THERMO FISHER SCIENFTIFIC INDIA P. LTD,MUMBAI vs. DCIT 15(3)(1), MUMBAI

Date of Hearing – 09/12/2025 Date of Order - 02/01/2026 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeals against the separate final assessment order passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 ("the Act") pursuant to the directions issued by the learned Dispute Resolution Panel - 2, Mumbai [“learned DRP’’], under section ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 2 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15)

144C(5) of the Act, for the assessment years 2011-12, 2012-13, 2013-14 and 2014-15.

Ground 1 – General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- II (DRP') and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd ('GSK') in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 7.54,46,294 on the written down value of business or commercial rights being the manufacturing contracts as on 1. April 2010 under section 32(1) r.w.s 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 1,81,98,807 on the written down value of business or commercial rights being the supply contracts as on 1. April 2010 under section 32(1) r.w.s 2(11) of the IT Act. 2.3 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts:

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• Manufacturing and supply contracts are not self-generated by GSK and have not been transferred to the Appellant • Manufacturing and supply contracts are not an intangible asset as per Accounting Standard ('AS')-26 issued by the Institute of Chartered Accountants of India 2.4 Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s 2(11) of the IT Act. 2.5 Without prejudice to para 2.2 and 2.3 above the above, the learned DCIT and Hon'ble DRP erred in not considering the value of supply contracts as goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s 2(11) of the IT Act.

3. Ground 3 - Depreciation on contracts - Acquisition from Chemito Technologies Private Limited ('CTPL') in AY 2009-10 3.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 36,61,868 on the written down value of business or commercial rights being the maintenance contracts as on 1 April 2010 under section 32(1) r.w.s 2(11) of the IT Act. 3.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of maintenance contracts based on the following observations which are incorrect on facts: • Maintenance contracts are not self-generated by CTPL and have not been transferred to the Appellant • Maintenance contracts are not an intangible asset as per AS-26 issued by the Institute of Chartered Accountants of India 3.3 Without prejudice to the above, the learned DCIT and Hon'ble DRP erred in not considering the value of maintenance contracts as goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s 2(11) of the IT Act.

4. Ground 4 - Consequential depreciation on software expenses capitalised in AY 2007-08 On the facts and in the circumstances of the case and in law, the learned DCIT has erred in not following the directions of the Hon'ble DRP for granting consequential depreciation of Rs. 16,790 on the written down value of software expenses considered to be depreciable capital expenditure in completed assessment proceedings of AY 2007-08.

5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AY 2008-09

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5.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73.52,790 on goodwill purchased from GSK. 5.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 262,345 relating to depreciation on software expenses treated as capital expenditure in AY 2007-08.

6. Ground 6 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10 6.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 6.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 14,05,14,593 on the written down value of goodwill purchased from GSK as on 1 April 2008. 6.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 7,23,12,099 on goodwill purchased from CTPL. 6.4. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 104,938 relating to depreciation on software expenses treated as capital expenditure in AY 2007-08.

7. Ground 7 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 7.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 7.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 10,53,85,945 on the written down value of goodwill purchased from GSK as on 1 April 2009. 7.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 5,42,34,074 on goodwill purchased from CTPL as on 1 April 2009.

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7.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to depreciation on software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Transfer pricing (TP") adjustment relating to purchase of finished goods (Rs. 2,90,74,384) The Appellant most respectfully submits before Your Honours that this Ground of Appeal is subject to learned DCIT disposing the rectification application filed by the Appellant under Sec 154 of the IT Act on 09. February 2016. In this application, it was brought to the notice of learned DCIT that the learned TPO has incorrectly granted relief by deleting the entire TP adjustment in relation to purchase of finished goods amounting to Rs. 13,44.35,683 while giving effect to the directions of the Hon'ble DRP i.e. accepting Advanced Micronic Devices Ltd. and Frontline Electro Medical Ltd. as comparables for the purpose of computing the revised arm's length gross profit margin. In view of this, the revised TP adjustment stands at Rs. 2,90,74.384 instead of Rs. Nil as confirmed by Learned TPO. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 2,90,74- 384 to the income of the Appellant in relation to the international transaction of purchase of finished goods; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TPO's a. rejecting the economic analysis in the TP documentation maintained by the Appellant; b. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis, which are comparable to the Appellant's distribution activity in terms of functions, asset base and risk profile. Ground 9 - TP adjustment relating to receipt of indenting commission (Rs. 4.27.53,174) On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 4,27.53.174 to the income of the Appellant in relation to the international transaction of receipt of indenting commission; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TPO's action of – a. rejecting the economic analysis in the TP documentation maintained by the Appellant; b. rejecting commission agreements (i) Smith & Nephew Inc. S&N and Harry Kraus; (ii) VipMed and Fulfilment Services Inc.; and (iii) Cincinnati Sub- Zero Products, Inc. and Dimension Distributing Inc. from the economic

