Income Tax Appellate Tribunal - Kolkata
Dcit, Circle - 10(1), Kolkata , Kolkata vs M/S. Goodcare Pharma Pvt. Ltd., , ... on 5 April, 2019
I.T.A. Nos. 2485 & 2486/KOL/2017
Assessment Years: 2012-13 & 2013-14
M/s. Goodcare Pharma Pvt. Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'C' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri S.S. Viswanethra Ravi, Judicial Member
I.T .A. Nos. 2485 & 2486/KOL/2017
Assessment Years: 2012-2013 & 2013-2014
Deputy Commissioner of Income Tax,............................................... .Appellant
Circle-10(1 ), Ko lkata,
Aayakar Bhawan, 3 r d Floor,
P-7, Chowringhee Square, Kolkata-700 069
-Vs.-
M/s. Goodc are Pharma Pvt. Limi ted, ........................................... ...Respondent
1, Gupta Lane, Ko lkata-700 006
[PAN: AAACG 9260 B]
Appearances by:
Shri Saurabh Kumar, Addl. CIT (D.R.), fo r t he Appellant
Shri S.M. Surana, Advocate, for the Respo ndent
Date of concluding th e hearing : January 22, 2019
Date of pronouncing the order : April 05, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President (Kolkata Zone):-
These two appeals are preferred by the Revenue against the common order passed by the ld. Commissioner of Income Tax (Appeals)-4, Kolkata dated 27.09.2017 for A.Ys. 2012-13 and 2013-14 and since some of the issues raised therein are common, the same have been heard together and are being disposed of by a single consolidated order.
2. First we take up the appeal of the Revenue for A.Y. 2012-13 being ITA No. 2485/KOL/2017. The relevant facts of the case giving rise to this appeal are as follows:-
1I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited The assessee in the present case is a Company, which is engaged in the business of trading and manufacturing of Ayurvedic Medicine. The return of income for the year under consideration was originally filed by the assessee on 13.09.2012 declaring total income of Rs.1,33,52,899/-. Subsequently a revised return was filed by the assessee on 07.10.2013 declaring total income of Rs.1,32,36,575/-. In the assessment originally completed under section 143(3) vide an order dated 22.09.2014, the total income of the assessee was determined by the Assessing Officer at Rs.2,40,51,000/- after making addition, inter alia, on account of disallowance of assessee's claim for deduction under section 80IC to the extent of Rs.1,04,78,226/-. The said assessment was subsequently set aside by the concerned ld. Principal CIT vide an order dated 02.02.2016 passed under section 263 with a direction to the Assessing Officer to make the assessment afresh on certain issues specifically raised by him.
3. One of the issues raised by the ld. Principal CIT in the order under section 263 was relating to the sales of Rs.7,16,01,719/- made by the assessee to its group concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited at the rate ranging between 45 to 50% of the M.R.P. Since the said sales to the extent of Rs.4.89 crores were made by the assessee out of the production of Baidyanath Unit, the profit of which was exempt under section 80IA, it was observed by the ld. Principal CIT in the order under section 263 that the failure of the assessee to take the market value of sales attracted the provisions of section 80IA(8) of the Act. When this issue was raised by the Assessing Officer during the course of the fresh assessment proceedings initiated in pursuance of the order of the ld. Principal CIT passed under section 263, it was explained by the assessee that its Dehradun Unit was manufacturing the patented Ayurvedic medicines of M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited and since Shree Baidyanath Ayurved Bhawan Pvt. Limited was ultimately selling its patented products to the ultimate customers through sequential chain of intermediaries involved in the distribution 2 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited chain, there was a difference in the price charged by the assessee and the MRP of the products to take care of the profits of the said intermediaries involved at every stage. This explanation of the assessee was not found acceptable by the Assessing Officer. According to him, there was no valid reason for the assessee-company to sell its products at only 45% to 50% of the MRP to the sister concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited and treating this as undervaluation of its sales by the assessee by 50%, he made an addition of Rs.7,16,01,719/- to the total income of the assessee by invoking the provisions of section 80IA(8).
4. Another point that was raised by the ld. Principal CIT in the order under section 263 was relating to the advertisement expenditure of Rs.59,18,098/- incurred by the assessee and claimed as expenditure entirely against the profit of the Kolkata Unit, which was chargeable to tax. As noted by the ld. Principal CIT, the total sales of the assessee- company to third parties was only about Rs.80 lakhs and the expenditure incurred on advertisement against the said sales was very high. It was alleged that the expenditure relating to advertisement of different production of the Group was debited by the assessee-company in the non- exempted Unit. In this regard, it was submitted on behalf of the assessee before the Assessing Officer that the advertisement expenditure was not required to be incurred for effecting sales to group companies and it was incurred for these products which were manufactured in Kolkata Unit for enhancing the sales of the assessee-company through its own dealers. The Assessing Officer did not find merit in these submissions made on behalf of the assessee-Company. According to him, there was a deviation from the matching principle in respect of Unit to Unit for setting off advertisement expenditure. He held that the assesee-company by not claiming any advertisement expenditure in Dehradun Unit had inflated its profit for claiming higher deduction under section 80IC. He also noted that the profit booked by the assessee-company in Dehradun Unit at 45.18% was not in conformity with the net profit derived by other 3 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited manufacturing units of the assessee-company at Kolkata and Gurgaon, which were not eligible for deduction under section 80IC. Since the sales of the said Units was only 10% of the total sales, the Assessing Officer restricted the deduction claimed by the assessee on account of total advertisement expenditure of Rs.59,18,098/- to 10% and disallowed the balance expenditure of Rs.53,26,288/-. In the assessment completed under section 143(3)/263 of the Act vide an order dated 17.12.2016, two additions of Rs.7,16,01,719/- and Rs.53,26,288/- thus were made by the Assessing Officer to the total income of the asseessee of Rs.2,40,51,000/- as assessed in the assessment originally completed under section 143(3) and the total income of the assessee was accordingly determined by him at Rs.10,09,79,000/-.
5. Against the order passed by the Assessing Officer under section 143(3)/263, an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), the issue relating to the disallowance of Rs.1,04,78,226/- as made by the Assessing Officer on account of its claim for deduction under section 80IC in the assessment originally completed under section 143(3) was also raised by the assessee. The ld. CIT(Appeals) entertained the said claim and decided this issue in favour of the assessee for the following reasons given in his impugned order:-
"7. I h ave gone though th e assessment o rder and the written submissio ns filed by the assessee. I find that the AO has adopt ed the figures of total income as per the o riginal assessment order but has not discussed th e issue with regard to part disallowability o f part of the cl aim of deduction u/s 80IC which was discussed by th e AO in the original assessment order. Since however, the AO has t aken th e figures of o riginal assessment while starting the comput atio n, the grievance of the assessee in ground no 1 remains to be addressed with regard to the disallo wance of part of the claim for deductio n ss] s BOlC in the original assessment o rder.
7.1. I find that th e assessee h ave been cl aiming deductio n u/s 80IC on th e profit fro m it s Deh radun unit since assessment year 2009-10. The sales of Dehradun Unit during the year was made to Sree Baidyanath Ayurved Bh awan P Ltd.. The profit in 4 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited Dehradun Unit during the year was 45 .18% as against profit of 23.78% in Joka Unit . The AO viewed th at Sree Baidyanath Ayurved Bh awan P Lt d., was owned and co ntrolled by the same Sharma famil y, rel atives and associates. T his prompted the AO to make enquiry as to the reasonableness of th e profit at Dehradun Unit. The AO called fo r th e explanat ion with regard to the higher profit at Dehradun Unit as wel l with regard to the advertisement expenses booked in Joka Unit alone. I find that the assessee filed explanation on 4 .8.2014. It was explained that the advertisement expenses incurred by the ass essee at Joka Unit were for it s own branded goods which were sold to outside part ies. The details of such sales were filed. The AO vide his notice dated 18.8.2014 again asked fo r the expl anation of the assessee wit h regard to the applicatio n of sectio n 80I(10) and 80IC(7) and also pro posed to disallow 90% of the advertisement expenses. The assessee by his letter dated 28.08.2014 expl ained that the advertisement expenses at Joka Unit was onl y fo r creat ing market for its own branded products. As regards the higher profit at Deh radun Unit the assessee filed its expl anat ion o n 4 .8.2014 wherein it was st ated that there were several facto rs because of which the profit at Dehradun Unit was higher. The assessee submitted th at in Joka Unit, th e selling and dist ributio n expense were claimed because there was sales to outsiders whereas no such expenses were required in Deh radun Unit since the sale during thi s year was made Jo Sree Baidyanath Ayurved Bh awan P Lt d., onl y. It also expl ained that labour co st was high er at 8.57% in Calcutt a being met ropolitan city as against 4 .52% in Deh radu n. It was also explained vide letter dated 4.8 .2014 that the assessee cannot be t reat ed as rel ative o r close associat e of Sree Baidyanath Ayurved Bhawan P Ltd. The AO, in o rder to verify the transactions al so issued notice u/s 13 3(6) on 18.8 .2014 to Sree Baidyanath Ayurved Bhawan P Lt d., which was duly replied by them vide their letter on 12.9 .2014 wherein, they confirmed th at they did not incur any expenses of th e assessee. The assessee also expl ained the cost of pro duction at Deh radun Unit as well as th e reasons fo r h igher margin. The assessee expl ained th at th e materials purchased from the local market at Deh radun was cheaper since such material also enjo yed the benefit of t ax exemptions like Cent ral Excise, VAT , Sales t ax, Subsidy etc at th at place and hence the o verh ead costs were also lower resulting in higher profit at Deh radun U nit . The assessee also submitt ed th at the profit at Dehradun Unit since its inception was higher than Joka Unit . I find that the AO has not cont roverted the expl anation filed by t he assessee. The AO has not brought on record any evidence to show that the cost of the materials purchased at Kolkat a and Dehradun was same. The AO h as also not contro verted the submissions of the assessee th at the labo ur cost at Kolkat a was higher. The AO h as also not brought on record any evidence to suggest that th e advertisement expenses incurred were relat ed to Sree Baidyanath Ayurved Bhawan P Lt d., o r th at same were related 5 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited to the sales made by the assessee from it s Deh radun it , Th e assessee filed evidence befo re the AO to show that the assessee was selling its own produces under it s own brand fo r which advertisement were made. I also find that deduction u/s 80IC was allowed to th e assessee o n same facts and circumst ances in earlier years. Sales from Dehradun Unit was admitt edly made to Sree Baidyanath Ayurved Bh awan P Ltd., in all earlier years and the ratio of profit at Dehradun Unit was always higher. I also find th at in the initial assessment year 2009-10 proceedings u/s 263 were initiated by the CIT -Kol.-4 with regard to the allowability of the deduction u/s 80IC but the Ld CIT-Kol-4 held that o n the facts and circumstances of the case the assessee was entit led to the deduction u/ s BOIC. I also find that th e assessee vide is letter dat ed 4.8 .2014 also explained the basis of price fixatio n of the goods sold to M/ s Sree Baidyanath Ayurved Bhawan P. Ltd., the discount allowed to them, calculation of billing rates, comparative rat e of raw materials and packing materials of Kolkat a Unit and Deh radun Unit, detail s of sales of similar products by other Ayurvedic medicine manufacturers to justify the rate of sales to Sree Baidyanath Ayurved Bhawan P Ltd., I also find th at the assessee dul y explained that Sree Baidyanath Ayurved Bh awan P Lt d., is not a related part y within th e meaning of section 80I(10) o r 80IC(7 ).
As against the explanation' and overwhel ming evidences filed by the assessee, the AO has not bro ught on reco rd any evidence to show that raw material co st o r the l abour cost of both the units was same and the expl anation of the assessee was not acceptable. T he AO has also not brought on record any evidence to suggest that the price charged from Sree Baidyanath Ayurved Bhawan P Ltd., was higher o r lower th an the mark et price of such goods even after the explanat ion and evidences filed by the assessee. The AO h as also not distinguished the facts of the case as were prevailing in the earlier years to suggest th at th e principles of consistency are not applicable. Th e deduction is being allowed from the initial year itself. Considering the facts and circumstances of the case I am of the opinion t hat the AO was not justified in restricting the deduction u/s 80IC by estimating the profit @23.78% of the sales at Deh radun Unit. Th e AO is directed to allow deductio n u/s 80 IC as cl aimed".
6. In the appeal filed before the ld. CIT(Appeals), both the additions made by the Assessing Officer to its total income in the assessment completed under section 143(3)/263 of the Act were challenged by the assessee and after considering the submissions made by the assessee as 6 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited well as the material available on record, the ld. CIT(Appeals) deleted the said additions for the following reasons given in his impugned order:-
"The records show th at th e tot al sale of th e assessee at Kolkata and Dehradun Unit was Rs.8,03,81 ,472/- o ut of which the sale to Sree Baidyanath Ayurved Bhawan P Ltd. was Rs.7 ,16,01,719/- from both the units. No deduction was claimed u/s 80IC in so far th e sale fro m Kolkat a Unit was concerned. Out of th e tot al sale, the sale of the products of Dehradun Unit was for Rs.4 ,89,49,30 8/- to the said Sree Baidyanath Ayurved Bhawan P Lt d. The profit at Deh radun Unit was declared at Rs.2 ,21,18,372/- which was cl aimed as deduction u/s 80IC as in earlier years. The Ld. AO accepted th at the assessee was eligible to the claim of deduction u/s 80 IC in respect of profit s from Deh radun Unit for the assessment year in question. Th e AO however restricted the deduct ion at 23.78% of the sales. In my decision vide para.6 , I h ave considered the clai m of the assessee and in my opinion the assessee was entitled to the claim as made in th e return of inco me.
In the o rder u/s. 263, the Pr. C IT-4 fo und th at th e sale h as been made by the assessee to Shri Baidyanath Ayurved Bh avan P Lt d. at 45% to 50% of market price. (MRP of Shri Baidyan ath Ayurved Bh awan P Lt d.]. The Pr CIT direct ed the AO to examine the sales price which should h ave been made. The AO noted that the total sale from both the units to Shri Baidyanath Ayurved Bhavan Pvt Ltd. was Rs.7 ,16,01,719/- The AO noted th at th e goods were sold to t he said party at 45% to 50% discount of the MRP Th e AO has t aken th e MRP of Shri Baidyanath Ayurved Bhawan Pvt Lt d. as sales price and added back Rs.7 ,16,01,719/- as further profit wh ich the assessee should have made. The AO in the o riginal assessment co nsidered that the assessee declared profit @ 45.18% of the sales price at the said unit which as per the AO was excessive. The AO rest rict ed the profit @ 23.78% and acco rdingly disallowed Rs.1,04,78,226/ - u/ s. 80IC which was cl aimed at Rs.2,21,18,37 2/-. The AO in the reassessment took opposite view and co nsidered that the sales price should h ave been t aken at MRP and acco rdingly further added Rs.7 ,16,01,719/- as profit including Rs.4 ,89,49,308/- at Dehradoon Unit . I find that the AO in th e assessment for all earlier years have accepted the det ermination of th e price mechanism in respect of sales to Sree Baidyanath Ayurved Bhawan Pvt. Lt d., Not only that the pro visions of section 92BA (Domestic T ransfer Pricing) came into force fro m assessment year 2013-14, and in that year the assessee obtained repo rt of the auditor as required u/s. 92E in form no 3CEB and submitted the same befo re the AO. The AO also raised various queries in respect of the DTA in the said year. The entire mech anism of price fixatio n which was prevalent fro m earlier years was expl ained. Similar billing price at which manufactured products were sold to Sh ri Baidyanath Ayurved Bh awan P. Ltd., was accept ed by th e AO in th at year after examination. In fact 7 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited the price fixation during the assessment year in qu estion was also explained by the assessee vide his letter dated 4 .8.2014 on specific query fro m th e AO and the said price was accepted. The sale price was also not disputed in earlier years. It was expl ained that sale was made to Sh ri Baidnath Ayurved Bh avan P Ltd., at 45 to 50% of the MRP because the said medicines were sold by them under their brand developed by th em after working fo r years, t hat they had also to incur all marketing expenses for sale th rough their net work , wholesale dealers, stockists and ret ailers to whom sufficient margin has to be given. I find th at t he sale was at arm' s length which was accept ed after examination of the same during the o riginal assessment as well as in the next year under domestic t ransfer price mech anism. I also find th at in the reassessme nt the AO has adopted the in computed in the original assessment meaning th ereby he was of the view that th e profit of Deh radun unit shoul d have been only 23 .78% and in t he reassessment h as reversed his own finding. The MRP of Sree Baidya Nath Ayurved Bhawan P Lt d. cannot be considered as sales price of the assessee since all market ing expenses are borne by the said party. The AO has not brought on reco rd any evidence cont rary to the cl aim of the assessee that the price fixed for any evidence contrary to the claim of th e assessee that th e price fixed for Sh ree Baidya N ath Ayurved Bhawan was fair and reasonable. Further t he judgment of Satsang 193 ITR 321 is well founded. Th e Supreme Court clearl y led down th at the principles of consistency should be maintained when th e facts continued to be the same. The reliance o n the judge ment of Delhi High Court in th e case of Amadeus India Pvt Lt d. reported in 395 IT R page 659 also support s the view th at whe n there was no ch ange in modus operandi, rule of consistency should be followed. It will not be out of place to mentio n that if the version of th e AO is accepted, the inco me as co mputed fo r Dehradun unit sh all go up and shall fo rm part of deductio n u/s 80IC as has been hel d in the case of Durga Industries In ITA "No. 2376jDe12010 dated 21.9.2010, Special Bench Calcutt a reported in 116 ITD page 1 and Delhi High Court decisio n reported in 289 ITR page 475. Further the AO h as not given any basis as to why th e MRP of Shri Baidyanat h Ayurved Bh awan P Ltd., shoul d be t aken as sales price of th e assessee. Hence the addit ion made by the AO T aking MRP as sal es price is deleted.
In third ground, the assessee h as disputed the disallowance of Rs.53 ,26,288/- out of advertisement expenses. The AO was of th e view that 90% of th e sales was to Sree Baidyanath Ayurved Bhawan P Lt d., and on the basis of matching principles 9 0% of the expense rel ated to the sales of Sri Baidyanath Ayurved Bhawan P Ltd, Th e AO also found that the advertisement expenses were paid through gro up co mpany. The AO therefo re disallowed 90% of advertisement expenses. I find that the assessee has explained that the advertisement expense were incurred solely for marketing it s own brand and 8 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited evidences of the same was filed in the course of assessment proceedings along with the advert ised mat ters. The AO h as not controverted the said evidences and explanation. In so far as the expenses as such are concerned, the same is not disputed. Therefo re it h ardly matters wh ether th e payment is directly made or made th rough group co mpany. The genuinit y of the expenses incurred is not disputed. In view of the above the disallowance made in not maint ainable. The same is delet ed".
7. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal for A.Y. 2012-13 on the following grounds:-
"1. On the facts and circumst ances of th e case and in law the Ld.C IT(A) h as erred in deleting the disallowance of claim for deduct ion u/s.80 IC amounting to Rs.1 ,04,78,226/- ignoring the fact th at the assessee att empted t o infl ate profit of Dehradun Unit to avoid paying any tax by way of cl aiming excess deduction u/s.80IC.
2. On the facts and circumst ances of th e case and i n law the Ld.C IT(A) has erred in igno ring the fact that the assessee company' s is covered by the sub-sect ion 10 to the sectio n 80IA with relevance to the Section 80IC(7) of the I. T . Act,1961.
3. On the facts and circumst ances of th e case and i n law the Ld.C IT(A) has erred in deleting the additio n made u/s.80IA(8) ignoring the fact that the assessee co mpany co uld not give valid reasons for selling their product s at prices wh ich is only 45% to 50% of MRP to "Sh ree Baidyanat h Ayurved Bh awan Pvt. Ltd..
4. On the facts and circumst ances of th e case and i n law the Ld. C IT(A) has erred in deleting the disallowance of Advertisement Expenditure of Rs.53 ,26,288/- igno ring the fact that th e assessee company h as not booked any advertisement expenses fo r Dehradun Unit fo r making 100% sale to its associated/ rel ated companies whereas the company has claimed 100% advert isement expenses wh en only 10% sales has been made to th e outside parties fro m J oka (Kolkat a) unit and 90% of sales of manufactured goods by Joka unit made to its same associated/related companies" .
8. We have heard the arguments of both the sides and also perused the relevant material available on record. As regards the issue involved in Grounds No. 1 & 2 relating the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer in the assessment originally 9 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited completed under section 143(3) by way of disallowance of assessee's claim for deduction under section 80IC to the extent of Rs.1,04,78,226/-, the ld. D.R. has relied on the order of the Assessing Officer in support of the Revenue's case. The ld. Counsel for the assessee, on the other hand, has submitted that the deduction claimed by the assessee under section 80IC in respect of profit derived from the eligible Dehradun Unit was restricted by the Assessing Officer on the ground that the profit of the said Unit as declared by the assessee was allegedly higher. In this regard, he has invited our attention to the relevant details furnished at page no. 561 of the paper book to point out that the profitability of Dehradun Unit was always higher and it was accepted by the Assessing Officer in the earlier years. He also submitted that the entire sales of Dehradun Unit was made by the assessee-company to its associate concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited and the transactions involving the said sales were the subject matter of Transfer Pricing exercise for A.Y. 2013-14. He has pointed out that the Transfer Pricing Officer after making the Transfer Pricing analysis based on comparable cases found the sale price charged by the assessee to M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited as at Arm's Length. As further pointed out by the ld. Counsel for the assesese, the reasons for the higher profit margin earned by the Dehradun Unit were also explained by the assessee by showing as to how the cost of production of the same Unit was lower due to various incentives and the availability of raw material at cheaper rates in the local market. Keeping in view all these relevant aspects highlighted by the ld. Counsel for the assessee as well as the other reasons given by the ld. CIT(Appeals) in his impugned order, we are of the view that there was no justifiable reasons for the Assessing Officer to doubt or dispute the higher rate of profit declared by the assessee-company in its Dehradun Unit and to estimate the same at a lower rate thereby restricting the claim of the assessee for deduction under section 80IC. In that view of the matter, we uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of assessee's 10 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited claim for deduction under section 80IC and dismiss Grounds No. 1 & 2 of the Revenue's appeal.
9. As regards the issue involved in Ground No. 3 relating to the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer by invoking section 80IA(8), it is observed that the sale price charged by the assessee to the other group concern namely M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited was alleged by the Assessing Officer as understated by the assessee on the basis of M.R.P. of the relevant products. As explained on behalf of the assessee before the authorities below as well as before us, the MRP was the price finally charged by M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited to the ultimate consumers and the same, therefore, was inclusive of the profit of M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited as well as the substantial expenditure incurred by them including especially the marketing expenses incurred for selling the products through their network, which comprised of wholesale dealers, stockists, retailers etc. The MRP of the products of M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited thus was not comparable with the sale price charged by the assesese to M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited and since the price so charged had fetched a net profit of 45.17% to the assessee, we find that the allegation of the Assessing Officer regarding under charging of sale price by the assessee was totally unfounded. As a matter of fact, a contradictory stand taken by the Assessing Officer himself while restricting the claim of the assessee for deduction under section 80IC in respect of Dehradun Unit when he alleged that the profit of Dehradun Unit, which sold its entire production of M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited, was inflated by the assessee for claiming higher deduction under section 80IC. It is difficult to comprehend as to how the sale price could be lower when profitability shown by the assessee was higher. Moreover, the sale price charged by the assessee to its associate concern M/s. Shree Baidyanath Ayurved 11 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited Bhawan Pvt. Limited was the subject matter of Transfer Pricing Exercise in A.Y. 2013-14 and as already noted by us, the same was accepted by the Transfer Pricing Officer as at Arm's Length after carrying out the Transfer Pricing Analysis based on comparable cases. It was also pertinent to note here that the sale price charged by the assessee to M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited on the same basis was accepted by the Assessing Officer in the assessments for all the earlier years and there was no cogent material brought on record by the Assessing Officer to dispute the price mechanism adopted by the assessee in the year under consideration. Having regard to all these facts and circumstances of the case, we are of the view that the addition made by the Assessing Officer by alleging the understatement of sales price by the assessee on the basis of MRP of the relevant products was not sustainable and the ld. CIT(Appeals) was fully justified in deleting the same. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 3 of the Revenue's appeal.
10. As regards the issue involved in Ground No. 4 relating to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer on account of advertisement expenditure, it is observed that the entire advertisement expenses incurred during the year under consideration were claimed by the assessee in Kolkata Unit. Since the sale of Kolkata Unit was only 10% of the total sales, the Assessing Officer allowed the advertisement expenses only to the extent of 10% and disallowed the balance 90%. As explained on behalf of the assessee before the ld. CIT(Appeals) as well as before us, the entire advertisement expenses were incurred by the assessee in respect of its own products, which were manufactured in Kolkata Unit whereas no advertisement expenses were required to be incurred in respect of Dehradun Unit where the entire sales was made to the sister concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited of their own products. It clearly shows that the entire expenditure incurred by the assessee on advertisement was 12 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited related to marketing of its own products sold under its own brand and since such products were manufactured solely in Kolkata Unit, we find ourselves in agreement with the ld. CIT(Appeals) that the disallowance made by the Assessing Officer out of advertisement expenses was not justified especially when the genuineness of the said expenses was never doubted or disputed by the Assessing Officer. We, therefore, uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer out of advertisement expenses and dismiss Ground No. 4 of the Revenue's appeal.
11. As regards the Revenue's appeal for A.Y. 2013-14 being ITA No. 2486/KOL/2017, it is observed that the solitary issue involved therein relating to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer on account of assessee's claim for deduction under section 80IC is similar to the one involved in Grounds No. 1 and 2 of the Revenue's appeal for A.Y. 2012-13, which has already decided by us in the foregoing portion of this order. As the material facts relevant to this issue as involved in A.Y. 2013-14 as well as the arguments of both the sides are similar to A.Y. 2012-13, we follow our conclusion drawn in A.Y. 2012-13 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of assessee's claim for deduction under section 80IC.
12. In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open Court on April 05, 2019.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 5 t h day of April, 2019
Co pies to : (1) Deputy Commissioner of Income Tax, Circle-10(1 ), Ko lkata, Aayakar Bhawan, 3 r d Floor, P-7, Chowringhee Square, Kolkata-700 069 13 I.T.A. Nos. 2485 & 2486/KOL/2017 Assessment Years: 2012-13 & 2013-14 M/s. Goodcare Pharma Pvt. Limited (2) M/s. Goodc are Pharma Pvt. Limi ted, 1, Gupta Lane, Ko lkata-700 006 (3) Commissioner of Inco me T ax (Appeals)-4, Kolkata, (4) Commissio ner of Income Tax- , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 14