Income Tax Appellate Tribunal - Pune
Serum Institute Of India Ltd.,, Pune vs Deputy Commissioner Of Income-Tax,, on 12 October, 2018
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "ए
ए" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
ी डी.
डी क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.549 & 550/PUN/2016
िनधा रण वष / Assessment Years : 2011-12 and 2012-13
Serum Institute of India Ltd.
Sarosh Bhavan, 16-B/1,
Dr. Ambedkar Road,
Pune - 411 001
PAN : AABCS4225M .... अपीलाथ /Appellant
Vs.
DCIT, Central Circle-1(1),
Pune .... यथ / Respondent
आयकर अपील सं. / ITA Nos.607 & 934/PUN/2016
िनधा रण वष / Assessment Years : 2011-12 and 2012-13
DCIT, Central Circle-1(1),
Pune .... अपीलाथ /Appellant
Vs.
Serum Institute of India Ltd.
212/2, Hadapsar,
Pune-411 028.
PAN : AABCS4225M .... यथ / Respondent
Assessee by : Shri Rajshekhar S. Abhyankar
Revenue by : Shri Rajeev Kumar
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 23.08.2018 Date of Pronouncement: 12.10.2018
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
These are the two sets of cross appeals filed by the Assessee and the Revenue against the separate orders of CIT (Appeals)-11, Pune, dated 29-01-2016 & 04-02-2016 for the Assessment years 2011-12 and 2012-13.
2 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
2. Background facts of the assessee include that the assessee is a company engaged in the business of manufacture and sale of life saving drugs and vaccines. The cases of Poonawalla Group include two sub- groups (1) includes family members of Shri Cyprus Soli Poonawalla (in short CSP) and the group concerns under his control and management (with M/s. Serum Institute of India Ltd. as the flagship company; and (2) other sub-group includes family members of Shri Zavareh Soli Poonawalla (in short ZSP) and the group concerns under his control and management, which is mainly engaged in stud farm activities.
There was search and seizure action u/s.132 of the Act on the assessee's group of cases on 21-06-2011. In response to notice u/s.153A of the Act, assessee filed the return of income on 13-02-2012 declaring total income of Rs.14,83,08,431/-. During the said search action, various incriminating documents were found and seized/ by the Department in respect of entities connected with the group. Cash was also seized by the Department. During the assessment proceedings u/s.143(3) of the Act, AO made various disallowances u/s.14A of the Act, EDP expenses, Foreign Travel Expenses, depreciation on plant and machinery, freight and insurance expense pertains to EOU unit, provision for leave encashment, repairs to building, plant and machinery and product development expenses, etc., apart from others and finally assessed the income at Rs.109,08,84,068/-. CIT(A) partly allowed the appeal of the assessee relying on the decisions of his predecessor/Tribunal.
3. Aggrieved with the part relief given by the CIT(A), the Revenue is in appeal before the Tribunal. Further, aggrieved with the confirmation of additions, the assessee is in appeal before us 3 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 We shall first take up the appeal of the Assessee. ITA No.549/PUN/2016 (By Assessee)
A.Y. 2011-12
4. Grounds raised by the assessee are extracted here as under :
"On the facts and in the circumstances of the case and in law learned CIT(A) erred:
1a. in confirming the disallowance u/s.14A amounting to Rs.2,42,65,925/- as per rule 8D.
b. in not addressing the ground regarding net off "Interest received" with "interest paid" to consider the proportionate disallowance of "Interest paid".
2. in confirming the disallowance of foreign travel expenses of employees amounting to Rs.12,38,850/- who travelled abroad.
3. a. In directing the AO to classify items of fixed assets of Rs.38,70,450/- like stainless steel tables, stools, racks etc. located in manufacturing unit into 'Furniture and Fixtures' and 'Plant and Machinery'.
4. in confirming the disallowance of the 'Provision for Leave Encashment' amounting to Rs.128,83,627/- pertaining to 'DTA' unit ascertained on the basis of actuarial valuation for the specific employees of the Appellant company.
5. a. in confirming disallowance of deduction u/s.35(2AB) on "Product development expenses of Rs.2,25,42,606/- related to period prior to the date of approval of in-house R&D facility y/s.35(2AB) , i.e. before 03-08-2010.
b. in not allowing the weighted deduction on expenditure incurred for clinical trials amounting to Rs.5,45,49,486/-.
6. in confirming the disallowance of 'demat charges' amounting to Rs.4,28,524/- made by the Assessing Officer.
7. in upholding the disallowance of purchases of Rs.61,172/- by treating the same as 'Bogus purchases'.
8. in confirming disallowance of rent paid of Rs.31,44,000/- for bungalow located at 70, Koregaon Park, Pune taken on lease (belonging to M/s. Poonawalla Finvest & Agro Pvt. Ltd., ZSP Group Company) for office of Director of appellant company and depreciation of Rs.12,97,701/- on the assets placed there at
9. a. not considering the 'cost of Electrical work and Civil work - Rs.20,82,47,820/- required to erect Windmill as integrated cost of Windmill eligible for @80% depreciation.
b. in not granting additional depreciation on Windmills generating "Power for captive consumption in spite of complying the provisions of sec. 32(1)(iia).
4 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
10. in confirming disallowance of Selling and Distribution expenses of Rs.3,64,81,120/-.
11. in confirming the action of A.O. for not directing the AO to reduce Wealth Tax paid of Rs.20,45,836/- for computing book profit u/s.115JB.
12. The appellant craves leave to add/alter/withdraw any of the Grounds of Appeal at the time of appeal proceedings. Your appellant further submits that the grounds of appeal are, save as otherwise specified, notwithstanding and without prejudice to each other. 4.1 Assessee also filed modified grounds and the same read as under:
"1a. The Ld.CIT(A) ought to have held that no disallowance u/s.14A(2) r.w.r.8D can be sustained in the absence of a specific recording of satisfaction by the A.O. based on cogent material and having regard to the accounts of the assessee, to the effect that the claim of the assessee is not correct.
b. The Ld.CIT(A) failed to appreciate that the A.O. made the disallowance merely on the basis of observation that "salaries and other administrative expenses are debited to P&L A/c for both taxable and tax free incomes, therefore it is difficult to accept that tax free incomes are earned without incurring these expenses."
Supplementary Ground to Ground -10.
10. "Disallowance of Selling & Distribution expenses have been partly set off against contingency offered, if the disallowance is deleted by Hon. ITAT, as a corollary, the addition of contingency may also be deleted in view of decisions of earlier years."
5. Before us, at the outset, Ld. Counsel for the assessee submitted that most of the grounds raised by the Revenue and the Assessee are covered issues in favour of the assessee. In this regard, Ld. Counsel submitted charts on the grounds raised by the Revenue as well as the Assessee. Therefore, we proceed to decide the issues raised in these appeals based on the said information.
We shall take up the issue-wise adjudication in the following paragraphs.
6. Ground No.1(a) : If the disallowance made by the AO u/s.14A r.w. Rule 8D(2) of the I.T. Rules, 1962 is sustainable when there is no satisfaction invoking the provisions of the Act/Rules.
5 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 6.1 Bringing our attention to the assessment order in this regard, Ld. Counsel for the assessee submitted that, on similar satisfaction mentioned by the AO, the Tribunal in the assessee's own case for the A.Y. 2009-10 and in the group case of the company - Poonawalla Investments and Industries Ltd. Vs. DCIT in ITA Nos. 245 to 250/PUN/2016 for A.Yrs. 2006-07 to 2011-12, dated 28-02-2018 deleted the disallowance made u/s.14A of the Act. In this regard, he read out the following lines from the assessment order :
"5.1 . . . . . . . . It is difficult to accept the proposition that all the tax free income has been earned without incurring these expenditures and these expenditures were incurred only for earning taxable income. Further, assessee has disallowed expenditure on Adhoc basis without applying rule 8D.
Therefore, I am satisfied that the assessee has not made adequate disallowance as mandated u/s.14A of the I.T. Act and therefore, the case of the assessee is a fit case for computation of the said disallowance u/s.14A of the I.T. Act."
6.2 After hearing both the sides on this issue, perusing the orders of the Revenue and the assessee's own case for the A.Y. 2009-10, we find the AO did not give the satisfaction having regard to the book of account of the assessee. Further, with similar kind of satisfaction in the case of Poonawalla Investment and Industries Pvt. Ltd. (supra), we hold that the same falls short of the requirement. For the sake of completeness, relevant paras are extracted as follows :
"27. In connection with Ground No.1, Ld. Counsel for the assessee submitted that AO failed to record satisfaction which is required while invoking the provisions of section 14A of the Act r.w. Rule 8D of the I.T. Rules, 1962. Bringing our attention to the contents of Para No.5.1 of the assessment order, Ld. Counsel submitted that the AO failed to record the satisfaction before invoking the provisions u/s.14A of the Act. Further, Ld. AR read out the relevant lines from the said para of the assessment order. For the sake of completeness, we proceed to extract the same as under :
"5.1. . . . . . . .
It is difficult to accept the proposition that all the tax free income has been earned without incurring these expenditures and these expenditure were incurred only for earning taxable income. Therefore, I am satisfied that the assessee has not made adequate 6 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 disallowance as mandated u/s.14A of the I.T. Act and therefore, the case of the assessee is a fit case for computation of the said disallowance u/s.14A of the I.T. Act."
28. Further, Ld. AR for the assessee submitted that the above recorded satisfaction , is extremely general and it falls short of the legal requirement as provided in the judgement of Hon'ble Apex Court in the case of Godrej and Boyce Manufacturing Company Ltd vs. DCIT 394 ITR 448 (SC). Contents of Para No.37 of the said judgment is relied heavily and prayed for deletion of the addition made by the AO invoking the provisions of section 14A of the Act.
29. Ld. DR for the Revenue relied on the orders of the AO/CIT(A).
30. We heard both the parties on the issue relating to the issue of recording of satisfaction and perused the above extracted satisfaction recorded by the AO on this issue. We find the legal position was explained by the Hon'ble Apex Court and the Para No.37 of the judgment of Hon'ble Apex Court in the case of Godrej and Boyce Manufacturing Company Ltd. (supra) are relevant. Hon'ble Supreme Court explained the provisions of sub-section (2) and (3) of section 14A of the Act. For the sake of completeness, we proceed the extract the same here as under :
"37. We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002-03. Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." (emphasis supplied).
31. The above ratio was adopted by the Pune Bench of the Tribunal in the case of Capgemini Technology Services India Limited, (in the matter of iGate Computer Systems Limited, (formerly Patni Computer systems Limited amalgamated with iGate Global Solutions Limited and name changed) Vs. DCIT vide ITA Nos. 216 and 360/PUN/2015, order dated 25-01-2018 and allowed the issue in favour of the assessee. For the sake of completeness, relevant operational paras are extracted here as under :
"34. We have heard the rival contentions and perused the record. The Assessing Officer while passing the assessment order in para 10 had observed that the assessee had earned significant amount of tax free dividends and in the computation of income, the assessee has disallowed sum of Rs.50 lakhs under section 14A of the Act. Then, reference is made to the Note filed by the assessee on expenditure disallowable under section 14A of the Act. The Assessing Officer thereafter, takes note of the contents of said explanation and observed as under:-
7 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 "I have gone through the submissions made by the assessee. It is observed that apart from investments in the overseas subsidiaries (where there is no tax-free income since the dividend is also taxable) the investments made by the assessee are in mutual funds. The entire investment in mutual fund is in non-equity scheme. In respect of investment in mutual funds, except for growth funds, the company receives tax free dividend. The amount of dividend received by the company is substantial. This is a clear case for application of Rule 8D. Hence, the contention of the assessee cannot be accepted. The disallowance u/s 14A is required to be made by applying Rule 8D. As per the working of disallowance u/s 14A as per Rule 8D, the amount of disallowance comes to Rs.5,68,32,323/-. The assessee has already disallowed Rs.50,00,000/- in the computation of income."
35. The requirement of section 14(2) of the Act is that the Assessing Officer is to record as to why the disallowance made by the assessee i.e. Rs.50 lakhs under section 14A of the Act is not correct. The Assessing Officer takes note of the disallowance, considers the explanation of assessee and holds that the contention of assessee cannot be accepted. The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC).
"37. We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002-03. Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable."
(underline provided by us for emphasis)
36. The ratio laid down by the Hon'ble High Court of Delhi in Indiabulls Financial Services Ltd. Vs. DCIT (supra) is thus, not applicable. The ground of appeal No.3 raised by the Revenue is thus, dismissed."
32. From the above, we are of the view that the satisfaction recorded by the AO in Para No.5.1 is extremely based on the suspicion and surmises. The satisfaction arrived at by the AO with reference to the entries in the books of account of the assessee and also having regard to the correctness of the claim of the assessee. In that sense of the matter, the satisfaction recorded by the AO is extremely generic and which falls 8 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 short of the legal requirement for assuming jurisdiction u/s.14A of the Act.
Considering the above position, we are of the view that the AO failed to record the sustainable satisfaction before invoking the provisions of section 14A of the Act. Therefore, the disallowance made by the AO is unsustainable technically. Accordingly, this part of the argument of Ground No.1 is allowed. We find adjudication of the other issues of the said ground relating to merits becomes an academic exercise. Therefore, the same are dismissed as academic."
Therefore, on the technical grounds, the Ground No.1(a) raised by the assessee on the issue of satisfaction stands allowed in favour of the assessee.
Ground No.1(b), being on merits of quantification of disallowable expenditure u/s.14A of the Act, is dismissed as academic in view of the relief granted to the assessee in Ground 1(a). Accordingly, Ground No.1
(a) & (b)/modified grounds 1(a) and (b) stand partly allowed.
7. Ground No.2 raised by the assessee relates to disallowance of foreign travel expenses of employees amounting to Rs.12,38,850/- 7.1. Relevant facts of the issue include that the AO treated the said foreign Travel expenses as capital in nature as against the claim of assessee as revenue expenditure. Assessee contended that the expenditure is incurred by senior executives in the normal course of business and 75% of the assessee's turnover is on exports and therefore, the expenditure is allowable u/s.37(1) of the Act. The AO considered the decision of his predecessor in assessee's own case for the A.Y. 2006-07 where the matter was travelled upto the Tribunal and the Tribunal confirmed the same. Therefore, considering the above facts, AO concluded that the assessee travelled abroad for acquiring machinery and thus denied the benefit to the assessee. In the First 9 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 Appellate proceedings, the CIT(A) upheld the views of the AO. Aggrieved with the order of CIT(A) the assessee is in appeal before us. 7.2. Before us, Ld. Counsel submitted that the expenses incurred are purely for the business purposes. He further submitted in the assessee's own case for the A.Y. 2009-10 the Tribunal relying on the order of Tribunal for the A.Y. 2008-09 remitted the issue to the file of AO for verification. He submitted that, in this year also, the issue may be remitted to the file of AO for verification of facts. 7.3 Per Contra, Ld. DR relied on the orders of the AO/CIT(A). 7.4 On hearing both the sides on this issue, we find the Tribunal in the assessee's own case for A.Y. 2009-10 remitted the matter to the file of AO. We proceed to extract the findings of the Tribunal and the same reads as under :
"31. However, on the issue of capitalization of the expenditure, in view of the assessee's submission that the expenses incurred for the purpose other than the purchase of machinery, needs to be verified by the AO, we find this issue needs to be remitted back to the file of AO for verification of correctness of the facts relating to this claim. AO is directed to verify the expenses in this regard after granting reasonable opportunity of being heard to the assessee. Assessee is directed to produce relevant documents to substantiate his claim. Accordingly, Ground No. 2 raised by the assessee is allowed for statistical purposes."
7.5 Following the same reasoning, we are of the view that this grounds needs to be remitted to the file of AO. Thus, Ground No.2 raised by the assessee is allowed for statistical purposes.
8. Ground No.3 raised by the assessee relates to classification of items of fixed assets amounting to Rs.40,60,897/-. 8.1 Relevant facts of this issue include that the AO classified certain items as Furniture and allowed depreciation at the rate applicable to Furniture and certain items as Plant and Machinery and allowed 10 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 depreciation at the rate applicable to them by applying functional test. Eventually, in the assessment made u/s.143(3) r.w.s. 153A of the Act, the AO made addition of Rs.1,08,291/- being difference in depreciation @10% and 15% on some items under block of Plant and Machinery treating the same as Furniture. Before the CIT(A), the assessee submitted that this issue has been decided by the Tribunal for the A.Yrs. 2006-07 and 2007-08. The CIT(A) after considering the submissions of the assessee and the order of CIT(A) partly allowed the appeal of the assessee. Contents of Para No.7.1 of the order of CIT(A) are relevant.
8.2. Before us, Ld. Counsel for the assessee submitted that this issue is consistently being allowed in favour of the assessee in the earlier years A.Y. 2006-07 to 2009-10. Therefore, Ld. Counsel prayed for allowing the ground.
8.3 After hearing both the sides, we find this issue is settled one in favour of the assessee by virtue of the orders of Tribunal in the A.Yrs. 2006-07 to 2009-10. Considering the same and following the rule of consistency, we allow the ground No.3 raised by the assessee.
9. Ground No.4 raised by the assessee relates to disallowance made by the AO on account of 'provision for Leave Encashment' amounting to Rs.18,16,795/-.
9.1 Before us, Ld. Counsel for the assessee submitted that the issue stands decided against the assessee by the orders of Tribunal in assessee's own case 2008-09 & 2009-10.
9.1 We heard both the sides and perused the orders of the Revenue as well as the order of the Tribunal in the assessee's own case for the A.Y. 2009-10 and find this issue stands decided against the assessee in 11 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 the earlier assessment years. Considering the same, without going into the merits, we dismiss this Ground No.4 raised by the assessee.
10. Ground No.5 relates to confirmation of disallowance on account of Product Development expenses amounting to Rs.2,25,42,606/-. 10.1 Relevant facts on this issue include that the assessee an amount of Rs.19,08,48,208/- has been claimed as revenue expenditure u/s.35(2AB)of the Act. AO did not allow the weighted deduction of the expenses incurred prior to 03-08-2010 (approval date). In the First Appellate proceedings, the CIT(A), relying on the order of Tribunal in the case of M/s.Advik Hightech Pvt. Ltd. 51 taxmann.com 245, confirmed the addition made by the AO.
10.2 Before us, assessee submits that it has all the approvals in place from the prescribed authority which are applicable for the period under consideration. However, the CIT(A) emphasized that the approval for revenue expenses should be available from 03-08-2010. Assessee submitted that section 35(2AB) was introduced with a view to encourage the R&D in industrial sector and nowhere it is mentioned R&D facility is to be approved from a particular date. For this proposition, he relied on the following decisions :
1. CIT Vs. Claris Life Sciences Ltd. 326 ITR 251 (Guj.)
2. Maruti Suzuki India Ltd. Vs. UOI 84 taxmann.com 45 (Delhi HC)
3. Banco Products (India) Ltd. Vs. DCIT 95 taxmann.com 132 (Gujarat).
Ld. AR for the assessee further submitted that it carried out the scientific research in the facility approved by DSIR. Assessee incurred various expenditure which includes expenses on clinical trials for 12 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 product development which are conducted out of the approved facility and the reasons behind the same are :
"i. Clinical drug trial is an integral part of R&D activity carried by the approved R&D unit.
ii. Due to peculiar nature of vaccines, practically of bringing subjects of clinical trials to the approved R&D facility and regulatory requirement of Ministry of Health, such trials are required to be necessarily carried out in the approved Government Hospitals.
iii. While conducting such clinical trials, company's R&D personnel retail ultimate control over and remain responsible for the activities of clinical trial even if such activities are carried out by the external agencies outside the approved facilities.
Assessee further submitted that the CIT(A) failed to take note of Explanation to section 35(2AB)(1) of the Act introduced by Finance Act, 2001 w.e.f. 01-04-2002 and relied on the decision in the case of CIT Vs. Cadila Health care Ltd. 31 taxmann.com 300 (Gujarat).
10.3 On the other hand, Ld. DR for the Revenue relied heavily on the orders of the AO and the CIT(A).
10.4 We heard both the sides and perused the orders of the Revenue as well as the submissions made by the assessee before us. We find the Hon'ble Delhi High Court in the case of M/s.Maruti Suzuki India Ltd.
Vs. UOI held as under :
"40. The settled position in law is that, for availing the benefit under Section 35 (2AB) of the Act what is relevant is not the date of recognition or the cut- off date mentioned in the certificate of the DSIR or even the date of approval but the existence of the recognition. If a R&D Centre is not recognised it is not entitled to deduction but if it is recognised, it is entitled to the benefit. The Gujarat High Court in Claris Lifesciences (supra) has rightly observed that the date of approval of the R&D Centre, not being a part of the provision, extending benefit only from the date of recognition "amounts to reading more in the law which is not expressly provided".
41. Section 35 (2AB) clearly provides that any expenditure incurred by a party on its R&D facility except, insofar as it relates to land and building is liable to be allowed to be claimed as deduction (twice the amount of expenditure). A perusal of the scheme of the Act especially Sections 35 (2AB), 35A and 35AB reveals in no uncertain terms, that the purpose 13 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 behind these provisions is to provide impetus for research, development of new technologies, obtaining patent rights, copyrights and know-how.
42. Insofar as the Apollo Tyres (supra) is concerned, in the said case, the Petitioner had omitted to apply for approval under Form 3CK, though recognition was granted to its R&D Centre. The said Form 3CK consists of the Agreement to be entered into with the DSIR, in Part B. The omission by the Petitioner was held against it and this Court held that since the Petitioner had omitted to obtain the approval under Form 3CK, it is not entitled to the benefit of Section 35(2AB) since 2004. The facts of the present case are different and there has been no omission by the Petitioner herein to obtain approvals. The stage for approval arises after the recognition is granted by the DSIR, for which the application was filed right at inception by the Petitioner. Upon obtaining recognition, which was granted on 26th March 2014, the Form 3CK was filed on 31st March 2014. There has been no lapse of time, unlike in Apollo Tyres (supra) wherein the recognition was granted on 31st March, 2004 and the Form 3CK application was made only on 21st August, 2008. Thus the present case is clearly distinguishable from the facts in Apollo Tyres (supra).
43. In the present case, it could be true that there are some errors in the Petitioner's application dated 31st October, 2011, however, one cannot ignore that since 2011, the Petitioner has been candid with the DSIR about its expenses for the Gurgaon and Rohtak R&D Centres and has given the break-up of the expenditure incurred thereupon; has submitted the Auditor's certificate required for the same; has entered into an agreement with the DSIR as required for sharing of technologies; and has also repeatedly requested for certification of the expenditure incurred by it. Under such circumstances, an isolated error in an application cannot result in the entire benefit itself being refused to the Petitioner resulting in it being deprived of the deduction as permissible under Section 35 (2AB).
44. In the facts and circumstances of the present case, this Court holds that the Petitioner is entitled to deduction under Section 35 (2AB) of the Act for the expenditure in respect of its Rohtak R&D Centre as per the provisions of Section 35 (2AB) for AYs 2011-12, 2012-13 and 2013-14. Accordingly, the Corrigendum dated 7th May, 2015 is set aside and the Respondent No.1 DSIR is directed to issue a fresh certification in Form 3CL in respect of the expenditure on scientific research on the Rohtak R&D Centre of the Petitioner for AYs 2011-12, 2012-13 and 2013-14. Since the DSIR has already issued the certification for the Gurgaon R&D centres, for AYs 2012- 13 and 2013-14, no orders are called for in that respect. The Respondent No.2 is further directed to give consequential deductions as per Section 35 (2AB) to the Petitioner.
10.5 From the above, it is evident that the assessment year specific approach is the decided issue legally and not the date specific approach. We find the facts are somewhat identical to the facts of the present case.
Considering the above, we allow the Ground No.5 (a) and (b) needs to be remanded to the file of AO for fresh adjudication on the 14 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 matters. AO shall follow the above judgment with reference to the issue raised in Ground 5(a) and 5(b). AO is directed to decide the issue in the set aside proceedings after granting reasonable opportunity of being heard to the assessee. Accordingly, Ground 5(a) and 5(b) are allowed for statistical purposes.
11. Ground No.6 raised by the assessee relates to addition of Rs.4,28,524/- u/s.48 of the Act made on account of demat charges which was claimed as expenditure incurred for earning income from capital gains.
11.1 Relevant facts on this issue include that assessee debited the said sum to the profit and loss account and claimed that the same should be allowed while computing the capital gains. Assessee relied on the decision of Bangalore Bench of the Tribunal in the case of Infosys Technologies Vs. JCIT 109 TTJ 631 (Bang.). Assessee contended that the said expenses has been incurred in the normal course of business and the dematerialization helped the assessee significantly in reducing the administrative costs. AO opined that the expenditure incurred for maintenance of share transactions from demat account is not to be allowed u/s.48 of the Act since the expenditure was not incurred wholly and exclusively in connection with such transfer or as the cost of acquisition and cost of improvement thereto and thus made the disallowance of sum of Rs.4,28,524/-. While doing so, the AO relied on the decision of Kolkata Bench of the Tribunal in the case of ACIT Vs. Sri Raghupati Singhania - ITA No.1761/Kol/2010.The CIT(A) upheld the disallowance made by the AO relying on the earlier orders. Aggrieved with the order of CIT(A), the assessee is in appeal before us.
15 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 11.2 Ld counsel for the assessee at the outset submitted that the issue stands decided in favour of the assessee by virtue of the order of Tribunal in the assessee's own case for the A.Y. 2009-10. The Tribunal in the said order relied on the decision of the Pune Bench of the Tribunal in the case of KRA Holding and Trading Pvt. Ltd. Vs. DCIT and vice-versa vide ITA No.703/PN/2012 & ITA No.665/PN/2012 order dated 19-09-2013 for A.Y. 2008-09 and held that the claim of Portfolio Management Fees is an allowable expenditure from such capital gain. 11.3 Ld. DR for the Revenue relied heavily on the orders of the AO/CIT(A).
11.4 On hearing both the sides and on perusing the decision of the Tribunal in the assessee's own case for the A.Y. 2009-10, we find the issue of allowing the demat charges, stands decided in favour of the assessee. Therefore, following the same reasoning, we allow Ground No.6 raised by the assessee.
12. Ground No.7 relates to disallowance of purchases made by the assessee treating them as bogus purchases.
12.1 Relevant facts include that based on the information received from Sales Tax Department through DGIT (Inv.), Pune, the AO noticed that assessee purchased some goods from the parties whose names are listed in the suspected suppliers providing accommodation entries. In the assessment proceedings, assessee claimed these purchases as genuine. Alternatively, the assessee claimed the quantum of purchases for the year under consideration may be treated as inflated and the set off may be given against the non-business expenditure offered during search action at Rs.2.25 crores. However, in the absence of producing the parties and substantiating the claim with supporting evidences, the 16 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 AO treated the same as non-business expenditure. The contention of the assessee to give set off against the non-business expenditure is allowed. In the First Appellate proceedings, the CIT(A) upheld the action of the AO.
12.3 Aggrieved with the action of the CIT(A), the assessee is in appeal before us.
12.4 Before us, Ld. Counsel for the assessee submitted for remanding the issue to the file of AO by virtue of decision of Pune Bench of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, decided on 28-04-2017.
12.5 Ld. DR for the Revenue relied heavily on the orders of the AO/CIT(A).
12.6 On hearing both the sides, we are of the opinion that the matter should be remanded to the file of CIT(A) for deciding the issue in the light of classification of various groups of suppliers as done by the Tribunal while adjudicating the appeal in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, decided on 28-04-2017. In this case, the Tribunal analysed various beneficiaries of such bogus entry operators and depending on the submission of the evidences with regard to the trail of goods, payment etc. the Tribunal identified 4 types of categories. For the sake of completeness, we proceed to extract the said paragraphs from the order of the Tribunal (supra) and the same read as under :
"40. In view of the above said ratios, the present issue of bogus purchases is to be decided on the basis of facts of each case. The first aspect is the information received by the Assessing Officer from the Sales 17 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 Tax Department in respect of alleged hawala dealers. In many cases, the Assessing Officer has not even received the copy of statement recorded or any other evidence from the Sales Tax Department, except the list of hawala dealers and on the basis of the said list, the assessment proceedings have been completed in the hands of assessee, who had made the purchases from the said parties. In case, no such evidence has been received by the Assessing Officer before making addition, then there is no warrant in making aforesaid addition in the hands of assessee merely on the basis of so called list of hawala dealers. There are other cases, where the Assessing Officer had received the statement of the persons who were hawala dealers and who had admitted to have just issued bills of sale without delivery of goods. In such circumstances, there is evidence against the respective assessee that where the seller of the goods, has admitted not to have entered into real transaction of sale of goods. Against such non- transaction, there can be no delivery of goods, then it is case of passing of bills of sale and purchases, against which no VAT has been paid. Such bogus purchases are then to be added in the hands of assessee. Where the Assessing Officer had confronted the assessee with the information received, supplied copies of statements and where the persons have not been traced and no confirmation has been filed by the assessee in this regard, then the addition is to be made in the hands of assessee on account of such bogus purchases. In the facts and circumstances of some cases, the goods have been transferred by such hawala dealers to the respective purchasers, against which the assessee has to discharge onus of establishing the trail of goods which are transferred and further sold by them. Where the assessee is able to produce evidence of purchase of goods by way of weighment bridge receipts, transportation documents, payment of octroi and subsequent sale of goods to the respective parties and / or where the assessee has maintained complete quantitative details of purchase and sale of goods, then total bogus purchases cannot be added in the hands of assessee, but GP rate of 10% is to be applied on bogus purchases. Where the assessee does not establish its case, then the complete bogus purchases are to be added as hawala purchases. Further, in cases, where the statements are recorded and copies of which have been supplied to the assessee and assessee established the case of receipt of goods and its onward transmission by way of sale bills, then the factum of purchases by the assessee stands established in such circumstances. However, the benefit of purchases being made from grey market, needs estimation in the hands of assessee. The Tribunal has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases. Accordingly, it is so held. In view thereof, the issues which emerge are as under:-
I. In case no information is received by the Assessing Officer from the Sale Tax Department and no copy of statement recorded or any other evidence is received from the Sales Tax Department, then no addition is to be made on the basis of name of hawala dealer in the list prepared by the Sales Tax Department, where the assessee had asked for the said information during assessment proceedings.
II. Where the Assessing Officer had received the statements of persons who had admitted to have just issued bills of sale without any delivery of goods. In view of such evidence, where the assessee had not entered into real transaction of purchase of goods and in the absence of any delivery of goods, the sales are bogus and the entire sales are to be added in the hands of assessee. Admittedly, the dealer had not even paid VAT against such passing of goods.
III. The case where the Assessing Officer had confronted the information received from the Sales Tax Department and had supplied copies of statements recorded and had also issued notice under section 133(6) of the Act, where hawala dealer was not traceable and in the absence of the assessee failing to file any documentary evidence of delivery of 18 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 goods, addition is to be upheld in the hands of assessee on account of such bogus purchases.
IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintained quantitative details and also evidence of its movement i.e. transportation details and quality control details of consumption of the said material or exact details of sale of the same consignment through same transporter directly to the party, then the total purchases cannot be added in the hands of assessee. However, since the purchases are made from the grey market, some estimation needs to be made in the hands of assessee. The Tribunal in M/s. Chetan Enterprises Vs. ACIT (supra) has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases, over and above the GP shown by the respective assessee.
V. Another set of cases where the statements recorded by the Sales Tax Department have been handed over to the assessee and the copies of same have been supplied to the assessee, then where the assessee established the case of receipt of goods and its onward transmission, then the factum of purchases by the assessee stands established in such circumstances. However, estimation is to be made in the hands of assessee because of purchases from the grey market and following the above said ratio, addition is to be made by estimating the same @ 10% of the alleged hawala purchases, over and above the net profit shown by the assessee.
41. Now, coming to the factual aspects of each of the appeal, which have already been referred to by the learned Authorized Representative for the assessee and also refer to the orders of authorities below, where none has appeared on behalf of the assessee.
42. The lead case is in the case of M/s. Chhabi Electricals Pvt. Ltd., where the grievance of the assessee is that the Assessing Officer before making the addition has not even supplied the copy of statement or any other evidence recorded by the Sales Tax Department to establish that the purchases made by the assessee were bogus. I have already decided this issue in M/s. Chetan Enterprises Vs. ACIT (supra) and held that in cases where the Assessing Officer has failed to supply such statement recorded by the Sales Tax Department or any other evidence justifying the addition, no addition is to be made in the hands of assessee. The grounds of appeal raised by the assessee are thus, allowed. The learned Authorized Representative for the assessee has further referred to various documents i.e. gate pass, GRN and issue pass establish its case of delivery of goods i.e. purchase from hawala dealer and its onwards consumption in the manufacturing process of the assessee. In such circumstances, where the assessee has established the trail of goods purchased to the final consumption, then there is no merit in the addition made by the Assessing Officer. Thus, the grounds of appeal raised by the assessee are allowed and appeal of the assessee is allowed."
12.7 Further, we find the said decision of the Tribunal is not available at the time of passing of order by the CIT(A) on 29-01-2016. In all fairness, we are of the opinion that the matter should be remanded to the file of CIT(A) for considering the above decision of the Tribunal and 19 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 apply the ratio laid down to the facts of the present case. Accordingly, the ground No.7 raised by the assessee on merits is allowed for statistical purposes.
13. Ground No.8 raised by the assessee relates to the addition made on account of rent paid for the property at Bungalow No.70, Koregaon Park amounting to Rs.31,44,000/- and depreciation at Rs.12,97,701/-.
13.1 Background facts of this issue include that there is house property at 70, Koregaon Park and the same is owned by Poonawalla Finvest and Agro Pvt. Ltd. The said property is occupied by Mr. Z.S. Poonawalla (Director of both Poonawalla Finvest and Agro Pvt. Ltd. and Serum Institute of India Ltd.). He is the brother of Dr. Cyprus Poonawalla. Considering the heritage value of the property as well as the occupation of the said property by Mr. Z.S. Poonawalla (Director of the company), the Serum Institute incurred huge expenditure on the repairs and renovation of the said house. Further, to compensate the housing facility provided to its own Director, Serum Institute paid rent of Rs.31,44,000/- per annum over the years including the year under consideration. Allowability of the said expenditure incurred the rent and the repairs/renovation was the bone of contention between the assessee and the Revenue over the years. In the First Appellate proceedings, the CIT(A) dismissed the ground raised by the assessee stating that the issue is same as that of A.Y. 2010-11. 13.1 Before us, Ld. Counsel for the assessee submitted that, the Tribunal decided the issue in favour of the assessee holding that the said expenditure incurred on repairs and renovation constitutes revenue expenditure and allowable u/s.37(1) of the Act in the case of 20 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 Serum Institute of India Ltd, The decision of the Tribunal in this regard are already cited by the assessee's counsel before us.
Additionally, the rent of Rs.31,44,000/- lakhs paid by Serum Institute of India Ltd. to Poonawalla Finvest and Agro Pvt. Ltd. is also held as an allowable deduction in the case of Serum Institute of India Ltd. over the years including A.Y. 2006-07. Contents of Para Nos. 24 to 27 of the order of Tribunal in ITA Nos. 985 and 986/PN/2015 and ITA Nos.1535 & 1536/PUN/2015, dated 28-11-2007 for the A.Yrs. 2006-07 and 2007-08 are relevant.
13.2 We heard both the sides, perused the orders of the Revenue and the order of Tribunal for the A.Y. 2009-10. We find it relevant to reproduce the finding given by the Tribunal and the same reads as under :
"54. We heard both the sides and perused the orders of the Revenue and the order of the Tribunal in the assessee's own case for the A.Yrs. 2006-07 and 2007-08. On perusal of the said order of the Tribunal (supra), it is evident that the ground raised in this appeal relates to rent as well as expenditure incurred on repairs and renovation. At the end of the proceedings, the Tribunal allowed the ground raised by the assessee.
We find it relevant to extract the relevant paras of the Tribunal (supra) and the same reads as under :
"25. On this issue, Ld. Counsel for the assessee submitted that similar issue was adjudicated in assessee's own case for A.Y. 2005-06 in his favour. Bringing our attention to Para Nos. 35 to 37 of the order of the Tribunal in ITA No.1703/PN/2014 dated 30-11-2016, Ld. Counsel for the assessee submitted that the expenditure incurred on Repairs/Renovation of the Bungalow was allowed, as 'business expenditure' of the assessee.
26. On hearing both the sides on this issue, we perused the said paragraphs of the order of the Tribunal in assessee's own case dated 30- 11-2016 and for the sake of completeness, we proceed to extract the relevant lines of the operational para. The same reads as under :
"35. In view of the above discussion, we are of the considered opinion that the expenditure of Rs.1,17,88,000/- incurred on repairs and renovation on bungalow located at 70, Koregaon Park, Pune has to be allowed as a business expenditure in the hands of the assessee company. We therefore set aside the order of the CIT(A). The ground raised by the assessee is accordingly allowed."
21 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
27. We find that the arguments raised by the Ld. DR for the Revenue are identically raised in the said appeal proceedings for A.Y. 2005-06. Following the decision of the Tribunal in assessee's own case for A.Y. 2005-06 (supra), we are of the opinion that this issue also should be allowed in favour of the assessee. Accordingly, Ground no.4 raised by the assessee is allowed."
Although, the above finding did not specify the rent expenditure in fact, the ground is on the rent only. Therefore, the ground raised by the assessee stands allowed in favour of the assessee. Considering the above decision of the Tribunal in assessee's own case, we are of the opinion that the expenditure on account of rent paid on the house property is allowable in favour of the assessee.
55. Regarding the other limb of ground relating to allowability of depreciation of capital expenditure in connection with the said house property at 70, Koregaon Park, it is now settled legal issue that the expenditure by Serum Institute of India Ltd. constitutes an allowable expenditure so long as there are revenue in nature. Regarding the expenditure of capital nature of same analogy, assessee only wanted allowability of depreciation on the said capitalised expenditure considered for business purposes.
56. On hearing both the parties on this issue, we find there is no clarity with reference to the capitalised items of assets credited to the Serum Institute of India Ltd. in the said house premises occupied by Mr. Z.S. Poonawalla, applicable rate of depreciation and the use of the asset etc. As discussed in the open court, we are of the opinion that this limb of the ground should be remanded to the file of AO for fresh adjudication after granting reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly, this part of the issue is allowed for statistical purposes. Thus, Ground No.8 is partly allowed for statistical purposes.
13.3 Considering the above, we are of the opinion that, with similar directions given in A.Y. 2009-10 (supra) this grounds is remanded to the file of AO for fresh adjudication. Accordingly, the Ground No.8 by the assessee is allowed for statistical purposes.
14. Ground No.9 relates to allowability of depreciation @80% on the cost and Electrical and Civil Works amounting to Rs.20,82,47,820/-.
14.1 Relevant facts on this issue include that, during the impugned assessment year, assessee installed windmill and claimed depreciation @80% on the same. The AO relying on the decision of Tribunal in the case of Poonawalla Finvest and Agro (P) Ltd. Vs. ACIT 118 TTJ 68 22 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 allowed the depreciation at the rate of 10% and 15% on building/civil construction and transformer. In the First Appellate proceedings, the CIT(A) relying on the decision of Pune Bench of the Tribunal in the case of Ghodawat Energy Pvt. Ltd. in ITA No.1986/PN/2012, dated 14-07-2014 partly allowed the appeal of the assessee. We proceed to reproduce the operational para No.26 of the order of CIT(A) here as under :
"26. In the present case it can be seen that the AO has disallowed the appellant's claim of accelerated depreciation on the civil foundation work of Rs.14,20,32,000/-. Following the above cited ITAT order the AO may treat 60% of this as part of the windmill eligible for 80% depreciation and 40% as civil work eligible for normal rate of depreciation. The AO shall verify the details, apply the functional test as held by the honourable Tribunal and allocate the electric work also in a like fashion. The ground of appeal is allowed partly, subject to above discussion. As regards the claim of additional depreciation, the amendment cited by the appellant is not retrospective. The contention is therefore rejected."
14.2 Aggrieved with the part relief given by the CIT(A) the assessee is in appeal before us.
14.3 Before us, Ld. Counsel for the assessee submitted that the company considered the expenditure incurred on Electrical as well as Civil work and labour charges as an integral cost so as to make the windmill functional. However, the AO deviating from the principles of capitalization isolated certain expenses allowed the depreciation at different rates and the dispute depreciation amount works out to Rs.9,20,56,123/-. In support of its claim, Ld. Counsel relied on the following decisions :
1. CIT Vs. Cooper Foundry Private Ltd. - ITA No.1326/2010 (Bombay High Court)
2. CIT Vs. Infrastructure Leasing & Financial Services Ltd. 69 taxmann.com 20 (Bombay)
3. CIT Vs. CTR Manufacturing Industries Ltd. - ITA No.2125 of 2025 (Bombay High Court) 23 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 In connection with granting of additional depreciation on windmills generation power for captive consumption, despite complying the provisions of section 32(1)(iia) of the Act. Ld. Counsel contends that the generation of Electricity falls under the ambit of production of any article or thing. For this proposition, he relied on the following decisions :
1. CTR Manufacturing Industries Ltd. Vs. DCIT - ITA No.2456/PUN/2012 (Pune ITAT)
2. Giriraj Enterprises Vs. DCIT 163 ITD 1 (Pune Trib.) (TM) 14.4 We heard both the sides and perused the orders of the Revenue on this issue and the decisions relied on by the Ld. Counsel for the assessee. We find the Hon'ble Bombay High Court in the case of CIT Vs. Cooper Foundary Pvt. Ltd. on the identical issue has held as under :
"2. The Tribunal has recorded finding of fact that windmill was erected in the desert area of Rajasthan which required special foundation of reinforced cement concrete and that the said reinforced cement concrete formed integral part of the windmill. The Tribunal has also followed the decision of this Court in the case of CIT Vs. Herdilla Chemicals Ltd. reported in (1005) 216 ITR 742 (Bom.) in allowing the claim of the assessee. In our opinion, the finding recorded by the Tribunal that RCC foundation forms integral part of the windmill is a finding of fact and no question of law arises from the same. Hence the appeal is dismissed with no order as to costs.
14.5 Further, we find the Pune Bench of the Tribunal also decided similar issue in catena of decisions. We find in the case of DCIT Vs. Shri Subhas Hastimal Lodha in ITA No.1078/PUN/2016 for the A.Y. 2011-12, dated 20-06-2018 held as under :
"5. We heard both the sides on this limited issue of allowing of depreciation @80% for civil structures of the windmill. We also perused the orders of the Revenue authorities and the decisions relied on by both the representatives. We find it relevant to extract the discussion given by the CIT(A) while concluding the issue in favour of the assessee and the same reads as under :
"3.1.2 During the course of appellate proceedings, in respect of Ground No.1 for restricting the allowance of depreciation on wind mill foundation civil work which resulted in addition of Rs.54,19,719, the Ld AR submitted that-
24 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
a) Addition on account of disallowance of depreciation on Wind Mill for A.Y. 2009-10 is pending before Hon'ble ITAT is totally wrong.
According, to the Ld AR there was no addition on account of disallowance of depreciation on Wind Mill and no appeal was filed before CIT(A) for A.Y. 2009-10 and no appeal is pending before ITAT.
b) AO has not considered the fact that the appellant himself has not claimed depreciation of Rs.12,43,100 being consideration paid for providing easy and free access and keeping the area vacant surrounding land.
c) Ld AR suggested that no expenses were incurred for control room, site development and internal road has claimed by. the AO and the depreciation of 10% has been allowed by Hon'ble ITAT, Pune in the case of Poonawala Finvest & Agro Pvt. Ltd. (2008) 118 TTJ 68.
d) Ld AR also submitted that foundation civil work in a integral part of Wind Mill on which depreciation @ 80% is allowable and this has been held in the following cases.
i) Mayura Steels Pvt. Ltd. Vs. ACIT ITA No1347/PN/2014 by ITAT 'B' Bench, Pune dated 26-10-2015.
ii) Dr. Santosh Kalmesh Prabhu Vs. ACIT ITA No.1294/PN/2014 by ITAT 'B' Bench, dated 28/10/2015
iii) ACIT Vs. Suma Shilipa Limited ITAT Pune (2015) 44 CCH
514.
e) Ld AR also submitted that CIT Vs. Sai Udyog Ltd. relied by AO is in no way applicable to the facts of this case. With the above, Ld AR for the appellant requested that additions of Rs.54,19,719 may kindly be deleted.
3.1.3 At the outset, the observation made by the AO that similar disallowances made for the AY 2009-10 is pending before the Hon'ble ITAT is factually incorrect. Adverting to the merit of the case, the quantum which remains is whether civil work and foundation necessary for installation of wind mill should be considered as integral part or not. If yes, then, depreciation as applicable to wind mill should be accorded to the civil structure and foundation needed to set up wind mill or not. In my considered view it is a well settled legal position that expenses incurred on foundation should be considered as an integral part of the plant and machinery. This fact has been reiterated by the Hon'ble Supreme Court in the case of Challapalli Sugars Ltd. Vs. CIT (Supra) wherein it has been decided that "fixed assets should include all the expenditure necessary to bring such assets into existence and put them in working condition. During the course of the appellate proceedings Ld AR while referring the ratio of decision of CIT Vs. K. K. Enterprise (2014) reported at 108 DTR 0109 (Raj), Hon'ble Rajasthan High Court has observed that the civil work and foundation is necessary for strong foundation and no windmill could be installed without having a strong foundation. As such depreciation on investment for civil work and foundation at the rate which the depreciation is allowed to windmill is applicable for these items too. The electrical items, components and common power evacuation too are integral part of a wind mill as that could have not been operational without these items". The 25 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 revenue challenged the decisions of the CIT(A) before the ITAT, Jodhpur be dismissed wherein the Hon'ble ITAT affirmed the findings given by the CIT(A) by holding as under:-
"Without doing the civil construction work including foundation work, it was not possible to install the windmill. Similarly, the electric items, components and installation were necessary for the wind mill, because in the absence of these components and electric items it was not possible for the windmill to produce electricity. Therefore, it was also the integral part of the windmill."
In this regard Hon'ble ITAT has also held that foundation of civil work is an integral part of windmill on which depreciation @ 80% is to be allowed. The above positions have been decided by Hon'ble ITAT, Pune in the case of Mayura Steels Pvt. Ltd. Vs. ACIT (Supra), in the case of Santosh Kalmesh Prabhu Vs. ACIT (Supra) and in the case of ACIT Vs. Suma Shilipa Limited (Supra). In the case of Mayura Steels Pvt. Ltd. Vs. ACIT (Supra), Hon'ble ITAT has followed the ratio of Hon'ble Gujarat High Court in the case of CIT, Ahmedabad-III Vs. Parry Engineering & Electronics (P) Ltd (Supra). The same is reproduced below for ready reference:-
"5. We are of the opinion that the approach of both the authorities is perfectly justified. Windmill would require a scientifically designed machinery in order to harness the wind energy to the maximum potential. Such device has to be fitted and mounted on a civil construction, equipped with electric fittings in order to transmit the electricity so generated. Such civil structure and electric fittings, therefore, it can be well imagined, would be highly specialized. Thus, such civil construction and electric fitting would have no use other than for the purpose of functioning of the windmill. On the other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plant. As already noted, the legislature has provided for higher rate of depreciation of 80% on renewable energy devises including windmill and any specially designed devises, which runs on windmill. The civil structure and the electric fitting, equipments are part and parcel of the windmill and cannot be separated from the same. The assessee's claim for higher depreciation on such investment was, therefore, rightly allowed."
3.1.4 Hon'ble Bombay High Court in the case of CIT-III, Pune Vs. Cooper Foundry Pvt. Ltd.(Supra) has also held that cement foundation is to be included in the cost of the windmill while granting depreciation @ 80%. Similar issue has been taken by Pune Bench "B" in the case of ACIT Vs. Western Precicast Pvt. Ltd. (Supra) and by Chennai Tribunal in the case of Kutti Spinners (P) Ltd. In view of the foregoing discussion and respectfully following the decisions of Bombay High Court in the case of CIT Vs. Great Eastern Shipping Co. Ltd. reported at 118 ITR 772 (Born) and Challapalli Sugars Ltd. Vs. CIT 98 ITR 167 (SC) and decision of Pune ITAT in the case of Mayura Steels Pvt. Ltd. Vs. ACIT (Supra), in the case of Dr. Santosh Kalmesh Prabhu Vs. ACIT (Supra) and in the case of ACIT Vs. Suma Shilipa Limited (Supra), I am of the considered view that higher depreciation is applicable in wind mill and also expenses incurred on civil structures are 26 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 applicable in wind mill and therefore the amount of Rs.54,19,719 disallowed by the AO on account of Hence, the AO is directed to delete the amount of Rs.54,19,719/- on account of excess depreciation. With this ground No.1 stands adjudicated in favour of the appellant.
5.1 Further, we find the Pune Bench of the Tribunal in the case of ACIT Vs. Suma Shilpa Limited 44 CCH 0514 (Pune-Trib.) has held as under :
Conclusion :
Civil construction and electrical work are specifically designed for operation of windmills and are not separable, therefore, depreciation on these structures/fittings have to be applied at same rate, as is available to principle asset.
Considering the binding precedents on this limited issue of allowing higher depreciation on the civil works linked to the foundation work of the windmill, we are of the opinion that the assessee is entitled to claim higher depreciation @80% on the civil structures of the windmill which is part and parcel of the windmill and which cannot be separated. Therefore, the order of CIT(A) holding that the higher depreciation is applicable in windmill and also expenses incurred on civil structure, is fair and reasonable and it does not call for any interference. Accordingly, the ground raised by the Revenue is dismissed."
14.6 Considering the above and following the rule of consistency, we allow Ground No.9 raised by the assessee in its favour.
15. Ground No.10 relates to disallowance of Selling and Distribution Expenses amounting to Rs.3,64,81,120/-.
15.1 Relevant facts on this issue include that, assessee during the year under consideration, launched various schemed for the doctors. On being asked as to why the expenditure on these schemes should not be disallowed u/s.37(1) of the Act, assessee furnished the reply. The AO incorporated the submission of the assessee on page 51 of the assessment order. The AO rejected the submissions given by the assessee relying on the CBDT Circular No.5/2012, dated 01-08-2012.
Eventually, the AO disallowed an amount of Rs.3,64,81,120/- u/s.37(1) of the Act. However, the AO allowed the set off of the same against the additional income disclosed by the assessee on non-business 27 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 expenditure/other expenses/contingency at Rs.6.07 crores. The CIT(A) dismissed the ground raised by the assessee relying on the order for A.Y.2010-11.
15.2 Aggrieved with the confirmation of disallowance by the CIT(A) on this issue, the assessee is in appeal before us.
15.3 Before us, Ld. Counsel for the assessee submitted that the CIT(A) failed to appreciate the fact that the assessee company is one of the largest vaccine manufacturing company. During the year, assessee company launched various new products, such as Hibpro & Pentavac. In order to make the doctors aware of this innovation, assessee company conducted a campaign involving private doctors for encouraging the doctors to conduct vaccination on infants. In the process, a scheme was formulated offering discount on the basis of purchases made by them. He submitted that the AO failed in placing relying on the Notification issued by Medical Council of India dated 14-09-2009. The said circular prohibits medical practitioners, professional associates from taking any gift, travel facility, hospitality etc. AO failed to appreciate that the Pharma companies are not the members of Medical Council and hence, the notification is not applicable to them. AO failed to appreciate the facts on records that the expenditure incurred by the assessee company by giving discounts as incentive to the doctors are wholly & exclusively for the purpose of business. Passing of the discounts is a post-facto step, which cannot be equated with freebies, which are prohibited by the notification of Medical Council of India. Since discounts on purchase of vaccines given to doctors do not violate any laws and hence, are not covered by Explanation u/s.37(1) of the Act. AO failed to appreciate that the Circular issued by CBDT No.5/2015 enlarges the scope of disallowance 28 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 in the hands of Pharma Companies without any enabling Notification or circular of Medical Council of India. In support of its claim, Ld. Counsel relied on the following decisions :
1. M/s. Solvay Pharma India Ltd. VS. PCIT 89 taxmann.com 249 (Mum. ITAT)
2. DCIT Vs. PHL Pharma Pvt. Ltd. 78 taxmann.com 36 (Mum. ITAT)
3. Emcure Pharmaceuticals Ltd. Vs. DCIT - ITA No.1532/PUN/2015 15.4 On the other hand, Ld. DR for the Revenue relied on the orders of the AO/CIT(A).
15.5 We heard both the sides and perused the orders of the Revenue and the decisions relied on by the Ld. Counsel for the assessee. We perused the decision of Pune Bench of the Tribunal in the case of Emcure Pharmaceuticals Ltd. decided on 29-01-2018 (supra) had an occasion to decide an identical issue in favour of the assessee. We proceed to extract the findings given by the Tribunal here as under for the sake of completeness :
"8. We heard both the parties on the issue of requirement of making disallowance u/s.37(1) of the Act in respect of the companies, the giver of the gifts and the articles and others to the medical professionals. There is no dispute on the fact that claim of Rs.76,28,622/- was by the assessee on the gifts and other benefits passed on to the medical professionals. There is also no dispute on the taxability of the same in the hands of the said medical professionals. The only dispute relates to the correct legal position with regard to disallowability of the same u/s.37(1) of the Act in the cases of Pharmaceutical companies. We find this issue is now squarely covered by the decisions of Mumbai Bench of the Tribunal in the case of DCIT Vs. PHL Pharma Pvt. Ltd.decided on 12-01-2017 and in the case of M/s. Solvay Pharma India Ltd. Vs. Pr.CIT decided on 11- 01-2018. For the sake of completeness of the order, we proceed to extract the operational finding from the aforesaid orders of the Tribunal.
Finding from PHL Pharma Pvt. Ltd.
"6. On a plain reading of the aforesaid notification, which has been heavily relied upon by the department, it is quite apparent that the code of conduct enshrined therein is meant to be followed and adhered by medical practitioners/doctors alone. It illustrates the various kinds of conduct or activities which a medical practitioner should avoid while dealing with pharmaceutical companies and allied health sector industry. It provides guidelines to the medical practitioners of their ethical codes and moral conduct. Nowhere the regulation or the notification mentions that such a regulation or code of conduct will cover pharmaceutical companies or health care sector in any manner. The department has not
29 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner........
The aforesaid provision applies to an assessee who is claiming deduction of expenditure while computing his business income. The Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies...........
10. From the perusal of the nature of expenditure incurred by the assessee, it is seen that under the head "Customer Relationship Management", the assessee arranges national level seminar and discussion panels of eminent doctors and inviting of other doctors to participate in the seminars on a topic related to therapeutic area. It arranges lectures and sponsors knowledge upgrade course which helps pharmaceutical companies to make aware of the products and medicines manufactured and launched by it. Under Key Account Management, the assessee makes endeavour to create awareness amongst certain class of key doctors about the products of the assessee and the new developments taking place in the area of medicine and providing correct diagnosis and treatment of the patients. The said activities by the assessee are to make the doctors aware of its products and research work carried out by it for bringing the medicine in the market and its results are based on several levels of tests and approvals. Unless the pharmaceutical companies make aware of such kind of products to key doctors or medical practitioners, then only it can successfully launch its products/medicines. This kind of expenditure is definitely in the nature of sales and business promotion, which has to be allowed...... Finding from M/s. Solvay Pharma India Ltd.
"17. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements cited by learned AR and DR during the course of hearing before us as well as referred by CIT in his order passed u/s.263 of the IT Act, in the context of factual matrix of the case. In this case, we found from record that the assessee is engaged in the manufacturing of pharmaceutical products. In the course of its business it has incurred expenditure on advertisement and publicity. While framing the assessment, AO has called for the detail of expenditure so incurred and examined the nature of expenditure and thereafter only AO has allowed the expenditure as having been incurred for the purpose of business. We had also carefully gone through the notification dated 11/03/2002 notifying the regulations issued by the Medical Council of India (MCI). The code of conduct laid down in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('MCI Regulations') issued with effect from 10th December 2009 applies only to doctors and not to Pharmaceutical and Medical device companies. Accordingly, MCI Regulations are not applicable to assessee, the question of assessee incurring expenditure in alleged violation of the regulations does not arise.
30 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
18. On the plain and simple reading of the provision of the Indian Medical Council Act, 1956, it is apparent that the ambit of statutory provisions relating to professional conduct of registered medical practitioners under the Indian Medical Council Act, 1956 is restricted only to persons registered as medical practitioners with the State Medical Council and whose names are entered into the Indian Medical Register maintained u/s 21 of the Act. 'Under the scheme of the Act.
19. Furthermore, there is no ambiguity of any kind in the scheme of the Indian Medical Council Act, 1956 that it neither deals with nor provides for any conduct of any association / society and deals only with the conduct of individual registered medical practitioners. There is no other interpretation, which is possible under the Act.
20. The intent of the applicability of the MCI Regulations was always to cover only individual medical practitioners, and not the pharmaceutical and medical device companies. Whether there is any contravention of the MCI Regulations or not is a matter which can be decided by the MCI itself and not by the Income-tax Department. Furthermore, the MCI has itself admitted that it has no jurisdiction whatsoever over any association/ society etc and its jurisdiction is confined only to the conduct of the registered medical practitioners. Furthermore, since the said MCI Regulations 2002 contains punitive "provisions, it has to be read strictly and consequently it can apply only to Medical Practitioners and Physicians and not to the pharmaceutical companies. Further, MCI Act, 1956 does not apply pharmaceutical companies and consequently MCI Regulations 2002 cannot apply to such companies.
21. CBDT Circular no. 5 of 2012 seeks to disallow expenditure incurred by pharmaceutical companies inter-alia in providing 'freebies' to doctors in violation of the MCI Regulations. The term "freebies' has neither been defined in the Income-tax Act nor in the MCI Regulations'. However, the expenditure so incurred by assessee does not amount to provision of 'freebies' to medical practitioners. The expenditure incurred by it is in the normal course of its business for the purpose of marketing of its products and dissemination of knowledge etc and not with a view to giving something free of charge to the doctors. The act of giving something free of charge is incidental to the main objective of product awareness. Accordingly, it does not amount to provision of freebies. Consequently, there is no question of contravention of the MCI Regulations and applicability of Circular no. 5 of 2012 for disallowance of the expenditure.
22. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, the assessee has brought to the notice of the bench the judgment of the Delhi High Court in the case of Max Hospital v. MCI in [WPC 1334 of 2013, dated 10- 1-2014], wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law/regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure.
31 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
23. Now coming to the Explanation to Section 37(1) invoked by the CIT, the Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies. Here the maxim of 'Expressio Unius Est Exclusio Alterius' is clearly applicable, that is, if a particular expression in the statute is expressly stated for particular class of assessee then by implication what has not been stated or expressed in the statute has to be excluded for other class of assessee. If the Medical Council regulation is applicable to medical practitioners then it cannot be made applicable to Pharma or allied health care companies. If section 37(1) is applicable to an assessee claiming the expense then by implication, any impairment caused by Explanation 1 will apply to that assessee only. Any impairment or prohibition by any law/regulation on a different class of person/assessee will not impinge upon the assessee claiming the expenditure under this section.
24. We observe that the CBDT Circular dated 1-8-2012 (supra) in its clarification has enlarged the scope and applicability of 'Indian Medical Council Regulation 2002' by making it applicable to the pharmaceutical companies or allied health care sector industries. Such an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The free sample of medicine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic areas, etc. Every day there are new developments taking place around the world in the area of medicine and therapeutic, hence in order to provide correct diagnosis and treatment of 32 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 the patients, it is imperative that the doctors should keep themselves updated with the latest developments in the medicine and the main object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies."
9. The above judgmental laws are relevant for the proposition that the circular issued by the CBDT enlarging the scope of disallowance to the pharmaceutical companies is without any enabling notification or circular of the Medical Council of India. Considering the settled legal position on the issue, we are of the opinion that the issue now stands covered in favour of the assessee. The pharmaceutical company like the assessee is outside the scope of the circulars by the Medical Council of India or the CBDT. Therefore, the conclusions of the AO/CIT(A) in this regard are reversed. Thus, the grounds raised by the assessee are required to be allowed.
From the above, it is evident that the scope of the CBDT Circular cannot be extended to the pharmaceutical companies without having any enabling Notification or Circular for Medical Council of India. Consequently, the present assessee being a pharmaceutical company is outside the scope of the said circulars of MCI and the CBDT. Considering the above, we are of the opinion that the Ground No.10/Modified Ground No.10 raised by the assessee should be allowed in favour of the assessee.
16. Ground No.11 raised by the assessee relates to allowability of deduction to the Wealth Tax paid by the assessee for the purpose of computing book profits u/s.115JB of the Act. AO denied the said payment of tax as not an allowable deduction.
16.1 Before us, Ld. Counsel for the assessee submitted that this issue is also covered in favour of the assessee by virtue of decision of Tribunal in the assessee's own case in ITA Nos. 1183 and 1537/PUN/2015, dated 28-11-2017 for the A.Y. 2008-09 as well as ITA No.1184/PUN/2016, dated 08-06-2018 for the A.Y. 2009-10. 16.1 On hearing both the sides, we find this issue needs to be decided allowed in favour of the assessee by virtue of orders of Tribunal (supra) 33 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 in assessee's own case for the A.Yrs. 2008-09 and 2009-10. For the sake of completeness, we proceed to extract the finding given by the Tribunal for the A.Y. 2009-10 (supra) and the same reads as under :
59. On hearing both the sides, we find this issue has to be decided in favour of the assessee in view of the order of Tribunal (supra) in assessee's own case for the A.Y. 2008-09. For the sake of completeness, we proceed to extract the finding given by the Tribunal and the same reads as under :
"26. On hearing both the parties on this issue, we find the decision in the case of Usha Martin Industries Ltd. (supra) helps the assessee. For the sake of completeness, we perused the said decision of the Tribunal and find the discussion given in Para Nos. 7 & 8 are relevant. The Tribunal considered the relevant provisions of section 115JA(2) of the Act and held the provisions of Wealth Tax constitutes an ascertained liability. The relevant portion of the Tribunal order is extracted as under :
"7. . . . . . . . . . . .We agree with the contention of the learned authorised representative of the assessee that a provision made for wealth-tax cannot be equated to any liability towards income- tax and accordingly, cannot be disallowed while computing the book profit by invoking Clause (a) of the Explanation to Section 115JA(2) of the Act.
27. In any case, this is the case where no incriminating material was seized by the Revenue during the search action connecting to the disallowability of Wealth Tax payment qua the book profits computation. Therefore, on both counts, the assessee is entitled to relief. Accordingly, Ground No.9 raised by the assessee is allowed.
Thus, the Wealth Tax paid constitutes an allowable deduction as held by the Tribunal in assessee's own case for the A.Y. 2008-09. Considering the settled nature of the issue in favour of the assessee, the Ground No.9 raised by the assessee is allowed."
16.2 Considering the above, we hold that the wealth tax paid by the assessee, being an ascertained liability is an allowable deduction for the purpose of section 115JA of the Act. Accordingly, Ground No.11 by the assessee is allowed.
17. In the result, appeal of the assessee is partly allowed for statistical purposes.
34 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 ITA No.550/PUN/2016 - By Assessee A.Y. 2012-13
18. Grounds raised by the Assessee read as under :
"On the facts and in the circumstances of the case and in law learned CIT(A) erred:
1. in confirming the disallowance u/s.14A amounting to Rs.4,08,35,729/-
as per rule 8D.
2. a. in confirming the disallowance of foreign travel expenses of employees amounting to Rs.12,13,652/-
b. in not allowing depreciation towards the addition of Rs.12,13,652/-
c. in not addressing and allowing the expenditure incurred on foreign travel expenditure of lady directors amounting to Rs.76,11,395/-.
d. in not addressing towards addition of Rs.76,11,395 to income in the computation inspite of it being set off in the amount declared in search action as "Non Business expenditure".
3. in directing the AO to classify items of fixed assets of Rs.15,19,712/- like stainless steel tables, stools, racks etc. located in manufacturing unit into "Furniture and Fixtures' and 'Plant and Machinery'.
4. in not allowing the weighted deduction of expenditure incurred for clinical trials amounting to Rs.5,23,17,132/-.
5. in not confirming the disallowance of "Demat charges" amounting to Rs.7,52,744/- made by the Assessing Officer.
6. a. in not considering the 'cost of electrical work and civil work' of Rs.1,22,83,188/- required to erect Windmill as integrated cost of Windmill eligible for @80% depreciation.
b. in not granting additional depreciation on Windmills generation "Power for captive consumption inspite of complying the provisions of sec.32(1)(iia).
7. in confirming disallowance of Selling and Distribution expenses of Rs.4,03,04,115/- (after setting of Rs.2,48,88,605/- against the amount of income offered as non business expenditure during search proceedings.
8. in confirming the action of A.O. for not directing the AO to reduce Wealth Tax paid of Rs.27,74,198/- for computing book profit u/s.115JB.
9. in confirming the disallowance of the 'Provision for Leave Encashment' amounting o Rs.1,39,65,575/- pertaining to 'DTA' unit ascertained on the basis of actuarial valuation for the specific employees of the Appellant Company.
10. The appellant craves leave to add/alter/withdraw any of the 'Grounds of Appeal' at the time of appeal proceedings. Your appellant further submits that the grounds of appeal are, save as otherwise specified, notwithstanding and without prejudice to each other."
35 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13 18.1 The modified grounds raised by the assessee read as under :
"1a. The Ld.CIT(A) ought to have held that no disallowance u/s.14A(2) r.w.r.8D can be sustained in the absence of a specific recording of satisfaction by the A.O. based on cogent material and having regard to the accounts of the assessee, to the effect that the claim of the assessee is not correct.
b. The Ld.CIT(A) failed to appreciate that the A.O. made the disallowance merely on the basis of observation that "salaries and other administrative expenses are debited to P&L A/c for both taxable and tax free incomes, therefore it is difficult to accept that tax free incomes are earned without incurring these expenses."
Supplementary Ground to Ground -10.
10. "Disallowance of Selling & Distribution expenses have been partly set off against contingency offered, if the disallowance is deleted by Hon. ITAT, as a corollary, the addition of contingency may also be deleted in view of decisions of earlier years."
19. We find all the grounds/modified grounds raised by the assessee are identical to that of grounds raised by the Assessee in the appeal of the assessee for the A.Y. 2011-12. We have decided the issues and allowed/partly allowed/dismissed/allowed for statistical purposes, the grounds, as the case may be. Following the same parity of reasoning, we dispose the appeal of the assessee for the A.Y. 2012-13 pro tanto as stated in Para Nos. 6 to 16.2 of this order for the A.Y. 2011-12.
20. In the result, appeal of the assessee for the A.Y. 2012-13 is partly allowed for statistical purposes ITA No.607 & 934/PUN/2016 (By Revenue) A.Yrs. 2011-12 and 2012-13 We shall now take up the appeals of the Revenue for the A.Yrs. 2011-12 and 2012-13.
36 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
21. Identical grounds have been raised by the Revenue for both the assessment years. Therefore, we proceed to decide the appeal No.607/PUN/2016, taking the facts in the said appeal, as a standard one. Grounds raised by the Revenue for A.Y. 2011-12 are extracted here as under:
"1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in directing the AO to exclude investments in Debt Oriented Mutual Funds for the purpose of disallowance u/s.14A r.w.r. 8D when no such exclusion has been mandated by the Act.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in directing the AO to segregate assets into furniture and Plant and Machinery when both assets are indistinguishable and fall in the category of furniture and not plant and machinery.
3. The order of the Ld.CIT(A) may be vacated and the assessing officer be restored.
4. The appellant craves leave to add, alter amend and modify any of the above grounds of appeal."
22. The issues raised by the Revenue in these two assessment years vide Ground Nos. 1 and Ground No.2 have been dealt by us while adjudicating the appeal of the assessee vide Ground Nos. 1 and 3 above. We have decided Ground No.1 against the Revenue on the technicalities, i.e. absence of satisfaction of the AO; Further the Ground No.2, being related to classification of the assets into furniture and Plant and Machinery qua the depreciation rates, was decided in favour of the assessee relying on the order of Tribunal in the assessee's own case for the A.Y. 2009-10.
Therefore, the adjudication of these grounds becomes an academic. Accordingly, the grounds raised by the Revenue in both the appeals are dismissed.
37 Serum Institute of India Ltd., A.Yrs. 2011-12 and 2012-13
23. In the result, both the appeals of the Revenue are dismissed.
24. To sum up, both the appeals of the assessee are partly allowed for statistical purposes and both the appeals of the Revenue are dismissed.
Order pronounced in the open court on this 12th day of October, 2018.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; िदनां क Dated : 12th October, 2018
सतीश
आदे श की ितिलिप अ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent
3. The CIT(Appeals-11, Pune.
4. The CIT (Central), Pune.
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "A Bench" Pune;
6. गाड फाईल / Guard file.
आदे शानु सार/ BY ORDER,स //True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune