DCIT 7(3)(2), MUMBAI vs. PIRAMAL ENTERRISES LTD, MUMBAI

Shri A. Mohan, the learned Departmental Representative, though, agreed that the issue is covered by the decision of the Tribunal in assessee’s own case. However, he relied upon the observations of the Revenue authorities.

We have considered rival submissions and perused the materials on record. As could be seen, the disputed disallowance is in respect of expenditure claimed towards “repairs –computers-annual maintenance” and “Repairs- computers-others”. The Assessing Officer has treated it as capital expenditure on the reasoning that it was towards purchase of licenses and allowed depreciation at the rate of 25%. However, while deciding identical issue in assessee’s own

Having held so, for the sake of completeness we must observe that the assessee is bound to succeed with regard to its alternative claim that even if the expenditure is treated as capital, depreciation would be allowable at the rate of 60%. As could be seen, while deciding similar issue in assessee’s own case in Assessment Years 2009-10 and 2010-11 (supra), the Tribunal has allowed depreciation at the rate of 60%. This ground is allowed.

In ground No.(ii), assessee has challenged disallowance of deduction clamed under section 35(2)(AB) of the Act amounting to ₹27,82,95,269/-.

Briefly the facts are, the Assessing Officer noticing that the assessee had claimed weighted deduction under section 35(2AB) of the Act called for necessary details. After verifying the details furnished by the assessee, he found that the deduction clamed is in respect of expenses incurred in the 5 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted Research and Development (R&D) units located at Ennore and Goregaon. Further, he observed, an approval for R&D units was granted by the competent authority up to 31.03.2011. Further, he observed, when the assessee was called upon to furnish approval of the competent authority in form 3CM for claiming weighted deduction, it expressed its inability to furnish the same for the impugned assessment year. Thus, in absence of form 3CM, the Assessing Officer disallowed assessee’s claim of deduction under section 35(2AB) of the Act. The learned Dispute Resolution Panel also confirmed the aforesaid decision of the Assessing Officer.

The learned Counsel for the assessee submitted, while deciding identical issue in the preceding assessment years, the Tribunal has restored back the issue to the Assessing Officer for providing opportunity to the assessee to furnish the approval in from 3CM. Thus, he submitted, similar direction may be issued in the impugned assessment year.

The learned Departmental Representative has no objection against restoration of the issue to the Assessing Officer.

Having considered rival submissions, we find that the Assessing Officer has not raised any doubt on the incurring of expenditure by the assessee. Therefore, he has allowed deduction under section 35(1)(i) of the Act. However, he has disallowed weighted deduction under section 36(2AB) of the Act at the enhanced rate only because the assessee failed to furnish approval of the competent authority in form 3CM. Notably, while

In ground No.(iii), the assessee has challenged the disallowance of depreciation on additions made to computer software claimed at the rate of 60%.

Briefly stated facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee had claimed depreciation at the rate of 60% on some newly purchased computer software. On being asked to explain, the assessee submitted that such expenses were incurred mainly on upgradation of the existing software. Referring to Rule 5 of the Income-tax Rules, the Assessing Officer held that when software is purchased along with computer then it forms part of the computer, hence, eligible for depreciation at the rate of 7 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted 60%. Accordingly, he restricted it to 25%. The learned Dispute Resolution Panel also confirmed the aforesaid decision of the Assessing Officer.

The learned Counsel for the assessee submitted, while deciding identical issue in assessee’s own case in Assessment Years 2009-10, 2010-11(supra), the Tribunal has allowed deprecation at 60%.

The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Dispute Resolution Panel.

We have considered rival submissions and perused the materials on record. Notably, while deciding identical claim made by the assessee in Assessment Year 2009-10 (supra), the Tribunal has held that the computer software purchased by the assessee is eligible for depreciation at the rate of 60%. The same view was reiterated while deciding assessee’s appeal in Assessment Year 20099-10. Respectfully following the consistent view of the Tribunal in assessee’s own case, we direct the Assessing Officer to allow depreciation on addition made to computer software at the rate of 60%. This ground is allowed.

In ground No.(iv), the assessee has challenged disallowance of expenditure under section 14A of the Act read with Rule 8D of the Rules amounting to ₹2,33,84,000/-.