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 6 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) analysis, which are comparable to the Appellant's indenting activity in terms of functions, asset base and risk profile. Ground 10 - TP adjustment relating to purchase of analysers (Rs. 6,90.51,774) The Appellant most respectfully submits before Your Honours that this Ground of Appeal is subject to learned DCIT disposing the rectification application filed by the Appellant under Sec 154 of the IT Act on 09. February 2016. In this application, it was brought to the notice of learned DCIT that the learned TPO has not granted any relief instead of Rs. 1,47.30,693 in relation to purchase of analysers while giving effect to the directions of the Hon'ble DRP i.e. accepting Advanced Micronic Devices Ltd. and Frontline Electro Medical Ltd. as comparables for the purpose of computing the revised arm's length gross profit margin. In view of this, the revised TP adjustment stands at Rs. 6,90,51,774 instead of Rs. 8,37,82,467 as confirmed by Learned TPO. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 6,90,51,774 to the income of the Appellant in relation to the international transaction of purchase of analysers; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TPO's action of – a. rejecting the economic analysis in the TP documentation maintained by the Appellant; b. rejecting the comparable uncontrolled price analysis of the Appellant for purchase from Associated Enterprises ('AEs) amounting to Rs. 2,26,13,896; and c. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis for the balance purchases from AEs amounting to Rs. 4,49,43,913, which are comparable to the Appellant's assembling activity in terms of functions, asset base and risk profile; and d. not granting proportionate adjustment in the ratio of AE and non AE purchases. Ground 11 -No TP adjustment of Rs. 2,21,66,890 in respect of reimbursement of expenses in view of voluntary disallowance under section 40(a)(ia) On the facts and in the circumstances of the case and in law, the Learned DCIT and Hon'ble DRP erred in conforming the upward adjustment to the income of the Appellant in respect of the international transaction of reimbursement of expenses amounting to Rs. 2,21,66,890, although the said expenses were already disallowed by the Assessee Company in its return of income under section 40(a)(ia) of the IT Act and such action of the learned DCIT has resulted in a double disallowance. Ground 12 - TP adjustment of Rs. 6,43.65.504 relating to reimbursement expenses

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On the facts and in the circumstances of the case and in law, the Hon'ble DRP and learned DCIT erred in confirming the learned TPO's action of determining the arm's length price of the appellant's international transaction of reimbursement of expenses (in the nature of employee expenses, inter- connectivity charges, SAP related cost, professional expenses and administrative expenses) as Nil (instead of Rs. 6,43,65.504) and in doing so the Hon'ble DRP failed to take cognizance of the third party supporting documentation maintained by the Appellant and the fact that these expenses are essential to the business of the Appellant. Ground 13 - Interest levied under section 234C of the IT Act On the facts and circumstances of the case and in law, the Learned DCIT has erred in levying interest of Rs. 49,041 under section 234C of the IT Act. Ground 14 - Interest under section 244A of the IT Act recovered back On the facts and circumstances of the case and in law, the Learned DCIT has erred in recovering alleged excess interest Rs. 3,78,055 on refund under section 244A of the IT Act despite the fact that the Appellant was not in receipt of any excess interest on refund. Ground 15 - Interest levied under section 234D of the IT Act On the facts and circumstances of the case and in law, the Learned DCIT has erred in levying consequential interest of Rs. 86,446 under section 234D of the IT. Ground 16 - Penalty proceedings On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceedings under section 271(1)(c) of the IT Act.”

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(b) No evidence of these intangible assets being self-generated, and the same were transferred to the assessee in a slump sale.

(c) Manufacturing contract, and supply/maintenance contracts are not akin to the assets identified under the provision of section 32(1)(ii) of the Act.

(d) From the valuation report, "future economic benefits" and "cost measurement" cannot be measured reliably.

(e) Regarding the manufacturing contracts purchased from GSK Pharma Ltd, it is seen from the Valuation Report that the future economic benefits could not be measured reliably because the same is altogether dependent on market conditions and demand and supply conditions and measurement of cost of the contracts is not based on any scientific and logical formulae, but the same is based on mere surmises. Thus, the purchased “manufacturing contracts” do not satisfy the criteria of “cost measurement” and “future economic benefits” for an asset to be recognised as an intangible asset as per Accounting Standards - 26.

(f) Regarding the maintenance contracts purchased from Chemito Technologies Pvt. Ltd., from the Valuation Report, it is evident that the "future economic benefits" cannot be measured reliably. Thus, the "maintenance contracts" do not satisfy the definition of an asset to be recognised as an intangible asset as per Accounting Standard- 26.

7. Accordingly, the AO, vide draft assessment order, disallowed the depreciation claimed by the assessee in respect of manufacturing contracts and supply/maintenance contracts and added the same to the total income of the assessee.

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8. The learned DRP, vide its direction dated 14.12.2015 issued under section 144C(5) of the Act, rejected the objections filed by the assessee on this issue following the approach adopted in the assessee’s own case in preceding years, wherein depreciation on manufacturing contracts and supply/maintenance contracts was disallowed. Accordingly, the action of the AO in not entertaining the claim of the assessee was upheld. In conformity, the AO passed the impugned final assessment order dated 09.01.2016 under section 144(3) read with section 144C(13) of the Act on this issue. Being aggrieved, the assessee is in appeal before us.

10. On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities on this issue.

11. On the contrary, the learned Departmental Representative (“learned DR”) submitted that as per the provisions of the Accounting Standard-26, manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions cannot be recognised as intangible assets. The learned DR further submitted that the Accounting Standard-26 specifically requires the capacity of an enterprise to control future economic benefits from an intangible asset. However, in the present case, the assessee has not been able to demonstrate its capacity to control future economic benefits from the contracts, which are only for the duration of 1 year, 2 years or 5 years. It was further submitted that the cost of these contracts cannot be measured reliably. Thus, the learned DR submitted that these contracts cannot be recognised as intangible assets in view of the provisions of the Accounting Standard-26.

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12. In his rebuttal, the learned Authorised Representative (“learned AR”) submitted that the manufacturing contracts related to toll manufacturing sites are engaged in exclusive manufacturing of Qualigens chemicals based on specifications provided by the assessee and the said toll manufacturers were identified in 1997 by GSK Pharma Ltd and have been associated with them for the past 10 years and have developed significant manufacturing efficiencies and better capacity utilisation leading to considerable cost advantages. Thus, the learned AR submitted that the same is likely to continue in the future. As regards the supply contracts, the learned AR submitted that the Qualigens business enjoys a leadership position with about 30% market share in the speciality chemicals market, and thus, even though supply contracts entered into on an annual basis, majority of these relationships with customers/distributors date back to 30 to 40 years and thus expected to be renewed and continued on year-on- year basis. Further, as regards the maintenance contracts, the learned AR submitted that these contracts were entered into with customers for annual maintenance of the products sold by Chemito Technologies Pvt. Ltd. business and were entered on the expiry of the warranty period of the products, normally for a period of 5 years. Thus, it was submitted that the maintenance contracts that were unexpired on the date of transfer of business were transferred to the assessee and have been valued on the basis of the discounted net contribution arising from the maintenance contracts. Further, the learned AR by referring to the sample copy of these contracts submitted that these contracts continued between the parties and the assessee beyond the period mentioned in the Business Transfer Agreements, which clearly demonstrates that the future economic benefits have flowed to the assessee from the impugned contracts.

14. In any case, it is pertinent to note that in the present case, the total consideration paid by the assessee for the afore-mentioned slump sale acquisitions from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. includes consideration paid for manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee. Thus, even if it is assumed that these contracts are not separate intangible assets under section 32(1)(ii) of the Act, it cannot be disputed that the consideration paid also covered the consideration for these contracts, and the said consideration was over and above the net asset value of other recognised tangible and intangible assets. We find that the coordinate bench of the Tribunal in assessee’s own case in Thermo Fisher Scientific India Pvt. Ltd.

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 13 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) v/s DCIT, in for the assessment year 2009-10, vide order dated 31/07/2023 held that the consideration paid over and above the fair value of the assets and liabilities acquired by way of slump sale from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. is attributable to goodwill. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - “5.18 We have heard rival submission of parties. The issue in dispute is claim of depreciation on Goodwill recognised by the assessee in two transaction of acquisition of two units. The assessee claimed that those acquisitions are for purchase of unit for lumpsum consideration, as going concerns in the nature of slump sale, which is subject to capital gain tax us 50B in the hand of seller. Whereas the according the Assessing officer the acquisitions are in the nature of amalgamation. Before us, the learned counsel has referred to various clauses of business transfer agreement (BTA) in respect of units acquired from GSK and CTPL respectively. On perusal of relevant clauses referred, we find that transaction in both the cases are of slump sale and not, amalgamation as stated by the Assessing Officer. 5.19 The learned Assessing Officer has further relied on the Explanation 7 to section 43(1) of the Act, to hold that assessee is not entitled for depreciation on the Goodwill recognised. For ready reference, the relevant explanation is reproduced as under: "Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business. Explanation 7A.—Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting company is an indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business : Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company." 5.20 On perusal of the above Explanation, we find that same is in relation to transactions of amalgamation and not related to slump sale transactions, which is the case of the assessee. 5.21 The learned Assessing Officer has further relied Explanation-2 to section 43(6) of the Act, which reads as under: "Explanation 2.—Where in any previous year, any block of assets is transferred,— (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 14 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year.

5.22 On perusal of above Explanation, we find that it is in relation to acquisition of a subsidiary company by its holding company or vice versa and in relation to transactions of amalgamation and not in respect of slump sale.

5.23 The learned Assessing Officer has further relied on fifth proviso (now sixth proviso) to section 32(1)(ii) of the Act, which is reproduced for ready reference: "Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them." 5.24 On plain reading of the above proviso, it is clear that same is in relation to allocation of the depreciation on the asset between predecessor and successor entities, whereas in the instant case goodwill was not in existence as intangible asset in the case of predecessor companies from whom the assessee has acquired corresponding units under slump sale. Therefore, the said provision is also not applicable of the facts of the instant case. 5.25 The ratio is in the case of United Breweries (supra) is also not applicable over the facts of case as in the said case there was amalgamation of the three wholly owned subsidiaries whereas in the instant case there is a acquisition of units of third parties by way of slump sale. 5.26 The learned DR before us submitted that allocation of values to the fixed asset acquired has been on lower side for creating goodwill as intangible asset. But in our opinion, if the quantum of goodwill is reduced, the valuation of the fixed asset will increase, which are also eligible for depreciation and thus in the exercise of reallocation of values among the goodwill and other fixed asset, will be a revenue neutral exercise. 5.27 In view of the above discussion, we concur with the arguments of the learned counsel of the assessee that goodwill arising from transactions of acquisition of units of GSK and CTPL, is eligible for depreciation under the provisions of the Act. As far as claim of the assessee for allowing depreciation

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 15 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) on said goodwill corresponding to assessment year 2008-09, we are of the opinion that claim with respect to depreciation for assessment years 2008-09, cannot be allowed in the appeal for assessment year 2009-10. It is for the assessee to explore necessary remedy under the provisions of the Act or any other legal remedy as advised. The ground No.2 (two) of the appeal of the assessee is accordingly allowed.”

15. Therefore, we are of the considered view that the entire exercise of determining the nature of manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee from the afore-mentioned slump sale acquisitions is merely academic, as even if these contracts are not considered as separate intangible assets as per the provisions of Accounting Standard-26, even then the excess consideration paid over and above the fair value of the recognised assets and liabilities acquired by way of slump sale transactions has been held to be goodwill in nature and the assessee was allowed depreciation on the same under the provisions of the Act by the coordinate bench of the Tribunal. Accordingly, accepting the alternative plea of the assessee and respectfully following the decision of the coordinate bench of the Tribunal rendered in assessee’s own case, we direct the AO to treat the excess of consideration paid over and above the fair value of the assets and liabilities as goodwill and allow the depreciation on same to the assessee under the provisions of the Act. On similar lines, the depreciation on goodwill amounting to INR 15,96,20,019 claimed by the assessee in the year under consideration is also allowed. As a result, grounds no.2-5, raised in assessee’s appeal, are allowed. In view of our aforesaid findings, additional ground no.15 needs no separate adjudication.”

12. Further, in the assessee’s own case for the assessment year 2015-16, following the aforesaid decision rendered in assessment year 2010-11, the Co-ordinate Bench of the Tribunal vide its order dated 31.07.2025 passed in allowed a similar claim of depreciation by the assessee. The Revenue could not bring any material on record to deviate from the decision so rendered by the Tribunal on this issue. Therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal rendered in assessee’s own case cited supra, we direct the AO to allow the depreciation claimed by the assessee on similar lines. As a result, Grounds No. 2 and 3 raised in assessee’s appeal are allowed.

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13. The issue arising in Grounds No.4 – 7, raised in assessee’s appeal, pertains to the claim of brought forward and unabsorbed depreciation for the assessment years 2008-09 to 2010-11.

14. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the AO has not allowed brought forward and unabsorbed depreciation on account of disallowance of depreciation on intangible assets in several preceding years and the allowance of depreciation on software as well as allowance on brought forward and unabsorbed depreciation for the assessment years 2008-09 to 2010-11 during the present year is linked to the outcome of the previous years. Thus, as per the assessee, this issue is consequential and depends on the outcome of the preceding years. We find that while considering a similar issue, the Co- ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2015-16, cited supra, observed as follows: - “6.2. On perusal of record we find that the Assessing Officer did not allow Assessee's claim of brought forward unabsorbed depreciation on account of disallowances made in the preceding years. Since the allowance of unabsorbed depreciation is linked to the outcome of the appeals for the Assessment Years 2008-2009 to 2014-2015, we deem it appropriate to direct the Assessing Officer to consider the claim of the Assessee in respect of unabsorbed depreciation as per the orders passed by the Tribunal in the appeals for each of the preceding assessment years (i.e. Assessment Years 2008-2009 to 2014- 2015). In terms of the aforesaid directions Ground No.4 to 10 raised by the Assessee are treated as allowed for statistical purposes.”

15. Therefore, respectfully following the decision of the Co-ordinate Bench cited supra, we restore this issue to the file of the AO with similar directions. Accordingly, Grounds No.4-7 raised in the assessee’s appeal are allowed for statistical purposes.

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16. Ground No.8, raised in assessee’s appeal, pertains to the transfer pricing adjustment in respect of the international transaction of the purchase of finished goods.

S.No. Name of the Company GP/Sales% 1 Hicks Thermometers (India) Ltd. 43.92 2 Frontline Electro Medical Ltd. 26.02 3 Advanced Micronic Devices Ltd. 14.42 Healthcare 4 Sataytej Commercial Company Ltd. 12.86 5 Remi Sales & Engg. Ltd. 18.10 Mean 23.06%

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ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 21 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) accruing to the enterprise or to an unrelated enterprise from the purchase and resale of the same or similar property or from obtaining and providing the same or similar services, in a comparable uncontrolled transaction, or a number of such transactions; (iii) the price so arrived at is further reduced by the expenses incurred by the enterprise in connection with the purchase of property or obtaining of services; (iv) the price so arrived at is adjusted to take into account the functional and other differences, including differences in accounting practices, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of gross profit margin in the open market; (v) the adjusted price arrived at under sub-clause (iv) is taken to be an arm's length price in respect of the purchase of the property or obtaining of the services by the enterprise from the associated enterprise;”

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 22 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) criteria while evaluating the transactions in the RPM wherein price is identified at which property or services are resold and normal gross profit margin is derived at by the enterprise which is deducted from the resale price of such property or service in comparable uncontrolled transactions. The gross profit margin earned by the independent enterprise in comparable uncontrolled transactions is served as a guidance factor. This is also what happens in the case of a distributor wherein the property and service are purchased from the A.E. and are resold to other independent entities, without any value additions. The gross profit margin earned in such transactions becomes the determination factor to see the gross compensation after the cost of sales. In the instant case, the assessee is a distributor of Mattel toys and gets the finished goods from its A.E. and resells the same to independent parties without any value addition. In such a situation, RPM can be the best method to evaluate the transactions whether they are at ALP.”

38 Thus, in the aforesaid decision, the coordinate bench arrived at the conclusion that for benchmarking under the RPM, functional attribute is a primary factor rather than the similarity of the products. Therefore, respectfully following the aforesaid decision, we do not find any merit in the findings of the lower authorities in excluding Satyatej Commercial Co. Ltd. as a comparable on the basis that it is dealing in different products.

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“49. From the perusal of the TPO’s order, we find that Smith & Nephew, Inc., selected by the assessee, was excluded by the TPO on the basis that the same is into bone healing therapy for Fresh Closed Distal Radius Fractures. Thus, the TPO held the company to be functionally not comparable to the assessee. From the perusal of the Sales Representative Agreement entered into between Hand Innovations Inc. and Harry Kraus, forming part of the paper book from pages 1068-1072, we find that the product was Distal Radius Fractures Plate,

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 27 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) which is similar to the product profile of Smith & Nephew, Inc., excluded by the TPO. Further, it is also pertinent to note that both companies have similar Sales Representative Agent, i.e., Harry Kraus. Therefore, we concur with the submissions of the learned AR and direct the TPO to also exclude Hand Innovations Inc. for benchmarking the international transaction of receipt of the indenting commission.

Hand Innovations Inc. and RG Medical Diagnostics, it is found that the functional profile is similar to the companies which have already been excluded, the TPO is directed to also exclude Hand Innovations Inc. and RG Medical Diagnostics in lines with the findings of the Co-ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2010-11. Therefore, with the above directions, the impugned transfer pricing adjustment on this issue is set aside, and Ground No.9, raised in the assessee’s appeal, is allowed for statistical purposes.

37. Ground No.10, raised in assessee’s appeal, pertains to the transfer pricing adjustment in respect of the international transaction of purchase of analysers.

