in the case of Sicpa India (P.) Ltd. Vs DCIT (80 taxmann.com 87) involving identical facts and circumstances as found in the present case before us. identical facts and circumstances as found in the present case before us. identical facts and circumstances as found in the present case before us. In the decided c In the decided case, it has been held that the subsidy received by the ase, it has been held that the subsidy received by the assessee in form of excise duty exemption for setting up new industry in assessee in form of excise duty exemption for setting up new industry in assessee in form of excise duty exemption for setting up new industry in the North Eastern State viz., Sikkim was in the capital field and therefore the North Eastern State viz., Sikkim was in the capital field and therefore the North Eastern State viz., Sikkim was in the capital field and therefore not liable to tax under the provisions of section 11 not liable to tax under the provisions of section 115JB of the Act. The 5JB of the Act. The relevant findings of this Tribunal are as follows: relevant findings of this Tribunal are as follows: ………………………….. ………………………….. 14.9 For the reasons set out above and respectfully following the decisions 14.9 For the reasons set out above and respectfully following the decisions 14.9 For the reasons set out above and respectfully following the decisions (supra), we uphold the order of Ld. CIT(A) excluding the subsidy received (supra), we uphold the order of Ld. CIT(A) excluding the subsidy received (supra), we uphold the order of Ld. CIT(A) excluding the subsidy received by the assessee for setting up new industry, by way of refund of excise by the assessee for setting up new industry, by way of refund of excise by the assessee for setting up new industry, by way of refund of excise duty from the computation of book duty from the computation of book profit u/s 115JB of the Act. profit u/s 115JB of the Act. 14.10 As far as the ld. CIT, DR's contention regarding admission of fresh 14.10 As far as the ld. CIT, DR's contention regarding admission of fresh 14.10 As far as the ld. CIT, DR's contention regarding admission of fresh claim is concerned, we note that the assessee had raised the claim in the claim is concerned, we note that the assessee had raised the claim in the claim is concerned, we note that the assessee had raised the claim in the abated AYs 2012 abated AYs 2012-13 & 2014-15. It is noted that the Hon’ble Bombay High 15. It is noted that the Hon’ble Bombay High Court in the decisions rendered in the cases of Pr. CIT v. JSW Steel Limited n the decisions rendered in the cases of Pr. CIT v. JSW Steel Limited n the decisions rendered in the cases of Pr. CIT v. JSW Steel Limited (270 Taxman 201) and CIT v. B. G. Shirke Construction Technology (P.) (270 Taxman 201) and CIT v. B. G. Shirke Construction Technology (P.) (270 Taxman 201) and CIT v. B. G. Shirke Construction Technology (P.) Ltd.(395 ITR 371) has held that, it is open for an assessee to lodge a new Ltd.(395 ITR 371) has held that, it is open for an assessee to lodge a new Ltd.(395 ITR 371) has held that, it is open for an assessee to lodge a new claim in a proceeding under section 153A claim in a proceeding under section 153A which was not claimed in his which was not claimed in his regular return of income, provided the assessment stood abated as a regular return of income, provided the assessment stood abated as a regular return of income, provided the assessment stood abated as a consequence of the search. Also, the Hon’ble Bombay High Court in the consequence of the search. Also, the Hon’ble Bombay High Court in the consequence of the search. Also, the Hon’ble Bombay High Court in the case of CIT Vs Pruthvi Brokers & Shareholders (supra) after considering case of CIT Vs Pruthvi Brokers & Shareholders (supra) after considering case of CIT Vs Pruthvi Brokers & Shareholders (supra) after considering the decisions of the decisions of the Hon’ble Supreme Court in the cases of Addl. CIT v. the Hon’ble Supreme Court in the cases of Addl. CIT v. Gurjargravures (P.) Ltd., (111 ITR 1), Jute Corpn. of India Ltd. v. CIT (187 Gurjargravures (P.) Ltd., (111 ITR 1), Jute Corpn. of India Ltd. v. CIT (187 Gurjargravures (P.) Ltd., (111 ITR 1), Jute Corpn. of India Ltd. v. CIT (187 ITR 688), National Thermal Power Co. Ltd. v. CIT (229 ITR 383) and Goetze ITR 688), National Thermal Power Co. Ltd. v. CIT (229 ITR 383) and Goetze ITR 688), National Thermal Power Co. Ltd. v. CIT (229 ITR 383) and Goetze (India) Ltd. v. CIT (supra) has upheld the powers (India) Ltd. v. CIT (supra) has upheld the powers (India) Ltd. v. CIT (supra) has upheld the powers of the appellate authorities including Ld. CIT(A) to entertain and adjudicate additional authorities including Ld. CIT(A) to entertain and adjudicate additional authorities including Ld. CIT(A) to entertain and adjudicate additional claims which was not made by an assessee in the return of income. claims which was not made by an assessee in the return of income. claims which was not made by an assessee in the return of income. 14.11 We further note that, on similar set of facts & circumstances, 14.11 We further note that, on similar set of facts & circumstances, 14.11 We further note that, on similar set of facts & circumstances, identical contention was also ra identical contention was also raised by the Revenue before the Hon'ble ised by the Revenue before the Hon'ble Calcutta High Court in the case of Ankit Metal and Power Ltd. (supra). In Calcutta High Court in the case of Ankit Metal and Power Ltd. (supra). In Calcutta High Court in the case of Ankit Metal and Power Ltd. (supra). In the decided case also, the assessee had raised this plea for the first time the decided case also, the assessee had raised this plea for the first time the decided case also, the assessee had raised this plea for the first time before the Tribunal viz., the subsidy received under the State Indu before the Tribunal viz., the subsidy received under the State Indu before the Tribunal viz., the subsidy received under the State Industrial Scheme is capital in nature and therefore should be excluded from the Scheme is capital in nature and therefore should be excluded from the Scheme is capital in nature and therefore should be excluded from the book profit u/s 115JB of the Act. The Tribunal admitted this legal issue book profit u/s 115JB of the Act. The Tribunal admitted this legal issue book profit u/s 115JB of the Act. The Tribunal admitted this legal issue raised by the assessee and answered it in their favour. Before the Hon'ble raised by the assessee and answered it in their favour. Before the Hon'ble raised by the assessee and answered it in their favour. Before the Hon'ble High Court, the Revenue raised High Court, the Revenue raised the following question for their the following question for their consideration. consideration.

IPCA Laboratories Limited, IPCA Laboratories Limited, 64 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

……………………………………. ……………………………………. 14.13 For the reasons set out above therefore, we do not find any merit in 14.13 For the reasons set out above therefore, we do not find any merit in 14.13 For the reasons set out above therefore, we do not find any merit in the legal plea raised by the Ld. CIT, DR contesting validity of admission of the legal plea raised by the Ld. CIT, DR contesting validity of admission of the legal plea raised by the Ld. CIT, DR contesting validity of admission of additional claim by the Ld. CIT(A). Over additional claim by the Ld. CIT(A). Overall thus, we see no reason to all thus, we see no reason to interfere with the order of Ld. CIT(A) on this issue and uphold his action of interfere with the order of Ld. CIT(A) on this issue and uphold his action of interfere with the order of Ld. CIT(A) on this issue and uphold his action of directing the AO to delete / reduce the excise duty subsidy both while directing the AO to delete / reduce the excise duty subsidy both while directing the AO to delete / reduce the excise duty subsidy both while computing income under normal provisions as well as book profit u/s computing income under normal provisions as well as book profit u/s computing income under normal provisions as well as book profit u/s 115JB of the Act. These grounds of the Revenue are therefore dismissed.” the Act. These grounds of the Revenue are therefore dismissed.” the Act. These grounds of the Revenue are therefore dismissed.” 14.10 Thus in light of the above decisions (supra) and following the decision of 14.10 Thus in light of the above decisions (supra) and following the decision of 14.10 Thus in light of the above decisions (supra) and following the decision of Tribunal in the assessee’s own case, it is held that the excise duty refund of Tribunal in the assessee’s own case, it is held that the excise duty refund of Tribunal in the assessee’s own case, it is held that the excise duty refund of Rs.11,44,53,373/- is a capital r is a capital receipt and the same is should be deducted from eceipt and the same is should be deducted from the income as per normal provision and books profits as per section 115 JB of the the income as per normal provision and books profits as per section 115 JB of the the income as per normal provision and books profits as per section 115 JB of the Act. Ground no. 15 & 16 are allowed.” Act. Ground no. 15 & 16 are allowed.” 10.9 Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that the issue is squarely the issue is squarely covered by the decision of the Coordinate covered by the decision of the Coordinate Bench rendered in the assessee’s own case. It was contended that Bench rendered in the assessee’s own case. It was contended that Bench rendered in the assessee’s own case. It was contended that the dominant purpose of the NEIIPP Scheme was to encourage the dominant purpose of the NEIIPP Scheme was to encourage the dominant purpose of the NEIIPP Scheme was to encourage entrepreneurs to establish industries in economically backward entrepreneurs to establish industries in economically backward entrepreneurs to establish industries in economically backward regions and thereby genera regions and thereby generate employment and industrial growth. te employment and industrial growth. Applying the well-settled “purpose test” laid down by the Hon’ble settled “purpose test” laid down by the Hon’ble settled “purpose test” laid down by the Hon’ble Supreme Court in Sahney Steel & Press Works Ltd. v. CIT Sahney Steel & Press Works Ltd. v. CIT, CIT Sahney Steel & Press Works Ltd. v. CIT v. Ponni Sugars & Chemicals Ltd. v. Ponni Sugars & Chemicals Ltd., CIT v. Shree Balaji Alloys CIT v. Shree Balaji Alloys and CIT v. Chaphalkar Brothers CIT v. Chaphalkar Brothers, it was submitted that the it was submitted that the subsidy was clearly capital in character. subsidy was clearly capital in character. It is further submitted that It is further submitted that the decision of Mumbai Tribunal in the case of Man Industries the decision of Mumbai Tribunal in the case of Man Industries the decision of Mumbai Tribunal in the case of Man Industries India Ltd. vs. ACIT held that incentives granted for setting up India Ltd. vs. ACIT held that incentives granted for setting up India Ltd. vs. ACIT held that incentives granted for setting up industries in backward areas co industries in backward areas constitute capital receipts and are not nstitute capital receipts and are not liable to tax.

IPCA Laboratories Limited, IPCA Laboratories Limited, 65 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

10.10 It was further submitted that the issue relating to It was further submitted that the issue relating to It was further submitted that the issue relating to exclusion of such subsidy from book profit under section 115JB is exclusion of such subsidy from book profit under section 115JB is exclusion of such subsidy from book profit under section 115JB is equally covered by the decisions of the Hon’ble Calcutta High Court equally covered by the decisions of the Hon’ble Calcutta High Court equally covered by the decisions of the Hon’ble Calcutta High Court in Pr. CIT v. Ankit Metal & Power Ltd. v. Ankit Metal & Power Ltd., as well as the decisions of as well as the decisions of various Coordinate Benches of the Tribunal including Sicpa India various Coordinate Benches of the Tribunal including various Coordinate Benches of the Tribunal including (P.) Ltd. v. DCIT. Reliance was also placed on the decision of the Reliance was also placed on the decision of the Reliance was also placed on the decision of the Hon’ble Bombay High Court in Pruthvi Brokers & Shareholders Pruthvi Brokers & Shareholders Hon’ble Bombay High Court in Pvt. Ltd. to contend that the appellate authorities are fully to contend that the appellate authorities are fully to contend that the appellate authorities are fully competent to entertain and adjudicate a legal claim raised through competent to entertain and adjudicate a legal claim raised through competent to entertain and adjudicate a legal claim raised through a revised computation. a revised computation. Further, the same issue has been accepted Further, the same issue has been accepted by ld. AO himself in AY 2015 by ld. AO himself in AY 2015-16.

10.11 In view of the above submiss In view of the above submissions it was prayed that the revised computation filed by the assessee be admitted and the revised computation filed by the assessee be admitted and the revised computation filed by the assessee be admitted and the excise duty refund amounting to Rs.11,44,53,373/- be directed to excise duty refund amounting to Rs.11,44,53,373/ excise duty refund amounting to Rs.11,44,53,373/ be excluded from the taxable income as well as from the be excluded from the taxable income as well as from the be excluded from the taxable income as well as from the computation of book profit u/s 115JB of the A computation of book profit u/s 115JB of the Act.

10.12 We have given our thoughtful consideration to the rival We have given our thoughtful consideration to the rival We have given our thoughtful consideration to the rival submissions and perused the material available on record. We find submissions and perused the material available on record. We find submissions and perused the material available on record. We find that the issue is no longer res integra. The Coordinate Bench of the that the issue is no longer res integra. The Coordinate Bench of the that the issue is no longer res integra. The Coordinate Bench of the Tribunal, Tribunal, Tribunal, while while while adjudicating adjudicating adjudicating the the the assessee’s assessee’s assessee’s own own own case case case for fo fo Assessment Years 2012 Assessment Years 2012-13 and 2014-15, has undertaken a detailed 15, has undertaken a detailed examination of the very same subsidy scheme and has categorically examination of the very same subsidy scheme and has categorically examination of the very same subsidy scheme and has categorically held that the excise duty refund received under the NEIIPP Scheme held that the excise duty refund received under the NEIIPP Scheme held that the excise duty refund received under the NEIIPP Scheme

IPCA Laboratories Limited, IPCA Laboratories Limited, 66 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

is a capital receipt. The Tribunal, after applying the “purpose test” is a capital receipt. The Tribunal, after applying the “pu is a capital receipt. The Tribunal, after applying the “pu enunciated by the Hon’ble Supreme Court, recorded a finding that enunciated by the Hon’ble Supreme Court, recorded a finding that enunciated by the Hon’ble Supreme Court, recorded a finding that the the the dominant dominant dominant object object object of of of the the the incentive incentive incentive was was was to to to encourage encourage encourage industrialisation industrialisation industrialisation in in in an an an underdeveloped underdeveloped underdeveloped region region region and and and not not not to to to supplement the day supplement the day-to-day business operations of the recipient. day business operations of the recipient. Such finding directly brings the subsidy within the capital field. finding directly brings the subsidy within the capital field. finding directly brings the subsidy within the capital field.

10.13 We also find no infirmity in the conclusion of the learned We also find no infirmity in the conclusion of the learned We also find no infirmity in the conclusion of the learned CIT(A) regarding admission of the revised claim. The legal position is CIT(A) regarding admission of the revised claim. The legal position is CIT(A) regarding admission of the revised claim. The legal position is well settled that while the Assessing Officer may be constrained by well settled that while the Assessing Officer may be cons well settled that while the Assessing Officer may be cons the ratio laid down in Goetze (India) Ltd.(supra), the powers of the the ratio laid down in the powers of the appellate authorities remain unaffected. The judgments of the appellate authorities remain unaffected. The judgments of the appellate authorities remain unaffected. The judgments of the Hon’ble Bombay High Court in Pruthvi Brokers & Shareholders Pruthvi Brokers & Shareholders Hon’ble Bombay High Court in Pvt. Ltd.(supra) unequivocally recognize the jurisdiction of unequivocally recognize the jurisdiction of unequivocally recognize the jurisdiction of appellate authorities to entertain and adjudicate additional legal appellate authorities to entertain and adjudicate additional legal appellate authorities to entertain and adjudicate additional legal claims, even if such claims were not made in the original return of claims, even if such claims were not made in the original return of claims, even if such claims were not made in the original return of income.

10.14 We further note that the Coordinate Bench, while We further note that the Coordinate Bench, while We further note that the Coordinate Bench, while deciding the assessee’s own case, has also held that once the assessee’s own case, has also held that once the assessee’s own case, has also held that once the subsidy is found to be capital in nature and outside the scope of subsidy is found to be capital in nature and outside the scope of subsidy is found to be capital in nature and outside the scope of taxable income, it cannot be brought within the ambit of book profit taxable income, it cannot be brought within the ambit of book profit taxable income, it cannot be brought within the ambit of book profit under section 115JB of the Act. This view finds support from the under section 115JB of the Act. This view finds support from the under section 115JB of the Act. This view finds support from the decisions of the Hon’ble Calcutta High Court in ns of the Hon’ble Calcutta High Court in Ankit Metal & Ankit Metal & Power Ltd. (supra) and other judicial precedents cited before us. and other judicial precedents cited before us.

IPCA Laboratories Limited, IPCA Laboratories Limited, 67 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Significantly, the Revenue has not pointed out any distinguishing Significantly, the Revenue has not pointed out any distinguishing Significantly, the Revenue has not pointed out any distinguishing feature either in the factual matrix or in the governing legal position feature either in the factual matrix or in the governing legal positi feature either in the factual matrix or in the governing legal positi which would warrant a departure from the view consistently taken which would warrant a departure from the view consistently taken which would warrant a departure from the view consistently taken in the assessee’s own case. In fact, it has been brought on record in the assessee’s own case. In fact, it has been brought on record in the assessee’s own case. In fact, it has been brought on record that the Assessing Officer himself accepted a similar claim in that the Assessing Officer himself accepted a similar claim in that the Assessing Officer himself accepted a similar claim in Assessment Year 2015 Assessment Year 2015-16.

10.15 In these circumstances, and In these circumstances, and respectfully following the respectfully following the binding decision of the Coordinate Bench rendered in the assessee’s binding decision of the Coordinate Bench rendered in the assessee’s binding decision of the Coordinate Bench rendered in the assessee’s own case, we find no reason to interfere with the order of the own case, we find no reason to interfere with the order of the own case, we find no reason to interfere with the order of the learned CIT(A). We accordingly uphold the finding that the excise learned CIT(A). We accordingly uphold the finding that the excise learned CIT(A). We accordingly uphold the finding that the excise duty refund of ₹11,44,53,373/ 11,44,53,373/- received under the NEIIPP Scheme received under the NEIIPP Scheme is a capital receipt not chargeable to tax and is liable to be excluded is a capital receipt not chargeable to tax and is liable to be excluded is a capital receipt not chargeable to tax and is liable to be excluded both from the computation of income under the normal provisions both from the computation of income under the normal provisions both from the computation of income under the normal provisions and from the computation of book profit under section 115JB of the and from the computation of book profit under section 115JB of the and from the computation of book profit under section 115JB of the Act. The Ground No.4 he Ground No.4 of the appeal of the Revenue is accordingly of the appeal of the Revenue is accordingly dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 68 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.1 The facts, in brief, are that the Assessing Officer referred the The facts, in brief, are that the Assessing Officer referred the The facts, in brief, are that the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) for determination of the matter to the Transfer Pricing Officer (TPO) for determination of the matter to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) of the international transactions as well as Arm’s Length Price (ALP) of the international transactions as well as Arm’s Length Price (ALP) of the international transactions as well as specified domestic transactions undertaken by the specified domestic transactions undertaken by the assessee. In the assessee. In the transfer pricing study report, the assessee had benchmarked the transfer pricing study report, the assessee had benchmarked the transfer pricing study report, the assessee had benchmarked the impugned transactions by adopting the Transactional Net Margin impugned transactions by adopting the Transactional Net Margin impugned transactions by adopting the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM), treating Method (TNMM) as the Most Appropriate Method (MAM), treating Method (TNMM) as the Most Appropriate Method (MAM), treating itself as the tested party and undertaking benchmarking at the itself as the tested party and undertaking benchmar itself as the tested party and undertaking benchmar entity level. According to the assessee, no reliable Comparable entity level. According to the assessee, no reliable Comparable entity level. According to the assessee, no reliable Comparable Uncontrolled Price (CUP) was available for the products in question Uncontrolled Price (CUP) was available for the products in question Uncontrolled Price (CUP) was available for the products in question and, therefore, TNMM constituted the most appropriate method for and, therefore, TNMM constituted the most appropriate method for and, therefore, TNMM constituted the most appropriate method for determining the ALP. determining the ALP.

11.2 The TPO, however, rej The TPO, however, rejected the benchmarking approach ected the benchmarking approach adopted by the assessee. According to him, the transactions adopted by the assessee. According to him, the transactions adopted by the assessee. According to him, the transactions undertaken with the Associated Enterprise constituted only a small undertaken with the Associated Enterprise constituted only a small undertaken with the Associated Enterprise constituted only a small portion of the overall operations of the assessee and, therefore, the portion of the overall operations of the assessee and, therefore, the portion of the overall operations of the assessee and, therefore, the entity-level profitability level profitability of the assessee could not furnish a reliable of the assessee could not furnish a reliable basis for benchmarking the impugned transactions. The TPO basis for benchmarking the impugned transactions. The TPO basis for benchmarking the impugned transactions. The TPO accordingly treated the Associated Enterprise, namely M/s Exon accordingly treated the Associated Enterprise, namely M/s Exon accordingly treated the Associated Enterprise, namely M/s Exon Laboratories Pvt. Ltd., as the tested party and sought to benchmark Laboratories Pvt. Ltd., as the tested party and sought to benchmark Laboratories Pvt. Ltd., as the tested party and sought to benchmark its profitability with that of certain independent entities operating in that of certain independent entities operating in that of certain independent entities operating in the pharmaceutical sector. the pharmaceutical sector.

IPCA Laboratories Limited, IPCA Laboratories Limited, 69 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.3 For this purpose, the TPO selected M/s Brook Laboratories For this purpose, the TPO selected M/s Brook Laboratories For this purpose, the TPO selected M/s Brook Laboratories Ltd. and M/s NGL Fine Ltd. and M/s NGL Fine-Chem Ltd. as comparables and, applying Chem Ltd. as comparables and, applying TNMM, compared their margins with the operating margin of the TNMM, compared their margins with the operating margi TNMM, compared their margins with the operating margi Associated Enterprise. Associated Enterprise. The ld. TPO further held that the functions The ld. TPO further held that the functions performed by the comparable companies were similar to those performed by the comparable companies were similar to those performed by the comparable companies were similar to those performed by the AE and that both the comparable entities as well performed by the AE and that both the comparable entities as well performed by the AE and that both the comparable entities as well as the AE operated within the pharmaceutical sector. The TPO as the AE operated within the pharmaceutical sector. T as the AE operated within the pharmaceutical sector. T therefore disregarded the contention of the assessee that the AE therefore disregarded the contention of the assessee that the AE therefore disregarded the contention of the assessee that the AE was was was merely merely merely engaged engaged engaged in in in manufacturing manufacturing manufacturing pharmaceutical pharmaceutical pharmaceutical intermediates and undertaking job work activities. intermediates and undertaking job work activities. Based on such comparison, the TPO concluded that the transactions entered into comparison, the TPO concluded that the transactions entered into comparison, the TPO concluded that the transactions entered into by the assessee with its Associated Enterprise were not at arm’s the assessee with its Associated Enterprise were not at arm’s the assessee with its Associated Enterprise were not at arm’s length and consequently proposed an adjustment of ₹4,17,22,865/- length and consequently proposed an adjustment of length and consequently proposed an adjustment of

IPCA Laboratories Limited, IPCA Laboratories Limited, 70 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

products. However, the comparables selected by the TPO, namely s. However, the comparables selected by the TPO, namely s. However, the comparables selected by the TPO, namely M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd., were M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd., were M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd., were engaged in manufacturing finished pharmaceutical formulations for engaged in manufacturing finished pharmaceutical formulations for engaged in manufacturing finished pharmaceutical formulations for human and veterinary consumption. human and veterinary consumption. The ld. CIT(A) held that the The ld. CIT(A) held that the companies selected by the TPO were functionally different from the companies selected by the TPO were functionally different from the companies selected by the TPO were functionally different from the AE. It was observed that an intermediate manufacturer operates AE. It was observed that an intermediate manufacturer operates AE. It was observed that an intermediate manufacturer operates with lower commercial and marketing risks, whereas manufacturers with lower commercial and marketing risks, whereas manufacturers with lower commercial and marketing risks, whereas manufacturers of finished formulations bear higher risks along with branding, of finished formulations bear higher risks along with brandin of finished formulations bear higher risks along with brandin packaging and marketing functions. packaging and marketing functions. The ld. CIT(A) further recorded The ld. CIT(A) further recorded that TPO had not carried out proper FAR analysis before selecting that TPO had not carried out proper FAR analysis before selecting that TPO had not carried out proper FAR analysis before selecting the comparables. Accordingly, the ld. CIT(A) accepted the the comparables. Accordingly, the ld. CIT(A) accepted the the comparables. Accordingly, the ld. CIT(A) accepted the contention of the assessee that the comparables adopted by the contention of the assessee that the comparables adopted by the contention of the assessee that the comparables adopted by the TPO were not appropriate for benchmarking the international TPO were not appropriate for benchmarking the international TPO were not appropriate for benchmarking the international transaction. The ld. CIT(A) also accepted the submission of the The ld. CIT(A) also accepted the submission of the The ld. CIT(A) also accepted the submission of the assessee that the AE could not be treated as the tested party in the assessee that the AE could not be treated as the tested party in the assessee that the AE could not be treated as the tested party in the absence of proper comparable companies engaged in intermediate absence of proper comparable companies engaged in intermediate absence of proper comparable companies engaged in intermediate manufacturing activities. Reliance was placed on the data available manufacturing activities. Reliance was placed on the data available manufacturing activities. Reliance was placed on the data available in the Prowess database showing that companies in the in the Prowess database showing that companies in the in the Prowess database showing that companies in the pharmaceutical segment were mainly engaged in formulation and pharmaceutical segment were mainly engaged in formulation and pharmaceutical segment were mainly engaged in formulation and finished product manufacturing. finished product manufacturing. The ld. CIT(A) therefore held that, The ld. CIT(A) therefore held that, even if the AE was considered as the less complex entity, in the n if the AE was considered as the less complex entity, in the n if the AE was considered as the less complex entity, in the absence of proper comparables and reliable adjustments, its net absence of proper comparables and reliable adjustments, its net absence of proper comparables and reliable adjustments, its net margin could not be benchmarked under TNMM. margin could not be benchmarked under TNMM. Accordingly, the Accordingly, the ld. CIT(A) upheld the benchmarking analysis carried out by the ld. CIT(A) upheld the benchmarking analysis carried out by the ld. CIT(A) upheld the benchmarking analysis carried out by the

IPCA Laboratories Limited, IPCA Laboratories Limited, 71 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

assessee by treating the assessee company as the tested party. It see by treating the assessee company as the tested party. It see by treating the assessee company as the tested party. It was further noted that the TPO had not pointed out any defect in was further noted that the TPO had not pointed out any defect in was further noted that the TPO had not pointed out any defect in the margin computation undertaken by the assessee. In view of the the margin computation undertaken by the assessee. the margin computation undertaken by the assessee. above findings, the ld. CIT(A) held that the transfer pricing above findings, the ld. CIT(A) held that the transfer pricing above findings, the ld. CIT(A) held that the transfer pricing adjustment made by the ld. TPO was unsustainable and the justment made by the ld. TPO was unsustainable and the justment made by the ld. TPO was unsustainable and the adjustment made by the TPO was deleted. adjustment made by the TPO was deleted. The relevant finding of The relevant finding of the Ld. CIT(A) is reproduced as under: the Ld. CIT(A) is reproduced as under:-

“11.3 I have gone through the contention of the TPO and submission of the “11.3 I have gone through the contention of the TPO and submission of the “11.3 I have gone through the contention of the TPO and submission of the assessee. There is no d assessee. There is no dispute between the assessee and TPO that TNMM is the ispute between the assessee and TPO that TNMM is the MAM. The question which arises here is that whether the action of the AO in MAM. The question which arises here is that whether the action of the AO in MAM. The question which arises here is that whether the action of the AO in holding AE M/s. Exon Laboratories Pvt. Ltd. as a ‘tested party‘ and selecting the holding AE M/s. Exon Laboratories Pvt. Ltd. as a ‘tested party‘ and selecting the holding AE M/s. Exon Laboratories Pvt. Ltd. as a ‘tested party‘ and selecting the two companies as comparable, can be confirmed two companies as comparable, can be confirmed. 11.4 In the transfer pricing order, TPO has calculated the net margin of the AE 11.4 In the transfer pricing order, TPO has calculated the net margin of the AE 11.4 In the transfer pricing order, TPO has calculated the net margin of the AE and has compared the same with the margin shown by two companies namely and has compared the same with the margin shown by two companies namely and has compared the same with the margin shown by two companies namely M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd. The assessee has M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd. The assessee has M/s. Brook Laboratories Ltd. and M/s. NGL Fine Chem Ltd. The assessee has pointed out that the AE is pointed out that the AE is engaged in the business of manufacturing intermediate engaged in the business of manufacturing intermediate product such as HNDA, etodolac, etc. which are used in the manufacturing product such as HNDA, etodolac, etc. which are used in the manufacturing product such as HNDA, etodolac, etc. which are used in the manufacturing process of the assessee to produce the final product. The assessee has submitted process of the assessee to produce the final product. The assessee has submitted process of the assessee to produce the final product. The assessee has submitted the list of products manufactured by the compara the list of products manufactured by the comparable companies taken by TPO i.e. ble companies taken by TPO i.e. M/s. Brook Laboratories Ltd. is engaged in the business of finished dosages of M/s. Brook Laboratories Ltd. is engaged in the business of finished dosages of M/s. Brook Laboratories Ltd. is engaged in the business of finished dosages of injectable range of product (Liquids and Dry Powder) of pharmaceuticals injectable range of product (Liquids and Dry Powder) of pharmaceuticals injectable range of product (Liquids and Dry Powder) of pharmaceuticals formulations and M/s. NGL Fine Chem Ltd. which is involved in the formulations and M/s. NGL Fine Chem Ltd. which is involved in the formulations and M/s. NGL Fine Chem Ltd. which is involved in the manufacturing of finished goods for Human consumption as well as veterinary turing of finished goods for Human consumption as well as veterinary turing of finished goods for Human consumption as well as veterinary animals consumption. I find that the comparable should be ‘functionally similar’ animals consumption. I find that the comparable should be ‘functionally similar’ animals consumption. I find that the comparable should be ‘functionally similar’ entities which means that companies being compared should Perform similar entities which means that companies being compared should Perform similar entities which means that companies being compared should Perform similar functions, Bear similar risks, U functions, Bear similar risks, Use similar assets 11.5 In the case of intermediate manufacturer such as AE, their products are 11.5 In the case of intermediate manufacturer such as AE, their products are 11.5 In the case of intermediate manufacturer such as AE, their products are used in the early stage of production which means that they are at lower used in the early stage of production which means that they are at lower used in the early stage of production which means that they are at lower commercial risks, lower marketing cost. Whereas in case of formulation commercial risks, lower marketing cost. Whereas in case of formulation commercial risks, lower marketing cost. Whereas in case of formulation manufacturer, their product are directly used for consumption which means that eir product are directly used for consumption which means that eir product are directly used for consumption which means that they are at higher commercial risk, higher marketing, branding, packaging cost. they are at higher commercial risk, higher marketing, branding, packaging cost. they are at higher commercial risk, higher marketing, branding, packaging cost. Moreover, the assessee has pointed out that TPO has not made any FAR analysis Moreover, the assessee has pointed out that TPO has not made any FAR analysis Moreover, the assessee has pointed out that TPO has not made any FAR analysis before selecting the said comparabl before selecting the said comparable. Therefore, I agree with the submission of e. Therefore, I agree with the submission of the assessee that the comparable used by the TPO are not correct. the assessee that the comparable used by the TPO are not correct. the assessee that the comparable used by the TPO are not correct.

IPCA Laboratories Limited, IPCA Laboratories Limited, 72 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.6 Further, the assessee has pointed out that the AE cannot be taken as tested 11.6 Further, the assessee has pointed out that the AE cannot be taken as tested 11.6 Further, the assessee has pointed out that the AE cannot be taken as tested party since there are no comparable available for the companies who are party since there are no comparable available for the companies party since there are no comparable available for the companies engaged in the business of intermediate manufacturing. In this regard, the engaged in the business of intermediate manufacturing. In this regard, the engaged in the business of intermediate manufacturing. In this regard, the assessee has submitted the relevant extract from Prowess wherein the segment assessee has submitted the relevant extract from Prowess wherein the segment assessee has submitted the relevant extract from Prowess wherein the segment available under the pharma and drug manufacturing companies are only related available under the pharma and drug manufacturing companies are only related available under the pharma and drug manufacturing companies are only related to formulations or to formulations or medicines drugs which are finished products. I have medicines drugs which are finished products. I have considered the submission of the assessee. Even if I am inclined to consider the considered the submission of the assessee. Even if I am inclined to consider the considered the submission of the assessee. Even if I am inclined to consider the AE as tested party being relatively less complex; however, in the absence of AE as tested party being relatively less complex; however, in the absence of AE as tested party being relatively less complex; however, in the absence of proper comparable and adjustment to be done, t proper comparable and adjustment to be done, the net margin of the AE cannot he net margin of the AE cannot be compared. I have already held that the comparable considered by the TPO are be compared. I have already held that the comparable considered by the TPO are be compared. I have already held that the comparable considered by the TPO are not proper. 11.7 In light of the above discussion, I find that the ALP arrived by the assessee 11.7 In light of the above discussion, I find that the ALP arrived by the assessee 11.7 In light of the above discussion, I find that the ALP arrived by the assessee by considering the appellant as tested party needs by considering the appellant as tested party needs to be upheld. No doubt on the to be upheld. No doubt on the working of the net margin treating the company as a tested party, has been working of the net margin treating the company as a tested party, has been working of the net margin treating the company as a tested party, has been raised by the TPO in the order. Accordingly, the adjustment made by the TPO raised by the TPO in the order. Accordingly, the adjustment made by the TPO raised by the TPO in the order. Accordingly, the adjustment made by the TPO should be deleted. Hence, should be deleted. Hence, Ground no. 9 is allowed.” 11.6 Before us the Ld Before us the Ld. Counsel for the assessee submitte . Counsel for the assessee submitted that the assessee had correctly adopted the TNMM assessee had correctly adopted the TNMM as the Most Appropriate as the Most Appropriate Method for benchmarking the international transactions entered Method for benchmarking the international transactions entered Method for benchmarking the international transactions entered into with its AE, namely M/s. Exon Laboratories Pvt. Ltd. into with its AE, namely M/s. Exon Laboratories Pvt. Ltd. into with its AE, namely M/s. Exon Laboratories Pvt. Ltd.

11.7 In the transfer pricing order, ld. TPO has considered the AE as In the transfer pricing order, ld. TPO has considered the AE as In the transfer pricing order, ld. TPO has considered the AE as a tested party and has compared its profit with tow comparables a tested party and has compared its profit with tow comparables a tested party and has compared its profit with tow comparables selected by the ld. TPO, namely M/s. Brook Laboratories Ltd. and selected by the ld. TPO, namely M/s. Brook Laboratories Ltd. and selected by the ld. TPO, namely M/s. Brook Laboratories Ltd. and M/s. NGL Fine-Chem Ltd. In this regard, it is submitted that wh Chem Ltd. In this regard, it is submitted that wh Chem Ltd. In this regard, it is submitted that while considering such comparables, ld. TPO has failed to provide the considering such comparables, ld. TPO has failed to provide the considering such comparables, ld. TPO has failed to provide the FAR analysis and scientific search process as to how such FAR analysis and scientific search process as to how such FAR analysis and scientific search process as to how such comparable has been selected. He has failed to provide the working comparable has been selected. He has failed to provide the working comparable has been selected. He has failed to provide the working as to how he has narrowed down to such comparable and on what as to how he has narrowed down to such comparable and on what as to how he has narrowed down to such comparable and on what criteria he has selected such comparables. It is a settled position riteria he has selected such comparables. It is a settled position riteria he has selected such comparables. It is a settled position that cherry picking of comparables is not allowed. Without such that cherry picking of comparables is not allowed. Without such that cherry picking of comparables is not allowed. Without such

IPCA Laboratories Limited, IPCA Laboratories Limited, 73 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

working, the action of the ld. TPO in adopting such comparables is working, the action of the ld. TPO in adopting such comparables is working, the action of the ld. TPO in adopting such comparables is not correct. Further, it Further, it was submitted that M/s. Brook submitted that M/s. Brook Laboratories Ltd. was engaged in manufacturing finished dosage boratories Ltd. was engaged in manufacturing finished dosage boratories Ltd. was engaged in manufacturing finished dosage formulations, particularly injectable pharmaceutical products, formulations, particularly injectable pharmaceutical products, formulations, particularly injectable pharmaceutical products, whereas M/s. NGL Fine whereas M/s. NGL Fine-Chem Ltd. was engaged in manufacturing Chem Ltd. was engaged in manufacturing APIs and veterinary pharmaceutical products. The activities carried APIs and veterinary pharmaceutical products. The activities carried APIs and veterinary pharmaceutical products. The activities carried on by by the said entities by the said entities the said entities were entirely different were were entirely different entirely different from the from from the the manufacturing of pharmaceutical intermediates undertaken by the manufacturing of pharmaceutical intermediates undertaken by the manufacturing of pharmaceutical intermediates undertaken by the AE. 11.8 It was submitted that TPO has treated all pharmaceutical submitted that TPO has treated all pharmaceutical submitted that TPO has treated all pharmaceutical companies as comparable merely because they operated within the companies as comparable merely because they operated within the companies as comparable merely because they operated within the pharma sector. It is submitted that product segmentation and ector. It is submitted that product segmentation and ector. It is submitted that product segmentation and functional comparability are crucial factors in transfer pricing functional comparability are crucial factors in transfer pricing functional comparability are crucial factors in transfer pricing analysis, particularly in the pharmaceutical industry. It was analysis, particularly in the pharmaceutical industry. analysis, particularly in the pharmaceutical industry. submitted that while preparing its Transfer Pricing Study Report, submitted that while preparing its Transfer Pricing Study Report, submitted that while preparing its Transfer Pricing Study Report, assessee had undertaken a detailed accept had undertaken a detailed accept-reject analysis and had reject analysis and had excluded excluded excluded companies companies companies engaged engaged engaged in in in functionally functionally functionally dissimilar dissimilar dissimilar pharmaceutical segments. Accordingly, the observation of the TPO pharmaceutical segments. Accordingly, the observation of the TPO pharmaceutical segments. Accordingly, the observation of the TPO that the assessee itself had selected companies operating in that the assessee itself had selected companies operating in that the assessee itself had selected companies operating in different product s different product segments is factually incorrect. Thus, the egments is factually incorrect. Thus, the comparables adopted by the ld. TPO is incorrect and deserves to be comparables adopted by the ld. TPO is incorrect and deserves to be comparables adopted by the ld. TPO is incorrect and deserves to be deleted.

