DCIT, CIRCLE-3(4), MUMBAI, MUMBAI vs. GLENMARK PHARMACEUTICALS LIMITED, MUMBAI

18. "Whether, in view of the assessee not having made the claim in the return of income and in absence of a revised return, the CIT(A) was justified in allowing such claim by way of additional ground without verify1ng its correctness?"

19. "Whether, on the facts and in the Circumstances of the case, the CITA) erred in treating the excise duty exemption received by the assessee as capital receipts and hence not includable fin book profit of assessee ignoring their direct nexus with the bus operations, profitability and recurring nature?" 20. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that export incentives received under the FPS, FMS, and SHIS schemes are capital receipts not liable to tax under the normal provisions of the Act and also liable for exclusion while computing book profit under section 115JB of the Income Tax Act, 1961 contrary to the binding precedent of the Hon'ble Supreme Court in Liberty India v. CIT (317 ITR 218)" (Tax Effect (20): Rs. 59,72,866)

1. Whether on the facts and in the circumstances of the case. the CIT(A) was justified in deleting the adjustment of deleting the addition of Rs. 6.17.842/- to the income of the assessee company made by the Transfer Pricing Officer on account of export of pharmaceutical products to Glenmark South Africa? 2. Whether on the facts and in the circumstances of the case, the CIT(A) was justified in deleting the adjustment of deleting the addition of Rs. 6,17,842/- to the income of the assessee company made by the Transfer Pricing Officer by disregarding the benchmarking analysis carried out by the TPO as per stipulated provisions of the Income-tax Act and Rules? 1 & 2: Tax Effect Rs. 1,90,913/- 3. "Whether, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition made under Section 41(1) of the Act without appreciating that the liabilities were time-barred, unconfirmed, and without any evidence of enforceability or continued existence? and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 4. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in allowing the appeal of the assessee and thereby deleting the addition made on account of sundry credit balances written back, ignoring the decision of the Hon'ble Supreme Court in the case of CIT Vs TVS Iyengar & Sons Ltd (222 ITR 344 (SC) which is applicable to the assessee's case." 3 & 4: Tax Effect Rs. 1,19,027/- 5 "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that DSIR has not approved the expenditure for clinical trials and BABE studies incurred outside R&D centre. 6 "Whether, on the facts and in the circumstances of the case and in law. the ld. CIT(A) has erred in allowing assessee's claim u/s. 35(2AB), despite the fact that. a) the Hon'ble Andhra Pradesh High Court in the case of Electronic Corporation of India Ltd v. ACIT, Circle 2(2) Hyderabad (2012] 28 taxmann.com 280 (Hyd.) has held that "the expenditure as approved by the DSIR in the certificate given by them in form 3CL alone is to be granted weighted deduction..." (b) the Hon'ble Karnataka High Court in the case of Tejas Networks Limited v. DCIT (Writ Petition No. 7004/2014) held that for the purposes of claims made under section 35(2AB), ie decision of DSIR, being the authority under section 35/2AB) read with rule 6(7A), would be al and that DSIR alone is competent to take decision with regards to the correctness Of expenses u/s 35(2AB) of the Act r.w.r. 6(7A) of the Rules." 5 & 6: Tax Effect: Rs. 35, 70,31,430/- 7. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in holding that no apportionment of Research and Development expenses is warranted to units elig1ble u/s.801C/801E/10AA of the Act?" 8. "Whether in the facts & circumstances of the case and in law, the ld. CIT(A) has erred in ignoring the fact that in the assessee's case the exempt units of the assessee company don't have its own independent R&D unit and the entire R&D related work is instead undertaken centrally from their R&D units situated independently and hence the facts are different than the decision of the Hon'ble jurisdictional High Court in the case of Zandu Pharmaceuticals Works Ltd (350ITR 366) where each unit of assessee had a separate R&D unit" 7 & 8: Tax Effect: Rs. 11,93,24,554/- 9 "Whether, on the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in rejecting the allocation of interest expenses to units eligible u/s. 801C/801E/10AA of the Act in the ration of turnover of such units, and thereby deleting the addition of Rs 3,03 87,366/-, ignoring the fact that assessee could not establish direct nexus of interest expense and in absence of direct nexus, all indirect expenses should be allocated to all units and in the absence of any other specific criteria turnover is most rational and logical method of allocation. 9: Tax Effect: Rs. 1,05,16,459/- 10. "Whether, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of Rs. 38,67,98, 362/- made under Section 37(1) of the Income-tax Act, 1961, on account of gifts and promotional expenses, without appreciating that such expenses were hit by the Explanation and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 to Section 37(1), being in violation of the Medical Council of India (Professional Conduct, Etiquette and Ethics) Regulations, 2002 and CBDT Circular No. 5/2012?" 10: Tax Effect Rs. 13,38 63,177/. 11 "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the assessing officer to restrict disallowance made u/s 14A rw. Rule 8D exempt income earned by assessee while computing income under normal provisions of the Act 12. Whether, on the facts and in the circumstances of the case and in law. the Ld. ClT(A) erred in directing the assessing officer to not add the disallowance u/s 14A of the Act, while computing book profit u/s 115JB of the Act without appreciating the fact that clause (f) of explanation 1 to 115JB which provide that net profit shall be increased by the amount of expenditure incurred Tor earning exempt income?" 13. "Whether the CIT(A) erred in law and on facts in admitting additional grounds of appeal regarding the claim of excise duty exemption being capital receipts, when this claim was made neither in the return of income nor in the revised return of income filed by assessee? 14. "Whether, on the facts and in the circumstances of the case. the CIT(A) erred in treating the excise duty exemption received by the assessee as capital receipts, ignoring their direct nexus with the business operations, profitability and recurring nature?

15. "Whether, in view of the assessee not having made the claim in the return of income and in absence of a revised return, the CIT(A) was justified in allowing such claim by way of additional ground without verifying its correctness?

16. "Whether, on the facts and in the circumstances of the case, the CIT(A) erred in treating the excise duty exemption received by the assessee as capital receipts and hence not includable in book profit of assessee ignoring their direct nexus with the business operations, profitability and recurring nature?" 13 to 16: Tax Effect: Rs. 1,79,287/- 17. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that export incentives received under the FPS and MEIS schemes are capital receipts not liable to tax under the normal provisions of the Act and also liable for exclusion while computing book profit under section 115JB of the Income Tax Act, 1961, contrary to the binding precedent of the Hon'ble Supreme Court in Liberty India v. CIT (317 ITR 218)" 17: Tax Effect: Rs. 1,79,287/.

2.1. Both the appeals were heard on two different dates but before the same constituting bench. Since identical grounds are raised in both the appeals and the difference is only on account of variation in the 2.2. At the outset, it is noted that there is a delay of 2 days in filing both the appeals before the Tribunal. Upon considering the explanation furnished for this brief delay, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay. Accordingly, we take up the matter for adjudication.

