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ADDL CIT R G 7(1), MUMBAI vs NOVARTIS INDIA LTD ( FORMERLY KNOWN AS HINDUSTAN CIBA GIEGY LTD. ), MUMBAI | BharatTax

ADDL CIT R G 7(1), MUMBAI vs. NOVARTIS INDIA LTD ( FORMERLY KNOWN AS HINDUSTAN CIBA GIEGY LTD. ), MUMBAI

ITA 6772/MUM/2010Status: DisposedITAT Mumbai20 March 2024AY 2002-03Bench: SHRI AMIT SHUKLA, HON'BLE (Judicial Member), SHRI S. RIFAUR RAHMAN, HON'BLE (Accountant Member)1 pages

AI SummaryDismissed

Facts

The assessee filed its return of income for AY 2002-03. The assessment order was passed by the Additional Commissioner of Income Tax (Addl. CIT) under section 143(3) of the Income-Tax Act, 1961. The assessee argued that this order was bad in law, illegal, and without jurisdiction because the Addl. CIT lacked the proper legal authority to pass such an order.

Held

The tribunal held that the additional ground was raised after a significant delay of 16 years and lacked a cogent basis or explanation. The tribunal also noted that the issue of jurisdiction was not a pure question of law and required factual verification, which was missing. Furthermore, the assessee had not demonstrated how raising this ground would lead to a determination of the correct tax liability. Therefore, the additional ground was not maintainable.

Key Issues

The core issue was whether the Additional Commissioner of Income Tax had the valid jurisdiction to pass the assessment order, given the alleged lack of proper authorization and transfer of jurisdiction.

Sections Cited

143(3), 120(4)(b), 127, 2(7A), 253, 124(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI

Before: SHRI AMIT SHUKLA, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE

For Appellant: Shri J.D. Mistry &, Shri Nitesh Joshi

For Respondent: Shri S. Srinivasu

Pronounced: 20.03.2024

Date of conclusion of Hearing : 18.01.2024 Date of Pronouncement : 20.03.2024 O R D E R PER S. RIFAUR RAHMAN (AM)

1. These appeals are filed by assessee and revenue against order of the Learned Commissioner of Income Tax (Appeals)-13, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 20.05.2010for the A.Y.2002-03. Cross objection is filed by the assessee against the appeal of the revenue.

2. Since the issues raised in all the above appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. (A.Y. 2002-03) – ASSESSEE APPEAL

3. At the outset, we observe from the record that assessee has raised following additional grounds of appeal: -

Page No. 2 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited “1. On the facts and in the circumstances of the case, the assessment order dated 22 March 2005 passed by the Additional Commissioner of Income Tax ('Addl. CIT') under section 143(3) of the Income-Tax Act, 1961('the Act') is bad in law, illegal and without jurisdiction and/or in the excess of jurisdiction, on the grounds amongst others, that he did not possessed legal and valid jurisdiction under the Act to pass the assessment order and consequently the Hon'ble tribunal he pleased to quash the said order.

2. On the facts and the circumstances of the case, the Addl. CIT lacked jurisdiction to pass the assessment order under section 143(3) of the Act dated 22 March 2005 and to exercise the powers of performing the functions of an assessing officer, without establishing that he possess such jurisdiction conferred on him under section 120(4)(b) of the Act. Accordingly, in the absence of an order under Section 120(4)(b) conferring jurisdiction on the Addl. CIT the assessment order dated 2 August, 2010passed by him needs to be quashed.

The brief facts, as may be relevant for deciding the aforesaid issues, are as stated hereafter: Sr. Dates Events No. 1 31.10.2002 The Appellant filed its Return of income (‘ROI’) for the assessment year (‘AY’) 2002-03 with the Assistant Commissioner of Income- tax-7(1), Mumbai (the Asstt. CIT) being the then jurisdictional Assessing Officer (the AO) exercising jurisdiction over the assessee for making an assessment under the Act (see page 1 of Factual paper book-1) 2 21.02.2003 The aforesaid return of income was processed by the Deputy Commissioner of Income-tax–7(1), Mumbai(the Dy. CIT), pursuant to which he issued an Intimation under section 143(1) of the Act (see page 2 of Factual paper book-1). 3 12.03.2003 In response to a rectification application dated 06.03.2003 filed by the Assessee for short grant of credit of TDS, the Dy. CIT had passed an order under section 154 of the Act (see pages 3-5 of Factual paper book-1). 4 25.08.2003 The Dy. CIT issued a notice under section 143(2) of the Act, selecting the Assessee’s ROI for scrutiny (see page 6 of Factual paper book-1). 5 17.10.2003 The Addl. CIT (Transfer Pricing -II) issued notice under section 92CA(2) of the Act wherein it is mentioned that the Dy. CIT vide letter dated 14.10.2003 referred the case for determination of Arm’s Length price for international transaction (Copy of notice submitted during the course of hearing on 11.01.2024) 6 29.03.2004 The Assessee filed a revised ROI with the Asstt. CIT (see pages 7-8 of Factual paper book-1). 7 20.09.2004 The Asst CIT issued notice under section 143(2) of the Act (see page 9 of Factual paper book-1). 8 09.11.2004 The Addl. CIT issued notices under sections 143(2) and 142(1) of the Act (see pages 10 to 13 of Factual paper book-1). It is the Assessee's submission that, it has not been shown by the Revenue despite repeated opportunities being provided by the ITAT that the Addl. CIT qualified as an AO as per section 2(7A) read with section 120(4)(b) of the Act. In any event, assuming without admitting that he would qualify as an AO, it has not been shown that the jurisdiction which admittedly vested with the Dy. CIT/Asstt. CIT was transferred in his favor in accordance with section 127 of the Act. It is hence submitted that, the entire assessment proceedings thereafter and the passing of the assessment order are without jurisdiction. 9 22.11.2004 The Addl. CIT again issued notices under section 143(2) and 142(1) of the Act (see page 14 to 18 of Factual paper book-1).

Page No. 4 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. Dates Events No. 10 20.01.2005 The Addl. CIT (Transfer Pricing-II) passed the assessment order under section 92CA(3) of the Act. In the said order, it is mentioned that a reference under section 92CA(1) of IT Act was received on 16.10.2003 from the Dy. Commissioner of Income- tax, Circle 7(1), Mumbai. (Copy of the said order is submitted during the course of hearing on 11.01.2024) 11 09.03.2005 The Addl. CIT called for clarification from the valuer whose valuation report has been relied upon by the Assessee in respect of the issue relating to determination of cost of acquisition of an asset as on 01.04.1981 (see page 19 of Factual paper book-1) 12 22.03.2005 The Addl. CIT passed the assessment order under section 143(3) of the Act. As stated hereinabove, it is submitted that this order is nonest, as it has been passed by an authority without jurisdiction. 13 05.05.2008 In the assessment order for the AY 2006-07, it has been observed by the Addl. CIT that the case was assigned to him for completion of the assessment vide order dated 05.05.2008 passed under section 120(4)(b) of the Act. Though the Assessee denies the validity of the jurisdiction of the Addl. CIT for AY 2006-07 (which will be argued in the appeal for that year), it is submitted that admittedly on 22.03.2005 i.e., the date on which the assessment order for the year under consideration was passed, the Addl. CIT had no jurisdiction as an AO. The extract of assessment order for the AY 2006-07 is submitted during the course of hearing on 18.01.2024. In the written submissions dated 05.08.2021 filed by the then Ld. DR before the Tribunal, he has referred to communication dated 02.07.2021 from the Asstt. CIT (see pages 3 and 5 of the said submission) wherein, it is an accepted position that this order allegedly assigning jurisdiction in favor of the Addl. CIT is not available on record. Therefore, the presumption should be that even this order does not exist. It also clarifies that for the year under consideration, no document conferring jurisdiction in favour of Addl. CIT is available on record.

Page No. 8 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 3.1 The Hon'ble Supreme Court has decided this issue as under:- "Under section 254, the Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier." 3.2 The Hon'ble Supreme Court has clearly observed that the additional ground is to be admitted by the Tribunal to assess the correct tax liability in accordance with law. If in a subsequent judicial decision, certain item is decided to be allowed, the assessee can raise this issue in the additional ground to claim the relief if this benefit was not allowed to the assessee. In a nutshell, additional ground is to be admitted if it is a pure question law and for determination of correct tax liability. In the assesee's case, these both aspects are missing. Firstly, challenging the jurisdiction of assessing officer after 16 years after completion of assessment, is not a pure question of law. This needs to verify the facts from the case records. Hence, factual verification of existence of jurisdiction at the time of assessment is required to be done. Secondly, the assessee has not demonstrated how the assessee is seeking the levy of correct tax liability by raising such an additional ground. There is no issue of determining the correct tax liability in challenging the jurisdiction of the AO after 16 years time lapse. Hence in view of the decision of Hon'ble Supreme Court in the case NTPC (229 ITR 383), the additional ground raised by the assesee challenging the jurisdiction of AO after 16 years of completion of assessment order is non- maintainable.

Page No. 9 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited IV. Such a jurisdictional issue being raised with respect to existence of an order u/s 120, u/s 124 or u/s 127 is not appealable under section 253 of the I.T. Act; 5. Delay in filing an additional ground: The additional ground of appeal should not be admitted due to inordinate delay in filing the ground. Taking example of A.Y.2002-03, the assessment order was passed on 22.03.2005. The assessee did not question the jurisdiction of the Assessing Officer before CIT(A). The assessee filed the instant appeal before the Tribunal. Even at the time of filing of appeal, the ground relating to the jurisdiction of Addl. CIT was not raised. The additional ground was filed the first time before the Tribunal on 10.03.2021. There is a delay of more than 16 years. Under these circumstances, the Assessee is required to give a satisfactory explanation before the Tribunal for the delay. The sequence of events from the stage of initiation of assessment proceedings to till the date of filing of additional ground, show that all along the assessee had participated and was satisfied that the Additional CIT was having valid jurisdiction to pass the assessment order. 5.1 It is submitted that the additional grounds raised by the assessee were different from the ordinary additional grounds arising from the orders of the authorities below. This is a different ground altogether where the validity of the assessment order is being challenged on account of lack of jurisdiction of the Addl.CIT for the first time after the gap of more than 16 years of filing the appeal. 5.2 In support of the above argument, the undersigned relies on the reference of Black's Law Dictionary - (i) Estoppel by acquiescence: estoppels arising from a party's failure to respond to a claim within a reasonable time after receiving notice of the claim, thereby giving rise to presumption of acceptance; (ii) Estoppel by laches: an equitable doctrine by which some courts deny relief to a claimant who has unreasonable delayed or been negligent in asserting a claim etc. Reliance is further placed on the following decisions: (i) State of Punjab vs. Bhatinda Dist. Co-operative Milk Producers Union Ltd. (2007)

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited order is quashed after such a long time without deciding the merits of the case, there may be substantial loss of revenue to the Department on such an issue. It is further submitted that doctrine of laches needs to be invoked for unreasonable delay in asserting the claim. Accordingly, the additional ground should not be admitted. 5.4 This issue of delay in raising an additional ground after lapse of substantial time is covered by the decision of Honble Coordinate Bench of ITAT Mumbai in the case of ACIT 2(3), Mumbai Vs. Stock Traders Pvt. Ltd. In dated 11.07.2018. The Honble Tribunal has decided on the additional ground challenging the jurisdiction of Additional CIT as not having valid authority to perform and exercise the powers and functions of an Assessing Officer, as per the provisions of Section 2(7) r.w.s. 120(4)(b) of the Act. The Hon'ble ITAT held that the assessee's assertions, in the additional ground, after 15 years has no cogent basis, whatsoever and dismissed the additional ground. The relevant extract from the said order is as below: "20. In this case, the only reason for the assessee's allegation that the above provisions are not complied with is that the notice u/s.143(2) was issued by the ACIT. However, the assessment order has been passed by the Addl.CIT. We note that that the assessment order was passed on 22.03.2003. Since then the assessee has got no information whatsoever and has never ever had reason to challenge the jurisdiction of the Assessing Officer in this case. However, suddenly on 13.04.2018, the assessee has filed an additional ground that the Assessing Officer in this case did not have any jurisdiction. We note that there is no information in the possession of the assessee that the internal procedure of the department regarding the transfer and posting of officers has not been complied with. The assessee in this case after a lapse of 15 years is making a wild guess. In our considered opinion, there is no cogent reason to accede to this request of the Id. Counsel of the assessee. The case laws referred by the Id. Counsel of the assessee were rendered on the facts of those cases where the bench upon the facts has gone into the specifics and particulars of that case. In the present case, we have already held the assessee's assertion after 15 years has no cogent basis whatsoever. Hence, we are unable to accept the assessee's request that the assessment deserves to be quashed in as much as the Assessing Officer did not have the authority of law. Hence, the additional ground raised by the assessee stands dismissed." 5.5 During the hearing, the Id. AR of the assessee has relied on the judgement of the Hon'ble ITAT, J Bench in the case of M/s. Vertiv Energy Pvt. Ltd. (ITA No. 1975/MUM/014 and ITA No. 1771/MUM/2015 dated 22.06.2021. The Id. AR has emphasised on para no. 3.6 of this order. In this para, the Hon'ble ITAT has stated as under:- "We find under similar facts and circumstances, this Tribunal had indeed admitted the additional grounds raised by the assessee after a long gap of ten years or 15 years, as the case may be. And adjudicated those additional grounds". The AR contended that, the Hon'ble Tribunal has decided the issue of condonation of delay in filing an additional ground. 5.5.1 It is to be noted that the delay in filing of an additional ground in this case i.e. Vertiv Energy Pvt. Ltd. is only 5 years, whereas, in the assessee's

Page No. 11 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited case, it is 16 years. Further, the Hon'ble Tribunal has not decided the issue of condonation of delay on merit. Hence, this decision is not applicable in the Assessee's case. The facts in the assessee's case are different. The delay in filing of an additional ground is 16 years and no cogent evidence or no explanation has been filed by the assessee to justify the substantial delay of 16 years. In fact, the decision of Hon'ble Tribunal, L Bench, in the case of Stock Traders Pvt. Ltd. as discussed in the above para is directly applicable in the assessee's case. In para 20 of this order, the Hon'ble Tribunal has discussed the delay of 15 years in filing an additional ground and on merit, the contention of the assessee is rejected. The delay in filing of an additional ground in the case of Stock Traders P. Ltd. Was of 15 years and in the case of assessee it is 16 years. Hence facts in the case of M/s, Stock Traders P. Ltd. and in case of the assessee are similar. Therefore, the decision of Hon'ble ITAT in case of Stock Traders Pvt. Ltd. is directly applicable in the assessee's case. 5.5.2 During hearing, the Id. AR of the assessee has also tried to differentiate the decisions in case of Stock Traders P. Ltd. It was argued that in the case of Stock Traders P. Itd., there was no cogent basis. However, in assessee's case, there is a ground as there are 10 to 15 orders of Hon'ble ITAT on this issue. Thus, the AR tried to contend that the reason for delay in raising additional ground after 16 years is mainly the decisions of Honb'le ITAT Mumbai in the case of Tata Sons & Other cases. It is to be noted that the decision of Hon'ble ITAT in the case of Stock Traders Pvt. Ltd. is dated 11.07.2018 and all theses decisions quoted by the AR were available before the order passed by the Hon'ble ITAT. Hence, the decision of Hon'ble ITAT in the case of Stock Traders Pvt. Ltd. is on the same facts and is directly applicable in the assesee's case. 5.6 The above stated decision in M/s. Stock Traders Pvt. Ltd. (supra) was rendered on 11.07.2018 which is much later to the decisions in M/s. Tata Sons Ltd. (76 Taxmann.com 126-Mumbai-Trib.)(A.Y. 2001-02) (Date of order 31.10.2016) and M/s. Tata Communications Ltd. (ITA No. 7071/Mum/2005) dated 30.06.2017. Therefore, it is submitted that the Co-ordinate Bench of Hon'ble Tribunal has not followed the decisions stated above and dismissed the additional ground on jurisdiction of Additional Commissioner to perform the functions of an Assessing Officer. The main principle laid down in this decision of M/s. Stock Traders Pvt. Ltd. (supra) is that an additional ground filed after 15 years has no cogent basis whatsoever. In the instant case of the assessee, as stated above, the additional ground challenging the jurisdiction of the Additional CIT has been filed after more than 16 years needs to be quashed on this ground of inordinate delay.

7. Transfer of jurisdiction order is for administrative convenience of the Department/No Prejudice caused to the Asseessee 7.1 On this issue, the Hon'ble Madras High Court in the case of Advantage Strategic Consulting P. Ltd. Vs. PCIT (124 Taxmann.com 511) has given findings as under:- "Having heard the Id. Counsel for the parties, we are of the opinion that the writ appeal has become infructuous in view of the assessment order having been passed by the assessing authority in pursuance of the impugned transfer order u/s. 127 of the I.T. Act, 1961 dated 24.06.2016. We are further of the opinion that the transfer order passed u/s. 127 of the IT Act, 1961 is more in the nature of and administrative order rather than quasi judicial order and the assessee cannot have any right to choose his assessing authority, as no prejudice can be said to have been caused to the assessee depending upon which authority of the department passes ses the assessment order. The assessee can only be concerned with getting an opportunity of hearing before the concerned assessing authority and adduce is evidence and make his submissions before the concerned authority" 7.2 The Hon'ble Supreme Court of India in the case of Kashiram Aggarwalla Vs. Union of India & Ors. Has given findings as under:- Where, as in the present proceedings, assessment cases pending against the appellant before an office in one word are transferred to an officer in another ward in the same place, there is hardly any occasion for mentioning any reasons as such, because such transfers are invariably made on grounds of administrative conveniences, and that shows that on principle in such cases neither can the notice be said to be necessary, nor would it be necessary to record any reasons for the transfer. The Hon'ble High Court and Supreme Court have given clear findings that the jurisdiction issue is an administrative decision of the department. No prejudice is caused to the assessee depending upon which authority of the department passes an assessment order.

127. It is thus also open to the Commissioner to divest the jurisdiction of an existing authority either wholly or partially and confer the same on another appropriate authority if it is considered expedient by him for administrative or policy reasons. When such act is done, the cover of jurisdiction is withdrawn from the existing authority while the same cover is spread over to the other authority who thereby acquires jurisdiction over such matters specifically mentioned, which automatically comes before him for appropriate action under the Act from the stage it was before the original authority. This general power of conferment of jurisdiction by the Commissioner to different authorities under the Act under s. 123 or s. 124, which is obviously an administrative act of policy and convenience, is the power of the Government conferred on him as a delegated authority under the provisions of the statute. The power u/s.127 to transfer any case is much limited in scope as being limited to cases and subject to statutory fetters where an assessee has a right to be heard under certain conditions while the reasons for transfer are to be recorded." (emphasis supplied) 8.2 Apart from the above, the Hon'ble Delhi High Court in the decision of CIT vs. S.S. Ahuluwalia(2014) 47 taxman.com 169 (Del)has held as under :- "It is also clear that question of jurisdiction cannot be made subject matter of appeal, as the issue has to be decided on the administrative side by the Commissioner/Commissioners/ Board. Appeal can, however, be filed questioning the action of the Assessing Officer in not following the procedure mentioned/stipulated in Section 124. In Wallace Brothers & Co. Ltd. v. CIT [1945] 13 ITR 39, Federal Court had held that the objection to place of assessment could not be raised in an appeal against the assessment under the Income Tax Act, 1922. This view was affirmed by the Supreme Court in RaiBahadur Seth Teomalv. CIT [1959] 36 ITR 9 holding that the objection as to the place of objection under the 1922 Act could not be made a subject or issue before the appellate forums including the Tribunal and reference to the Page No. 14 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited High Court. Thus, the question of place or authority of the particular Assessing Officer was the matter of administrative convenience and not strictly a matter of subject matter jurisdiction and where there was an error or erroneous exercise by the Assessing Officer/Commissioner notwithstanding the challenge within stipulated time, it could be corrected by way of writ jurisdiction. The position is no different under the Act i.e. Income Tax Act 1961, as was elucidated by a Division Bench of this Court in Kanji Mal & Sons v. CIT [1982] 138 ITR 391/[1983] 12 Taxman 34 (Delhi), wherein reference to said two decisions was made and it was observed that if the assessee fails to raise objection before the Income Tax Officer within the time, he will be shut out from raising the question altogether. Further, if the issue was raised and decided by the Commissioner, the decision would be final and cannot be questioned in the appellate forums but where the Income Tax Officer does not refer the question to the Commissioner" (emphasis supplied) The aforesaid aspect has also been reiterated in para 35 in following words :- "35.......Sub-section (4) and (6) of Section 124 and for that matter sub- section (2) and (4) of Section 124 after amendment w.e.f. 1st April, 1988 are procedural sections. They relate to administration and exercise of powers/authority by the Assessing Officers/Income Tax Officers and are not part of the substantive law. That the Act i.e. Income Tax Act 1961 being complete code deals with substantive and procedural aspects. Section 120/124/127 govern the process of procedure for assessment and not the subject matter or its purpose. They relate to conduct of the Assessing Officer/Income Tax Officers and the assessees in respect of the assessment proceedings. It is a matter of merely a process. A irregularity in procedure need not result in annulment unless the statute specifically stipulates to the contrary. The appellate authorities have right to put a clock back and direct the Income Tax Officer/Assessing Officer to follow the procedure notwithstanding the difference between mandatory and directory procedural norms. In Grindlays Bank Ltd. v. ITO [1980] 122 ITR 55/3 Taxman 38 (SC), the Supreme Court quashed the assessment order but then issued directions to make fresh assessment in the circumstances of the case. The said principle has been followed in cases of violation of principles of natural justice wherein an order of remit/remand when justified are passed. The courts have taken recourse of pragmatism and exigencies of the situation rather than legalistic approach of void and voidable (see Principle of Administrative Law, M.P. Jain and S.N. Jain, Fifth Edition, 2007 at pages 592- 95)." (emphasis supplied) 8.3 The Punjab and Haryana High Court in the case of Subhash Chander (218 CPR 191) held that the question with regard to jurisdiction should have been determined by the Director General or the Chief Commissioner or the Commissioner and not by the Tribunal or the Commissioner (Appeals) in terms of Section 124(3)(b). Thus, the ITAT cannot entertain this ground of appeal

Page No. 15 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited not prescribe their respective jurisdiction or functions. Any case can be dealt with by any Income Tax authority with the possible exception of the Board. Accordingly, the various Income Tax authorities are of co-ordinate jurisdiction. What function or functions, which authority or officer, shall perform is left to be decided either by the Board or by the Commissioner. On what principles the Board and the Commissioner will allocate the functions is not indicated in the Act. The principle is, however, apparent from the nature of the enactment. The Act has been enacted with a view to collect revenue. Income Tax is the main source of revenue for the State. It is through revenue that the machinery of the State is run. It is desirable that the tax should be collected as early as possible. Collection of tax is preceded by assessment thereof. It is consequently desirable that the assessment proceedings should be completed expeditiously but expeditious disposal of an assessment does not mean that the assessee may be put to unwarranted harassment or prejudice. Therefore, the Board and the Commissioner shall take into account the convenience of the assessee also. It is with this purpose in view that it has been provided in Sub-section (1) of Section 127 that, whenever possible, an opportunity of hearing may be given to the assessee while transferring a case from one place to another. Since the assessee does not suffer any inconvenience or prejudice if a case is transferred locally, no such opportunity has been prescribed. From these provisions it is obvious that the Board and the Commissioner will exercise the power of allocation of functions to various authorities or officers in the exigency of tax collection with due regard to the convenience of the assessee. In other words, the allocation is a measure of administrative convenience. In such a situation, the concept of jurisdiction cannot be imported and, certainly, not in the sense of invalidating the resultant action on account of the defect in the exercise of functions. Being an enactment aimed at collecting revenue, the Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in Section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture. From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substanceIt treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action." 8.5 What emerges from the above judicial decisions is that, the allocation of functions to various Authorities under the Income Tax Act is one of procedure and not of substance. Hence, any defect in procedure will not invalidate the end action i.e. even if any defect is found, this is an irregularity which is curable in nature. For this alternative argument, reliance is placed on the landmark decision of Hon'ble Supreme Court in Pr. CIT-4, Mumbai vs S.G. Asia Holdings (India) Pvt. Ltd. (ITA No. 6144 of 2019) dated 13-08-2018 (TS-775-SC-2019-TP)

9. Administrative order is not an appealable order The question of existence of an order u/s 120, u/s 124 or u/s 127 is non- appealable u/s 253 of the I.T. Act as there is no mention of these sections i.e., 120, 124 and 127 under section 253 where an appeal can be filed before the Hon'ble Tribunal. For the sake of clarity, sec. 253 is reproduced as under. "Appeals to the Appellate Tribunal. 253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals)] before the 1st day of October, 1998or, as the case may be, a Commissioner (Appeals)] under section 154], section 250, section 270A, section 271, section 271A,section 271J or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Principal Commissioner or] Commissioner under section 12AAor under clause (vi) of sub-section (5) of section 80G or under section 263or under section 270Aor under section 271or under section 272Aor an order passed by him under section 154 amending his order under Page No. 17 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited section 263or an order passed by a Principal Chief Commissioner or Chief Commissioner or a Principal Director General or] Director General or a Principal Director or] Director under section 272A; or (d) an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147or section 153A or section 153C in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order; (e) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 or section 153A or section 153C with the approval of the Principal Commissioner or] Commissioner as referred to in sub-section (12) of section 144BA or an order passed under section 154 or section 155 in respect of such order; (f) an order passed by the prescribed authority under sub-clause (iv) or sub- clause (v) or] sub- clause (vi) or sub-clause (via) of clause (23C) of section 10. (2) The Principal Commissioner or] Commissioner may, if he objects to any order passed by a Deputy Commissioner (Appeals)) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals)] under section 154 or section 250, direct the Assessing] Officer to appeal to the Appellate Tribunal against the order. (2A) *** (3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the Principal Commissioner or] Commissioner, as the case may be : 9.1 From the provisions of section 253, it is apparent that there is no mention of any appeal that may be filed against an order passed u/s 120, u/s 124 or u/s 127 in the said section. Provided that in respect of any appeal under clause (b) of sub-section (1), this sub-section shall have effect as if for the words "sixty days", the words "thirty days" had been substituted." 9.2 As seen from the additional ground of appeal

18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court." 10.4 The Hon'ble High Court of Calcutta in Elite Pharmaceuticals (73 taxmann.com 69) has held that assessee had lost right to raise objection to territorial jurisdiction by efflux of time that is beyond the time prescribed in Page No. 20 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sec. 124(3). In para 11, the High Court agreed with the view expressed by the Hon'ble Delhi High Court in the case of Shri Shyam Sunder Infrastructure (P) Ltd. relied on by Counsel for Revenue (kindly see para 16 of the decision) that "facially, section 124(3) stipulates a bar to any contention about of lack of jurisdiction of an AO. It is not as if the provisions of the Act disable an assessee form contending that in the given circumstances, the AO lacks jurisdiction, rather Sec. 124(3) limits the availability of those options at the threshold. The assessee upon receipt of the kind mentioned in Clause (a) and (b) of section-3 has the option to urge the question of jurisdiction. The expressed tenor and terms of the provisions clarify that such objections are to be articulated at the threshold or at the earlier points of time. The two points of time are stipulated in section 124(3)(a). () within one month from the date of service of notice or (ii) After completion of assessment - whichever is earlier In the present case, there is no dispute that the re-assessment notice was issued by the A.O. on 22/03/2010, upon its receipt, the assessee reiterated its earlier return on 21/04/2010. Since its response led to objection as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision u/s.124(3)(a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the re- assessment proceedings." 10.5 The Hon'ble ITAT Chandigarh in Punjab Urban Development Authority, Mohali (42 taxmann.com 160) held that once a notice u/s 143(3) is issued by a particular officer and if assessee wishes to object to such jurisdiction then objection has to be raised in terms of section 124(3)(a) within 30 days of issue of such notice and, in absence of such objection, the assessee cannot challenge jurisdiction later on. Kindly see para 21 for the decision thereon. 10.6 Moreover, on the identical question of facts and law, Hon'ble Delhi High Court in the case of Pr.CIT Vs. Mega Corporation Ltd (ITANo.128/2016; order dated 23-02-2017) has clearly laid down the law that sec. 124(3)(a) enacts a statutory bar to the question of jurisdiction. This principle has been clearly laid down by the Hon'ble High Court in the following words :- "Para 7 Secondly, even if for some reason, the assessee were unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuation of the proceeding by the DCIT it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Ifs failure to do so within the stipulated time i.e. one month after receipt of notice which was in fact a condition of sec. 143(2) proceeding and was treated as such by the assessee precluded it from urging lack of jurisdiction." In the said decision, Hon'ble High Court has used the abbreviation ACIT for Addl. Commissioner of Income Tax and DCIT for Dy. Commissioner of Income Tax. The above decisions of various High Courts and Tribunal uphold the ratio that jurisdiction has to be questioned and settled u/s 124 of the I.T. Act within the time limits prescribed therein and that is it not an appealable matter. Further, having subjected oneself to jurisdiction, the assessee cannot

11. Additional CIT is also an Assessing Officer. It is respectfully submitted that Sec. 2(7A) which defines Assessing Officer always meant Joint Commissioner who was directed under Sec. 120(4)(b) to exercise or perform all or any of the powers and functions conferred or assigned to an Assessing Officer (Joint Commissioner was substituted for "Deputy Commissioner or Deputy Director" by the Finance Act, 1998 w.e.f. 1- 10- 1998. Section 2(28C) was brought on the statute by Finance Act, 1998 w.e.f. 1-10-1998 and this section gives the definition of Joint Commissioner of Income Tax; Joint Commissioner means a person appointed to be a Joint Commissioner of Income Tax or an Addl. Commissioner of Income Tax under Sec. 117(1). Thus, a Joint Commissioner always meant an Addl. Commissioner from 1-10-1998 itself. Consequently, an Assessing Officer as in Sec. 2(7A) always meant Addl. Commissioner authorized u/s 120(4)(b) right from 1-10-1998. Further, "Addl. Commissioner" has been inserted by Finance Act, 2007 with retrospective effect from 1-6-1994 in sec.2(7A). The amendment to Sec.2(7A) issued in Circular No.3/2008 dated 12-3-2008 which is explanatory notes to the Provisions of Finance Act 2007 reads that it is a clarificatory amendment to the definition of Assessing Officer and definition of certain other Income Tax authorities. It is stated that Addl. Commissioner was not specifically mentioned in Sec. 2(7A) [definition of Assessing officer] because it was already included in the definition of Joint Commissioner u/s 2(28C); and in order to further clarify the intention of the legislator with regard to the meaning of the term "Assessing Officer", amendments have been carried out through Finance Act, 2007 and will be effective from 1st June, 1994; similar amendments were also carried out in Sec. 120(4)(b). Therefore, AO always meant Addl. Commissioner from 1-6-1994 and in any event definitely from 1-10-1998. This is a definition of Assessing Officer, which is on the statute; it is reiterated that this is on the statute and not an interpretation of the statute. 11.1 Having established that A.O mean Addl. Commissioner, the undersigned shall now proceed to demonstrate that the Addl. Commissioner, was authorized under clause 120(4)(b) to be an Assessing Officer per section 2(7A) of the I.T. Act. Gazette Notification dated 31-07-2001 in SO732(E) authorized the Commissioners of Income Tax to issue orders in writing for the exercise of powers and performance of the functions by Joint Commissioners of Income Tax in respect of persons, classes of persons and territories and also authorized the Joint Commissioners of Income Tax to issue orders in writing for the exercise of the powers and performance of the functions by the Assessing Officers who are subordinate to them in respect of persons, classes of persons and territories. Further, vide Gazette Notification dated 17th September, 2001 in SO 889E, the CBDT u/s 120(4)(b) directed that the Joint Commissioners of Income Tax can exercise the powers and functions of Assessing Officers in respect of territorial area etc. in respect of which such Joint Commissioners of Income Tax are authorized by the CIT vide Government of India, CBDT Notification No. SO 732E dated 31-07-2001 and other notifications published in the Gazette of India.