IPCA Laboratories Limited, IPCA Laboratories Limited, 74 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.9 It was further submitted that the AE had entered into two further submitted that the AE had entered into two further submitted that the AE had entered into two distinct categories of transactions with the assessee, namely (i) distinct categories of transactions with the assessee, namely (i) distinct categories of transactions with the assessee, namely (i) supply of intermediate intermediate intermediate products products products and and and (ii) (ii) (ii) rendering rendering rendering of of of manufacturing/job work services. The margins attributable to job manufacturing/job work services. The margins attributable to job manufacturing/job work services. The margins attributable to job work activities are inherently higher since there is no purchase cost work activities are inherently higher since there is no purchase cost work activities are inherently higher since there is no purchase cost for the same. Whereas in the case of supply of products, the for the same. Whereas in the case of supply of products, the for the same. Whereas in the case of supply of products, the purchase cost is debited in the P & L account. However, the TPO s debited in the P & L account. However, the TPO s debited in the P & L account. However, the TPO has incorrectly considered a combined operating margin of 20.83% has incorrectly considered a combined operating margin of 20.83% has incorrectly considered a combined operating margin of 20.83% without carrying out any proper segmental bifurcation between the without carrying out any proper segmental bifurcation between the without carrying out any proper segmental bifurcation between the two streams of revenue. two streams of revenue. It was submitted that for the purpose of a submitted that for the purpose of a proper comparability analysis, the comparable companies selected omparability analysis, the comparable companies selected omparability analysis, the comparable companies selected should also be engaged in both manufacturing as well as job work should also be engaged in both manufacturing as well as job work should also be engaged in both manufacturing as well as job work activities. However, the ld. TPO failed to identify any such activities. However, the ld. TPO failed to identify any such activities. However, the ld. TPO failed to identify any such comparable entity. 11.10 Further, on perusal of the financial statements of the AE, Further, on perusal of the financial statements Further, on perusal of the financial statements namely M/s. Exon Laboratories Pvt. Ltd., placed at page nos. 513 namely M/s. Exon Laboratories Pvt. Ltd., placed at page nos. 513 namely M/s. Exon Laboratories Pvt. Ltd., placed at page nos. 513 and 514 of the paper book, it can be observed that the AE had and 514 of the paper book, it can be observed that the AE had and 514 of the paper book, it can be observed that the AE had reported revenue from sale of products amounting to Rs. 52.48 reported revenue from sale of products amounting to Rs. 52.48 reported revenue from sale of products amounting to Rs. 52.48 crores crores crores and and and income income income from from from manufacturing/job manufacturing/job manufacturing/job work work work charges charges charges amounting to Rs. 11.15 crores. Since job work activities do not ounting to Rs. 11.15 crores. Since job work activities do not ounting to Rs. 11.15 crores. Since job work activities do not involve any material purchase cost, the profitability from such involve any material purchase cost, the profitability from such involve any material purchase cost, the profitability from such activities would naturally be substantially higher as compared to activities would naturally be substantially higher as compared to activities would naturally be substantially higher as compared to profitability from sale of products. However, the TPO has considered profitability from sale of products. However, the TPO has consid profitability from sale of products. However, the TPO has consid

IPCA Laboratories Limited, IPCA Laboratories Limited, 75 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the overall profitability of the AE without appreciating or examining the overall profitability of the AE without appreciating or examining the overall profitability of the AE without appreciating or examining this crucial distinction. this crucial distinction. 11.11 Accordingly, the profitability of the AE could not have Accordingly, the profitability of the AE could not have Accordingly, the profitability of the AE could not have been reliably adopted for benchmarking purposes. The assessee been reliably adopted for benchmarking purposes. The assessee been reliably adopted for benchmarking purposes. The assessee had therefore rightly adopted T had therefore rightly adopted TNMM at the entity level as the Most NMM at the entity level as the Most Appropriate Method for determining the arm’s length price of the Appropriate Method for determining the arm’s length price of the Appropriate Method for determining the arm’s length price of the international transactions. international transactions. Moreover, it was also submitted that ld. also submitted that ld. TPO has incorrectly applied the transfer pricing adjustment on the TPO has incorrectly applied the transfer pricing adjustment on the TPO has incorrectly applied the transfer pricing adjustment on the entire turnover of entire turnover of Rs. 59.26 crores of the AE, whereas the Rs. 59.26 crores of the AE, whereas the transactions with the assessee aggregated only to Rs. 47.52 crores. transactions with the assessee aggregated only to Rs. 47.52 crores. transactions with the assessee aggregated only to Rs. 47.52 crores. The said approach clearly demonstrates non The said approach clearly demonstrates non-application of mind application of mind while computing the transfer pricing adjustment. while computing the transfer pricing adjustment. 11.12 In light of the above, it In light of the above, it was submitted that the working of submitted that the working of the ld. TPO is faulty, incorrect and deserves to be rejected. the ld. TPO is faulty, incorrect and deserves to be rejected. the ld. TPO is faulty, incorrect and deserves to be rejected. 11.13 In the present case, the In the present case, the assessee has undertaken a has undertaken a detailed FAR analysis wherein it was noted that the products detailed FAR analysis wherein it was noted that the products detailed FAR analysis wherein it was noted that the products manufactured by the AE were pharmaceutical intermediaries manufactured by the AE were pharmaceutical i manufactured by the AE were pharmaceutical i produced strictly as per the specifications, formulations and quality produced strictly as per the specifications, formulations and quality produced strictly as per the specifications, formulations and quality standards prescribed by the assessee. Such intermediates were not standards prescribed by the assessee. Such intermediates were not standards prescribed by the assessee. Such intermediates were not standard market products and were further utilized by the assessee standard market products and were further utilized by the assessee standard market products and were further utilized by the assessee in manufacturing final pharmaceutical p in manufacturing final pharmaceutical products. Therefore, no roducts. Therefore, no

IPCA Laboratories Limited, IPCA Laboratories Limited, 76 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

reliable internal or external CUP was available for benchmarking reliable internal or external CUP was available for benchmarking reliable internal or external CUP was available for benchmarking the said transactions. the said transactions. 11.14 It was submitted that the assessee had benchmarked the submitted that the assessee had benchmarked the submitted that the assessee had benchmarked the transactions under TNMM by considering itself as the tested party transactions under TNMM by considering itself as the tested party transactions under TNMM by considering itself as the tested party and comparing its net margin of 17.06% with the industry average net margin of 17.06% with the industry average net margin of 17.06% with the industry average margin of 12.93%, thereby establishing that the transactions were margin of 12.93%, thereby establishing that the transactions were margin of 12.93%, thereby establishing that the transactions were undertaken at arm’s length. The above working has nowhere been undertaken at arm’s length. The above working has nowhere been undertaken at arm’s length. The above working has nowhere been doubted by the ld. TPO. doubted by the ld. TPO. It is also submitted that even if the AE It is also submitted that even if the AE were to be considered as the tested party, no reliable comparables nsidered as the tested party, no reliable comparables nsidered as the tested party, no reliable comparables engaged in similar activities of manufacturing pharmaceutical engaged in similar activities of manufacturing pharmaceutical engaged in similar activities of manufacturing pharmaceutical intermediates were available in the public domain. The comparable intermediates were available in the public domain. The comparable intermediates were available in the public domain. The comparable companies available under pharmaceutical segments largely related companies available under pharmaceutical segments largely related companies available under pharmaceutical segments largely related to formulations, finished drugs, APIs, vitamins and veterinary lations, finished drugs, APIs, vitamins and veterinary lations, finished drugs, APIs, vitamins and veterinary products, which were functionally different from the activities products, which were functionally different from the activities products, which were functionally different from the activities carried out by the AE. carried out by the AE. Further, it was also submitted that assessee submitted that assessee was justified in adopting itself as the tested party considering that was justified in adopting itself as the tested party considering that was justified in adopting itself as the tested party considering that its operations were homogeneous in nature and consisted of its operations were homogeneous in nature and consisted of its operations were homogeneous in nature and consisted of integrated manufacturing, distribution and export activities in the integrated manufacturing, distribution and export activities in the integrated manufacturing, distribution and export activities in the pharmaceutical business. In such circumstances, entity-level pharmaceutical business. In such circumstances, entity pharmaceutical business. In such circumstances, entity TNMM constituted the most appropriate method. Moreover, it may TNMM constituted the most appropriate method. Moreover, it may TNMM constituted the most appropriate method. Moreover, it may be noted that the TPO has accepted TNMM method at entity level be noted that the TPO has accepted TNMM method at entity level be noted that the TPO has accepted TNMM method at entity level for similar transaction done with another AE M/s. Paschim for similar transaction done with another AE M/s. Paschim for similar transaction done with another AE M/s. Paschim Chemicals Pvt. Ltd. which can be observed in our Transfer Pricing Chemicals Pvt. Ltd. which can be observed in our Transfer Pricing Chemicals Pvt. Ltd. which can be observed in our Transfer Pricing

IPCA Laboratories Limited, IPCA Laboratories Limited, 77 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Study Report (TPSR) placed at page no. 413 y Report (TPSR) placed at page no. 413-414, 424 414, 424-425 of the paper book. 11.15 In respect of this issue, reliance is placed on the decision In respect of this issue, reliance is placed on the decision In respect of this issue, reliance is placed on the decision of McCann Erickson India Pvt. Ltd. vs. ACIT (supra), McCann Erickson India Pvt. Ltd. vs. ACIT (supra), McCann Erickson India Pvt. Ltd. vs. ACIT (supra), wherein it has been held that where business operations are homogeneous has been held that where business operations are hom has been held that where business operations are hom and international transactions are closely linked, entity-level TNMM and international transactions are closely linked, entity and international transactions are closely linked, entity is the most appropriate method for benchmarking. It is submitted is the most appropriate method for benchmarking. is the most appropriate method for benchmarking. that entity-level TNMM avoids distortions arising from product mix level TNMM avoids distortions arising from product mix level TNMM avoids distortions arising from product mix differences, market conditions and regulatory differences, market conditions and regulatory factors, and therefore factors, and therefore provides a more reliable basis for determining arm’s length provides a more reliable basis for determining arm’s length provides a more reliable basis for determining arm’s length profitability. In view of the aforesaid submissions, it is prayed that In view of the aforesaid submissions, it is prayed that In view of the aforesaid submissions, it is prayed that the transfer pricing adjustment made by the TPO be deleted in the transfer pricing adjustment made by the TPO be deleted in the transfer pricing adjustment made by the TPO be deleted in entirety.

11.16 We have considered th We have considered the rival submissions and have e rival submissions and have carefully perused the material placed before us. The controversy lies carefully perused the material placed before us. The controversy lies carefully perused the material placed before us. The controversy lies in a narrow compass. There is no dispute between the parties that in a narrow compass. There is no dispute between the parties that in a narrow compass. There is no dispute between the parties that the Transactional Net Margin Method (TNMM) constitutes the Most the Transactional Net Margin Method (TNMM) constitutes the Most the Transactional Net Margin Method (TNMM) constitutes the Most Appropriate Method for benc Appropriate Method for benchmarking the impugned specified hmarking the impugned specified domestic transactions. The dispute essentially pertains to the domestic transactions. The dispute essentially pertains to the domestic transactions. The dispute essentially pertains to the selection of the tested party and the comparability analysis selection of the tested party and the comparability analysis selection of the tested party and the comparability analysis undertaken by the Transfer Pricing Officer. undertaken by the Transfer Pricing Officer.

IPCA Laboratories Limited, IPCA Laboratories Limited, 78 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.17 On a careful examination of the record, we find that the On a careful examination of the record, we find th On a careful examination of the record, we find th Associated Enterprise, namely M/s Exon Laboratories Pvt. Ltd., is Associated Enterprise, namely M/s Exon Laboratories Pvt. Ltd., is Associated Enterprise, namely M/s Exon Laboratories Pvt. Ltd., is engaged engaged engaged primarily primarily primarily in in in the the the manufacture manufacture manufacture of of of pharmaceutical pharmaceutical pharmaceutical intermediates, which intermediates, which are utilized by the assessee in the intermediates, which are utilized by are utilized by the assessee in the assessee in the the manufacture of finished pharmaceutical products. The comparables manufacture of finished pharmaceutical products. The comparables manufacture of finished pharmaceutical products. The comparables selected by the Transfer Pricing Officer, namely M/s Brook ed by the Transfer Pricing Officer, namely M/s Brook ed by the Transfer Pricing Officer, namely M/s Brook Laboratories Ltd. and M/s NGL Fine Laboratories Ltd. and M/s NGL Fine-Chem Ltd., are admittedly Chem Ltd., are admittedly engaged in the manufacture of finished formulations, injectable engaged in the manufacture of finished formulations, injectable engaged in the manufacture of finished formulations, injectable products, APIs and veterinary pharmaceutical products intended for products, APIs and veterinary pharmaceutical products intended for products, APIs and veterinary pharmaceutical products intended for ultimate consumption. The functional profile, asset base and risk nsumption. The functional profile, asset base and risk nsumption. The functional profile, asset base and risk matrix of such entities are materially different from those of an matrix of such entities are materially different from those of an matrix of such entities are materially different from those of an enterprise enterprise enterprise engaged engaged engaged in in in the the the manufacture manufacture manufacture of of of pharmaceutical pharmaceutical pharmaceutical intermediates.

11.18 It is trite law that comparability under the transfer It is trite law that comparability under the transfer It is trite law that comparability under the transfer pricing provisions cannot be determined merely on the basis of ing provisions cannot be determined merely on the basis of ing provisions cannot be determined merely on the basis of broad industry classification. What is required is a meaningful broad industry classification. What is required is a meaningful broad industry classification. What is required is a meaningful comparison of functions performed, assets employed and risks comparison of functions performed, assets employed and risks comparison of functions performed, assets employed and risks assumed by the tested party vis assumed by the tested party vis-à-vis the comparable entities. The vis the comparable entities. The record reveals that no detailed FAR analysis was undertaken by the d reveals that no detailed FAR analysis was undertaken by the d reveals that no detailed FAR analysis was undertaken by the Transfer Pricing Officer before selecting the aforesaid comparables. Transfer Pricing Officer before selecting the aforesaid comparables. Transfer Pricing Officer before selecting the aforesaid comparables. In the absence of such foundational exercise, the comparability In the absence of such foundational exercise, the comparability In the absence of such foundational exercise, the comparability analysis loses its reliability and cannot form a sustainable basis for analysis loses its reliability and cannot form a sustainable analysis loses its reliability and cannot form a sustainable determination of the Arm's Length Price. determination of the Arm's Length Price.

IPCA Laboratories Limited, IPCA Laboratories Limited, 79 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.19 We further find merit in the observations of the learned We further find merit in the observations of the learned We further find merit in the observations of the learned CIT(A) that the Associated Enterprise had multiple streams of CIT(A) that the Associated Enterprise had multiple streams of CIT(A) that the Associated Enterprise had multiple streams of operations, including manufacture and supply of pharmaceutical operations, including manufacture and supply of pharmaceutical operations, including manufacture and supply of pharmaceutical intermediates as well as rendering of job well as rendering of job-work/manufacturing work/manufacturing services. The profitability arising from these activities is inherently services. The profitability arising from these activities is inherently services. The profitability arising from these activities is inherently different in character. However, the Transfer Pricing Officer adopted different in character. However, the Transfer Pricing Officer adopted different in character. However, the Transfer Pricing Officer adopted the overall margin of the Associated Enterprise without carrying out the overall margin of the Associated Enterprise without carrying out the overall margin of the Associated Enterprise without carrying out any segmental analysis or making appropriate adjustments. Such ny segmental analysis or making appropriate adjustments. Such ny segmental analysis or making appropriate adjustments. Such an approach, in our considered opinion, does not satisfy the an approach, in our considered opinion, does not satisfy the an approach, in our considered opinion, does not satisfy the standards of comparability contemplated under Chapter X of the standards of comparability contemplated under Chapter X of the standards of comparability contemplated under Chapter X of the Act.

11.20 The learned CIT(A) has recorded a categorical finding that The learned CIT(A) has recorded a categorical finding that The learned CIT(A) has recorded a categorical finding that reliable comparable companies engaged in similar intermediate reliable comparable companies engaged in similar intermediate reliable comparable companies engaged in similar intermediate manufacturing manufacturing manufacturing activities activities activities were were were not not not available available available and and and that that that the the the comparables selected by the Transfer Pricing Officer were comparables selected by the Transfer Pricing Officer were comparables selected by the Transfer Pricing Officer were functionally dissimilar. The Revenue has not brought any material functionally dissimilar. The Revenue has not brought any material functionally dissimilar. The Revenue has not brought any material before us to controvert these findings of fact. Nor has it been controvert these findings of fact. Nor has it been controvert these findings of fact. Nor has it been demonstrated that the benchmarking analysis undertaken by the demonstrated that the benchmarking analysis undertaken by the demonstrated that the benchmarking analysis undertaken by the assessee by adopting itself as the tested party suffered from any assessee by adopting itself as the tested party suffered from any assessee by adopting itself as the tested party suffered from any specific infirmity. Significantly, the Transfer Pricing Officer has not specific infirmity. Significantly, the Transfer Pricing Officer has not specific infirmity. Significantly, the Transfer Pricing Officer has not pointed out any defect in the computation of margins adopted by ed out any defect in the computation of margins adopted by ed out any defect in the computation of margins adopted by the assessee under TNMM. the assessee under TNMM.

IPCA Laboratories Limited, IPCA Laboratories Limited, 80 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.21 In our considered view, the findings recorded by the In our considered view, the findings recorded by the In our considered view, the findings recorded by the learned CIT(A) are borne out from the material available on record learned CIT(A) are borne out from the material available on record learned CIT(A) are borne out from the material available on record and are in consonance with the settled princip and are in consonance with the settled principles governing transfer les governing transfer pricing analysis. We find no perversity, factual error or legal pricing analysis. We find no perversity, factual error or legal pricing analysis. We find no perversity, factual error or legal infirmity in the conclusion arrived at by the learned CIT(A) infirmity in the conclusion arrived at by the learned CIT(A) infirmity in the conclusion arrived at by the learned CIT(A) warranting interference by this Tribunal. warranting interference by this Tribunal.

11.22 Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) deleting the transfer pricing adjustment of ing the transfer pricing adjustment of ₹4,17,22,865/ 4,17,22,865/- made in respect of the specified domestic transactions entered into by the respect of the specified domestic transactions entered into by the respect of the specified domestic transactions entered into by the assessee with M/s Exon Laboratories Pvt. Ltd. Consequently, the assessee with M/s Exon Laboratories Pvt. Ltd. Consequently, the assessee with M/s Exon Laboratories Pvt. Ltd. Consequently, the ground raised by the Revenue stands dismissed. ground raised by the Revenue stands dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 81 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

(API) and other captive raw materials from the assessee’s non- (API) and other captive raw materials from the assessee’s non (API) and other captive raw materials from the assessee’s non eligible units. For the purpose of determi For the purpose of determining the Arm’s Length ning the Arm’s Length Price Price (ALP) (ALP) of of such such inter-unit inter unit transactions, transactions, the the assessee assessee benchmarked the transactions by adopting the annual weighted benchmarked the transactions by adopting the annual weighted benchmarked the transactions by adopting the annual weighted average sale price of similar products sold to unrelated third average sale price of similar products sold to unrelated third average sale price of similar products sold to unrelated third parties. Based on such benchmarking, the assessee had already parties. Based on such benchmarking, the assessee ha parties. Based on such benchmarking, the assessee ha made suo motu transfer pricing adjustments in the return of made suo motu transfer pricing adjustments in the return of made suo motu transfer pricing adjustments in the return of income by reducing the eligible profits claimed under the respective income by reducing the eligible profits claimed under the respective income by reducing the eligible profits claimed under the respective deduction provisions. deduction provisions. 12.2 The ld. TPO, however, rejected the approach adopted by the The ld. TPO, however, rejected the approach adopted by the The ld. TPO, however, rejected the approach adopted by the assessee and held that the ann assessee and held that the annual average price adopted by the ual average price adopted by the assessee was not appropriate for benchmarking the transactions. assessee was not appropriate for benchmarking the transactions. assessee was not appropriate for benchmarking the transactions. According to the TPO, monthly average rates of comparable According to the TPO, monthly average rates of comparable According to the TPO, monthly average rates of comparable uncontrolled transactions ought to have been considered instead of uncontrolled transactions ought to have been considered instead of uncontrolled transactions ought to have been considered instead of annual weighted averages. annual weighted averages. On the basis of the aforesaid approach, basis of the aforesaid approach, the TPO recomputed the ALP of the inter the TPO recomputed the ALP of the inter-unit transactions and unit transactions and proposed additional transfer pricing adjustments over and above proposed additional transfer pricing adjustments over and above proposed additional transfer pricing adjustments over and above the adjustments already offered by the assessee in various years. the adjustments already offered by the assessee in various years. the adjustments already offered by the assessee in various years. 12.3 The TPO further held that The TPO further held that wherever monthly prices charged to wherever monthly prices charged to unrelated third parties were higher than the rates charged to the unrelated third parties were higher than the rates charged to the unrelated third parties were higher than the rates charged to the eligible units, upward adjustments were required to be made for eligible units, upward adjustments were required to be made for eligible units, upward adjustments were required to be made for determining the ALP. Accordingly, adjustments were made on the determining the ALP. Accordingly, adjustments were made on the determining the ALP. Accordingly, adjustments were made on the

IPCA Laboratories Limited, IPCA Laboratories Limited, 82 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

allegation that the assesse allegation that the assessee had supplied goods to the eligible units e had supplied goods to the eligible units at prices lower than the arm’s length prices. at prices lower than the arm’s length prices.

12.4 On further appeal On further appeal the ld. CIT(A) upheld the action of the TPO the ld. CIT(A) upheld the action of the TPO in rejecting the benchmarking methodology adopted by the assessee in rejecting the benchmarking methodology adopted by the assessee in rejecting the benchmarking methodology adopted by the assessee for determining the arm’s length price of inter-unit transfer for determining the arm’s length price of inter for determining the arm’s length price of inter transactions. The contention of the assessee that annual weighted transactions. The contention of the assessee that annual weighted transactions. The contention of the assessee that annual weighted average prices should be adopted under the CUP method was not ould be adopted under the CUP method was not ould be adopted under the CUP method was not accepted. The ld. CIT(A) observed that under the CUP method, accepted. The ld. CIT(A) observed that under the CUP method, accepted. The ld. CIT(A) observed that under the CUP method, transactions are required to be compared within the same period transactions are required to be compared within the same period transactions are required to be compared within the same period and that adoption of yearly average prices is not prescribed under and that adoption of yearly average prices is not prescribed under and that adoption of yearly average prices is not prescribed under the transfer pricing provisions. Accordingly, the explanation of the g provisions. Accordingly, the explanation of the g provisions. Accordingly, the explanation of the assessee regarding stability of inter assessee regarding stability of inter-unit prices and fluctuation in unit prices and fluctuation in third party prices was rejected. However, the alternate contention of third party prices was rejected. However, the alternate contention of third party prices was rejected. However, the alternate contention of the assessee regarding applicability of the permissible tolerance the assessee regarding applicability of the permissible tolerance the assessee regarding applicability of the permissible tolerance range under Rule 10CA was accepted. The ld. CIT(A) held that ange under Rule 10CA was accepted. The ld. CIT(A) held that ange under Rule 10CA was accepted. The ld. CIT(A) held that where the difference between the transfer price and arm’s length where the difference between the transfer price and arm’s length where the difference between the transfer price and arm’s length price falls within the prescribed tolerance band of 3%, no price falls within the prescribed tolerance band of 3%, no price falls within the prescribed tolerance band of 3%, no adjustment is warranted. adjustment is warranted. The relevant finding of the Ld. CIT(A) is The relevant finding of the Ld. CIT(A) is reproduced as under: duced as under:-

“12.3 I have considered the contention of the TPO and submission of the “12.3 I have considered the contention of the TPO and submission of the “12.3 I have considered the contention of the TPO and submission of the assessee. In its submission, the assessee company has stressed that the price assessee. In its submission, the assessee company has stressed that the price assessee. In its submission, the assessee company has stressed that the price charged in the inter unit transfer are generally fixed over the period unlike third charged in the inter unit transfer are generally fixed over the period unlike third charged in the inter unit transfer are generally fixed over the period unlike third party where the market condition results into daily fluctuations. Further, it has where the market condition results into daily fluctuations. Further, it has where the market condition results into daily fluctuations. Further, it has been explained that many units have low transaction as compared to third party been explained that many units have low transaction as compared to third party been explained that many units have low transaction as compared to third party comparisons. I find the explanation of the appellant not acceptable since the comparisons. I find the explanation of the appellant not acceptable since the comparisons. I find the explanation of the appellant not acceptable since the transaction needs to b transaction needs to be compared within the same period and adopting yearly e compared within the same period and adopting yearly

IPCA Laboratories Limited, IPCA Laboratories Limited, 83 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

average to compare the transactions have nowhere been prescribed under the average to compare the transactions have nowhere been prescribed under the average to compare the transactions have nowhere been prescribed under the CUP method. Therefore, the contention of yearly average to compare transaction CUP method. Therefore, the contention of yearly average to compare transaction CUP method. Therefore, the contention of yearly average to compare transaction is rejected. 12.4 On a without prejudice basis, 12.4 On a without prejudice basis, the appellant has submitted that the benefit of the appellant has submitted that the benefit of tolerable range should be allowed wherever the difference is less than 3%. The tolerable range should be allowed wherever the difference is less than 3%. The tolerable range should be allowed wherever the difference is less than 3%. The working for the same has also been furnished. It has been submitted that similar working for the same has also been furnished. It has been submitted that similar working for the same has also been furnished. It has been submitted that similar relief has been allowed to the assessee by TPO w relief has been allowed to the assessee by TPO while passing the TP order for AY hile passing the TP order for AY 2016-17. 12.5 I have considered the submission of the appellant and working submitted 12.5 I have considered the submission of the appellant and working submitted 12.5 I have considered the submission of the appellant and working submitted adopting the tolerable range of 3% wherein the net adjustment comes to Rs. adopting the tolerable range of 3% wherein the net adjustment comes to Rs. adopting the tolerable range of 3% wherein the net adjustment comes to Rs. 23,56,449/-. It is a settled position that where the arms . It is a settled position that where the arms-length price is within the gth price is within the applicable tolerable range of the actual transaction, no adjustment is required. applicable tolerable range of the actual transaction, no adjustment is required. applicable tolerable range of the actual transaction, no adjustment is required. Accordingly, AO is directed to confirm the addition to the extent of Rs. Accordingly, AO is directed to confirm the addition to the extent of Rs. Accordingly, AO is directed to confirm the addition to the extent of Rs. 23,56,449/-. Ground no. 10 to 13 are partly allowed.” . Ground no. 10 to 13 are partly allowed.” 12.5 The CIT(A) held th The CIT(A) held that under the CPU method, transactions are CPU method, transactions are required to be compared within the same period and that adoption required to be compared within the same period and that adoption required to be compared within the same period and that adoption for yearly average prices were not prescribed under the transfer for yearly average prices were not prescribed under the transfer for yearly average prices were not prescribed under the transfer pricing provisions. Accordingly, the explanation of the assessee pricing provisions. Accordingly, the explanation of the assessee pricing provisions. Accordingly, the explanation of the assessee regarding stability of inter of inter-unit prices and fluctuation in third party unit prices and fluctuation in third party prices was rejected.

12.6 Before us the ld Counsel submitted that Before us the ld Counsel submitted that the benchmarking the benchmarking analysis undertaken by the assessee was fully in accordance with analysis undertaken by the assessee was fully in accordance with analysis undertaken by the assessee was fully in accordance with the provisions of Chapter X of the Act and was based on annual the provisions of Chapter X of the Act and was based o the provisions of Chapter X of the Act and was based o weighted average prices of similar products sold to unrelated weighted average prices of similar products sold to unrelated weighted average prices of similar products sold to unrelated parties. The said methodology was consistently adopted considering parties. The said methodology was consistently adopted considering parties. The said methodology was consistently adopted considering the continuous and regular supply of captive raw materials to the the continuous and regular supply of captive raw materials to the the continuous and regular supply of captive raw materials to the eligible units throughout the year. eligible units throughout the year. It was submitted that the submitted that the monthly average approach adopted by the TPO is fundamentally monthly average approach adopted by the TPO is fundamentally monthly average approach adopted by the TPO is fundamentally incorrect and has resulted in distorted and unreliable comparisons. incorrect and has resulted in distorted and unreliable comparisons. incorrect and has resulted in distorted and unreliable comparisons.

IPCA Laboratories Limited, IPCA Laboratories Limited, 84 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

It is submitted that sales made to third parties were not undertaken It is submitted that sales made to third parties were not undertaken It is submitted that sales made to third parties were not undertaken on a regular or uniform basis every mo on a regular or uniform basis every month, whereas supplies to nth, whereas supplies to captive units were continuous, stable and recurring in nature. captive units were continuous, stable and recurring in nature. captive units were continuous, stable and recurring in nature. Therefore, comparison on a month Therefore, comparison on a month-wise basis does not provide a wise basis does not provide a true and reliable determination of the arm’s length price. true and reliable determination of the arm’s length price. true and reliable determination of the arm’s length price. 12.7 It was further further further submitted that submitted submitted that that market pric market prices market pric in the pharmaceutical industry are subject to substantial fluctuations on pharmaceutical industry are subject to substantial fluctuations on pharmaceutical industry are subject to substantial fluctuations on account of several commercial and economic factors such as account of several commercial and economic factors such as account of several commercial and economic factors such as transaction volume, market competition, pharmacopoeia standards, transaction volume, market competition, pharmacopoeia standards, transaction volume, market competition, pharmacopoeia standards, export market requirements and customer export market requirements and customer-specific commer specific commercial negotiations. Accordingly, a month negotiations. Accordingly, a month-wise comparison without wise comparison without considering these crucial commercial differences leads to arbitrary considering these crucial commercial differences leads to arbitrary considering these crucial commercial differences leads to arbitrary and unrealistic results. and unrealistic results. It was further submitted that annual further submitted that annual weighted average pricing neutralizes temporary market fluctuations weighted average pricing neutralizes temporary market fluctuat weighted average pricing neutralizes temporary market fluctuat and provides a more reliable, scientific and commercially acceptable and provides a more reliable, scientific and commercially acceptable and provides a more reliable, scientific and commercially acceptable basis for determining the arm’s length price. It is pointed out that basis for determining the arm’s length price. It is pointed out that basis for determining the arm’s length price. It is pointed out that market prices fluctuated significantly during different periods of the market prices fluctuated significantly during different periods of the market prices fluctuated significantly during different periods of the year; however, the TPO selectively conside year; however, the TPO selectively considered only those instances red only those instances where uncontrolled prices were higher, while ignoring comparable where uncontrolled prices were higher, while ignoring comparable where uncontrolled prices were higher, while ignoring comparable transactions where uncontrolled prices were lower than the captive transactions where uncontrolled prices were lower than the captive transactions where uncontrolled prices were lower than the captive transfer prices. It was was also submitted that TPO failed to consider also submitted that TPO failed to consider economic and commercial factors economic and commercial factors affecting pricing, including lower affecting pricing, including lower transaction volumes, fluctuating market demand, varying quality transaction volumes, fluctuating market demand, varying quality transaction volumes, fluctuating market demand, varying quality

IPCA Laboratories Limited, IPCA Laboratories Limited, 85 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

specifications and prevailing competitive market conditions. These specifications and prevailing competitive market conditions. These specifications and prevailing competitive market conditions. These factors materially influence pricing in uncontrolled transactions and factors materially influence pricing in uncontrolled transactions and factors materially influence pricing in uncontrolled transactions and therefore a simplistic monthly price comparison cannot be regarded ic monthly price comparison cannot be regarded ic monthly price comparison cannot be regarded as a reliable benchmarking methodology under the transfer pricing as a reliable benchmarking methodology under the transfer pricing as a reliable benchmarking methodology under the transfer pricing provisions. Accordingly, Accordingly, the adjustment made by the TPO may the adjustment made by the TPO may kindly be deleted. 12.8 Without prejudice to the above submissions, it Without prejudice to the above submissions, it Without prejudice to the above submissions, it was submitted that although the ld.CIT(A) has granted partial relief by allowing the that although the ld.CIT(A) has granted partial relief by allowing the that although the ld.CIT(A) has granted partial relief by allowing the benefit of the 3% tolerance band prescribed under Rule 10CA, the benefit of the 3% tolerance band prescribed under Rule 10CA, the benefit of the 3% tolerance band prescribed under Rule 10CA, the methodology adopted for computing the transfer pricing adjustment methodology adopted for computing the transfer pricing adjustment methodology adopted for computing the transfer pricing adjustment by ld. TPO as well as ld.CIT(A) is not in accordanc by ld. TPO as well as ld.CIT(A) is not in accordance with law. The ld. e with law. The ld. TPO has considered only those within the same month transactions TPO has considered only those within the same month transactions TPO has considered only those within the same month transactions wherein the prices charged to unrelated third parties were higher wherein the prices charged to unrelated third parties were higher wherein the prices charged to unrelated third parties were higher than the prices charged to the eligible units and, after applying the than the prices charged to the eligible units and, after applying the than the prices charged to the eligible units and, after applying the permissible tolerance range, propos permissible tolerance range, proposed adjustment on such positive ed adjustment on such positive differences alone. A sample working made by TPO for the same can differences alone. A sample working made by TPO for the same can differences alone. A sample working made by TPO for the same can be seen at page nos. 537 of the paper book. However, the ld. TPO be seen at page nos. 537 of the paper book. However, the ld. TPO be seen at page nos. 537 of the paper book. However, the ld. TPO has ignored those instances where the prices charged to unrelated has ignored those instances where the prices charged to unrelated has ignored those instances where the prices charged to unrelated third parties within the same third parties within the same month were lower than the prices month were lower than the prices charged to the eligible units, resulting in negative differences. It is charged to the eligible units, resulting in negative differences. It is charged to the eligible units, resulting in negative differences. It is submitted that for determining the correct Arm’s Length Price, both submitted that for determining the correct Arm’s Length Price, both submitted that for determining the correct Arm’s Length Price, both positive as well as negative differences are required to be considered positive as well as negative differences are required to be considered positive as well as negative differences are required to be considered collectively and the adjustment, if any, should be arrived at only y and the adjustment, if any, should be arrived at only y and the adjustment, if any, should be arrived at only

IPCA Laboratories Limited, IPCA Laboratories Limited, 86 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

after adopting a netting after adopting a netting-off approach. Thus, selective consideration off approach. Thus, selective consideration of only upward differences, while disregarding downward variations, of only upward differences, while disregarding downward variations, of only upward differences, while disregarding downward variations, has resulted in an incorrect and excessive adjustment. A sample has resulted in an incorrect and excessive adjustment. has resulted in an incorrect and excessive adjustment. revised working for the same is enclosed herewith as Annexure-1. It revised working for the same is enclosed herewith as Annexure revised working for the same is enclosed herewith as Annexure was submitted that in such circumstances, while computing the submitted that in such circumstances, while computing the submitted that in such circumstances, while computing the transfer pricing adjustment, the net impact of both positive and transfer pricing adjustment, the net impact of both positive and transfer pricing adjustment, the net impact of both positive and negative price differences ought to have been considered instead of negative price differences ought to have been considered ins negative price differences ought to have been considered ins considering considering considering only only only those those those instances instances instances where where where the the the comparable comparable comparable uncontrolled price was higher. The transactions undertaken by the uncontrolled price was higher. The transactions undertaken by the uncontrolled price was higher. The transactions undertaken by the assessee were spread over the entire financial year and while in assessee were spread over the entire financial year and while in assessee were spread over the entire financial year and while in some months there existed a positive variance, there were also some months there existed a positive variance, there were also some months there existed a positive variance, there were also several instances where the variance was negative. several instances where the variance was negative. 12.9 Accordingly, it Accordingly, it was submitted that for the purpose of submitted that for the purpose of determining the adjustment, the negative differences should also be determining the adjustment, the negative differences should also be determining the adjustment, the negative differences should also be aggregated & only the net of said difference should be considered aggregated & only the net of said difference should be considered aggregated & only the net of said difference should be considered for adjustment. 12.10 In this regard, reliance In this regard, reliance was placed on the decision of placed on the decision of Mumbai tribunal in the case of Barclays Bank PLC vs. ADIT Mumbai tribunal in the case of Barclays Bank PLC vs. ADIT Mumbai tribunal in the case of Barclays Bank PLC vs. ADIT reported in [2018] 100 taxmann.com 476 (Mumbai - Trib.) wherein reported in [2018] 100 taxmann.com 476 (Mumbai reported in [2018] 100 taxmann.com 476 (Mumbai it was held that arm's length price should be after aggregation and it was held that arm's length price should be after aggregation an it was held that arm's length price should be after aggregation an there was no scope for adjustment without aggregation. The there was no scope for adjustment without aggregation. The there was no scope for adjustment without aggregation. The relevant part of the tribunal decision is as relevant part of the tribunal decision is as under:-

IPCA Laboratories Limited, IPCA Laboratories Limited, 87 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

12.13 We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the orders of the auth perused the orders of the authorities below as well as the material orities below as well as the material placed on record. The controversy before us relates to the placed on record. The controversy before us relates to the placed on record. The controversy before us relates to the

IPCA Laboratories Limited, IPCA Laboratories Limited, 88 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

determination of the Arm’s Length Price in respect of inter-unit determination of the Arm’s Length Price in respect of inter determination of the Arm’s Length Price in respect of inter transfer of Active Pharmaceutical Ingredients (APIs) and other transfer of Active Pharmaceutical Ingredients (APIs) and other transfer of Active Pharmaceutical Ingredients (APIs) and other captive raw materials supplied captive raw materials supplied by the non-eligible units of the eligible units of the assessee to its eligible units claiming deduction under sections 80- assessee to its eligible units claiming deduction under sections 80 assessee to its eligible units claiming deduction under sections 80 IC, 80-IB, 10AA and 80 IB, 10AA and 80-IE of the Act. 12.14 The principal grievance of the assessee is directed against The principal grievance of the assessee is directed against The principal grievance of the assessee is directed against the rejection of the benchmarking methodology adopted by it, the rejection of the benchmarking methodology adopt the rejection of the benchmarking methodology adopt namely, determination of the arm’s length price on the basis of namely, determination of the arm’s length price on the basis of namely, determination of the arm’s length price on the basis of annual weighted average prices of comparable uncontrolled annual weighted average prices of comparable uncontrolled annual weighted average prices of comparable uncontrolled transactions. transactions. transactions. According According According to to to the the the assessee, assessee, assessee, annual annual annual averaging averaging averaging neutralizes market fluctuations and provides a more reliable neutralizes market fluctuations and provides a more reliable neutralizes market fluctuations and provides a more reliable benchmark. The Revenue, on the other hand, is aggrieved by the mark. The Revenue, on the other hand, is aggrieved by the mark. The Revenue, on the other hand, is aggrieved by the relief granted by the learned CIT(A) by extending the benefit of the relief granted by the learned CIT(A) by extending the benefit of the relief granted by the learned CIT(A) by extending the benefit of the tolerance range prescribed under Rule 10CA of the Income-tax tolerance range prescribed under Rule 10CA of the Income tolerance range prescribed under Rule 10CA of the Income Rules, 1962.

12.15 Having examined the rival contentions, we find ourselves Having examined the rival contentions, we find ou Having examined the rival contentions, we find ou in agreement with the reasoning and conclusion recorded by the in agreement with the reasoning and conclusion recorded by the in agreement with the reasoning and conclusion recorded by the learned CIT(A). Under the Comparable Uncontrolled Price (CUP) learned CIT(A). Under the Comparable Uncontrolled Price (CUP) learned CIT(A). Under the Comparable Uncontrolled Price (CUP) Method, the essence of comparability lies in comparing controlled Method, the essence of comparability lies in comparing controlled Method, the essence of comparability lies in comparing controlled transactions with comparable uncontrolled transactions occurring transactions with comparable uncontrolled transactions oc transactions with comparable uncontrolled transactions oc under similar circumstances and during a comparable period. The under similar circumstances and during a comparable period. The under similar circumstances and during a comparable period. The reliability of the CUP Method diminishes when transactions spread reliability of the CUP Method diminishes when transactions spread reliability of the CUP Method diminishes when transactions spread across different time periods, subject to varying market conditions, across different time periods, subject to varying market conditions, across different time periods, subject to varying market conditions,

IPCA Laboratories Limited, IPCA Laboratories Limited, 89 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

are aggregated by adopting annual averages. Such are aggregated by adopting annual averages. Such an approach has an approach has the potential to mask significant price variations prevailing during the potential to mask significant price variations prevailing during the potential to mask significant price variations prevailing during the relevant period and may not accurately reflect the arm’s length the relevant period and may not accurately reflect the arm’s length the relevant period and may not accurately reflect the arm’s length conditions governing individual transactions. conditions governing individual transactions.