The learned Counsel submitted, the assessee had sufficient interest free surplus fund available with it to take care of the investment, hence, no disallowance of interest expenditure can be made. Further, he submitted, as regards disallowance of administrative expenditure under Rule 8D(2)(iii), only those investments which yielded exempt income during the year can be considered as part of average value of 9 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted investment for computing disallowance. However, the learned Counsel fairly submitted, while deciding identical issue in the preceding assessment years, the Tribunal has consistently restored the issue back to the Assessing Officer for fresh adjudication with certain directions. Without prejudice, the learned Counsel submitted, in so far as the issue relating to availability of surplus interest free fund, all factual details are available on record.

The learned Departmental Representative submitted, in view of the directions of the Tribunal in the preceding assessment years, the issue may be restored back to the Assessing Officer.

We have considered rival submissions and perused the materials on record. As regards the disallowance of interest expenditure under Rule 8D(2)(ii) of the Rules, we have noted, before learned Dispute Resolution Panel the assessee had specifically submitted that it has sufficient interest free fund available with it to take care of the investment. The relevant facts and figures relating to availability of surplus fund was also furnished before learned Dispute Resolution Panel which is evident from paragraph 8.3 of learned Dispute Resolution Panel’s order. Further, learned Dispute Resolution Panel has not addressed the aforesaid contention of the assessee properly. Now, the legal position is fairly well settled by various judicial precedent including the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. HDFC Bank Ltd. (2014) 366 ITR 505 and HDFC Bank Ltd. vs. DCIT (2016) 383 ITR 529 that in case

In ground No. 5, assessee has challenged disallowance of advertisement and business promotion expenses amounting to ₹115,44,22,171/-.

Briefly the facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of ₹138.55 crores under the head ‘advertisement and business promotion expenses’. After calling for necessary details and examining them, he found that such expenditure included an amount of ₹22,88,44,342/- towards Key Account Manager (KAM) expenses, Customer Relation Manager (CRM) expenses and gift articles. Seeking explanation of the assessee on allowability of such expenses and examining it, the Assessing Officer observed that such expenses are for providing gift articles, travel facility to the doctors for promoting their products. Further, he observed, a number of such expenses involved cash payment made to third parties for onward transmission of gifts. Alleging that providing gift articles to doctors is in violation of provisions of Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations, 2002, the Assessing Officer disallowed an amount of ₹11,44,22,171/-

The learned Counsel for the assessee submitted, identical disallowances were made in assessee’s own case in assessment years 2009-10 and 2010-11. He submitted, while deciding the issue, the Tribunal allowed assessee’s claim on the reasoning that firstly, the CBDT Circular referred to by the Assessing Officer is not retrospective, hence would not apply to the impugned assessment year and secondly, the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations will apply to medical practitioners and not to pharma companies. Thus, he submitted, the issue is covered in favour of the assessee. Further, the learned Counsel relied upon a number of other decisions.

The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Dispute Resolution Panel.

We have considered rival submissions and perused the material on record. Undoubtedly, the expenditure incurred by the assessee was for providing gifts and travel facility to the doctors. The Assessing Officer has disallowed a part of expenditure on the allegation that it is in violation of the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations. In this context, he also referred to CBDT Circular No. 5/2012. In our view, the stand of the Assessing Officer is 13 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted self contradictory. If he was of the view that the expenditure incurred is in violation of Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations as well as the CBDT circular, he should not have allowed 50% of the expenditure, thereby, accepting a part of the expenses to be not only genuine but in accordance with law. Be that as it may, we have noted that identical disallowances were made in assessee’s own case in the preceding assessment years. While deciding the issue in assessment year 2009-10 (supra), the Tribunal has allowed assessee’s claim holding that the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations does not apply to the assessee and further, the CBDT circular also applies prospectively. The same view was reiterated by the Tribunal while deciding the issue in assessment year 2010-11. Respectfully following the consistent view of the Tribunal in assessee’s own case as discussed above, we allow assessee’s claim by deleting the disallowance of ₹11,44,22,171/-. This ground is allowed.

In ground No.vi, the assessee has challenged reduction of deduction claimed under section 80IC of the Act in respect of Baddi unit by allocating a part of interest and R&D expenditure to it.

During the assessment proceedings, to ascertain the correctness of assessee’s claim of deduction under section 80IC of the Act in respect of Baddi unit, the Assessing Officer called upon the assessee to furnish the details of expenditure allocated to 80IC unit and other units as well as the profit rate earned by 14 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted both the units. From the details furnished including the profit and loss account of 80IC and other units, the Assessing Officer found that the assessee had not allocated any expenditure including interest and R&D expenditure to Baddi unit, thereby has inflated the profit rate of the Baddi unit compared to other units. Though, the assessee submitted that Baddi unit was set up with self-finance without utilizing any borrowed fund and further, the entire R&D expenditure was not related to the manufacturing activity of the Baddi Unit, however, rejecting the submissions of the assessee, the Assessing Officer allocated a part of interest and R&D expenditure to Baddi unit, thereby, reducing the deduction claimed under section 80IC of the Act to the extent of `34.63 crores. The learned Dispute Resolution Panel confirmed the aforesaid decision of the Assessing Officer while dealing with the objection of the assessee.

Reiterating the stand taken before the Departmental authorities, the learned Counsel submitted, no part of the borrowed fund was utilized for setting up the Baddi unit, hence, even a small portion of the expenditure cannot be allocated to the Baddi unit. Further, he submitted, the R&D expenditure incurred by the assessee is also not in connection with manufacturing activity in Baddi unit. He submitted, while deciding identical issue in preceding assessment years, the Tribunal has restored it to the Assessing Officer for considering assessee’s claim keeping in view the material brought on record. Therefore, he submitted, similar directions may be issued in the impugned assessment year.

We have considered rival submissions and perused the materials available on record. As could be seen from the facts on record, this is a recurring issue between the assessee and the Revenue. In Assessment Year 2008-09, on identical reasoning, the Assessing Officer had allocated a part of the interest and R&D expenditure to the Baddi unit, thereby, reducing the deduction claimed by the assessee under section 80IC of the Act. While deciding assessee’s appeal on the issue in Assessment Year 2008-09, the Tribunal has restored it to the Assessing Officer for fresh adjudication after considering assessee’s claim in the context of facts and materials brought on record. Same view was reiterated by the Tribunal while deciding the issue in Assessment Years 2009-10 and 2010-11 as well. Facts being identical, consistent with the view expressed by the Tribunal in the preceding assessment years, we restore the issue to the Assessing Officer for fresh adjudication with similar direction. The ground raised is allowed for statistical purposes.

In ground No.vii, the assessee has challenged disallowance of deduction under section 80IC of the Act.

Briefly stated facts are, during the assessment proceedings, the Assessing Officer noticed that while verifying

The learned Counsel submitted, the assessee has brought all facts and material on record to demonstrate that none of the conditions under section 80IC(4) of the Act were violated while setting up the Baddi unit. He submitted, without verifying the facts and materials on record, the Assessing Officer has disallowed the deduction by simply relying upon the earlier assessment orders passed on the issue. To demonstrate that the conditions of section 80IC(4) of the Act were satisfied, the learned Counsel drew our attention to various documentary evidences furnished in the paper book. Further, he submitted, while dealing with the issue of disallowance of deduction

We have considered the rival submissions and perused materials on record. As could be seen from the facts on record, this is fourth year of claim of deduction under section 80IC of the Act by the assessee in respect of Baddi unit. The assessment order clearly reveals that relying upon the reasoning on the basis of which similar claim was disallowed in Assessment Years 2008-09 to 2010-11, the Assessing Officer concluded that the assessee had failed to comply with the conditions of section 80IC of the Act and accordingly, disallowed

The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and Dispute Resolution Panel.

We have considered rival submissions and perused the materials on record. As noted above, similar nature of dispute arose in assessee’s own case in Assessment Year 2008-09 (supra). In the decision referred to above, the Tribunal has accepted assessee’s claim that guarantee commission for corporate guarantee provided should be charged at 0.5%. Similar view has been expressed by the Tribunal while deciding the issue in assessment years 2009-10 and 2010-11. Facts being identical, respectfully following the view expressed by the Tribunal in the preceding assessment years, we direct the Assessing Officer to compute the ALP of the guarantee commission for providing corporate guarantee to the AEs at 0.5%. The ground is allowed as indicated above.

In ground No. ix, assessee has challenged the disallowance of deduction claimed under section 48 of the Act for an amount of ` 18,96,00,000/-.

Briefly the facts are, during the year under consideration, the assessee had sold its stake in one of its units viz. Piramal Diagnostic Services Pvt. Ltd. (PDSPL) by entering into a share purchase agreement with Super Religare Limited (SRL) on 17.07.2010. Though, the assessee offered to tax the gain

The learned counsel for the assessee submitted, the assessee wanted to divest its shares held in PDSPL, therefore, wanted to enter into a deal with any interested party/ entity, which can purchase the shares and take over the diagnostic division of the assessee company. To achieve that object, the assessee entrusted the doctors working/ associated with the diagnostic division viz. Dr. Avinash Phadke, Dr. Subendhu Roy and Dr. Bhavin Jhankaria to identify, evaluate and negotiate with interested parties towards divesting assessee’s stake in PDSPL while maximizing the value of company’s investment. He submitted, the above said decision was also approved by the Board through resolution and as per the terms of the resolution, the payment made to the concerned parties for brokering the deal was also fixed. He submitted, in terms of Board resolution mandate was issued to the concerned doctors, which they not only accepted but also took active interest in brokering the deal for and on behalf of the assessee, which resulted in execution of share purchase agreement with SRL. He submitted, in terms of the board resolution, payments were made to the concerned persons towards services rendered by them in sale of shares to SRL. Thus, he submitted, the expenditure incurred being wholly and exclusively in connection with the transfer of PDSPL to SRL, is allowable as deduction. The learned Counsel submitted, while the Assessing Officer has completely misdirected himself by disallowing the expenditure on the wrongful conclusion that it is 23 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted in violation of Indian Medical Council regulation, the Dispute Resolution Panel has confirmed the disallowance without properly examining the materials brought on record. He submitted, before learned Dispute Resolution Panel, the assessee had not only furnished evidence in support of its claim of expenditure but has even offered to produce the concerned doctors for examination to justify its claim of deduction. He submitted, without examining the doctors to whom the payment was made and verifying the materials brought on record, the Dispute Resolution Panel has perfunctorily held that the expenditure incurred is not wholly and exclusively in connection with the transfer. Thus, he submitted, the deduction claimed by the assessee has to be allowed. In support of such contention, the learned counsel relied upon the following decisions: -

To substantiate the claim that the aforesaid expenditure was incurred in connection with transfer of shares, the learned counsel has drawn our attention to the mandate letters issued by the assessee, acceptance letters issued by the concerned persons, the bills/vouchers in support of payment made etc. the learned Counsel further drew our attention to the submissions filed on behalf of the assessee to support its claim that the expenditure incurred was in connection with the transfer. As discussed earlier, the Assessing Officer has disallowed assessee’s claim of deduction on the reasoning that such payment is in violation of Indian Medical Council regulations. There cannot be any doubt that the aforesaid reasoning of the Assessing Officer to disallow the expenditure is unsustainable. What is required to be examined in terms of section 48(1) of the Act is, whether the expenditure claimed is wholly and exclusively in connection with the transfer. Of course, learned Dispute Resolution Panel deviating from the reasoning of the Assessing Officer has held that the expenditure cannot be considered to be wholly and exclusively in connection with the transfer since the doctors to whom such payments were made do not have the expertise to broker a deal involving valuation of shares. Further, prima facie it appears, while coming to their respective conclusions neither the Assessing Officer nor learned Dispute Resolution Panel has paid much attention to the relevant facts which are crucial for determining the issue. As 26 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted discussed earlier, the assessee has ultimately sold its shares in the diagnostic division PDSPL to SRL. It has not been clarified either before us or before the departmental authorities as to why the assessee has to avail the services of three persons to ultimately conclude a deal with a single party and incurred such huge expenditure. When the deal is ultimately entered with SRL, it is not understood why three persons have to negotiate either individually or as a team and why it cannot be done by a single individual. It is further relevant to observe, Dr. Avinash Phadke and Dr. Bhavin Jhankaria were the shareholders of PDSPL and were also in the board of directors. They are also parties to the share purchase agreement with SRL. That being the case, it certainly raises a doubt regarding payment made to them when they are part of the board resolution approving such payment. It is further necessary to observe, what specific services are rendered by the concerned persons to broker the deal requiring such huge payment is not forthcoming from the facts on record. The mandate letters issued by the assessee to the concerned persons and their acceptance letters are identically worded and stereotype. They do not specify the services rendered by each individual in brokering the deal when ultimately the buyer is the same party i.e. SRL. Therefore, the onus is very much on the assessee to establish on record that the expenditure incurred is wholly and exclusively in connection with the transfer. One more aspect which needs mention is the difference in the fee structure while making payment to the concerned persons for the same work. As discussed earlier, the payment made to Dr. Avinash Phadke was fixed at 2.5% of the 27 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted net consideration and in respect of Dr. Subendhu Roy it was fixed at 1.5% of the net considering. Whereas, in case of Dr. Bhavin Jhankaria it was fixed at ` 5 crores. It is not disputed that payments have been made to the concerned persons at the rate fixed in the resolution. Thus, it certainly defies logic peaks an answer when the parties are performed, when the concerned persons, as per the mandate letter are performing the same work, it certainly defies logic why there is difference in their fee structure. There is no transparency on the aforesaid factual aspect from assessee’s side. The assessee has to satisfactorily explain, firstly, when the deal has been ultimately struck with SRL, why services of three persons was required to broker such deal and secondly, what is the necessity of employing three persons for the very same work. Further, the assessee has to explain the parameters on the basis of which different fee structure was fixed for making payment to the concerned persons. All these factors have not been explained properly by the assessee through credible evidence. Of course, as it appears, aforesaid aspects were also neither examined nor enquired into in earlier stages. Therefore, keeping in perspective the overall facts and circumstances of the case, we are of the view that the issue has to be restored back to the Assessing Officer for fresh adjudication after verifying all relevant facts and if necessary conducting adequate enquiry to ascertain the true nature and character of the expenditure claimed by the assessee. If so required, the Assessing Officer may also summon the concerned parties, viz, the doctors to whom the payments were made as well as the buyer of the 28 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted shares to ascertain the correct facts. The result of enquiry conducted by the Assessing Officer, if any, should also be confronted to the assessee and the assessee must be give a fair opportunity to counter/explain any adverse material brought on record as a result of such enquiry. The Assessing Officer must decide the issue after considering all the facts and materials on record, submissions of the assessee and only after providing due and reasonable opportunity of being heard to the assessee. Before parting, we must observe, we have consciously restrained ourselves from deliberating on the decisions cited by the learned counsel for the assessee simply for the reason that the issue has been restored back to the Assessing Officer due to lack of proper enquiry and factual verification of the issue in the earlier stages. This ground is allowed for statistical purposes.

In ground No. x, assessee has challenged the disallowance of exemption claimed in respect of interest on tax free bonds amounting to `8,25,13,638/-.

Briefly stated facts are, the assessee had made certain investment in tax free bonds, interest on such is exempt under section 10(15) of the Act. However, in the return of income filed for the impugned assessment year, the assessee wrongly offered to tax the interest earned on such bond amounting to `8,25,13,638/-. During the assessment proceedings, assessee filed revise computation claiming exemption of interest earned on tax free bond under section 10(15) of the Act. However, the Assessing Officer rejected such claim on the reasoning that it was not made through a revised return of income. Learned

We have considered rival submissions and perused materials on record. Undisputedly, interest earned on tax free bond is exempt under section 10(15) of the Act. Though, it may be a fact that the assessee has wrongly offered such interest income to tax in the return of income filed for the year under consideration, however, it is equally true that during the assessment proceedings the assessee has filed a revised computation claiming exemption in respect of such income offered to tax. Both the Assessing Officer and learned Dispute Resolution Panel have rejected assessee’s claim on a purely technical reason that assessee has not claimed such exemption by filing revised return of income. In our view, if an item of income is not taxable under the provisions of the Act and cannot form part of the computation of total income, merely because the assessee has mistakenly offered it as income it will be forbidden from claiming exemption afterwards during the course of the proceeding. It is trite law, there cannot be any estoppel against law. It is more so in respect of an item of income exempt under section 10 of the Act. The Assessing Officer as per the statutory mandate is duty bound to compute the real and correct income of the assessee. Though, on one hand he is empowered to disallow any wrongful claim made by the assessee, on the other hand, he is also required to allow deduction/exemption/benefit the assessee is legally entitled to. Therefore, keeping in view the aforesaid legal principle,

In ground No. xi, assessee has challenged disallowance made under section 14A read with Rule 8D of the Rules while computing book profit under section 115JB of the Act.

We have considered rival submissions and perused the materials on record. As could be seen, while deciding identical issue in Assessment Year 2008-09, the Tribunal following the decisions of the ITAT Special Bench Delhi in ACIT vs. Vireet Investment P. Ltd. (82 taxmann.com 415) has held that no adjustment/disallowance can be made under section 115JB of the Act with reference to section 14A read with Rule 8D of the Rules. However, the Tribunal has directed the Assessing Officer to compute the book profit in consonance with the provisions of section 115JB of the Act read with explanation (1)(f). Similar view has been expressed by the co-ordinate Bench while deciding the issue in assessee’s own case in Assessment Years 2009-10 and 2010-11. Consistent with the view expressed by the Tribunal in the preceding assessment years, we direct the 31 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted Assessing Officer to compute the book profit under section 115JB of the Act following the directions of the Tribunal in the preceding assessment years. This ground is allowed for statistical purposes.

In ground No. xii, assessee has challenged short grant of credit of TDS.

Having considered rival submissions, we direct the Assessing Officer to factually verify assessee’s claim and allow credit for TDS in accordance with law.

In ground No. xiii, assessee has raised the issue of mis- calculation of dividend distribution tax payable and grant of short credit thereof.

Having considered rival submissions, we direct the Assessing Officer to factually verify assessee’s claim and allow credit in accordance with law.

In the Result the appeal of the assessee is partly allowed.

The only issue raised relates to deletion of disallowance under section 35A of the Act relating to Sarabhai Piramal Pharmaceuticals Ltd. (SPPL).

Briefly stated facts are, noticing that the assessee had claimed an amount of `2,42,85,715/- being 1/14th of ` 34,00,00,000/- as deduction under section 35A of the Act, the AO called for the necessary details. After verifying them, he

We have considered rival submissions and perused the materials on record. As could be seen from the facts on record Sarabhai Piramal Pharmaceuticals Ltd. (SPPL), since merged with the assessee, paid an amount of Rs.34 crores to Ambalal Sarabhai Enterprises (ASE) towards purchase of trademark in terms of agreement dated 03.10.1997. Such amount paid was amortized in the books of SPPL and it claimed 1/14th of ₹ 35 crores paid towards purchase of trademark. From the very first year of claim of such deduction, the Assessing Officer continued to disallow the expenditure claimed on the reasoning that trademark does not come within the purview of section 35A of the Act, as it only speaks patents and copyrights. Following the reasoning of the Assessing Officer in the preceding assessment years, the Assessing Officer disallowed the expenditure in the 33 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted impugned assessment year as well. However, as could be seen from the facts on the record, in all the preceding assessment years the Tribunal has allowed assessee’s claim of deduction under Section 35A of the Act and in respect of some of these assessment years, Department’s appeals challenging the decision of the Tribunal have been dismissed by the Hon'ble Jurisdictional High court. While deciding identical issue in assessee’s own case in Assessment Year 2008-09 (supra), the co-ordinate Bench has held in the following manner: -

On a careful reading of the aforesaid extracted portion from the judgment of the Hon'ble Jurisdictional High Court, it is very much clear that while examining the allowability of identical deduction claimed by SPPL the Tribunal has allowed it claim by holding that trade mark is not alien to the patent right as there is a direct link between patent right and trade mark. Thus, the assessee is eligible to claim deduction under section 35A of the Act. Alternatively, the Tribunal also held that even if the assessee's claim of deduction under section 35A of the Act is not allowable, still the deduction claimed has to be 34 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted allowed under section 37 of the Act in view of the judgment of the Apex Court in Alembic Chemicals Works Co. Ltd. v. CIT [1988] 177 ITR 377/43 Taxman 312. When the appeal of the Revenue on the disputed issue came up before the Hon'ble Jurisdictional High Court, the Revenue being conscious of the fact that if assessee's claim is allowed under section 37 of the Act then the entire amount of Rs. 34 crores has to be allowed in one-go, therefore, the Revenue would be in a disadvantageous position, did not press its appeal on the issue of allowability of claim under section 35A of the Act. Therefore, considering the fact that in the preceding assessment years assessee's claim of deduction under section 35A of the Act has been allowed, applying the rule of consistency also assessee's claim of deduction in the impugned assessment year cannot be disallowed. Therefore, we uphold the decision of the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the Revenue.”

The same view has been expressed by the Tribunal while deciding the issue in Assessment Years 2009-10 and 2010-11 as well. Facts being identical, respectfully following the consistent view of the Tribunal in the preceding assessment years we uphold the decision of learned DRP on the issue. The 35 | P a g e I TA N o s. 8 5 0 /M um/ 2 0 15 & 1 7 9 9/M um / 20 16 Pir am al E nter pr i s es Li mi ted ground raised is dismissed. In the result, the appeal is dismissed. 64. To sum up, assessee’s appeal is partly allowed and Revenue’s appeal is dismissed. Order pronounced through circulation in notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules,1962 on 27.05.2020. (शक्तिजीि डे /SAKTIJIT DEY) (एस रिफ़ौि िहमान / S RIFAUR RAHMAN) (लेखा सदस्य / ACCOUNTANT MEMBER) (न्याययक सदस्य/ JUDICIAL MEMBER) मुंबई, ददनांक/ Mumbai, Dated: 27.05.2020 स दीप सरकार, व.यनजी सधिव / Sudip Sarkar, Sr.Ps