IPCA LABORATORIES LTD,MUMBAI vs. ASST CIT (LTU), MUMBAI

This is the bunch of 10 appeals pertaining to M/s IPCA Laboratories Limited (the appellant/ assessee) for A.Ys. 2005- 06 to 2010-11 filed by the assessee as well as cross appeals by the learned Assessing Officer, involving common grounds. The parties argued the lead appeal for AY 2008-09 filed by the assessee as well as the Asst. Commissioner of Income tax, LTU, Mumbai (the learned Assessing Officer). The issues in other years of appeals of both the parties are more or less on identical facts. Therefore, appeals for AY 2008-09 are taken as lead appeal. All these appeals are disposed of by this common order.

In ITA No.2493/Mum/2015 assessee has raised following grounds of appeal:-

In ITA No. 2815/Mum/2015 , the learned AO has raised following grounds of appeal:-

The brief facts of the case show that Assessee Company is engaged in the business of manufacturing and sale of

The assessee has sold pharmaceuticals products to its Associated Enterprises and adopting the CUP method, it benchmarked the same. The assessee has given details for the sale of various products to its associated enterprises. The assessee has given arm’s length price and the transaction

The learned Transfer Pricing Officer held that under the Comparable Uncontrolled Price method, an item-by-item [product-by-product] comparison has to be made and this approach was adopted in the earlier year also and therefore, it is inappropriate to use a basket of product approach. Accordingly, he analyzed each of the products and compared it with the third party sales. He found that sale of 06 items showed that actual sale at FOB value and third party arm’s length sale at Fob value, there is a difference of ₹1,33,25,479/- and accordingly, adjustment was proposed of the above sum for the sale of export of products to the associated enterprises.

Assessee has also given loans to its associated enterprises on which no interest was charged. The learned Transfer Pricing Officer found that assessee has given loan to four entities on which no interest is charged. The learned Transfer Pricing Officer adopted the Comparable Uncontrolled Price (CUP) method and considered that interest is required to be benchmarked. It collected information under Section 133(6)

The learned Assessing Officer passed consequent to that assessment order under Section 143(3) read with section 144C of the Act on 2nd February 2012. The learned Assessing Officer further made following addition;

Accordingly, total income as per normal computation was determined at ₹71,38,54,894/- and book profit was computed at ₹177,24,08,742/- by order dated 2nd February 2012.

Assessee being aggrieved with the same preferred the appeal before the learned Commissioner of Income tax (Appeals). He passed an order on 11th February 2015. The learned CIT (A) held that;

Thus, the appeal was partly allowed and both the parties aggrieved with the order of the learned CIT (A) are in appeal before us. 014. We first take up appeal of assessee. Coming to the first ground of appeal of the assessee which is against the transfer pricing adjustment made in respect of goods sold to its associated enterprise of ₹1,27,40,126/-. The learned Authorized Representative submitted that assessee is selling the products along with its Anti malarial products to its

The learned Departmental Representative vehemently supported the order of the learned lower authorities and submitted that in the comparability, analysis of each transaction is required to be tested for Arms Length Price and there is no provision in the Indian tax laws, which permit the basket product approach for determination of Arms Length Price in CUP method. Therefore, according to the learned Departmental Representative there is no infirmity in the orders of the lower authorities.

We have carefully considered the rival contentions and perused orders of lower authorities. The issue here is that assessee with respect to its international transaction filed form number 3CEB wherein as per annexure C it was stated that assessee has sold pharmaceutical products to IPCA Pharma Nigeria Limited of Rs. 1666 lakhs and arm’s-length price the same is determined at ₹ 1398.18 lakhs adopting cup method, thus the transaction is at arm’s-length. To demonstrate the CUP method statement 1 of annexure C shows that assessee has sold 20 products to that entity amounting to ₹ 1 66 6 lakhs. The assessee benchmarked these transactions determining FO be sale price per unit to other parties, made adjustment with respect to cost for additional credit period to the associated enterprise and

The fact also shows that assessee has pushed antimalarial products in Nigeria along with the other products. The

OECD guidelines of 22 July 2010 were also pressed to state that business strategies are also required to be considered. The market penetration scheme needs to be considered where a taxpayer penetrating a market or to increase its market share my temper a really charge a price for its products that is lower than the price charged or otherwise comparable products in the same market. Therefore, the market strategy of the assessee is to push antimalarial drugs into of written market along with the other products, the combined arm’s- length price of the 20 products required to be benchmarked.

For basket approach the assessee relied upon judicial precedent of Toyota Kirloskar motors private limited versus ACIT 828/Bangalore/2010 dated 2011 -2012, Godrej Sara Lee Ltd versus additional CIT 598/M/2013 dated 11/3/2015.

On careful examination of the facts, it is clear that according to rule 10 A (d) transactions include a number of closely linked transactions. Therefore, it is clear that if the transactions are closely linked transactions they should be benchmark together.

Undisputedly the revenue as well as the assessee has adopted CUP method. The CUP method requires comparison of the price charged paid for property transferred. The property is defined in rule 10 A (b) to include goods, articles or things and intangible property. Therefore, there is no bar that the property may include a basket of product.

It is not unusual for taxpayers to negotiate their products altogether, regardless of their individual prices, as they aim to reach an overall profit. The price of a product is cut down to stimulate the purchase of a more profitable one among a

However, it is important that basket of product must have greater rational to show that all the products in the basket are interlinked and they cannot be sold or there are not practicable is sold individually. If those are sold individually, their marketability may be affected. In the present case before us to independent products, which does not have any correlation with each other, i.e. antimalarial as well as other pharmaceutical products are no way connected with each other. There is no evidence placed before us that both these medicines are always used together. It is also not shown that the use of such products is also made together. The only reason given is that assessee is also producing antimalarial drugs which are required to be pushed into Nigerian market and therefore it is a market penetration effort made by the assessee along with the other sales of pharmaceutical products and hence they should be benchmarked on basket of product approach. We do not find any rational to accept the argument of the assessee. The assessee has to show that the

The decisions relied upon before us were also carefully perused but they do not support the case of the assessee.

Even in the later years, i.e. assessment year 2009 – 10 and 2010 – 11 assessee himself stated that CUP method may not be appropriate and adopted profit split method for the reason that the basket of product approach is not acceptable to the revenue. Even in those cases, the learned transfer-pricing officer is applied CUP method.

Merely because invoices are prepared in a particular manner, they do not prove that goods sold in those products are inextricably linked with each other.

In view of this, we confirm the action of the lower authorities in making a transfer pricing adjustment with respect to sale of pharmaceutical products in Nigeria to associated enterprises amounting to ₹ 1,27,40,126/–. Thus, the ground number 1 of the appeal to that extent is dismissed.

With respect to second transfer pricing adjustments because of interest on interest free advances charged at 8.25%, the learned Authorized Representative submitted that these loans are given earlier years. He submitted that these are in the form of quasi equity and therefore, no interest should be charged. He further submitted chart to show that the business structure of the assessee showed that there were two wholly

The learned Departmental Representative vehemently supported the order of the learned Transfer Pricing Officer and the learned CIT (A), he submitted that assessee has given advances and loan to its subsidiary companies, no independent party would have invested in its subsidiary without charging any interest and therefore, same is correctly charged.

We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, undoubtedly assessee has given advances to its four associated enterprises the learned transfer-pricing officer rejected the contention of the assessee that the concerned loans had been sourced out of the cost free owned funds from internal accruals and on account of commercial expediency is and therefore the interest is not charged. According to us, the interest rate is required to be benchmarked looking at comparable prices. Only in the circumstances where there is no comparable prices available then only the interest can be benchmarked by the cost of borrowing by the lender. Admittedly, in this case assessee states that it has not incurred the cost for borrowing the above funds, which have been lent to the associated enterprises. However, here the comparable rates are available. Therefore, the argument of the assessee that it has not incurred any cost of borrowing does not have any relevance. The second argument of the assessee is that that the advances given to the two of the

Accordingly, ground number 1 of the appeal is partly allowed.

Ground no. 2 and 3 of the appeal with respect to not considering the sale of empty containers, etc. as profit industrial unit for the purpose of deduction under Section 80IB of the Act.

The brief facts shows that ₹4,19,430/- is the income of sale of containers of industrial undertaking at Silvassa unit which is eligible for deduction under Section 80IB of the Act and ₹13,13,310/- is the similar income for Dehradun unit which is eligible for deduction under Section 80IC of the Act. The

The learned Authorized Representative submitted that sale of empty containers is part of eligible income under Section 80IB as well as 80IC of the Act.

The learned Departmental Representative vehemently supported the order of the learned lower authorities.

We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently, assessee earned receipt of sale of empty containers. Undisputedly, the unit at Silvassa and Dheradun are eligible undertakings income, which is eligible for deduction under Section 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is 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 well as

In the result, the appeal of the assessee is partly allowed.