12.16 In the present case, the Transfer Pricing Officer adopted In the present case, the Transfer Pricing Officer In the present case, the Transfer Pricing Officer monthly comparable prices with a view to ensuring temporal monthly comparable prices with a view to ensuring temporal monthly comparable prices with a view to ensuring temporal proximity between the controlled and uncontrolled transactions. In proximity between the controlled and uncontrolled transactions. In proximity between the controlled and uncontrolled transactions. In our considered opinion, comparison within the same period our considered opinion, comparison within the same period our considered opinion, comparison within the same period substantially minimizes distortions arising from fluctuations in substantially minimizes distortions arising from fluctuations in substantially minimizes distortions arising from fluctuations in market conditions and provides a more reliable basis for market conditions and provides a more reliable basis for market conditions and provides a more reliable basis for determining the arm’s length price. We, therefore, find no merit in determining the arm’s length price. We, therefore, find no merit in determining the arm’s length price. We, therefore, find no merit in the contention of the assessee that annual weighted average prices the contention of the assessee that annual weighted average prices the contention of the assessee that annual weighted average prices ought to have been adopted in preference to period-specific ought to have been adopted in preference to period ought to have been adopted in preference to period comparable prices.

12.17 We also find that the learned CIT(A) has correctly We also find that the learned CIT(A) has correctly We also find that the learned CIT(A) has correctly observed that neither the provisions of Chapter X of the Act nor the observed that neither the provisions of Chapter X of the Act nor the observed that neither the provisions of Chapter X of the Act nor the transfer pricing rules envisage determination of the arm’s length transfer pricing rules envisage determination of the arm’s length transfer pricing rules envisage determination of the arm’s length price under the CUP Method by adopting annual weighted averages price under the CUP Method by adopting annual we price under the CUP Method by adopting annual we as a matter of course. The reasoning advanced by the assessee as a matter of course. The reasoning advanced by the assessee as a matter of course. The reasoning advanced by the assessee regarding stability of captive transfer prices and fluctuations in regarding stability of captive transfer prices and fluctuations in regarding stability of captive transfer prices and fluctuations in third-party prices, though commercially plausible, cannot override party prices, though commercially plausible, cannot override party prices, though commercially plausible, cannot override the the the fundamental requirement of fundamental fundamental requirement of requirement of transactional transactional transactional comparability embedded in the CUP Method. embedded in the CUP Method.

IPCA Laboratories Limited, IPCA Laboratories Limited, 90 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

12.18 So far as the alternate plea advanced by the assessee So far as the alternate plea advanced by the assessee So far as the alternate plea advanced by the assessee regarding aggregation and netting regarding aggregation and netting-off of positive and negative off of positive and negative differences is concerned, we find that the learned CIT(A) has already differences is concerned, we find that the learned CIT(A) has already differences is concerned, we find that the learned CIT(A) has already granted substantial granted substantial relief by directing application of the tolerance relief by directing application of the tolerance range prescribed under Rule 10CA. The Revenue has not been able range prescribed under Rule 10CA. The Revenue has not been able range prescribed under Rule 10CA. The Revenue has not been able to demonstrate any infirmity in the said direction. Equally, the to demonstrate any infirmity in the said direction. Equally, the to demonstrate any infirmity in the said direction. Equally, the assessee has not placed before us any cogent material warranting assessee has not placed before us any cogent material warranting assessee has not placed before us any cogent material warranting further interference with the computation sustained by the learned ference with the computation sustained by the learned ference with the computation sustained by the learned CIT(A). The benefit of the statutory tolerance range having already CIT(A). The benefit of the statutory tolerance range having already CIT(A). The benefit of the statutory tolerance range having already been extended, the adjustment ultimately sustained by the learned been extended, the adjustment ultimately sustained by the learned been extended, the adjustment ultimately sustained by the learned CIT(A) cannot be said to suffer from any legal or factual infirmity. CIT(A) cannot be said to suffer from any legal or factual infirmity. CIT(A) cannot be said to suffer from any legal or factual infirmity.

12.19 It is a settled principle that where the first appellate It is a settled principle that where the first appellate It is a settled principle that where the first appellate authority has examined the issue in detail, applied the correct legal authority has examined the issue in detail, applied the correct legal authority has examined the issue in detail, applied the correct legal principles and granted appropriate relief in accordance with the principles and granted appropriate relief in accordance with the principles and granted appropriate relief in accordance with the statutory framework, interference by the Tribunal is unwarranted statutory framework, interference by the Tribunal is unwa statutory framework, interference by the Tribunal is unwa unless the findings are shown to be perverse or contrary to law. In unless the findings are shown to be perverse or contrary to law. In unless the findings are shown to be perverse or contrary to law. In the present case, we find that the learned CIT(A) has adopted a the present case, we find that the learned CIT(A) has adopted a the present case, we find that the learned CIT(A) has adopted a balanced and legally sustainable approach by affirming the CUP- balanced and legally sustainable approach by affirming the CUP balanced and legally sustainable approach by affirming the CUP based benchmarking methodology adopted by the Transfer Pricing based benchmarking methodology adopted by the Transfe based benchmarking methodology adopted by the Transfe Officer while simultaneously granting the assessee the benefit of the Officer while simultaneously granting the assessee the benefit of the Officer while simultaneously granting the assessee the benefit of the permissible tolerance band under Rule 10CA. permissible tolerance band under Rule 10CA.

12.20 In view of the foregoing discussion, we find no reason to In view of the foregoing discussion, we find no reason to In view of the foregoing discussion, we find no reason to interfere with the well interfere with the well-reasoned findings recorded by the learned reasoned findings recorded by the learned

IPCA Laboratories Limited, IPCA Laboratories Limited, 91 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

CIT(A). Accordingly, the order of the learned CIT(A) on this issue is T(A). Accordingly, the order of the learned CIT(A) on this issue is T(A). Accordingly, the order of the learned CIT(A) on this issue is affirmed. Consequently, Ground No. 4 raised by the assessee and affirmed. Consequently, Ground No. 4 raised by the assessee and affirmed. Consequently, Ground No. 4 raised by the assessee and Ground Nos. 7 to 10 raised by the Revenue are dismissed. Ground Nos. 7 to 10 raised by the Revenue are dismissed. Ground Nos. 7 to 10 raised by the Revenue are dismissed.

Disallowance of Sales & Marketing Expenses Disallowance of Sales & Marketing Expenses 1. On the facts and circumstances of the Appellant's case and in law the Ld. 1. On the facts and circumstances of the Appellant's case and in law the Ld. 1. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in holding Assessing Officer erred in holding the sales & marketing expenses incurred by the sales & marketing expenses incurred by the appellant as alleged 'freebies' to the medical practitioners, without any the appellant as alleged 'freebies' to the medical practitioners, without any the appellant as alleged 'freebies' to the medical practitioners, without any concrete material on record. concrete material on record. 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in re Assessing Officer erred in relying on the statement of Shri Sharawan Beli, GM lying on the statement of Shri Sharawan Beli, GM (Taxation) in-spite of the fact that the same was not based on correct facts and spite of the fact that the same was not based on correct facts and spite of the fact that the same was not based on correct facts and cannot be applied to the appellant, as per the ground/s contained in the cannot be applied to the appellant, as per the ground/s contained in the cannot be applied to the appellant, as per the ground/s contained in the assessment or otherwise. assessment or otherwise. 3. On the facts and circumst 3. On the facts and circumstances of the Appellant's case and in law the Ld. ances of the Appellant's case and in law the Ld. Assessing Officer erred in making disallowance of Rs. 17,14,87,839/- on account Assessing Officer erred in making disallowance of Rs. 17,14,87,839/ Assessing Officer erred in making disallowance of Rs. 17,14,87,839/ of alleged freebies services provided by the appellant to the medical practitioners, of alleged freebies services provided by the appellant to the medical practitioners, of alleged freebies services provided by the appellant to the medical practitioners, as per the ground/s contained in the asses as per the ground/s contained in the assessment or otherwise sment or otherwise Over invoicing and unexplained purchases Over invoicing and unexplained purchases 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in holding that the appellant has inflated its purchases Assessing Officer erred in holding that the appellant has inflated its purchases Assessing Officer erred in holding that the appellant has inflated its purchases with various parties, without any conc with various parties, without any concrete material on record. rete material on record. 5. On the facts and circumstances of the Appellant's case and in law the Ld. 5. On the facts and circumstances of the Appellant's case and in law the Ld. 5. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Assessing Officer erred in relying on the statement of Shri Prashant Godha, Shri Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Manoj Jain, Shri Manoj Jayawant, Shri Peter Fernandez and Shri Bhupendra Joshi in-spite of the fact that the same was not based on correct facts cannot be spite of the fact that the same was not based on correct facts cannot be spite of the fact that the same was not based on correct facts cannot be applied to the appellant and have been retracted, as per the ground/s contained applied to the appellant and have been retracted, as per the ground/s contained applied to the appellant and have been retracted, as per the ground/s contained in the assessment or otherwise. in the assessment or otherwise.

IPCA Laboratories Limited, IPCA Laboratories Limited, 92 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

IPCA Laboratories Limited, IPCA Laboratories Limited, 93 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

determining Arm's length price; and instead arbitrarily adopting CUP for determining Arm's length price; and instead arbitrarily adopting CUP for determining Arm's length price; and instead arbitrarily adopting CUP for computing arms's length price. The Appellant submits that considering the nature omputing arms's length price. The Appellant submits that considering the nature omputing arms's length price. The Appellant submits that considering the nature of business activities of Your Appellant and the validity of its claim for of business activities of Your Appellant and the validity of its claim for of business activities of Your Appellant and the validity of its claim for applicability of TNMM, the aforesaid Arm's length adjustment made by the TPO applicability of TNMM, the aforesaid Arm's length adjustment made by the TPO applicability of TNMM, the aforesaid Arm's length adjustment made by the TPO and confirmed by the AO, and confirmed by the AO, by considering CUP as most appropriate method, be by considering CUP as most appropriate method, be held to be unsustainable and be deleted. held to be unsustainable and be deleted. 13. On the facts and circumstances of the Appellant's case and in law the Ld. 13. On the facts and circumstances of the Appellant's case and in law the Ld. 13. On the facts and circumstances of the Appellant's case and in law the Ld. TPO has not bought any material to show that the method followed by the TPO has not bought any material to show that the method followed by the TPO has not bought any material to show that the method followed by the appellant is not proper and the TPO has only chosen to adopt CUP method ot proper and the TPO has only chosen to adopt CUP method ot proper and the TPO has only chosen to adopt CUP method because the same was more favourable to revenue. because the same was more favourable to revenue. 14. On the facts and circumstances of the Appellant's case and in law the Ld. 14. On the facts and circumstances of the Appellant's case and in law the Ld. 14. On the facts and circumstances of the Appellant's case and in law the Ld. AO/TPO erred in considering the monthly average of rate of products sold by the AO/TPO erred in considering the monthly average of rate of products sol AO/TPO erred in considering the monthly average of rate of products sol appellant to non-related parties for the purpose of comparing ALP of inter unit related parties for the purpose of comparing ALP of inter unit related parties for the purpose of comparing ALP of inter unit transfers as against annual average rate of similar products. The appellant transfers as against annual average rate of similar products. The appellant transfers as against annual average rate of similar products. The appellant submits that these captive materials are used on regular basis in the production submits that these captive materials are used on regular basis in the production submits that these captive materials are used on regular basis in the production of the appellant's units while sale to non ellant's units while sale to non-related parties are not on regular basis. related parties are not on regular basis. Therefore the appellant had rightly considered monthly average rates and Therefore the appellant had rightly considered monthly average rates and Therefore the appellant had rightly considered monthly average rates and therefore adjustment of Rs.53,35,824/ made by the TPO is erroneous and therefore adjustment of Rs.53,35,824/ made by the TPO is erroneous and therefore adjustment of Rs.53,35,824/ made by the TPO is erroneous and unsustainable in law. unsustainable in law. Other grounds 15. On the facts and circumstances of the Appellant's case and in law the Ld. 15. On the facts and circumstances of the Appellant's case and in law the Ld. 15. On the facts and circumstances of the Appellant's case and in law the Ld. Assessing Officer erred in making disallowance of Rs. 27,50,024/- being scrap Assessing Officer erred in making disallowance of Rs. 27,50,024/ Assessing Officer erred in making disallowance of Rs. 27,50,024/ sales while allowing the deduction to the appellant u/s 80IB/801C/801E of the sales while allowing the deduction to the appellant u/s 80IB/801C/801E of the sales while allowing the deduction to the appellant u/s 80IB/801C/801E of the Income Tax Act, 1961, Income Tax Act, 1961, as per the ground/s contained in the assessment or as per the ground/s contained in the assessment or otherwise.” 13.1. The grounds raised by the Revenue are reproduced as under: The grounds raised by the Revenue are reproduced as under:- The grounds raised by the Revenue are reproduced as under:

IPCA Laboratories Limited, IPCA Laboratories Limited, 94 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Tax Act, 1961, as per the ground/s contained in the assessment or Tax Act, 1961, as per the ground/s contained in the assessment or Tax Act, 1961, as per the ground/s contained in the assessment or otherwise." Grounds of Appeal on TP adjustments: Grounds of Appeal on TP adjustments:

4.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment done by the TPO of Rs. justified deleting the transfer pricing adjustment done by the TPO of Rs. justified deleting the transfer pricing adjustment done by the TPO of Rs. 12,96,73,021/- made on account of sale of products to it’s Associated Enterprise made on account of sale of products to it’s Associated Enterprise made on account of sale of products to it’s Associated Enterprise i.e. IPCA Pharma Nigeri i.e. IPCA Pharma Nigeria Ltd.? 4.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 4.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 4.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment done by the TPO without justified deleting the transfer pricing adjustment done by the TPO without justified deleting the transfer pricing adjustment done by the TPO without appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the assessee?" 4.3. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO in determining Arm's Length Price erred in rejecting the adjustment done by TPO in determining Arm's Length Price erred in rejecting the adjustment done by TPO in determining Arm's Length Price (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the same has been done by the T same has been done by the TPO in earlier years and has been upheld by Ld PO in earlier years and has been upheld by Ld CIT(A) in its orders for AY 2008 CIT(A) in its orders for AY 2008-09 to AY 2011-12?." 4.4. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 4.4. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 4.4. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the adjustment of Rs.6,00,998/ justified in deleting the adjustment of Rs.6,00,998/- made on account of made on account of Corporate Guarantee. orporate Guarantee. 5. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 5. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 5. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified is justified deleting the transfer pricing adjustment of Rs. 1,36,34,585/- justified is justified deleting the transfer pricing adjustment of Rs. 1,36,34,585/ justified is justified deleting the transfer pricing adjustment of Rs. 1,36,34,585/ made on account of service charges paid to its Associated Enterprise in USA ?". made on account of service charges paid to its Associated Enterprise made on account of service charges paid to its Associated Enterprise 5.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 5.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 5.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO wherein the TPO has observed that erred in rejecting the adjustment done by TPO wherein the TPO has observed that erred in rejecting the adjustment done by TPO wherein the TPO has observed that onus cast on the assessee to justify the payment of cost plus 20% to the AE by onus cast on the assessee to justify the payment of cost plus 20% to the AE by onus cast on the assessee to justify the payment of cost plus 20% to the AE by benchmarking the above transaction as per provisions of section 92C of the marking the above transaction as per provisions of section 92C of the marking the above transaction as per provisions of section 92C of the Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". 5.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 5.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 5.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the tr justified in deleting the transfer pricing adjustment done by the TPO without ansfer pricing adjustment done by the TPO without appreciating the fact that the TPO has pointed out that the assessee has not done appreciating the fact that the TPO has pointed out that the assessee has not done appreciating the fact that the TPO has pointed out that the assessee has not done any benchmarking in arriving at the payment of cost plus 20% to the AE for the any benchmarking in arriving at the payment of cost plus 20% to the AE for the any benchmarking in arriving at the payment of cost plus 20% to the AE for the service charges paid"?. service charges paid"?. 6.1. "Whether on fact 6.1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is s and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment (SDT) of Rs.44,90,241/- made on justified deleting the transfer pricing adjustment (SDT) of Rs.44,90,241/ justified deleting the transfer pricing adjustment (SDT) of Rs.44,90,241/ Inter unit transfers?" Inter unit transfers?" 6.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 6.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 6.2. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO wherein the TPO has done the n rejecting the adjustment done by TPO wherein the TPO has done the n rejecting the adjustment done by TPO wherein the TPO has done the

IPCA Laboratories Limited, IPCA Laboratories Limited, 95 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

benchmarking of the above transactions and arrived at the ALP adjustment for benchmarking of the above transactions and arrived at the ALP adjustment for benchmarking of the above transactions and arrived at the ALP adjustment for the Inter unit transfers as per provisions of section 92C of the Income Tax Act the Inter unit transfers as per provisions of section 92C of the Income Tax Act the Inter unit transfers as per provisions of section 92C of the Income Tax Act 1961?" 6.3. "Whether on facts a 6.3. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) nd circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the tolerance limit of 3% benefit is generally erred in not appreciating the fact that the tolerance limit of 3% benefit is generally erred in not appreciating the fact that the tolerance limit of 3% benefit is generally applied on an aggregate basis* (i.e., after considering the net effect of all applied on an aggregate basis* (i.e., after considering the net effect of all applied on an aggregate basis* (i.e., after considering the net effect of all transactions of the same category) transactions of the same category) rather than item-wise as has been held by wise as has been held by Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. Hon'ble ITAT, Mumbai in the case of DCIT vs. Tata Autocomp Systems Ltd. (2012)?" 14. The Ground No.1 of the appeal was not pressed and therefore The Ground No.1 of the appeal was not pressed and therefore The Ground No.1 of the appeal was not pressed and therefore same is dismissed as infructuous. same is dismissed as infructuous.

IPCA Laboratories Limited, IPCA Laboratories Limited, 96 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

adjustment of ₹12,96,73,021/ 12,96,73,021/- made by the Transfer Pricing Officer made by the Transfer Pricing Officer in respect of export sales effected by the assessee to its Associated in respect of export sales effected by the assessee to its Associated in respect of export sales effected by the assessee to its Associated Enterprise, namely M/s IPCA Nig Enterprise, namely M/s IPCA Nigeria Limited. 17.1 The relevant facts, in brief, are that the assessee exported The relevant facts, in brief, are that the assessee exported The relevant facts, in brief, are that the assessee exported finished pharmaceutical products aggregating to ₹15,63,04,317/ finished pharmaceutical products aggregating to 15,63,04,317/- to its Associated Enterprise (“AE”), namely M/s IPCA Nigeria Limited. its Associated Enterprise (“AE”), namely M/s IPCA Nigeria Limited. its Associated Enterprise (“AE”), namely M/s IPCA Nigeria Limited. For For For the the the purpose purpose purpose of of of benchmarking benchmarking benchmarking the the the said said said international international international transaction, the assessee adopted the Transactional Net Margin transaction, the assessee adopted the Transactional Net Margin transaction, the assessee adopted the Transactional Net Margin Method (“TNMM”) as the Most Appropriate Method (“MAM”) and Method (“TNMM”) as the Most Appropriate Method (“MAM” Method (“TNMM”) as the Most Appropriate Method (“MAM” benchmarked the transaction at the entity level. Since the operating benchmarked the transaction at the entity level. Since the operating benchmarked the transaction at the entity level. Since the operating profit margin earned by the assessee exceeded that of the profit margin earned by the assessee exceeded that of the profit margin earned by the assessee exceeded that of the comparable companies, the assessee concluded that the transaction comparable companies, the assessee concluded that the transaction comparable companies, the assessee concluded that the transaction was at arm’s length. 17.2 The Transfer Pricing Officer ( The Transfer Pricing Officer (“TPO”), however, did not accept “TPO”), however, did not accept the benchmarking approach adopted by the assessee. According to the benchmarking approach adopted by the assessee. According to the benchmarking approach adopted by the assessee. According to the TPO, benchmarking the transaction by comparing the entity- the TPO, benchmarking the transaction by comparing the entity the TPO, benchmarking the transaction by comparing the entity level profit margin of the assessee was inappropriate, particularly level profit margin of the assessee was inappropriate, particularly level profit margin of the assessee was inappropriate, particularly when the value of transactions when the value of transactions with the Nigerian AE constituted with the Nigerian AE constituted only a small fraction of the assessee’s overall operations. The TPO only a small fraction of the assessee’s overall operations. The TPO only a small fraction of the assessee’s overall operations. The TPO was, therefore, of the view that the international transaction was, therefore, of the view that the international transaction was, therefore, of the view that the international transaction required an independent examination and directed the assessee to required an independent examination and directed the assessee to required an independent examination and directed the assessee to benchmark the same under t benchmark the same under the Comparable Uncontrolled Price he Comparable Uncontrolled Price

IPCA Laboratories Limited, IPCA Laboratories Limited, 97 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

(“CUP”) Method by furnishing details of comparable uncontrolled (“CUP”) Method by furnishing details of comparable uncontrolled (“CUP”) Method by furnishing details of comparable uncontrolled transactions with non transactions with non-associated enterprises. 17.3 The TPO observed that the assessee had not furnished any The TPO observed that the assessee had not furnished any The TPO observed that the assessee had not furnished any internal CUP data for comparable transactions. Consequently, in internal CUP data for comparable transactions. Cons internal CUP data for comparable transactions. Cons the absence of internal comparables, he proceeded to compare the the absence of internal comparables, he proceeded to compare the the absence of internal comparables, he proceeded to compare the prices at which identical pharmaceutical products were sold to the prices at which identical pharmaceutical products were sold to the prices at which identical pharmaceutical products were sold to the AE with the prices charged by the assessee to unrelated parties in AE with the prices charged by the assessee to unrelated parties in AE with the prices charged by the assessee to unrelated parties in other jurisdictions. According to the TPO, d other jurisdictions. According to the TPO, differences relating to ifferences relating to geography, quantity, and other commercial factors did not geography, quantity, and other commercial factors did not geography, quantity, and other commercial factors did not materially influence the prices charged and, therefore, did not materially influence the prices charged and, therefore, did not materially influence the prices charged and, therefore, did not preclude the application of the CUP Method. Placing reliance on preclude the application of the CUP Method. Placing reliance on preclude the application of the CUP Method. Placing reliance on Rule 10B(3) of the Income Rule 10B(3) of the Income-tax Rules, 1962, the tax Rules, 1962, the TPO held that adjustments are warranted only where the differences materially adjustments are warranted only where the differences materially adjustments are warranted only where the differences materially affect the prices charged in the controlled and uncontrolled affect the prices charged in the controlled and uncontrolled affect the prices charged in the controlled and uncontrolled transactions. Since, according to him, the products sold were transactions. Since, according to him, the products sold were transactions. Since, according to him, the products sold were identical and the sales to both AE and non identical and the sales to both AE and non-AE customers AE customers were largely within the Asian and African regions, the comparison was largely within the Asian and African regions, the comparison was largely within the Asian and African regions, the comparison was considered appropriate. considered appropriate. 17.4 Before the TPO, the assessee vehemently opposed the adoption Before the TPO, the assessee vehemently opposed the adoption Before the TPO, the assessee vehemently opposed the adoption of the CUP Method and submitted that the method demands a high of the CUP Method and submitted that the method demands a high of the CUP Method and submitted that the method demands a high degree of comparability, which w degree of comparability, which was absent in the present case. It as absent in the present case. It was contended that material differences existed in geographical was contended that material differences existed in geographical was contended that material differences existed in geographical markets, sales volumes, commercial terms, pack sizes, packaging markets, sales volumes, commercial terms, pack sizes, packaging markets, sales volumes, commercial terms, pack sizes, packaging

IPCA Laboratories Limited, IPCA Laboratories Limited, 98 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

configurations, regulatory requirements and other economic factors. configurations, regulatory requirements and other economic factors. configurations, regulatory requirements and other economic factors. The assessee further submi The assessee further submitted that identical pharmaceutical tted that identical pharmaceutical products may be marketed in different countries with varying products may be marketed in different countries with varying products may be marketed in different countries with varying specifications, packaging formats and commercial conditions, specifications, packaging formats and commercial conditions, specifications, packaging formats and commercial conditions, thereby rendering a mere comparison of unit sale prices unreliable thereby rendering a mere comparison of unit sale prices unreliable thereby rendering a mere comparison of unit sale prices unreliable and misleading.

17.5 The TPO, however, was not persuaded by the aforesaid wever, was not persuaded by the aforesaid wever, was not persuaded by the aforesaid submissions. Rejecting the objections raised by the assessee, he submissions. Rejecting the objections raised by the assessee, he submissions. Rejecting the objections raised by the assessee, he held that the differences pointed out were not of such a nature as to held that the differences pointed out were not of such a nature as to held that the differences pointed out were not of such a nature as to materially affect the prices charged and, accordingly, proceeded to materially affect the prices charged and, accordingly, proceeded to materially affect the prices charged and, accordingly, proceeded to benchmark the transaction under the CUP Method. Based on a he transaction under the CUP Method. Based on a he transaction under the CUP Method. Based on a comparison of prices charged to the AE vis comparison of prices charged to the AE vis-à-vis unrelated parties, vis unrelated parties, the TPO determined an adjustment of ₹12,96,73,021/ the TPO determined an adjustment of 12,96,73,021/- and proposed the same as a transfer pricing adjustment, observing as proposed the same as a transfer pricing adjustment, observing as proposed the same as a transfer pricing adjustment, observing as under:

“5.4 The submission of the assessee is considered and is not found to be bmission of the assessee is considered and is not found to be bmission of the assessee is considered and is not found to be acceptable. a) It is stated that the assessee's contention in support of rejection of CUP a) It is stated that the assessee's contention in support of rejection of CUP a) It is stated that the assessee's contention in support of rejection of CUP method owing to various economic differences like geographical difference, method owing to various economic differences like geographical difference, method owing to various economic differences like geographical difference, quantity sold etc. is not fou quantity sold etc. is not found to be acceptable as these differences do not nd to be acceptable as these differences do not appear to be such that it will materially affect the price charged to AE vis appear to be such that it will materially affect the price charged to AE vis appear to be such that it will materially affect the price charged to AE vis- a-vis non-AE. As per Rule 108(3) adjustment is required to be made on AE. As per Rule 108(3) adjustment is required to be made on AE. As per Rule 108(3) adjustment is required to be made on account of differences between the controlled and the uncontr account of differences between the controlled and the uncontr account of differences between the controlled and the uncontrolled transactions only if the differences are likely to materially affect the prices transactions only if the differences are likely to materially affect the prices transactions only if the differences are likely to materially affect the prices charged. Considering that the products sold are same and the countries in charged. Considering that the products sold are same and the countries in charged. Considering that the products sold are same and the countries in which the products are sold (both to AE and non which the products are sold (both to AE and non-AE) seem to be within AE) seem to be within Asia or Africa region, and Asia or Africa region, and no effect of the geography on the price is pointed no effect of the geography on the price is pointed out by the assessee, the CUP comparison for the sald products seem to be out by the assessee, the CUP comparison for the sald products seem to be out by the assessee, the CUP comparison for the sald products seem to be appropriate. Further, from the data given for export to AE as well as non appropriate. Further, from the data given for export to AE as well as non appropriate. Further, from the data given for export to AE as well as non-

IPCA Laboratories Limited, IPCA Laboratories Limited, 99 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

AE, it is observed that there is no correlation between r AE, it is observed that there is no correlation between r AE, it is observed that there is no correlation between rate charged and quantity sold. Further the assessee could not show that assessee has quantity sold. Further the assessee could not show that assessee has quantity sold. Further the assessee could not show that assessee has given any volume discount. given any volume discount. c) Further regarding benchmarking by TNMM, as per the Act, each class of c) Further regarding benchmarking by TNMM, as per the Act, each class of c) Further regarding benchmarking by TNMM, as per the Act, each class of transactions has to be examined having regard to the arm's length transactions has to be examined having regard to the arm's length transactions has to be examined having regard to the arm's length principle by applying the most appropriate method. In this regard, Rule iple by applying the most appropriate method. In this regard, Rule iple by applying the most appropriate method. In this regard, Rule 10B is reproduced below for application of CUP and TNNM methods as 10B is reproduced below for application of CUP and TNNM methods as 10B is reproduced below for application of CUP and TNNM methods as under. "108. (1) For the purposes of sub "108. (1) For the purposes of sub-section (2) of section 92C, the arms section (2) of section 92C, the arms length price in relation to an international length price in relation to an international transaction shall be transaction shall be determined by any of the following methods, being the most determined by any of the following methods, being the most determined by any of the following methods, being the most appropriate method, in the following manner, namely: appropriate method, in the following manner, namely: appropriate method, in the following manner, namely: a) Comparable uncontrolled price method, by which, a) Comparable uncontrolled price method, by which, a) Comparable uncontrolled price method, by which,

(1) the price charged or paid for property transferred or services (1) the price charged or paid for property transferred or services (1) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of provided in a comparable uncontrolled transaction, or a number of provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; such transactions, is identified; (1) such price is adjusted to account for differences, if any, between (1) such price is adjusted to account for differences, if any, between (1) such price is adjusted to account for differences, if any, between the international transaction and the comparable uncontrolled the international transaction and the comparable uncontrolled the international transaction and the comparable uncontrolled transactions or between transactions or between the enterprises entering into such the enterprises entering into such transactions, which could materially affect the price in the open transactions, which could materially affect the price in the open transactions, which could materially affect the price in the open market; market; (ii) the adjusted price arrived at under sub (ii) the adjusted price arrived at under sub-clause (il) is taken to be clause (il) is taken to be an arm's length price in respect of the property transferred or an arm's length price in respect of the property transferred or an arm's length price in respect of the property transferred or services p services provided in the international transaction; rovided in the international transaction; (c) (d) (e) Transactional net margin method, by which, (e) Transactional net margin method, by which, (1) the net profit margin realized by the enterprise from an (1) the net profit margin realized by the enterprise from an (1) the net profit margin realized by the enterprise from an international transaction entered into with an associated enterprise international transaction entered into with an associated enterprise international transaction entered into with an associated enterprise is computed in relation to is computed in relation to costs incurred or sales effected or assets costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to employed or to be employed by the enterprise or having regard to employed or to be employed by the enterprise or having regard to any other relevant base; any other relevant base; from (ii) the net profit margin realized by the enterprise or by an from (ii) the net profit margin realized by the enterprise or by an from (ii) the net profit margin realized by the enterprise or by an unrelated enterprise a unrelated enterprise a-comparable uncontrolled transact comparable uncontrolled transaction or a

IPCA Laboratories Limited, IPCA Laboratories Limited, 100 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

number of such transactions is computed having regard to the same number of such transactions is computed having regard to the same number of such transactions is computed having regard to the same base; (III) the net profit margin referred to in sub (III) the net profit margin referred to in sub-clause (il) arising in clause (il) arising in comparable uncontrolled transactions is adjusted to take into comparable uncontrolled transactions is adjusted to take into comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international account the differences, if any, between th account the differences, if any, between th transaction and the comparable uncontrolled transactions, or transaction and the comparable uncontrolled transactions, or transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which between the enterprises entering into such transactions, which between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open could materially affect the amount of net profit margin in the open could materially affect the amount of net profit margin in the open market; market; (iv) the net profit margin realized by t (iv) the net profit margin realized by the enterprise and referred to in he enterprise and referred to in sub-clause (1) is established to be the same as the net profit margin clause (1) is established to be the same as the net profit margin clause (1) is established to be the same as the net profit margin referred to in sub referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account (v) the net profit margin thus established is then taken into account (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international to arrive at an arm's length price in relation to to arrive at an arm's length price in relation to transaction." transaction." (1) Thus as can be seen from above, CUP and TNNM are the (1) Thus as can be seen from above, CUP and TNNM are the (1) Thus as can be seen from above, CUP and TNNM are the methods to be applied on transactions. Under CUP metnod, the price methods to be applied on transactions. Under CUP metnod, the price methods to be applied on transactions. Under CUP metnod, the price charged in an uncontrolled transaction or a number of such charged in an uncontrolled transaction or a number of such charged in an uncontrolled transaction or a number of such transactions are relevant. Similarly, und transactions are relevant. Similarly, under TNNM, the profit realised er TNNM, the profit realised by an independent enterprise from a comparable uncontrolled by an independent enterprise from a comparable uncontrolled by an independent enterprise from a comparable uncontrolled transaction or a number of such transactions are relevant. Thus the transaction or a number of such transactions are relevant. Thus the transaction or a number of such transactions are relevant. Thus the Act does not say that TNNM is to be applied at the enterprise level Act does not say that TNNM is to be applied at the enterprise level Act does not say that TNNM is to be applied at the enterprise level and once TNMM is applied at the and once TNMM is applied at the enterprise level, all the enterprise level, all the international transactions are at arm's length, TNMM, when applied international transactions are at arm's length, TNMM, when applied international transactions are at arm's length, TNMM, when applied to each international transaction of sale of each product to AE to each international transaction of sale of each product to AE to each international transaction of sale of each product to AE against the corresponding Internal TNMM on sale of same product to against the corresponding Internal TNMM on sale of same product to against the corresponding Internal TNMM on sale of same product to non-AE, as is required under th AE, as is required under the relevant rules, will lead to the e relevant rules, will lead to the same results as in CUP. same results as in CUP. (if) When a taxpayer is involved in distinct activities, these have to (if) When a taxpayer is involved in distinct activities, these have to (if) When a taxpayer is involved in distinct activities, these have to be analyzed separately by applying the most appropriate method in be analyzed separately by applying the most appropriate method in be analyzed separately by applying the most appropriate method in each case. This issue was discussed by the ITAT, Mumbal in the each case. This issue was discussed by the ITAT, Mumbal in t each case. This issue was discussed by the ITAT, Mumbal in t case of Star India Pvt Ltd Vs ACIT (2008 case of Star India Pvt Ltd Vs ACIT (2008-TIOL TIOL-426-ITAT-MUM), wherein it was held that distinctive activities are to be analyzed wherein it was held that distinctive activities are to be analyzed wherein it was held that distinctive activities are to be analyzed separately. separately. (iii) The aspect of aggregation by class of transactions rather than at (iii) The aspect of aggregation by class of transactions rather than at (iii) The aspect of aggregation by class of transactions rather than at the enterprise level is also upheld by th the enterprise level is also upheld by the ITAT Mumbai in the case of e ITAT Mumbai in the case of UCB India Pvt Ltd (317 ITR 292 (AT) (Mumbai) UCB India Pvt Ltd (317 ITR 292 (AT) (Mumbai) (iv) Thus as held above, the TPO is empowered to apply appropriate (iv) Thus as held above, the TPO is empowered to apply appropriate (iv) Thus as held above, the TPO is empowered to apply appropriate method for each class of transactions. In the light of the above, method for each class of transactions. In the light of the above, method for each class of transactions. In the light of the above, TNMM on an entity level cannot be considered to be Most TNMM on an entity level cannot be considered to b TNMM on an entity level cannot be considered to b

IPCA Laboratories Limited, IPCA Laboratories Limited, 101 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

appropriate method (MAM) because transactions with the above AE appropriate method (MAM) because transactions with the above AE appropriate method (MAM) because transactions with the above AE is very less in comparison to the total cost of the assessee and is very less in comparison to the total cost of the assessee and is very less in comparison to the total cost of the assessee and accordingly the ALP calculated is not in accordance with Section accordingly the ALP calculated is not in accordance with Section accordingly the ALP calculated is not in accordance with Section 92C(1), necessitating invocation of Section 92C(3) for specific 92C(1), necessitating invocation of Section 92C(3) for 92C(1), necessitating invocation of Section 92C(3) for examination of each international transaction, to ascertain whether examination of each international transaction, to ascertain whether examination of each international transaction, to ascertain whether the arm's the arm's-length price in respect of the same has been determined in length price in respect of the same has been determined in accordance with law. accordance with law. (v) The CIT(A) in the assessee's own case for AY 2008-09 to 2010-11 (v) The CIT(A) in the assessee's own case for AY 2008 (v) The CIT(A) in the assessee's own case for AY 2008 has upheld the adjust has upheld the adjustment proposed by the TPO using internal CUP ment proposed by the TPO using internal CUP method. method. Hence, it is held that internal CUP, comparing the AE transactions Hence, it is held that internal CUP, comparing the AE transactions Hence, it is held that internal CUP, comparing the AE transactions with the assessee's exports to 3rd parties, is applied. with the assessee's exports to 3rd parties, is applied. with the assessee's exports to 3rd parties, is applied. It is pertinent to note that spite of giving sufficient opportunity of It is pertinent to note that spite of giving sufficient opportunity of It is pertinent to note that spite of giving sufficient opportunity of more than more than 3 months, the assessee has submitted the annual 3 months, the assessee has submitted the annual average rates for export to third parties on 23.10.2017. Therefore, average rates for export to third parties on 23.10.2017. Therefore, average rates for export to third parties on 23.10.2017. Therefore, the issue of paucity of time raised by the assessee is factually the issue of paucity of time raised by the assessee is factually the issue of paucity of time raised by the assessee is factually incorrect. incorrect. In view of the above, comparison of rate charged to AE and non-AE In view of the above, comparison of rate charged to AE and non In view of the above, comparison of rate charged to AE and non was carried out on the data furnishes by the AE and the difference was carried out on the data furnishes by the AE and the difference was carried out on the data furnishes by the AE and the difference between AE and non between AE and non-AE pricing (where the price charged to AE is AE pricing (where the price charged to AE is lower than the price charged to non lower than the price charged to non-AE) is proposed as adjustment. AE) is proposed as adjustment. The same is summarized below. Accordingly, an adjustment of Rs. The same is summarized below. Accordingly, an adjustment The same is summarized below. Accordingly, an adjustment 12,96,73,021/ 12,96,73,021/- is proposed. Name of product Adjustment S. Name of product Qty Sale Sale price differe differe No. sold nce price to nce to unrelated AE party 1 500 500 721 NA Azee -500 2 Betamoti Injection 1407 914 1,907 993 1,397,151 Betamoti Injection 3 Clopact 75mg Tab 3188 239 224 Clopact 75mg Tab 4 2990 232 153 Glycinorm 80 Tablets / Glycinorm 80 Tablets / Glycinorm M 80 Glycinorm M 80 Tablets 5 19473 96 652 555 10,626,988 6 HCQS Tablets 18804 95 389 294 5,527,060 HCQS Tablets 7 Laridox Tablets 219797 407 559 152 33,409,144 Laridox Tablets

IPCA Laboratories Limited, IPCA Laboratories Limited, 102 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

