SGD PHARMA INDIA PRIVATE LIMITED, ,MAHABUBNAGAR vs. DCIT, CIRCLE -3 (1), HYDERABAD

On the facts and in the circumstances of the case and in law, the final assessment order dated 25 February 2022 passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act pursuant to invalid and non-est directions passed by the Ld. Panel, is bad in law, null and void and liable to be quashed.

On the facts and in the circumstances of the case and in law, the final assessment order dated 25th February 2022 passed by the Ld. A.O under section 143(3) r.w.s. 144C(13) of the Act having been passed beyond the limitation period provided in terms of section 153 of the Act, is void-ab-initio, illegal and bad in law and is therefore liable to be quashed”.

The brief facts of the case are that the assessee is a company engaged in the manufacture and sale of borosilicate type-I glass moulded vials, glass tubular vials and ampoules for pharmaceuticals and biological companies. The assessee filed its return of income for Assessment Year 2017–18 on 30.11.2017, declaring a loss of Rs.2,21,78,327/-. The case of the assessee was selected for complete scrutiny, and accordingly, a notice under section 143(2) of the Act was issued to the assessee. In view of the involvement of international transactions with the Associated

Aggrieved by the order of the Ld. AO, the assessee filed objections before the Ld. DRP. The Ld. DRP disposed of the objections of the assessee vide directions dated 28.01.2022. Pursuant thereto, the Ld. AO finalized the assessment under section 143(3) read with sections 144C(13) and 144B of the Act on 25.02.2022, making, inter alia, the following additions/disallowances: a. Addition of Rs.2,28,23,848/- towards adjustment in respect of interest on ECB loans; and b. Disallowance of Rs.20,32,596/- under section 43B of the Act.

Aggrieved with the order of the Ld. AO, the assessee is in appeal before this Tribunal. We noted that the assessee has filed request letter dated 17.12.2025 for withdrawal of additional grounds, which is to the following effect:

As the assessee has already withdrawn the additional grounds of the appeal, no separate adjudication is required on the same. Hence, the additional grounds of appeal

We have heard the rival submissions and perused the material available on record including the case law relied upon. In this regard, we have also gone through para no. 2.4.6 of the order of the Ld. DRP, which is to the following effect:

On perusal of the above, we find that this Tribunal for the same assessment year and for ECB loans having a tenure of seven years, has held that benchmarking of interest at LIBOR + 500 basis points is justified. In the present case, the assessee has Page 11 of 14 benchmarked the ECB loans at LIBOR + 500 / 450 basis points, which is not higher than the rate approved by the Tribunal. Therefore, respectfully following the said decision, we hold that the benchmarking adopted by the assessee is at arm’s length. Accordingly, the addition of Rs.2,28,23,848/- made on account of interest on ECB loans is directed to be deleted.

With regard to the disallowance of Rs.20,32,596/- under section 43B of the Act, the Ld. AR submitted that the said amount pertains to provision for gratuity, which was already disallowed by the assessee itself while computing the total income in the return of income. However, due to incorrect reporting in the tax audit report, the said amount was once again disallowed by the Ld. AO, resulting in double disallowance. In this regard, the Ld. AR invited our attention to para nos. 2.8.1 and 2.8.2 of the directions of the Ld. DRP, wherein the Ld. DRP had directed the Ld. AO to verify the factual position and decide the issue as per law. It was prayed that the matter be restored to the file of the Ld. AO for verification in accordance with the DRP’s directions.

Per contra, the Ld. DR did not object to such a remand.

We have considered the rival submissions and gone through the directions of the Ld. DRP. We find that the Ld. DRP had specifically directed the Ld. AO to verify the claim of the assessee regarding disallowance under section 43B of the Act. Since the said verification has not been carried out, we deem it appropriate, in the interest of justice, to restore this issue to the Page 12 of 14 file of the Ld. AO. The Ld. AO is directed to verify from the records whether the amount of Rs.20,32,596/- towards provision for gratuity has already been disallowed by the assessee in the return of income and to decide the issue in accordance with law, after giving due effect to the directions of the Ld. DRP and after providing adequate opportunity of being heard to the assessee.

In the result, the appeal of the assessee in is allowed for statistical purposes. ITA-TP No. 477/Hyd/2022 (A.Y. 2018-19): 17. At the outset, the Ld. AR submitted that the solitary issue involved in the present appeal relates to the benchmarking of the rate of interest on ECB loans. It was further submitted that the issue involved in this appeal is identical to the issue involved in for Assessment Year 2017-18. Accordingly, he submitted that the findings of the Tribunal in on this issue may be mutatis mutandis apply to this appeal also.

As there is no dispute about the facts that the issue involved in this appeal is identical to the issue involved in for Assessment Year 2017-18 apply mutatis mutandis to this appeal also. Accordingly, we hold

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