Now we come to the appeal of learned Assessing Officer. The ground no.1 with respect to the Transfer Pricing adjustment with respect to advances given to the subsidiary companies where the Transfer Pricing Officer is charged interest at the rate of 14.39%, whereas, the learned CIT (A) has reduced it to 8.25%. This ground is connected with the ground of appeal no.1(ii) of the assessee’s appeal, wherein we have held that the interest is required to be charged at the rate of Libor plus and 200 points on the above advances. In view of this, the above ground of appeal of the learned Assessing Officer deserves to be deleted, hence dismissed.

The second ground of appeal is with respect to allowance of depreciation of ₹98,85,782/- to the assessee on account of foreign exchange Gain variance.

The brief facts of the case shows that during the period, assessee has earned foreign exchange fluctuation gain of ₹11.66 crores at the time of making actual payments of actual external commercial borrowing. The assessee for purchase of capital assets in India took this loan. The claim of

We have carefully considered the rival contentions and perused the orders of the lower authorities. Undisputedly, assessee has earned foreign exchange fluctuation gain at the time of actual payment of external commercial borrowing, which was taken for acquisition of capital assets in India. As there is no acquisition of capital assets from outside India, there is no application of the provision of Section 43A of the Act. Therefore, foreign exchange fluctuation gain cannot be reduced from the actual cost of assets purchase in India. Accordingly, there is no infirmity in the order of he learned Commissioner of Income tax (Appeals). Accordingly, ground no. 2 of the appeal is dismissed.

Third ground of appeal is with respect to the additional depreciation of ₹1,23,37,420/- disallowed by the learned

The facts show that the assessee has acquired certain assets, which were entitled for additional depreciation according to Section 32(1)(iia) of the Act in the second half of the immediately preceding year. As the assessee has put to use those assets for less than 180 days in the previous financial year, assessee is entitled to only 50% of the additional depreciation. The same was allowed to the assessee in that year. Assessee has claimed balance 50% of such depreciation in the current year, the learned Assessing Officer says that there is no such provision in the Act and therefore the same was disallowed. The learned CIT (A) following the decision of the co-ordinate Bench in case of Cosmo Films Ltd (supra) allowed the claim of the assessee. The learned Assessing Officer has challenged the same before us.

We have heard the rival parties; we find that the issue is squarely covered by the decision of the Hon'ble Madras High Court in CIT vs. Shri. TP Textiles Pvt. Ltd. 394 ITR 483 (Madras). In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the disallowance. Accordingly, ground no. 3 of the appeal is dismissed.

Ground no. 4 is with respect to claim of the assessee in respect of Employees Stock Option Scheme under Section 37(1) of the Act.

Briefly stated facts shows that assessee has issued a stock option to selected employees under Employee's Stock Option

We have heard the rival parties and the order of the lower authorities. Now, we find that the issue is squarely covered in favour of the assessee by the decision of Hon'ble Karnataka High Court in [2021] 133 taxmann.com 149 (Kar.), wherein the decision of the Special Bench of ITAT in case of Biocon Limited (supra) has been upheld. In view of this, we do not find any infirmity in the order of the learned CIT (A) in allowing the claim of the assessee on deduction of employees stock option scheme discount. Ground no.4 of the appeal is dismissed.

In the result, appeal of the learned Assessing Officer is dismissed.

In the result, appeals for A.Y. 2008-09 filed by the learned Assessing Officer are dismissed and appeal of the assessee is partly allowed.

In ITA No.7511/Mum/2010 the learned Assessing Officer has raised following grounds of appeal:-

In ITA No.8120/Mum/2010, assessee has raised following ground of appeal:-

The brief facts of the case shows that assessee filed its return of income on 29th October, 2005, declaring total income at ₹18,17,99,490/-. This return was further revised on 16th December, 2006 at ₹18,23,83,300/-. During the course of assessment proceedings, it was found that assessee has entered into international transactions and therefore, such transactions were referred to the learned Transfer Pricing Officer for determining Arms Length Price. The learned Transfer Pricing Officer found that assessee has exported pharmaceutical products to National Drugs (Pty) Ltd. It considered the CUP as the most appropriate method. It was stated that as Associated Enterprises supply its goods to the local Government on tender basis whose price are fixed, the assessee had to honour the tender price irrespective of its margin. Since, the transaction was on a marginal cost