8 Larinate Injection 143250 44 67 23 3,294,750 Larinate Injection 9 Larithar 40 Injection 12926 80 484 404 5,225,336 Larithar 40 10 10 Mg Tab 21300 72 91 19 394,263 Lisoril -10 Mg Tab 11 5 Mg Tab 16770 53 74 21 352,170 Lisoril -5 Mg Tab 12 Lumerax Tabs 9607 578 600 22 211,334 Lumerax Tabs 13 Olex 10mg Tab 4209 305 2,404 2,099 8,832,923 Olex 10mg Tab 2,099 14 Olex 5mg Tab 2100 180 1,638 Olex 5mg Tab 15 Preqartan 50 Tab 2054 134 144 1,458 3,062,199 Preqartan 50 Tab 1,458 16 Presartan H 50 Tabs 6470 154 119 10 20,047 Presartan H 50 Tabs 17 Rapiclav 375 Tab (5*3) 1692 124 222 98 165,630 Rapiclav 375 Tab (5*3) 18 Rapiclav 625 Tab (5*3) 7506 160 145 Rapiclav 625 Tab (5*3) 19 Rapiclav 625 Tab (7*3) 23087 207 285 78 1,798,246 Rapiclav 625 Tab (7*3) 20 20Mg tab 2930 178 207 29 83,827 Simlo-20Mg 21 Tenolol 50mg tabs 17548 19 56 37 655,242 Tenolol 50mg tabs 22 Tenoric 100mg Tab 81700 65 126 61 4,983,700 Tenoric 100mg Tab 23 Tenoric 50mg Tab 136276 45 88 43 5,316,260 Tenoric 50mg Tab 24 Zerodol CR Tabs 3052 132 174 42 128,672 Zerodol CR Tabs 25 Zerodol 100mg tab 161734 74 327 253 40,886,355 Zerodol 100mg tab 26 -P 16281 88 248 160 2,601,704 Zerodol- Total Adjustment 129,673,021 Total Adjustment

17.6 On appeal, the learned CIT(A), after a detailed examination of On appeal, the learned CIT(A), after a detailed examination of On appeal, the learned CIT(A), after a detailed examination of the transfer pricing analysis undertaken by the Transfer Pricing the transfer pricing analysis undertaken by the Transfer Pricing the transfer pricing analysis undertaken by the Transfer Pricing Officer, did not concur with the approach adopted by the latter. The Officer, did not concur with the approach adopted by the latter. The Officer, did not concur with the approach adopted by the latter. The learned CIT(A) observed that the CUP Method, by its very nature, learned CIT(A) observed that the CUP Method, by its very na learned CIT(A) observed that the CUP Method, by its very na requires a high degree of comparability between the controlled and requires a high degree of comparability between the controlled and requires a high degree of comparability between the controlled and

IPCA Laboratories Limited, IPCA Laboratories Limited, 103 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

uncontrolled transactions and that the economic circumstances uncontrolled transactions and that the economic circumstances uncontrolled transactions and that the economic circumstances surrounding such transactions must be substantially similar. surrounding such transactions must be substantially similar. surrounding such transactions must be substantially similar. According to the learned CIT(A), the foundational requirement for According to the learned CIT(A), the foundational requiremen According to the learned CIT(A), the foundational requiremen application of the CUP Method is the existence of comparable application of the CUP Method is the existence of comparable application of the CUP Method is the existence of comparable market conditions, commercial circumstances and economic market conditions, commercial circumstances and economic market conditions, commercial circumstances and economic environments, failing which the reliability of the benchmarking environments, failing which the reliability of the benchmarking environments, failing which the reliability of the benchmarking exercise becomes seriously impaired. exercise becomes seriously impaired. 17.7 The learned CIT(A) further The learned CIT(A) further noted that the reliance placed by noted that the reliance placed by the Transfer Pricing Officer on the orders passed in the assessee’s the Transfer Pricing Officer on the orders passed in the assessee’s the Transfer Pricing Officer on the orders passed in the assessee’s own case for the earlier assessment years was misplaced. It was own case for the earlier assessment years was misplaced. It was own case for the earlier assessment years was misplaced. It was observed that the controversy adjudicated by the Tribunal in those observed that the controversy adjudicated by the Tribunal in those observed that the controversy adjudicated by the Tribunal in those years was confined to years was confined to the validity of the “basket approach” adopted the validity of the “basket approach” adopted by the assessee while applying the CUP Method and did not involve by the assessee while applying the CUP Method and did not involve by the assessee while applying the CUP Method and did not involve the question whether transactions undertaken in countries having the question whether transactions undertaken in countries having the question whether transactions undertaken in countries having materially different economic and geographical conditions could be materially different economic and geographical conditions could be materially different economic and geographical conditions could be compared under the CUP Method without appropriate adjustments. er the CUP Method without appropriate adjustments. er the CUP Method without appropriate adjustments. The learned CIT(A), therefore, held that the earlier decisions did not The learned CIT(A), therefore, held that the earlier decisions did not The learned CIT(A), therefore, held that the earlier decisions did not constitute a binding precedent on the issue arising in the year constitute a binding precedent on the issue arising in the year constitute a binding precedent on the issue arising in the year under consideration, particularly when the assessee had adopted under consideration, particularly when the assessee had adopted under consideration, particularly when the assessee had adopted TNMM as the Most Appropriate Method during the relevant s the Most Appropriate Method during the relevant s the Most Appropriate Method during the relevant assessment year. 17.8 Upon examining the benchmarking exercise undertaken by the Upon examining the benchmarking exercise undertaken by the Upon examining the benchmarking exercise undertaken by the Transfer Pricing Officer, the learned CIT(A) found merit in the Transfer Pricing Officer, the learned CIT(A) found merit in the Transfer Pricing Officer, the learned CIT(A) found merit in the

IPCA Laboratories Limited, IPCA Laboratories Limited, 104 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

assessee’s contention that the comparison of prices charged in assessee’s contention that the comparison of prices charged assessee’s contention that the comparison of prices charged Nigeria with prices prevailing in other jurisdictions across Asia, Nigeria with prices prevailing in other jurisdictions across Asia, Nigeria with prices prevailing in other jurisdictions across Asia, Europe and South America, without carrying out suitable Europe and South America, without carrying out suitable Europe and South America, without carrying out suitable adjustments for differences in market conditions, purchasing adjustments for differences in market conditions, purchasing adjustments for differences in market conditions, purchasing power, regulatory environment, commercial risks, volume of power, regulatory environment, commercial risks, volume of power, regulatory environment, commercial risks, volume of transactions, logistics, taxation and other economic factors, could ns, logistics, taxation and other economic factors, could ns, logistics, taxation and other economic factors, could not furnish a reliable basis for determining the Arm’s Length Price. not furnish a reliable basis for determining the Arm’s Length Price. not furnish a reliable basis for determining the Arm’s Length Price. The learned CIT(A) observed that sales made in a developing or The learned CIT(A) observed that sales made in a developing or The learned CIT(A) observed that sales made in a developing or economically distinct market such as Nigeria could not be equated economically distinct market such as Nigeria could not be equated economically distinct market such as Nigeria could not be equated with sales made in developed or materially different markets with sales made in developed or materially different markets with sales made in developed or materially different markets without first neutralizing the impact of such differences through without first neutralizing the impact of such differences through without first neutralizing the impact of such differences through scientifically determinable adjustments. In the absence of such scientifically determinable adjustments. In the absence of such scientifically determinable adjustments. In the absence of such adjustments, the comparability analysis undertaken by the Transfer adjustments, the comparability analysis undertaken by the Transfe adjustments, the comparability analysis undertaken by the Transfe Pricing Officer was held to be inherently deficient and incapable of Pricing Officer was held to be inherently deficient and incapable of Pricing Officer was held to be inherently deficient and incapable of yielding a reliable arm’s length result. yielding a reliable arm’s length result.

17.9 The learned CIT(A) further accepted the assessee’s contention The learned CIT(A) further accepted the assessee’s contention The learned CIT(A) further accepted the assessee’s contention regarding the applicability of the Transactional Net Margin Method regarding the applicability of the Transactional Net Margin Method regarding the applicability of the Transactional Net Margin Method at the entity level. It was observed that the assessee was engaged in at the entity level. It was observed that the assessee was engaged in at the entity level. It was observed that the assessee was engaged in an integrated pharmaceutical business comprising interconnected an integrated pharmaceutical business comprising intercon an integrated pharmaceutical business comprising intercon manufacturing, distribution and export operations, all of which manufacturing, distribution and export operations, all of which manufacturing, distribution and export operations, all of which constituted a homogeneous and closely linked set of activities. In constituted a homogeneous and closely linked set of activities. In constituted a homogeneous and closely linked set of activities. In such circumstances, the learned CIT(A) held that benchmarking such circumstances, the learned CIT(A) held that benchmarking such circumstances, the learned CIT(A) held that benchmarking individual transactions in isolation may not produce a reliable individual transactions in isolation may not produce a r individual transactions in isolation may not produce a r

IPCA Laboratories Limited, IPCA Laboratories Limited, 105 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

measure of arm’s length conditions and that application of TNMM measure of arm’s length conditions and that application of TNMM measure of arm’s length conditions and that application of TNMM at the entity level constituted a more appropriate and commercially at the entity level constituted a more appropriate and commercially at the entity level constituted a more appropriate and commercially realistic approach.

17.10 The learned CIT(A) also noted that the Transfer Pricing The learned CIT(A) also noted that the Transfer Pricing The learned CIT(A) also noted that the Transfer Pricing Officer had neither disputed the Officer had neither disputed the computation of the operating computation of the operating margins furnished by the assessee nor demonstrated any infirmity margins furnished by the assessee nor demonstrated any infirmity margins furnished by the assessee nor demonstrated any infirmity in the comparability analysis undertaken under TNMM. It was in the comparability analysis undertaken under TNMM. It was in the comparability analysis undertaken under TNMM. It was further observed that suitable segmental data for benchmarking further observed that suitable segmental data for benchmarking further observed that suitable segmental data for benchmarking individual transactions was not availab individual transactions was not available and that the transactions le and that the transactions entered into by the assessee were so closely interlinked that entered into by the assessee were so closely interlinked that entered into by the assessee were so closely interlinked that separate evaluation thereof was neither practicable nor warranted. separate evaluation thereof was neither practicable nor warranted. separate evaluation thereof was neither practicable nor warranted. Reliance was placed on the decision of the Coordinate Bench of the Reliance was placed on the decision of the Coordinate Bench of the Reliance was placed on the decision of the Coordinate Bench of the Delhi Tribunal in McCann Ericks McCann Erickson India Pvt. Ltd. v. ACIT on India Pvt. Ltd. v. ACIT, wherein entity-level TNMM was held to be an appropriate method in cases level TNMM was held to be an appropriate method in cases level TNMM was held to be an appropriate method in cases involving closely connected and integrated business activities. involving closely connected and integrated business activities. involving closely connected and integrated business activities.

17.11 In light of the aforesaid findings, the learned CIT(A) In light of the aforesaid findings, the learned CIT(A) In light of the aforesaid findings, the learned CIT(A) concluded that the CUP Method adopted by the Transfer Pricing concluded that the CUP Method adopted by the Transfer Pricing concluded that the CUP Method adopted by the Transfer Pricing Officer was unsuitable in the facts and circumstances of the case Officer was unsuitable in the facts and circumstances of the case Officer was unsuitable in the facts and circumstances of the case and that the entity and that the entity-level TNMM adopted by the assessee level TNMM adopted by the assessee represented the Most Appropriate Method for benchmarking the st Appropriate Method for benchmarking the st Appropriate Method for benchmarking the impugned impugned impugned international international international transaction. transaction. transaction. The The The transfer transfer transfer pricing pricing pricing adjustment made in respect of exports to M/s IPCA Nigeria Limited adjustment made in respect of exports to M/s IPCA Nigeria Limited adjustment made in respect of exports to M/s IPCA Nigeria Limited

IPCA Laboratories Limited, IPCA Laboratories Limited, 106 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

was, accordingly, directed to be deleted. was, accordingly, directed to be deleted. The relevant finding of the The relevant finding of the learned CIT(A) is reproduced as under: produced as under:

“18.4 I have considered the contention of the TPO and submissions of the 18.4 I have considered the contention of the TPO and submissions of the 18.4 I have considered the contention of the TPO and submissions of the assessee. It is understood that issue arises in the present ground is to whether e. It is understood that issue arises in the present ground is to whether e. It is understood that issue arises in the present ground is to whether CUP can be applied for determining ALP. In the transfer pricing order, TPO has CUP can be applied for determining ALP. In the transfer pricing order, TPO has CUP can be applied for determining ALP. In the transfer pricing order, TPO has contended that the appellant has sold certain products to its Nigeria AE and the ended that the appellant has sold certain products to its Nigeria AE and the ended that the appellant has sold certain products to its Nigeria AE and the same has also been sold to third parties in different countries across the globe. same has also been sold to third parties in different countries across the globe. same has also been sold to third parties in different countries across the globe. As per TPO, when the products are sold within the same continent of Africa or As per TPO, when the products are sold within the same continent of Africa or As per TPO, when the products are sold within the same continent of Africa or even in Asia, the same are comparable. The appellant has pointed out that TPO ame are comparable. The appellant has pointed out that TPO ame are comparable. The appellant has pointed out that TPO has compared the price of products sold in Nigeria with the price of products has compared the price of products sold in Nigeria with the price of products has compared the price of products sold in Nigeria with the price of products which is sold even in South America or Europe since sales made in Nigeria are which is sold even in South America or Europe since sales made in Nigeria are which is sold even in South America or Europe since sales made in Nigeria are only made to AE and there no other compar only made to AE and there no other comparable for the same country. It has been able for the same country. It has been pointed out that the prices are at arm’s length and AE has reported losses which pointed out that the prices are at arm’s length and AE has reported losses which pointed out that the prices are at arm’s length and AE has reported losses which supports the contention of the assess supports the contention of the assessee. In my view, comparing the rate of a e. In my view, comparing the rate of a product sold to two different countries whose economic and geographical product sold to two different countries whose economic and product sold to two different countries whose economic and conditions are different, cannot be compared. Also, without making necessary conditions are different, cannot be compared. Also, without making necessary conditions are different, cannot be compared. Also, without making necessary adjustment on account of market risk, pricing, volume, logistics, taxes, etc., such adjustment on account of market risk, pricing, volume, logistics, taxes, etc., such adjustment on account of market risk, pricing, volume, logistics, taxes, etc., such comparison is not futile, It is observed that the assess comparison is not futile, It is observed that the assessee has made sales to e has made sales to Nigeria which is under developed country with the sales made to developed ia which is under developed country with the sales made to developed ia which is under developed country with the sales made to developed nation in Asia, South America, Europe, etc. For the purpose of applying CUP nation in Asia, South America, Europe, etc. For the purpose of applying CUP nation in Asia, South America, Europe, etc. For the purpose of applying CUP method, it is necessary that there is a high degree of comparability between the method, it is necessary that there is a high degree of comparability between the method, it is necessary that there is a high degree of comparability between the controlled and uncontrolled tr controlled and uncontrolled transactions. CUP method would be most reliable ansactions. CUP method would be most reliable when the economic circumstances are similar. In my view, the comparison made when the economic circumstances are similar. In my view, the comparison made when the economic circumstances are similar. In my view, the comparison made by TPO of adopting CUP method as MAM is not proper in the given circumstances. by TPO of adopting CUP method as MAM is not proper in the given circumstances. by TPO of adopting CUP method as MAM is not proper in the given circumstances. I have also considered the order passed in the case of I have also considered the order passed in the case of assess assessee for earlier period AY 2008-09 to 2010 09 to 2010-11. The appellant has pointed out that the issue decided by 11. The appellant has pointed out that the issue decided by the ITAT relates to whether the approach of the appellant in applying basket the ITAT relates to whether the approach of the appellant in applying basket the ITAT relates to whether the approach of the appellant in applying basket approach while arriving at ALP under CUP method, can be upheld or not. After approach while arriving at ALP under CUP method, can be upheld or not. approach while arriving at ALP under CUP method, can be upheld or not. considering the facts of the case, ITAT rejected the claim of comparing the prices considering the facts of the case, ITAT rejected the claim of comparing the prices considering the facts of the case, ITAT rejected the claim of comparing the prices of products sold by applying the basket approach. I note that the nowhere before of products sold by applying the basket approach. I note that the nowhere before of products sold by applying the basket approach. I note that the nowhere before the AO or ITAT, the issue as to whether CUP can be applied in respect of countries the AO or ITAT, the issue as to whether CUP can be applied in respect of countries the AO or ITAT, the issue as to whether CUP can be applied in respect of countries with different economic conditions, was decided. During this year, the assess h different economic conditions, was decided. During this year, the assessee h different economic conditions, was decided. During this year, the assess has applied TNMM and therefore, the facts are different. Therefore, in my view, has applied TNMM and therefore, the facts are different. Therefore, in my view, has applied TNMM and therefore, the facts are different. Therefore, in my view, the earlier decision is not applicable to the present case. the earlier decision is not applicable to the present case. 18.5 Further, TPO has contended that th 18.5 Further, TPO has contended that the TNMM on the entity cannot be applied e TNMM on the entity cannot be applied since it has to be applied on each transaction wise. The assesseehas explained since it has to be applied on each transaction wise. The assess since it has to be applied on each transaction wise. The assess that the company primarily engages in the pharmaceutical business with that the company primarily engages in the pharmaceutical business with that the company primarily engages in the pharmaceutical business with interconnected manufacturing, distribution, and export activities. The operations interconnected manufacturing, distribution, and export activities. interconnected manufacturing, distribution, and export activities. are homogeneous, making entity are homogeneous, making entity-level TNMM the most appropriate method. The level TNMM the most appropriate method. The assessee has calculated the net margin of the appellant and has compared the e has calculated the net margin of the appellant and has compared the e has calculated the net margin of the appellant and has compared the same with the industry comparable. I find that there is no bar as per transfer same with the industry comparable. I find that there is no bar as per transfer same with the industry comparable. I find that there is no bar as per transfer

IPCA Laboratories Limited, IPCA Laboratories Limited, 107 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

pricing rules to adopt the entity level margin to apply TNMM. The assess les to adopt the entity level margin to apply TNMM. The assessee has les to adopt the entity level margin to apply TNMM. The assess explained that the transaction entered into by the company is inter connected explained that the transaction entered into by the company is inter connected explained that the transaction entered into by the company is inter connected making the transaction specific profit margin not workable. Also, the assesse has making the transaction specific profit margin not workable. Also, the assesse has making the transaction specific profit margin not workable. Also, the assesse has explained thatcomparable fo explained thatcomparable for each transaction wise profit margin or segment r each transaction wise profit margin or segment wise are not available. I find that the working of the net margin has not been wise are not available. I find that the working of the net margin has not been wise are not available. I find that the working of the net margin has not been doubted by the TPO. Also, the assesse has pointed out that TNMM has been doubted by the TPO. Also, the assesse has pointed out that TNMM has been doubted by the TPO. Also, the assesse has pointed out that TNMM has been accepted by TPO in the subsequent years. I find that th accepted by TPO in the subsequent years. I find that the entity level margin is e entity level margin is proper considering the interconnected activities of the assesse. In this regard, I proper considering the interconnected activities of the assesse. In this regard, I proper considering the interconnected activities of the assesse. In this regard, I find that the assesse has relied upon the decision of Delhi Tribunal in the case of find that the assesse has relied upon the decision of Delhi Tribunal in the case of find that the assesse has relied upon the decision of Delhi Tribunal in the case of McCann Erickson India Pvt. Ltd. vs. ACIT, ITA No.5871/Del/2011 wherein the McCann Erickson India Pvt. Ltd. vs. ACIT, ITA No.5871/Del/2011 w McCann Erickson India Pvt. Ltd. vs. ACIT, ITA No.5871/Del/2011 w entity level TNMM has been upheld and the same reads as under- entity level TNMM has been upheld and the same reads as under entity level TNMM has been upheld and the same reads as under "6.9 Ld. AR has argued that even on me "6.9 Ld. AR has argued that even on merits TNMM was the most ts TNMM was the most appropriate method, due to the fact that appellant was engaged in only appropriate method, due to the fact that appellant was engaged in only appropriate method, due to the fact that appellant was engaged in only one activity ie, advertising and marketing service one activity ie, advertising and marketing services and all the international s and all the international transactions are closely linked and having nexus with the core revenue transactions are closely linked and having nexus with the core revenue transactions are closely linked and having nexus with the core revenue generating advertising activity. In such circumstances, it is considered generating advertising activity. In such circumstances, it is considered generating advertising activity. In such circumstances, it is considered appropriate to assess the impact of all the international transactions appropriate to assess the impact of all the international transactions appropriate to assess the impact of all the international transactions pertaining to its advertising activity at the net unit operating entity level. in its advertising activity at the net unit operating entity level. in its advertising activity at the net unit operating entity level. in support of his arguments, Ld. AR has relied upon case laws. Ld. AR relied support of his arguments, Ld. AR has relied upon case laws. Ld. AR relied support of his arguments, Ld. AR has relied upon case laws. Ld. AR relied upon the decision of Addl. CIT Vs. Tej Diam (2010 upon the decision of Addl. CIT Vs. Tej Diam (2010- -TII-27-ITAT-MUM-TP) (placed at pages 872 to 875 of paper book) (placed at pages 872 to 875 of paper book) for the proposition that in these for the proposition that in these facts and circumstances TNMM is the most appropriate method. Ld. AR facts and circumstances TNMM is the most appropriate method. Ld. AR facts and circumstances TNMM is the most appropriate method. Ld. AR further relied upon the decision of Mumbai bench of Tribunal in the case of further relied upon the decision of Mumbai bench of Tribunal in the case of further relied upon the decision of Mumbai bench of Tribunal in the case of UCB India Pvt. Ltd wherein it was held that in cases where profits of an UCB India Pvt. Ltd wherein it was held that in cases where profits of an UCB India Pvt. Ltd wherein it was held that in cases where profits of an enterprise are attributable to similar transactions and when an enterprise prise are attributable to similar transactions and when an enterprise prise are attributable to similar transactions and when an enterprise does not have any dissimilar transactions/activities which distort the does not have any dissimilar transactions/activities which distort the does not have any dissimilar transactions/activities which distort the profits, then the net margin derived by enterprise as a whole may be profits, then the net margin derived by enterprise as a whole may be profits, then the net margin derived by enterprise as a whole may be considered for TP analysis. It was also observ considered for TP analysis. It was also observed that TNMM may be ed that TNMM may be appropriate when a transaction or a class of transaction. is to be appropriate when a transaction or a class of transaction. is to be appropriate when a transaction or a class of transaction. is to be evaluated. Ld. AR also drew our attention to the relevant portion of the evaluated. Ld. AR also drew our attention to the relevant portion of the evaluated. Ld. AR also drew our attention to the relevant portion of the OECD Guidelines wherein it was provided that there are certain situations OECD Guidelines wherein it was provided that there are certain situations OECD Guidelines wherein it was provided that there are certain situations where separate transac where separate transactions are so closely linked or continuous that they tions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis, Ld. AR further cannot be evaluated adequately on a separate basis, Ld. AR further cannot be evaluated adequately on a separate basis, Ld. AR further submitted that after factoring in the costs of all related party transactions submitted that after factoring in the costs of all related party transactions submitted that after factoring in the costs of all related party transactions (including payment of management charges and coordination f (including payment of management charges and coordination f (including payment of management charges and coordination fee) as well as third party costs, the appellant earned an OP/TC of 26% during the FY as third party costs, the appellant earned an OP/TC of 26% during the FY as third party costs, the appellant earned an OP/TC of 26% during the FY 2006-07, which was significantly higher than the mean OP/TC of 8% 07, which was significantly higher than the mean OP/TC of 8% 07, which was significantly higher than the mean OP/TC of 8% earned by comparable companies using FY 2006 earned by comparable companies using FY 2006 earned by comparable companies using FY 2006-07 data, thus establishing establishing that that all all the the underlying underlying transactions, transacti ons, including including the the transactions in dispute of payment of management charges and transactions in dispute of payment of management charges and transactions in dispute of payment of management charges and coordination fee were at arm's length. Ld. AR further argued that in light of coordination fee were at arm's length. Ld. AR further argued that in light of coordination fee were at arm's length. Ld. AR further argued that in light of the above, it is the specific averment of the appellant that by adopting a the above, it is the specific averment of the appellant that by adopting a the above, it is the specific averment of the appellant that by adopting a completely contradictor completely contradictory position of accepting TNMM as the most y position of accepting TNMM as the most appropriate method on the one hand, and yet seeking to question appropriate method on the one hand, and yet seeking to question appropriate method on the one hand, and yet seeking to question

IPCA Laboratories Limited, IPCA Laboratories Limited, 108 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

appropriateness of individual elements of operating cost on the other, the appropriateness of individual elements of operating cost on the other, the appropriateness of individual elements of operating cost on the other, the Ld TPO has thereby failed to appreciate fundamental TP principles. 6.10 Ld TPO has thereby failed to appreciate fundamental TP principles. 6.10 Ld TPO has thereby failed to appreciate fundamental TP principles. 6.10 The Ld. AR further submitted that the TPO adopted CUP method as the Ld. AR further submitted that the TPO adopted CUP method as the Ld. AR further submitted that the TPO adopted CUP method as the most appropriate method for benchmarking the international transactions most appropriate method for benchmarking the international transactions most appropriate method for benchmarking the international transactions under review and derived the ALP to be 'NIL' without providing the reasons under review and derived the ALP to be 'NIL' without providing the reasons under review and derived the ALP to be 'NIL' without providing the reasons for selection of CUP method as the most appro for selection of CUP method as the most appropriate method over the priate method over the TNMM selected by the appellant. TNMM selected by the appellant. 9. We have heard both sides and have also gone through the orders of the 9. We have heard both sides and have also gone through the orders of the 9. We have heard both sides and have also gone through the orders of the AO, TPO and DRP. We have also perused the relevant evidences filed AO, TPO and DRP. We have also perused the relevant evidences filed AO, TPO and DRP. We have also perused the relevant evidences filed before the authorities below. The DRP has allowed part relief before the authorities below. The DRP has allowed part relief before the authorities below. The DRP has allowed part relief to the assessee. The assessee had placed evidences in respect of the assessee. The assessee had placed evidences in respect of the assessee. The assessee had placed evidences in respect of the management service charges and client coordination fee on record. The management service charges and client coordination fee on record. The management service charges and client coordination fee on record. The chart at pages 18 to 26 of this order which is part of assessee's argument chart at pages 18 to 26 of this order which is part of assessee's argument chart at pages 18 to 26 of this order which is part of assessee's argument establishes the nature of service provide establishes the nature of service provided by AE and received by d by AE and received by assessee. Benefits derived by assessee are also narrated in assessee. Benefits derived by assessee are also narrated in assessee. Benefits derived by assessee are also narrated in this chart disclosed net margin servic disclosed net margin services. anything for negating any of es. anything for negating any of considered view, the Revenue had not brought content of this chart of services and view, the Revenue had not brought content of this chart of services and view, the Revenue had not brought content of this chart of services and benefits derived thereof. The assessee company has 26% as against 8% benefits derived thereof. The assessee company has 26% as against 8% benefits derived thereof. The assessee company has 26% as against 8% average of the comparable other companies at entity level. The assessee is average of the comparable other companies at entity level. The assessee is average of the comparable other companies at entity level. The assessee is engaged in one class of busi engaged in one class of business that is advertising and its allied ness that is advertising and its allied segments different activities which business of the assessee, there are be segments different activities which business of the assessee, there are be segments different activities which business of the assessee, there are be said independent of each other, in our considered view the entity level said independent of each other, in our considered view the entity level said independent of each other, in our considered view the entity level benchmarking on T benchmarking on TNMM method shall be most appropriate for all NMM method shall be most appropriate for all international transactions with AE Although the principle of res judicata is tional transactions with AE Although the principle of res judicata is tional transactions with AE Although the principle of res judicata is the income-tax proceedings. udicata is not applicable however, something tax proceedings. udicata is not applicable however, something tax proceedings. udicata is not applicable however, something material or adverse nature, which is having direct bearing on the peculiar material or adverse nature, which is having direct bearing on the peculiar material or adverse nature, which is having direct bearing on the peculiar facts and circumstances of the case, h facts and circumstances of the case, has to be brought on record to draw as to be brought on record to draw the adverse inference. Although it is pleaded by revenue that this year, the adverse inference. Although it is pleaded by revenue that this year, the adverse inference. Although it is pleaded by revenue that this year, TPO and Assessing Officer have done more intelligent analysis of facts but TPO and Assessing Officer have done more intelligent analysis of facts but TPO and Assessing Officer have done more intelligent analysis of facts but no adverse material has been brought on record by the revenue in our no adverse material has been brought on record by the revenue in our no adverse material has been brought on record by the revenue in our considered view, due to the peculiar aliar nature of the business of the idered view, due to the peculiar aliar nature of the business of the idered view, due to the peculiar aliar nature of the business of the nature of services received from the associated enterprises, the most nature of services received from the associated enterprises, the most nature of services received from the associated enterprises, the most appropriate method for benchmarking to evaluate the results from the appropriate method for benchmarking to evaluate the results from the appropriate method for benchmarking to evaluate the results from the principle of arms length basis shall be Transact principle of arms length basis shall be Transactional Net Margin Method ional Net Margin Method (TNMM). The evidences have been submitted before the authorities below (TNMM). The evidences have been submitted before the authorities below (TNMM). The evidences have been submitted before the authorities below showing rendering of the certain services against the payments made to showing rendering of the certain services against the payments made to showing rendering of the certain services against the payments made to the associated enterprises. In the arena in which the assessee company is the associated enterprises. In the arena in which the assessee company is the associated enterprises. In the arena in which the assessee company is functioning, it functioning, it will be difficult to imagine a successful business entity in the will be difficult to imagine a successful business entity in the global environment without receipt of the services which carries huge global environment without receipt of the services which carries huge global environment without receipt of the services which carries huge intrinsic and creative value. In our considered view, it is only a particular intrinsic and creative value. In our considered view, it is only a particular intrinsic and creative value. In our considered view, it is only a particular business expert who can evaluate the true i business expert who can evaluate the true intrinsic and creative value of ntrinsic and creative value of such services. In view of these facts, it shall be just to avoid any such services. In view of these facts, it shall be just to avoid any such services. In view of these facts, it shall be just to avoid any guesswork to evaluate or judge value of these services in isolation or guesswork to evaluate or judge value of these services in isolation or guesswork to evaluate or judge value of these services in isolation or individually. In any case, the value of these services cannot be taken at nil individually. In any case, the value of these services cannot be taken at nil individually. In any case, the value of these services cannot be taken at nil

IPCA Laboratories Limited, IPCA Laboratories Limited, 109 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

which the AO as well as TPO ori he AO as well as TPO originally sought to do. Hon'ble Jurisdictional ginally sought to do. Hon'ble Jurisdictional High Court in the case of Hive Communication Pvt. Ltd. (ITA) No.306/2011) High Court in the case of Hive Communication Pvt. Ltd. (ITA) No.306/2011) High Court in the case of Hive Communication Pvt. Ltd. (ITA) No.306/2011) has held that the legitimate business needs of the company must be has held that the legitimate business needs of the company must be has held that the legitimate business needs of the company must be judged from the view point of the company itse judged from the view point of the company itself and must be viewed from lf and must be viewed from the point of view of a prudent businessman. It is not for the AO to dictate the point of view of a prudent businessman. It is not for the AO to dictate the point of view of a prudent businessman. It is not for the AO to dictate what the business needs of the company should be it is the buslitossman what the business needs of the company should be it is the buslitossman what the business needs of the company should be it is the buslitossman who can only to judge the legitimacy of the business needs of the company who can only to judge the legitimacy of the business needs of the company who can only to judge the legitimacy of the business needs of the company from the point of view of a prudent businessman. The benefit derived and e point of view of a prudent businessman. The benefit derived and e point of view of a prudent businessman. The benefit derived and occurring to the company must also be considered from the angle of a occurring to the company must also be considered from the angle of a occurring to the company must also be considered from the angle of a prudent businessman. The term "benefit" to a company in relation to its prudent businessman. The term "benefit" to a company in relation to its prudent businessman. The term "benefit" to a company in relation to its business has a very wide connotation. It is diffi business has a very wide connotation. It is difficult to accurately measure cult to accurately measure these benefits in terms of money value separately. We have examined the these benefits in terms of money value separately. We have examined the these benefits in terms of money value separately. We have examined the chart where assessee has enumerated in detail and description of type of chart where assessee has enumerated in detail and description of type of chart where assessee has enumerated in detail and description of type of services received and how these services have been received and in what services received and how these services have been received and in what services received and how these services have been received and in what manner the b manner the benefits have been derived from these services by the enefits have been derived from these services by the assessee company. The description of services received by the assessee assessee company. The description of services received by the assessee assessee company. The description of services received by the assessee company from its associated enterprises has been mentioned in para 6.13. company from its associated enterprises has been mentioned in para 6.13. company from its associated enterprises has been mentioned in para 6.13. For the sake of brevity, the description of the services al For the sake of brevity, the description of the services al For the sake of brevity, the description of the services along with the explanation of the type of services received, how these services were explanation of the type of services received, how these services were explanation of the type of services received, how these services were received and what benefits derived by the assessee are not repeated here received and what benefits derived by the assessee are not repeated here received and what benefits derived by the assessee are not repeated here again. In these charts, the assessee. has given detailed functions, again. In these charts, the assessee. has given detailed functions, again. In these charts, the assessee. has given detailed functions, submissions and references to va submissions and references to various evidences. The revenue has not rious evidences. The revenue has not brought anything on record to negate the details provided in these charts. brought anything on record to negate the details provided in these charts. brought anything on record to negate the details provided in these charts. In view of these evidences brought on record by the assessee and In view of these evidences brought on record by the assessee and In view of these evidences brought on record by the assessee and considering the peculiar nature of business and facts and circumstances of considering the peculiar nature of business and facts and circumstances of considering the peculiar nature of business and facts and circumstances of the case, we find merits in the claim of the assessee. Therefore, we find no case, we find merits in the claim of the assessee. Therefore, we find no case, we find merits in the claim of the assessee. Therefore, we find no justification to sustain any addition in this regard on this issue. We direct justification to sustain any addition in this regard on this issue. We direct justification to sustain any addition in this regard on this issue. We direct to delete the addition and this ground is allowed." to delete the addition and this ground is allowed." 18.6. Considering the above decision and facts of the Considering the above decision and facts of the case, I direct the AO to case, I direct the AO to delete the adjustment made in respect of sales made to Nigerian AE Accordingly, adjustment made in respect of sales made to Nigerian AE Accordingly, adjustment made in respect of sales made to Nigerian AE Accordingly, ground no. 7 is allowed. allowed.” 17.12 Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted that the assessee had rightly adopted the Transactional Net the assessee had rightly adopted the Transactional Net Margin the assessee had rightly adopted the Transactional Net Method (“TNMM”) as the Most Appropriate Method (“MAM”) for Method (“TNMM”) as the Most Appropriate Method (“MAM”) for Method (“TNMM”) as the Most Appropriate Method (“MAM”) for benchmarking its international transactions, considering the nature benchmarking its international transactions, considering the nature benchmarking its international transactions, considering the nature of the business activities carried out, the functional profile of the of the business activities carried out, the functional profile of the of the business activities carried out, the functional profile of the assessee assessee assessee and and and the the the overall overall overall economic economic economic comparability comparability comparability of of of the t t

IPCA Laboratories Limited, IPCA Laboratories Limited, 110 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

transactions. Therefore, the rejection of TNMM by the TPO is transactions. Therefore, the rejection of TNMM by the TPO is transactions. Therefore, the rejection of TNMM by the TPO is unwarranted and contrary to the settled transfer pricing principles. unwarranted and contrary to the settled transfer pricing principles. unwarranted and contrary to the settled transfer pricing principles. 17.13 It was submitted that section 92C provides for adopting submitted that section 92C provides for adopting submitted that section 92C provides for adopting the Most Appropriate Method considering the facts of the case. In the Most Appropriate Method considering the facts of the case. In the Most Appropriate Method considering the facts of the case. In the present case, the assessee has made detailed analysis in its the present case, the assessee has made detailed analysis in its the present case, the assessee has made detailed analysis in its TPSR wherein the CUP method was rejected since the comparable TPSR wherein the CUP method was rejected since the comparable TPSR wherein the CUP method was rejected since the comparable for the sale of similar products in the same region were not of similar products in the same region were not of similar products in the same region were not available. It was further submitted that CUP analysis carried out further submitted that CUP analysis carried out further submitted that CUP analysis carried out by the TPO is itself vitiated by factual and computational by the TPO is itself vitiated by factual and computational by the TPO is itself vitiated by factual and computational infirmities. The TPO has compared the prices charged to AE with infirmities. The TPO has compared the prices charged to AE with infirmities. The TPO has compared the prices charged to AE with prices charged to unrelated unrelated parties parties situated situated in in different different geographical jurisdictions without conducting the proper FAR geographical jurisdictions without conducting the proper FAR geographical jurisdictions without conducting the proper FAR analysis. The TPO has ignored the fact that the comparable rates analysis. The TPO has ignored the fact that the comparable rates analysis. The TPO has ignored the fact that the comparable rates have been made to different geographical markets having extremely have been made to different geographical markets having extremely have been made to different geographical markets having extremely different economic fact different economic factors. Further, TPO has also failed to consider ors. Further, TPO has also failed to consider the the the volume volume volume of of of sales, sales, sales, commercial commercial commercial terms, terms, terms, pack pack pack size, size, size, pack pack pack configuration and other economic factors which materially affect the configuration and other economic factors which materially affect the configuration and other economic factors which materially affect the pricing of pharmaceutical products in different jurisdictions. For pricing of pharmaceutical products in different jurisdictions. pricing of pharmaceutical products in different jurisdictions. example, at page 68 example, at page 689-690, the appellant has placed the details of 690, the appellant has placed the details of sales made of product namely HCQS Tablets to various countries. sales made of product namely HCQS Tablets to various countries. sales made of product namely HCQS Tablets to various countries. The sales made to third party vary sales made to third party vary in the pricing from as low as in the pricing from as low as Rs.199 per unit to Rs. 3160 per unit. Similarly, the volume differs Rs.199 per unit to Rs. 3160 per unit. Similarly, the volume differs Rs.199 per unit to Rs. 3160 per unit. Similarly, the volume differs from as low as 60 units one party as 60 units one party to 131252 units to other party. units to other party.

IPCA Laboratories Limited, IPCA Laboratories Limited, 111 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

However, without considering such material differences, TPO has However, without considering such material differences, TPO has However, without considering such material differences, TPO has compared the rates for making the adjustments. Moreover, ld. TPO compared the rates for making the adjustments. Moreover, ld. TPO compared the rates for making the adjustments. Moreover, ld. TPO has made comparison by aggregating the entire yearly transaction has made comparison by aggregating the entire yearly transaction has made comparison by aggregating the entire yearly transaction which is itself incorrect since itself incorrect since the CUP method requires strict method requires strict comparability. No item to item wise comparison has been done by comparability. No item to item wise comparison has been done by comparability. No item to item wise comparison has been done by the ld. TPO. It is pertinent to mention that where reasonable It is pertinent to mention that where reasonable It is pertinent to mention that where reasonable adjustment are not possible to be made for making the comparison, adjustment are not possible to be made for making the comparison, adjustment are not possible to be made for making the comparison, then CUP method cannot be applied. method cannot be applied. 17.14 Further, it Further, it was submitted that pharmaceutical products submitted that pharmaceutical products are sold across different countries in varying pack sizes, packaging are sold across different countries in varying pack sizes, packaging are sold across different countries in varying pack sizes, packaging structures and commercial configurations. For instance, a product structures and commercial configurations. For instance, a product structures and commercial configurations. For instance, a product such as Glycinorm such as Glycinorm-M 80 Tablets may be sold in a pack ay be sold in a pack configuration of 3x10 tablets in one jurisdiction and 10x10 tablets configuration of 3x10 tablets in one jurisdiction and 10x10 tablets configuration of 3x10 tablets in one jurisdiction and 10x10 tablets in another jurisdiction. In such circumstances, comparison of unit in another jurisdiction. In such circumstances, comparison of unit in another jurisdiction. In such circumstances, comparison of unit prices without suitable adjustments for pack size and packaging prices without suitable adjustments for pack size and packaging prices without suitable adjustments for pack size and packaging differences would not yield a reliab differences would not yield a reliable or meaningful comparison. le or meaningful comparison. This fact was duly pointed out to the ld. CIT(A) in our submission. This fact was duly pointed out to the ld. CIT(A) in our submission. This fact was duly pointed out to the ld. CIT(A) in our submission. However, the TPO has mechanically compared the unit sale prices However, the TPO has mechanically compared the unit sale prices However, the TPO has mechanically compared the unit sale prices charged to AEs with those charged to unrelated parties without charged to AEs with those charged to unrelated parties without charged to AEs with those charged to unrelated parties without appreciating appreciating the the material material differ differences ences in in pack pack size, size, pack pack configuration and other economically relevant factors affecting the configuration and other economically relevant factors affecting the configuration and other economically relevant factors affecting the pricing of the products. Such an approach is contrary to the settled pricing of the products. Such an approach is contrary to the settled pricing of the products. Such an approach is contrary to the settled principles governing the application of the CUP method. It is further principles governing the application of the CUP method. It is further principles governing the application of the CUP method. It is further

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submitted that CUP could submitted that CUP could not have been reliably applied in the not have been reliably applied in the present facts, particularly when sales made even within European present facts, particularly when sales made even within European present facts, particularly when sales made even within European and American markets differ substantially from sales made to other and American markets differ substantially from sales made to other and American markets differ substantially from sales made to other jurisdictions owing to varying market conditions and commercial jurisdictions owing to varying market conditions and commercial jurisdictions owing to varying market conditions and commercial realities.

