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

Grounds taken by the Revenue are reproduced as under: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17 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.3,29,72,122/- to the income of the assessee company made by the Transfer Pricing Officer on account of export of pharmaceutical products to Glenmark Nigeria and to Glenmark Czech?

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.3,29,72,122/- 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? (Tax Effect (1 & 2): Rs.1, 10, 22, 255)

"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

"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. (Tax Effect (3&4): Rs.1,85, 595)

"Whether. on the facts and in the c1rcumstances 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 BA/BE studies incurred outside R&D centre.

"Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT (A) Was erred in allowing assessee's claim w/s 35(2AB) despite the fact that,

"Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing assessee's methodology of computation of expenditure eligible for deduction u/s 35(2AB), whereas such method is based on the gross cost, and Ao has rightly computed it using net cost (gross cost subtracted by the corresponding receipts) (Tax Effect (5, 6 & 7): Rs. 16,55, 07,500) Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

"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 eligible u/s.801CI801E/10AA of the Act?"

"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 juri ictional High Court in the case of Zandu Pharmaceuticals Works Ltd. (35OITR 366) where each unit of assessee had a separate R&D unit" (Tax Effect (8 & 9): Rs. 5,21, 17, 153/-)

"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.5,63,06,678/- 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. (Tax Effect (10): Rs. 1,91,38,639)

"Whether on the facts and in the circumstances of the case and in law, the Ld. CII(A) erred in directing the assessing officer to restrict disallowance made u/s. 14A r.w. Rule 8D to the exempt income earned by assessee while computing income under normal provisions of the Act

"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 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 for earning exempt income?" (Tax Effect (12 & 13): Rs. 1,64,33, 047/-)

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the additional claim of deduction of Rs.11,66,05,610/- under section 32AC of the Income Tax Act, 1961, made by the assessee through a revised computation of income during assessment proceedings, without a revised return of income as mandated under section139(5) of the Act, and in disregard of the binding decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (284 ITR 323)?" Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

"Whether the Ld. CIT(A) erred in law in allowing deduction under section 32AC in respect of capital expenditure incurred by the amalgamating company prior to amalgamation, ignoring the specific condition that such deduction is allowable only to the entity which acquired and installed the plant and machinery during the specified period?" (Tax Effect (14 & 15):Rs. 3,96,32, 340-)

"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?

"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?"

"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?"

"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?

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/-

"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? Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

"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/-

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?"

"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 juri ictional 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/-

"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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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?"

"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?

"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?"

"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?"

"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/-

"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/.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

Brief facts of the case are that assessee is the ultimate holding company of the Glenmark Group. It is research led global, fully integrated pharma company, head quartered in Mumbai, incorporated in 1977, and engaged in the business of manufacturing and marketing of formulations in India. Globally, it enjoys diversified presence in regulated and developing international market. Post restructuring in 2008, it now focuses on manufacturing and marketing FDF. The specialty business comprises branded generics and R&D is a part of the assessee. Assessee filed its return of income on 28.11.2015, reporting total income at Rs.570,05,14,430/- under the normal provisions of the Act and book profit of Rs.1261,54,80,329/- u/s. 115JB. Assessee had undertaken international transactions with its Associate Enterprises (AEs). Case of the assessee was thus, referred to ld. Transfer Pricing Officer (TPO) for computation of Arm’s Length Price (ALP) in respect of international transactions. Ld. TPO vide his order u/s.92CA(3) proposed upward adjustment of Rs.45,95,35,746/-, details of which is tabulated below: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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)

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.

Ground nos.1 and 2 are in respect of transfer pricing adjustment on account of export of pharmaceutical products to two of its AEs, Glenmark Nigeria and Glenmark Czech. Ld. TPO observed that assessee had earned lower margin in the case of export to these two AEs. For the purpose of benchmarking, assessee had taken AE as tested party and selected Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM) to benchmark the transaction by taking OP/Sales as Profit Level Indicator (PLI). Ld. TPO rejected assessee’s stand of taking AE as the tested party and considered GPL India (assessee) as the tested party.

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

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, ITA No. 575/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”

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

Ground nos. 3 and 4 relates to addition made u/s.41(1). In this regard, ld. Assessing Officer called for details of sundry creditors pending for more than three years along with reasons therefor. Assessee furnished a list of 49 creditors having an aggregate balance of Rs.5,46,029/-, showing outstanding for more than three years. Assessee also submitted that this issue stands covered in its favour by the decision of Coordinate Bench in assessee’s own case for Assessment Year 2005-06 in ITA no. 6916/Mum/2008 dated 20.10.2010. However, ld. Assessing Officer noted that there is no movement in the creditors account in the books of the assessee. According to him, no prudent Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

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. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

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…..” Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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).