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 29 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) with the unit price charged by the associated enterprise to the third parties in India. For the remaining transactions amounting to Rs.4,49,43,913/-, since the CUP details were not available, the assessee adopted RPM as the most appropriate method by considering itself as a tested party. In this regard, the assessee selected the following five companies as comparable having a mean gross profit by sales margin of 23.06%: - Sr. No. Name of the Company GP/Sales % 1 Hicks Thermometers (India) Ltd. 43.92 2 Frontline Electro Medical Ltd 26.02 3 Advanced Micronic Devices Ltd- 14.42 Healthcare 4 Sataytej Commercial Company Ltd. 12.86 5 Remi Sales & Engg Ltd 18.10 Mean 23.06%

39. Since the assessee’s margin for the purpose of comparison under RPM was determined at 23.76%, after considering the voluntary transfer pricing adjustment of Rs.89,54,468/-, the international transaction was considered at arms’ length.

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9. This very issue/question as raised herein was raised by the Revenue in Pedro Araldite Pvt. Ltd. (Supra). The question raised therein was as"Whether on the facts and law the Tribunal was justified in directing AO/TPO to bench mark as AE transactions without appreciating (a) the Assessee itself in its transfer pricing study & report (TPSR) has chosen entity level PLI to benchmark the AE transactions; (b) the Assessee had itself failed to furnish audited segmental accounts and therefore, the TPO had rightly applied revised PLI at the entity level to determine the ALP?" At the above hearing, the Revenue accepted that even in the absence of segmental accounts, the adjustment has to be done only in respect of the international transactions with Associated Enterprises. This is so recorded in the order dated 24 November 2015. Therefore, on the above ground itself, the question as proposed does not give rise to any substantial question of law.

11. We also note that the Delhi High Court in Commissioner of Income Tax Vs. Keihin Panalfa Ltd. (ITA No.11 of 2015) decided on 9 September, 2015 has while dealing with transfer pricing adjustment in the absence of segmental accounts held that adjustments have to be restricted only to transactions with Associated Enterprises. It further held that where separate accounts are not available, then proportionate adjustments to be made only in respect of the international transactions with Associated Enterprises.

insurmountable issue, as proportionate basis could be adopted as done by the Delhi High Court in Keihin Panalfa Ltd. (supra). 13. In the above view, no substantial question of law arises. Therefore, we do not entertain the present appeal."

50. Having considered the submissions of both sides and perused the material on record, as per the assessee, it made suo motu disallowance to an extent of Rs.8,97,25,506/- under section 40(a)(ia) of the Act, which inter alia includes the reimbursement of communication expenses of Rs.2,08,30,427/- and reimbursement of professional expenses of Rs.13,36,463/-. As per the assessee, the TPO, vide its order passed under section 92CA(3) of the Act,

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 35 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) considered the arm’s length price of the expenditure reimbursed by the assessee to its associated enterprises as Rs.Nil, and while doing so, the aforementioned reimbursement of communication expenses and reimbursement of professional expenses, which were suo motu disallowed by the assessee under section 40(a)(ia) of the Act, were again disallowed. We agree with the submissions of the assessee that no expenditure should be disallowed twice. Since this issue only requires factual verification, we restore this issue to the file of the jurisdictional AO to delete the double disallowance to the extent of the suo motu disallowance already made by the assessee in its return of income, after necessary verification of the facts. As a result, Ground No.11 raised in assessee’s appeal is allowed for statistical purposes.

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 36 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) that it was a requirement of the assessee and also failed to file evidence that established that the assessee had received the goods/services. The TPO further held that the assessee has not established how the allocation of cost has been done by the associated enterprises. Accordingly, the TPO treated the arms’ length price of the international transaction of reimbursement of expenses as Rs. Nil.

“54. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee reimbursed expenditures in the nature of SAP development expenses, Internet charges, professional expenses and administrative expenses to its Associated Enterprises for the cost incurred on behalf of the assessee. Such reimbursement was made by the assessee without paying

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 37 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) any markup on the cost. The TPO, as well as the learned DRP, treated the arm’s length price of this transaction at NIL on the basis that the assessee has failed to justify/prove the rendition, necessity and benefit of this expenditure. We find that during the proceedings before the learned DRP, the assessee filed the details of reimbursement paid to the Associated Enterprises by way of additional evidence. As regards the SAP development expenses, the assessee furnished the invoice raised by Dell Perot Systems in respect of the India rollout project. As regards the Internet services received by the assessee, the assessee placed on record the invoices raised by AT&T relating to the assessment year 2011-12 on the basis that the invoices for the year under consideration are not available, as the data is very old. Further, as regards the reimbursement of professional expenses, the assessee placed on record the invoices raised by the legal consultant for various assignments in India. It is evident from the record that the TPO neither undertook any benchmarking analysis nor searched for any comparable transaction for considering the arm’s length price at NIL. In this regard, it is relevant to note the following observations of the Hon’ble Delhi High Court in CIT v/s Cushman and Wakefield (India) Pvt. Ltd., reported in [2014] 367 ITR 730 (Del.): -

“35. The TPO's Report is, subsequent to the Finance Act, 2007, binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO's authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That exercise - of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot - after a consideration of the facts - state that the ALP is 'nil' given that an independent entity in a comparable transaction would not pay any amount. However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure.”

55. As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction, and the arm’s length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the AO under section 37 of the Act. Further, accrual of benefit to the assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by the Hon’ble Delhi High Court in the case of CIT v/s EKL Appliances Ltd., reported in [2012] 345 ITR 241 (Del.).

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 38 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 of the Act and/or genuineness of the expenditure. This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination of ALP of the advertisement expenses. Therefore, the issue for examination in this appeal is only the issue of ALP as determined by the TPO in respect of advertisement expenses. The jurisdiction of the TPO is specific. and limited l.e. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with Rule 10A to 10E of the Income Tax Rules. The determination of the ALP by the respondent assessee of its advertisement expenses has not been disputed on the parameters set out in Chapter X of the Act and the relevant Rules. In fact, as found both by the CIT (A) as well as the Tribunal that neither the method selected as the most appropriate method to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the ad-hoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained.”

57. In view of the above, we are of the considered opinion that TPO, as well as learned DRP, were not justified in treating the value of the international transaction of reimbursement of expenses to be NIL, in the present case. Accordingly, ground no.12 raised in assessee’s appeal is allowed.”

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56. Grounds No.13-15, raised in assessee’s appeal, pertain to the levy of interest under section 234C, 234D and 244A of the Act, which are consequential in nature. Therefore, the same need no separate adjudication.

Assessee’s Appeal (A.Y. 2012-13)

1. Ground 1 – General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- 2 ('DRP') and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai ('DCIT") are bad in law and merit to be set aside.

2. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd ("GSK') in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 5,65,84,720 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2011 under section 32(1) r.w.s. 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 1,36,49,105 on the written down value of business or commercial rights being the supply contracts as on 1 April 2011 under section 32(1) r.w.s. 2(11) of the IT Act. 2.3 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon’ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts:

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• Manufacturing and supply contracts are not self-generated by GSK and have not been transferred to the Appellant • Manufacturing and supply contracts are not an intangible asset as per Accounting Standard ('AS')-26 issued by the Institute of Chartered Accountants of India 2.4 Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as Goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 2.5 Without prejudice to para 2.2 and 2.3 above the above, the learned DCIT and Hon'ble DRP erred in not considering the value of supply contracts as Goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s. 2(11) of the IT Act.

3. Ground 3 - Depreciation on contracts - Acquisition from Chemito Technologies Private Limited (*CTPL') in AX 2009-10 3.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 27,46,401 on the written down value of business or commercial rights being the maintenance contracts as on 1 April 2011 under section 32(1) r.w.s 2(11) of the IT Act. 3.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of maintenance contracts based on the following observations which are incorrect on facts: • Maintenance contracts are not self-generated by CTPL and have not been transferred to the Appellant • Maintenance contracts are not an intangible asset as per AS-26 issued by the Institute of Chartered Accountants of India 3.3 Without prejudice to the above, the learned DCIT and Hon'ble DRP erred in not considering the value of maintenance contracts as Goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. Ground 4 - Consequential depreciation on software expenses capitalised in AY 2007-08 On the facts and in the circumstances of the case and in law, the learned DCIT has erred in not following the directions of the Hon'ble DRP for granting consequential depreciation of Rs. 6,716 on the written down value of software expenses considered to be depreciable capital expenditure in completed assessment proceedings of AY 2007-08.

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5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AX 2008-09 5.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73.52,790 on Goodwill purchased from GSK. 5.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 262,345 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 6 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10 6.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 6.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 14,05,14,593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 6.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 7,23,12,099 on Goodwill purchased from CTPL. 6.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 104,938 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 7 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 7.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 7.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 10,53,85,945 on the written down value of Goodwill purchased from GSK as on 1 April 2009.

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7.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 5,42,34,074 on Goodwill purchased from CTPL as on 1 April 2009. 7.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 8.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 9 - Transfer pricing (TP') adjustment relating to purchase and sale of finished goods (Rs, 8,79,59,642) 9. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming to the extent of Rs. 8,79,59,642 the income of the Appellant in relation to the international transaction of purchase and sale of finished goods; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned Transfer Pricing Officer's (TPO's) action of – a. rejecting the economic analysis in the TP documentation maintained by the Appellant; and b. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis, which are comparable to the Appellant's distribution activity in terms of functions, asset base and risk profile.

10. The Appellant therefore prays that the adjustment upheld by the learned DCIT and Hon'ble DRP of Rs. 8,79,59,642 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TPO under section 92CA(3) of the IT Act be deleted. Ground 10 - TP adjustment in relation to purchase and sale of finished goods (Rs. 19,63.43,226) 10.1 On the facts and circumstances of the case and in law, the learned DCIT erred in adding Rs. 28,43,02,868 to the total income of the Appellant when the DRP had upheld an adjustment of only Rs. 8,79.59,642. Ground 11 - TP adjustment relating to purchase of analysers (Rs. 3.01,05,086)

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11.1 On the facts and circumstances of the case and in law, the learned DCIT erred in adding Rs. 3,01,05,086 to the total income of the Appellant when the DRP had deleted the adjustment made by the learned TPO. Ground 12 -No TP adjustment of Rs. 1,24,97,382 in respect of reimbursement of expenses in view of voluntary disallowance under section 40(a)(ia) 12.1 On the facts and in the circumstances of the case and in law, the learned DCIT erred in confirming the upward adjustment to the income of the Appellant in respect of the international transaction of reimbursement of expenses amounting to Rs. 1,24,97,382, although the said expenses were already disallowed by the Assessee Company in its return of income under section 40(a)(ia) of the IT Act and such action of the learned DCIT has resulted in a double disallowance; and further, Hon'ble DRP had directed that the disallowance having been suo motu added, ought to be deleted subject to verification. Ground 13 - TP adjustment of Rs. 79,19,536 relating to reimbursement expenses 13.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the learned TPO's action of determining the arm's length price of the appellant's international transaction of reimbursement of expenses [in the nature of communication expenses (inter-connectivity charges), professional expenses, employee expenses and travel expenses] as Nil (instead of Rs. 79,19,536) and in doing so the learned DCIT and Hon'ble DRP failed to take cognizance of the third party supporting documentation maintained by the Appellant and the fact that these expenses are essential to the business of the Appellant. The Appellant therefore prays that the addition made by the learned DCIT and Hon'ble DRP of Rs. 79,19,536 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TPO under Section 92CA(3) of the IT Act be deleted.

14. Ground 14 - Interest under section 244A of IT Act 14.1. On the facts and circumstances of the case and in law, the Learned DCIT has erred in allowing consequential amount of interest under section 244A of IT Act.

15. Ground 15 - Penalty proceeding 15.1. On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act.

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As a result, Grounds No.9-10 raised in assessee’s appeal are allowed for statistical purposes.

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Assessee’s Appeal (A.Y. 2013-14)

Ground 1 – General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- 2 (DRP) and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside.

2. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd (GSK) in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 4,24,38,540 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2012 under section 32(1) r.w.S. 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 1,02,36,829 on the written down value of business or commercial rights being the supply contracts as on 1 April 2011 under section 32(1) r.w.s. 2(11)| of the IT Act. 2.3 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts: • Manufacturing and supply contracts are not self-generated by GSK and have not been transferred to the Appellant • Manufacturing and supply contracts are not an intangible asset as per Accounting Standard (AS)-26 issued by the Institute of Chartered Accountants of India 2.4 Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as Goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 2.5 Without prejudice to para 2.2 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of supply contracts as Goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s. 2(11) of the IT Act.

3. Ground 3 - Depreciation on contracts - Acquisition from Chemito Technologies Private Limited (CTPL) in AY 2009-10

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3.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 20,59,801 on the written down value of business or commercial rights being the maintenance contracts as on 1 April 2012 under section 32(1) r.w.s 2(11) of the IT Act. 3.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of maintenance contracts based on the following observations which are incorrect on facts: • Maintenance contracts are not self-generated by CTPL and have not been transferred to the Appellant • Maintenance contracts are not an intangible asset as per AS-26 issued by the Institute of Chartered Accountants of India 3.3 Without prejudice to the above, the learned DCIT and Hon'ble DRP erred in not considering the value of maintenance contracts as Goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act.

4. Ground 4 - Deduction for employee's contribution to Provident Fund (PF) and Employees State Insurance Corporation (ESIC) On the facts and in the circumstances of the case and in law, the Hon'ble DRP and learned DCIT erred in disallowing payment towards employees contribution to PF and ESIC aggregating to Rs. 7,29,418 without appreciating that the amount was paid before the due date of filing the original return of income.

5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AY 2008-09 5.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon"ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs.23,42,60,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs.18,73.52,790 on Goodwill purchased from GSK. 5.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 262,345 relating to software expenses treated as capital expenditure in AY 2007-08.

6. Ground 6 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10

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6.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 6.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 14,05,14.593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 6.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 7,23,12,099 on Goodwill purchased from CTPL. 6.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 104,938 relating to software expenses treated as capital expenditure in AY 2007-08.

7. Ground 7 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 7.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 7.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 10,53,85,945 on the written down value of Goodwill purchased from GSK as on 1 April 2009. 7.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 5,42,34,074 on Goodwill purchased from CTPL as on 1 April 2009. 7.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 8.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08.

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9. Ground 9 - Allowance of brought forward unabsorbed depreciation pertaining. to AY 2012-13 9.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2012-13 of Rs. 26,32,11,490 as per return of income. 9.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 6,716 relating to software expenses treated as capital expenditure in AY 2007-08.

10. Ground 10 - Transfer Pricing (TP) adjustment relating to receipt of indenting commission (Rs. 1,58,06,479) 10. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming to the extent of Rs. 1,58,06,479 to the income of the Appellant in relation to the international transaction of receipt of indenting commission; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TP Officer's (TPO's) action of - a. rejecting the economic analysis in the TP documentation maintained by the Appellant; and b. rejecting commission agreements (i) Smith & Nephew, Inc. (S&N) and Harry Kraus; (ii) VipMed and Fulfilment Services, Inc.; and (ili) Cincinnati Sub-Zero Products, Inc. and Dimension Distributing, Inc. from the economic analysis, which are comparable to the Appellant's indenting activity in terms of functions, asset base and risk profile. 10.2. The Appellant therefore prays that the adjustment upheld by the learned DCIT and Hon'ble DRP of Rs. 1,58,06,479 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TPO under section 92CA(3) of the IT Act be deleted.

11. Ground 11 - Failure to grant credit of tax deducted at source (TDS) of the merged entities 11.1. On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for TDS of Rs. 92,28,780 claimed by the appellant in its return of income pertaining following merged entities in accordance with section 199 of the IT Act read with Rule 37BA of Income-tax Rules, 1962 (IT Rules). Sr. No. Name of the entities TDS 1 Dionex India Private Limited 15,44,349 2 Thermo Electron India Private 74,95,478 Limited 3 Phadia India Private Limited 14,099 4 Kendro Laboratory Products India 4,77,254 Private Limited Total 92,28,780

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12. Ground 12 - Failure to grant credit of TDS and tax collected as source (TCS) pertaining to the Appellant 12.1. On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for TDS of Rs. 81,97,129 and TCS credit of Rs. 745 pertaining to the appellant as claimed in its return of income.

13. Ground 13 - Failure to grant credit of advance tax of merged entities 13.1. On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for advance tax of Rs. 6,27,40,000 claimed by the appellant in its return of income in accordance with section 199 of the IT Act read with Rule 37BA of IT Rules which was paid by the following merged entities. Sr. No. Name of the entities Advance tax 1 Dionex India Private Limited 3,21,70,000 2 Thermo Electron India Private Limited 2,79,00,000 3 Phadia India Private Limited 26,70,000 Total 6,27,40,000

14. Ground 14 - Penalty proceeding 14.1. On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act.”

78. Since the issue raised by way of additional ground can be decided on the basis of the material available on record, the same is admitted for adjudication.

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Inc., it is found that the functional profile is similar to the companies which have already been excluded, the TPO is directed to also exclude Hand Innovations Inc. in lines with the findings of the Co-ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2010-11. Therefore, with the above directions, the impugned transfer pricing adjustment on this issue is set aside, and Ground No.10 and additional Ground no.15, raised in the assessee’s appeal, are allowed for statistical purposes.

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Officer to verify the records. In case on verification it is found that the income corresponding to the differential TDS Credit of INR.10,75,900/- claimed by the Assessee has been offered to tax, and the said TDS Credit is reflected in Form 26AS for the Assessment Year 2015-2016 of the Assessee Company and/or the merged entities, the Assessing Officer is directed to allow Credit for the TDS Credit. In terms of the aforesaid, Ground No.11 raised by the Assessee is allowed for statistical purposes.”

Assessee’s Appeal (A.Y. 2014-15)

1. Ground 1 – General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel-

2. (DRP) and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd ("GSK') in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 3,18,28,905 on the written down value of business or commercial rights being

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 58 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) the manufacturing contracts as on 1 April 2013 under section 32(1) r.w.s. 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 76,77,622 on the written down value of business or commercial rights being the supply contracts as on 1 April 2012 under section 32(1) r.w.s. 2(11) of the IT Act. 2.3 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts: • Manufacturing and supply contracts are not self-generated by GSK and have not been transferred to the Appellant • Manufacturing and supply contracts are not an intangible asset as per Accounting Standard (AS)-26 issued by the Institute of Chartered Accountants of India 2.4 Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as Goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 2.5 Without prejudice to para 2.2 and 2.3 above, the learned DCIT and Hon'ble-DRP erred in not considering the value of supply contracts as Goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s. 2(11) of the IT Act.

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 59 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. Ground 4 - Allowance of brought forward unabsorbed depreciation of AY 2008-09 4.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,60,932 as per return of income. 4.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs.18,73,52,790 on Goodwill purchased from GSK. 4.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 262,345 relating to software expenses treated as capital expenditure in AY 2007-08.

5. Ground 5 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2009-10 5.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2009-10 of Rs. 17,82,24,085 as per the original return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 14,05,14,593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 5.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 7,23,12,099 on Goodwill purchased from CTPL. 5.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 104,938 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 6 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 6.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 6.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 60 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) depreciation of AY 2010-11 of Rs. 10,53,85,945 on the written down value of Goodwill purchased from GSK as on 1 April 2009. 6.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 5,42,34,074 on Goodwill purchased from CTPL as on 1 April 2009. 6.4. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08.

7. Ground 7 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 7.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 7.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2012-13 8.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2012-13 of Rs. 26,32,,11,490 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 6,716 relating to software expenses treated as capital expenditure in AY 2007-08.

9. Ground 9 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2013-14 9.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2013-14 of Rs. 16,66,17,345 as per return of income. 9.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 2,686 relating to software expenses treated as capital expenditure in AY 2007-08.

10. Ground 10 - Transfer pricing (TP') adjustment relating to purchase of finished goods (Rs. 5,60,52,674) 10.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 5,60,52,674 to the income of the Appellant in relation to the international transaction of purchase of finished goods; and in doing so the learned DCIT

ITAs No.1236/Mum/2016, 577/Mum/2017, 7393/Mum/2017 & 7294/Mum /2018 61 (A.Ys. 2011-12, 2012-13, 2013-14 & 2014-15) and Hon'ble DRP grossly erred in agreeing with the learned Transfer Pricing Officer's (TPO's) action of – a. rejecting the economic analysis in the TP documentation maintained by the Appellant; and b. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis, which are comparable to the Appellant's distribution activity in terms of functions, asset base and risk profile. The Appellant therefore prays that the adjustment made by the learned DCIT and Hon'ble DRP of Rs. 5,60,52,674 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TO under section 92CA(3) of the IT Act be deleted. Ground 11 - TP adjustment relating to receipt of indenting commission (Rs. 5,93,65,507) On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming to the upward adjustment of Rs. 5,93,65,507 to the income of the Appellant in relation to the international transaction of receipt of indenting commission; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TP Officer's (TPOS) action of – a. rejecting the economic analysis in the TP documentation maintained by the Appellant; and b. rejecting commission agreements (i) Smith & Nephew, Inc. (S&N) and Harry Kraus; and (il) VipMed and Fulfilment Services, Inc. from the economic analysis, which are comparable to the Appellant's indenting activity in terms of functions, asset base and risk profile. The Appellant therefore prays that the adjustment upheld by the learned DCIT and Hon'ble DRP of Rs. 5,93,65,507 under Section 143(3) r.w.s 144(C) of the IT Act on the basis of the order passed by the learned TPO under Section 92CA(3) of the IT Act be deleted.

12. Ground 12 - Failure to grant credit of tax deducted at source (TDS) and tax collected as source (TCS) of the merged entities 12.1 On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for TDS of Rs. 86,63,797 and TCS of Rs. 3,788 pertaining to following merged entities in accordance with section 199 of the IT Act read with Rule 37BA of Income-tax Rules, 1962 (IT Rules). Sr. No. Name of the entities TDS TCS 1 Dionex India Private 20,60,756 3,788 Limited 2 Thermo Electron India 62,87,177 - Private Limited

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3 Kendro Laboratory 3,24,864 - Products India Private Limited Total 86,63,797 3,788

13. Ground 13 - Failure to grant partial credit of TDS and TCS pertaining to the Appellant 13.1 On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting partial credit for TDS of Rs. 1,64,041 and TCS credit of Rs. 648 pertaining to the appellant. Ground 14 - Failure to grant credit of advance tax of merged entity 14.1. On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for advance tax of Rs. 8,00,000 claimed by the appellant in its return of income in accordance with section 199 of the IT Act read with Rule 37BA of IT Rules which was paid by Phadia India Private Limited. Ground 15 - Penalty proceeding On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act.”

97. Since the issue raised by way of additional ground can be decided on the basis of the material available on record, the same is admitted for adjudication.

98. Ground No.1 is general in nature. Therefore, the same needs no specific adjudication.

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