17.15 In this regard, reliance this regard, reliance was placed on the decision of placed on the decision of Bombay High Court in the case of PCIT vs. M/s. Amphenol Bombay High Court in the case of PCIT vs. M/s. Amphenol Bombay High Court in the case of PCIT vs. M/s. Amphenol Interconnect India P. Ltd. ITA No. 1131 of 2015 wherein the Hon’ble Interconnect India P. Ltd. ITA No. 1131 of 2015 wherein the Hon’ble Interconnect India P. Ltd. ITA No. 1131 of 2015 wherein the Hon’ble High Court has upheld the Tribunal’s order holding TNMM as the High Court has upheld the Tribunal’s order holding TNMM as the High Court has upheld the Tribunal’s order holding TNMM as the Most Appropriate Method (“MAM”) for determining the ALP of export Method (“MAM”) for determining the ALP of export Method (“MAM”) for determining the ALP of export sales and sales commission transactions with AEs. The Court sales and sales commission transactions with AEs. The Court sales and sales commission transactions with AEs. The Court observed that due to geographical, volume, functional and risk observed that due to geographical, volume, functional and risk observed that due to geographical, volume, functional and risk differences between AE and non differences between AE and non-AE transactions, the CUP method AE transactions, the CUP method was not appropriate. was not appropriate. It was further held that the Tribunal had It was further held that the Tribunal had carried out a proper FAR analysis and its findings constituted a carried out a proper FAR analysis and its findings constituted a carried out a proper FAR analysis and its findings constituted a reasonable and possible view based on facts. The relevant part of reasonable and possible view based on facts. The relevant part of reasonable and possible view based on facts. The relevant part of the High Court order is reproduced as under: the High Court order is reproduced as under:-

“(e) We find the only grievance urge (e) We find the only grievance urged by the Revenue is unjustified. In fact, d by the Revenue is unjustified. In fact, we find that the TPO has, while stating that FAR analysis has to be we find that the TPO has, while stating that FAR analysis has to be we find that the TPO has, while stating that FAR analysis has to be carried out, not indicated that it was actually carried out. On the contrary, carried out, not indicated that it was actually carried out. On the contrary, carried out, not indicated that it was actually carried out. On the contrary, we find that the Tribunal in the impugned order has done the necessa we find that the Tribunal in the impugned order has done the necessa we find that the Tribunal in the impugned order has done the necessary FAR analysis. This is so as it has compared the risk and functional FAR analysis. This is so as it has compared the risk and functional FAR analysis. This is so as it has compared the risk and functional differences involved in finished goods being sold to AEs as against those differences involved in finished goods being sold to AEs as against those differences involved in finished goods being sold to AEs as against those sold to third parties, as we have enumerated above, to come to the sold to third parties, as we have enumerated above, to come to the sold to third parties, as we have enumerated above, to come to the conclusion that the prices at which the fini conclusion that the prices at which the finished goods sold to the third shed goods sold to the third parties are not comparables to the prices at which the goods sold to the parties are not comparables to the prices at which the goods sold to the parties are not comparables to the prices at which the goods sold to the AEs inter alia on the FAR analysis. We note that the finished goods are AEs inter alia on the FAR analysis. We note that the finished goods are AEs inter alia on the FAR analysis. We note that the finished goods are customized goods and the geographical differences, volume differences, customized goods and the geographical differences, volume differences, customized goods and the geographical differences, volume differences,

IPCA Laboratories Limited, IPCA Laboratories Limited, 113 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

timing differences, risk differences and functional differences, came to a erences, risk differences and functional differences, came to a erences, risk differences and functional differences, came to a conclusion that the CUP method would not be the MAM to determine the conclusion that the CUP method would not be the MAM to determine the conclusion that the CUP method would not be the MAM to determine the ALP. It upheld the stand of the respondent assessee that TNM method is ALP. It upheld the stand of the respondent assessee that TNM method is ALP. It upheld the stand of the respondent assessee that TNM method is the MAM to arrive at ALP. Thus, the view taken by th the MAM to arrive at ALP. Thus, the view taken by th the MAM to arrive at ALP. Thus, the view taken by the Tribunal on the facts before it, is a possible view on the application of appropriate tests. facts before it, is a possible view on the application of appropriate tests. facts before it, is a possible view on the application of appropriate tests. Revenue has not shown that the selection of TNM method as the MAM to Revenue has not shown that the selection of TNM method as the MAM to Revenue has not shown that the selection of TNM method as the MAM to determine the AL of export to AEs is perverse. determine the AL of export to AEs is perverse. (f) In the above view, this question does not (f) In the above view, this question does not give rise to any substantial give rise to any substantial question of law. Thus, not entertained. question of law. Thus, not entertained. (b) In appeal, the Tribunal in the impugned order found that there are vast (b) In appeal, the Tribunal in the impugned order found that there are vast (b) In appeal, the Tribunal in the impugned order found that there are vast differences in the functions which are performed and the rate of differences in the functions which are performed and the rate of differences in the functions which are performed and the rate of commission paid by the respondent to the AEs commission paid by the respondent to the AEs as well as to the third as well as to the third parties. This was evidenced by the fact that the rate of commission paid parties. This was evidenced by the fact that the rate of commission paid parties. This was evidenced by the fact that the rate of commission paid varies from 1% to 7% depending upon the services rendered by the AEs in varies from 1% to 7% depending upon the services rendered by the AEs in varies from 1% to 7% depending upon the services rendered by the AEs in respect of the sales made. The impugned order of the Tribunal finds on respect of the sales made. The impugned order of the Tribunal finds on respect of the sales made. The impugned order of the Tribunal finds on facts that the f facts that the functions performed by the AEs for which they paid sales unctions performed by the AEs for which they paid sales commission was much wider than that performed by non commission was much wider than that performed by non commission was much wider than that performed by non-AE agents. Further, the comparison of sales commission paid on sales made in India Further, the comparison of sales commission paid on sales made in India Further, the comparison of sales commission paid on sales made in India to sales commission paid to sales made abroad would, in view of to sales commission paid to sales made abroad would, in view of to sales commission paid to sales made abroad would, in view of the geographical differences and differences in the functions performed, result geographical differences and differences in the functions performed, result geographical differences and differences in the functions performed, result in the TNM method and not the CUP method as the MAM to determine the in the TNM method and not the CUP method as the MAM to determine the in the TNM method and not the CUP method as the MAM to determine the ALP of the sales commission paid to AEs. Thus, allowed the appeal. ALP of the sales commission paid to AEs. Thus, allowed the appeal. ALP of the sales commission paid to AEs. Thus, allowed the appeal. (c) We note that the impugned order of t (c) We note that the impugned order of the Tribunal has analyzed the he Tribunal has analyzed the differences between sales commission paid to its AEs for clients identified differences between sales commission paid to its AEs for clients identified differences between sales commission paid to its AEs for clients identified by them and the sales commission paid to third party agents in respect of by them and the sales commission paid to third party agents in respect of by them and the sales commission paid to third party agents in respect of sales goods in India. On account of the differences in respect of function sales goods in India. On account of the differences in respect of function sales goods in India. On account of the differences in respect of function and geography between the AEs transaction and third party transaction, d geography between the AEs transaction and third party transaction, d geography between the AEs transaction and third party transaction, the CUP method is not the MAM method. It, therefore, held that TNM the CUP method is not the MAM method. It, therefore, held that TNM the CUP method is not the MAM method. It, therefore, held that TNM method is the most appropriate. In these circumstances, the view of the method is the most appropriate. In these circumstances, the view of the method is the most appropriate. In these circumstances, the view of the Tribunal that the TNM method is the most appropr Tribunal that the TNM method is the most appropr Tribunal that the TNM method is the most appropriate method is a reasonable and possible view on application of appropriate test in the reasonable and possible view on application of appropriate test in the reasonable and possible view on application of appropriate test in the present facts. present facts. (d) In the above view, this question also does not give rise to any (d) In the above view, this question also does not give rise to any (d) In the above view, this question also does not give rise to any substantial question of law. Thus, not entertained. substantial question of law. Thus, not entertained.” 17.16 Further, reliance Further, reliance was also placed on the decision of also placed on the decision of Mumbai tribunal in the case of Mumbai tribunal in the case of Firmenich Aromatics Production Firmenich Aromatics Production (India) (P.) Ltd. vs. ITO reported in [2018] 100 taxmann.com (India) (P.) Ltd. vs. ITO reported in [2018] 100 taxmann.com (India) (P.) Ltd. vs. ITO reported in [2018] 100 taxmann.com 279 (Mumbai - Trib.) Trib.) wherein the Hon’ble Tribunal has held that wherein the Hon’ble Tribunal has held that

IPCA Laboratories Limited, IPCA Laboratories Limited, 114 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

where assessee sold similar products where assessee sold similar products to AEs as well as Non to AEs as well as Non-AEs, in view of fact that there were huge differences between two view of fact that there were huge differences between two view of fact that there were huge differences between two transactions on account of volume, geographical locations, transactions on account of volume, geographical locations, transactions on account of volume, geographical locations, functions performed and risk assumed, CUP could not be used as functions performed and risk assumed, CUP could not be used as functions performed and risk assumed, CUP could not be used as most appropriate method for determining ALP of international most appropriate method for determining ALP of most appropriate method for determining ALP of transactions. The relevant part of the Tribunal order is reproduced transactions. The relevant part of the Tribunal order is reproduced transactions. The relevant part of the Tribunal order is reproduced as under:-

“11. Further, with respect to the DRP observations on geographical 11. Further, with respect to the DRP observations on geographical 11. Further, with respect to the DRP observations on geographical differences, we find from the facts of the case that the adjustment made differences, we find from the facts of the case that the adjustment made differences, we find from the facts of the case that the adjustment made with respect to sales with respect to sales made @ item No 55, the majority of the sales are made @ item No 55, the majority of the sales are made to an AE in Switzerland. Out of the total AE sales of 38,528 kgs of made to an AE in Switzerland. Out of the total AE sales of 38,528 kgs of made to an AE in Switzerland. Out of the total AE sales of 38,528 kgs of sales made, 23,310 kgs of sales is made to Firmench SA in Switzerland sales made, 23,310 kgs of sales is made to Firmench SA in Switzerland sales made, 23,310 kgs of sales is made to Firmench SA in Switzerland which comprises of 61% of sales to AE. According to us the TPO which comprises of 61% of sales to AE. According to us the TPO which comprises of 61% of sales to AE. According to us the TPO erred in simply comparing the prices of common products sold to both AEs and simply comparing the prices of common products sold to both AEs and simply comparing the prices of common products sold to both AEs and Non-AEs without appreciating that the two transactions are not AEs without appreciating that the two transactions are not AEs without appreciating that the two transactions are not comparable owing to differences on account of volume, geography, comparable owing to differences on account of volume, geography, comparable owing to differences on account of volume, geography, functions performed and risks assumed while transac functions performed and risks assumed while transac functions performed and risks assumed while transacting with AEs and non-AEs. Also, sub AEs. Also, sub-rule (3) of rule 10B provides that, uncontrolled rule (3) of rule 10B provides that, uncontrolled transaction would not be regarded as being comparable unless any of the transaction would not be regarded as being comparable unless any of the transaction would not be regarded as being comparable unless any of the differences between the transactions if compared are likely to materially differences between the transactions if compared are likely to materially differences between the transactions if compared are likely to materially affect the price or cost affect the price or cost charged or paid or the profit arising from such charged or paid or the profit arising from such transaction in the open market. Therefore, it is essential to adjust for the transaction in the open market. Therefore, it is essential to adjust for the transaction in the open market. Therefore, it is essential to adjust for the above mentioned differences in order to create level paying filed ie.. in above mentioned differences in order to create level paying filed ie.. in above mentioned differences in order to create level paying filed ie.. in order to ensure like by like comparison. Since, the TPO order to ensure like by like comparison. Since, the TPO order to ensure like by like comparison. Since, the TPO was unable to quantify the same, the CUP should not be used as the most appropriate quantify the same, the CUP should not be used as the most appropriate quantify the same, the CUP should not be used as the most appropriate method.” 17.17 Further, it Further, it was submitted that TNMM method adopted for submitted that TNMM method adopted for comparing the sales made to Nigeria has been accepted by the ld. comparing the sales made to Nigeria has been accepted by the ld. comparing the sales made to Nigeria has been accepted by the ld. TPO in AY 2013-14 as well as in AY 14 as well as in AY 2018-19 to 2022 19 to 2022-23, when no adjustment have been made. Accordingly, applying the principle of adjustment have been made. Accordingly, applying the principle of adjustment have been made. Accordingly, applying the principle of consistency, no adjustment can be made. In this regard, reliance is consistency, no adjustment can be made. In this regard, reliance is consistency, no adjustment can be made. In this regard, reliance is placed on the decision placed on the decision of Mumbai Tribunal in the case of Tribunal in the case of M/s.

IPCA Laboratories Limited, IPCA Laboratories Limited, 115 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Lubrizol India Private Limited Lubrizol India Private Limited vs. DCIT bearing ITA No. vs. DCIT bearing ITA No. 4630/MUM/2024, wherein the Hon’ble Tribunal has held that that , wherein the Hon’ble Tribunal has held that that , wherein the Hon’ble Tribunal has held that that the rejection of TNMM method and adoption of the CUP method was the rejection of TNMM method and adoption of the CUP method was the rejection of TNMM method and adoption of the CUP method was unjustified, particularly when TNMM had been consistently unjustified, particularly when TNMM had been consistently unjustified, particularly when TNMM had been consistently accepted in the assessee’s own case in earlier accepted in the assessee’s own case in earlier as well as subsequent as well as subsequent assessment years. The relevant part of the tribunal order is assessment years. The relevant part of the tribunal order is assessment years. The relevant part of the tribunal order is reproduced as under: under:-

IPCA Laboratories Limited, IPCA Laboratories Limited, 116 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

been accepted by the Tribunal for AYs 2005 been accepted by the Tribunal for AYs 2005-06 to 2007 06 to 2007-08 and no change in facts or circumstances has been demonstrated before us fo in facts or circumstances has been demonstrated before us fo in facts or circumstances has been demonstrated before us for this year. Therefore, following the rule of consistency and the cited order of Tribunal Therefore, following the rule of consistency and the cited order of Tribunal Therefore, following the rule of consistency and the cited order of Tribunal in assessee's own case, we hold that TNMM methodology as adopted by in assessee's own case, we hold that TNMM methodology as adopted by in assessee's own case, we hold that TNMM methodology as adopted by the assessee to benchmark the transactions was to be accepted. Since, the the assessee to benchmark the transactions was to be accepted. Since, the the assessee to benchmark the transactions was to be accepted. Since, the margin of the assessee u margin of the assessee under this method have been shown to be within nder this method have been shown to be within ALP range, the impugned adjustment of Rs.347.41 Lacs stand deleted." ALP range, the impugned adjustment of Rs.347.41 Lacs stand deleted." ALP range, the impugned adjustment of Rs.347.41 Lacs stand deleted." 17.18 It is also pertinent to note that the assessee’s AE in It is also pertinent to note that the assessee’s AE in It is also pertinent to note that the assessee’s AE in Nigeria had incurred losses, as is evident from the financial Nigeria had incurred losses, as is evident from the financial Nigeria had incurred losses, as is evident from the financial statements placed at page 732 of the paper book. This itself at page 732 of the paper book. This itself at page 732 of the paper book. This itself demonstrates that the sales made by the assessee to its AE were at demonstrates that the sales made by the assessee to its AE were at demonstrates that the sales made by the assessee to its AE were at fair and reasonable prices and not at suppressed pricing. fair and reasonable prices and not at suppressed pricing. fair and reasonable prices and not at suppressed pricing. Accordingly, it was was submitted the CUP method cannot be submitted the CUP method cannot be considered as MAM in the present considered as MAM in the present case. Once, the CUP is not case. Once, the CUP is not leviable, the TNMM Method applied by the appellant needs to be leviable, the TNMM Method applied by the appellant needs to be leviable, the TNMM Method applied by the appellant needs to be upheld when no discrepancy has been shown by the TPO.It was upheld when no discrepancy has been shown by the TPO. upheld when no discrepancy has been shown by the TPO. submitted that in view of the aforesaid facts and circumstances, the n view of the aforesaid facts and circumstances, the n view of the aforesaid facts and circumstances, the transfer pricing adjustment made by t transfer pricing adjustment made by the learned TPO is based on he learned TPO is based on an an an erroneous erroneous erroneous computation computation computation mechanism mechanism mechanism and and and an an an unreliable unreliable unreliable comparability analysis. The adjustment so made is therefore liable comparability analysis. The adjustment so made is therefore liable comparability analysis. The adjustment so made is therefore liable to be deleted in full.

17.19 We have thoughtfully considered the rival submissions and We have thoughtfully considered the rival submissions and We have thoughtfully considered the rival submissions and perused the orders of the authorities below as well as the material perused the orders of the authorities below as well as the material perused the orders of the authorities below as well as the material placed on record. The short controversy before us is whether the placed on record. The short controversy before us is whether the placed on record. The short controversy before us is whether the Transfer Pricing Officer was justified in rejecting the Transactional Transfer Pricing Officer was justified in rejecting the Transacti Transfer Pricing Officer was justified in rejecting the Transacti Net Margin Method (TNMM) adopted by the assessee and in Net Margin Method (TNMM) adopted by the assessee and in Net Margin Method (TNMM) adopted by the assessee and in

IPCA Laboratories Limited, IPCA Laboratories Limited, 117 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

substituting the same with the Comparable Uncontrolled Price substituting the same with the Comparable Uncontrolled Price substituting the same with the Comparable Uncontrolled Price (CUP) (CUP) (CUP) Method Method Method for for for benchmarking benchmarking benchmarking the the the export export export transactions transactions transactions undertaken with its Associated Enterprise, namely M/s IPCA undertaken with its Associated Enterprise, namely M/s IPCA undertaken with its Associated Enterprise, namely M/s IPCA Nigeria Limited.

17.20 Upon a careful consideration of the facts on record, we Upon a careful consideration of the facts on record, we Upon a careful consideration of the facts on record, we find ourselves in agreement with the conclusion reached by the find ourselves in agreement with the conclusion reached by the find ourselves in agreement with the conclusion reached by the learned CIT(A). It is a settled principle of transfer pricing learned CIT(A). It is a settled principle of transfer pricing learned CIT(A). It is a settled principle of transfer pricing jurisprudence that the CUP Method, though generally regarded as a jurisprudence that the CUP Method, though generally regarded as a jurisprudence that the CUP Method, though generally regarded as a direct method for determining the Arm’s Length Price, can be method for determining the Arm’s Length Price, can be method for determining the Arm’s Length Price, can be reliably applied only when a high degree of comparability exists reliably applied only when a high degree of comparability exists reliably applied only when a high degree of comparability exists between between between the controlled the the controlled controlled and and uncontrolled and uncontrolled transactions. uncontrolled transactions. transactions. The The The comparability requirement under the CUP Method extends not comparability requirement under the CUP Method extends not comparability requirement under the CUP Method extends not merely to the produc merely to the product but also to the economic circumstances, t but also to the economic circumstances, geographical markets, contractual terms, volume of transactions, geographical markets, contractual terms, volume of transactions, geographical markets, contractual terms, volume of transactions, market risks, regulatory environment and other commercially market risks, regulatory environment and other commercially market risks, regulatory environment and other commercially relevant factors having a bearing on the price. relevant factors having a bearing on the price.

17.21 In the present case, the Transfer P In the present case, the Transfer Pricing Officer has ricing Officer has benchmarked the prices charged by the assessee to its Nigerian benchmarked the prices charged by the assessee to its Nigerian benchmarked the prices charged by the assessee to its Nigerian Associated Enterprise with prices charged to unrelated parties Associated Enterprise with prices charged to unrelated parties Associated Enterprise with prices charged to unrelated parties situated in diverse geographical jurisdictions across Asia, Europe, situated in diverse geographical jurisdictions across Asia, Europe, situated in diverse geographical jurisdictions across Asia, Europe, South America and other regions. However, no meaningful South America and other regions. However, n South America and other regions. However, n adjustment has been carried out to account for material differences adjustment has been carried out to account for material differences adjustment has been carried out to account for material differences in market conditions, purchasing power, economic environment, in market conditions, purchasing power, economic environment, in market conditions, purchasing power, economic environment,

IPCA Laboratories Limited, IPCA Laboratories Limited, 118 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

regulatory framework, volume of sales, logistics, taxation, pack size, regulatory framework, volume of sales, logistics, taxation, pack size, regulatory framework, volume of sales, logistics, taxation, pack size, packaging configuration and other factors packaging configuration and other factors which undoubtedly which undoubtedly influence pricing in the pharmaceutical industry. In the absence of influence pricing in the pharmaceutical industry. In the absence of influence pricing in the pharmaceutical industry. In the absence of such adjustments, the comparability analysis undertaken by the such adjustments, the comparability analysis undertaken by the such adjustments, the comparability analysis undertaken by the Transfer Pricing Officer lacks the degree of reliability required for Transfer Pricing Officer lacks the degree of reliability required for Transfer Pricing Officer lacks the degree of reliability required for application of the CUP Method. application of the CUP Method.

17.22 We further find that the learned CIT(A) has correctly We further find that the learned CIT(A) has correctly We further find that the learned CIT(A) has correctly distinguished the decisions rendered in the assessee’s own case for distinguished the decisions rendered in the assessee’s own case for distinguished the decisions rendered in the assessee’s own case for earlier assessment years. The controversy considered therein was earlier assessment years. The controversy considered therein was earlier assessment years. The controversy considered therein was confined to the validity of the “basket approach” adopted under the confined to the validity of the “basket approach” adopted under the confined to the validity of the “basket approach” adopted under the CUP Method and did not involve the question whether transactions UP Method and did not involve the question whether transactions UP Method and did not involve the question whether transactions undertaken in countries having materially different economic undertaken in countries having materially different economic undertaken in countries having materially different economic conditions could be compared under the CUP Method without conditions could be compared under the CUP Method without conditions could be compared under the CUP Method without suitable adjustments. Consequently, the reliance placed by the suitable adjustments. Consequently, the reliance placed by the suitable adjustments. Consequently, the reliance placed by the Transfer Pricing Officer on those decisions was misplaced. ricing Officer on those decisions was misplaced. ricing Officer on those decisions was misplaced.

17.23 We also find no infirmity in the finding of the learned We also find no infirmity in the finding of the learned We also find no infirmity in the finding of the learned CIT(A) that the assessee is engaged in an integrated pharmaceutical CIT(A) that the assessee is engaged in an integrated pharmaceutical CIT(A) that the assessee is engaged in an integrated pharmaceutical business comprising interconnected manufacturing, distribution business comprising interconnected manufacturing, distribution business comprising interconnected manufacturing, distribution and export activities. The record demonstrates that the transactions ivities. The record demonstrates that the transactions ivities. The record demonstrates that the transactions undertaken by the assessee are closely linked and form part of a undertaken by the assessee are closely linked and form part of a undertaken by the assessee are closely linked and form part of a homogeneous business structure. The Transfer Pricing Officer has homogeneous business structure. The Transfer Pricing Officer has homogeneous business structure. The Transfer Pricing Officer has neither disputed the computation of operating margins furnished by neither disputed the computation of operating margins furnished by neither disputed the computation of operating margins furnished by the assessee nor demonstrated any defect in the benchmarking assessee nor demonstrated any defect in the benchmarking assessee nor demonstrated any defect in the benchmarking

IPCA Laboratories Limited, IPCA Laboratories Limited, 119 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

analysis carried out under TNMM. Significantly, no reliable analysis carried out under TNMM. Significantly, no reliable analysis carried out under TNMM. Significantly, no reliable segmental data or comparable transaction segmental data or comparable transaction-wise margins have been wise margins have been brought on record so as to justify rejection of the entity-level TNMM brought on record so as to justify rejection of the entity brought on record so as to justify rejection of the entity adopted by the assessee. ed by the assessee.

17.24 The Revenue has also failed to controvert the finding of The Revenue has also failed to controvert the finding of The Revenue has also failed to controvert the finding of the learned CIT(A) that the Associated Enterprise in Nigeria had the learned CIT(A) that the Associated Enterprise in Nigeria had the learned CIT(A) that the Associated Enterprise in Nigeria had incurred losses and that no material has been brought on record to incurred losses and that no material has been brought on record to incurred losses and that no material has been brought on record to suggest any profit shifting or manipulati suggest any profit shifting or manipulation of transfer prices. on of transfer prices. Equally, no cogent material has been produced before us to Equally, no cogent material has been produced before us to Equally, no cogent material has been produced before us to establish that the prices charged by the assessee to its Associated establish that the prices charged by the assessee to its Associated establish that the prices charged by the assessee to its Associated Enterprise were not at arm’s length. Enterprise were not at arm’s length.

17.25 In our considered opinion, the learned CIT(A) has n our considered opinion, the learned CIT(A) has n our considered opinion, the learned CIT(A) has correctly appreciated both the factual and legal aspects of the reciated both the factual and legal aspects of the reciated both the factual and legal aspects of the matter and has arrived at a conclusion which is fully supported by matter and has arrived at a conclusion which is fully supported by matter and has arrived at a conclusion which is fully supported by the transfer pricing provisions, judicial precedents and the material the transfer pricing provisions, judicial precedents and the material the transfer pricing provisions, judicial precedents and the material available on record. We find no perversity, factual error or legal available on record. We find no perversity, factual error or legal available on record. We find no perversity, factual error or legal infirmity in the findings recorded by the learned CIT(A) warranting nfirmity in the findings recorded by the learned CIT(A) warranting nfirmity in the findings recorded by the learned CIT(A) warranting interference by this Tribunal. interference by this Tribunal.

17.26 Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) deleting the transfer pricing adjustment of deleting the transfer pricing adjustment of ₹12,96,73,021/ 12,96,73,021/- made in respect of export sales to M/ respect of export sales to M/s IPCA Nigeria Limited. Consequently, s IPCA Nigeria Limited. Consequently, Ground Nos. 4.1 to 4.3 raised by the Revenue are dismissed. Ground Nos. 4.1 to 4.3 raised by the Revenue are dismissed. Ground Nos. 4.1 to 4.3 raised by the Revenue are dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 120 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

18.2 For the purpose of transfer pricing compliance, the assessee For the purpose of transfer pricing compliance, the assessee For the purpose of transfer pricing compliance, the assessee adopted the Comparable Uncontrolled Price (CUP) Method as the adopted the Comparable Uncontrolled Price (CUP) Method as the adopted the Comparable Uncontrolled Price (CUP) Method as the Most Appropriate Method and considered the Most Appropriate Method and considered the charges levied by the charges levied by the bank for providing the guarantee facility as the best available bank for providing the guarantee facility as the best available bank for providing the guarantee facility as the best available comparable. Since the assessee had not recovered the said amount comparable. Since the assessee had not recovered the said amount comparable. Since the assessee had not recovered the said amount from its Associated Enterprise, the expenditure incurred towards from its Associated Enterprise, the expenditure incurred towards from its Associated Enterprise, the expenditure incurred towards bank charges was itself treated as an ad bank charges was itself treated as an adjustment and offered as justment and offered as income while computing the Arm’s Length Price. income while computing the Arm’s Length Price.

IPCA Laboratories Limited, IPCA Laboratories Limited, 121 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

18.3 The learned TPO further observed that the assessee had not The learned TPO further observed that the assessee had not The learned TPO further observed that the assessee had not furnished the complete loan agreement or guarantee documentation furnished the complete loan agreement or guarantee documentation furnished the complete loan agreement or guarantee documentation and had merely placed on record an amendment to the guarantee and had merely placed on record an amendment to the guar and had merely placed on record an amendment to the guar arrangement executed subsequently. Proceeding on the premise arrangement executed subsequently. Proceeding on the premise arrangement executed subsequently. Proceeding on the premise that that that the the the corporate corporate corporate guarantee guarantee guarantee constituted constituted constituted an an an international international international transaction within the meaning of section 92B of the Act, the TPO transaction within the meaning of section 92B of the Act, the TPO transaction within the meaning of section 92B of the Act, the TPO undertook an independent determination of the Arm’s Length Price undertook an independent determination of the Arm’s Length Price undertook an independent determination of the Arm’s Length Price of such transaction.

18.4 For this purpose, reliance was placed upon information For this purpose, reliance was placed upon information For this purpose, reliance was placed upon information collected from various banking institutions, which revealed that collected from various banking institutions, which revealed that collected from various banking institutions, which revealed that banks generally charged guarantee commission at approximately banks generally charged guarantee commission at approximately banks generally charged guarantee commission at approximately 0.60% for providing similar facilities. Accordin 0.60% for providing similar facilities. According to the TPO, the risk g to the TPO, the risk assumed by the assessee in extending a corporate guarantee to its assumed by the assessee in extending a corporate guarantee to its assumed by the assessee in extending a corporate guarantee to its Associated Enterprise was qualitatively higher than the risk Associated Enterprise was qualitatively higher than the risk Associated Enterprise was qualitatively higher than the risk assumed by a bank, since the bank’s exposure was secured by the assumed by a bank, since the bank’s exposure was secured by the assumed by a bank, since the bank’s exposure was secured by the counter-guarantee and support extended by guarantee and support extended by the assessee, whereas the assessee, whereas the assessee itself did not enjoy any corresponding security against the assessee itself did not enjoy any corresponding security against the assessee itself did not enjoy any corresponding security against possible default by its Associated Enterprise. The TPO, therefore, possible default by its Associated Enterprise. The TPO, therefore, possible default by its Associated Enterprise. The TPO, therefore, held that an independent enterprise would have charged a held that an independent enterprise would have charged a held that an independent enterprise would have charged a guarantee fee at a rate higher than that guarantee fee at a rate higher than that charged by banks. charged by banks.

18.5 Proceeding on the aforesaid reasoning, the TPO determined Proceeding on the aforesaid reasoning, the TPO determined Proceeding on the aforesaid reasoning, the TPO determined the Arm’s Length Price of the corporate guarantee commission at the Arm’s Length Price of the corporate guarantee commission at the Arm’s Length Price of the corporate guarantee commission at 1% of the guaranteed amount by applying the CUP Method. Since 1% of the guaranteed amount by applying the CUP Method. Since 1% of the guaranteed amount by applying the CUP Method. Since

IPCA Laboratories Limited, IPCA Laboratories Limited, 122 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

no such commission had been charged by the assessee from its no such commission had been charged by the assess no such commission had been charged by the assess Associated Enterprise, an adjustment of Associated Enterprise, an adjustment of ₹6,00,998/ 6,00,998/- was made under section 92CA of the Act towards guarantee commission under section 92CA of the Act towards guarantee commission under section 92CA of the Act towards guarantee commission chargeable on the corporate guarantee extended by the assessee. chargeable on the corporate guarantee extended by the assessee. chargeable on the corporate guarantee extended by the assessee.

18.6 Accordingly, Accordingly, Accordingly, the the the Transfer Transfer Transfer Pricing Pricing Pricing Officer Officer Officer proposed proposed proposed an an an adjustment of ₹6,00,998/ 6,00,998/- in respect in respect of the international of the international transaction relating to the corporate guarantee furnished on behalf transaction relating to the corporate guarantee furnished on behalf transaction relating to the corporate guarantee furnished on behalf of the Associated Enterprise. of the Associated Enterprise. The relevant part of order of relevant part of order of Ld. TPO is reproduced as under: under:-

“8.4 The contentions of the assessee a 8.4 The contentions of the assessee are considered. In this case, the bank has re considered. In this case, the bank has charged fee to the assessee for providing the guarantee to the beneficiary bank charged fee to the assessee for providing the guarantee to the beneficiary bank charged fee to the assessee for providing the guarantee to the beneficiary bank for extending SBLC to AE of the assessee as per request of the assessee for the for extending SBLC to AE of the assessee as per request of the assessee for the for extending SBLC to AE of the assessee as per request of the assessee for the services rendered by the Bank and risk assumed by it f services rendered by the Bank and risk assumed by it for any probability of or any probability of default by the AE to repay the loan. The assessee paid the fee to the banks but it default by the AE to repay the loan. The assessee paid the fee to the banks but it default by the AE to repay the loan. The assessee paid the fee to the banks but it has neither recovered the amount paid to Bank from AE nor charged to AE any has neither recovered the amount paid to Bank from AE nor charged to AE any has neither recovered the amount paid to Bank from AE nor charged to AE any fee for providing the service of giving guarantee to the Bank and also assu providing the service of giving guarantee to the Bank and also assu providing the service of giving guarantee to the Bank and also assuming risk of paying the loan default amount to Bank if its AE fails to repay the loan. risk of paying the loan default amount to Bank if its AE fails to repay the loan. risk of paying the loan default amount to Bank if its AE fails to repay the loan. The bank has charged a fee for similar services and less risk as compared to the The bank has charged a fee for similar services and less risk as compared to the The bank has charged a fee for similar services and less risk as compared to the assessee because the risk assumed by the bank was secured by the guarantee assessee because the risk assumed by the bank was secured by the guarantee assessee because the risk assumed by the bank was secured by the guarantee provided by the assessee in the case of default but the risk assumed by the he assessee in the case of default but the risk assumed by the he assessee in the case of default but the risk assumed by the assessee is not secured. The bank usually takes security so that if the guarantee assessee is not secured. The bank usually takes security so that if the guarantee assessee is not secured. The bank usually takes security so that if the guarantee is Invoked, the payment should be made to the beneficiaries without delay and is Invoked, the payment should be made to the beneficiaries without delay and is Invoked, the payment should be made to the beneficiaries without delay and cemur. However, same is not true cemur. However, same is not true in case the AE default on the loan. In such as in case the AE default on the loan. In such as case, the assessee will not be able to recover Immediately from the AE in the case, the assessee will not be able to recover Immediately from the AE in the case, the assessee will not be able to recover Immediately from the AE in the absence of any security. The process of recovery, especially in case of a absence of any security. The process of recovery, especially in case of a absence of any security. The process of recovery, especially in case of a subsidiary in a foreign jurisdiction, is very long and ar subsidiary in a foreign jurisdiction, is very long and arduous. Therefore the rates duous. Therefore the rates charged by the assessee while giving guarantee to a bank for the facilitation of charged by the assessee while giving guarantee to a bank for the facilitation of charged by the assessee while giving guarantee to a bank for the facilitation of loan taken by the AE should Ideally be higher than the rate charged by banks for loan taken by the AE should Ideally be higher than the rate charged by banks for loan taken by the AE should Ideally be higher than the rate charged by banks for the same risk profile of the AE depending upon the terms and conditions. The the same risk profile of the AE depending upon the terms and condit the same risk profile of the AE depending upon the terms and condit average rates charged by various banks was 0.6% as per the information average rates charged by various banks was 0.6% as per the information average rates charged by various banks was 0.6% as per the information collected u/s. 133(6) of the Act collected u/s. 133(6) of the Act Thus, the assessee at least charge a fee of 1% over and above the amount Thus, the assessee at least charge a fee of 1% over and above the amount Thus, the assessee at least charge a fee of 1% over and above the amount paid to the Bank and can be considered as arm's length using CUP method. paid to the Bank and can be considered as arm's length using CUP method. paid to the Bank and can be considered as arm's length using CUP method. Further, the contention of the assessee that the company is in the business of Further, the contention of the assessee that the company is in the business of Further, the contention of the assessee that the company is in the business of

IPCA Laboratories Limited, IPCA Laboratories Limited, 123 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

manufacturing and marketing of manufacturing and marketing of pharmaceutical products and guarantee charges pharmaceutical products and guarantee charges is not business activity hence it has not recovered additional amount is not is not business activity hence it has not recovered additional amount is not is not business activity hence it has not recovered additional amount is not acceptable because the fee to be charged depends mainly on the functions acceptable because the fee to be charged depends mainly on the functions acceptable because the fee to be charged depends mainly on the functions performed, assets utilised and risk assumed not on the main business carried out performed, assets utilised and risk assumed not on the main performed, assets utilised and risk assumed not on the main by service provider. In view of the facts of the case and legal position, and finding of the TPO in In view of the facts of the case and legal position, and finding of the TPO in In view of the facts of the case and legal position, and finding of the TPO in earlier assessment years, I deem it fit to levy a fee @ 1% for CG provided by the earlier assessment years, I deem it fit to levy a fee @ 1% for CG provided by the earlier assessment years, I deem it fit to levy a fee @ 1% for CG provided by the assessee on behalf of the AE. The working of fee on assessee on behalf of the AE. The working of fee on CG is as under: CG is as under:

guaranteed ALP rate Guarantee Guarantee Guarantee amount $ Commission $ Commission in Rs. Commission in Rs.

1,00,000 1% 10,000 600998

The above amount of Rs. 6,00,998/ The above amount of Rs. 6,00,998/- is being treated as an adjustment u/s is being treated as an adjustment u/s 92CA in respect of guarantee fee chargeable on the 92CA in respect of guarantee fee chargeable on the corporate guarantee provided corporate guarantee provided on behalf of AE.”

18.7 Accordingly, the Ld. TPO made adjustment of Rs.6,00,998/ the Ld. TPO made adjustment of Rs.6,00,998/- to the Ld. TPO made adjustment of Rs.6,00,998/ the international transaction of guarantee fee chargeable on the the international transaction of guarantee fee chargeable on the the international transaction of guarantee fee chargeable on the guarantee provided on behalf of the AE. guarantee provided on behalf of the AE.

18.8 On appeal, the learned CIT(A) examined the transfer pricing On appeal, the learned CIT(A) examined the transfer pricing On appeal, the learned CIT(A) examined the transfer pricing adjustment made by the Transfer Pricing Officer and found that the adjustment made by the Transfer Pricing Officer and found that the adjustment made by the Transfer Pricing Officer and found that the assessee had already assessee had already suo motu offered an adjustment of offered an adjustment of ₹64.35 lakhs, representing the actual guarantee commission and charges lakhs, representing the actual guarantee commission and charges lakhs, representing the actual guarantee commission and charges paid to the bank for availing the Standby Letter of Credit (SBLC) d to the bank for availing the Standby Letter of Credit (SBLC) d to the bank for availing the Standby Letter of Credit (SBLC) facility extended in favour of its Associated Enterprise. The learned facility extended in favour of its Associated Enterprise. The learned facility extended in favour of its Associated Enterprise. The learned CIT(A) observed that the adjustment so offered by the assessee was CIT(A) observed that the adjustment so offered by the assessee was CIT(A) observed that the adjustment so offered by the assessee was

IPCA Laboratories Limited, IPCA Laboratories Limited, 124 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

based on a direct and reliable comparable, namely, the actual based on a direct and reliable comparable, namely, the a based on a direct and reliable comparable, namely, the a charges levied by the bank for providing the guarantee facility. charges levied by the bank for providing the guarantee facility. charges levied by the bank for providing the guarantee facility.