Sr. No. Nature of Transaction Adjustment (Rs.) 1. Export to Glenmark Nigeria 1,27,64,913 2. Export to Glenmark Czech 2,02,07,209 3. Corporate Guarantee on behalf of GHSA 28,54,64,332 4. Corporate Guarantee on behalf of GGFSA 9,02,97,175 5. Comfort Guarantee 5,08,02,117 Total 45,95,35,746 3.1. Thereafter, ld. Assessing Officer completed the assessment with total income assessed at Rs.715,03,76,410/- under the normal provisions of the Act and book profit of Rs.1266,35,45,089/- u/s. 115JB. Additions/disallowances so made, in the impugned assessment are tabulated below: S. No. Particulars Amount (Rs.) 1. Adjustments u/s. 92CA(3) A Adjustment on account of 1,27,64,913 Export of Pharmaceutical Products to Glenmark Nigeria B Adjustment on account of 2,02,07,209 Export of Pharmaceutical Products to Glenmark Czech C Adjustment on account of 28,54,64,332 corporate guarantee to GHSA D Adjustment on account of 9,02,97,175 corporate guarantee to CGFSA E Adjustment on account of 5,08,02,117 45,95,35,764 comfort guarantee 2. Outstanding Creditors u/s. 41(1) 5,46,029 3. Disallowance of weighted deduction u/s. 35(2AB) 48,69,29,980 4. Allocation of R & D expenses to units eligible u/s. 15,33,30,842 10AA/80IC/80IE of the Act 5. Allocation of interest expenses to units eligible 5,63,06,678 u/s. 10AA/80IC/80IE of the Act 6. Disallowance u/s. 37(1) on account of IMC 31,90,72,944 Regulations.

7. Disallowance u/s. 14A (Normal provisions as well 4,83,46,713 as MAT u/s. 115JB) 8. Disallowance of investment allowance u/s. 32AC 11,66,05,610 of the Act.

3.2. Assessee went in appeal before the ld. CIT(A) wherein it reiterated its detailed submissions and explanations along with corroborative documentary evidences. After considering the same, ld. CIT(A) gave relief to the assessee by allowing its appeal, against which Revenue is in appeal before the Tribunal. We take up grounds raised by the Revenue, seriatim.

4.1. Contention of the assessee is that it is a manufacturer who owns the IP of the products sold to the two AEs namely, Glenmark Nigeria and Glenmark Czech. Based on the OECD guidelines and having regard to the extant Income-tax regulations, assessee has selected the AE to be the tested party for the transaction of export of pharmaceutical products to the AEs. The OECD guidelines define tested party as under- "the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparable can be found, i.e., it will most often be the one that has the less complex functional analysis A Tested party should have the following attributes on bases of these definitions: ● Available of reliable and accurate data for comparison, ● Least Complex (amongst the parties to the transaction) and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 ● Data available can be used with minimal adjustments transaction), 3 Further, the US Treasury Regulations under section 1.482-5 has defined tested party as below: "…the tested party will be the participant in the controlled transaction whole operating profit attributable to the controlled transactions can be verified using the most reliable data and requiring the fewest and most reliable adjustments, and for which reliable data regarding uncontrolled comparable can be located. Consequently, in most cases the tested party will be the least complex of the controlled taxpayer and will not own valuable intangible property or unique assets that distinguish it from potential uncontrolled comparables."

4.2. Based on the above, assessee submitted that with respect to the benchmarking of the export transaction, AEs possess the least complex functional analysis and hence, chosen AE as the tested party. For its above stand, assessee relied on the decision of Ranbaxy Laboratories Ltd. vs. Addl. CIT [2016] 68 taxmann.com 322 (Del Trib). Further, assessee submitted this issue is already held in its favour by the order of the Coordinate Bench of ITAT, Mumbai in its own case for A.Y. 2014- 15 (Combined Order in & C.O. No.31/Mum/2020, dated 01.02.2024), wherein the Coordinate Bench on the issue held as under:- “8.9 We have noticed that the above said methodology adopted by the assessee has been accepted by the TPO in the earlier years. Further, the table above would show that the profitability of the assessee in exporting products to these two AEs is increasing year after year. Under these set of facts and in the facts and circumstances of the case, we are of the view that there is no reason to ignore transfer pricing study conducted by the assessee should be accepted. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the transfer pricing adjustment made in respect of exports made to M/s Glenmark, South Africa and M/s Glenmark, Mexico”

4.3. On these set of facts, ld. CIT(A) found that profitability of the assessee in exporting products to these two AEs is increasing year after year. Further, margin of assessee from these AEs has increased year after year and benchmarking of the same has been accepted by the ld. TPO. We have perused the material on record and gone through the submissions made before us. The issue is in regard to selection of tested and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 party for the purpose of benchmarking. This issue has been held in favour of the assessee by the Coordinate Bench in assessee’s own case (supra) whereby selection of AE as the tested party for the transaction of export of pharmaceutical products to the AEs has been upheld. Case of the ld. TPO is that AEs are overseas entities and thus, foreign AE cannot be taken as tested party. In the year before us, the AEs are foreign AEs though different from the one which were dealt by the Coordinate Bench in assessee’s own case for Assessment Year 2014-15 which were Glenmark, South Africa and Glenmark, Mexico. In the case before us, foreign AEs are Glenmark, Nigeria and Glenmark Czech. On principle basis, the issue stands covered in favour of the assessee to consider foreign AE as tested party for the purpose of benchmarking of the impugned transaction. Since there is similarity in the nature of transactions undertaken by the assessee, respectfully following the decision of the Coordinate Bench in assessee’s own case (supra), we hold that transfer pricing adjustment made by the ld. TPO and added to the total income of the assessee by the ld. Assessing Officer is not justifiable. Finding arrived at by the ld. CIT(A) does not call for any interference. Ground nos.1 and 2 of the Revenue are dismissed.

and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 businessman would keep recovery pending for three years, unless the same is not recoverable. With this view, he held that the liabilities have ceased to exist and made the addition u/s.41(1). The details of outstanding creditors as reported in the balance sheet for the year is tabulated below: Current Status of creditors outstanding as per the balance sheet as on 31.03.2015 Sr. No. Action taken AY Amount (Rs.) 1. Paid off to the creditor 2015-16 17,924 2. Written Back to the P/l 2015-16 8,824 account and offered to tax 2016-17 1,26,582 2020-21 3,87,837 2023-24 4,863 Total 5,46,029 5.1. Assessee submitted that these have been paid off or written back to the profit and loss account and offered to tax as tabulated above and therefore no addition is warranted. This issue had come up before the Coordinate Bench in assessee’s own case for several past Assessment Years. Ld. CIT(A) has taken note of the judicial pronouncements of the preceding years in assessee’s own case and held that merely due to fact that the same is pending for three years, section 41(1) cannot be invoked. Actual remission or cessation has to be established which has not been done in the present case.

5.2. Nothing cogent has been brought on record to controvert these factual observations and findings, fortified by the judicial pronouncements in assessee’s own case. Accordingly, in the given set of facts and judicial pronouncement of the preceding years, we do not find any reason to interfere with the findings arrived at by ld. CIT(A). Ground nos. 3 and 4 are dismissed. and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 6. Ground nos. 5 and 6 relates to disallowance u/s. 35(2AB). According to ld. Assessing Officer, assessee has claimed weighted deduction of Rs.438,01,87,660/-. However, assessee did not receive Form No. 3CL from DSIR for the year, hence disallowed the claim of deduction amounting to Rs.34,99,16,082/-. Ld. Assessing Officer while disallowing the claim noted that the amount which is not approved by the DSIR is not eligible for weighted deduction and thus, proceeded to make the addition.

6.1. Contention of the assessee is that its R&D facility has been approved by DSIR and it has performed its part of obligation under the statute by applying before DSIR as provided u/s. 35(2AB) r.w.r. 6 of the Income-tax Rules, 1962 (The Rules). Merely because DSIR has not forwarded its report in Form No.3CL, claim of the assessee cannot be disallowed when there is no dispute on incurring of the expenditure towards scientific research. It was also submitted that amendment brought in rule 6(7A)(b) does not apply retrospectively but only w.e.f. 01.07.2016. According to it, the amendment is applicable from Assessment Year 2017-18, not relevant to the year under consideration. Further, it is an undisputable fact that the R&D facility of the assessee is duly approved w.e.f. 01.04.2010 to 31.03.2015 for the purpose of section 35(2AB) vide Form No. 3CL by DSIR, dated 08.04.2015. This issue had come up before the Coordinate Bench in assessee’s own case for Assessment Year 2014-15 (supra) wherein on similar issue it was held that- “9.5 We heard the parties on this issue and perused the record. With regard to the first issue of exclusion of expenses not approved by DSIR for the purpose of computing deduction u/s 35(2AB) of the Act, we notice that similar issue has been decided in favour of the assessee in the assessee's own case in AY 2013-14. We also notice that the Rule 6(7A), which requires approval of expenses also by DSIR has been brought into the statute w.e.f. 1.7.2016 and hence the same will not apply to AY 2014-15…..”

6.2. Ld. CIT(A) has considered the submissions made by the assessee as well as amendment made to Rule 6(7A) which has come on the statute w.e.f. 01.07.2016, hence applicable from A.Y. 2017-18. He has also taken note of the decision of Coordinate Bench in assessee’s own case (supra) and thus, allowed the claim of weighted deduction of the assessee. Having gone through the factual position and judicial pronouncement as noted above, we do not find any reason to interfere with the findings arrived at by ld. CIT(A).

6.3. We also take note of the decision of the Coordinate Bench in another case of Marksans Pharma Ltd. vs. DCIT [2023] 155 taxmann.com 59 (Mum) which also dealt with similar issue holding that prior to amendment in Rule 6(7A)(b) w.e.f. 01.07.2016, once facility is approved by DSIR, assessee is entitled to weighted deduction u/s. 35(2AB) and there is no requirement that expenses also need to be approved by DSIR in Form No.3CL. Thus, in conspectus of the above, ground nos. 5 and 6 raised by the Revenue are dismissed.

7.2. There being no change in fact and position of law, as noted above and the decision of Hon'ble High Court of Karnataka in the case of Microlabs Ltd. [2016] 383 ITR 490 (Kar) and the decision of Coordinate Bench in the case of Wockhardt Ltd. in has already been considered by ld. CIT(A) also, we find no reason to interfere with the findings so arrived at. Accordingly, ground no.7 raised by the Revenue is dismissed.

S. No. Particulars Deduction u/s. Deduction claimed (in INR) 1. Baddi (Unit I) 80IC 85,59,64,468/- 2. Nalagarh (Unit II) 80IC 71,64,25,864/- 3. Sikkim Unit 80IE 284,09,41,116/- Total deduction 441,33,31,448/- claimed 8.1. In respect of the Baddi (unit III), assessee had not claimed any deduction as it had incurred loss during the year. During the course of assessment proceedings, ld. Assessing Officer observed that assessee had not allocated any R & D expenses to Baddi I, Solan, Baddi III and Sikkim units which are eligible for profit linked deduction u/s 80IC/80IE. He further noted that assessee has 12 manufacturing units, i.e., Baddi I, Solan, Baddi III, Sikkim Unit, Pithampur and Dahej (6 units are exempted) and 6 units, i.e., Nasik, Goa, Ankleshwar, Mohol, Kurkumbh and Aurangabad which are not exempt. At none of the 12 manufacturing units. R & D Activities are being carried out. In fact, all the R & D activities are carried out at their independent R & D Centres. Based on the above facts, assessee was asked to give details of both, R & D expenses incurred and claimed at all the seven R & D units and to explain as to why the same should not be apportioned to all the manufacturing units in their respective turnover ratio basis, in order to arrive at the true and correct profit of each unit. Assessee vide its detailed explanation submitted before the Assessing Officer for non- allocation of R & D expenses to all the 12 manufacturing units. Further, assessee had submitted details of allocation of common expenses allocated to eligible units. The same has been reproduced by ld. and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 Assessing Officer in the assessment order at Para 5.5. However, ld. Assessing Officer did not agree with the contention of assessee and proceeded to allocate the R & D expenses incurred at seven R & D centres to the five manufacturing units in their respective turnover ratio basis by excluding trading sales. Accordingly, he reduced the deduction claimed at Baddi Unit I, Solan Unit, Baddi Unit III and Sikkim Unit.

8.2. Assessee submits that all the Research and Development expenses were incurred at the seven approved R & D Centres only situated at Mahape-NCE, Taloja, Sinnar, Goa, Pithampur, Mahape- Generics and Sanpada which are not 80IC/80IE Units. These R & D expenses are directly or indirectly not connected with the manufacturing operation carried out at the above units. The Research and Development expenses incurred had no connection with the normal business of the above 6 units nor any benefit is received by them from the said research. Research and Development expenses incurred at the above approved centres had nothing to do with the above manufacturing units. Research and Development activities by these R & D centres were in relation to new drugs and not with the drugs manufactured by these 6 units. There is no correlation either direct or indirect of R & D expenses with the sales of company whether it is sale of Baddi unit-l, Baddi unit-II (Solan), Baddi Unit III, Sikkim unit or Dahej. The entire development process (R&D) requires a long gestation period of 4 to 7 years with very high probability of failure. Moreover, it is not certain that the final product will be manufactured at the Baddi unit-I, Baddi unit-II (Solan), Baddi Unit III, Sikkim Unit or Dahej only. Hence, these expenses do not require to be allocated to any of the manufacturing unit. and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 8.3. Ld. CIT(A) took note of the decision of the Coordinate Bench in assessee’s own case for the Assessment Year 2014-15 (supra) wherein on similar issue, it held to remit the matter back to the file of ld. Assessing Officer for factual verification. Observations in this regard are as under: “14.2 We noticed that the Ld CIT(A) has followed the decision taken by the Tribunal in the assessee's own case in AY 2010-11 and accordingly remitted this issue to the file of AO. In our view, no prejudice is caused to the revenue by the decision of Ld CIT(A), since the matter required factual verification. Accordingly, we uphold the order passed by Ld CIT(A) on this issue.”

8.4. We note that this legacy issue has been dealt by the Coordinate Bench in Assessment Year 2009-10 and 2010-11 also, wherein similar directions were given setting aside the matter to the file of ld. Assessing Officer for factual verification. On this position, ld. Counsel for the assessee fairly agreed that issue for this year also be remitted back to the file of ld. Assessing Officer as directed in the preceding years for factual verification. Accordingly, in these set of facts and judicial pronouncements, ground nos. 8 and 9 are allowed for statistical purposes.

and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 9.1. Ld. Counsel for the assessee demonstrated through the financial statement of each of the units, placed in the paper book that these units had not taken money from head office and had sufficient owned funds, which did not warrant apportionment of interest expenses. Assessee also furnished a chart giving working of interest allocation made by the ld. Assessing Officer:

9.2. From the above table, it was pointed out that assessee has used the basis as ‘capital employed’ whereas ld. Assessing Officer has used ‘turnover’ as the basis while allocation of interest expense. It is because of the turnover as the basis, the other two units of Pithampur SEZ and Dahej SEZ also got an apportionment out of the total interest expense.

9.3. From the above factual position and the findings arrived at by the Coordinate Bench in assessee’s own case in Assessment Year 2014-15 (supra), whereby the impugned apportionment was deleted, it was observed that since these units have not taken money from Head Office, and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 the question of allocating interest expense of head office to these units does not arise. Accordingly, reasoning given by ld. Assessing Officer fails for the three units. Considering the factual position and judicial pronouncement, the issue stands squarely covered in favour of the assessee. We do not find any reason to interfere with the findings arrived at by ld. CIT(A). Ground no.10 raised by the Revenue is dismissed.

10.1. This issue had also come up before the Coordinate Bench in assessee’s own case for Assessment Year 2014-15 (supra). It was noted by the Coordinate Bench that ld. Assessing Officer has computed the disallowance on the total turnover, whereas the issue is related to sales promotion expenses and disallowance to be made as per explanation to section 37(1). It was also noted that ld. CIT(A) had adopted a completely different approach which was not at all the case of the ld. Assessing Officer. There was no doubt on the actual expenses having been incurred by the assessee. The Coordinate Bench took a view that the issue requires fresh examination at the end of the Assessing Officer and and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 thus, remitted the matter back to the file of ld. Assessing Officer. It also observed that the amount, if any, disallowed may be distributed among the eligible units and deduction u/s 80IC/80IE may be re-computed accordingly.

10.2. Pursuant to the above stated direction, ld. Assessing Officer passed an order giving effect u/s. 143(3) r.w.s. 254 for Assessment Year 2014-15 dated 24.12.2024, by adopting the methodology as directed by the Coordinate Bench. On this, ld. Counsel for the assessee fairly admitted that in the year under consideration also, ld. Assessing Officer be directed to adopt the same methodology as done in order giving effect for Assessment Year 2014-15. In these set of facts and the judicial precedent, we agree with the submissions made by the ld. Counsel and accordingly, remit the matter back to the file of ld. Assessing Officer to adopt the same methodology as done in Assessment Year 2014-15 while passing the order giving effect u/s. 143 r.w.s.

11. Ground nos.12 and 13 are towards disallowance made u/s.14A r.w. rule 8D. During the year under consideration, assessee had earned dividend income of Rs 94,50,332/- which is claimed as exempt u/s. 10(34) of the Act. Following the decision of Coordinate Bench of ITAT, Mumbai in assessee's own case for Assessment Years 2002-03 to 2006- 07, assessee suo-moto disallowed Rs.9,45,033/- u/s 14A (10% of dividend income) while computing the total income. Subsequently, assessee vide submission dated 13.02.2018 filed a revised computation before the ld. Assessing Officer by recalculating the amount of disallowance u/s 14A at Rs.6,63,079/- by following the decision of ld. CIT(A) in assessee's own case for A.Y. 2012-13 and A.Y. 2013-14. The revised computation of total income was filed before the ld. Assessing

and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 Officer in view of judgement of Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders [2012] 349 ITR 336 (Bom).

11.1 Ld. Assessing Officer asked the assessee to show cause why the disallowance should not be invoked as per provision of section 14A of the Act read with Rule 8D of the Rules. Assessee submitted its reply, however, ld. Assessing Officer invoked the provisions of section 14A r.w. Rule 8D to compute disallowance at Rs 4,92,91,746/- and made net disallowance of Rs.4,83,46,713/- i.e. after reducing the suo moto disallowance made in the original return of income.

11.2. Before ld. CIT(A), assessee took an additional ground contending that the disallowance u/s 14A should not exceed exempt income. In this regard, assessee placed its reliance on the decision rendered by Hon'ble Delhi High Court in the cases of Joint Investment Pvt Ltd 372 ITR 694 (Del) and the decision rendered by the Tribunal in the case of Future Corporate Resources Ltd in dated 26.07.2017.

11.3. With regard to the addition made u/s 115JB of the Act, assessee placed reliance on the decision rendered by Hon'ble Special Bench in the case of ACIT vs. Vireet Investment Pvt Ltd in ITA 502/Del/2012. By placing reliance on the above said decision, ld. CIT(A) held that the disallowance computed u/s 14A should not be considered for computing book profit u/s 115JB of the Act.

11.4. Ld. CIT(A) after considering the decision of Coordinate Bench in assessee’s own case for Assessment Year 2014-15 (supra) held in favour of the assessee, restricting the disallowance to the extent of exempt income earned by the assessee and deleting the amount in excess thereof.

11.5. The issue raised by the Revenue is no longer res integra as held by the Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs. Ajit Ramakant Pathardekar [2021] 124 taxmann.com 124 (Bom) wherein it held that disallowance u/s.14A could not be more than the exempt income earned by the assessee. In the given set of facts and the judicial pronouncements referred above, we uphold the finding arrived at by ld. CIT(A).

11.6. Further, in this regard, ld. Assessing Officer has made addition of the disallowance made by him u/s.14A r.w.r. 8D while computing the book profit u/s.115JB. This issue is also no longer res integra for which ld. CIT(A) has referred to the judicial precedent in the case of ACIT vs. Vireet Investments (supra) wherein it was held that no disallowance u/s.14A should be made while computing book profit u/s.115JB. On this aspect also, we uphold the finding of ld. CIT(A). Accordingly, ground no.12 and 13 raised by the Revenue are dismissed.

12.1. Fact of the matter is that GGL and Glenmark Access Limited (GAL) have been amalgamated with assessee w.e.f. 01.04.2014, i.e. Assessment Year 2015-16. While passing assessment order for Assessment Year 2014-15 in the case of GGL, the entire claim of deduction u/s 32AC of Rs 19,04,87,767/- was disallowed by the ld. Assessing Officer as alleged that the total eligible investments were only Rs. 49,01,73,342/- out of Rs. 126,99,18,444/-, as the balance assets of Rs. 77,97,45,102/- were acquired before 01.04.2013, but installed during Financial Year 2013-14. In respect of eligible investments of Rs. 49,01,73,342, it was stated that deduction would be allowed for the same in subsequent year subject of fulfilment of conditions of section 32AC.

12.2. Details of eligible investment for the purpose of deduction u/s 32AC are as follows: Particulars Amount (in INR) Assets acquired and installed in FY 2013-14 28,71,97,191 by assessee (AY 2014-15) Assets acquired and installed in FY 2013-14 49,01,73,342 by GGL (AY 2014-15) Assets acquired and installed in FY 2014-15 98,40,31,465 (AY 2015-16) Total eligible investment 176,14,02,198 12.3. In the light of above facts, assessee would be eligible for additional claim of deduction u/s 32AC of Rs. 11,66,05,610/- which is worked out as follows: Particulars Amount (in INR) Total eligible investment 176,14,02,198 Deduction @ 15% 26,42,10,330 Less: Deduction claimed in the return 14,76,04,720 Additional deduction u/s 32AC 11,66,05,610 12.4. On these set of facts, ld. CIT(A) observed that GGL got merged with the assessee w.e.f. 01.04.2014, claim of deduction u/s. 32AC in the year under consideration, in the hands of the assessee is legally correct since GGL is no more in existence in the relevant year. He further noted that ld. Assessing Officer stated in his order that claim of deduction would be allowed in the subsequent year. He also took note of the decision of the Coordinate Bench in assessee’s own case in Assessment Year 2014- 15 (supra) wherein on the similar issue, it was held that claim of deduction u/s. 32AC is allowable. Based on these factual position, ld. CIT(A) directed the ld. Assessing Officer to allow the correct claim of investment allowance of Rs.11,66,05,610/- on merits.

12.5. In the course of hearing, before us, ld. Counsel for the assessee referred to a chart for calculation of deduction claimed u/s.32AC, computing the claim for both the Assessment Years 2014-15 and for 2015-16 in the hands of the assessee as well as in the erstwhile GGL. The said working is extracted below for ready reference:

12.6. Ld. CIT DR pointed out that issue of amalgamation was not there in Assessment Year 2014-15 which is relied upon by ld. CIT(A) while giving relief to the assessee. Having considered the above stated facts, we find it appropriate to remit the issue back to the file of ld. Assessing Officer to decide afresh by taking into account the outcome of final position in the litigation for Assessment Year 2014-15 which is pending in the case of GGL. Accordingly, ground no.14 and 15 are allowed for statistical purposes.

and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 13.1. Ld. CIT DR objected on the admission of additional claims at the first appellate stage by placing reliance on the decision of Hon'ble Supreme Court in the case of Shriram Investments vs. CIT in Civil Appeal No. 6274 of 2013, dated 04.10.2024. On the strength of this decision, he contended that since assessee did not file its revised return for claiming these benefits, the relief granted by the ld. CIT(A) is not justified. He also referred to another decision in the case of Wipro Finance Ltd. [2022] 137 taxmann.com 230 (SC) which has been referred to by the Hon'ble Supreme Court in the case of Shriram Investments.

13.2. On this aspect, ld. Counsel for the assessee referred to the decision of the Coordinate Bench of ITAT Mumbai in the case of DCIT vs. Shelter Developers in dated 18.01.2025 to point out that reliance placed by the Revenue on the decision of Shriram Investments (supra) does not apply in the case of the assessee. The Coordinate Bench has extensively dealt with the judgement of Shriram Investments (supra) as well as in the case of Wipro (supra) to come to a conclusion that the judgement in the case of Shriram Investment, in fact, speaks in favour of the assessee that power can be exercised by the Tribunal u/s.254 to consider such a claim. Relevant paragraphs from the said decision of the Coordinate Bench are extracted below for ready reference: “18. Now coming to the judgment relied upon by the Id. CIT DR, the Hon'ble Supreme Court in the case of Shriram Investments vs. CIT (supra), the issue before the Hon'ble Supreme Court was whether the revised return filed by the assessee which was barred by limitation u/s.139 (5), does the AO has jurisdiction to consider the claim made by the assessee in the said revised return. The Hon'ble Supreme Court held that the revised return was barred by limitation and Id. AO does not have any jurisdiction to consider the claim by the assessee in the revised return. Nowhere, the Hon'ble Supreme Court has held that the Tribunal does not have the power u/s.254. On the contrary, the Hon'ble Supreme Court observed that the Tribunal has not exercised its power u/s.254 to consider the assessee's claim and instead Tribunal has directed the Id. AO to consider the assessee's claim made in the revised return which was barred by limitation and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 where Id.AO had no jurisdiction to consider the claim. The relevant para 8 & 9 clarifying this issue reads as under- “8. Coming to the decision of the Tribunal, we find that the Tribunal has not exercised its power under Section 254 of the IT Act to consider the claim. Instead, the Tribunal directed the assessing officer to consider the assessee's claim. The assessing officer had no jurisdiction to consider the claim made by the assessee in the revised return filed after the time prescribed by Section 139(5) for filing a revised return had already expired.

9. Therefore, we find no reason to interfere with the impugned judgment of the High Court. The appeal is, accordingly, dismissed."

19. Thus, this judgment in fact conversely speaking implies that the power can be exercised by the Tribunal u/s.254 to consider the claim.

21. However, there is another judgment of the Hon'ble Supreme Court in the case of Wipro Ltd., vs. CIT reported in (2022) 140 txmann.com 223(SC), wherein, the Hon'ble Supreme Court held that the Tribunal can entertain any legal ground for the first time before the Hon'ble Supreme Court had referred to the three Judge Bench judgment of the Hon'ble Supreme Court in the case of NTPC Ltd., The relevant observation of the Hon'ble Supreme Court reads as under:- "10. The learned ASG appearing for the department had faintly argued that since the assessee in its return had taken a conscious explicit plea with regard to the part of the claim being ascribable to capital expenditure and partly to revenue expenditure, it was not open for the assessee to plead for the first time before the ITAT that the entire claim must be treated as revenue expenditure. Further, it was not open to the ITAT to entertain such fresh claim for the first time. This submission needs to be stated to be rejected. In the first place, the ITAT was conscious about the fact that this claim was set up by the assessee for the first time before it, and was clearly inconsistent and contrary to the stand taken in the return filed by the assessee for the concerned assessment year including the notings made by the officials of the assessee. Yet, the ITAT entertained the claim as permissible, even though for the first time before the ITAT, in appeal under section 254 of the 1961 Act, by relying on the dictum of this Court in National Thermal Power Co. Ltd. (supra). Further, the ITAT has also expressly recorded the no objection given by the representative of the department, allowing the assessee to set up the fresh claim to treat the amount and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 declared as capital expenditure in the returns fas originally filed), as revenue expenditure. As a result, the objection now taken by the department cannot be countenanced.

11. Learned ASG had placed reliance on the decision of this Court in Goetze (India) Ltd. v. CIT (2006) 157 Taxman 1/284 ITR 323 in support of the objection pressed before us that it is not open to entertain fresh claim before the ITAT. According to him, the decision in National Thermal Power Co. Ltd. (supra) merely permits raising of a new ground concerning the claim already mentioned in the returns and not an inconsistent or contrary plea or a new claim. We are not impressed by this argument. For, the observations in the decision in Goetze (India) Ltd. (supra) itself make it amply clear that such limitation would apply to the "assessing authority", but not impinge upon the plenary powers of the ITAT bestowed under section 254 of the Act. In other words, this decision is of no avail to the department."

22. The aforesaid judgment of the Hon'ble Supreme Court clearly clinches the issue that the ITAT can entertain such a claim for the first time in terms of its claim u/s.254, accordingly, we admit the legal issue raised by the assessee in the cross objection and the objections raised by the ld. AR is rejected.” 13.3. Accordingly, in the given set of facts and legal position as discussed above, admission of additional grounds along with additional documentary evidences for which a remand report was called for by the ld. CIT(A) is justified. Thus, on this aspect, the contentions of the Revenue are not tenable to dislodge the claim of the assessee at the very threshold, by an appellate authority.

14.1. Brief facts of the case are that assessee has set up two units in Baddi, Himachal Pradesh and one unit in Sikkim. By virtue of New Industrial Policy, it availed excise duty subsidy amounting to Rs. and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 65,19,73,610/-and Rs. 18,64,63,399/-, respectively. The undertakings in Baddi commenced production, in Unit-1 on 22.10.2005 and in Unit- 11 on 01.07.2008). Undertaking in Sikkim commenced production on 17.05.2012. Since the said undertakings are located in the specified backward area, these are entitled to excise duty exemption under the Central Excise notification no. 49-50/2003-CE dated 10.06.2003 and notification no. 56/2003 dated 25.06.2003. In terms of the said notification, these undertaking are entitled to 100% excise duty exemption for a period of 10 years from the date of commencement of commercial production. A letter stating the entire fact that the assessee is eligible for exemption from payment of central excise for a period of 10 years was filed before Deputy Commissioner, Custom & Central Excise, Himachal Pradesh/Sikkim which are placed in the paper book. During the year consideration, being the 10th year for Baddi Unit-1 and 7th year for Baddi Unit-Il and being 3rd year for Sikkim unit, assessee has availed excise duty exemption of Rs. 83,84,37,009/-. Working of the said exemption is placed in the paper book. Further, copies of monthly excise returns filed by the assessee before Commissioner, Custom and Central Excise are also collectively placed in the paper book. It is further noted that under the provisions of section 80IC/80IE, assessee is also claiming deduction u/s 80IC on the undertakings - Baddi Unit-1 and 11, and deduction u/s 80IE on the undertaking in Sikkim. These deductions have been allowed by the department for period of 10 years.

14.2. Claim of the assessee is that the said exemption was given to the said undertakings located in the backward area of Baddi, Himachal Pradesh and North-Eastern States, i.e., Sikkim in terms of the observation of the then Hon'ble Prime Minister for generation of employment and utilization of local resources. The said fact is evident and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 from Office Memorandum dated 07.01.2003 and 01.04.2007, respectively. According to the assessee, incentive in the form of excise duty exemption had been given with an objective to achieve industrialization in the specified areas of Baddi, Himachal Pradesh and North-Eastern States i.e., Sikkim and to generate employment opportunities. Assessee referred to the decision of Coordinate Bench of ITAT, Amritsar in the case of ACIT vs. Gravita Metal Inc. in and 587/Asr/2019, dated 15.06.2023, wherein similar issue had come up. The factual position recorded in this order are in para-2 and 2.1, which are extracted below for ready reference: “2. Briefly, the facts as per record are that the assessee firm is engaged in the business of manufacturing and recycling of used lead acid battery for supply of pure/refined/unrefined lead ingots, lead alloys to cable and battery manufacturers of India. For the year under consideration, it has filed the return on 12.10.2016 at Nil income. The assessee firm set up its manufacturing unit in Kathua, Jammu & Kashmir on 28.06.2005 to avail the benefit of New Industrial Policy launched for the state of Jammu & Kashmir launch. The Ministry of Commerce & Industry vide Office Memorandum dt. 14.06.2002 (PB 30-32) has provided New Industrial Policy for the state of Jammu & Kashmir in order to accelerate industrial development of the state and to boost investor confidence, as per which new industrial units are entitled to 100% excise duty exemption for a period of 10 years from the date of commencement of commercial production. Accordingly, the assessee firm was being entitled for exemption from payment of excise duty on the goods manufactured by it claimed 100% exemption and filed returned income at NIL. 2.1 In view of insertion of clause (xviii) to section 2(24) of the Act introduced by Finance Act, 2015, the AO held that contention of assessee that this was just a notional entry as explained vide letter dt. 14.12.2018 (PB 25-29) is not relevant. Assessee is following mercantile system of accounting and income is to be taxed on accrual basis. Assessee has passed the entry in books of accounts and is thus liable to be taxed. Hence, the amount of Rs.5,15,25,900/- claimed as capital receipt exempt u/s 10 of the Act is taxed as revenue receipt in view of section 2(24)(xviii) of the Act and accordingly added to the income of assessee.”

14.3. Coordinate Bench considered the amendment brought to section 2(24)(xviii) which is effective from 01.04.2016 which provides for two exceptions in clause (a) and (b), i.e., subsidy or grant or reimbursement received to meet actual cost of asset as per Explanation 10 to section and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 43(1) and subsidy or grant by Central Government for the purpose of corpus of a trust or institution established by the Central Government or a State Government. It noted the view of ld. CIT(A), according to which exemption granted to the assessee does not fall in the category of exemptions. Ld. CIT(A) viewed the central excise refund in the nature of subsidy and held that 36% of the said excise duty refundable to the assessee is income u/s.2(24)(xviii). The Bench by taking note of the submissions of the assessee differentiated between the words “exemption” and “subsidy” which are two separate independent words and not defined under the Act. It concluded that the word “exemption” is not included in the ambit of section 2(24)(xviii) though, it specifically includes the words, ‘subsidy’, ‘grant’, ‘cash incentive’, ‘duty drawback’, ‘waiver’, ‘concession’ and ‘reimbursement’, and hence in absence of the inclusion of word “exemption” under the said clause, it held that scope of this section cannot be enlarged to include exemption by interpreting it as ‘subsidy’. In this case, assessee is granted payment of excise duty to the extent of 36% of the total excise duty collected. It thus, allowed the claim of assessee treating it as capital receipt.

14.4. Revenue took up the matter before the Hon'ble High Court of Jammu & Kashmir & Ladakh in case of PCIT vs. Gravita Metal Inc. [2024] 168 taxmann.com 379 (J&K and Lad). Hon'ble Court after deliberating on the amendment brought to clause (xviii) to section 2(24) affirmed the view taken by the Coordinate Bench, treating it as a capital receipt, not taxable under the provisions of the Act. Relevant para-12 is extracted below for ready reference: “12. In the present case, the assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected, meaning thereby the same is not subsidy given to meet the cost of the project. Therefore, we are also in full agreement with the learned Tribunal that exemption from excise duty does not fall in the definition of income as envisaged under Section 2(24)(xvi) of and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 the Act and that the amount of Rs. 1,85,49,324/- is not an income but a capital receipt not taxable under the provisions of the Income Tax Act.” 14.5. Assessee also placed on record judicial precedents of Coordinate Benches which has dealt with this matter, namely- i) PCIT vs. Greenply Industries Ltd. [2025] 172 taxmann.com 294 (Guwahati) ii) DCIT vs. PC Jewellers Ltd. [2025] 175 taxmann.com 281 (Delhi Trib) wherein it was held that exemption under excise duty notification is capital in nature.

15.1. In view of elaborate discussion made above, more so that the amendment is not applicable in Assessment Year 2015-16 and also when the view so taken by ld. CIT(A) is fortified by the decision of and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 Hon'ble High Court of Jammu & Kashmir & Ladakh (supra), we are in agreement with the said view, to affirm the same. Accordingly, addition made to this extent is not called for as held by ld. CIT(A).

16.1. During the year under consideration, assessee has received Focus Product Scheme (FPS), Focus Market Scheme (FMS) and Status Holder Incentive Scrip (SHIS) in the form of export incentives under the Foreign Trade Policy, 2009-2014 amounting to Rs.43,15,763/-, Rs. 1,22,51,003/- and Rs.10,05,658/-, respectively. Copy of working sheet are collectively placed in the paper book. The incentive was granted as the assessee made export to various potential new markets and not for all the markets. The incentive was given for exploring the new market for a long term prospective. Assessee now contends to claim the said incentives as capital in nature.

16.2. Before embarking to adjudicate on this aspect further, it is relevant to note the objective of the scheme which is produced as follows for ready reference: "with a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine. Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from tone to time."

16.3. From the above, it is observed that objective of scheme is to promote export of products which have high intensity/employment potential. This is an incentive given for exploring new market on a long- term perspective. The potential markets will be identified by the Government and the samples will be sent for exploring the markets. It is submitted that incentive has been given with an objective to intensify and accelerate the manufacture and export of the notified goods/product. As the purpose of the said subsidy is to intensify and accelerate the manufacture and export of notified goods/product, the same shall be treated as capital receipt, claims the assessee. Reliance is placed on the judgement of Hon'ble Rajasthan High Court in the case of PCIT v. Nitin Spinners Limited in dated 19.09.2019 wherein it was held that FMS subsidy should be treated as a capital receipt. The relevant extract of order is reproduced as below: “8. As far as the question with regard to Focus Marketing Scheme was concerned, apparently the Central Government gave the subsidy to enhance Indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. The ITAT took note of judgment in Ponni Sugars & Chemicals Ltd. (supra) and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason.” 16.4. Assessee placed reliance on the decision of the Coordinate Bench of ITAT, Mumbai in the case of DCIT vs. Aarti Industries Ltd. [2025] 178 taxmann.com 676 (Mum) which also dealt with same Assessment Year 2015-16. In this appeal also, assessee claimed it as capital in nature by way of an additional ground by placing reliance on the Goetze India Ltd. (supra). The Coordinate Bench after taking into account the facts, relied upon the decision for earlier years and held it to be capital in nature. Contents of the said decision are reproduced as under: and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 “32. We have considered rival submissions and perused the materials on record. Insofar as the power of ld. first appellate authority to admit assessee's claim, which was not accepted by the A.O. at the first stage, we must observe that there is no restriction on the appellate authorities to entertain a fresh claim if facts relating to such claim are available on record. In the facts of the present appeal, undoubtedly, in course of assessment proceedings itself the assessee has made the claim that SHIS and fertilizer subsidies are taxable as they are capital in nature. All facts relevant to the aforesaid claim were available before the A.O. That being the case, in our considered opinion, Id. first appellate authority was wholly within his power to entertain the claim. Insofar as the merits of the issue is concerned, in our view, it squarely stands settled in favour of the assessee by virtue of the decisions of the co-ordinate bench in assessee's own case in A.Ys. 2011-12 to 2014-15 (in to 4537 Mam/2024 vide order dated 04.04.20251, wherein while dealing with identical issue, the co-ordinate bench has held as under: 8. We shall now take up the appeal filed for 41 2012-13 in 2014-15. In these three sears. the Revenue in challenging the decision of the Lat CITEA) in excluding the incentives received under Status Holder Incentive Scrips (SUS) and fertilizer subsidy received under NBS Scheme, treating both of them as capital receipt.

9. In all the three years, the Revenue in placing reliance on the amend mere made to the definition of income by Finance Act. 2015 wef 01-04-2016 While adjudicating the appeal of the assessee for AY 2011-12. in an earlier paragraph, we have held that the above said amendment cannot be applied retrospectively for the assessment years prior to A7s 2016-17 Accordingly, we reject this ground of the Revenue in all the three years 10 With regard to the fertilizer subsidy, we have upheld the decision of the Ld CITIA) treating it as capital receipt in AY 2011-12 since the Ld CIT(A) has held so by following the decision rendered by the Co-ordinate Bench in the case of ACII vs M's. Shree Pushkar Chemicals (supra) Following the decision rendered by us in AY. 2011-12, we uphold the decision rendered by the Ld CIT(A) on this issue in all these three years.

and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 (4) Engineering Sector (excluding Iron & Steel. Non-ferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships. Boats and Floating Structures.) (5) Plastics, and (6) Basic Chemicals (excluding Pharma Products) The Status Holders of the additional sectors listed in the Para 3:10.8 of HBPv1 2009-14 (RE 2010) shall be eligible for this Status Holders Incentive Scrip an exports made during 2010-11 and 2011-12." 8 The scheme is self-explanatory. There is nothing on record to which it can be assumed that the same is not in existence. No reason has been explained to which it can be assumed that the CIT(A) has granted the relief wrongly and illegally. The facts are not distinguishable at this stage. In view of the facts and circumstances and the law considered by the CIT(A), we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfered with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue 11.1. The Ld. AR also submitted that the Co-ordinate Bench has held in the assessee's sister concern's case, named, Aarti Drugs Ltd. (ITA No. 2503/Mum/2021, dt. 20-01-2023) that the incentive received under SHIS Scheme is capital in nature 11.2. Following the above said decisions, we uphold the order passed by the Ld. CIT(A) on this issue.

17.1. It is also important to note the contents of remand report called by ld. CIT(A) from the ld. Assessing Officer which is dated 18.11.2024. In this report at para-4.1, ld. Assessing Officer mentions about the and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 salient objectives of the schemes is to achieve industrialisation in the specified areas of Himachal Pradesh and Sikkim and to generate employment opportunities. The said para is extracted below: “4.1 The assessee in its submission has filed various case laws in its favour, copy of the scheme under which exemption was granted, copy of the declaration under notification no. 49 & 50/2003, working of the said incentive, copy of the excise returns filed to substantiate its claim for treating the said incentive as capital receipt. Submission, schemes and various facts placed shows the salient objective the scheme was to achieve industrialization in the specified areas of Himachal Pradesh as well as Sikkim and to generate employment opportunities.”

17.2. Similarly in para-5.2, he makes an observation vis-à-vis rewards received in the form of FPS, FMS, SHIS under the Foreign Trade Policy. In this regard, he noted that purpose of introduction of these schemes is to encourage industries which required industrial growth, technological development and investment. From the observations of the ld. Assessing Officer, we note that he himself has applied the purpose test while making such observations though he declined to accept the claim of the assessee to treat it as capital receipt. The relevant para is extracts below: 5.2 The assessee in its submission has filed details of subsidy including ledger copy showing the amount of subsidy received, various case laws, copy of scheme under which subsidy is received, working of the subsidy, copy of the notification issued by the Government authorities for eligibility of subsidy and proof of receipt of subsidy to substantiate its claim for treating the said subsidy as capital receipt. Submissions, schemes and various facts placed shows the salient objective of the FPS/FMS/ SHIS subsidy received under FTP to increase percentage share of global trade by increasing competitiveness in selected markets, technological up gradation and expanding employment opportunity. Purpose of introduction of these schemes was to encourage industries which require industrial growth, technological up-gradation and development.

17.3. Before us, assessee has also placed reliance on several other judicial precedents including that of Coordinate Benches as well as of Hon'ble High Courts of Rajasthan and Calcutta which are listed as under: and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 Sr. Case Law Nature of Subsidy No.

are identical except for variation in the quantum of disallowance/additions. The coverage and our observations and findings from our adjudication from Assessment Year 2015-16 apply mutatis mutandis. We find that ground nos. 1 to 10 raised in appeal for Assessment Year 2016-17 are squarely covered by adjudication given by us in the above paragraphs for Assessment Year 2015-16. Accordingly, similar treatment follows in this year also. In this respect, ld. Counsel for the assessee has tabulated the grounds of appeal for this year and mapped the same for their coverage by the ground dealt in appeal for Assessment Year 2015

16. (supra). The said table is reproduced as under: and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 Gr. Issue TPO CIT(A) Remarks No. /AO Pg. Pg. Para 1,2 Transfer Pricing 1-6 8-14 5.1 – This issue is covered in favour of adjustments in 5.2.19 assessee vide order of the respect of Export Tribunal in assessee's own case transactions for A.Y. 2014-15. (Similar to Gr. no. 1 and 2 of A.Υ. 2015-16). 3,4 Addition u/s. 3-4 25-27 5.3 – This issue is covered in favour of 41(1) of the Act 5.3.2 assessee vide orders of the Tribunal in assessee's own case for A.Ys. 2005-06, 2008-09, 2009- 10, 2010-11, 2011-12 and 2012- 13. (Similar to Gr. no. 3 and 4 of A.Y. 2015-16). 5,6 Disallowance 4-13 27-32 1.4 – This issue is covered in favour of u/s. 35(2AB) 5.43 assessee vide order of the expenditure not Tribunal in assessee's own case approved by for A.Y. 2013-14. DSIR This issue is also covered in favour of assessee vide order of the Tribunal in the case of Marksans Pharma Limited for A.Υ. 2014-15. (Similar to Gr. no. 5 and 6 of A.Y. 2015-16). 7,8 Apportionment 17- 32-39 5.5 – 1. This issue is covered in favour of R&D 36 5.5.10 of assessee vide order of the expenses to Tax Tribunal in assessee's own case holiday units for A.Υ. 2009-10.

3. The Tribunal in assessee's own case has upheld the order of CIT(A) setting aside the issue to the file of A.O. for A.Υ. 2014-15. (Similar to Gr. no. 8 and 9 of A.Y. 2015-16). 9 Apportionment 36- 39-46 5.6 – This issue is covered in favour of of interest 43 5.6.5 assessee vide order of the expense to tax Tribunal in assessee's own case holiday units for A.Ys. 2010-11, 2011-12, 2012- 13 and 2014-15. (Similar to Gr. no. 10 of A.Y. 2015- 16). 10 Disallowance of 61- 46-51 5.7 – This issue has been set aside for gifts and 71 5.7.10 fresh examination vide order of presentation the Tribunal in assessee's own u/s.37(1) case for A.Υ. 2014-15. (Similar to Gr. no. 11 of A.Y. 2015- 16).

20. In respect of ground nos. 11 and 12, relating to disallowance u/s.14A r.w.r. 8D, there is a change in the factual position. Assessee had earned dividend income of Rs.88,13,907/- claimed as exempt u/s.10(34). Assessee made a suo moto disallowance of Rs.6,39,838/- being 0.5% of the annual average value of investment yielding exempt income in the year under consideration. Ld. Assessing Officer applied Rule 8D to arrive at a disallowance of Rs.11,57,858/- and thus, made an incremental disallowance of Rs.5,18,020/-. This disallowance computed by ld. Assessing Officer included disallowance under Rule 8D(2)(ii) of Rs.5,17,834/- towards interest component. In this respect, assessee has factually demonstrated availability of sufficient owned funds for the purpose of making investments which yielded exempt income. Details in this respect is tabulated below:

Sr. Particulars Amount as on Amount as on No. March 31, 2016 March 31, 2015 1 Share Capital 28,21,58,156 27,12,94,553 2 Reserve and surplus 7257,53,78,799 4924,92,13,805 Total 7185,75,36,955 4952,05,07,358 Investment in wholly owned --- --- Indian subsidiaries Other investment from which 12,83,56,616 12,76,20,816 income is exempt Total Investment 12,83,56,616 12,76,20,816 20.1. Ld. CIT(A) considered the above stated factual position against which nothing contrary has been brought on record, to controvert these facts. He also took into consideration the judicial precedents of Hon'ble Supreme Court in the case of CIT(A) vs. Reliance Industries Ltd. 313 ITR 340 (SC) where it was held that when there are interest free as well and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 as interest bearing funds, and the interest free funds available to the assessee are sufficient to meet its investment, it could be presumed that the investments are made from the interest free funds available with the assessee and not from borrowed funds. Relevant text from the said judgement is reproduced for ready reference: "The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. The Tribunal has also followed its own order for Assessment Year 2002-03. In view of the above findings, we find no reason to interfere with the judgment of the High Court in regard to the first question. Accordingly, the appeals are dismissed in regard to the first question."

20.2. Further, reliance is also placed in the case of South India Bank vs. CIT (Civil Appeal No. 9906 of 2011) wherein Hon'ble Apex Cort held as under: "The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favouring the assessees.”

20.3. Considering the facts on records and the judicial precedents, ld. CIT(A) restricted the disallowance to the extent of suo moto disallowance made by the assessee, against which Revenue is in appeal before the Tribunal. On the uncontroverted facts tabulated above, the issue contested before us is no longer res integra, as already held by Hon'ble Supreme Court in the decisions referred above. Respectfully, following the same, disallowance made by ld. Assessing Officer is deleted, as held by ld. CIT(A). Accordingly, ground no.11 raised by the Revenue is dismissed.

20.4. Ground no.12 relates to computation of book profit by including disallowance made u/s. 14A which has already been dealt by us in the and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 appeal for Assessment Year 2015-16 (supra). Our observations and findings cover this issue vide ground nos. 13 of the appeal for Assessment Year 2015-16. The same is accordingly, dismissed.

21.1. So far as the first component is concerned, i.e. excise duty exemption, the same stands covered in view of the decision of the Hon'ble High Court of Jammu and Kashmir in the case of Gravita Metal Inc. (supra) which is relied upon while adjudicating on this issue for AY 2015-16 in the above paragraphs. Our observations and findings, while adjudicating on the excise duty exemption component for Assessment Year 2015-16, applies mutatis mutandis, since decision in the case of Gravita Metal Inc. (supra) dealt with Assessment Year 2016-17. Accordingly, assessee gets relief to the extent of excise duty exemption claimed by it of Rs.73.31 crores, both under the normal provisions of the Act as well as while computing the book profit u/s. 115JB.

21.2. So far as the second component is concerned in respect of FMS and MEIS of Rs.93.80 Crores, on account of amendment brought in section 2(24) as referred above, a Special Bench of ITAT has been constituted in the case of Aarti Drugs Ltd. bearing and 3991/Mum/2025 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 (Α.Υ. 2016-17), CO 134/M/25 (Α.Υ. 2016-17), 3138/M/23 (Α.Υ. 2017- 18), 2873/M/23 (A.Y. 2017-18), for deciding the issue as under: "(i) Whether in view of the amended provisions of Section 2(24) introducing clause (xviii) w.e.f. AY 2016-17, the amount received by the assessee under the MEIS of the Foreign Trade Policy, 2015 is taxable as a revenue receipt."

21.3. Considering this development which relates to amended provisions of section 2(24) introducing clause (xviii) w.e.f. A.Y. 2016-17, we find it appropriate to remit the matter back to the file of ld. Assessing Officer with a direction to follow the judicial pronouncement as and when it comes up in the matter referred above. Accordingly, grounds relating to the issue of taxability of subsidies are partly allowed for statistical purposes.