On appeal before the learned CIT (A), he deleted the addition of ₹59,89,000/- with respect to sale of the assessee to its Associated Enterprises which in turn supplied goods to the local government on tender basis for which prices are fixed. With respect to interest on interest free advances, the learned CIT (A) directed the learned Assessing Officer to recompute the adjustment on account of interest to Associated

The second ground of appeal of the learned Assessing Officer and only ground of appeal of the assessee are with respect to the benchmarking of interest on interest free advances good to the subsidiary companies. The fact shows that the assessee has given an advance to subsidiaries of ₹2.66 crores on which no interest has been charged. The learned Transfer Pricing Officer held that no independent party would have given interest free advances even to its 100% subsidiaries. Therefore, the learned Transfer Pricing Officer adopted Libor plus 300 basis points as the reasonable rate of interest thereon. Accordingly, an adjustment of ₹37,69,078/- was made. The claim of the assessee is that the appellant out of its own fund has made the advances and the cost of borrowing of the assessee is only 3.38%. Further, it was contended that the interest can be computed only if the period for which the advance were outstanding and not for the whole year. Based on these arguments, the learned CIT (A) directed the learned Assessing Officer to adopt the

The learned Authorised Representative reiterated the submission which were made before the learned CIT (A) and further stated that the amount of advances given to subsidiary companies are quasi equity and therefore, no interest is required to be charged.

The learned Departmental Representative in turn submitted that cost of borrowing of the assessee cannot be considered as an internal CUP.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The CUP method is required to be applied where the services are supplied in similar conditions. In the present case, the cost borrowing of the assessee does not have any relevance. Associated Enterprises have made the borrowing in foreign jurisdiction, therefore, the cost of borrowing of the assessee in India cannot be held to be an internal CUP. The learned Transfer Pricing Officer has adopted the Libor plus 300 basis points for

Accordingly, appeal for Assessment Year 2005-06 filed by the assessee is dismissed and filed by the learned AO is partly allowed.

ITA no. 8084/Mum/2010 is filed by the assessee against the order of the learned Assessing Officer passed under Section 143(3) read with Section 144C(13) of the Act on 9th September, 2010. Assessee has raised the following grounds of appeal:–

The learned Departmental Representative supported the order of the learned Assessing Officer as well as the direction of the learned Dispute Resolution Panel.

We have carefully considered the rival contentions and perused the orders of the lower authorities. Both the grounds of appeal have already been dealt with by us in appeals of the assessee for A.Y. 2008-2009. Therefore, respectfully following the decision in appeal of the assessee for A.Y. 2008-09, we confirm the addition of ₹17,33,115/- for sale of pharmaceutical products to Ipca Pharma Nigeria Limited and

With respect to the interest on loans and advances to the sister concern following the order for A.Y. 2008-09, we find that the interest has been charged at Libor plus 200% rate of interest for the number of days, the loans were given resulting into adjustment of ₹5,44,049/-. Accordingly, the order of the learned Assessing Officer is confirmed to that extent. Accordingly, appeal filed by the assessee is party allowed.

In the Result, appeals for A.Y. 2006-07 filed by the assessee is partly allowed.

ITA No.3267/Mum/2015 is filed by assessee for A.Y. 2007-08 against the order passed by learned CIT (A)-15, Mumbai dated 12th December, 2012. The assessee has raised the following grounds of appeal:-

Income of the assessee was assessed under Section 143(3) of the Act vide order dated 14th February, 2011, wherein over and above the transfer pricing adjustment the learned Assessing Officer made the following disallowances;

Assessee preferred the appeal before the learned CIT (A), who passed an order on 12th December, 2011. The learned CIT (A) considering the transfer pricing adjustment of sale of pharmaceutical products as well as the interest adjustment on interest free advances to its subsidiaries were confirmed. The

The ground no.1 of the appeal with respect to the transfer pricing adjustment wherein adjustment of ₹1,17,44,223/- is made in respect of goods sold to IPCA Pharma Nigeria Ltd. the assessee benchmarked the above transactions adopting the basket approach which is rejected by the learned lower authorities. This ground is identical to ground of the assessee’s appeal for A.Y. 2008-09. As this issue has already been decided by us for A.Y. 2008-09, wherein we have confirmed the action of the learned Transfer Pricing Officer, as there is no change in the facts and circumstances, we confirm the action of the learned CIT (A) in confirming the addition of ₹1,17,44,223/- with respect to sale of pharmaceutical products to IPCA Pharma Nigeria Limited.

The addition of ₹49,55,079/- is made on account of Arms Length Price of interest to be charged on the interest free advances given to Associated Enterprises of the assessee by adopting Libor plus 300 basis point interest rate. We find that this ground is also identical to the ground of appeal of assessee in A.Y. 2008-09. As per our decision therein, where we have upheld the interest rate of Libor plus 200-basis market, similarly we direct the learned Transfer Pricing

Ground no.2 and 3 is with respect to the deduction under Section 80IB and 80IC of the Act wherein the learned Assessing Officer did not grant the benefit of deduction on sales of empty containers. This ground is also identical to ground of appeal of the assessee for A.Y. 2008-09, wherein we have held that sale of empty containers is part of the profit derived from the business of the undertaking and therefore, is eligible for deduction under these respective sections. Accordingly, we allow the ground no.2 and 3 of the appeal of the assessee and directing the learned Assessing Officer to grant deduction on account of sale of empty containers under Section 80IB and 80IC of the Act.

Ground no.4 of the appeal is with respect to the disallowance under Section 40A (3) of the Act. The fact shows that the above disallowance is made on account of payment made to government agencies such as road tax and attestation charges to various embassy’s’. We find that lifetime road tax of ₹25,810/- is paid to the government and therefore, it cannot be considered for disallowance. Further, the various attestation charges paid to foreign embassy amounting to ₹1,08,755/- which is covered under Rule 6DD(b) of the Income Tax, Rules 1962. Accordingly, the disallowance to the extent of ₹21,800/- out of total disallowance of ₹1,56,365/- is upheld and Assessing Officer is directed to delete the balance

In the result, the appeal filed by the assessee for A.Y. 2007- 08 is partly allowed.

In ITA No.3597/Mum/2016, the assessee has raised the following three grounds of appeal:-

In ITA No. 3691/Mum/2016, the learned Assessing Officer has raised the following two grounds:-

Facts for assessment year 2009 – 10 was that assessee filed return of income on 30/9/2009 declaring total income of ₹ 278,678,540/–. The return was processed but selected for scrutiny.

As assessee has entered into international transactions the learned it assessing officer referred the matter to the additional Commissioner of income tax, transfer pricing officer – I (3), Mumbai (the learned transfer pricing officer) for determination of arm’s-length price. The assessee has entered into the international transactions of purchase of pharmaceutical products of ₹ 23,935,240/– and sales of pharmaceutical products of ₹ 535,832,634/–. The assessee adopted the CUP method as the most appropriate method. With respect to the interest free unsecured loan with no

With respect to the sale of pharmaceutical products the assessee has sold finished goods to its AE during the year. Assessee has benchmarked the sale of pharmaceutical products by employing CUP as the most appropriate method and stated that transaction of sale is are higher than the amount of arm’s-length price determined according to that method and therefore the international transactions are at arm’s-length. As per annexure attached to the audit report in form number 3 CEB, assessee benchmarked the sale of pharmaceutical products to income Pharma Nigeria Ltd. The assessee states that there are 14 pharmaceutical products which are exported to that company. Assessee has sold finished drug formulations amounting to ₹ 19.03 crores to this company. The assessee has determined the arm’s-length price on basket approach method comparing the price at which the assessee has sold the tracks to the associated enterprise and the average price at which the drugs has been sold to the third parties. While computing the price, at which it has sold them to the AES as well as to the third party, the assessee has made various adjustment to the price such as adjustment has been made in the sale price to the third party because of credit, export credit guarantee insurance claim premium et cetera. Similar adjustment have also been made to the sale price of the drugs to the AE -like product

The learned transfer pricing officer accepted the arm’s-length principle benchmarking by the assessee with respect to all other associated enterprises however questioned the sale to IPCA Pharma Nigeria Ltd. The learned assessing officer was of the opinion that Under the CUP method each product is different in the price of each product has to be complied with the similar product and Under the Indian transfer pricing regulations and item by item comparison has to be done. The same approach was taken by the transfer pricing officer in the earlier year also and therefore he rejected a basket of