18.9 The learned CIT(A) further noted that the amount already The learned CIT(A) further noted that the amount already The learned CIT(A) further noted that the amount already offered by the assessee was commensurate with, and in fact offered by the assessee was commensurate with, and in fact offered by the assessee was commensurate with, and in fact exceeded, the rate of 0.60 per cent referred to by the Transfer exceeded, the rate of 0.60 per cent referred to by the Transfer exceeded, the rate of 0.60 per cent referred to by the Transfer Pricing Officer on the basis of information collected from various Pricing Officer on the basis of information collected from various Pricing Officer on the basis of information collected from various banking institutions. In these circumstances, the learned CIT(A) banking institutions. In these circumstances, the learned CIT(A) banking institutions. In these circumstances, the learned CIT(A) held that the arm’s length consideration attributable to the held that the arm’s length consideration attributable to the held that the arm’s length consideration attributable to the corporate guarantee transaction had already been duly factored into corporate guarantee transaction had already been duly factored corporate guarantee transaction had already been duly factored the computation made by the assessee and that the same the computation made by the assessee and that the same the computation made by the assessee and that the same adequately compensated for the functions performed and risks adequately compensated for the functions performed and risks adequately compensated for the functions performed and risks assumed in connection with the guarantee facility. assumed in connection with the guarantee facility.

18.20 Having regard to the factual matrix and the nature of the Having regard to the factual matrix and the nature of the Having regard to the factual matrix and the nature of the transaction, the learned CIT(A) concluded that once the assessee rned CIT(A) concluded that once the assessee rned CIT(A) concluded that once the assessee had already made an adjustment equivalent to the actual guarantee had already made an adjustment equivalent to the actual guarantee had already made an adjustment equivalent to the actual guarantee commission charged by the bank, there remained no justification commission charged by the bank, there remained no justification commission charged by the bank, there remained no justification for making a further upward adjustment by applying an additional for making a further upward adjustment by applying an additional for making a further upward adjustment by applying an additional rate of 1 per cent on the guaranteed amount, as proposed by the nt on the guaranteed amount, as proposed by the nt on the guaranteed amount, as proposed by the Transfer Pricing Officer. The learned CIT(A), therefore, held that the Transfer Pricing Officer. The learned CIT(A), therefore, held that the Transfer Pricing Officer. The learned CIT(A), therefore, held that the adjustment made by the assessee sufficiently met the arm’s length adjustment made by the assessee sufficiently met the arm’s length adjustment made by the assessee sufficiently met the arm’s length standard contemplated under Chapter X of the Act and that the standard contemplated under Chapter X of the Act and that the standard contemplated under Chapter X of the Act and that the further adjustment made by the Transfer Pricing Officer lacked any djustment made by the Transfer Pricing Officer lacked any djustment made by the Transfer Pricing Officer lacked any cogent factual or legal basis. cogent factual or legal basis.

IPCA Laboratories Limited, IPCA Laboratories Limited, 125 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

18.21 Accordingly, the learned CIT(A) directed deletion of the Accordingly, the learned CIT(A) directed deletion of the Accordingly, the learned CIT(A) directed deletion of the transfer pricing adjustment of transfer pricing adjustment of ₹6,00,998/- made on account of made on account of corporate guarantee commission. corporate guarantee commission. The relevant finding of nt finding of Ld. CIT(A) is reproduced as under: as under:-

“19.4 I have considered the facts of the case and submission made by the 19.4 I have considered the facts of the case and submission made by the 19.4 I have considered the facts of the case and submission made by the assessee. I find that the assesse . I find that the assessee has provided the corporate guarantee on behalf has provided the corporate guarantee on behalf of its AE and it has made the adjustment to the ex of its AE and it has made the adjustment to the extent of Rs. 64.35 Lakhs being tent of Rs. 64.35 Lakhs being the actual amount of fee charged by the bank. I find that the assessee has made the actual amount of fee charged by the bank. I find that the assesse the actual amount of fee charged by the bank. I find that the assesse adjustment which is equivalent to the rates charged by the bank which is in adjustment which is equivalent to the rates charged by the bank which is in adjustment which is equivalent to the rates charged by the bank which is in excess of rates quoted by the various bank @ 0.6% as mentioned by the TPO. I excess of rates quoted by the various bank @ 0.6% as mentioned by the excess of rates quoted by the various bank @ 0.6% as mentioned by the find that the said adjustment is adequate considering the facts of the case and find that the said adjustment is adequate considering the facts of the case and find that the said adjustment is adequate considering the facts of the case and additional adjustment @1% is not required. Accordingly, the AO is directed to additional adjustment @1% is not required. Accordingly, the AO is directed to additional adjustment @1% is not required. Accordingly, the AO is directed to delete the adjustment made @ 1% on account of corporate guarantee commission. delete the adjustment made @ 1% on account of corporate guarantee commission. delete the adjustment made @ 1% on account of corporate guarantee commission. Hence, ground no. 8 is allowed. no. 8 is allowed.” 18.22 Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted that the bank had charged a guarantee fee amounting to Rs. that the bank had charged a guarantee fee amounting to Rs. that the bank had charged a guarantee fee amounting to Rs. 64,35,400, which was almost 10%, and the said amount was 64,35,400, which was almost 10%, and the said amount was 64,35,400, which was almost 10%, and the said amount was directly paid by the assessee to the bank. It was submitted that directly paid by the assessee to the bank. It was directly paid by the assessee to the bank. It was while benchmarking the transaction, the assessee had adopted CUP while benchmarking the transaction, the assessee had adopted CUP while benchmarking the transaction, the assessee had adopted CUP as the most appropriate method considering the bank charges as the most appropriate method considering the bank charges as the most appropriate method considering the bank charges constituted the best internal comparable uncontrolled price for constituted the best internal comparable uncontrolled price for constituted the best internal comparable uncontrolled price for determination of the arm's length nature of the transaction. Since determination of the arm's length nature of the tran determination of the arm's length nature of the tran no amount was recovered from the AE, the assessee itself grossed no amount was recovered from the AE, the assessee itself grossed no amount was recovered from the AE, the assessee itself grossed up the amount paid to the bank and offered the same as income up the amount paid to the bank and offered the same as income up the amount paid to the bank and offered the same as income while computing the ALP. while computing the ALP.

18.23 It was submitted that once the entire bank guarantee charges It was submitted that once the entire bank guarantee charges It was submitted that once the entire bank guarantee charges paid to the bank had a paid to the bank had already been offered as income, no further lready been offered as income, no further

IPCA Laboratories Limited, IPCA Laboratories Limited, 126 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

adjustment on account of guarantee commission could be made. It adjustment on account of guarantee commission could be made. It adjustment on account of guarantee commission could be made. It was submitted that the amount already offered by the assessee was submitted that the amount already offered by the assessee was submitted that the amount already offered by the assessee exceeded 10% of the total guarantee amount and therefore exceeded 10% of the total guarantee amount and therefore exceeded 10% of the total guarantee amount and therefore adequately covered any possible adequately covered any possible arm’s length compensation arm’s length compensation attributable to the guarantee transaction. attributable to the guarantee transaction. 18.24 We have given our thoughtful consideration to the rival We have given our thoughtful consideration to the rival We have given our thoughtful consideration to the rival submissions and have carefully perused the orders of the submissions and have carefully perused the orders of the submissions and have carefully perused the orders of the authorities below as well as the material placed on record. authorities below as well as the material placed on record. authorities below as well as the material placed on record. 18.25 The undisputed factual position is that the assessee had he undisputed factual position is that the assessee had he undisputed factual position is that the assessee had extended a corporate guarantee/Standby Letter of Credit (SBLC) extended a corporate guarantee/Standby Letter of Credit (SBLC) extended a corporate guarantee/Standby Letter of Credit (SBLC) facility in favour of its Associated Enterprise, M/s IPCA USA, and, facility in favour of its Associated Enterprise, M/s IPCA USA, and, facility in favour of its Associated Enterprise, M/s IPCA USA, and, in connection therewith, had incurred guarantee charges of in connection therewith, had incurred guarantee charges of in connection therewith, had incurred guarantee charges of ₹64,35,400/- payable to the bank. It is equally undisputed that payable to the bank. It is equally undisputed that payable to the bank. It is equally undisputed that while benchmarking the transaction, the assessee adopted the while benchmarking the transaction, the assessee adopted the while benchmarking the transaction, the assessee adopted the Comparable Uncontrolled Price (CUP) Method and, considering the Comparable Uncontrolled Price (CUP) Method and, considering the Comparable Uncontrolled Price (CUP) Method and, considering the bank guarantee charges as the most reliable internal comparable, bank guarantee charges as the most reliable internal comparable, bank guarantee charges as the most reliable internal comparable, ered the entire amount of ₹64,35,400/ 64,35,400/- as a transfer suo motu offered the entire amount of pricing adjustment while determining the Arm’s Length Price of the pricing adjustment while determining the Arm’s Length Price of the pricing adjustment while determining the Arm’s Length Price of the transaction.

18.26 The Transfer Pricing Officer, however, proceeded to make The Transfer Pricing Officer, however, proceeded to make The Transfer Pricing Officer, however, proceeded to make a further adjustment of a further adjustment of ₹6,00,998/- by applying a guarantee by applying a guarantee commission rate of 1% on the guaranteed amount. In our commission rate of 1% on the guaranteed amount. In our commission rate of 1% on the guaranteed amount. In our

IPCA Laboratories Limited, IPCA Laboratories Limited, 127 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

considered opinion, the approach adopted by the Transfer Pricing considered opinion, the approach adopted by the Transfer Pricing considered opinion, the approach adopted by the Transfer Pricing Officer is not borne out from the facts available on record. Once the Officer is not borne out from the facts available on record. Once the Officer is not borne out from the facts available on record. Once the assessee had already benchmarked the transaction by adopting the assessee had already benchmarked the transaction by adopting the assessee had already benchmarked the transaction by adopting the actual guarantee charges levied by the bank and had voluntarily ctual guarantee charges levied by the bank and had voluntarily ctual guarantee charges levied by the bank and had voluntarily offered the entire amount incurred towards such guarantee facility offered the entire amount incurred towards such guarantee facility offered the entire amount incurred towards such guarantee facility as an adjustment, the arm’s length impact of the transaction stood as an adjustment, the arm’s length impact of the transaction stood as an adjustment, the arm’s length impact of the transaction stood fully neutralised.

18.27 We find considerable force in the We find considerable force in the reasoning adopted by reasoning adopted by the learned CIT(A) that the amount of the learned CIT(A) that the amount of ₹64,35,400/ 64,35,400/- already considered by the assessee for transfer pricing purposes was considered by the assessee for transfer pricing purposes was considered by the assessee for transfer pricing purposes was substantially higher than the benchmark rate of 0.60% referred to substantially higher than the benchmark rate of 0.60% referred to substantially higher than the benchmark rate of 0.60% referred to by the Transfer Pricing Officer on the basis of i by the Transfer Pricing Officer on the basis of information obtained nformation obtained from banking institutions. In such circumstances, the arm’s length from banking institutions. In such circumstances, the arm’s length from banking institutions. In such circumstances, the arm’s length consideration attributable to the corporate guarantee transaction consideration attributable to the corporate guarantee transaction consideration attributable to the corporate guarantee transaction stood adequately reflected in the computation made by the assessee stood adequately reflected in the computation made by the assessee stood adequately reflected in the computation made by the assessee itself.

18.28 It is a settled princi It is a settled principle of transfer pricing law that an ple of transfer pricing law that an adjustment can be made only to the extent necessary to bring an adjustment can be made only to the extent necessary to bring an adjustment can be made only to the extent necessary to bring an international transaction to its arm’s length standard. Once an international transaction to its arm’s length standard. Once an international transaction to its arm’s length standard. Once an appropriate adjustment has already been offered and such appropriate adjustment has already been offered and such appropriate adjustment has already been offered and such adjustment adequately compensates f adjustment adequately compensates for the functions performed, or the functions performed, assets employed and risks assumed, there remains no justification assets employed and risks assumed, there remains no justification assets employed and risks assumed, there remains no justification for making a further ad hoc enhancement in the absence of any for making a further ad hoc enhancement in the absence of any for making a further ad hoc enhancement in the absence of any

IPCA Laboratories Limited, IPCA Laboratories Limited, 128 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

cogent material demonstrating inadequacy of the adjustment cogent material demonstrating inadequacy of the adjustment cogent material demonstrating inadequacy of the adjustment already made.

18.29 The Revenue has not b The Revenue has not brought on record any material to rought on record any material to establish that the adjustment of establish that the adjustment of ₹64,35,400/- voluntarily offered by voluntarily offered by the assessee failed to reflect the arm’s length value of the guarantee the assessee failed to reflect the arm’s length value of the guarantee the assessee failed to reflect the arm’s length value of the guarantee transaction. Nor has it been demonstrated that the methodology transaction. Nor has it been demonstrated that the methodology transaction. Nor has it been demonstrated that the methodology adopted by the asses adopted by the assessee suffered from any factual or legal infirmity see suffered from any factual or legal infirmity warranting a further upward adjustment. In the absence of any warranting a further upward adjustment. In the absence of any warranting a further upward adjustment. In the absence of any such material, the additional adjustment made by the Transfer such material, the additional adjustment made by the Transfer such material, the additional adjustment made by the Transfer Pricing Officer is rendered wholly unsustainable. Pricing Officer is rendered wholly unsustainable.

18.30 In view of the foregoing di In view of the foregoing discussion, we find ourselves in scussion, we find ourselves in complete agreement with the findings recorded by the learned complete agreement with the findings recorded by the learned complete agreement with the findings recorded by the learned CIT(A). The order of the learned CIT(A) does not suffer from any CIT(A). The order of the learned CIT(A) does not suffer from any CIT(A). The order of the learned CIT(A) does not suffer from any legal or factual infirmity warranting interference by this Tribunal. legal or factual infirmity warranting interference by this Tribunal. legal or factual infirmity warranting interference by this Tribunal. Accordingly, the deletion of t Accordingly, the deletion of the transfer pricing adjustment of he transfer pricing adjustment of ₹6,00,998/- made on account of corporate guarantee commission is made on account of corporate guarantee commission is made on account of corporate guarantee commission is upheld. Consequently, Ground No. 4.4 raised by the Revenue upheld. Consequently, Ground No. 4.4 raised by the Revenue upheld. Consequently, Ground No. 4.4 raised by the Revenue stands dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 129 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

19.1 The facts, in brief, are that during the year under The facts, in brief, are that during the year under The facts, in brief, are that during the year under consideration, consideration, the the assessee assessee paid paid an an a aggregate ggregate amount amount of of ₹6,84,22,926/- to to to its its its Associated Associated Associated Enterprise, Enterprise, Enterprise, M/s M/s M/s IPCA IPCA IPCA Pharmaceuticals Inc., USA, towards reimbursement of expenses Pharmaceuticals Inc., USA, towards reimbursement of expenses Pharmaceuticals Inc., USA, towards reimbursement of expenses incurred for rendering marketing support services, liaisoning incurred for rendering marketing support services, liaisoning incurred for rendering marketing support services, liaisoning activities, regulatory compliance support, customer coordination activities, regulatory compliance support, customer activities, regulatory compliance support, customer and follow-up of export realisations in the United States market. up of export realisations in the United States market. up of export realisations in the United States market. Apart from reimbursement of the operating costs incurred by the Apart from reimbursement of the operating costs incurred by the Apart from reimbursement of the operating costs incurred by the Associated Enterprise, the assessee also paid a mark-up/service Associated Enterprise, the assessee also paid a mark Associated Enterprise, the assessee also paid a mark charge at the rate of 20 per cent on such costs. charge at the rate of 20 per cent on such costs. 19.2 For the purpose of benchmarking the aforesaid international For the purpose of benchmarking the aforesaid international For the purpose of benchmarking the aforesaid international transaction, the assessee adopted the Transactional Net Margin transaction, the assessee adopted the Transactional Net Margin transaction, the assessee adopted the Transactional Net Margin Method (TNMM) as the Most Appropriate Method. The transaction Method (TNMM) as the Most Appropriate Method. The transaction Method (TNMM) as the Most Appropriate Method. The transaction was benchmarked at the entity level by comparing the net profit was benchmarked at the entity level by comparing the net profit was benchmarked at the entity level by comparing the net profit margin earned by the assessee with the margins earned by rgin earned by the assessee with the margins earned by rgin earned by the assessee with the margins earned by comparable independent enterprises. Since the assessee’s operating comparable independent enterprises. Since the assessee’s operating comparable independent enterprises. Since the assessee’s operating margin was found to be higher than that of the comparable margin was found to be higher than that of the comparable margin was found to be higher than that of the comparable companies, the assessee concluded that the consideration paid to companies, the assessee concluded that the consideration paid to companies, the assessee concluded that the consideration paid to M/s IPCA Pharmaceuticals Inc., USA, for the services rendered was armaceuticals Inc., USA, for the services rendered was armaceuticals Inc., USA, for the services rendered was at arm’s length. 19.3 The Transfer Pricing Officer, however, did not accept the The Transfer Pricing Officer, however, did not accept the The Transfer Pricing Officer, however, did not accept the benchmarking analysis undertaken by the assessee. According to benchmarking analysis undertaken by the assessee. According to benchmarking analysis undertaken by the assessee. According to the TPO, the application of entity the TPO, the application of entity-level TNMM was inapprop level TNMM was inappropriate for

IPCA Laboratories Limited, IPCA Laboratories Limited, 130 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

examining the arm’s length nature of the impugned intra-group examining the arm’s length nature of the impugned intra examining the arm’s length nature of the impugned intra service transaction. The TPO observed that the value of the service transaction. The TPO observed that the value of the service transaction. The TPO observed that the value of the transaction with the Associated Enterprise constituted only a small transaction with the Associated Enterprise constituted only a small transaction with the Associated Enterprise constituted only a small fraction of the assessee’s overall operating costs and turnover and, fraction of the assessee’s overall operating costs and t fraction of the assessee’s overall operating costs and t therefore, the profitability of the enterprise as a whole could not be therefore, the profitability of the enterprise as a whole could not be therefore, the profitability of the enterprise as a whole could not be regarded as determinative of the arm’s length character of a specific regarded as determinative of the arm’s length character of a specific regarded as determinative of the arm’s length character of a specific service transaction.

19.4 The TPO further held that the Associated Enterprise ought to The TPO further held that the Associated Enterprise ought to The TPO further held that the Associated Enterprise ought to have been considered as the tested party for the purpose of dered as the tested party for the purpose of dered as the tested party for the purpose of benchmarking the transaction under TNMM. According to him, an benchmarking the transaction under TNMM. According to him, an benchmarking the transaction under TNMM. According to him, an independent analysis of the profitability of the Associated independent analysis of the profitability of the Associated independent analysis of the profitability of the Associated Enterprise was necessary to ascertain whether the mark-up earned Enterprise was necessary to ascertain whether the mark Enterprise was necessary to ascertain whether the mark by it on the services re by it on the services rendered to the assessee was consistent with ndered to the assessee was consistent with the arm’s length standard. However, since the requisite financial the arm’s length standard. However, since the requisite financial the arm’s length standard. However, since the requisite financial and benchmarking details relating to the Associated Enterprise and benchmarking details relating to the Associated Enterprise and benchmarking details relating to the Associated Enterprise were not furnished, the TPO rejected the assessee’s transfer pricing were not furnished, the TPO rejected the assessee’s transfer pricing were not furnished, the TPO rejected the assessee’s transfer pricing analysis.

19.5 The TPO also questioned the commercial rationale underlying The TPO also questioned the commercial rationale underlying The TPO also questioned the commercial rationale underlying the payment of the 20 per cent mark the payment of the 20 per cent mark-up/service charge to the up/service charge to the Associated Enterprise. According to him, the assessee had failed to Associated Enterprise. According to him, the assessee had failed to Associated Enterprise. According to him, the assessee had failed to substantiate the basis on which such mark substantiate the basis on which such mark- -up had been determined and had not demonstrated, through cogent evidence, d had not demonstrated, through cogent evidence, d had not demonstrated, through cogent evidence, either the necessity for availing the services or the tangible either the necessity for availing the services or the tangible either the necessity for availing the services or the tangible

IPCA Laboratories Limited, IPCA Laboratories Limited, 131 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

economic benefits derived therefrom. The TPO further observed that economic benefits derived therefrom. The TPO further observed that economic benefits derived therefrom. The TPO further observed that no formal service agreement or contemporaneous documentation no formal service agreement or contemporaneous documentation no formal service agreement or contemporaneous documentation had been produced to establish the precise nature, scope and terms d to establish the precise nature, scope and terms d to establish the precise nature, scope and terms governing the services allegedly rendered by the Associated governing the services allegedly rendered by the Associated governing the services allegedly rendered by the Associated Enterprise.

19.6 Proceeding on the aforesaid premise, the TPO concluded that Proceeding on the aforesaid premise, the TPO concluded that Proceeding on the aforesaid premise, the TPO concluded that the assessee had failed to establish the arm’s length nature of the the assessee had failed to establish the arm’s length nature of the the assessee had failed to establish the arm’s length nature of the service charge component paid to the Associated Enterprise. He service charge component paid to the Associated Enterprise. He service charge component paid to the Associated Enterprise. He was, therefore, of the view that no independent enterprise would was, therefore, of the view that no independent enterprise would was, therefore, of the view that no independent enterprise would have agreed to pay the impugned mark have agreed to pay the impugned mark-up under comparable up under comparable circumstances. Consequently, the Arm’s Length Price of the mark- circumstances. Consequently, the Arm’s Length Price of the mark circumstances. Consequently, the Arm’s Length Price of the mark up/service charge was determined at ‘Nil’, and the entire amount ice charge was determined at ‘Nil’, and the entire amount ice charge was determined at ‘Nil’, and the entire amount representing the mark representing the mark-up paid to the Associated Enterprise was up paid to the Associated Enterprise was proposed for adjustment. proposed for adjustment. 19.7 Accordingly, the TPO determined the Arm’s Length Price of the Accordingly, the TPO determined the Arm’s Length Price of the Accordingly, the TPO determined the Arm’s Length Price of the service charge component at Nil and made a service charge component at Nil and made a transfer pricing transfer pricing adjustment of ₹1,36,84,585/ 1,36,84,585/- to the income of the assessee. to the income of the assessee.

19.8 On appeal, the learned CIT(A), upon a comprehensive On appeal, the learned CIT(A), upon a comprehensive On appeal, the learned CIT(A), upon a comprehensive examination of the factual matrix and the material placed on examination of the factual matrix and the material placed on examination of the factual matrix and the material placed on record, observed that the assessee had a substantial export record, observed that the assessee had a substantial export record, observed that the assessee had a substantial export presence in the United States market, with export turnover resence in the United States market, with export turnover resence in the United States market, with export turnover exceeding ₹300 crores during the relevant previous year. The 300 crores during the relevant previous year. The 300 crores during the relevant previous year. The

IPCA Laboratories Limited, IPCA Laboratories Limited, 132 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

learned CIT(A) noted that, in order to sustain and expand its learned CIT(A) noted that, in order to sustain and expand its learned CIT(A) noted that, in order to sustain and expand its operations in a highly regulated jurisdiction such as the United operations in a highly regulated jurisdiction such as the United operations in a highly regulated jurisdiction such as the United States, the assessee was required to maintain continuous e assessee was required to maintain continuous e assessee was required to maintain continuous compliance with the regulatory framework prescribed by the United compliance with the regulatory framework prescribed by the United compliance with the regulatory framework prescribed by the United States Food and Drug Administration (USFDA), including obtaining States Food and Drug Administration (USFDA), including obtaining States Food and Drug Administration (USFDA), including obtaining and maintaining necessary approvals, and maintaining necessary approvals, licenses and regulatory clearances.

19.9 The learned CIT(A) further recorded a finding that the assessee The learned CIT(A) further recorded a finding that the assessee The learned CIT(A) further recorded a finding that the assessee had filed as many as 33 Abbreviated New Drug Applications had filed as many as 33 Abbreviated New Drug Applications had filed as many as 33 Abbreviated New Drug Applications (ANDAs) before the USFDA, out of which 14 applications had (ANDAs) before the USFDA, out of which 14 applications had (ANDAs) before the USFDA, out of which 14 applications had already been approved. It was observed that the extensive already been approved. It was observed that the extensive already been approved. It was observed that the extensive liaisoning, coordination and follow ination and follow-up activities required in up activities required in connection with such regulatory processes were being undertaken connection with such regulatory processes were being undertaken connection with such regulatory processes were being undertaken through through through the the the assessee’s assessee’s assessee’s Associated Associated Associated Enterprise, Enterprise, Enterprise, M/s M/s M/s IPCA IPCA IPCA Pharmaceuticals Inc., USA, which was strategically positioned in Pharmaceuticals Inc., USA, which was strategically positioned in Pharmaceuticals Inc., USA, which was strategically positioned in the United States to intera the United States to interact with the regulatory authorities and ct with the regulatory authorities and other stakeholders.

19.10 The learned CIT(A) also noted that the Associated The learned CIT(A) also noted that the Associated The learned CIT(A) also noted that the Associated Enterprise was actively engaged in providing marketing support, Enterprise was actively engaged in providing marketing support, Enterprise was actively engaged in providing marketing support, customer coordination and post customer coordination and post-sales assistance in the United sales assistance in the United States market. Apart from facilitating regulatory compliance, the Apart from facilitating regulatory compliance, the Apart from facilitating regulatory compliance, the Associated Enterprise was also rendering assistance in maintaining Associated Enterprise was also rendering assistance in maintaining Associated Enterprise was also rendering assistance in maintaining customer relationships, addressing market customer relationships, addressing market-related issues and related issues and

IPCA Laboratories Limited, IPCA Laboratories Limited, 133 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

ensuring timely realization of export proceeds from customers ensuring timely realization of export proceeds from customers ensuring timely realization of export proceeds from customers situated in the United States. United States.

19.11 It was further observed that the Associated Enterprise It was further observed that the Associated Enterprise It was further observed that the Associated Enterprise had incurred various expenses in the course of rendering the had incurred various expenses in the course of rendering the had incurred various expenses in the course of rendering the aforesaid services on behalf of the assessee and those expenses aforesaid services on behalf of the assessee and aforesaid services on behalf of the assessee and were reimbursed by the assessee on a cost were reimbursed by the assessee on a cost-to-cost basi cost basis together with a mark-up of 20 per cent towards service charges. The learned up of 20 per cent towards service charges. The learned up of 20 per cent towards service charges. The learned CIT(A) took cognizance of the fact that the assessee had furnished a CIT(A) took cognizance of the fact that the assessee had furnished a CIT(A) took cognizance of the fact that the assessee had furnished a certificate issued by an independent Certified Public Accountant certificate issued by an independent Certified Public Accountant certificate issued by an independent Certified Public Accountant (CPA) certifying the nature and quantum of e (CPA) certifying the nature and quantum of expenditure incurred by xpenditure incurred by the Associated Enterprise. Significantly, the learned CIT(A) recorded the Associated Enterprise. Significantly, the learned CIT(A) recorded the Associated Enterprise. Significantly, the learned CIT(A) recorded that the Transfer Pricing Officer had neither disputed the that the Transfer Pricing Officer had neither disputed the that the Transfer Pricing Officer had neither disputed the genuineness of the expenditure so incurred nor questioned the genuineness of the expenditure so incurred nor questioned the genuineness of the expenditure so incurred nor questioned the actual rendering of services by the Associ actual rendering of services by the Associated Enterprise. ated Enterprise.

19.12 Having Having Having regard regard regard to to to the the the nature nature nature of of of the the the assessee’s assessee’s assessee’s international business operations, the learned CIT(A) held that the international business operations, the learned CIT(A) held that the international business operations, the learned CIT(A) held that the establishment establishment establishment and and and maintenance maintenance maintenance of of of a a a dedicated dedicated dedicated Associated Associated Associated Enterprise in the United States for undertaking liaisoning, Enterprise in the United States for undertaking liaisoning, Enterprise in the United States for undertaking liaisoning, regulatory ulatory ulatory support, support, support, marketing marketing marketing assistance assistance assistance and and and customer customer customer coordination constituted a commercially prudent and business- coordination constituted a commercially prudent and business coordination constituted a commercially prudent and business oriented arrangement. The learned CIT(A) observed that the oriented arrangement. The learned CIT(A) observed that the oriented arrangement. The learned CIT(A) observed that the commercial expediency underlying such an arrangement could not commercial expediency underlying such an arrangement could not commercial expediency underlying such an arrangement could not

IPCA Laboratories Limited, IPCA Laboratories Limited, 134 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

be questioned merely b be questioned merely because the services were rendered by an ecause the services were rendered by an Associated Enterprise. Associated Enterprise.

19.13 Insofar as the Transfer Pricing Officer’s approach of Insofar as the Transfer Pricing Officer’s approach of Insofar as the Transfer Pricing Officer’s approach of treating the Associated Enterprise as the tested party was treating the Associated Enterprise as the tested party was treating the Associated Enterprise as the tested party was concerned, the learned CIT(A) accepted the contention of the concerned, the learned CIT(A) accepted the contention of the concerned, the learned CIT(A) accepted the contention of the assessee that reliable and publicly available data relating to reliable and publicly available data relating to reliable and publicly available data relating to comparable independent enterprises operating in the United States comparable independent enterprises operating in the United States comparable independent enterprises operating in the United States and performing similar functions was not available. The learned and performing similar functions was not available. The learned and performing similar functions was not available. The learned CIT(A) further observed that despite rejecting the assessee’s CIT(A) further observed that despite rejecting the assessee’s CIT(A) further observed that despite rejecting the assessee’s benchmarking analysis, the Transfer Pricing Officer had failed to nalysis, the Transfer Pricing Officer had failed to nalysis, the Transfer Pricing Officer had failed to identify or bring on record any suitable comparable entities to identify or bring on record any suitable comparable entities to identify or bring on record any suitable comparable entities to substantiate his alternative benchmarking approach. substantiate his alternative benchmarking approach. substantiate his alternative benchmarking approach.

19.14 The learned CIT(A) also found merit in the contention of The learned CIT(A) also found merit in the contention of The learned CIT(A) also found merit in the contention of the assessee that once th the assessee that once the existence of services and their actual e existence of services and their actual rendition had not been disputed, the Arm’s Length Price of such rendition had not been disputed, the Arm’s Length Price of such rendition had not been disputed, the Arm’s Length Price of such services could not be determined at ‘Nil’. It was observed that the services could not be determined at ‘Nil’. It was observed that the services could not be determined at ‘Nil’. It was observed that the transfer pricing provisions empower the authorities to determine transfer pricing provisions empower the authorities to determine transfer pricing provisions empower the authorities to determine the arm’s length price of a transaction and not to disregard a rice of a transaction and not to disregard a rice of a transaction and not to disregard a genuine transaction altogether in the absence of evidence genuine transaction altogether in the absence of evidence genuine transaction altogether in the absence of evidence demonstrating that no services had in fact been rendered. The demonstrating that no services had in fact been rendered. The demonstrating that no services had in fact been rendered. The learned CIT(A) further noted that the Transfer Pricing Officer had learned CIT(A) further noted that the Transfer Pricing Officer had learned CIT(A) further noted that the Transfer Pricing Officer had not not specifically specifically rejected rejecte d the the margin margin computation computation or or the the benchmarking analysis undertaken by the assessee under the benchmarking analysis undertaken by the assessee under the benchmarking analysis undertaken by the assessee under the

IPCA Laboratories Limited, IPCA Laboratories Limited, 135 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Transactional Net Margin Method, nor had he demonstrated any Transactional Net Margin Method, nor had he demonstrated any Transactional Net Margin Method, nor had he demonstrated any material defect therein. material defect therein.

19.15 In light of the aforesaid facts and circumstances, the In light of the aforesaid facts and circumstances, the In light of the aforesaid facts and circumstances, the learned CIT(A) concluded that the determination of the Arm’s cluded that the determination of the Arm’s cluded that the determination of the Arm’s Length Price of the impugned service charges at ‘Nil’ was Length Price of the impugned service charges at ‘Nil’ was Length Price of the impugned service charges at ‘Nil’ was unsustainable both in law and on facts. He accordingly held that unsustainable both in law and on facts. He accordingly held that unsustainable both in law and on facts. He accordingly held that the transfer pricing adjustment made by the Transfer Pricing Officer the transfer pricing adjustment made by the Transfer Pricing Officer the transfer pricing adjustment made by the Transfer Pricing Officer was devoid of a sound was devoid of a sound factual and legal foundation and, therefore, factual and legal foundation and, therefore, liable to be deleted.

19.16 Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted Before us, the learned counsel for the assessee submitted that the assessee had substantial export business in the USA that the assessee had substantial export business in the USA that the assessee had substantial export business in the USA market and was regularly exporting products to the American market and was regularly exporting products to the American market and was regularly exporting products to the American continent. In order to sustain and expand its export operations, continent. In order to sustain and expand its export operations, continent. In order to sustain and expand its export operations, continuous marketing support, customer coordination, regulatory continuous marketing support, customer coordination, regulatory continuous marketing support, customer coordination, regulatory liaisoning and follow- -up activities were required to be undertaken in up activities were required to be undertaken in the USA. For this purpose, the assessee had established its wholly the USA. For this purpose, the assessee had established its wholly the USA. For this purpose, the assessee had established its wholly owned subsidiary, IPCA Pharmaceuticals Inc., USA, which acted as owned subsidiary, IPCA Pharmaceuticals Inc., USA, which acted as owned subsidiary, IPCA Pharmaceuticals Inc., USA, which acted as a support entity for facilitating business operations in the USA a support entity for facilitating business operations in the a support entity for facilitating business operations in the market. It was submitted that the assessee was engaged in submitted that the assessee was engaged in submitted that the assessee was engaged in development of generic formulations and filing of ANDAs with the development of generic formulations and filing of ANDAs with the development of generic formulations and filing of ANDAs with the US FDA. Accordingly, continuous support was required in the USA US FDA. Accordingly, continuous support was required in the USA US FDA. Accordingly, continuous support was required in the USA for for for maintaining maintaining maintaining regulatory regulatory regulatory compliances, compliances, compliances, coordination coordination coordination with with with authorities, customer interaction and identification of business rities, customer interaction and identification of business rities, customer interaction and identification of business

IPCA Laboratories Limited, IPCA Laboratories Limited, 136 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

opportunities. The AE rendered such support services and incurred opportunities. The AE rendered such support services and incurred opportunities. The AE rendered such support services and incurred expenses on behalf of the assessee, which were reimbursed on a expenses on behalf of the assessee, which were reimbursed on a expenses on behalf of the assessee, which were reimbursed on a cost basis along with a markup/service charge of 20%. cost basis along with a markup/service charge of 20%. cost basis along with a markup/service charge of 20%. 19.17 It was submitted that the international transaction was submitted that the international transaction was submitted that the international transaction was benchmarked by adopting TNMM as the Most Appropriate Method benchmarked by adopting TNMM as the Most Appropriate Method benchmarked by adopting TNMM as the Most Appropriate Method at the entity level. Since the profit margin earned by the assessee at the entity level. Since the profit margin earned by the assessee at the entity level. Since the profit margin earned by the assessee was higher than that of comparable uncontrolled entities, the was higher than that of comparable uncontrolled entities, the was higher than that of comparable uncontrolled entities, the transaction was considered to be at arm’s length. It was contended considered to be at arm’s length. It was contended considered to be at arm’s length. It was contended that the TPO had effectively disallowed the entire service charges that the TPO had effectively disallowed the entire service charges that the TPO had effectively disallowed the entire service charges paid to the AE without bringing any material on record to paid to the AE without bringing any material on record to paid to the AE without bringing any material on record to demonstrate that the services were not actually rendered or that the demonstrate that the services were not actually rendered or that the demonstrate that the services were not actually rendered or that the transaction was sham or non was sham or non-genuine. Further, it Further, it was submitted that the AE was actively engaged in marketing support functions, that the AE was actively engaged in marketing support functions, that the AE was actively engaged in marketing support functions, liaisoning with regulatory authorities, customer coordination, liaisoning with regulatory authorities, customer coordination, liaisoning with regulatory authorities, customer coordination, product registration and identification of export opportunities in the product registration and identification of export opportunities in the product registration and identification of export opportunities in the USA market. These services are essential for smooth functioning market. These services are essential for smooth functioning market. These services are essential for smooth functioning and expansion of the assessee’s export business and, therefore, the and expansion of the assessee’s export business and, therefore, the and expansion of the assessee’s export business and, therefore, the expenditure incurred towards such services constituted legitimate expenditure incurred towards such services constituted legitimate expenditure incurred towards such services constituted legitimate business expenditure wholly and exclusively incurred for business business expenditure wholly and exclusively incurred for busin business expenditure wholly and exclusively incurred for busin purposes. It was further submitted that the genuineness of the It was further submitted that the genuineness of the It was further submitted that the genuineness of the services rendered by the AE and the expenses incurred by it were services rendered by the AE and the expenses incurred by it were services rendered by the AE and the expenses incurred by it were substantiated substantiated substantiated through through through documentary documentary documentary evidences, evidences, evidences, including including including accountant certificates certifying the costs incurred by the AE. accountant certificates certifying the costs incurred by the AE. accountant certificates certifying the costs incurred by the AE.