Page No. 22 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 11.2 Thus, a conjoint reading of the Notification u/s 120(4)(b) with the SO 732E unambiguously establish that the Addl. Commissioner mentioned therein has been authorized to function as Assessing Officers u/s 120(4)(b). Therefore, these Gazette Notifications establish that the Addl. Commissioner had jurisdiction as Assessing Officer over the assessee as per Sec.120(40(b) r.w.s. 2(7A) of the Act. 11.3 It is respectfully submitted that the first judicial decision, where the jurisdictional issue of Addl. CIT, identical to the additional ground as raised in the present case, is that of the Hon'ble Delhi Tribunal in the case of Mega Corporation Ltd. vs. Addl. Commissioner (2015) 155ITD 1019/62 Taxmann.com 351. In that case, the assessee raised identical additional ground i.e., in the absence of any order u/s 120(4)(b) or u/s 127 the assessment order passed by the Additional Commissioner of the Income Tax is bad in law. The Hon'ble Tribunal allowed the appeal of the assessee based on the following facts- (1) The order issues by the CIT, Delhi-II, New Delhi conferring jurisdiction of the case to the concerned AddI. CIT is an order u/s 120(2) of the Act and not u/s 120(4)(b) of the Act. (Kindly refer to para 6-7/page 12-14 of the order) (2) As observed in para 8.1/page 14 of the order, since the issue relates to lack of jurisdiction of the AddI CIT, the ratio of the judgment in CIT vs British India Corpn. Ltd. (2011) 337 ITR 64/(2012) 20 taxmann.com 446 (All.) is applicable, wherein it is held that the question of jurisdiction of the Assessing Authority cannot be disputed after the completion of the assessment proceedings as contemplated under section 124. According, to the Hon'ble High Court, if such a question arises, the said question can be addressed by the Commissioner of Income Tax or the Board. The concluding paragraph of the Hon'ble High Court is as under- "18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court." (3) The notification no. 267/2001 dated 17.9.2001, issued by CBDT u/s 120(4)(b) of the Act, directs the Joint Commissioner of income Tax to exercise the power and function of an Assessing Officer. However, the said notification is applicable in respect of Joint Commissioner and not to the Additional Commissioner. No further notification is brought to the notice of the Hon'ble Tribunal. (Please refer to para 7.1/page 14 of the order) (4) After the initiation of assessment proceedings, any other authority can take over the proceedings only by an order of transfer u/s 127(1) or 127(2) of the I.T. Act. (Please refer to para 9.1/page 16 of the order) 11.4 On appeal by the Revenue, the aforesaid decision of the Hon'ble Tribunal in Mega Corporation Ltd. (supra) is reversed by the Hon'ble High Court of Delhi in ITA 128/2016 in Pr. CIT- 6 vs. Mega Corporation Ltd. in its order dated 23-02-2017. Hon'ble High Court has considered the following question of law:

Page No. 23 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited "Did the Income Tax Appellate Tribunal (ITAT) fall into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b)." 11.5 In the question of law, the word "ACIT" is the abbreviated to the Additional Commissioner of Income Tax as mentioned in para 2 of the HC order. Similarly, the abbreviation "DCIT" is used for the Deputy Commissioner of Income Tax. The Hon'ble High Court in para 2 has noted that "the ITAT, however, considered the material on record, including the notification dated 01.08.2007, under Section 120(2) and proceeded to hold that in the absence of specific notification under section 120(4)(b), the ACIT could not have acted as an AO. It however, did not deal with the second or rather the alternative argument made by the assessee, i.e., that even the notice issued under section 143(2) was by an incompetent officer since the DCIT did not possess jurisdiction at that stage." 11.6 While rejecting the findings of the Hon'ble Tribunal, Hon'ble High Court held that (i) The notice issued by the DCIT was by a competent officer who always had jurisdiction in view of section 120 r.w.s 2(7A) that includes DCIT as an AO. (Para 5 of the decision) (ii) Reference to an incorrect provision per se cannot invalidate the authority conferred in the present case under section 120(2) instead of section 120(4)(b). Hence, the assessee's argument that the Additional Commissioner of Income-tax (ACIT) did not possess jurisdiction, cannot be countenanced (allowed). (Para 6 of the decision) (iii) In the instant case, the provisions of sec. 124(3) bars raising of the jurisdictional issue within one month of the receipt of the notice. The relevant portion of the judgment in para 7 is reproduced as under- "Secondly, even if for some reason, the assessee was unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuance of the proceedings by the DCIT, it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Its failure to do so within the stipulated time i.e., one month after receipt of notice which was in fact a condition of section143(2) proceeding and was treated as such by the assessee preclude it from urging lack of jurisdiction." (emphasis supplied) ) There is no relevance to the section 127 in such an issue, as held in para 8, in the following words- "8. As far as the section 127 goes, we are of the opinion that having regard to the findings rendered, that question does not arise." 11.7 Accordingly the Hon'ble High Court held the question of law in favour of the Revenue by stating that "9. The parties are directed to appear before the ITAT for further hearing on the merits on 27.03.2017.

Page No. 24 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 10. In view of the above discussion that the question of law framed has to be answered in favour of the Revenue and against the assessee. The appeal is accordingly allowed." 11.8 In my humble opinion, once Hon'ble Delhi High Court has rejected and reversed the judgment of the Tribunal on the issue raised before it, what subsists is the judgment of the Superior Court (that of the Delhi High Court), particularly the ratio laid down on the question of law before it, in view of the well-known Doctrine of Merger. The Hon'ble Apex Court in the case of S. Shanmugavel Nadar vs State of T.N. (2002) 8 SCC 361 367 has held that "..as a general rule the judgment order having been dealt with by a superior forum and having resulted in confirmation, reversal or modification, what merges is the operative part i.e., the mandate or decree issued by the court which may have been expressed in a positive or negative form" 11.9 Once it is held so, the reliance of any judgment on the findings of the Delhi Tribunal in Mega Corporation Ltd. vs. Addl. Commissioner (supra) has no relevance and will be against the binding ratio laid down by the Hon'ble Delhi High Court on the question of law before it. 11.10 It is further submitted that the Hon'ble High Court of Mumbai in N. Rajgopal Vs AddI CIT- 23(3), Mumbai (supra) addressed the question of jurisdiction of Assessing officer u/s 2(7A) of the Act and held at Para 4 of the order as under: "4. We would first deal with the question of jurisdiction of the Assessing Officer. We notice that Section 2(7A) of the Act defines the term "Assessing Officer" as to mean every Revenue officers mentioned therein. Reference to "Additional Commissioner" in the list of such officers was included by an amendment made under Finance Act, 2008 but with retrospective effect from 01.06.1994. Thus, by virtue of this amendment, an Additional Commissioner of Income Tax was included in the definition of "Assessing Officer". It is true, as pointed out by the learned counsel for the assessee that when the Additional Commissioner passed the order of assessment, Section 2(7A) did not contain a specific reference of an Additional Commissioner, However, when the statute has been amended with retrospective effect, the effect of such amendment must be applied to the pending proceedings as in the present case. Non-applying such amendment in the present proceedings would destroy the retrospectivity granted to it by the legislature. This contention of the assessee is, therefore, rejected." 11.11 In the light of above factual position and adherence to the settled position of law, it is respectfully submitted that the binding precedence of Hon'ble Bombay High Court in N. Rajgopal (supra), being jurisdictional High Court and Hon'ble Delhi High Court in Pr. CIT-6 vs. Mega Corporation Ltd. (supra), being High Court decisions on the issue of jurisdiction of the Addl. CIT in passing the assessment order, will prevail over other ITAT decisions.

12. Analysis of the Decisions of Honble Coordinate benches on the issue It is also added that various Co-ordinate benches of Hon'ble Tribunal has followed the Hon'ble Delhi Tribunal decision in Mega Corporation Ltd. vs. AddI. CIT (supra), notwithstanding the fact that some of the co-ordinate benches had the privilege of the decision of Hon'ble Delhi High Court (where the Hon'ble High Court reversed the decision of the Tribunal's decision) on Page No. 25 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited the identical issue. Such decisions can only be termed as per incuriam or sub-silentio. Hence, the same cannot be followed. The validity of such decisions is discussed in the following paragraphs- Tata Sons Ltd. vs Asstt. CIT (2016) 76 taxmann.com 126 (Mumbai- Trib.) (A.Y. 2001-02) (Date of Order- 31-10-2016) i. In para 3.7, the Hon'ble Tribunal has noted that the assessee filed the additional ground since the Delhi Tribunal in the case of Mega Corporation Ltd. (ITA no. 102/Del/2014) on the facts similar to the facts in the aforesaid appeals has held the assessment order to be invalid and bad in law, which was recently reported. Thus, it can be seen that the basis of filing the additional ground, the issue was the outcome of the decision of Delhi Tribunal in the case of Mega Corporation Ltd., which was subsequently overturned by the Hon'ble Delhi High Court as discussed above, ii. Reliance of Delhi Tribunal's decision in Mega Corporation Ltd was further made in para 3.15 and 3.22 (where this decision was extensively quoted) and in para 3.23, the observation made is "In the case before us, the facts are identical." Thus, it can be said that this decision of Hon'ble Mumbai Tribunal has the genesis as well as complete reliance on the Delhi Tribunal decisions in MegaCorporation Ltd (supra). iii. It is also worth mentioning here that the Hon'ble Tribunal order in the case of Tata Sons Ltd (supra) was delivered on 31/10/2016 prior to the decision of Hon'ble Delhi High Court in the case of Pr.CIT vs. Mega Corporation Ltd (supra) (date of order 23/02/2017). Hence, this Tata Sons Ltd decision cannot be relied upon after 23/02/2017. iv. It is further informed that the decision of the Tribunal in M/s Tata Sons Ltd (supra) has since been admitted by the Hon'ble High Court of Bombay vide appeal no. 1403 of 2017 dated 09.03.2022. The substantial questions of law admitted by the Hon'ble High Court are as under: "1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in admitting the additional ground when the assessee had not raised issue of jurisdiction of the Assessing Officer before the Assessing Officer and CIT(A)? II. Whether on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the Additional Commissioner of Income Tax, Range 2(3), Mumbai, has no jurisdiction to pass the assessment order?" II. Tata Communication Ltd. vs Asstt. CIT (ITA No.6981/Mum/2005) (Mumbai- Trib.) (A.Y. 2002-03) (Date of Order- 30-06-2017) i. In this case too, the same issue of competence & jurisdiction of the Addl.CIT to pass the assessment order dated 21/02/2005, was raised. The Hon'ble Mumbai bench was of the view that the orders passed by the Tribunal in cases of Mega Corporation Ltd (supra) and Tata Sons Ltd (2016) 76 taxman.com 126 have already considered the notifications issued by CBDT and relied upon by the DR and thereafter the issue was decided in Page No. 26

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited favour of the assessee. Kindly refer to page 25 of the said order. In the subsequent page No.26, the Hon'ble Tribunal has extensively quoted the decisions of Tata Sons Ltd (supra) for A.Y.2001-02 and came to the conclusion that the ratio laid down in that decision applies to the facts of that case and allowed the appeal in favour of the assessee. ii. It is respectfully submitted that the Delhi High Court judgment in the case of Mega Corporation Ltd was not brought to the notice of the Hon'ble Mumbai Tribunal and hence the Hon'ble Bench had no occasion to follow the non jurisdictional High Court jurisdiction on identical issue which was ruled the Delhi Tribunal decision. Therefore, the decision of Tata Communication Ltd cannot be followed as it is a sub silentio with respect to the binding precedence of a higher forum decision on identical issue. Tata Sons Ltd. vs Asstt. CIT (ITA No.193&374/Mum/2006) (Mumbai- Trib.) (Α.Υ. 2002-03) (Date of Order-27-11-2017) - i.This decision was rendered subsequent to the Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). However, the Hon'ble Tribunal did not follow the said binding decision of Delhi High Court notwithstanding the fact that this was the only non-jurisdictional High Court decision available at that time. ii. The Hon'ble Tribunal in its conclusion in para 12& 13 has taken note of the identical issue decided by the Coordinate Benches in the case of the assessee for A.Y.2001-02 vide its order dated 31-10-2016 and in the case of Tata Communication Ltd in for A.Y.2002-03. As discussed in the preceding paragraphs, these decisions were rendered in the absence of Hon'ble Delhi High Court on identical issue in Mega Corporation Itd (supra), which was decided in favour of the Revenue. iii The reason for non adherence of the decision of Delhi High Court in the case of Mega Corporation Ltd (supra), as cited in para 15 was that various High Courts have taken a contrary view on this issue. According to the Hon'ble Tribunal, when there is contrary decision of the jurisdictional High Court (the Hon'ble Bombay High Court decision in the case of Thane Electricity Supply Ltd 206 ITR 727), the decision of Delhi High Court in not binding. Taking reliance of the Hon'ble Bombay High Court decision in Thane Electricity Supply Ltd (supra), it was held that the decision of non- jurisdictional High Court is neither binding decision for another High Court nor for Courts or Tribunals outside its territorial jurisdiction. Instead the Hon'ble Tribunal relied on the decision of Gujarat High Court in case of Ramesh D Patel (362 ITR 493) (Guj) wherein it was held that the provisions of sec. 124 of the IT Act are clearly concerning with territorial jurisdiction of the officer and has not relevance in so far as the inherent jurisdiction for passing an assessment order of assessment u/s.153 of the Act is concerned, when no such an authorisation u/s.132 was issued or requisition u/s.132A of the Act was made. In para 17, the Hon'ble Tribunal has also relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd (88 ITR 192) to the effect that when the language of a taxing provision is ambiguous, or capable of more meaning than one, then the Court has to adopt an interpretation which favours the assessee. In view of the above, the Hon'ble Tribunal did not follow the Hon'ble Delhi High Court decision in the case of Mega Corporation Ltd (supra).

Page No. 27 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited iv. In this regard, it is respectfully submitted that there is no direct High Court decision on the identical issue as raised in the present appeal other than the Hon'ble Delhi High Court in the case of Mega Corporation Ltd (supra). Therefore, there is no substance in the observation of the Hon'ble Tribunal that various High Courts have taken contrary view on the issue. In the case of Ramesh D Patel (supra) Hon'ble Gujarat High Court was seized with the matter as to when no search authorisation u/s.132 or requisition u/s.132A of the I.T. Act was issued, there was no occasion for the Assessing officer to pass assessment order u/s.153 of the Act. Thus, the facts of the case decided by Hon'ble Gujarat High Court was entirely different than the issue under consideration in the present case. With respect to Bombay Hon'ble High Court decision in Thane Electricity Supply Ltd (supra), Hon'ble Pune Bench of Tribunal in the case of ACIT vs. Aurangabad Holiday Resorts Pvt Ltd supra) and the Co-ordinate Bench decision in Page International Pvt Ltd vs. DCIT (supra) as observed by Hon'ble Mumbai Tribunal in the case of Kaybee Pvt ltd vs. ITO (supra) have extensively discussed this Hon'ble Bombay High Court judgment. In para 13, Hon'ble Pune Tribunal in ACIT vs. Aurangabad Holiday Resorts Pvt Ltd (supra) has resolved the issue in following words :- "13. It is thus clear that while the issue before the Hon'ble High Court in Thana Electricity Co. Ltd.'s case (supra) was whether or not a High Court should follow another High Court, whereas in Godavari Devi Saraf's case (supra), Their Lordships dealt with the issue whether or not a non- jurisdictional High Court is to be followed by a Bench of the Income-tax Appellate Tribunal. To that extent, and irrespective of some casual observations on the applicability of non-jurisdictional High Court judgments on subordinate courts and Tribunals, these two decisions deal in two different areas. As we have noticed earlier also, in Thana Electricity Co. Ltd's case, a note was taken of Godavari Devi Saraf's judgment and neither the said judgment was dissented nor overruled. In any event, in Thana Electricity Co. Ltd.'s case, Hon'ble Court was alive to the fact, which was acknowledged in so many words, that a Co-ordinate Bench decision cannot be overruled. In this view of the matter, it is difficult to hold, as has been strenuously argued before us by the learned Departmental Representative, that the Hon'ble Bombay High Court's judgment in the case of Godavari Devi Saraf's cases stands overruled by Their Lordship's judgment in the case of Thana Electricity Co. Ltd.'s case. The only way in which we can harmoniously interpret these judgments is that these decisions deal with two different issues and ratio decidendi of these decisions must be construed accordingly". V. Further emphasizing the importance of non-jurisdiction High Court decisions, Hon'ble Bombay High Court in the cases of Humayun Suleman Merchant (2016) 73 taxmann.com 2 (Bombay) and Earnest Business (P.) Ltd. (2017) 80 taxmann.com (Bombay), have held that- 25. It is a settled position in law that the decisions of another High Court though not binding upon us, would deserve the highest respect and normally be followed for the sake of uniformity and comity of Courts, unless the judgment is rendered, per incuriam or sub- silentio. vi. As far as the reliance of the Hon'ble Tribunal on the decision of Hon'ble Supreme Court in CIT vs. Vegetable Products Ltd (supra) is concerned, it is submitted that the scope of interpretation in favour of the assessee will arise only when there is an ambiguity in the language of taxing provision or where it is capable of more than one meaning. As held in full bench judgment of Page No. 28 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Hon'ble Guwahati High Court in the case of Smt. Sohani Devi Jain (1977) 109 ITR 130 (Guwahati) Sec. 124(3) has no relationship to territorial jurisdiction since the provisions of sec. 124 is clear and unambiguous. In page No.7/4th para Hon'ble High court has held as under :- It is urged by the assessee that the question is not whether the ITO Jorhat had or had not territorial jurisdiction, the question is whether he had the jurisdiction to make assessment for 1960-61, for which assessment had been made by the ITO, Calcutta. Section 124 has not used the word “territorial”. When a provision of law is clear and unambiguous, it is not permissible to add a word to, or omit a word from, it. In my opinion, the word "territorial" cannot be read into section 124 of the Act. The section speaks only of jurisdiction of the ITO Jurisdiction includes both territorial and other kinds of jurisdiction. In my opinion, therefore, the objection raised by the assessee only at the appellate stage is hit by sub-section (5) of section 124 of the Act. The ITO Jorhat, cannot be said to have lacked jurisdiction". (Emphasis supplied) vii.In view of the above discussion, the Hon'ble Mumbai Tribunal decision in Tata Sons Ltd vs. ACIT for A.Y.2002-03 cannot be followed as (i) As it did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (ii) It did not take into account the retrospective amendment made in the section 2(7A) of the I.T. Act (iii) It chose to follow Tata Sons Ltd decision, for A.Y.2001-02 completely ignoring the fact that the said decision was rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). IV. Tata Sons Ltd. vs Asstt. CIT (ITA No.2519/Mum/2009) (Mumbai-Trib.) (A.Y. 2004-05) (Date of Order-11-03-2019 and Tata Communications Ltd. vs Addl.CIT (ITA No.3972/Mum/2007) (Mumbai- Trib.) (A.Υ. 2003-04 & 2004-05) (Date of Order- 16-08-2019) i. In both the decisions, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Sons Ltd (2016) 76 taxman.com 126 (Mumbai) and Tata Communications Ltd (A.Y.2002-03) and came to the conclusion that in the absence of an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. As stated above, these judgments cannot be followed since the Hon'ble Tribunal (a) Did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (b) Did not take into account the retrospective amendment made in the section 2(7A) (c) It chose to follow the decisions of Tata Sons Ltd (supra) and Tata Communications Ltd (supra), ignoring the fact that the said decisions were Page No. 29