The AO also found that assessee has given interest free advances to its subsidiaries of US dollar 1,58,283 on which no interest has been charged. He noted that in the past year the transfer pricing officer has applied the interest rate at the rate of 14.3%. The assessee submitted that that no advances have been made from interest-bearing funds, the advances are out of free reserve and therefore there is no justification. Assessee also stated that the amount advanced to subsidiaries is in the nature of quasi-equity as assessee is hundred percent parent of each of the subsidiaries. Without prejudice, assessee submitted that the weighted average interest cost to the assessee is 4.28%. The learned transfer pricing officer rejected the explanation of the assessee stating that assessee has raised funds at the rate of 5.96% and has advanced interest free loan to the associated enterprises. He therefore submitted advance in the loan associated enterprise is an international transaction and interest is required to be imputed. He rejected the applicability of London interbank offered rate. He therefore determined the credit rating of each of the associated enterprise is adopting the interest coverage ratio. He also applied the credit rating as per the debt equity ratio. Accordingly he found that the credit rating is required to be taken of associated enterprises CCC. He obtained the interest rate quotations from Crystal and held that 8.90% of the interest is proper rate being corporate bond spread. He

Consequently order u/s 92CA (3) of the act was passed on 15/1/2013 proposing total adjustment of ₹ 23,210,396/–.

The AO passed the assessment order u/s 143 (3) read with Section 144C (3) read with Section 144C (4) of the act on 9/file/2013 wherein over and above the transfer pricing adjustment he made the

disallowance of additional depreciation of ₹ 28,475,543 with respect to the plant and machinery acquired before 31/3/2008 on which the balance depreciation of 10% was claimed in assessment year 2009 – 10.

Deduction u/s 80 IC and 80 IB was also restricted by an amount of ₹ 1,027,691 Under 80 IC and ₹ 294,280 u/s 80 IB on empty containers sale, which were not eligible for deduction Under the respective sections

Accordingly total income was assessed at ₹ 331,392,165 against the returned income of ₹ 278,678,540/-.

The assessee aggrieved with assessment order preferred an appeal before the learned CIT – A. The transfer pricing adjustment made by the learned assessing officer based on the order of the learned transfer pricing officer was confirmed

Therefore assessee is aggrieved with the confirmation of the addition with respect to the arm’s-length price of the international transaction as well as the denial of deduction u/s 80 IC had 80 IB of the act on empty containers sale, disallowance of additional depreciation during the year for assets purchased in immediately preceding year. The learned AO is aggrieved with the order of the learned CIT – A on rejecting the interest rate of 8.58% on interest free advances given to the associated enterprises with respect to the international transaction and on allowability of deduction of

We first take up the appeal of the assessee. As per ground number 1 the assessee has challenged the adjustment of ₹ 20,960,016/– in respect of goods sold to associated enterprises. This ground is identical to the grounds of appeal of the assessee for assessment year 2008 – 09. While deciding that appeal we have upheld the approach of the learned transfer pricing officer in rejecting the basket of product approach. We have held that price comparability has to be made in CUP method on product by product basis. Further we have held that there is no relationship between the different products put into one basket by the assessee. Accordingly, we uphold the transfer pricing adjustment of ₹ 20,960,016 made by the learned assessing officer and confirmed by the learned CIT – A.

Furthermore, with respect to the adoption of profit split method, we are of the opinion that there is no dispute with respect to the most appropriate method with respect to determination of arm’s-length price of sale of pharmaceutical products to the associated enterprises. The assessee has continuously adopted the CUP method and the learned transfer pricing officer has also accepted the CUP method. The only dispute is with respect to the determination of the comparability. The assessee is pressing for comparing prices by adopting the basket of product approach whereas the learned transfer pricing officer is adopting product by product approach. Therefore, when both the parties have agreed

With respect to the interest chargeability of ₹ 2,250,380/– in respect of interest free advances, this issue is also identical to the transfer pricing issue in the appeal of the assessee for assessment year 2008 – 09 wherein we have held that the interest is required to be charged on the basis of LIBOR+200 basis point. Therefore the reject the chargeability of interest at the rate of 8.58% by the assessing officer. Accordingly the learned transfer pricing officer is directed to charge interest at the rate of labor+ 200 basis points.

Accordingly ground number 1 of the appeal is partly allowed.

Ground number 2 of the appeal is with respect to the allowability of deduction on empty containers sold of ₹ 1,027,691/– at Dehradun unit which is eligible for deduction u/s 80 IC o of the act. We find that this issue is identical to the appeal of the assessee for assessment year 2008 – 09 wherein we have held what is eligible for deduction under that section is the profits of the business of the eligible industrial undertaking. The empty containers sold are necessarily part of the business of the industrial undertaking. Therefore deduction u/s 80 IC on the same cannot be denied.