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.

Ground no. 7 relates to reduction of contract research income received from AEs for the purpose of computing accrued expenditure. Ld. Assessing Officer observed that assessee incurred expenditure amounting to Rs.49,70,34,012/- on contract research done on behalf of Glenmark Pharmaceuticals SA (GPSA) and earned Rs.63,40,47,910/- from GPSA for the said contract research. While computing deduction u/s 35(2AB) of the Act, assessee reduced the cost incurred on contract research done on behalf of GPSA. However, ld. Assessing Officer was of the view that gross receipts from GPSA should be reduced while computing the deduction u/s 35(2AB) of the Act and accordingly, made Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

1. This is also a legacy issue dealt by the Coordinate Bench in preceding several years, latest being Assessment Year 2014-15 (supra) which held that - “9.5 ......With regard to the second issue relating to deduction of contract revenue, we notice that the said issue has also been decided in favour of the assessee by Hon'ble Karnataka High Court in the case of Microlabs Ltd (supra) and by Mumbai bench of Tribunal in the case of Wokhardt Ltd (supra) Since the Id CIT(A) has decided both these issues following the above said decisions, we do not find any reason to interfere with his order on both these issues.”

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 ITA no. 71/Mum/2007 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.

Ground nos. 8 and 9 are in respect of apportionment of R&D expenses to unit eligible u/s. 80IC/80IE/10AA of the Act, of Rs.15,33,30,842/-. Assessee has three units eligible to claim deduction of profit u/s 80IC of the Act, i.e. i) Baddi Unit I, ii) Solan Unit II and iii) Baddi Unit III. Further, it has got one eligible unit for the claim of deduction of profit u/s 80IE of the Act, i.e. Sikkim Unit and two eligible units claiming deduction u/s 10AA of the Act are i) Pithampur and ii) Dahej. In the return of income, assessee claimed deduction of Rs.441,33,31,448/- u/s 80IC/80IE in respect of the abovementioned eligible units. No deduction was claimed in respect of units eligible for deduction u/s 10AA since both the 10AA units had suffered loss during the year. Details of unit-wise deduction claimed are as under – Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.”

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.

Ground no.10 is towards apportionment of interest expense to units eligible u/s. 80IC/80IE/10AA. During the year under consideration, assessee has allocated interest expenses to 80IC/80IE/10AA units as under:- Unit

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:

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.

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, Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

Ground no.11 is towards disallowance of gifts and promotional expenses made u/s.37(1). During the course of assessment proceedings, ld. Assessing Officer assumed that assessee is providing freebies to medical practitioners and their professional associates in violation of the regulation issued by Medical Council of India (the Council) which is the regulatory body constituted under the Medical Council Act, 1956. Based on the above, ld. Assessing Officer called for the details of expenses incurred on account of freebies to doctors and medical professionals and why the same should not be disallowed. Assessee made a detailed submission along with a list of corporate gifts distributed by the assessee to its distributors, stockists, business associates and employees which contributed to its growth.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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. 254. Accordingly, ground no. 11 is allowed for statistical purposes.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

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 ITA No.4658/Mum/2015 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.

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. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

5. The issue raised by the Revenue is no longer res integra as held by the Hon'ble Juri ictional 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).

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.

Ground nos.14 and 15 are in respect disallowance u/s. 32AC for investment allowance being 15% of the new investments. In this regard, ld. Assessing Officer noted that assessee had claimed deduction u/s.32AC in respect of plant and machinery of amalgamating company, i.e., Glenmark Generics Ltd. (GGL). According to him, GGL was a separate legal entity before 01.04.2014. Deduction with respect to plant and machinery acquired and installed in the financial year 2013-14 cannot be allowed since, it is not in accordance with the provisions of the Act. Also, in respect of deduction towards plant and machinery of the assessee which were acquired and installed in the financial year 2013-14, the same was rejected by the ld. Assessing Officer by observing that assessee is already in appeal before the ld. CIT(A). Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

2. Details of eligible investment for the purpose of deduction u/s 32AC are as follows: Particulars

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

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: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

Ground nos. 16 to 20 relate to taxability of subsidies for which claim was made by the assessee by raising additional grounds at the first appellate stage. Through these additional grounds assessee contested on treatment of excise duty exemption and export incentives, specifically under the Focus Market Scheme (FMS), Focus Product Scheme (FPS) and Status Holder India Scheme (SHIS). According to the assessee, these incentives are capital receipts hence, not taxable under the provisions of the Act. To support its contentions, assessee furnished additional documentation and explanation supported by judicial precedents, all of which were confronted to the ld. Assessing Officer by calling a remand report. Ld. CIT(A) after taking into consideration the remand report received from the ld. Assessing Officer, he relied upon the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. 284 ITR 323 (SC) wherein it was held that nothing impinges on the appellate authority to admit an additional claim. He also placed reliance on the Hon'ble Juri ictional High Court of Bombay in the case of Pruthvi Brokers & Shareholders [2012] 349 ITR 336 (Bom). Thus, the additional claims made by the assessee were admitted for adjudication. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 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.

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 ITA No. 3753/Mum/2023, 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 juri iction 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 juri iction 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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

There are two components to issue which we need to address, viz. first relating to excise duty exemption for setting up two units in Baddi, Himachal Pradesh and one unit in Sikkim and the second component is regarding promotional benefits under the foreign trade policy in the form of rewards as FPS, FMS and SHIS. We first take up the component relating to excise duty exemption which according to the assessee is a capital receipt hence, not liable to tax under the Act.

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. Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

In the conspectus of the above discussion, we find that the order before us is for Assessment Year 2015-16 which is prior to the amendment brought in section 2(24)(xviii) which is w.e.f. 01.04.2016 by the Finance Act, 2015. Furthermore, even if the amendment is taken into account, case of the assessee is that objective for granting of this incentive is development of industries and generation of employment in specified areas. Assessee has availed excise duty exemption under the central excise notifications for setting up its units in Himachal Pradesh and Sikkim. Ld. CIT(A) has taken into consideration the submissions made by the assessee, fortified by judicial precedents which has been discussed above, to hold that excise duty exemption received on account of setting up of units in the state of Himachal Pradesh and Sikkim are capital in nature and therefore not liable to be taxed under the Act. Similar view has been taken while computing the book profit u/s.115JB and therefore, excluded from its computation.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

On the second component relating to rewards received from the FPS, FMS and SHIS of the Foreign Trade Policy, 2009-2014, these are export incentives granted specifically for exports made to various potential new markets with objectives of fostering long term market expansion. Though, assessee credited these in its profit and loss account, under the head “export incentives”, now claimed it as capital in nature.

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.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 ITA No. 31/2019, 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.”

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: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

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: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

DCIT vs Aarti Industries [2025] 178 taxmann.com 676 (Mumbai-Trib.) Status Holder Incentive Scheme 5. Principal Commissioner of Income-tax, Central-2, Kolkata vs. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93 (Calcutta) Interest and Power Subsidy (115JB)

Having considered the facts of the case and long line of judicial precedents, as well as the recent decision in the case of Aarti Industries Ltd. (supra), we are in agreement with the findings arrived at by ld. CIT(A) on this aspect also. Accordingly, in the given set of facts and position of law, ground nos. 16 to 20 are dismissed.

Now we take up appeal for Assessment Year 2016-17 in ITA No. 3991/Mum/2025, wherein also the grounds raised 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: Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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:

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 AYs 2015-16 and 2016-17

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.”

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.

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 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

Ground nos. 13 to 17 relates to issue of taxability of subsidies, which has already been dealt by us in ground nos.16 to 20, in appeal for Assessment Year 2015-16 (supra). In the year under consideration, i.e., A.Y. 2016-17, amendment brought in section 2(24)(xviii) by Finance Act, 2015 w.e.f. 01.04.2016 becomes relevant. The issues dealt in these grounds have two components namely, one relating to excise duty exemption and the second relating to taxability of FMS and MEIS incentives.

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.

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 ITA No. 3069/M/23 Glenmark Pharmaceuticals Ltd. AYs 2015-16 and 2016-17

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.

In the result, appeal of the Revenue for Assessment Year 2016-17 is partly allowed.

In the result, appeal of the Revenue for Assessment Year 2015-16 and for Assessment Year 2016-17, are partly allowed. Order is pronounced in the open court on 12 March, 2026 (Pawan Singh) Accountant Member Dated: 12 March, 2026 MP, Sr. P.S. Copy to :