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). Therefore, these decisions cannot be followed as it is a sub silentio with respect to the binding precedence of a higher authority on the identical issue. V. Sabras Investment (Tata Chemicals Ltd.) - to 918/Mum/2012 dated 05.09.2019 i. In the decision, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Communications Ltd. (supra) and came to the conclusion that in the absence of an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. As stated above, this judgment cannot be followed since the Hon'ble Tribunal (a) Did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (b) Did not take into account the retrospective amendment made in the section 2(7A) (c) It chose to follow the decisions of Tata Sons Ltd (supra) and Tata Communications Ltd (supra), ignoring the fact that the said decisions were rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). iii. Therefore, these decisions cannot be followed as it is a sub silentio with respect to the binding precedence of a higher authority on the identical issue. iv. This decision did not consider the order of Hon'ble High Court of Bombay in the case of N Rajgopal (supra) dated 29.01.2019 nor did it consider the decision of Hon'ble Delhi High Court in Mega Corporation Ltd. (supra). VI Shri Kishore Vitthaldas vs JCIT (ITA No.7397/Mum/2016) (Mumbai- Trib.) (A.Y. 2007-08) (Date of Order- 16-10-2019) i. Identical issue of the jurisdiction of Addl. CIT in passing assessment order has been decided in this order too. The Hon'ble Tribunal in para 13 has come to the conclusion that in the absence of order u/s.124(b) of the I.T. Act, the re-assessment order passed by the JCIT, Rg-17, Mumbai is void ab initio since the said officer did not possess valid jurisdiction and authority to pass such order. The Hon'ble Tribunal has noted in para 14 that the issue is squarely covered in favour of the assessee by the decision of Coordinated benches in the case of Tata Communications Ltd for A.Y.2003-04 in order dated 16/08/2019 and Tata Sons Ltd in ITANo.6981&7071/Mum/2005. These decisions have been extensively quoted the Coordinated Bench judgment from page Nos.17 to 45. ii.The Hon'ble Tribunal has also stated in para 16 that the Delhi High Court decision in the case of Pr. CIT Vs. Mega Corporation Ltd (supra) is not applicable to the facts of the present case since the matter before the Hon'ble High Court was whether the DCIT who passed the assessment order was having valid jurisdiction / authority in the absence of separate order

Page No. 30 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited u/s.120(4)(b) of the Act. This observation of the Hon'ble Tribunal is contrary to the law point and facts decided by the Hon'ble High Court. As stated in the preceding paragraphs, the question of law before the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Mega Corporation Ltd (supra) was as under :- "Did the Income Tax Appellate Tribunal (ITAT) fall into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b)." (Here 'ACIT' is the abbreviation of AddI.CIT) While rejecting the findings of the Hon'ble Tribunal, Hon'ble High Court held that (1) Reference to an incorrect provision per se cannot invalidate the authority conferred in the present case under section 120(2) instead of section 120(4)(b). Hence, the assessee's argument that the Additional Commissioner of Income-tax (ACIT) did not possess jurisdiction, cannot be countenanced (allowed). (Para 6 of the decision) (2) In the instant case, the provisions of sec. 124(3) bars raising of the jurisdictional issue within one month of the receipt of the notice. The relevant portion of the judgment in para 7 is reproduced as under- "Secondly, even if for some reason, the assessee were unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuance of the proceedings by the DCIT it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Its failure to do so within the stipulated time i.e., one month after receipt of notice which was in fact a condition of section 143(2) proceeding and was treated as such by the assessee preclude it from urging lack of jurisdiction." (emphasis supplied) (3) There is no interplay of section 127 as held in para 8, in the following words- "8. As far as the section 127 goes, we are of the opinion that having regard to the findings rendered, that question does not arise." iv. Moreover, in the present case, the Commissioner of Income Tax-2, Mumbai vide his order No.CIT-2/Assignment/2009-10 dated 04/08/2009 for A.Y.2007-08 has assigned the jurisdiction of the case to the Addl.CITRg-2(2), Mumbai for completion of the assessment. This assignment can only be u/s.120(4)(b) or u/s. 127(1) of the I.T. Act as there is no other provision in the Act for transfer of jurisdiction from one Assessing officer to another Assessing officer. V. The Hon'ble Tribunal has also relied on the judgment of Hon'ble Bombay High Court in the case of Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom)to come to the conclusion that the time limit provided u/s.124(3) of the Act has a relation to the A.O. territorial jurisdiction and would not apply to the cases where the assessee contents that the action of the A.O.is without authority of law. In this regard my respectful submission is that in Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom), the case of the assessee, a partnership firm, was that the Assessing Officer could not have issued notice

Page No. 31 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited u/s.153A of the Act, without carrying out search at the premises of the partnership firm. In this background, the assessee raised the following questions of law before the Hon'ble High Court:- (1) No search was initiated against the partnership firm. Notice under Section 153A of the Act, therefore, could not have been issued. He pointed out that there is a difference between search authorization and initiation of search, by relying on the decision of the Karnataka High Court in the case of CIT v. Wipro Finance Ltd. [2009] 176 Taxman 233/[2010] 323 ITR 467. He agreed that in the present case, search authorization was issued against the partnership firm but according to him since no search was actually carried out, it cannot be stated that the search was initiated against the partnership firm. (ii) Learned Counsel submitted that for the purpose of the Income Tax Act, a partnership firm and its partners are treated as separate independent entities. The search carried out at the premises of the partners cannot be equated with the search against the partnership firm. In this context, the learned Counsel relied on the observations made by the Supreme Court in the case of CIT v. A. W. Figgies&Co. [1953] 24 ITR 405. (iii) Counsel further submitted that the objection of limitation of the Department is wholly fallacious. Section 124 of the Act relates to territorial jurisdiction of the Assessing Officer. The time limit provided under sub- section (3) of Section 124, therefore, must be seen in the light of such issue. Vi. In the light of the above peculiar facts and questions of law put up, the Hon'ble Bombay High Court agreed with the assessee that the objection to the jurisdiction of the Assessing officer (that once no search was initiated, notice u/s.153(A) of the Act could not be issued) cannot be curtailed on the ground that such objection was not raised within the period mentioned u/s.124(3) of the Act. The relevant paragraph of the decision is reproduced as under :- "7. We are also in agreement with the contention of the Counsel for the petitioner that the petitioner's objection to the jurisdiction of the Assessing Officer on the ground that if no search was initiated, notice under Section 153A of the Act could not have been issued, cannot be curtailed on the ground that such objection was raised beyond the period referred to in sub- section (3) of Section 124 of the Act. Section 124 of the Act pertains to jurisdiction of Assessing Officers. Sub-section (1) of Section 124 lays down territorial jurisdiction of the Assessing Officer. Sub-section (2) of Section 124 provides that where the question arises under said section, as to whether an Assessing Officer has jurisdiction to assess any person, such question shall be determined by the authority prescribed under the said sub-section. Sub- section (3) of section 124 provides time limits for a person to call in question jurisdiction of an Assessing Officer. Clause (c) of sub-section (3) of section 124 provides that no person shall be entitled to call in question jurisdiction of an Assessing Officer where an action has been taken under Section 132 or section 132A, after the expiry of one months from the date on which he was served with a notice under sub-section (1) of Section 153A or sub-section (2) of Section 153C of the Act or after the completion of the assessment, whichever is earlier. In clear terms, the time limit for raising objection to the jurisdiction of the Assessing Officer prescribed under sub-section (3) of section 124 has a relation to the Assessing Officer's territorial jurisdiction. The time limit prescribed would not apply to a case where the assessee

Page No. 32 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited contends that the action of the Assessing Officer is without authority of law and, therefore, wholly without jurisdiction." vii. In the light of the above peculiar fact where the jurisdiction of the Assessing Officer is questioned by the assessee u/s.124(3)(c) i.e., when no search action was initiated as in its case but notice for assessment u/s 153A was issued, Hon'ble High Court held that sec. 124(3) has a relation to its territorial jurisdiction. The facts of the present case are entirely different. vi. Moreover, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Mega Corporation Ltd (supra) has clearly held (on the identical question as in the present case) that the time limitation u/s.124(3) will be applicable where jurisdiction of Addl. CIT making the assessment u/s.143(3) is under question. Finally, as held by the Hon'ble full bench of Guwahati High Court in the case of Smt. Sohani Devi Jain (1977) 109 ITR 130 (Guwahati) Sec. 124(3) has no relationship to territorial jurisdiction since the provisions of sec. 124 is clear and unambiguous. as jurisdiction has been challenged u/s.124(3)(a) and not u/s.124(3)(c). While the former provisions u/s.124(3)(a) relates to jurisdiction of the Assessing Officer where notices u/s.142(1) or 143(2) issued, as in the present case, the latter provision (u/s.124(3)(c) relates to the jurisdiction where search action u/s.132 or requisition u/s.132A was initiated and notices u/s.153A or 153Cissued by the Assessing officer. Since the question before the Hon'ble Bombay High Court was related to challenge of jurisdiction u/s.124(3)(c), the answer was also given accordingly. Hence, the mention of "territorial jurisdiction in the decision, is confined to sub section (c) and not sub-section (a) of Section 124(3) of the I.T. Act. It is worth mentioning here that when the decision of Smt. Sohani Devi Jain (1977) (supra) was given, there exists no sub-section (c) to sec. 124(3). Even for the present assessment order viz. for A.Y.2007-08 where the assessment order was passed on 24-10-2011, there existed only sub- sections(a) and (b) to section 124(3). It was only by Finance Act, 2016 (w.e.f. 01-06-2016), sub- section (c) was substituted to section 124(3). In the Bansilal B Raisoni vs. ACIT (2019) (supra) case, the amended provisions of sec. 124(3) were before the Hon'ble Bombay High Court and the decision of the Hon'ble High Court was related to sub-section (c) of sec. 124(3) as can be seen from the discussions made in para 7 (as reproduced above). Hence, it is humbly submitted that the decision of Hon'ble Bombay High Court in Bansilal B Raisoni vs. ACIT (2019) (supra) had not applicability on the facts of the case of Kishore Vitthaldas Vs. JCIT (supra) or the present case, as these are prior to amendment of sec. 124(3) by the Finance Act, 2016. Thus, in my respectful submission there is no precedence value as far as this decision is concerned as it has totally over looked the binding precedence of the Hon'ble Delhi Court in the case of Mega Corporation Ltd (supra) on the identical question of law and facts. VII. The Indian Hotels Co. Ltd. (ITA Nos. 8570/Mum/2011, 565/Mum/2013, 2049/Mum/2014 and 1910/Mum/2014) date of order 21.05.2021. i. In the decision, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Communications Ltd. (supra) and Kishore Vitthaldas (supra) and came to the conclusion that in the absence of Page No. 33 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. The above stated decision has already been discussed in detail in relevant paragraphs above.

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal Para nos. 3.11 to 3.17 at page nos. 10 to 13 of Legal paper book no -1) ii. Tata Communications Ltd -ITA no 7071/Mum/ 2005 –(see Para nos. 4 to 6 at page nos. 42 to 44 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no: 2519/Mum/2009 and 2639/Mum/2009 (see Para no 2 at page no 144-145 of Legal paper book no -1) iv. Tata Sons Ltd – no:5090/Mum/2012 (see Para nos. 3-4 at Page nos. 171 -172 of Legal paper book no-1) v. Tata Communications Ltd - ITA no: 2891/Mum/2010 & ITA no 1015/ Mum/2010 (see Para nos. 3.2 - 3.3 at page nos. 195 - 197 of Legal paper book no- 1) vi. Tata Power Co Ltd -ITA no:3081/Mum/2009 & ITA no 3082/Mum/2009 (see Para nos. 3-8 at page nos. 234- 237 of Legal paper book no -1) vii. Sabras Investment (Tata Chemicals Ltd) ITA no 915 to 918/Mum/ 2012 (see Para nos. 3 to 7 at Page nos. 307 to 311, Para no 3.11 to 3.16 at Page no 325 to 330, Para no 11 at Page no 378 to 379 of Legal Paper book Page no 1) viii. Tata Communications Ltd -ITA no 4452 & 3460/Mum/2011 & ITA no 8768Mum/2010 (see Para nos. 5 to 6.2 at page nos. 391 to 425 of Legal paper book no-1) ix. Tata Sons Ltd- ITA no 4893,2545, 4543 & 2487/Mum/2012 – (see Para 3 to 8 at page nos. 432 to 435 of Legal paper book no -1) x. The Indian Hotels Company Ltd - ITA no 8570/Mum/2011 & 565/Mum/2013 & 2049/Mum/2014 – (see Para nos. 2 and 2.1 at page no 468 of Legal paper book no -1) xi. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 (see Para nos. 3 to 6 at Page nos. 502.3 to 502.5 of Legal paper book no 1) xii. Tata Communications Ltd-ITA No - 7514/MUM/2011 – (see Para 8 at internal Page 9 of order-copy submitted separately) xiii. Vertiv Energy Pvt Ltd -ITA no. 1975/Mum/2014 & 1771/ Mum/ 2015 – (see Para nos. 2 – 2.1 at internal Page no 2 of the order copy provided ) xiv. Sandoz Pvt Limited – ITA no 3733 /Mum / 2013, ITA no 3740/ Mum/2013 – (see Para nos. 9 to 11 at internal Page nos. 5 to 7 of the order copy provided) xv. Tata International Limited ITA No.1605/Mum/2012 - (see Para nos. 2 to 3 at internal Page nos. 2 to 3 of the order copy provided) xvi. M/s Nuclear Power Corporation ITA Nos. 202, 114, 4413/M/2004, 3867/M/2008, 4743 to 4745/M/2007, 2452/M/2011 & Ors

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal (see Para nos. 4 to 6.6 at internal Page nos. 7 to 27 of the order copy provided) The jurisdictional High Court in the case of Inventors Industrial Corporation Ltd. 194 ITR 548 has held that additional ground challenging the jurisdiction of an officer could be raised at any stage of the appellate proceeding including the second round though the said issue had not been raised in the first round of proceeding. Issues raised by the additional grounds in the present case questions the validity of the assessment order passed by the Addl. CIT as without jurisdiction which also goes to the root of the matter. Hence, the additional ground may be admitted. 2 That the additional grounds have The assessee has filed the present appeal before the been filed on 10.03.2021 which is Tribunal on 29.09.2010 challenging the appellate order after a lapse of sixteen (16) years and passed by the CIT(A) on 20.05.2010. The additional ought not to be admitted in view of grounds have been filed in the said appeal on the inordinate delay in raising such 10.03.2021.Hence the delay, if any, is of (10) ten years ground. and (5) five months approximately and not 16 years In this regard reliance was also placed Under the Act, an additional ground can be raised by a by him on the Tribunal order in the party litigant at any stage of the appeal proceedings. case of Stock Traders Pvt. Ltd. There is no limitation prescribed for raising any additional ground. In this regard, reliance is placed on judgment of Rajasthan High Court in Shilpa Associate vs ITO 263 ITR 317. Hence, the said period has no relevance. In any event, the time taken by the assessee's in the above referred Tribunal orders for filing of the additional grounds are as under: i. Tata sons Ltd - - Appeal filed in 2005 and additional ground filed on 15 Jan 2016 ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 - Appeal filed in 2005 and additional ground filed on 29 Dec 2015 iii. Tata sons Ltd - ITA no:193/Mum/ 2006 - Appeal filed on 12 June 2006 and additional ground filed on 17 Nov 2016 iv. Tata Sons Ltd - ITA no:2519/Mum/2009 and 2639/Mum/2009 - Appeal filed in 2009 and additional ground filed on 17 Mar 2017 v. Tata Sons Ltd - ITA no:5090/Mum/2012 - Appeal filed in 2012 and additional ground filed on 16 March 2017 vi. Tata Communication Ltd - ITA no: 2891/Mum/2010 & ITA no 1015/ Mum/2010 - Appeal filed in 2010 and additional ground filed on 15 Nov 2016 vii. Tata Power Co Ltd - ITA no:3081/Mum/2009 & ITA no 3082/Mum/2009 - Appeal filed in 2009 and additional ground filed on 20 January 2017 viii. Sabras Investment (Tata Chemicals Ltd) - ITA no915 to 918/ Mum/ 2012 - Appeal filed in 2012 and additional ground filed on 5 January 2018 ix. Tata Communication Ltd - ITA no 4452 & 3460/Mum/2011 & ITA no 8768/Mum/2010 - Appeal filed in 2011 and additional ground filed on 25 July 2017 x. Tata Sons Ltd –ITA no 4893,2545, 4543 &

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal 2487/Mum/2012 - Appeal filed in 2012 and additional ground filed on 22 February 2017 xi. Kishore Vithaldas- 2016 & ITA no 5661/Mum/ 2017 -Appeal filed in 2017 and additional ground filed on 8 March 2019 xii. Tata Communication Ltd- ITA No - 7514/MUM/2011 - Appeal filed in 2011 and additional ground filed on 10 September 2020 xiii. Vertiv Energy Pvt Ltd - ITA no 1975/Mum/ 2014 & ITA no 1771/ Mum/2015 – Additional ground is raised after a gap of 10 years or 15 years (see Para 3.6 at internal page 23 of order) xiv. Sandoz Pvt Ltd – ITA no 3733/Mum/2013 & 3740/Mum/2013 – Appeal filed in 2013 and additional ground filed on 12 October 2021 xv. M/s. Tata International Ltd ITA No.1605/Mum/2012 - Appeal filed in 2012 and additional ground filed on 19 October 2022 xvi. Nuclear Power Corporation ITA Nos. 202, 114, 4413/M/2004, 3867/M/2008, 4743 to 4745/M/2007- Appeal filed in 2004 to 2011 and additional ground filed on 23.07.2018 It is hence, submitted that this issue already stands concluded by the Tribunal in these orders. The additional ground has been raised in the present case by letter dated 10.03.2021 which came to be filed on 17.03.2021 as the assessee became aware of the jurisdictional issue at a later point of time when it came across the above referred Tribunal orders. When filing the present appeal on 29.10.2010, it had no knowledge of such an issue arising in the present appeal. With reference to the Tribunal’s Order in the case of Stock Traders Pvt Ltd, the Tribunal has observed that the assessee therein had not laid any material to show that the Additional CIT could not be regarded as its assessing officer. It is submitted that, in the aforesaid orders it has been clearly held that the burden to show that the assessing officer validly assumed jurisdiction was on the Revenue and not on the assessee. Therefore, this order is clearly distinguishable on facts. In any event, the said order has been considered and not followed in the case of Vertiv Energy Pvt Ltd.(supra) at internal page 21 of the Tribunal order 3 That the Addl. CIT was exercising As stated hereinabove, in the present case, the Addl. CIT concurrent jurisdiction and therefore could not be regarded as the assessing officer for the no transfer of jurisdiction as purposes of section 2(7A) read with section 120(4)(b) of contemplated by section 127 of the the Act as the jurisdictional pre-conditions contained Act was required. therein have not been satisfied. Hence, there is no question of him exercising concurrent jurisdiction with the Dy.CIT/the Asst. CIT obviating transfer of jurisdiction under section 127 of the Act. In any event, nothing has been placed before the Tribunal to show that concurrent jurisdiction for passing of the assessment order vested with the Addl. CIT in the present case. This issue also stands considered by the above referred Tribunal orders in the following cases:

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal i. Tata Sons Ltd – wherein the Revenue’s submission have been referred to in para 3.18 at Page no 15 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 3.22 at pages 18 and 19 thereof ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 wherein the Revenue’s submission have been referred to in para 11 at Page no 51- 52 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 15 at pages 58 to 63 thereof iii. Tata Sons Ltd – ITA no 193/Mum/ 2006 wherein the Revenue’s submission have been referred to in para 8 at Page no 103 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 18 at pages123-124 thereof 4 Relying on section 124(3) of the Act, it That section 124 of the Act deals with conferring of was urged that - territorial jurisdiction on an assessing officer. However, the Firstly orders conferring jurisdiction present case raises the fundamental issues of whether the are not appealable and in any event Addl. CIT who has passed the assessment order could be such orders could be challenged only regarded as the AO in accordance with section 2(7A) read in accordance with the said provisions with section 120(4)(b) of the Act. Further, assuming i.e. before the Principal Director without admitting that the Addl. CIT is to be regarded as General or Director General or the the AO, there is no transfer of jurisdiction under section Principal Chief Commissioner or Chief 127 of the Act in this favour. This issue has nothing to do Commissioner or the Principal with territorial jurisdiction. The jurisdictional High Court in Commissioner or Commissioner and Bansilal B. Raisoni& Sons V ACIT (2019) 101 Taxman.com such question cannot be raised after 20 has accepted that the limitations under section 124(3) the expiry of one month from the date of the Act with respect to the authority before whom an on which such order was served. order could be challenged and the bar of limitation for such challenge would be applicable only when question relates to territorial jurisdiction of an assessing officer and not otherwise. In any event, even this issue has been considered by the above referred Tribunal orders, wherein, the relevant references are as under: i. Tata sons Ltd - ITA no. 4497/Mum/2205 – (see Para no 3.15 at page nos 12-13 of Legal paper book no -1) ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 -(see Para no 18 at page nos 83-84 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no:2519/Mum/2009 and 2639/Mum/2009 -(see Para no 3.15 at page nos 148-149 of Legal paper book no -1) iv. Tata Sons Ltd - ITA no:5090/Mum/2012(see Para no 3.15 at page nos 174-175 of Legal paper book no -1) v. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 – (see Para 17 at page nos 502.47 – 502.48 of Legal paper book no -1) vi. VertivEngery Pvt Ltd – ITA no 1975/ Mum/ 2014 & ITA no 1771/ Mum/2015 – (see Para -6.4 to 6.6, 17 page nos 16-18 and Para 5- page no 21) 5 Reliance has been placed on judgment That a bare perusal of the said judgment shows that the of the Delhi High Court in the case of conclusion reached therein is based on section 124(3) of PCIT V. Mega Corporation, wherein, the Act. The jurisdictional High Court in the case of the Court has reversed the view taken Bansilal B. Raisoni (supra) has clearly held that section Page No. 38

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal by the Tribunal. Based on this 124(3) of the Act and the limitations contained therein judgment, it is also urged that the would have no application to a case, other than the one above referred Tribunal orders do not dealing with territorial jurisdiction of an assessing officer. lay down the correct position as they Since, section 124(3) of the Act has no application to the have overlooked the said judgment. present case, the conclusion reached by the Delhi High Court in the case of Mega Corporation will not apply. Further, the impact of the said judgment has been considered by the above referred Tribunal orders in the following paragraphs- i. Kishore Vithaldas -ITA no 7397/Mum/ 2016 & 2017 – (see Para 16 at page nos 502.46 – 502.47 of Legal paper book no 1) ii. Tata Communications Ltd – ITA no – 7514/Mum/2011 (see Para 11 at internal page no 12 of the order copy submitted separately) iii. Vertiv Energy Pvt Ltd – ITA no 1975/Mum/ 2014 and 1771/Mum/ 2015 – (see Para b at internal pages 14 to 20 of the order copy submitted separately) 6 With reference to the application of In Abhishek Jain (supra), the Court was concerned with a the limitation in section 124(3) of the case where the dispute was whether the assessing officer Act, reliance has been placed on in Delhi or in Noida had jurisdiction over the assessee's judgment of the Delhi High Court in case. In that case, the officer in Noida has been held to Abhishek Jain Vs ITO 405 ITR 1, assume concurrent jurisdiction over the assessee's case Allahabad High Court in CIT Vs British because the addition related to deposit of cash in a bank India Corporation and the Calcutta account at Noida, especially, when the assessee had not High Court in Elite Pharmaceuticals Vs disclosed his permanent account number and also not ITO (2016) 73 Taxman.com 69. Based responded to any notices. Therein, distinction has been thereon, it is urged that the additional drawn between irregular exercise of jurisdiction and ground need not be entertained. complete lack of jurisdiction and it was held that it was a case of irregular exercise of jurisdiction to which the provision of section 124 of the Act would apply. Similarly, the judgment of the Allahabad High Court in the case of British India Corporation Ltd. (supra) was again concerned with a dispute relating to territorial jurisdiction. Therein, in paragraphs 25 to 27 of the judgment distinction has been drawn between lack of jurisdiction and irregular exercise of jurisdiction observing that lack of jurisdiction would make an order to be nullity whereas that was a case where the dispute related to irregular exercise of jurisdiction. Further Calcutta High Court in Elite Pharmaceuticals was also concerned with a case of territorial exercise of jurisdiction. In the present case, the fundamental issues which require consideration are whether the Addl. CIT could be regarded as an AO in terms of section 2(7A) and section 120(4)(b) which goes to the root of the matter. It is submitted that non fulfillment of the conditions specified therein would mean that the Addl. CIT in the present case has no jurisdiction to pursue with the assessment proceeding and pass the assessment order. In any event, these judgments or the principle laid down therein already stands considered by the above referred Tribunal orders as under - i. Tata sons Ltd - ITA no. 4497/Mum/2205 – (see Para 3.24 – 3.26 at page nos 23 to 26 of Legal paper book no -1) ii. Tata Communication Ltd -ITA no 7071/Mum/ 2005(see

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal para nos 13 to 15 and 18 at page nos 54 to 61 and 83-84 of Legal paper book -1) iii. Tata Communication ltd – – (see Para no 5 to 6. at page nos 197 to 227 of Legal paper book no -1) iv. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 – (see Para 12 and 13 at page nos 502.14 to 502.15 of Legal paper book no-1) v. VertivEngery Pvt Ltd – ITA 1975/Mum/2014 and 1771/Mum/2015 – (see para 3.2 -3.3. 3.5 (b & d) and 3.6 at Internal page nos 4 – 7, 11,22-23 of order copy submitted separately) vi. Sandoz Pvt Limited - ITA 3733/Mum/2013 & ITA no 3740/Mum/2013 (see para 17-18 at internal page nos 12 of the order copy submitted separately.) vii. Tata International Ltd. - ITA No.1605/Mum/2012 (see para 10 at internal page nos 24 of the order copy submitted separately.) 7 Relying on the judgment of the Delhi The said case was also concerned with territorial High Court in CIT v S.S. Ahuluwalia jurisdiction under section 124 as the question was whether (2014) 47 taxman.com 169 it has the assessing officer in Delhi or the one in Dimapur would been urged thatjurisdiction is an exercise jurisdiction over the assessee in that case. The administrative matter and mistake, if substantial questions of law arising in that case are any, in exercising such administrative reproduced in paragraphs 24 to 29. In paragraph 36 powers is curable. It is also urged that thereof, referring to judgment of the Hon`ble Apex Court such administrative matters cannot be in the case of Budhai Swain vs Gopinath Dev (1999) 4 SCC taken up in appeal. 396 distinction has been drawn between lack of jurisdiction and error in exercise of jurisdiction and it has been observed that "Lack of jurisdiction strikes at the very root of the action and want of jurisdiction might vitiate proceedings rendering the orders passed and exercise thereof a nullity. But a mere error in exercise of jurisdiction would not vitiate the legality and validity of the proceedings and the said order was valid unless set-aside in the manner known to law..........' .Ultimately, in the summary of propositions in paragraph 1 in sub-paras (16) to (18) thereof, both the assessing officer at Delhi and Dimapur were held to have concurrent jurisdiction since the assessee therein also had a place of residence in Delhi. Therefore, the issue arising on the facts of that case were different from the present one. The said judgment has been considered in the following above referred Tribunal decision. i. Sandoz Private Limited (ITA no 3722/ Mum/ 2013 & ITA no 3740/ mum/2013) (see Para 16 at internal page nos 11 and 12 of the order copy submitted separately) 8 Reliance has been placed on the As stated above, insofar as the additional ground relating judgment of the Calcutta High Court to transfer of jurisdiction from the Dy.CIT/Asst.CIT to the in the case of ITO vs Ashoke Glass Addl. CIT is concerned, the assessee is challenging Works 125 ITR 491, the Madras High existence of such order and not the correctness of a Court in Advantage Strategic transfer order/s. It is the assessee's case that when there Consulting (P) Ltd. v PCIT 430 ITR 1 is no order under section 127,there cannot be any transfer and the Hon`ble Apex Court in of jurisdiction from one authority to another. Further, KashiramAggarwalla v UOI 56 ITR 14 assuming without admitting that a transfer order exists in for the proposition that transfer order the present case the transferring authority should qualify under section 127 of the Act are as an assessing officer. In the present case, the primary administrative orders and when no submission is that the Addl.CIT cannot be treated as the prejudice is caused to the assessee assessing officer in the absence of fulfillment of the such orders cannot be challenged. jurisdictional pre-conditions as specified in section Page No. 40

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal 120(4)(b) of the Act. Further, the fact that no prejudice has been caused to the assessee would not justify passing of an assessment order by an authority without jurisdiction. This would be contrary to the express provisions of the Act. The said judgments and the principles laid down therein have been considered by the following above referred Tribunal orders. i. Tata Sons Ltd -ITA no. 4497/Mum/2205(see para 3.22 -3.23 of page no 18 to 23 of Legal paper book no 1) ii. Tata Communications Ltd - 2005(see Para 18 of page no 83 of Legal paper book no 1) iii. Tata Power Co Ltd –ITA no:3081/Mum/ 2009 & ITA no 3082/Mum/2009 – (see Para 7 at page no 237 of the Legal paper book-1) iv. Sabras Investment (Tata Chemicals Ltd) - ITA no 915 to 918/Mum/ 2012– (see Para 6-8 at page nos 311 to 312 of Legal paper book no-1) v. Tata Sons Ltd - ITA no 4893,2545, 4543 & 2487/Mum/2012(see Para 7-10 at page nos 434 to 437 of Legal paper book no -1) vi. VertivEngery Pvt Ltd – ITA 1975/Mum/2014 and 1771/Mum/2015 – (see Para 2(a) & 2(c) & 3.8 at internal page nos 9-10 of order copy submitted separately) vii. Sandoz Private Limited - ITA no 3722/ Mum/ 2013 & ITA no 3740/ mum/2013) – (see Para 15-18 at internal page nos 10 to 12 of order copy submitted separately) 9 The Tribunal order in the case of A bare perusal of the said judgment shows that Vertiv Energy Pvt. Ltd. v ACIT being after referring to necessary fact in paragraphs 3 order dated 22.06.2022 as relied upon and 3.1,the issues have been summarized in by the assessee does not reflect paragraph 3.2. Paragraph 3.5 reproduces the independent application of mind by contention as raised by the Ld. DR and the the Tribunal as the ultimate assessee's rebuttal in respect of each of them. It conclusion is contained only in one is submitted that all the above referred issues paragraph. were similarly raised by the Revenue before the Tribunal in that case. The conclusion reached by the Tribunal in that case is contained in paragraphs 3.6 to 3.8. In paragraph 3.7 it has specifically observed" 3.7 We find that all the oral and written arguments of the ld. DR have been met in detail by the ld. AR before us as detailed supra. The issue indispute is already addressed by the various decisions of the Tribunal which are reproduced in the ld. AR’s rebuttal referred to supra. The same are not reiterated herein for the sake of brevity. As stated earlier, the issue is already settled by various decisions of the Tribunal in favour of the assessee." .Hence, the Tribunal has considered each and every aspects raised by the Ld. DR and gave a findings in favor of the assessee. by relying upon the conclusion reached by the earlier benches of the Tribunal. In such a scenario they need not reproduce the findings therein on each of the aspects.

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal 10 Referring to section 292B of the Act In that case, reassessment notice was issued in the name reliance was placed on judgment of of erstwhile private limited company which had ceased to the Delhi High Court in the case of exist after its conversion into an LLP. The conclusion Skylight Hospitality LLP 405 ITR 296, reached by the High Court in that case was based on its where the Hon'ble Apex Court has peculiar facts because of the large scale tax evasion in dismissed the assessee's SLP (2018) which the assessee had engaged. Further, the entire line 92 Taxman.com 93 of documents including the tax evasion petition, the reasons recorded before reopening the assessment, the approvals granted by the specified authority had referred to the assessee as a LLP. In fact, the assessee therein also did not have any confusion in its mind with respect to the name. In a later judgment in PCIT v Maruti Suzuki India Ltd.416 ITR 613/265 taxman 515, the Hon`ble Apex Court has considered this judgment in the context of an assessment order being made on an amalgamating company after its amalgamation and found the facts in that case to be peculiar and hence, distinguishable (see paragraph 27 at pages 631 to 633 of the Report). The facts and issues arising in that case has no resemblance to the present case. Further, the complete lack of jurisdiction in the Addl.CIT in view of non compliance with the jurisdictional pre- conditions in section 120(4)(b) of the Act cannot be regarded as a mistake, defect or omission in the procedure where in substance and effect the action is in conformity with and according to the intent and purpose of the Act. In the following Tribunal decision, the revenue had relied on section 292B which has been found to be inapplicable 11 Lastly, reference has been made to In this regard, reference is invited to the following above the following notifications 267/2001 referred Tribunal's order where these very notifications dated 17-09-2001 and 228/2001 have been considered and it has been held that they do dated 31-7-2001 to urge that the pre- not fulfill the requirement as laid down in the said section. conditions as specified in section Case paper 120(4)(b) have been fulfilled in the book-1 and Para present case. reference Tata Sons ITA no. Page 17 para 3.20 Ltd 4497/Mum and ITAT discussed /2205 about the power and authority between Pages 26 to 38 Paras 3.27, 3.28, 3.30 Tata ITA no Pages 58 - 61 Para Communications 7071/Mum/ 15 and Reproduced Ltd 2005 Tata sons - Pages 74 - 82 Paras 3.28, 3.30 Tata Sons ITA no: Reproduced Tata Ltd 193/Mum sons - Pages 129 - / 2006 139 Paras 3.28, 3.30, Tata Sons ITA no: Reproduced Tata Ltd 2519/Mum sons - Pages 158 - /2009 and 159 Paras 3.27, 2639/Mum 3.28, 3.30 /2009 Tata Sons ITA no: Reproduced Tata Ltd 5090/Mum sons - Pages 180 - /2012 186 Paras 3.27,

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Sr. No. Ld. DR's Submissions Assessee's Rebuttal 3.31 Tata ITA no: Co filed Page 194 Communications 2891/Mum para 3.1, Pages Ltd /2010 & 200-202 paras 5.3 Tata 1015/ Mum sons - Pages 219 – /2010 226 Paras 3.27, 3.28, 3.30 Kishore Vithaldas ITA no Page 502.16 para 5661/Mum/ 14, Reproduced 2017 & ITA Tata no Communications – 8768/Mum Page 502.33 Para 2010 3.27, 3.28, 3.30 Vertiv ITA No. Page 11 para d Energy 1975/ Private MUM/ Limited 2014 Sandoz ITA Page 10 para 14 Private No. 3871/ Limited Mum/2013 12 In paragraphs 9 to 9.5 of the written That the assessee had not filed any appeal in respect of submission filed on 12.08.2022 by the any order passed under section 120/127 of the Act. In the Ld. DR. before the Tribunal refeence present appeal arising out of assessment order passed for has been made to section 253 of the AY2002-03, it is urging that in the absence of any orders Act and it has been urged that the passed under section 120/127, such assessment order orders to be passed under section being passed by the Add. CIT is without jurisdiction. 120/127 are not appealable before the Therefore the said submission has no application to its Tribunal case. 13 In paragraph 11 of the written It is submitted that mere treating of an Addl. submissions dated 12.08.2022 filed by Commissioner of Income-tax to be a Jt. Commissioner of the Ld. DR reliance has been placed Income-tax would not qualify them to be an assessing on the definition of Jt. Commissioner officer, unless the pre-conditions in section 120(4)(b) of of Income tax to urge that the said the Act are fulfilled. Further, the pre-conditions for a Jt. authority would include an Addl. Commissioner of Income-tax to be regarded as an Commissioner, which amendment has assessing officer is also similar to that of an Addl. brought in by Finance Act, 1999 Commissioner. w.e.f.01.10.1998 This issue has also been considered by the following above referred Tribunal orders: i. Tata Sons Ltd - ITA no. 4497/Mum/2205–(see Para 3.24 to 3.26 at page nos 23-25 of Legal paper book no-1) ii. Tata Communications Ltd - ITA no. 7071/Mum/ 2005– (see Para 14 to 15 at page nos 56-63 of Legal paper book no-1) iii. Kishore Vithaldas - ITA no 5661/Mum/ 2017 & ITA no 8768/Mum 2010 (see Para 12 to 13 at page nos 502.14 to 502.16 of Legal paper book no-1) 14 In paragraph 11.10 reference has That, in that case the assessee nowhere challenged and been made to judgment of the there is no discussion of fulfillment of condition in section Hon`ble Bombay High Court in N. 120(4)(b) of the Act. In fact, that aspect was never Rajgopal vs Addl.CIT (Appeal no challenged by the assessee in that case. Hence, the said 1454/2016) for the proposition that an judgment has no application. This judgment has been Addl. Commissioner would qualify as considered by the following above referred Tribunal order: an assessing officer. Vertiv Energy Pvt. Ltd. (pages 12 & 13 thereof) 7. Apart from the above, the Tribunal vide is order dated 29 November 2023 in the case of Nuclear Power Corporation Limited has upheld exercise of such jurisdiction by the Additional

“22. We intended to follow the same, however, we considered reading the section 43(6) of the Act and observe that as per provisions contained in section 43(6)(c) with regard to block of assets, it says that in respect of any previous year relevant to the assessment year, the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year and adjusted, -- (A) by the increase of the actual cost of assets falling within that block, acquired during the year. (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any,so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) …….. From the above provision, it is clear that every year the block of assets has to be adjusted in case if there are any changes in the composition of the assets within the block. This exercise has to be done every assessment year. In the given case, it is fact on record that the impugned assets are not in existence with the organization. The ITAT has come to the conclusion in A.Y.2000-01 interpreting the provisions as applicable at that point of time. In our view the assets in the block has to be evaluated every assessment year and as per provision 43(6)(C)(B), it clearly indicates that the value has to be reduced of the moneys payable in respective of any assets falling within that block which is sold/discarded/demolished or destroyed. In the given case, the block does not consist the assets, which are transferred in the demerger in Page No. 54 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited the A.Y. 1997-98. However, these particular assets are not in existence in the beginning of the year and it can be considered as discarded in the provisions with “NIL” value. This issue needs to end some point of time. In that case, the value of the assets has to be written off this year and to be claimed as loss in the statement of income (instead of depreciation). Therefore, we are inclined to direct the Assessing Officer to treat the opening balance of the assets to the extent of assets, which was already transferred to the demerged company as loss of assets or discarded. Accordingly, this ground of appeal filed by the assessee is partly allowed.

“8. Ground No.8 deals with non eligibility of the assessee for depreciation on assets that stood vested in Ciba Speciality Chemicals (India) Ltd.(CSCIL).During the assessment proceedings the AO came to the conclusion that the book value of the transferred assets shall be adopted from block of assets for the purpose of depreciation. He was of the opinion that since consideration had flowed to the assessee for the transfer of assets to CSCIL the assessee was not entitled to claim of depreciation. 8.1. Before the FAA, the assessee contended that Demerger was not a sale-transaction, that consequently no money was payable as defined u/s.41(4) of the Act, that no adjustment was to be made to WDV of block of assets while computing depreciation claims. It further argued that what was required to be reduced from the block was money value received from the sale of assets. It relied on the decision of Kasturi & Sons(237ITR24) of the Hon'ble Supreme Court wherein the Hon’ble Court had defined the words “moneys payable” and had held that the phrase included actual currency form and not money’s worth. It was, therefore, contended that since no money in actual currency was received by the assessee on account of Page No. 56 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited demerger, no adjustment was required to be done to the WDV with reference to assets in question. It further submitted that reliance placed by the AO with regard to the treatment given by another assessee in its own case was irrelevant and also that the observation made by the AO that the assessee had fraudulently claimed excess depreciation was wholly unjustified, that it had fully disclosed the stand taken by it in the return filed. After considering the submissions of the assessee and the order of the AO, he held ,that an assessee had to be the owner of a particular asset on which depreciation had been claimed, that the said assets had to be used for the purpose of its business, that the assessee was neither the owner of the assets transferred nor were same used for the business purposes during the year under consideration, that it had failed to satisfy the basic condition prescribed u/s.32 of the Act on the assets transferred to CSCIL, that the assessee was not justified in claiming that nothing should be reduced from its block of assets and that depreciation should be granted on the full block of assets as existing prior to the transfer of assets, that the reliance placed by the assessee on section 43(6)(c)(i)(B) of the Act was no help to it, that it could not be said that it had not received any consideration or moneys payable as envisaged under section 43 (6), that the AO had rightfully held that the assets transferred by the assessee were not without any consideration, that the shareholders of the assessee company received shares of CSCIL as per the scheme of arrangement sanctioned by the Hon’ble, High Court, that CSCIL had paid consideration to the shareholders of assessee, that the transfer of shares was in respect of the assets transferred by the assessee. He further held that AO was not justified in adopting the book value of the assets transferred while reducing the assessee’s claim for depreciation, that he should have reduced from the block of asset that the WDV of the transferred assets as per the income tax records and not as per the book value of the assets. He directed the AO to substitute the written down value of the transferred assets by the WDV of the book value of such assets while reducing the value of assets from the block before allowing the assessee’s claim for depreciation. 8.2. During the course of hearing before us, the AR argued that whole business was transferred under the scheme of demerger, that the assessee did not receive any money, that the share holders of the company had received the shares in pursuance of the merger, that the arrangement was about whole business and not in respect of any asset, that nothing was sold/ discarded, that for claiming depreciation the ownership of a particular asset is not mandatory, that after the block concept has come into existence, individual assets would lose their independent character, that the provisions of section 43(6) were not applicable to the facts of the case. He relied upon the cases of Kastur i& Sons (supra),Motors and General Stores(66ITR692)and Bharat Bijlee Ltd.(46taxmann.com 257). The DR supported the order of the FAA. The DR stated that entire chemical business was not transferred, that only one division was transferred , that the AO had made enquiry with other concern, that he found that the assets were taken on book value, that requirement of ownership of assets was a must, that it was not a case of Page No. 57 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited slump sale, that the cases relied upon by the assessee were distinguishable on facts. 8.3. We find that in the case of Kastur i& Sons(supra)the Hon’ble Apex Court has interpreted the phrase money’s worth and applicability of section 41(2)of the Act as under: “ 19. We are unable to accept the contention that the word `money' should be interpreted as `money's worth'. The reasons given by us earlier are sufficient and we need not add to them. The reason for introducing a fiction in S.41 (2) of the Act as explained in Bipinchandra Maganlal& Co. Ltd. (41 I.T.R. 290) quoted in Artex Manufacturing Co. (1997) 6 S.C.C. 437 that it is for the purpose of recoupment by the Revenue of the benefit allowed to the assessee in the previous years does not alter the situation.

Page No. 62 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 11.2. We find that while deciding the appeal for the year 1995- 96(ITA/1749/mum/2003-25.09. 2013),Tribunal has dealt the issue as under: “The AO was of the opinion that the benefits of the software are long term or of enduring nature arid accordingly treated this expenditure as capital and allowed the depreciation and disallowed the remainder. Assessee strongly agitated this issue before CIT(A). The CIT(A) has considered this grievance of the assessee at para 8 and para 30 of its order. The CIT(A) was convinced that the application software of computers get outdated in no time. Hence, such expenditure cannot be treated as capital expenditure. The CIT(A) further observed that in immediately two preceding assessment years , his predecessors have treated similar expenditure as revenue expenditure, following the findings of his predecessors, the C1T(A) directed the AO to delete the entire disallowance. However, at the same time he directed the AO to withdraw the depreciation allowed. Aggrieved by this revenue is before us. The ld.DR strongly supported the findings of the AO, Counsel for the assess strongly relied upon the decision of the Hon’ble Delhi High Court in the case of Asahi India safety glass limited 245 CTR 529.We have considered the rival submissions and perused the orders of the lower authorities. It is not in dispute that the expenditure has been incurred on application software The Hon’ble Delhi High Court in the case of Asahi Safety Glass ltd.(Supra) has held that application software arc of revenue in nature as the AO has not doubted that the expenses were on application software therefore respectfully following the decision of the Hon’ble Delhi High Court, findings of the CIT(A) are confirmed. Appeal of the revenue is dismissed.” Following the same, ground no.1 filed by the AO, is decided against him. As the ground has been decided in favour of the assessee, so, first ground of CO become infructuous.” Respectfully following the orders of the Tribunal for the earlier years and judgment of Raychem RPG Ltd.(supra) of the Jurisdictional High Court, we decide Ground No.4 against the AO.”

“8.1 The assessee incurred an amount of Rs.27.31 Lacs towards purchase of various computer software packages as detailed in the assessment order. Majority of the expenses consisted of license fee or use of Microsoft packages (excel sheet, word document, power point presentation etc.) and Page No. 63 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Oracle software for developing accounting software at C & F locations. The assessee submitted that software expenses were for software packages which get frequently outdated and have to be replaced and therefore, the expenditure was revenue in nature. The assessee further stated that operating software is treated as capital expenditure whereas application software which gets outdated early, is revenue in nature. However, following the stand taken in AYs 1995-96 to 2000-01, the expenditure was said to be enduring in nature and thus capital expenditure. Accordingly, depreciation of 25% was allowed against the same. The action of Ld. AO resulted into an addition of Rs.20.48 Lacs. Consequently, similar depreciation of earlier years for Rs.18.98 Lacs was allowed to the assessee disregarding the depreciation on assets pertaining to demerged division. 8.2 The Ld. CIT(A) noted that the payments were in the nature of license fees or for right to use certain packages which have normally longer periods of life, usage and validity and therefore, the benefits would be enduring in nature. Accordingly, the action of Ld. AO was upheld. Aggrieved, the assessee is in further appeal before us. 8.3 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.2 to 5. The bench, following earlier years, held that the expenditure was revenue in nature. Upon perusal, we find that this ground is covered in assessee’s favor in several earlier years and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to allow the expenditure fully and reverse the depreciation adjustment thus made in the assessment order. Ground No.1(a) of assessee’s appeal stands allowed whereas Ground No.1(b) has been rendered infructuous.”

“2. Second Ground deals with disallowance of 20% of foreign travelling expenses (Rs.33, 89,997/-)on the ground that it is capital in nature. It was brought to our notice that while deciding the appeal for the AY.s 1991-92- 1996-97(ITA/9566/Mum/1995, dt. 04.11.10; 1584/Mum/1999, dt.12.10.2011; ITA/334/Mum/1997, dt.29.06.2012; ITA/2874/Mum/99/ dt.31. 10.2012; ITA/2951/Mum/2000, dt.13.06.2014) respectively, the Tribunal had dealt with the said issue. We would like to reproduce the Page No. 66 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited relevant portion of the said order (ITA/ 2951/Mum/2000, dated 13.06.2014) and it reads as under:- “6. Next ground is about disallowance of Rs.22,73,715/-,being 1/5th of the foreign travelling expenses. During the assessment proceedings, AO held that details of foreign travel expense were not furnished. Following the order for the year l995-96, he made the disallowance of 25% of foreign travel expenses. Before the FAA, it was argued that the details of foreign travel expenses were furnished as annexed to the return of Income. A copy of the same was also filed before the FAA, during the hearing of the appeal. He held that the details filed by the assessee contained the name of the persons who undertook the foreign travel expenses, places visited, period of visit and purpose of visits. Further, during the hearing of the appeal papers were filed along with the sample copies of the tour reports as submitted by the touring officers. He held that the details contained certain foreign visits which were to Kathmandu, Nepal against which the only purpose ‘given was ‘Business discussion’, that expenses of such visits totaled to Rs.7,70,051. He held that some of the visits were personal in nature, that the foreign travel expenses could not be allowed in full as claimed by the assessee. Following the orders for the year 1993-94 and 1991-92 he upheld disallowances of 20% of the foreign travel expenses claimed by the assessee. 6.1. Before us, AR and DR agreed that issue has been dealt by the Tribunal in earlier AY.s. 6.2. We have heard the rival submission and perused the details filed by assessee in this regard. We find the in the year 1991-92 Cross appeals were filed by the assessee and the AO against the partial allowance/ disallowance of foreign travel expenses. Deciding the appeal, Tribunal held as under: “The disallowance has been made on assumptions and presumptions. The very basis on which the disallowance has been made is found to be not correct. In fact in AY 74-75, 64-65 76-77 and 77-78 similar disallowance of expenses has been deleted by the Tribunal. Copies of the said orders are in the paper book. In view of the above, we direct that the disallowance sustained by the CIT(A) be deleted. Ground No.4(a) is allowed and therefore Ground No.4(b) and (c) do not require any adjudication. Ground No.2 of the Revenue is dismissed.” Following the same, we decide the issue in favour of the assessee. As ground no.5(a) has been decided in favour of the assessee, ground no. 5(b) becomes infructuous.” Respectfully following the above Tribunal order Ground No.2, raised by the assessee, is allowed.”

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited business finance and marketing strategies, solution of computer related problems, that the expenses were wholly and exclusively for the purpose of business. FAA upheld the order the AO. 7.1. Before us, representatives of both the sides stated that the identical issue has been dealt with by the Tribunal, while deciding the appeals for earlier years. 7.2. We have heard the rival submissions and perused the material before us. We find that in the year 1992-93 issue of hotel and airfare expenses was decided by the Tribunal as under: “31. We have considered the rival contention and perused the relevant material on record. We note that for the AY 1983-84, the Tribunal following the order for the AY 1981-82 to 82-83 has decided the issue in para 11 as under: 11. Ground no.3 is in respect of deletion of an addition of Rs. 83,202/- made on account of entertainment expenses incurred on foreign national. In assessee’s own case in the past i.e. Assessment Year 1981-82 and 1982-83, cited supra, this issue has been decided in favour of the assessee. Our attention was drawn on the order of I Bench Mumbai in assessee’s own case for the Assessment Year 1982-83 bearing & 2077/B/94 order dated 17.12.02 wherein it was held as under: “3. The second ground is that the CIT(A) erred in deleting the addition of Rs. 51,375/- made on account of entertainment expenses incurred on foreign nationals. This issue is discussed in page 6, paras 9 & 10 of the assessment order. The brief facts in this connection are that the assessee incurred expenditure in respect of visitors to India, in connection with its business. Such expenditure amounted to Rs. 51,375/-. The assessee furnished the details of such expenditure. The Assessing Officer took the view that the expenditure represented hospitality extended to the visitors and therefore, disallowed the same as entertainment expenses. On appeal the CIT(A) noted that the foreign visitors had come to India for the purpose of attending Board meeting, general discussion, finance, reporting etc. The assessee contended that this expenditure cannot therefore, be considered to be entertainment expenditure. An order of the Bombay Bench of the Tribunal in the case of R H Windsor India Ltd vs ITO was relied upon the CIT(A), finding that the facts of the present case are nearly similar, held that the expenditure cannot be treated as entertainment expenditure. The revenue is in appeal. In view of the finding recorded by the CIT(A) that the foreign victors came to India for purposes of attending the board meetings, general discussion, finance, reporting etc. It is considered that the expenditure represented predominantly business expenditure. This decision of the CIT(A) is accordingly upheld and the ground is dismissed.”

“24. Next independent ground (GOA-8) for the year under appeal is about deleting the disallowance on account of expenditure incurred in connection with earning of interest income exempt u/s.10(15) of the Act. During the assessment proceedings the AO found that the assessee had claimed an amount of Rs.2.70 crores relating to receipt of interest on tax free bonds as exempt, that it had also claimed exemption for Rs.45,448/- u/s.10(33), that Page No. 77 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited the deductions under both the provisions were claimed on gross amount of interest /dividend. He held that only net income by way of interest/dividend and not the gross amount received by the assessee was eligible for deduction. He called for an explanation from the assessee in that regard. Finally, he made a disallowance of Rs.5.41 lakhs-calling it a ‘reasonable estimate’ towards earning exempt income. 24.1. Before the FAA the assessee argued that no administrative/overhead expenses were incurred for earning tax free interest /dividend, that the AO had wrongly observed that certain managerial and administrative time/expenses must have been spent/devoted by assessee for managing large investment portfolio, that there had been no change in investment during the year under appeal, that in the AY 1995-96 the AO had attributed 2% of the dividend income towards administrative /overhead expenses while computing deduction u/s.80M of the Act. The assessee relied upon the case of General Insurance(254ITR203); Ingersoll Rand (I) Ltd. (ITA/1178/Bom/93) and United Collieries(203ITR 857-AT).After considering the submission of the assessee, the FAA ,following the order of his predecessors for AY.1995-96, deleted the addition made by AO. 24.2. Before us, the DR stated that the issue before the then FAA was deduction u/s. 80M, that the AO had invoked the provisions of section 14A of the Act for the year under consideration. The AR supported the order of the FAA. Alternatively, it was argued that disallowance should be restricted to reasonable limits. 24.3. We have heard the rival submissions. We find that the FAA had referred to the order of the then FAA for the AY.1995-96, that in that year the issue was of deduction u/s.80M. Considering the facts of the case we want to restrict the disallowance to 0.05% of the exempt income. Ground of appeal No.8 is decided in favour of the AO, in part.”

Page No. 92 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 36. At the outset, the learned Counsel for the assessee stated that this issue of exclusion of excise duty and sales tax is squarely covered in favour of assessee and against Revenue by the jurisdictional High Court in the case of CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom), wherein it is held as under: - “6. We find merit in the contentions of the assessee. Under section 80HHC, the Legislature intends that the profits from exports should not be taxed. For this purpose, a formula has been introduced whereby if the business is of composite nature then the proportionate profit relatable to the export business is to be found out by multiplying the profits of a business by export turnover and dividing the product by total turnover. This formula finds place in section 80 HHC (3) as it stood at the relevant time. Under clause (b) to the Explanation of section 80HHC, export turnover is defined to mean sale proceeds received in India by the assessee in foreign exchange. Under the said definition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading of the above two clauses show that they include anything which has nexus with the sale proceeds. Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds. Further, the meaning of export turnover in clause (b) of the Explanation to section 80HHC, therefore, clearly show that export turnover did not include excise duty and sales tax. Export turnover is the numerator in the above formula whereas total turnover is the denominator. The above formula has been prescribed to arrive at profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty cannot form part of total turnover. In fact, if the denominator was to include the above two items and if the numeration excluded the above two items then the formula would become unworkable. In the circumstances, we are of the view that in order to ascertain the export profits, the above two items cannot be introduced to inflate total turnover artificially in order to reduce the benefit which an assessee is entitled to. Ultimately, the object of section 80HHC is required to be kept in mind in order to encourage exports. The Legislature has applied the above formula in order to find out profits derived from the exports. In this connection, section 80 HHC (1) may also be noticed. Under section 80 HHC (1), it is, inter alia, provided that where an assessee is engaged in business of exports of any goods, there shall be allowed in computing the total of income of the assessee, a deduction of the profits derived by the assessee from the export of such goods. In other words, in computing the total income of such an assessee, profits derived by the assessee from the exports are deductible. The above expression, namely, ‘profits derived from exports’ also finds place in section 80HHC(3)(a). It says that where the export is of goods, the profits derived from such export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business. In fact, the earlier section 80 HHC (3) consisted of two parts, namely, whether the assessee carried on business as 100% exporter and,

Page No. 95 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited No. Item Amount (Rs.) 11. Misc. Claims 0.26 Lacs 12. Excise duty Refund 54.95 Lacs 13. PDC equipment Lease 53.34 Lacs 14. Conversion Charges 4.83 Lacs 15. Other Misc. write backs 136.38 Lacs 16. Profit on Sale of R & D Assets 37.62 Lacs 17. Cost of Services recovered from CSCIL 92.24 Lacs Total 2527.38 Lacs The assessee claimed that all these receipts were business receipts and not the receipts as mentioned in explanation (baa) of Sec.80HHC. Any income which necessarily flows from assessee’s business is not required to be reduced. All the receipts were stated to be arising out of assessee’s business activities and hence, not covered by explanation (baa) to Sec.80HHC. However, Ld. AO, interpreting the said explanation in the light of various juridical decisions, held that the items mentioned in explanation (baa) were only illustrative in nature and not exhaustive one. Reliance was also placed on CBDT Circular No. 621 dated 19/12/1991. Accordingly, all such receipts which do not have element of turnover would be excluded and all these items would fall under the expression “any other receipt of similar nature‟ as mentioned in explanation (baa) to Sec.80HHC. Accordingly 90% of above items aggregating to Rs.2527.38 Lacs was to be reduced while working out eligible profits for the purpose of Sec.80HHC. The said adjustment reduced the deduction u/s 80HHC from Rs.177.76 Lacs to Rs.167.14 Lacs. The working of the same has been made part of assessment order as „Annexure- 1‟. From the perusal of the same, it could be observed that the adjusted total turnover (net of export of trading goods) has been computed at Rs.46693.69 Lacs after adding back Sales Tax, excise duty and scrap sales. The profits of the business (after reducing profit from export of trading goods) and 90% of receipts (as tabulated above) has been computed at Rs.3038.16 Lacs. The adjusted export turnover of manufactured goods has been computed at Rs.423.05 Lacs. Finally, the deduction available u/s 80HHC(3)(c)(i) on export of manufactured goods has been computed at Rs.27.52 Lacs which is further increased by profit on trading goods for Rs.178.35 Lacs. Finally, deduction against 90% of export incentive has been added to arrive at total deduction of Rs.167.14 Lacs. 17.3 The Ld. CIT(A), following decision of Hon’ble Apex Court in Lakshmi Mills (290 ITR 667) directed Ld. AO not to include sales tax and excise duty in total turnover for the purpose of computing deduction u/s 80HHC. Regarding scrap sales, if the proceeds were out of scrap sales of raw material then they were to be excluded from total turnover. However, scrap sale of packing material was to be included as per the decision of Hon’ble Bombay High Court in Sudarshan Chemical Industries Ltd. (245 ITR 769). 17.4 Proceeding further, Ld. CIT(A), relying upon the decision of Hon’ble Apex Court in Pandian Chemicals Ltd. V/s CIT (262 ITR 278) which held that the term „derived from‟ must be understood as something which has a direct or immediate nexus with the assessee’s industrial undertaking, held that the tabulated receipts were not directly derived from export activities and therefore, the same should not form part of the eligible profits.

Page No. 100 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 11A. Counsel appearing on behalf of the Revenue submitted that the insurance claim has no element of export turnover and that consequently it must sustain a reduction of ninety per cent under Expln. (baa). Now it is necessary to note that Expln. (baa) in terms does not refer to export turnover. Sub-section (1) of section 80HHC contemplates a deduction to the extent of profits derived by the assessee from the export of goods or merchandise to which the section applies. The basic issue therefore is to determine the extent of profits derived by the assessee from the export of such goods or merchandise. The formula in sub-section (3) of section 80HHC has been provided by the Parliament, for the purposes of sub- section (1) to compute the profits derived from the export of goods. Clause (a) of sub-section (3) specifies that where the export is of goods or merchandise manufactured or processed by the assessee the profits derived from the export shall be the amount which bears to the profits of business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, in determining the profits derived from the export of goods or merchandise the proportion of the export turnover to the total turnover of the business is applied to the profits of the business. The profits of the business in turn are defined in Expln. (baa) to section 80HHC. Hence, the element of export turnover is a facet which has been taken care of by the legislature in the application of the formula which is referred to in sub-section (3) of section 80HHC. In determining the profits of the business for the purposes of Expln. (baa), the incomes which are susceptible to a reduction of ninety per cent are those which are specifically prescribed by the legislature. These are inter alia the incomes referred to in clauses (iiia), (iiib) and (iiic) of section 28 and receipts by way of brokerage, commission, interest, rent, charges or receipts of a similar nature included in such profits. Therefore, before a receipt is liable to be excluded to the extent of ninety per cent, it must be a receipt of a nature similar to brokerage, commission, interest, rent or charges. For the reasons which we have already indicated, we have come to the conclusion that the claim on account of insurance for the stock-in-trade did not constitute a receipt of a similar nature within the meaning of Expln. (baa) and was therefore not liable to be reduced to the extent of ninety per cent. The first question will therefore not raise any substantial question of law. In terms of above decision, the vital test to determine the exclusion or inclusion of an item would be whether it was an independent income having no nexus with export turnover. The objective was to avoid distortion in the figure of export profits. 18.3 In the background of statutory provisions as well as the principle laid down by Hon‟ble Courts as above, our adjudication to each of the item would be as follows: - Interest on employee’s loan-The interest arises from the fact that the assessee has granted loans to its employees as an incentive to retain their loyalty towards business enterprises. The employees are connected with the business of manufacture and sale of pharmaceuticals. Interest on overdue debtors- This income has arisen to the assessee because the customers have delayed the payment of debts within the stipulated credit period allowed to them. The interest so charged could not be said to be an independent source of income but could be said to have arisen only out of normal business operations only.

Page No. 101 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Interest on deposit with MSEB & MIDC- The income arises on account of deposit placed by the assessee with MSEB for obtaining power connections to run the manufacturing facility. Similarly, deposits with MIDC have been placed for obtaining land on which manufacturing facility would be set up. Unless the deposits are placed the assessee would not be able to manufacture the goods. Thus, the deposits have been placed only out of business compulsion. Insurance Claims- These represents claims allowed by insurance company in respect of loss of trading goods. A contract of insurance is in the nature of indemnity and indemnifies the assessee for loss of stock-intrade. Had the goods not been destroyed, the same would have been sold at profits and therefore, the insurance claims are compensatory in nature. The claims could not be said to be an independent source of income for the assessee and could not be equated with „receipts of similar nature‟ as mentioned in explanation (baa). Scrap Sales Income- This income arises from the sale of packing material and other material realized during manufacturing process and directly related with manufacturing activities of the assessee. Cash Discount- This represent discount received by the assessee on early payment to suppliers in respect of purchase of goods. These are directly related to normal trading operations and could not be said to be an independent source of income. Equipment lease rentals- represent amount received by assessee on lease of packing machines & other equipment to licensed manufacturers who are carrying on the manufacturing activity for the assessee. Conversion Charges- These charges are directly related to assessee‟s manufacturing activity. Write back of liabilities- These are the write-back of expenditure which were early shown payable but no longer required to be paid. The writebacks are not in the nature of actual receipts but reversal of early provisions. Cost of Services Recovered- The cost of services refers to recovery of costs in the nature of Municipal Taxes, Security and Electricity Charges of a shares premises between the assessee and CSCIL. These expenses have first been paid by the assessee and later on recovered from CSCIL. These are mere recoveries of expenses from associate concern. Profit u/s 41(3) on sale of R & D Assets – The research & development activity is directly connected with manufacturing activities and could not be said to be independent source of income for the assessee. Misc. Claims- These are petty claims arising out of business activity. We are of the considered opinion that all these items would form part of Profits of business and accordingly, not required to be reduced while computing deduction u/s 80HHC. 18.4 The remaining items have been dealt with as under: -

Page No. 106 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited companies had occupied the property jointly and shared the respective costs. The assessee by recovering the cost of shared premises does not stand to lose since occupation cost is recovered. However, Ld. AO opined that property owned by assessee was used by CSCIL for which no rent was reflected in the accounts of the assessee. The assessee owned the property and let out the same to CSCIL without charging any rent. No agreement was produced by assessee for use of premises by CSCIL. Therefore, the exact commercial consideration or the benefit other than rent, being derived by the assessee from the letting out of the premises, could not be ascertained. In the above background, Ld.AO proceeded to work out notional rent in terms of Section 22 of the Act. The assessee, without prejudice, contended that Municipal Rateable Value (MRV) of the premises was Rs.88,088/- for approx. 50,000 square feet of commercial and residential premises being used by CSCIL. However, Ld. AO opined that since the assessee had let out the property but did not charge the rent then in terms of decision of Hon‟ble Bombay High Court in M.V. Sonavala Vs. CIT (177 ITR 246) Bom.), it was possible for AO to take into consideration the amount for which the property might be let from year to year or AO could also consider the annual ratable value. Considering the market rate for commercial premises at Goregaon, the rates would be in the region of Rs.30/- per square feet per month and that of residential premises being Rs.15/- per square feet. Applying these rates to commercial area of 34,570 square feet and residential area of 15,278 square feet, Ld. AO arrived at ALV of Rs.124.45 Lacs for commercial space and Rs.27.50 Lacs for residential space. The total ALV was thus determined at Rs.151.95 Lacs. The statutory deduction u/s 24 would not be allowed separately since the assessee did not indicate depreciation claimed in respect of let out property and also did not indicate quantum of repairs & maintenance claimed for this property. Further, both these expenditure were already claimed in the computation of income. 16.3 The Ld. CIT(A), while confirming the stand of Ld. AO, directed him to grant statutory deduction u/s 24(a). Aggrieved, the assessee is in further appeal before us. 16.4 The Ld. Counsel explained that assessee prior to its merger with Sandoz (India) Limited in 1997 was known as M/s Hindustan CibaGeigy Limited and it was carrying on the business at various locations in Mumbai & Goa including residential and office premises at Goregoan (Mumbai). The assessee had various business units among them being Chemical business unit. In the year 1997, the chemical business unit was demerged to form Ciba Specialty Chemicals (India) Limited (CSCIL). Earlier all the businesses of assessee were being carried out jointly at various premises utilizing common facilities and infrastructure. As per the arrangement of demerger, the immoveable property situated at Goregaon came to the assessee. However, since the speciality chemical business was also carried on from the same premises, CSCIL was allowed to occupy the residential and office premises earlier used by them for a certain period till CSCIL was able to identify and acquire alternate facility. As per the arrangement, CSCIL was to pay to the assessee share of expenses incurred for the maintenance of the property. The total recovery of such costs for the year stood at Rs.92.24 Lacs which actually goes to reduce the expenditure debited to Profit & Loss Account. It was further explained that from AYs 1997-98 to 200001, the same arrangement continued and Ld. AO did not dispute the fact that the property stood occupied by the assessee for the purposes of its business and hence,

Page No. 107 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited was not liable to be assessed as “Income from House Property‟. For this, the attention was drawn to the assessment orders for AYs 1997-98 to 2000-01. Therefore, there being no change in facts, it was not open for Ld. AO to take a different view in the matter. In terms of Sec. 23(1), the income could not be assessed as „Income from House Property‟ if the property was occupied by the assessee for its business. The buildings have been used by both the entities for their respective businesses. Upon demerger, CSCIL could not have been asked to vacate the said premises immediately. They were allowed to occupy the premises for the purpose of their business for a reasonable time till they were able to find an alternate facility. Therefore, the arrangement should be viewed as occupation of the property by assessee for its own business. In the alternative, Ld. Sr. Counsel submitted that the annual value could not exceed municipal retable value in terms of various judicial decisions and not in the manner as estimated by Ld. AO. Another alternative argument was that the amount of Rs.92.24 Lacs recovered by the assessee from CSCIL ought to have been reduced from notional rental value as computed by the Ld. AO. 16.5 We have carefully considered the peculiar facts of the case. It is noted that prior to its demerger, the assessee was carrying on various businesses from various premises including premises at Goregaon (Mumbai). In 1997, the chemical business got demerged from the assessee and new entity i.e. CSCIL came to existence to carry out the chemical business. Since the business was continuing, as a part of demerger arrangement, CSCIL was allowed to use the said premises on the basis that costs would be shared. M/s CSCIL has paid proportionate cost of Rs.92.24 Lacs to the assessee during the year which has actually gone to reduce the assessee’s expenditure under the head municipal taxes, water charges and security charges. Therefore, it was not a case where the property was actually let out by the assessee to a third-party but was a case wherein to facilitate demerger and to ensure smooth running of existing business, an arrangement was made between the assessee and its demerged entity that the business premises would be shared with an understanding that the proportionate cost would be recovered from the demerged entity till the time an alternative facility was arranged by the demerged entity. This being the case, it could very well be said that the premises was being used by the assessee only in furtherance of its business interest, the objective of which was to facilitate demerger. It is quite discernible that this similar arrangement is continuing since AYs 1997- 98 onwards and such an arrangement has never been disturbed by Ld. AO while framing assessment for AYs 199798 to 2000-01 which is evident from extract of assessment orders of those years as placed on record. Therefore, rule of consistency would operate in assessee’s favor and the facts being identical, Ld. AO was not justified in disturbing such an arrangement. Therefore, on the peculiar facts and circumstances, the action of Ld.AO in bringing to tax notional rental value of the common premises was not justified. We order so. Ground No. 10(a) stands allowed which makes Ground Nos. 10(b) &10(c) infructuous.”

148.

Considered the submissions and material placed on record, we observe that the assessee has acquired the building which is depreciable asset for the purpose of scientific research and the same was allowed to claim as an expenditure u/s 35 of the Act. Even though the above building was allowed 100% deduction but it continued to be used by the assessee in its business. It is to be noted that it is part of block of assets with the value of ‘nil’ and continued to be used in the business. During this year the assessee has sold the same and recovered the value more than the cost of the acquisition. Hence the provisions of section 41(3) is attracted to the extent of the benefit availed by the assessee under section 35 of the Act. Even the assessee has declared his income under Page No. 125 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited section 41(3) of the Act to the extent of exemption claimed under section 35 of the Act as business income. The additional proceeds received by the assessee over and above the value of cost of acquisition of the building which assessee has declared as income under the head Capital Gains. The next issue raised before us is whether the assessee can apply the indexation cost on the value of cost of acquisition while declaring the income under the head capital gain. Since it is a capital assets transferred by the assessee the provisions of section 45 to 48 of the Act is attracted, since the assessee has claimed the benefit under section 35 of the Act to the extent of the benefit claimed by the assessee under section 35 of the Act, the provisions of the section 41(3) are attracted to that extent, we observe that the assessee has also complied by declaring the sale proceed as business income. Since it is a capital assets transferred, the provisions of section 48 of the Act is attracted to the portion of the sale proceed over and above the exemption claimed by the assessee under section 35 of the Act. Therefore, as per the provisions of section 48 of the Act, the income of the assessee under the head capital gains has to be determined for the value of excess consideration received by the assessee. Strictly speaking, the computation of capital gain has to done as under: -

13. The observations of Gujarat High Court in the case of Sarabhai Sons (P) Ltd. (supra) in this connection are at p. 733 of the report as under : "Sec. 80J falls in Chapter VI-A of the Act. Sec. 80A, as it then stood, provided that, in computing the total income of the assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in ss. 80C to 80U. Clause (5) of s. 80B defined "gross total income" as the total income computed in accordance with the provisions of the Act before making any deduction under the Chapter or under s. 280-O. Sec. 2(45) defines "total income" to mean the total amount of income referred to in s. 5, computed in the manner laid down in the Act. One of the heads which is chargeable to income-tax is "profits and gains of business or profession". Sec. 29 provides that the income referred to in s. 28 shall be computed in accordance with the provisions contained in ss. 30 to 43A. Thus, while computing the income from profits and gains of business or profession, the expenditure incurred for scientific research becomes a permissible deduction. Deduction by way of depreciation is permitted as the capital asset depreciates in value as a result of its use. Such deduction is permitted while computing the total income of the assessee. Sec. 80J was enacted for the purpose of giving an incentive to enterpreneurs to establish new Industrial undertakings and for certain other purposes. It provided for deduction, no doubt, while computing the total income of the assessee, but on a different basis. The deduction was provided to encourage establishment of new industrial undertakings and for that reason, the deduction was related to the capital employed in the new industrial undertakings. Whereas expenditure on scientific research is made deductible under s. 35 on the ground that it is expenditure incurred for the purpose of scientific research related to the business of the assessee, the deduction contemplated by s. 80J is not because of the fact

Page No. 132 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited 16. The further claim of the assessee that the said loss is to be allowed as a business loss, in our opinion, has no force. The loss is arising firstly because of the enhanced cost of acquisition by reason of the inflation index and that is the procedure provided under the head "capital gain". Such loss is not contemplated while working out the business loss of the assessee. Again, the loss is arising on account of sale of the capital asset and the capital gain or loss is specifically provided to be assessed under the head "capital gain" and, therefore, the same cannot be allowed as a business loss even though the asset was used for the purposes of business before its sale. The provisions of s. 71(2) are not applicable to such loss. Secondly, the provisions of s. 71(3) are clear which provide for the set off and carry forward of the loss arising under the head "capital gain" in a specific manner. For the sake of convenience, we reproduce here the provisions of s. 71(3) of the Act as under : "Where, in respect of any assessment year, the net result of computation under the head ‘capital gain’ is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against the income under the other head." There is thus a specific ban for setting off the loss under the head "capital gain" against any other head which includes the head under which the business income is computed. We, therefore, do not find any merit in this claim of the assessee and the same is accordingly, rejected. The Supreme Court decision in the case of Western State Trading Co. (P) Ltd. (supra) and the Gujarat High Court decision in the case of Bhavnagar Trust Corpn. (P) Ltd. (supra) relied upon by the learned counsel of the assessee are the cases of a reverse situation. In those cases there was a profit/income which was assessed under the head "other sources" and the question of allowing the carry forward of the business loss was the subject-matter of consideration. In the present case, on the contrary, there is a loss under the head "capital gain" which the assessee wants to get set off against the business income. This type of situation would be contrary to the specific provisions of s. 71(3) referred to above. We, therefore, reject the alternative claim of the assessee.

“13. Fifth Ground deals with deletion of an addition of Rs.71.70 lakhs made by the AO on account of estimated freight components in the closing stock. It was brought to our notice that identical issue was decided against the department by the Tribunal while adjudicating the appeals for the earlier AY.s(1992-93 to 1996-97).We are reproducing page 12-13 of the order of the Tribunal for 1996-97,dealing with the issue and it reads as under: “14. Ground no.4 is about deletion of Rs.33.58 lakhs on account of freight component of closing stock.Ground no.3 of CO also deals with same issue.Beforeus,DR supported the order of the AO.AR stated that similar issue arising in the earlier years had been decided in favour of the assessee by the Tribunal. 14.1. We find that in the year 1993-94 identical issue was raised by the Department before the Tribunal. Deciding the appeal, Tribunal (ITA.No.213/Mum/1997,AY.1993-94, dated 19/08/ 2005) held as under: “First issue is regarding the deletion of addition of Rs. 21,85,160/made to the valuation of closing stock as on 31.03.1993 attributable to estimate pro-rata freight on stock dispatched to various depots on the reasoning that the assessee company is regularly following the method of accounting and also the addition to the closing stock consequently increase the opening stock of next year which ultimately no benefit to revenue. As far as this issue is concerned, the Mumbai Bench ‘B’ of the Tribunal, vide Paras3,4 & 8, in ITA.No. 7894/ Mum/1995, the issue was been decided in favour of the assessee by holding as under: “We have considered the facts and the rival contentions. It is not disputed before us that the assessee has been consistently following the method of valuing the closing stock by excluding the expenses incurred pm freight and cartage outwards and packing of the goods for the purpose of enduring the transport from central distribution depot on Page No. 137 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited various depots across the country. Now, the departmental authorities are entitled to discord the consistent method following by the assessee, but only if the true profits of the business cannot be deducted therefrom. In the case of British Paints Ltd. (188 ITR 44), on which heavy reliance was placed by the departmental authorities as well as the ld.DR before us, the factory costs, which are undisputedly to be considered as part of the cost of the product, were not included in the closing stock valuation. It is for this reason that the Supreme Court held that the method adopted by the assessee in that case was not an acceptable or sound method from which the true profits could be deducted. It is in this context, that they held that a method of valuation of closing stock has been adopted by, it is erroneous or unsound or unacceptable or is against accounting or commercial practice, the same can be discarded. In case, this principle is not attracted because the incurring expenses on freight or cartage outward or packing expenses purposes of transporting the goods have not added any stock. They are post manufacturing expenses are to be as selling expenses. Normally, the manufacturing are debited to the manufacturing account whereas the expenses are debited to the profit & loss account. According to the Advanced Accounts by R.N.Carter (1939 Rev.Edn.,Page-32),carriage inwards increases the cost of the goods purchased and is hence debited to trading account whereas carriage outwards is a selling expenses and is debited to profit & loss account. In the present case, the goods manufactured by the assessee had to be distributed to the depots across the country from the centralized distribution depot at Bombay and the transporting cost is purely for the purpose of selling the goods. The packaging expenses are not the expenses are not expenses incurred in the primary wrapping of the products, but they have been incurred in packing them in boxes so as to facilitate easy transport to the various depots. The primary packing which makes the product marketable is no doubt part of the cost, but the further packaging carried out for the purpose of transporting the products is part of the selling. William Pickles in his 1960 edition of Accountancy has recognized this by observing at Page 88 of the his treatise that the direct and indirect expenses actually incurred, “having regard to the stage of manufacture condition or location of the goods may be added to the cost (underlining ours). It may possibly be argued that the carriage outwards and packaging expenses incurred for facilitation of the transport of the goods can be excluded from cost only if the goods have already been sold and that in the present case, the goods have not been sold, and therefore, such costs cannot be excluded. The answer to this argument is that these costs have been incurred after the manufacture of the products and though the goods have not been sold, the expenses will have to be considered as part of the selling expense. Certainly, while fixing ;the price, the assessee will take into account the selling expenses and recover the same in the pricing of the products, but that is not a satisfactory reason to hold that such expenses or costs

ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited It was brought to our notice that while deciding the appeal for the AY.1995- 96(ITA/ 498/ Mum/2003,dt.25.09.2013)Tribunal had dealt with the same issue. We would like to reproduce the relevant portion of the said order and it reads as under:- “36. Ground no. 6 relates to the disallowance of Rs.3,90,12,431/- on account of incremental liability for payment of pension under the Voluntary retirement scheme (VRS) created on an actuarial basis in computing the assessee’s total income. The AO has discussed this issue on para 12 on page 32 of his order, wherein the AO followed order of 1993-94 and 1994-95 for disallowing the incremental liability of Rs.3.90 crores. When the matter was agitated before the CIT(A), the CIT(A) has considered this issue of the assessee at para 13 of page 33 of his order wherein the CIT(A) has followed the decision of his predecessors for A.Y. 1993-94 and 1994-95 and confirmed the disallowance made by the AO. Before us, the counsel for the assessee drew our attention to page 134 of the paper book which is internal page 15 of order of the Tribunal in assessee’s own case for A.Y. 1994-95 in and ITA No.2720/Mum/1999. It is a say of the counsel that the Tribunal in that order has restored this issue back to the file of AO. Following the findings of the Tribunal for A.Y. 1993-94, the Ld. DR also agreed to the submission of the counsel, we have carefully gone through the orders of the lower authorities and the order of the Tribunal. We find that the Tribunal in its order at para 40 has followed the findings given by the Tribunal in A.Y. 1993-94 and has restored this issue back to the file of AO to examine and verify the actuary valuation certificate and the agreement with the company and the employee and if he finds that the liability has been calculated on a scientific basis, may allow the claim of the assessee. Facts and circumstances being identical, respectfully following the afore stated direction of the Tribunal in assessee’s own case for A.Y. 1994-95, this issue is restored back to the file of AO. The AO is directed to decide in the light of A.Y. 1993-94 and 1994-95. Ground no. 6 is allowed for statistical purposes.” Respectfully, following the above order of the Tribunal, Ground of appeal No.1 is decided in favour of the assessee.”

Page No. 142 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited “6.1 The assessee claimed an amount of Rs.253.73 Lacs towards incremental VRS (Voluntary Retirement Scheme) for Bhandup unit which was on the basis of actuarial valuation. As held in earlier years, the liability was a contingent liability. Similar disallowance made in AY 199394 was confirmed by Ld. CIT(A). Similar disallowance was in assessment order for AYs 1994-95 to 2000-01. However, actual payment of VRS payment made during relevant year was to be allowed. In this year, assessee made payment of Rs.417.76 Lacs which was to be allowed whereas the claim of Rs.253.72 Lacs as per actuarial valuation was to be disallowed. The said adjustment resulted into net relief of Rs.164.04 Lacs to the assessee. 6.2 The Ld. CIT(A) noted that in appellate order for AYs 1998-99 to 2000-01, Ld.AO was directed to allow the deduction of incremental liability of VRS and also allow that part of actual payment made during the year relating to the provision created during financial year 1992- 93 but disallowed in AY 1993-94. Similar directions were given by Ld. CIT(A) for this year, against which revenue is in further appeal before us. 6.3 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.31 to 34. In concluding para-34, the bench restored the issue to the file of Ld. AO for re-adjudication as per directions given in Tribunal order for AY 1995-96. The assessee sought rectification of the directions vide MA No.50/Mum/2018. The Learned Judicial Member concurred with the submissions that Tribunal order for AY 1995-96 stood amended by MA order dated 27/02/2015 wherein deduction was allowed to the assessee. Accordingly, applying the amended order, the deduction would be allowable to the assessee. However, the Learned Accountant Member, vide separate order, opined that the issue was to be recalled and placed before regular bench for fresh adjudication. Keeping in view the contrary views, a reference was made u/s 255(4) to Hon’ble Vice President (third member) who concurred with the view of Hon’ble Judicial Member. Finally, following majority view, confirmatory order was passed by the bench on 27/09/2019 allowing assessee’s miscellaneous application. Thus, this issue has already attained finality in assessee’s favor in AY 2000-01 wherein the bench has upheld the stand of Ld. CIT(A). Respectfully following the same, we confirm the impugned order, on this issue. Ground No.4 of revenue’s appeal stand dismissed which renders ground no.3 of assessee’s cross-objection infructuous. The assessee’s cross objection stands dismissed as infructuous.”