IPCA Laboratories Limited, IPCA Laboratories Limited, 137 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Financial statements of the AE were also furnished to demonstrate ancial statements of the AE were also furnished to demonstrate ancial statements of the AE were also furnished to demonstrate that the underlying expenditure had actually been incurred and that the underlying expenditure had actually been incurred and that the underlying expenditure had actually been incurred and only the markup/service charge component had been reflected as only the markup/service charge component had been reflected as only the markup/service charge component had been reflected as income in the hands of the AE. income in the hands of the AE. It was submitted that AE had submitted that AE had undertaken commercial and financial risks while rendering the aken commercial and financial risks while rendering the aken commercial and financial risks while rendering the aforesaid services and, therefore, payment of markup/service aforesaid services and, therefore, payment of markup/service aforesaid services and, therefore, payment of markup/service charges was commercially justified. It was submitted that a markup charges was commercially justified. It was submitted that a markup charges was commercially justified. It was submitted that a markup of 20% could not be regarded as excessive considering the functions of 20% could not be regarded as excessive considering the functions of 20% could not be regarded as excessive considering the functions performed and risks assumed by the AE. The absence of a formal ormed and risks assumed by the AE. The absence of a formal ormed and risks assumed by the AE. The absence of a formal written agreement was also explained by stating that the AE was a written agreement was also explained by stating that the AE was a written agreement was also explained by stating that the AE was a wholly owned subsidiary and the transactions were carried out wholly owned subsidiary and the transactions were carried out wholly owned subsidiary and the transactions were carried out based on established business understanding supported by proper based on established business understanding supported by proper based on established business understanding supported by proper debit notes. Hence, merely because a formal agreement was not notes. Hence, merely because a formal agreement was not notes. Hence, merely because a formal agreement was not furnished, the genuineness of the services could not be doubted. furnished, the genuineness of the services could not be doubted. furnished, the genuineness of the services could not be doubted. 19.18 With regards to the contention of the TPO for considering With regards to the contention of the TPO for considering With regards to the contention of the TPO for considering the AE as the tested party, the AE as the tested party, it is submitted that AE was situated in a it is submitted that AE was situated in a foreign jurisdiction and reliable comparable data relating to the AE foreign jurisdiction and reliable comparable data relating to the AE foreign jurisdiction and reliable comparable data relating to the AE was not available in the Indian public domain. Further, since the was not available in the Indian public domain. Further, since the was not available in the Indian public domain. Further, since the AE was functioning exclusively for the benefit of the assessee, it AE was functioning exclusively for the benefit of the assessee, it AE was functioning exclusively for the benefit of the assessee, it could not be regarded as the least complex entity for transfer could not be regarded as the least complex entity for could not be regarded as the least complex entity for pricing purposes. It is thus submitted that the approach adopted by pricing purposes. It is thus submitted that the approach adopted by pricing purposes. It is thus submitted that the approach adopted by the TPO was impractical and contrary to settled transfer pricing the TPO was impractical and contrary to settled transfer pricing the TPO was impractical and contrary to settled transfer pricing principles. Further, it is pointed out that that assessee has principles. Further, it is pointed out that that assessee has principles. Further, it is pointed out that that assessee has

IPCA Laboratories Limited, IPCA Laboratories Limited, 138 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

undertaken similar transactions with the same AE in AY 2018-19 undertaken similar transactions with the same AE in undertaken similar transactions with the same AE in which has been accepted by the Department and, therefore, which has been accepted by the Department and, therefore, which has been accepted by the Department and, therefore, following the principle of consistency, no adjustment ought to be following the principle of consistency, no adjustment ought to be following the principle of consistency, no adjustment ought to be made in the year under consideration. It was also pointed out that made in the year under consideration. It was also pointed out that made in the year under consideration. It was also pointed out that the AE had admittedly incurred various expenditures on behalf of the AE had admittedly incurred various expenditure the AE had admittedly incurred various expenditure the assessee and employed staff/personnel in the USA, due to the assessee and employed staff/personnel in the USA, due to the assessee and employed staff/personnel in the USA, due to which incurrence of administrative and support costs was natural which incurrence of administrative and support costs was natural which incurrence of administrative and support costs was natural and commercially expedient. Further, the TPO had not brought any and commercially expedient. Further, the TPO had not brought any and commercially expedient. Further, the TPO had not brought any comparable instances on record to demonstrate that the markup of comparable instances on record to demonstrate that th comparable instances on record to demonstrate that th 20% was excessive or not at arm’s length. In absence of any such 20% was excessive or not at arm’s length. In absence of any such 20% was excessive or not at arm’s length. In absence of any such comparable analysis, the adjustment made by the TPO was stated comparable analysis, the adjustment made by the TPO was stated comparable analysis, the adjustment made by the TPO was stated to be arbitrary and unsustainable. to be arbitrary and unsustainable. 19.19 Further, in reference to the ld. DR argument that profit Further, in reference to the ld. DR argument that profit Further, in reference to the ld. DR argument that profit percentage is high, reference can be made to the CBDT Notification h, reference can be made to the CBDT Notification h, reference can be made to the CBDT Notification dated 7 June 2017 no dated 7 June 2017 notifying the Safe Harbour Rules, i tifying the Safe Harbour Rules, it was submitted that sub-rule (2A), column 3 of the said Rules provides rule (2A), column 3 of the said Rules provides rule (2A), column 3 of the said Rules provides that in cases where the international transaction involves provision that in cases where the international transaction involves provision that in cases where the international transaction involves provision of Knowledge Process Outsourcing (KPO) services, the operating Process Outsourcing (KPO) services, the operating Process Outsourcing (KPO) services, the operating profit margin in relation to operating expenses should not be less profit margin in relation to operating expenses should not be less profit margin in relation to operating expenses should not be less than 24% for determination of the Arm’s Length Price. Though the than 24% for determination of the Arm’s Length Price. Though the than 24% for determination of the Arm’s Length Price. Though the present services are not KPO services, however, a comparison can present services are not KPO services, however, a comparison can present services are not KPO services, however, a comparison can be drawn from such notification wherein margin @ 24% has been from such notification wherein margin @ 24% has been from such notification wherein margin @ 24% has been approved. Accordingly, the assessee submitted that the transfer approved. Accordingly, the assessee submitted that the transfer approved. Accordingly, the assessee submitted that the transfer

IPCA Laboratories Limited, IPCA Laboratories Limited, 139 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

pricing adjustment made by the ld. TPO in respect of service pricing adjustment made by the ld. TPO in respect of service pricing adjustment made by the ld. TPO in respect of service charges/markup paid to the AE was unjustified, contrary to the charges/markup paid to the AE was unjustified, contrary to the charges/markup paid to the AE was unjustified, contrary to the facts on record and liable to be deleted. d and liable to be deleted. 19.20 We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the orders of the authorities below as well as the material perused the orders of the authorities below as well as the material perused the orders of the authorities below as well as the material available on record. The issue in controversy relates to the transfer The issue in controversy relates to the transfer The issue in controversy relates to the transfer pricing adjustment made by th pricing adjustment made by the Transfer Pricing Officer by e Transfer Pricing Officer by determining the Arm’s Length Price of the service charge/mark-up determining the Arm’s Length Price of the service charge/mark determining the Arm’s Length Price of the service charge/mark paid by the assessee to its Associated Enterprise, M/s IPCA paid by the assessee to its Associated Enterprise, M/s IPCA paid by the assessee to its Associated Enterprise, M/s IPCA Pharmaceuticals Inc., USA, at ‘Nil’. The services in question Pharmaceuticals Inc., USA, at ‘Nil’. The services in question Pharmaceuticals Inc., USA, at ‘Nil’. The services in question comprise marketing comprise marketing support, liaisoning activities, regulatory support, liaisoning activities, regulatory compliance assistance, customer coordination and follow-up of compliance assistance, customer coordination and follow compliance assistance, customer coordination and follow export realisations in the United States market. export realisations in the United States market.

19.21 At the outset, it is pertinent to note that the existence At the outset, it is pertinent to note that the existence At the outset, it is pertinent to note that the existence and actual rendition of services by the Associated Enterprise have and actual rendition of services by the Associated Enterprise have and actual rendition of services by the Associated Enterprise have not been disputed by the Revenue. The material on record not been disputed by the Revenue. The material on record not been disputed by the Revenue. The material on record demonstrates that the Associated Enterprise was actively engaged demonstrates that the Associated Enterprise was actively engaged demonstrates that the Associated Enterprise was actively engaged in facilitating the assessee’s business operations in the United tating the assessee’s business operations in the United tating the assessee’s business operations in the United States by undertaking regulatory liaisoning, customer support, States by undertaking regulatory liaisoning, customer support, States by undertaking regulatory liaisoning, customer support, market development and coordination activities. The learned CIT(A) market development and coordination activities. The learned CIT(A) market development and coordination activities. The learned CIT(A) has recorded a categorical finding that the Associated Enterprise has recorded a categorical finding that the Associated Enterprise has recorded a categorical finding that the Associated Enterprise had incurred expenditure in rendering such services and that the incurred expenditure in rendering such services and that the incurred expenditure in rendering such services and that the genuineness genuineness genuineness of of of the the the expenditure expenditure expenditure stood stood stood substantiated substantiated substantiated by by by

IPCA Laboratories Limited, IPCA Laboratories Limited, 140 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

documentary evidence, including certification issued by an documentary evidence, including certification issued by an documentary evidence, including certification issued by an independent Certified Public Accountant. These findings have not independent Certified Public Accountant. These findings have not independent Certified Public Accountant. These findings have not been controverted by the Revenue by bringing any material to the by the Revenue by bringing any material to the by the Revenue by bringing any material to the contrary.

19.22 We further find that the assessee has substantial export We further find that the assessee has substantial export We further find that the assessee has substantial export operations in the United States market and is engaged in the operations in the United States market and is engaged in the operations in the United States market and is engaged in the development and marketing of pharmaceutical products requiring development and marketing of pharmaceutical products requiring development and marketing of pharmaceutical products requiring continuous interaction with the USFDA and other regulatory interaction with the USFDA and other regulatory interaction with the USFDA and other regulatory authorities. The establishment of a dedicated Associated Enterprise authorities. The establishment of a dedicated Associated Enterprise authorities. The establishment of a dedicated Associated Enterprise in the United States for undertaking marketing, liaisoning and in the United States for undertaking marketing, liaisoning and in the United States for undertaking marketing, liaisoning and regulatory support functions cannot, therefore, be regarded as regulatory support functions cannot, therefore, be regarded as regulatory support functions cannot, therefore, be regarded as lacking commercial rationale or business expediency. On the cial rationale or business expediency. On the cial rationale or business expediency. On the contrary, the arrangement appears to be a legitimate business contrary, the arrangement appears to be a legitimate business contrary, the arrangement appears to be a legitimate business structure designed to support and facilitate the assessee’s overseas structure designed to support and facilitate the assessee’s overseas structure designed to support and facilitate the assessee’s overseas operations.

19.23 It is well settled that the Transfer Pricing Officer is It is well settled that the Transfer Pricing Officer is It is well settled that the Transfer Pricing Officer is empowered to determine the arm’s length price of an international ered to determine the arm’s length price of an international ered to determine the arm’s length price of an international transaction, but he cannot disregard a genuine transaction or transaction, but he cannot disregard a genuine transaction or transaction, but he cannot disregard a genuine transaction or determine its value at ‘Nil’ merely on the basis of subjective determine its value at ‘Nil’ merely on the basis of subjective determine its value at ‘Nil’ merely on the basis of subjective perceptions regarding the necessity or benefit of the expenditure. perceptions regarding the necessity or benefit of the expenditure. perceptions regarding the necessity or benefit of the expenditure. Once the taxpayer establishes the actual rendition of services and e the taxpayer establishes the actual rendition of services and e the taxpayer establishes the actual rendition of services and demonstrates that expenditure has been incurred in connection demonstrates that expenditure has been incurred in connection demonstrates that expenditure has been incurred in connection therewith, the arm’s length analysis must be undertaken on the therewith, the arm’s length analysis must be undertaken on the therewith, the arm’s length analysis must be undertaken on the

IPCA Laboratories Limited, IPCA Laboratories Limited, 141 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

basis of recognized transfer pricing principles and appropriate basis of recognized transfer pricing principles and appropriate basis of recognized transfer pricing principles and appropriate comparability analysis. parability analysis.

19.24 In the present case, the Transfer Pricing Officer has In the present case, the Transfer Pricing Officer has In the present case, the Transfer Pricing Officer has neither demonstrated that the services were not rendered nor neither demonstrated that the services were not rendered nor neither demonstrated that the services were not rendered nor brought any comparable uncontrolled transaction on record to brought any comparable uncontrolled transaction on record to brought any comparable uncontrolled transaction on record to establish that the mark establish that the mark-up of 20 per cent was excessi up of 20 per cent was excessive. Significantly, no independent benchmarking exercise has been Significantly, no independent benchmarking exercise has been Significantly, no independent benchmarking exercise has been undertaken by the Revenue to justify determination of the Arm’s undertaken by the Revenue to justify determination of the Arm’s undertaken by the Revenue to justify determination of the Arm’s Length Price at ‘Nil’. Such an approach, in our considered opinion, Length Price at ‘Nil’. Such an approach, in our considered opinion, Length Price at ‘Nil’. Such an approach, in our considered opinion, is contrary to the settled principles governing transfer pricing is contrary to the settled principles governing transfer pr is contrary to the settled principles governing transfer pr adjudication.

19.25 We also find merit in the contention of the assessee that We also find merit in the contention of the assessee that We also find merit in the contention of the assessee that reliable comparable data pertaining to entities situated in the reliable comparable data pertaining to entities situated in the reliable comparable data pertaining to entities situated in the foreign jurisdiction was not readily available and that the assessee foreign jurisdiction was not readily available and that the assessee foreign jurisdiction was not readily available and that the assessee had, therefore, benchmarked the transac had, therefore, benchmarked the transaction by adopting the tion by adopting the Transactional Net Margin Method. The learned CIT(A) has recorded Transactional Net Margin Method. The learned CIT(A) has recorded Transactional Net Margin Method. The learned CIT(A) has recorded a finding that the Transfer Pricing Officer failed to identify any a finding that the Transfer Pricing Officer failed to identify any a finding that the Transfer Pricing Officer failed to identify any suitable comparable enterprise to support his alternate approach of suitable comparable enterprise to support his alternate approach of suitable comparable enterprise to support his alternate approach of considering the Associated Enterpri considering the Associated Enterprise as the tested party. The se as the tested party. The Revenue has not been able to demonstrate any perversity in the Revenue has not been able to demonstrate any perversity in the Revenue has not been able to demonstrate any perversity in the said finding.

IPCA Laboratories Limited, IPCA Laboratories Limited, 142 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

19.26 Another important circumstance which cannot be Another important circumstance which cannot be Another important circumstance which cannot be ignored is that a similar mark ignored is that a similar mark-up charged by the same Associated up charged by the same Associated Enterprise in a subsequent assess Enterprise in a subsequent assessment year was accepted by the ment year was accepted by the Department. In the absence of any material change either in facts Department. In the absence of any material change either in facts Department. In the absence of any material change either in facts or in law, the principle of consistency also lends support to the or in law, the principle of consistency also lends support to the or in law, the principle of consistency also lends support to the assessee’s case.

19.27 Having Having Having regard regard regard to to to the the the totality totality totality of of of the the the facts facts facts and and and circumstances, we are of circumstances, we are of the considered view that the learned the considered view that the learned CIT(A) correctly appreciated the factual and legal position and CIT(A) correctly appreciated the factual and legal position and CIT(A) correctly appreciated the factual and legal position and rightly concluded that the determination of the Arm’s Length Price rightly concluded that the determination of the Arm’s Length Price rightly concluded that the determination of the Arm’s Length Price of the impugned services at ‘Nil’ was unsustainable. The findings of the impugned services at ‘Nil’ was unsustainable. The findings of the impugned services at ‘Nil’ was unsustainable. The findings recorded by the learn recorded by the learned CIT(A) are based on proper appreciation of ed CIT(A) are based on proper appreciation of the evidence on record and do not suffer from any legal or factual the evidence on record and do not suffer from any legal or factual the evidence on record and do not suffer from any legal or factual infirmity warranting interference by this Tribunal. infirmity warranting interference by this Tribunal.

19.28 Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) Accordingly, we uphold the order of the learned CIT(A) deleting the transfer pricing deleting the transfer pricing adjustment made in respect of the adjustment made in respect of the service charge/mark service charge/mark-up paid to M/s IPCA Pharmaceuticals Inc., up paid to M/s IPCA Pharmaceuticals Inc., USA. Consequently, Ground Nos. 5.1 to 5.3 raised by the Revenue USA. Consequently, Ground Nos. 5.1 to 5.3 raised by the Revenue USA. Consequently, Ground Nos. 5.1 to 5.3 raised by the Revenue stands dismissed.

IPCA Laboratories Limited, IPCA Laboratories Limited, 143 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

“1. Whether on the facts and circumstances of the case and 1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) 1. Whether on the facts and circumstances of the case and erred in confirming the disallowance of Rs. 14,10,70,135/ erred in confirming the disallowance of Rs. 14,10,70,135/-on account of alleged on account of alleged freebie services provided by the appellant to the medical practitioners is on flimsy freebie services provided by the appellant to the medical practitioners is on flimsy freebie services provided by the appellant to the medical practitioners is on flimsy grounds and not considering the submissions made by the appellant during the grounds and not considering the submissions made by the appellant during grounds and not considering the submissions made by the appellant during course of assessment vide its representatives letter dated 16th December 2019 course of assessment vide its representatives letter dated 16th December 2019 course of assessment vide its representatives letter dated 16th December 2019 and not following the decisions of th and not following the decisions of the PHL Pharma (P). Ltd. (163 ITD 10) and PHL Pharma (P). Ltd. (163 ITD 10) and Solve Pharma Ltd v/s CIT (169 ITD 13) and Delhi High Court in the case of Max Solve Pharma Ltd v/s CIT (169 ITD 13) and Delhi High Court in the case of Max Solve Pharma Ltd v/s CIT (169 ITD 13) and Delhi High Court in the case of Max Hospital us. MCI (WPC 1334 of 2013 the Mumbai Tribunal in the case of DCIT us. WPC 1334 of 2013 the Mumbai Tribunal in the case of DCIT us. WPC 1334 of 2013 the Mumbai Tribunal in the case of DCIT us. dated 10.1.2014). 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in disallowing expenses of Rs.36,65,376/u/s. 14A as against Rs. erred in disallowing expenses of Rs.36,65,376/u/s. 14A as against Rs. erred in disallowing expenses of Rs.36,65,376/u/s. 14A as against Rs. 1,02,307/-disallowed by th disallowed by the appellant company in the return of income. the case e appellant company in the return of income. the case and in law, Ld. CIT(A) has and in law, Ld. CIT(A) has

IPCA Laboratories Limited, IPCA Laboratories Limited, 144 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

IPCA Laboratories Limited, IPCA Laboratories Limited, 145 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment done deleting the transfer pricing adjustment done by the TPO of Rs deleting the transfer pricing adjustment done 1,57,11,574/- made on account of sale of products to it's Associated Enterprise made on account of sale of products to it's Associated Enterprise made on account of sale of products to it's Associated Enterprise Le. IPCA Pharma Nigeria Ltd.? Le. IPCA Pharma Nigeria Ltd.? 11.2 Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 11.2 Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is 11.2 Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjust justified deleting the transfer pricing adjustment done by the TPO without ment done by the TPO without appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the appreciating the flaws pointed out by the TPO in the method used by the assessee? 11.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO in determining Arm's Length Price erred in rejecting the adjustment done by TPO in determining Arm' erred in rejecting the adjustment done by TPO in determining Arm' (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the (ALP) by considering the CUP method as most appropriate method because the same has been done by the TPO in earlier years and has been upheld by Ld same has been done by the TPO in earlier years and has been upheld by Ld same has been done by the TPO in earlier years and has been upheld by Ld CIT(A) in its orders for AY 2008 CIT(A) in its orders for AY 2008-09 to AY 2011-12?" 12.1 "Whether on facts and circumstances 12.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) of the case and in law, the Ld. CIT(A) is justified is justified deleting the transfer pricing adjustment of Rs. is justified is justified deleting the transfer pricing adjustment of Rs. is justified is justified deleting the transfer pricing adjustment of Rs. 1,43,80,044/-made on account of service charges paid to its Associated made on account of service charges paid to its Associated made on account of service charges paid to its Associated Enterprise in USA ?" Enterprise in USA ?" 12.2 "Whether on facts and circumstances of the cas 12.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) e and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO wherein the TPO has observed that erred in rejecting the adjustment done by TPO wherein the TPO has observed that erred in rejecting the adjustment done by TPO wherein the TPO has observed that onus cast on the assessee to justify the payment of cost plus 25% to the AE by onus cast on the assessee to justify the payment of cost plus 25% to the AE by onus cast on the assessee to justify the payment of cost plus 25% to the AE by benchmarking the above transaction as per provisions of section 92C of the benchmarking the above transaction as per provisions of section 92C benchmarking the above transaction as per provisions of section 92C Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?". 12.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 12.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 12.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the transfer pricing adjustment done by the TPO without is justified in deleting the transfer pricing adjustment done by the TPO without is justified in deleting the transfer pricing adjustment done by the TPO without appreciating the fact that the TPO has pointed out that the assessee has not done the fact that the TPO has pointed out that the assessee has not done the fact that the TPO has pointed out that the assessee has not done any benchmarking in arriving at the payment of cost plus 25% to the AE for the any benchmarking in arriving at the payment of cost plus 25% to the AE for the any benchmarking in arriving at the payment of cost plus 25% to the AE for the service charges paid"? service charges paid"?” 21. Ground No. 1 was was not pressed and, therefore, dismissed not pressed and, therefore, dismissed as infructuous.

IPCA Laboratories Limited, IPCA Laboratories Limited, 146 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

IPCA Laboratories Limited, IPCA Laboratories Limited, 147 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

investments yielding exempt income. The learned CIT(A) further vestments yielding exempt income. The learned CIT(A) further vestments yielding exempt income. The learned CIT(A) further noted that the Assessing Officer had failed to establish any direct noted that the Assessing Officer had failed to establish any direct noted that the Assessing Officer had failed to establish any direct nexus between the borrowed funds and the investments from which nexus between the borrowed funds and the investments from which nexus between the borrowed funds and the investments from which exempt income had been earned. Relying upon the judgments of the exempt income had been earned. Relying upon the judgments of th exempt income had been earned. Relying upon the judgments of th Hon’ble Bombay High Court in CIT v. HDFC Bank Ltd. CIT v. HDFC Bank Ltd. [(2014) 366 Hon’ble Bombay High Court in ITR 505 (Bom)] and and HDFC Bank Ltd. v. DCIT [(2016) 383 ITR [(2016) 383 ITR 529 (Bom)], the learned CIT(A) held that where sufficient interest the learned CIT(A) held that where sufficient interest- the learned CIT(A) held that where sufficient interest free funds are available with the assessee, a presumption arises free funds are available with the assessee, a presumption arises free funds are available with the assessee, a presumption arises that the investments have been made out of such own funds and, hat the investments have been made out of such own funds and, hat the investments have been made out of such own funds and, consequently, no disallowance of interest expenditure under Rule consequently, no disallowance of interest expenditure under Rule consequently, no disallowance of interest expenditure under Rule 8D(2)(ii) is warranted. 8D(2)(ii) is warranted.

23.3 The learned CIT(A) further accepted the contention of the The learned CIT(A) further accepted the contention of the The learned CIT(A) further accepted the contention of the assessee that for the purpose of computing assessee that for the purpose of computing disallowance under Rule disallowance under Rule 8D(2)(iii), only those investments which had actually yielded exempt 8D(2)(iii), only those investments which had actually yielded exempt 8D(2)(iii), only those investments which had actually yielded exempt income during the relevant previous year could be considered. income during the relevant previous year could be considered. income during the relevant previous year could be considered. Following the decision of the Special Bench of the Tribunal in ACIT Following the decision of the Special Bench of the Tribunal in Following the decision of the Special Bench of the Tribunal in v. Vireet Investment Pvt. Ltd. v. Vireet Investment Pvt. Ltd. [(2017) 82 taxmann.com 415 (2017) 82 taxmann.com 415 (Delhi-Trib.) (SB)], the learned CIT(A) directed the Assessing Officer the learned CIT(A) directed the Assessing Officer the learned CIT(A) directed the Assessing Officer to restrict the computation under Rule 8D(2)(iii) only to such to restrict the computation under Rule 8D(2)(iii) only to such to restrict the computation under Rule 8D(2)(iii) only to such investments and further allow appropriate credit for the suo motu investments and further allow appropriate credit for the suo motu investments and further allow appropriate credit for the suo motu disallowance already offered b disallowance already offered by the assessee.

23.4 The learned CIT(A) also held that the disallowance computed The learned CIT(A) also held that the disallowance computed The learned CIT(A) also held that the disallowance computed under Section 14A read with Rule 8D could not be imported into under Section 14A read with Rule 8D could not be imported into under Section 14A read with Rule 8D could not be imported into

IPCA Laboratories Limited, IPCA Laboratories Limited, 148 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

the computation of book profit under Section 115JB of the Act. In the computation of book profit under Section 115JB of the Act. In the computation of book profit under Section 115JB of the Act. In reaching the said conclusion, reliance was aga reaching the said conclusion, reliance was again placed upon the in placed upon the decision of the Special Bench in decision of the Special Bench in Vireet Investment Pvt. Ltd. Vireet Investment Pvt. Ltd. (supra), wherein it was held that the mechanism prescribed under Section wherein it was held that the mechanism prescribed under Section wherein it was held that the mechanism prescribed under Section 14A and Rule 8D has no application while computing book profit 14A and Rule 8D has no application while computing book profit 14A and Rule 8D has no application while computing book profit under clause (f) of Explanation 1 to Sec under clause (f) of Explanation 1 to Section 115JB. tion 115JB. The relevant findings of the learned findings of the learned CIT(A) are reproduced as under: CIT(A) are reproduced as under:

30.3 During the course of appellate proceedings, the assesse has submitted that 30.3 During the course of appellate proceedings, the assesse 30.3 During the course of appellate proceedings, the assesse the appellant has sufficient own funds (capital and reserves) far in excess of the the appellant has sufficient own funds (capital and reserves) far in excess of the the appellant has sufficient own funds (capital and reserves) far in excess of the investments made that yield exempt income during the relevant assessment year made that yield exempt income during the relevant assessment year made that yield exempt income during the relevant assessment year according no disallowance should be made under rule 8D(). Further, with respect according no disallowance should be made under rule 8D(). Further, with respect according no disallowance should be made under rule 8D(). Further, with respect to disallowance made under rule BD(), the assessee submitted that AC has to disallowance made under rule BD(), the assessee submitted that AC has to disallowance made under rule BD(), the assessee submitted that AC has considered the entire investments, th considered the entire investments, the assessee pleaded that on those e assessee pleaded that on those investments which axempt income should only be considered for Rule BD(iii) investments which axempt income should only be considered for Rule BD(iii) investments which axempt income should only be considered for Rule BD(iii) computation. 30.4 Further, the assessee also pointed out that above disallowance was also 30.4 Further, the assessee also pointed out that above disallowance was also 30.4 Further, the assessee also pointed out that above disallowance was also adjusted by the AO in the book profit computed for the pur adjusted by the AO in the book profit computed for the purpose of 115JB of the pose of 115JB of the Act. In this regard, assessee has relied on the decision of Delhi tribunal in the Act. In this regard, assessee has relied on the decision of Delhi tribunal in the Act. In this regard, assessee has relied on the decision of Delhi tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 taxmann.com 415. case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 taxmann.com 415. case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 taxmann.com 415. 30.5 I have considered the facts of the case and submission filed by the assesse. 30.5 I have considered the facts of the case and submission filed by the ass 30.5 I have considered the facts of the case and submission filed by the ass In the assessment order, AO has made disallowance under Rüle 8D(ii) on account In the assessment order, AO has made disallowance under Rüle 8D(ii) on account In the assessment order, AO has made disallowance under Rüle 8D(ii) on account of interest and Rule 8D(iii) on account of average investment. I find that the of interest and Rule 8D(iii) on account of average investment. I find that the of interest and Rule 8D(iii) on account of average investment. I find that the assesse has own funds in excess of the investment made and AO has not made assesse has own funds in excess of the investment made and AO has not made assesse has own funds in excess of the investment made and AO has not made any linkage that the interest bearing fundshave been used for the purpose of the interest bearing fundshave been used for the purpose of the interest bearing fundshave been used for the purpose of investment. The assesse has relied upon the decision of Bombay High Court in investment. The assesse has relied upon the decision of Bombay High Court in investment. The assesse has relied upon the decision of Bombay High Court in the case of CIT v. HDFC Bank Ltd. [2014] 366 ITR 505 and HDFC Bank Ltd. v. the case of CIT v. HDFC Bank Ltd. [2014] 366 ITR 505 and HDFC Bank Ltd. v. the case of CIT v. HDFC Bank Ltd. [2014] 366 ITR 505 and HDFC Bank Ltd. v. DCIT [2016] 383 ITR 529, Following the decis DCIT [2016] 383 ITR 529, Following the decision of jurisdictional High Court, I ion of jurisdictional High Court, I hold that no interest disallowance can be made under Rule 8D(il) where the own hold that no interest disallowance can be made under Rule 8D(il) where the own hold that no interest disallowance can be made under Rule 8D(il) where the own funds are much more than the investiment amount funds are much more than the investiment amount 30.6 Further, assesse has submitted that while applying Rule 8D(iii), only 30.6 Further, assesse has submitted that while applying Rule 8D(iii), only 30.6 Further, assesse has submitted that while applying Rule 8D(iii), only investment on which exempt income has been earned shall be considered. This h exempt income has been earned shall be considered. This h exempt income has been earned shall be considered. This issue is covered in the favour of the assessee by the decision of Hon'ble Delhi issue is covered in the favour of the assessee by the decision of Hon'ble Delhi issue is covered in the favour of the assessee by the decision of Hon'ble Delhi Tribunal in the case of Vireet Investment Pvt. Ltd. Following the decision of Tribunal in the case of Vireet Investment Pvt. Ltd. Following the decision of Tribunal in the case of Vireet Investment Pvt. Ltd. Following the decision of Tribunal, I hold that the disallowance c Tribunal, I hold that the disallowance can be made under Rule 8D(iii) only on the an be made under Rule 8D(iii) only on the

IPCA Laboratories Limited, IPCA Laboratories Limited, 149 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

investment on which exempt income has been earned. The AO shall allow set off investment on which exempt income has been earned. The AO shall allow set off investment on which exempt income has been earned. The AO shall allow set off of the disallowance already made by the assesse. of the disallowance already made by the assesse. 30.7 Further, I also find favour in the argument of the assessee that the 30.7 Further, I also find favour in the argument of the assessee that the 30.7 Further, I also find favour in the argument of the assessee that the disallowance made u/s 14A r.w.r 8D should not be adjusted while computing the made u/s 14A r.w.r 8D should not be adjusted while computing the made u/s 14A r.w.r 8D should not be adjusted while computing the book profit for the purpose of section 115JB. This issue is covered in the favour of book profit for the purpose of section 115JB. This issue is covered in the favour of book profit for the purpose of section 115JB. This issue is covered in the favour of the assessee by the decision of Hon'ble Delhi Tribunal in the case of Vireet the assessee by the decision of Hon'ble Delhi Tribunal in the case of Vireet the assessee by the decision of Hon'ble Delhi Tribunal in the case of Vireet Investment Pvt. Ltd. Therefor Investment Pvt. Ltd. Therefore, AO is directed to not to make any adjustments in e, AO is directed to not to make any adjustments in the book profit in respect of the above disallowance. the book profit in respect of the above disallowance. In light of the above In light of the above discussion, ground no. 3.1 to 3.6 are partly allowed discussion, ground no. 3.1 to 3.6 are partly allowed” 23.5 Before us, the learned counsel for the assessee supported the Before us, the learned counsel for the assessee supported the Before us, the learned counsel for the assessee supported the order of the learned CIT(A) and submitted that the assessee f the learned CIT(A) and submitted that the assessee f the learned CIT(A) and submitted that the assessee possessed sufficient own funds far in excess of the investments possessed sufficient own funds far in excess of the investments possessed sufficient own funds far in excess of the investments yielding exempt income and, therefore, no disallowance under Rule yielding exempt income and, therefore, no disallowance under Rule yielding exempt income and, therefore, no disallowance under Rule 8D(2)(ii) could legally be sustained. It was further submitted that, 8D(2)(ii) could legally be sustained. It was further submitted that, 8D(2)(ii) could legally be sustained. It was further submitted that, after restricting the investments only to those which had actually r restricting the investments only to those which had actually r restricting the investments only to those which had actually generated exempt income, the disallowance under Rule 8D(2)(iii) generated exempt income, the disallowance under Rule 8D(2)(iii) generated exempt income, the disallowance under Rule 8D(2)(iii) worked out to ₹84,085/ 84,085/-, which was lower than the , which was lower than the suo motu disallowance of ₹1,02,037/ 1,02,037/- already offered by the assessee. already offered by the assessee. According to the learned counsel, no further disallowance survived to the learned counsel, no further disallowance survived to the learned counsel, no further disallowance survived for consideration. It was also contended that the settled legal for consideration. It was also contended that the settled legal for consideration. It was also contended that the settled legal position, as laid down by the Special Bench in position, as laid down by the Special Bench in Vireet Investment Pvt. Vireet Investment Pvt. Ltd. (supra), clearly prohibits any adjustment of disallowance u (supra), clearly prohibits any adjustment of disallowance under (supra), clearly prohibits any adjustment of disallowance u Section 14A while computing book profit under Section 115JB of Section 14A while computing book profit under Section 115JB of Section 14A while computing book profit under Section 115JB of the Act.

23.6 We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the material available on record. We find no merit in the perused the material available on record. We find no merit in the perused the material available on record. We find no merit in the grievance raised by the Revenue. grievance raised by the Revenue.

IPCA Laboratories Limited, IPCA Laboratories Limited, 150 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

23.7 The learned CIT(A) has recorded a categorical finding that the The learned CIT(A) has recorded a categorical finding that the The learned CIT(A) has recorded a categorical finding that the assessee possessed substantial own funds, comprising share capital assessee possessed substantial own funds, comprising share capital assessee possessed substantial own funds, comprising share capital and free reserves, far in excess of the investments yielding exempt and free reserves, far in excess of the investments yielding exempt and free reserves, far in excess of the investments yielding exempt income. The Revenue has not brought any material on record to income. The Revenue has not brought any material on record income. The Revenue has not brought any material on record demonstrate any nexus between the borrowed funds and the demonstrate any nexus between the borrowed funds and the demonstrate any nexus between the borrowed funds and the investments from which exempt income was earned. In such investments from which exempt income was earned. In such investments from which exempt income was earned. In such circumstances, the presumption recognized by the Hon’ble circumstances, the presumption recognized by the Hon’ble circumstances, the presumption recognized by the Hon’ble jurisdictional High Court in CIT v. HDFC Bank Ltd. CIT v. HDFC Bank Ltd.(supra) and jurisdictional High Court in HDFC Bank Ltd. v. D HDFC Bank Ltd. v. DCIT (supra) squarely applies, namely, that squarely applies, namely, that where sufficient interest where sufficient interest-free funds are available, investments are free funds are available, investments are deemed to have been made out of such funds. Consequently, no deemed to have been made out of such funds. Consequently, no deemed to have been made out of such funds. Consequently, no disallowance of interest expenditure under Rule 8D(2)(ii) can be disallowance of interest expenditure under Rule 8D(2)(ii) can be disallowance of interest expenditure under Rule 8D(2)(ii) can be sustained.

23.8 We further find that the learned CIT(A) has correctly directed further find that the learned CIT(A) has correctly directed further find that the learned CIT(A) has correctly directed that, for the purpose of computing disallowance under Rule that, for the purpose of computing disallowance under Rule that, for the purpose of computing disallowance under Rule 8D(2)(iii), only those investments which have actually yielded 8D(2)(iii), only those investments which have actually yielded 8D(2)(iii), only those investments which have actually yielded exempt income during the relevant previous year are to be exempt income during the relevant previous year are to be exempt income during the relevant previous year are to be considered. The said issue stands concluded by the decision of the said issue stands concluded by the decision of the said issue stands concluded by the decision of the Special Bench of the Tribunal in ACIT v. Vireet Investment Pvt. ACIT v. Vireet Investment Pvt. Special Bench of the Tribunal in Ltd., which has been consistently followed in a catena of decisions. which has been consistently followed in a catena of decisions. which has been consistently followed in a catena of decisions. The Revenue has not placed before us any contrary binding The Revenue has not placed before us any contrary binding The Revenue has not placed before us any contrary binding precedent warranting a departure from the aforesaid view. anting a departure from the aforesaid view. anting a departure from the aforesaid view.

IPCA Laboratories Limited, IPCA Laboratories Limited, 151 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

23.9 It has also been brought to our notice that, upon considering It has also been brought to our notice that, upon considering It has also been brought to our notice that, upon considering only those investments which yielded exempt income, the only those investments which yielded exempt income, the only those investments which yielded exempt income, the disallowance under Rule 8D(2)(iii) works out to disallowance under Rule 8D(2)(iii) works out to ₹84,085/ 84,085/-, whereas the assessee had alrea the assessee had already made a suo motu disallowance of disallowance of ₹1,02,037/- under Section 14A of the Act. This factual position has under Section 14A of the Act. This factual position has under Section 14A of the Act. This factual position has not been controverted by the Revenue. Therefore, no further not been controverted by the Revenue. Therefore, no further not been controverted by the Revenue. Therefore, no further disallowance survives for consideration. disallowance survives for consideration.

23.10 We also find no infirmity in the direction of the learned We also find no infirmity in the direction of We also find no infirmity in the direction of CIT(A) that the disallowance computed under Section 14A read with CIT(A) that the disallowance computed under Section 14A read with CIT(A) that the disallowance computed under Section 14A read with Rule 8D cannot be imported into the computation of book profit Rule 8D cannot be imported into the computation of book profit Rule 8D cannot be imported into the computation of book profit under Section 115JB of the Act. The issue is squarely covered by under Section 115JB of the Act. The issue is squarely covered by under Section 115JB of the Act. The issue is squarely covered by the decision of the Special Bench of the Tribunal in Vireet the decision of the Special Bench of the Tribunal the decision of the Special Bench of the Tribunal Investment Pvt. Ltd. (supra), wherein it has been held that the (supra), wherein it has been held that the computation mechanism contained in Section 14A and Rule 8D has computation mechanism contained in Section 14A and Rule 8D has computation mechanism contained in Section 14A and Rule 8D has no application while determining book profit under clause (f) of no application while determining book profit under clause (f) of no application while determining book profit under clause (f) of Explanation 1 to Section 115JB. Explanation 1 to Section 115JB.

23.11 In our considered opinion, the learned CIT(A) has considered opinion, the learned CIT(A) has considered opinion, the learned CIT(A) has correctly appreciated the facts of the case and applied the settled correctly appreciated the facts of the case and applied the settled correctly appreciated the facts of the case and applied the settled principles of law governing the field. The findings recorded by him principles of law governing the field. The findings recorded by him principles of law governing the field. The findings recorded by him are fully supported by the binding judicial precedents and do not are fully supported by the binding judicial precedents and do not are fully supported by the binding judicial precedents and do not suffer from any legal or factual infirmity warranting interference by any legal or factual infirmity warranting interference by any legal or factual infirmity warranting interference by this Tribunal. Accordingly, we uphold the order of the learned Accordingly, we uphold the order of the learned Accordingly, we uphold the order of the learned

IPCA Laboratories Limited, IPCA Laboratories Limited, 152 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

CIT(A) on this issue. Ground No. 2 to 4 raised by the Revenue is, CIT(A) on this issue. Ground No. 2 to 4 raised by the Revenue is, CIT(A) on this issue. Ground No. 2 to 4 raised by the Revenue is, therefore, dismissed.

24.1 The facts, in brief, are that during the year under The facts, in brief, are that during the year under The facts, in brief, are that during the year under consideration the assessee claimed Foreign Tax Credit aggregating consideration the assessee claimed Foreign Tax Credit aggregat consideration the assessee claimed Foreign Tax Credit aggregat to ₹41,72,734/- in respect of taxes withheld in Colombia on sales in respect of taxes withheld in Colombia on sales in respect of taxes withheld in Colombia on sales effected in that jurisdiction amounting to effected in that jurisdiction amounting to ₹8.30 crores. The assessee 8.30 crores. The assessee claimed credit for the entire amount of foreign taxes paid, claimed credit for the entire amount of foreign taxes paid, claimed credit for the entire amount of foreign taxes paid, contending that the same was eligible for relief under the provisions contending that the same was eligible for relief under t contending that the same was eligible for relief under t of Sections 90/91 of the Act of Sections 90/91 of the Act.

25.1 During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing Officer examined the claim and observed that the assessee had not Officer examined the claim and observed that the assessee had not Officer examined the claim and observed that the assessee had not furnished any separate profit and loss account or other reliable furnished any separate profit and loss account or other reliable furnished any separate profit and loss account or other reliable material demonstrating the actual income earned from its business ating the actual income earned from its business ating the actual income earned from its business operations in Colombia. The Assessing Officer, therefore, proceeded operations in Colombia. The Assessing Officer, therefore, proceeded operations in Colombia. The Assessing Officer, therefore, proceeded to determine the income attributable to the Colombian transactions to determine the income attributable to the Colombian transactions to determine the income attributable to the Colombian transactions by applying the net profit ratio of the assessee’s overall business, by applying the net profit ratio of the assessee’s overall business, by applying the net profit ratio of the assessee’s overall business, namely 3.85 per cent, to the turnover generated from Colombia ely 3.85 per cent, to the turnover generated from Colombia ely 3.85 per cent, to the turnover generated from Colombia amounting to ₹8.30 crores. On such basis, the income attributable 8.30 crores. On such basis, the income attributable 8.30 crores. On such basis, the income attributable to the Colombian operations was computed at to the Colombian operations was computed at ₹31,95,500/ 31,95,500/-.

IPCA Laboratories Limited, IPCA Laboratories Limited, 153 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

26.1 The Assessing Officer thereafter applied the applicable rate of The Assessing Officer thereafter applied the applicable rate of The Assessing Officer thereafter applied the applicable rate of tax under Section 115JB of the Act and determined the Indian tax under Section 115JB of the Act and determined the Indian tax under Section 115JB of the Act and determined the Indian tax attributable to such income at attributable to such income at ₹6,34,626/-. Holding that relief . Holding that relief under Sections 90/91 of the Act could not exceed the amount of tax under Sections 90/91 of the Act could not exceed the amount of tax under Sections 90/91 of the Act could not exceed the amount of tax payable in India on the doubly taxed income, the Assessing Officer payable in India on the doubly taxed income, the Assessing Offic payable in India on the doubly taxed income, the Assessing Offic restricted the Foreign Tax Credit to restricted the Foreign Tax Credit to ₹6,34,626/- and consequently and consequently disallowed the balance claim of disallowed the balance claim of ₹35,38,108/-

26.2 On appeal, the learned CIT(A) concurred with the approach On appeal, the learned CIT(A) concurred with the approach On appeal, the learned CIT(A) concurred with the approach adopted by the Assessing Officer and observed that the Foreign Tax adopted by the Assessing Officer and observed that the Foreign Tax adopted by the Assessing Officer and observed that the Foreign Tax Credit had been allowed on the basis of the tax payable in India on been allowed on the basis of the tax payable in India on been allowed on the basis of the tax payable in India on the income attributable to the Colombian transactions. The learned the income attributable to the Colombian transactions. The learned the income attributable to the Colombian transactions. The learned CIT(A) further held that the computation made by the Assessing CIT(A) further held that the computation made by the Assessing CIT(A) further held that the computation made by the Assessing Officer was in conformity with the provisions of Section 90 of the Officer was in conformity with the provisions of Section 90 of the Officer was in conformity with the provisions of Section 90 of the Act read with Rule 128 of the Income t read with Rule 128 of the Income-tax Rules, 1962, and tax Rules, 1962, and accordingly affirmed the disallowance. accordingly affirmed the disallowance.

26.3 Before us, the learned counsel for the assessee assailed the Before us, the learned counsel for the assessee assailed the Before us, the learned counsel for the assessee assailed the findings of the authorities below and submitted that the Assessing findings of the authorities below and submitted that the Assessing findings of the authorities below and submitted that the Assessing Officer had adopted an arbit Officer had adopted an arbitrary method for determining the income rary method for determining the income attributable to the Colombian operations by mechanically applying attributable to the Colombian operations by mechanically applying attributable to the Colombian operations by mechanically applying the overall net profit rate of the assessee’s business without the overall net profit rate of the assessee’s business without the overall net profit rate of the assessee’s business without examining the actual profitability of the transactions undertaken in examining the actual profitability of the transactions undertaken in examining the actual profitability of the transactions undertaken in Colombia. It was contended that such an approach did not reflect ntended that such an approach did not reflect ntended that such an approach did not reflect the true income arising from the said operations and consequently the true income arising from the said operations and consequently the true income arising from the said operations and consequently

IPCA Laboratories Limited, IPCA Laboratories Limited, 154 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

resulted in an incorrect quantification of the Foreign Tax Credit resulted in an incorrect quantification of the Foreign Tax Credit resulted in an incorrect quantification of the Foreign Tax Credit admissible to the assessee. admissible to the assessee.

26.4 In support of the aforesaid contention, the a In support of the aforesaid contention, the assessee filed an ssessee filed an application seeking admission of additional evidence and produced application seeking admission of additional evidence and produced application seeking admission of additional evidence and produced an income and expenditure statement relating to the Colombian an income and expenditure statement relating to the Colombian an income and expenditure statement relating to the Colombian operations, duly certified by a Chartered Accountant. It was operations, duly certified by a Chartered Accountant. It was operations, duly certified by a Chartered Accountant. It was submitted that the said evidence would enable an accurate submitted that the said evidence would enable an a submitted that the said evidence would enable an a determination of the profits attributable to the Colombian business determination of the profits attributable to the Colombian business determination of the profits attributable to the Colombian business activities and, consequently, the correct quantum of Foreign Tax activities and, consequently, the correct quantum of Foreign Tax activities and, consequently, the correct quantum of Foreign Tax Credit allowable in accordance with law. Credit allowable in accordance with law.

26.5 Having considered the rival submissions and perused the Having considered the rival submissions and perused the Having considered the rival submissions and perused the material placed on record, we find that the additional evidence ed on record, we find that the additional evidence ed on record, we find that the additional evidence furnished by the assessee goes to the root of the matter and has a furnished by the assessee goes to the root of the matter and has a furnished by the assessee goes to the root of the matter and has a direct bearing on the determination of the income attributable to direct bearing on the determination of the income attributable to direct bearing on the determination of the income attributable to the Colombian operations. The authorities below proceeded to the Colombian operations. The authorities below proceeded to the Colombian operations. The authorities below proceeded to compute such income by applying the overall net profit rate of the h income by applying the overall net profit rate of the h income by applying the overall net profit rate of the assessee’s business in the absence of any specific data relating to assessee’s business in the absence of any specific data relating to assessee’s business in the absence of any specific data relating to the Colombian transactions. However, the income and expenditure the Colombian transactions. However, the income and expenditure the Colombian transactions. However, the income and expenditure statement now placed on record purports to provide a more direct statement now placed on record purports to provide a more direct statement now placed on record purports to provide a more direct and reliable basis for determining the actual profits arising from the reliable basis for determining the actual profits arising from the reliable basis for determining the actual profits arising from the said operations.

IPCA Laboratories Limited, IPCA Laboratories Limited, 155 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

26.6 In our considered view, the interest of justice would be best In our considered view, the interest of justice would be best In our considered view, the interest of justice would be best served if the additional evidence is admitted and the matter is served if the additional evidence is admitted and the matter is served if the additional evidence is admitted and the matter is restored to the file of the Assessing Of restored to the file of the Assessing Officer for a fresh examination. ficer for a fresh examination. The Assessing Officer shall consider the income and expenditure The Assessing Officer shall consider the income and expenditure The Assessing Officer shall consider the income and expenditure statement and any other supporting material that may be furnished statement and any other supporting material that may be furnished statement and any other supporting material that may be furnished by the assessee, determine the profits properly attributable to the by the assessee, determine the profits properly attributable to the by the assessee, determine the profits properly attributable to the business activities carried business activities carried on in Colombia, and thereafter compute on in Colombia, and thereafter compute and allow the Foreign Tax Credit strictly in accordance with the and allow the Foreign Tax Credit strictly in accordance with the and allow the Foreign Tax Credit strictly in accordance with the provisions of Sections 90/91 of the Act read with Rule 128 of the provisions of Sections 90/91 of the Act read with Rule 128 of the provisions of Sections 90/91 of the Act read with Rule 128 of the Income-tax Rules, after affording adequate opportunity of hearing to tax Rules, after affording adequate opportunity of hearing to tax Rules, after affording adequate opportunity of hearing to the assessee.

26.7 Accordingly, the orders of the authorities below on this issue Accordingly, the orders of the authorities below on this issue Accordingly, the orders of the authorities below on this issue are set aside and the matter is restored to the file of the Assessing are set aside and the matter is restored to the file of the Assessing are set aside and the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law. Ground No. 4 Officer for fresh adjudication in accordance with law. Ground No. 4 Officer for fresh adjudication in accordance with law. Ground No. 4 raised by the assessee is, therefore, allowed for st raised by the assessee is, therefore, allowed for statistical purposes. atistical purposes.

IPCA Laboratories Limited, IPCA Laboratories Limited, 156 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

claimed weighted deduction under Section 35(2AB) amounting to d weighted deduction under Section 35(2AB) amounting to d weighted deduction under Section 35(2AB) amounting to ₹107.51 crores. The claim comprised both capital expenditure and 107.51 crores. The claim comprised both capital expenditure and 107.51 crores. The claim comprised both capital expenditure and revenue expenditure, including expenditure incurred towards Bio- revenue expenditure, including expenditure incurred towards Bio revenue expenditure, including expenditure incurred towards Bio Equivalence Studies and Clinical Trials undertaken in connection Equivalence Studies and Clinical Trials undertaken in connection Equivalence Studies and Clinical Trials undertaken in connection with the assessee’s pharmaceutical research activities. he assessee’s pharmaceutical research activities. he assessee’s pharmaceutical research activities.

27.2 It is an undisputed position that the assessee's in It is an undisputed position that the assessee's in It is an undisputed position that the assessee's in-house R&D facility stood duly approved by the Department of Scientific and facility stood duly approved by the Department of Scientific and facility stood duly approved by the Department of Scientific and Industrial Research (DSIR). The assessee further contended that the Industrial Research (DSIR). The assessee further contended that the Industrial Research (DSIR). The assessee further contended that the entire expenditure claimed was duly certified by its Chartered expenditure claimed was duly certified by its Chartered expenditure claimed was duly certified by its Chartered Accountant in Form No. 3CLA. Although the DSIR had approved Accountant in Form No. 3CLA. Although the DSIR had approved Accountant in Form No. 3CLA. Although the DSIR had approved eligible expenditure resulting in weighted deduction aggregating to eligible expenditure resulting in weighted deduction aggregating to eligible expenditure resulting in weighted deduction aggregating to ₹106.44 crores, the Assessing Officer restricted the deduction to 106.44 crores, the Assessing Officer restricted the deduction to 106.44 crores, the Assessing Officer restricted the deduction to ₹95.48 crores, thereby making a disallowance of 8 crores, thereby making a disallowance of ₹12.02 crores. 12.02 crores.

27.3 In appellate proceedings, the assessee pointed out that In appellate proceedings, the assessee pointed out that In appellate proceedings, the assessee pointed out that expenditure amounting to expenditure amounting to ₹10.96 crores incurred towards Clinical 10.96 crores incurred towards Clinical Trials and Bio-Equivalence Studies had also been certified by the Equivalence Studies had also been certified by the Equivalence Studies had also been certified by the DSIR in Form No. 3CL, but had inadvertently not been considered n Form No. 3CL, but had inadvertently not been considered n Form No. 3CL, but had inadvertently not been considered by the Assessing Officer while computing the eligible deduction. by the Assessing Officer while computing the eligible deduction. by the Assessing Officer while computing the eligible deduction. Upon verification of the relevant records, the learned CIT(A) Upon verification of the relevant records, the learned CIT(A) Upon verification of the relevant records, the learned CIT(A) accepted the contention of the assessee and directed allowance of accepted the contention of the assessee and directed allowance of accepted the contention of the assessee and directed allowance of the aforesaid amount of foresaid amount of ₹10.96 crores. Consequently, deduction 10.96 crores. Consequently, deduction aggregating to ₹106.44 crores ( 106.44 crores (₹95.48 crores plus 95.48 crores plus ₹10.96 crores)

IPCA Laboratories Limited, IPCA Laboratories Limited, 157 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

stood allowed on the basis of the expenditure certified by the DSIR. stood allowed on the basis of the expenditure certified by the DSIR. stood allowed on the basis of the expenditure certified by the DSIR. It is pertinent to note that the Revenue has not challenged the It is pertinent to note that the Revenue has not challenged the It is pertinent to note that the Revenue has not challenged the aforesaid relief granted by the learned CIT(A). aforesaid relief granted by the learned CIT(A).

27.4 Now, with respect to the remaining amount of Rs. 1.06 crores Now, with respect to the remaining amount of Rs. 1.06 crores Now, with respect to the remaining amount of Rs. 1.06 crores (Rs. 107.51 crores L Less Rs.106.44 crores), assessee has taken an ), assessee has taken an additional legal ground before the Tribunal vide letter dated additional legal ground before the Tribunal vide letter dated additional legal ground before the Tribunal vide letter dated 30.04.2016 which is as h is as under:-

“ On the facts and in the circumstances of the case and in law, the ld. AO has On the facts and in the circumstances of the case and in law, the ld. AO has On the facts and in the circumstances of the case and in law, the ld. AO has erred in disallowing the deduction claimed by the Appellant under section erred in disallowing the deduction claimed by the Appellant under section erred in disallowing the deduction claimed by the Appellant under section 35(2AB) of the Income 35(2AB) of the Income-tax Act, 1961 on the ground that the prescribed authority tax Act, 1961 on the ground that the prescribed authority had not certified the amount of expenditure in Form 3CL, without appreciating not certified the amount of expenditure in Form 3CL, without appreciating not certified the amount of expenditure in Form 3CL, without appreciating that fact that prior to AY 2017 that fact that prior to AY 2017-18 quantification of the amount of qualifying 18 quantification of the amount of qualifying amount/deduction by the prescribed authority was not the statutory pre- amount/deduction by the prescribed authority was not the statutory pre amount/deduction by the prescribed authority was not the statutory pre condition as per the provision of condition as per the provision of section 35(2AB) of the Act.” 27.5 Before us the ld Counsel submitted that s Before us the ld Counsel submitted that since the issue is ince the issue is legal in nature and all the facts are already on record, the same legal in nature and all the facts are already on record, the same legal in nature and all the facts are already on record, the same may kindly be admitted and adjudicated. may kindly be admitted and adjudicated.

27.6 Having heard the rival submissions on the question Having heard the rival submissions on the question Having heard the rival submissions on the question of admission, we find that the additional ground raises a pure admission, we find that the additional ground raises a pure admission, we find that the additional ground raises a pure question of law arising from facts already available on record and question of law arising from facts already available on record and question of law arising from facts already available on record and does not necessitate any further investigation into fresh facts. does not necessitate any further investigation into fresh facts. does not necessitate any further investigation into fresh facts. Accordingly, following the ratio laid down by the Hon’ble Supreme Accordingly, following the ratio laid down by the Hon’ble Su Accordingly, following the ratio laid down by the Hon’ble Su Court in CIT v. NTPC Ltd. CIT v. NTPC Ltd. [(1998) 229 ITR 383 (SC)] [(1998) 229 ITR 383 (SC)], the additional ground is admitted for adjudication. additional ground is admitted for adjudication.

IPCA Laboratories Limited, IPCA Laboratories Limited, 158 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

27.7 On merits, the learned counsel submitted that the year under On merits, the learned counsel submitted that the year under On merits, the learned counsel submitted that the year under consideration is Assessment Year 2016 consideration is Assessment Year 2016-17, i.e., prior to the 17, i.e., prior to the amendment brought amendment brought about by the Finance Act, 2015, whereby the about by the Finance Act, 2015, whereby the prescribed authority was empowered to quantify the eligible prescribed authority was empowered to quantify the eligible prescribed authority was empowered to quantify the eligible expenditure for the purposes of Section 35(2AB). It was contended expenditure for the purposes of Section 35(2AB). It was contended expenditure for the purposes of Section 35(2AB). It was contended that the said amendment became effective from 01.07.2016 and that the said amendment became effective from 01.07.2016 and that the said amendment became effective from 01.07.2016 and consequently applied only consequently applied only from Assessment Year 2017 from Assessment Year 2017-18 onwards. Prior thereto, the statutory role of the DSIR was confined to Prior thereto, the statutory role of the DSIR was confined to Prior thereto, the statutory role of the DSIR was confined to granting approval to the in granting approval to the in-house R&D facility and did not extend to house R&D facility and did not extend to determining or restricting the quantum of expenditure eligible for determining or restricting the quantum of expenditure eligible for determining or restricting the quantum of expenditure eligible for deduction.

27.8 It was further submitted that neither the Assessing Officer nor was further submitted that neither the Assessing Officer nor was further submitted that neither the Assessing Officer nor the learned CIT(A) has doubted the genuineness of the expenditure the learned CIT(A) has doubted the genuineness of the expenditure the learned CIT(A) has doubted the genuineness of the expenditure in question. No finding has been recorded that the expenditure of in question. No finding has been recorded that the expenditure of in question. No finding has been recorded that the expenditure of ₹1,06,18,872/- was bogus, excessive, unsupported by evidence, was bogus, excessive, unsupported by evidence, was bogus, excessive, unsupported by evidence, or unrelated to the approved research and development activities unrelated to the approved research and development activities unrelated to the approved research and development activities carried on by the assessee. According to the learned counsel, once carried on by the assessee. According to the learned counsel, once carried on by the assessee. According to the learned counsel, once the expenditure was actually incurred for the approved R&D the expenditure was actually incurred for the approved R&D the expenditure was actually incurred for the approved R&D facility, the deduction could not be curtailed merely because the facility, the deduction could not be curtailed merely because the facility, the deduction could not be curtailed merely because the said amount did not find place in Form No. 3CL issued by the DSIR. said amount did not find place in Form No. 3CL issued by the DSIR. said amount did not find place in Form No. 3CL issued by the DSIR.

27.9 Reliance was placed upon various judicial precedents, Reliance was placed upon various judicial precedents, Reliance was placed upon various judicial precedents, including the decisions in including the decisions in Pharmanza Herbal (P.) Ltd. v. DCIT Pharmanza Herbal (P.) Ltd. v. DCIT [2023] 155 taxmann.com 56 (Ahmedabad 155 taxmann.com 56 (Ahmedabad-Trib.) Trib.) and ACIT v.

IPCA Laboratories Limited, IPCA Laboratories Limited, 159 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

Crompton Greaves Ltd. eaves Ltd. [2019] 111 taxmann.com 338 (Mumbai 111 taxmann.com 338 (Mumbai- Trib.), wherein it has been held that, for assessment years wherein it has been held that, for assessment years wherein it has been held that, for assessment years preceding Assessment Year 2017 preceding Assessment Year 2017-18, the quantification made by 18, the quantification made by the DSIR in Form No. 3CL could not operate as a restriction on the the DSIR in Form No. 3CL could not operate as a restriction on the the DSIR in Form No. 3CL could not operate as a restriction on the deduction otherwise a deduction otherwise allowable under Section 35(2AB) of the Act. llowable under Section 35(2AB) of the Act.

27.10 We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and examined the material available on record. Prima facie, we find examined the material available on record. Prima facie, we find examined the material available on record. Prima facie, we find considerable force in the contention advanced on behalf of the considerable force in the contention advanced on behalf of the considerable force in the contention advanced on behalf of the assessee that, for the as assessee that, for the assessment year under consideration, the sessment year under consideration, the quantification made by the prescribed authority in Form No. 3CL quantification made by the prescribed authority in Form No. 3CL quantification made by the prescribed authority in Form No. 3CL was not determinative of the quantum of deduction admissible was not determinative of the quantum of deduction admissible was not determinative of the quantum of deduction admissible under Section 35(2AB). The statutory requirement was primarily the under Section 35(2AB). The statutory requirement was primarily the under Section 35(2AB). The statutory requirement was primarily the approval of the in approval of the in-house R&D facility, whereas the actual R&D facility, whereas the actual allowability of expenditure depended upon the nature and allowability of expenditure depended upon the nature and allowability of expenditure depended upon the nature and genuineness of the expenditure incurred on scientific research. genuineness of the expenditure incurred on scientific research. genuineness of the expenditure incurred on scientific research.

27.11 However, we also find that neither the Assessing Officer However, we also find that neither the Assessing Officer However, we also find that neither the Assessing Officer nor nor the the learned learned CIT(A) CIT(A) has has undertaken undertaken any a ny independent independent examination of the expenditure of examination of the expenditure of ₹1,06,18,872/- with reference to with reference to its nature, supporting evidence and nexus with the approved its nature, supporting evidence and nexus with the approved its nature, supporting evidence and nexus with the approved scientific research activities. The claim appears to have been scientific research activities. The claim appears to have been scientific research activities. The claim appears to have been restricted solely on the basis of the amount quanti restricted solely on the basis of the amount quantified by the DSIR fied by the DSIR in Form No. 3CL.

IPCA Laboratories Limited, IPCA Laboratories Limited, 160 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

27.12 In these circumstances, and in the interest of justice, we In these circumstances, and in the interest of justice, we In these circumstances, and in the interest of justice, we deem it appropriate to set aside the findings of the learned CIT(A) deem it appropriate to set aside the findings of the learned CIT(A) deem it appropriate to set aside the findings of the learned CIT(A) on this limited aspect and restore the matter to the file of the on this limited aspect and restore the matter to the file of the on this limited aspect and restore the matter to the file of the Assessing Officer. The A Assessing Officer. The Assessing Officer shall independently ssessing Officer shall independently examine the nature and admissibility of the expenditure in examine the nature and admissibility of the expenditure in examine the nature and admissibility of the expenditure in question, verify whether the same was incurred wholly and question, verify whether the same was incurred wholly and question, verify whether the same was incurred wholly and exclusively for the approved scientific research and development exclusively for the approved scientific research and development exclusively for the approved scientific research and development activities, and thereafter adjudicate activities, and thereafter adjudicate the claim afresh in accordance the claim afresh in accordance with law, uninfluenced by the mere quantification contained in with law, uninfluenced by the mere quantification contained in with law, uninfluenced by the mere quantification contained in Form No. 3CL. It is needless to mention that a It is needless to mention that adequate opportunity dequate opportunity of being heard shall be afforded to the assessee. Accordingly, the of being heard shall be afforded to the assessee. Accordingly, the of being heard shall be afforded to the assessee. Accordingly, the additional ground raised by additional ground raised by the assessee is allowed for statistical the assessee is allowed for statistical purposes.

“1. On the facts and in the 1. On the facts and in the circumstances of the case and in law, Ld. CTT(A) erred circumstances of the case and in law, Ld. CTT(A) erred in holding that the assessment order passed is barred by limitation as per the in holding that the assessment order passed is barred by limitation as per the in holding that the assessment order passed is barred by limitation as per the provisions of section 153 of the Act. provisions of section 153 of the Act. 2 On the facts and circumstances of the Appellant's case and in law the Ld. 2 On the facts and circumstances of the Appellant's case and in law the Ld. 2 On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. Assessing Officer in holding the sales erred in confirming the action of Ld. Assessing Officer in holding the sales erred in confirming the action of Ld. Assessing Officer in holding the sales & marketing expenses incurred by the appellant alleged 'freebies to the medical & marketing expenses incurred by the appellant alleged 'freebies to the medical & marketing expenses incurred by the appellant alleged 'freebies to the medical practitioners, without any concrete material on record. practitioners, without any concrete material on record. 3. On the facts and circumstances of the Ap 3. On the facts and circumstances of the Appellant's case and in law the Ld. pellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. Assessing Officer in making CIT(A) erred in confirming the action of Ld. Assessing Officer in making CIT(A) erred in confirming the action of Ld. Assessing Officer in making disallowance to the extent of Rs.1,29,90,113/ disallowance to the extent of Rs.1,29,90,113/-on account of alleged freebies on account of alleged freebies

IPCA Laboratories Limited, IPCA Laboratories Limited, 161 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

services provided by the appellant to the medical practitioners, as per the services provided by the appellant to the medical practitioners, as per services provided by the appellant to the medical practitioners, as per ground/s contained in the appellate order or otherwise.” ground/s contained in the appellate order or otherwise. 28.1. The grounds raised by the Revenue are reproduced as under: .1. The grounds raised by the Revenue are reproduced as under: .1. The grounds raised by the Revenue are reproduced as under:

IPCA Laboratories Limited, IPCA Laboratories Limited, 162 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

of the Act. The appellant submits that, sale of empty containers are directly of the Act. The appellant submits that, sale of empty containers are directly of the Act. The appellant submits that, sale of empty containers are directly related to the profits derived from the business of the industrial undertaking to related to the profits derived from the business of the industrial undertaking to related to the profits derived from the business of the industrial undertaking to the appellant and therefore the same is eligible for deduction. therefore the same is eligible for deduction. therefore the same is eligible for deduction. 9. Whether on the facts and circumstances of the Appellant's case and in law the 9. Whether on the facts and circumstances of the Appellant's case and in law the 9. Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in deleting taxing Rs.19,76,627/ Ld. CIT(A) erred in deleting taxing Rs.19,76,627/- u/s 80IE being sale of empty u/s 80IE being sale of empty containers from the profits of industrial undert containers from the profits of industrial undertaking for the purpose of deduction aking for the purpose of deduction u/s 80IE of the Act. The appellant submits that, sale of empty containers are u/s 80IE of the Act. The appellant submits that, sale of empty containers are u/s 80IE of the Act. The appellant submits that, sale of empty containers are directly related to the profits derived from the business of the industrial directly related to the profits derived from the business of the industrial directly related to the profits derived from the business of the industrial undertaking to the appellant and therefore the same is eligible for deduction. undertaking to the appellant and therefore the same is eligible for undertaking to the appellant and therefore the same is eligible for Grounds of appeal on TP adjustments: Grounds of appeal on TP adjustments: 10.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment done by the TPO of Rs. is justified deleting the transfer pricing adjustment done by the TPO of Rs. is justified deleting the transfer pricing adjustment done by the TPO of Rs. 16,17,926/-made on account of sale of products to made on account of sale of products to it's Associated Enterprise i.e. it's Associated Enterprise i.e. IPCA Pharma Nigeria Ltd.? IPCA Pharma Nigeria Ltd.? 10.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the transfer pricing adjustment done by the TPO without is justified deleting the transfer pricing adjustment done by the TPO without is justified deleting the transfer pricing adjustment done by the TPO without appreciating the flaws pointed out by th appreciating the flaws pointed out by the TPO in the method used by the e TPO in the method used by the assessee?" 10.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 10.3 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by TPO in determining Arm's Length Price erred in rejecting the adjustment done by TPO in determining Arm's Length Price erred in rejecting the adjustment done by TPO in determining Arm's Length Price (ALP) by considering the CUP method as most appropria (ALP) by considering the CUP method as most appropriate method because the te method because the same has been done by the TPO in earlier years and has been upheld by Ld same has been done by the TPO in earlier years and has been upheld by Ld same has been done by the TPO in earlier years and has been upheld by Ld CIT(A) in its orders for AY 2008 CIT(A) in its orders for AY 2008-09 to AY 2011-12?." 11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.1 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified is justified de is justified is justified deleting the transfer pricing adjustment of Rs.82,60,778/ leting the transfer pricing adjustment of Rs.82,60,778/- made on account of service charges paid to its Associated Enterprise in USA?" 2.2 made on account of service charges paid to its Associated Enterprise in USA?" 2.2 made on account of service charges paid to its Associated Enterprise in USA?" 2.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the adjustment done by T in rejecting the adjustment done by TPO wherein the TPO has observed that onus PO wherein the TPO has observed that onus cast on the assessee to justify the payment of cost plus 25% to the AE by cast on the assessee to justify the payment of cost plus 25% to the AE by cast on the assessee to justify the payment of cost plus 25% to the AE by benchmarking the above transaction as per provisions of section 92C of the benchmarking the above transaction as per provisions of section 92C of the benchmarking the above transaction as per provisions of section 92C of the Income Tax Act 1961 were not fulfilled and hence, liable to be rejected?", Income Tax Act 1961 were not fulfilled and hence, liable to be re Income Tax Act 1961 were not fulfilled and hence, liable to be re 11.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) 11.2 "Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the transfer pricing adjustment done by the TPO without is justified in deleting the transfer pricing adjustment done by the TPO without is justified in deleting the transfer pricing adjustment done by the TPO without appreciating the fact that the TPO has pointed out that the assessee has not done appreciating the fact that the TPO has pointed out that the assessee has not done appreciating the fact that the TPO has pointed out that the assessee has not done any benchmarking in arriving at the payment of cost plus 25% to the AE for the benchmarking in arriving at the payment of cost plus 25% to the AE for the benchmarking in arriving at the payment of cost plus 25% to the AE for the service charges paid"? service charges paid"?” 28.2 The issues arising in the grounds raised by both the Revenue The issues arising in the grounds raised by both the Revenue The issues arising in the grounds raised by both the Revenue and the assessee are identical to those adjudicated by us in the and the assessee are identical to those adjudicated by us in the and the assessee are identical to those adjudicated by us in the

IPCA Laboratories Limited, IPCA Laboratories Limited, 163 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

assessee’s own case for Assessment Years 2013 assessee’s own case for Assessment Years 2013–14, 2015 14, 2015–16 and 2016–17. Since the facts and circumstances giving rise to the 17. Since the facts and circumstances giving rise to the 17. Since the facts and circumstances giving rise to the present grounds are materially similar and no distinguishing present grounds are materially similar and no distinguishing present grounds are materially similar and no distinguishing feature, either on facts or in law, has been brought to our notice, we feature, either on facts or in law, has been brought to our notice, we feature, either on facts or in law, has been brought to our notice, we respectfully follow our findings and conclusions recorded in the respectfully follow our findings and conclusions recorded in the respectfully follow our findings and conclusions recorded in the aforesaid aforesaid aforesaid assessment assessment assessment years. years. years. Accordingly, Accordingly, Accordingly, the the the corresponding corresponding corresponding grounds raised by the Revenue as well as the assessee are disposed grounds raised by the Revenue as well as the assessee are disposed grounds raised by the Revenue as well as the assessee are disposed of mutatis mutandis in terms of our decision rendered for the ear in terms of our decision rendered for the earlier in terms of our decision rendered for the ear assessment years.

“1. On the facts and in the circumstances of the case and in law, 1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred 1. On the facts and in the circumstances of the case and in law, in holding that the assessment order passed is barred by limitation as per the in holding that the assessment order passed is barred by limitation as per the in holding that the assessment order passed is barred by limitation as per the provisions of section 153 of the Act provisions of section 153 of the Act 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. 2. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. CIT(A) erred in confirming the action of Ld. Assessing Officer in holding the sales Assessing Officer in holding the sales & marketing expenses incurred by the appellant as alleged 'freebies to the & marketing expenses incurred by the appellant as alleged 'freebies to the & marketing expenses incurred by the appellant as alleged 'freebies to the medical practitioners, without any concrete material on record. medical practitioners, without any concrete material on record. medical practitioners, without any concrete material on record. 3. On the facts and circumstances of the Appellant's case and in law the Ld. 3. On the facts and circumstances of the Appellant's case and in law the Ld. 3. On the facts and circumstances of the Appellant's case and in law the Ld. CTT(A) erred in confirming the action of Ld. Assessing Officer in making TT(A) erred in confirming the action of Ld. Assessing Officer in making TT(A) erred in confirming the action of Ld. Assessing Officer in making disallowance to the extent of Rs.2,13,98,278/ disallowance to the extent of Rs.2,13,98,278/-on account of alleged freebies on account of alleged freebies services provided by the appellant to the medical practitioners, as per the services provided by the appellant to the medical practitioners, as per the services provided by the appellant to the medical practitioners, as per the ground/s contained in the appel ground/s contained in the appellate order or otherwise. 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. 4. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. Assessing Officer in making CIT(A) erred in confirming the action of Ld. Assessing Officer in making CIT(A) erred in confirming the action of Ld. Assessing Officer in making adjustment of Rs.4,88,243/ adjustment of Rs.4,88,243/-being Arm's length adjustments made by the Ld. TPO being Arm's length adjustments made by the Ld. TPO u/s 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to its 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to its 92CA(3) of the Income Tax Act 1961 on account of inter unit transfer to its manufacturing unit, for the reasons mentioned in the impugned order or manufacturing unit, for the reasons mentioned in the impugned order or manufacturing unit, for the reasons mentioned in the impugned order or otherwise.”

IPCA Laboratories Limited, IPCA Laboratories Limited, 164 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

29.1. The grounds raised by the Revenue are reproduced as under: .1. The grounds raised by the Revenue are reproduced as under: .1. The grounds raised by the Revenue are reproduced as under:

“1. Whether on the facts and 1. Whether on the facts and circumstances of the Appellant's case and in law the circumstances of the Appellant's case and in law the Ld. CIT(A) erred in relying only on the 1 finding given in the order for the Ld. CIT(A) erred in relying only on the 1 finding given in the order for the Ld. CIT(A) erred in relying only on the 1 finding given in the order for the preceding assessment years in spite of the fact that the same was not based on preceding assessment years in spite of the fact that the same was not based on preceding assessment years in spite of the fact that the same was not based on correct facts and cannot be applied to the appe correct facts and cannot be applied to the appellant. 2. Whether on the facts and circumstances of the Appellant's case and in law the 2. Whether on the facts and circumstances of the Appellant's case and in law the 2. Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in deleting disallowance of Rs. 18,19,31,279/- made by the AO Ld. CIT(A) erred in deleting disallowance of Rs. 18,19,31,279/ Ld. CIT(A) erred in deleting disallowance of Rs. 18,19,31,279/ on account of alleged freebie services provided by the appellant to the medical on account of alleged freebie services provided by the appellant to the medical on account of alleged freebie services provided by the appellant to the medical practitioners is on flimsy grounds and not considering the submissions made by 2 ners is on flimsy grounds and not considering the submissions made by 2 ners is on flimsy grounds and not considering the submissions made by 2 the appellant during the course of assessment vide its representatives letter the appellant during the course of assessment vide its representatives letter the appellant during the course of assessment vide its representatives letter dated 8th September 2021 and not following the decisions of the Mumbai dated 8th September 2021 and not following the decisions of the Mumbai dated 8th September 2021 and not following the decisions of the Mumbai Tribunal in the case of DCIT vs. PH Tribunal in the case of DCIT vs. PHL Pharma (P). Lid. (163 ITD 10) and Solve L Pharma (P). Lid. (163 ITD 10) and Solve Pharma Lad vis CIT (169 ITD 13) and Delhi High Court in the case of Max Pharma Lad vis CIT (169 ITD 13) and Delhi High Court in the case of Max Pharma Lad vis CIT (169 ITD 13) and Delhi High Court in the case of Max Hospital vs. MCI (WPC 1334 of 2013 dated 10.1.2014). Hospital vs. MCI (WPC 1334 of 2013 dated 10.1.2014). 3. Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in deleting disallowing expenses of Rs.40,87,378/ A) erred in deleting disallowing expenses of Rs.40,87,378/-u/s. 14A as A) erred in deleting disallowing expenses of Rs.40,87,378/ against Rs.5.924/-disallowed by the appellant company in the return of income. disallowed by the appellant company in the return of income. disallowed by the appellant company in the return of income. 4. Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in deter Ld. CIT(A) erred in determining the amount 4 of expenditure incurred in relation to mining the amount 4 of expenditure incurred in relation to exempt income not in accordance with the method prescribed under Rule 8D of exempt income not in accordance with the method prescribed under Rule 8D of exempt income not in accordance with the method prescribed under Rule 8D of the Rules. 5. Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Whether on the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in deleting Ld. CIT(A) erred in deleting addition of Rs. 40,87,378/- being disallowance u/s being disallowance u/s 14A of the Act to the book profit u/s 115JB of the Act. The appellant submits that 14A of the Act to the book profit u/s 115JB of the Act. The appellant submits that 14A of the Act to the book profit u/s 115JB of the Act. The appellant submits that the disallowance u/s. 14A r.w.s. 8D cannot be applied while determining the the disallowance u/s. 14A r.w.s. 8D cannot be applied while determining the the disallowance u/s. 14A r.w.s. 8D cannot be applied while determining the book profit u/s 115JB of the Act. book profit u/s 115JB of the Act. 6. Whether on the facts and circumstances of the Appellant's case and in law the n the facts and circumstances of the Appellant's case and in law the n the facts and circumstances of the Appellant's case and in law the Ed. CIT(A) erred in not granting deduction 6 of Rs. 74,86,000/- u/s Ed. CIT(A) erred in not granting deduction 6 of Rs. 74,86,000/ Ed. CIT(A) erred in not granting deduction 6 of Rs. 74,86,000/ 35(1)(i)/35(1)(iv)/37(1) of the Act being the difference between the expenditure 35(1)(i)/35(1)(iv)/37(1) of the Act being the difference between the expenditure 35(1)(i)/35(1)(iv)/37(1) of the Act being the difference between the expenditure incurred by the appellant and that as incurred by the appellant and that as approved by the DSIR u/s 35(2AB) of the approved by the DSIR u/s 35(2AB) of the Act. 7. Whether on the facts and circumstances of the Appeliant's case and in law the 7. Whether on the facts and circumstances of the Appeliant's case and in law the 7. Whether on the facts and circumstances of the Appeliant's case and in law the Ld. CIT(A) erred in not considering the submissions of the appellant that the said Ld. CIT(A) erred in not considering the submissions of the appellant that the said Ld. CIT(A) erred in not considering the submissions of the appellant that the said expenses incurred by the appellant are for the expenses incurred by the appellant are for the purpose of its business and purpose of its business and incurred during the course of its business. incurred during the course of its business.” 29.2 The issues involved in the grounds raised by the Revenue and The issues involved in the grounds raised by the Revenue and The issues involved in the grounds raised by the Revenue and the assessee stand squarely covered by our decision in the the assessee stand squarely covered by our decision in the the assessee stand squarely covered by our decision in the

IPCA Laboratories Limited, IPCA Laboratories Limited, 165 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

assessee’s own case for Assessment Years 2013 assessee’s own case for Assessment Years 2013–14, 2015 14, 2015–16 and 2016–17. In the absence of any material distinction in facts or law, 17. In the absence of any material distinction in facts or law, 17. In the absence of any material distinction in facts or law, the said grounds are disposed of the said grounds are disposed of mutatis mutandis mutatis mutandis in accordance with the findings and conclusions recorded in the aforesaid with the findings and conclusions recorded in the aforesaid with the findings and conclusions recorded in the aforesaid assessment years. 30. The result of the appeals of assessee The result of the appeals of assessee and Revenue is and Revenue is summarized as under: summarized as under: S. ITA No. AY Assessee/Revenue Result No 1 4233/M/2025 2013-14 Assessee Partly allowed 2 5191/M/2025 2013-14 Revenue Dismissed 3 4234/M/2025 2015-16 Assessee Partly allowed 4 5192/M/2025 2015-16 Revenue Dismissed 5 4235/M/2025 2016-17 Assessee Partly allowed for statistical purposes 6 5193/M/2025 2016-17 Revenue Dismissed 7 4236/M/2025 2017-18 Assessee Dismissed 8 5194/M/2025 2017-18 Revenue Dismissed 9 4237/M/2025 2018-19 Assessee Partly allowed for statistical purposes

IPCA Laboratories Limited, IPCA Laboratories Limited, 166 ITA No.4233, 4234, 4235, 4236 and 4237/MUM/2026 4236 and 4237 ITA Nos. 5191, 5192, 5193, ITA Nos. 5194 and 5056/Mum/2026 5194 and 5056

10 5056/M/2025 2018-19 Revenue Partly allowed for statistical purposes

Order pronounced in the op ounced in the open Court on 23/ /06/2026.

Sd/- - Sd/ Sd/- (ANIKESH BANERJEE ANIKESH BANERJEE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 23/06/2026 M. Ranganath Vittal , Sr. P.S. M. Ranganath Vittal , Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai