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11. The next issue raised by the assessee in ground no. 3 of its appeal is that the learned CIT(A) erred in confirming the order of the AO by denying the deduction of remuneration received from partnership firm while computing book profit under section 115JB of the Act.

12. The assessee is a partner in the firm namely Sun Pharma Industries (SPI) and Sun Pharma Sikkim (SPS) from where it received remuneration of Rs. 6,19,63,711/- and Rs. 67,25,69,731/- which was not taxable in hand of the assessee under normal provision of the Act. However, the assessee while computing the book profit under section 115JB also reduced the same. However, the AO added back the same to book profit by holding that remuneration received by assessee to a non-working partner is distinguishable from receipt of share from firm. On appeal learned CIT (A) also confirmed the finding of the AO.

61. The assessee company claimed to have manufactured the medicine namely "Pantoprazole Sodium Delayed Release" and other medicine on contract basis for its AE namely Sun Pharma Global BVI (SPG-BVI) until December 2008 and thereafter for Sun Pharma Global FZE (SPG-FZE) a 100% subsidiary of SPG-BVI. As per the assessee SPG-BVI from 2009 onward SPG-FZE is the owner of the technology of the impugned drug and undertaking. The functions like marketing, distribution, credit risk, product litigation liability, inventory holding cost, sales return, charges back etc. As such it (the assessee) has only manufactured the medicine at its US-FDA plant on contract manufacturing basis and earned profit margin of 36.05% which is far more than the ALP of 4.06% determined using TNMM.

89. Coming to the application of TNMM, we find that the profit margin benchmark by the assessee at 21.57% on sales transactions is much higher than the margin shown by the assessee with Eli Lily.

90. The revenue authorities have compared the agreements of SPIL with Eli Lily and SPIL with SPG BVI and have come to the conclusion that a conspectus reading of the relevant clauses show that the assessee is not a contract manufacturer in the case of SPG BVI. This finding of the revenue authorities is not acceptable for the simple reason that they have compared the clauses of the respective agreements without considering the nature of work done by SPIL. It may be possible that certain terms and conditions may be absent in the agreement between the assessee and SPG BVI but that itself would not deny the assessee, the status of contract manufacturer. In our considered opinion, the assessee has performed only one function and that is manufacturing of Pantoprazole Sodium and for this, the demonstrative evidence is exhibited at pages 569 and 570 of the paper book, and as mentioned elsewhere, clearly establishes the ownership of ANDA with Sun Pharma Global. For the sake of completeness, it would not ITA No. 1462, 1463, 1519 & 1520/Ahd/2018 [Sun Pharma Laboratories Ltd.] A.Y. 2011-12 & 2013-14 - 42 -

73. The next issue raised by the Revenue in ground No. 10 of its appeal is that the learned CIT(A) erred in deleting the disallowances of selling and distribution expenses pertaining to sister concerns i.e. Sun Pharmaceutical Industries and Sun Pharma Sikkim.

74. The assessee is a partner in the firm namely Sun Pharmaceutical Industries (SPI) and Sun Pharma Sikkim (SPS) for 97.5% of share of profit. The ITA No. 1462, 1463, 1519 & 1520/Ahd/2018 [Sun Pharma Laboratories Ltd.] A.Y. 2011-12 & 2013-14 - 47 -