Income Tax Appellate Tribunal - MumbaiGlenmark Pharmaceuticals Ltd, Mumbai vs Acit (Ltu-1), Mumbai on 18 July, 2022IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI\n\n                        BEFORE SHRI PRASHANT MAHARISHI, AM\n                                       AND\n                          SHRI SANDEEP SINGH KARHAIL, JM\n\n\n                                 ITA No. 7742/Mum/2019\n                                 ( Assessment                Year 2009-10)\n                                 ITA No. 7582/Mum/2019\n                                 ( Assessment                Year 2010-11)\n                                                                              M/s Glenmark\n                                                                         Pharmaceuticals Limited\n                                                                            Glenmark House,\n            ACIT (LTU-1)\n                                                                         HDO Corporate Building,\n      29 t h Floor, Centre 1,\n                                                                        Wing A, B.D. Sawant Marg,\n      W orld Trade Centre\n                                                           Vs.                   Chakala,\n           Cuffe Parade,\n        Mumbai-400 005                                                    Opp. Western Express\n                                                                                Highway,\n                                                                              Andheri(East),\n                                                                             Mumbai-400 099\n            (Appellant)                                                             (Respondent)\n                                      PAN No. AAACG2207L\n\n\n                                     CO No. 62/Mum/2021\n      ( A r i s i n g o u t o f IT A N o . 7 7 4 2 / M u m / 2 0 1 9 f o r A s s e s s m e n t Y e a r 2 0 0 9 - 1 0 )\n\n                                 ITA No. 7933/Mum/2019\n                                 ( Assessment                Year 2010-11)\n\n        M/s Glenmark\n   Pharmaceuticals Limited\n      Glenmark House,\n                                                                                    ACIT (LTU-1)\n   HDO Corporate Building,                                                           th\n                                                                                 29 Floor, Centre 1,\n  Wing A, B.D. Sawant Marg,\n                                                                                 W orld Trade Centre\n           Chakala,                                        Vs.                      Cuffe Parade,\n    Opp. Western Express                                                           Mumbai-400 005\n          Highway,\n        Andheri(East),\n       Mumbai-400 099\n            (Appellant)                                                             (Respondent)\n                                                                                Page | 2\n                                                   ITA Nos. 7742, 7582, 7933/Mum/2019\n                                                                    CO No. 62/Mum/2021\n                                      Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n       Assessee by               :      Shri Vij ay Mehta, AR\n       Revenue by                :      Shri O P Sharma, DR\n\n             Date of hear ing:                    17.06.2022\n             Date of pronouncement :              18.07.2022\n\n\n                               ORDER\n\n\nPER PRASHANT MAHARISHI, AM:01.   These are three         appeals          and one cross objection\n      pertaining to one assessee         for two assessment years i.e.\n      AY 2009-10 and 2010-11                  involving common issue,\n      therefore; same is disposed of by this common order.02.   For AY 2009-10 , ITA No. 7742/Mum/2019 is filed by the\n      Asst. Commissioner of Income-tax (LTU-1 Mumbai) (the\n      learned     AO    )   against     the       order      passed         by      the\n      Commissioner of Income-tax (Appeals)-3, Mumbai                             [ the\n      ld CIT (A) ] dated 18th September, 2019. Assessee has\n      filed cross objection no. 62/Mum/2021.03.   The learned Assessing Officer has raised following grounds\n      of appeal:-"1.      Whether, on the facts and in the circumstances\n           Rs. 2,62,74,26 of the case and in law, the Ld. CIT(A)\n           was right in deleting the disallowance of weighted\n           deduction claimed u/s. 35(2AB) of the Act even\n           though para 4(xii) of DSIR Guidelines on deduction\n           u/s.     35(2AB)   clearly     state     that     total     revenue\n           expenditure on R&D should be reduced from payment\n                                                                                 Page | 3\n                                                    ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n             obtained by the company for sponsored research in\n             the approved in-house R&D centre?"04.   Assessee has raised cross objection stating that reopening\n      of the assessee upheld by the learned CIT (A) is                          not in\n      accordance with law           raising following solitary ground as\n      under :-"The     Honourable       Commissioner            of     income         tax\n             (Appeal) - 3 has erred in confirming the action of the\n             learned      assessing        officer      in      reopening            the\n             assessmentu/s 147of The Income Tax Act 1961\n             after a period of 4 years from the end of the relevant\n             assessment year without bringing any fresh and\n             tangible material on record.             Further, the appellant\n             has disclosed all material facts fully and truly during\n             the assessment proceedingsu/s 143 (3)of the act. "05.   Brief fact of the case shows that the assessee is a\n      company engaged in the business of manufacturing of\n      pharmaceuticals         products     and       related        research        and\n      development activities.06.   It filed its return of income on 25th September, 2009 at\n      ₹328,68,36,540/- as per the normal computation and\n      book     profit    underSection      115JBof     the      Act      at\n      ₹238,55,12,770/-. Assessee was assessed underSection\n      143(3)of     the   Act     on    30th      November,            2012        at\n      ₹350,69,67,780/- as per normal computation and underSection 115JBof the Act at ₹241,55,12,770/-.Page | 4\n                                                ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-1107.   Subsequently, on 30th March, 2016, notice underSection\n      148of the Act was issued               proposing reopening of\n      assessment recording following reasons :-"MESSER'S GLENMARK PHARMACEUTICALS LTD\n\n                    ASSESSMENT YEAR 2009 - 10\n\n               REASONS RECORDED FOR REOPENING1. The return of income has been filed electronically on\n        25/9/2009     declaring        a      total        income          of       ₹\n        3,286,836,540/-    Under        normal         provisions         and       ₹\n        238,55,12,770/- u/s 115JB of the act, 1961. The case\n        was selected for scrutiny and orderu/s 143 (3)was\n        passed on 30/11/2011 determining total income of ₹\n        3,506,967,780/-    Under           normal       provision         and       ₹\n        2,415,512,770/- u/s 115 JB of the act.2. During the year the assessee has sold the generic unit\n        to their sister concern Messer's Glenmark generics Ltd\n        for ₹ 75,000 lakhs. It is seen from the record that the\n        assessee has offered long-term capital gain of amount ₹\n        22,082.06 lakhs on said transaction. The assessee has\n        claimed deduction on account of book value of capital\n        work   in   progress   (    CWIP)        (excluding          production\n        development expenses already claimed in tax) of ₹\n        5491.08 lakhs from the total consideration whereas as\n        per the balance sheet as on 31/3/2009 and previous\n        year figures CWIP in case of sales unit amounting to ₹\n        5166.04 lakhs.    Therefore, the assessee has claimed\n                                                                        Page | 5\n                                           ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n  excess deduction amounting to ₹ 325.04 lakhs (₹\n  5491.08 lakh - 5166.04 lakhs).2.1   In the light of the above, the assessee company\n        had    incorrectly    claimed       excess        deduction          on\n        account of book value of CWP amounting to ₹\n        325.04 lakhs.3. Allowance of R & D expenses (contract receipts):-3.1   The assessee has approved units at Goa and\n        Baddi, which are claiming weighted deductionu/s\n        35 (2AB)of IT act of amount ₹ 2318.31 lakhs.During the year, the assessee has incurred gross\n        research    and      development          expenditure           of     ₹\n        5145.84 lakhs.       The assessee has received from\n        its associated enterprises, Messer's Glen mark\n        pharmaceuticals SA Switzerland, amount of ₹\n        5231.89 Lacs on account of contract research\n        rendered by it and claimed expenses of ₹ 3600.28\n        lakhs for rendering the services.                  The assessee\n        has, however, reduced expenses incurred towards\n        contract research of amount ₹ 3600.28 lakhs from\n        gross research and development expenses and\n        claimed weighted deduction (at the rate of 150%)\n        on such amount, i.e. ₹ 2318.31 lakhs.3.2   As per the provisions ofSection 35 (2AB)of IT\n        act,    prescribed       authority,          being         approval\n        authority, is Secretary, Department of science and\n                                                                              Page | 6\n                                                 ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n              industrial research (DSIR), government of India.As    per      DSIR        guidelines,           income          from\n              contract/sponsored, research should be reduced\n              from gross R & D expenditure and weighted\n              deductionu/s 35 (2AB)of the IT act is eligible to\n              the assessee on such net R & D Expenses.3.3   Thus, from the perusal of records, it is seen that\n              the   assessee       has    claimed         excess        weighted\n              deduction of ₹ 2447.41 lakhs (150% of ₹ 1631.61\n              lakhs)   u/s   35     (2AB)       by      not     following         the\n              prescribed mandatory DSIR guidelines.4. As there is a failure on part of the assessee to disclose\n        fully and truly all material facts necessary for its\n        assessment during the year Under consideration and\n        considering the new credible information on record, I\n        have reasons to believe that income of more than ₹ 1\n        lakh chargeable to tax has escaped assessment for this\n        assessment year i.e. assessment year 2009 - 10,\n        coming within the meaning ofSection 147of the\n        income tax act, 1961.5. In view of the same, noticeu/s 148is issued after\n        approvals      of    CIT      LTU        vide         letter       number\n        CIT/LTU/reopening/15 - 16 dated 30/3/2016."08.   Assessee filed a letter on 4 May 2016 reiterating that\n      original return of income filed by assessee may be treated\n      as Return filed in response to noticeu/s 148of The Act.Page | 7\n                                                 ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n      The   reasons     were     provided     to    the     assessee          on     7\n      September 2016, on same date assessee filed objection\n      stating that reopening is based on [1] change of opinion,\n      [2] no new fresh tangible material is available, [3] there is\n      no failure on the part of the assessee to disclose the\n      material fully and truly and therefore, the reopening is\n      invalid.09.   The learned Assessing Officer disposed of the objection by\n      a separate order dated 10 November 2016 stating that\n      reopening is valid rejecting all the objections.010. On the merits,\n\n         a. On the first issue of reopening of excess claim on\n            sale   of    unit,    LD    AO         did    not       make         any\n            addition/disallowance.b. On deductionu/s 35 (2AB)of the act , assessee filed\n            explanation on 6th December, 2016, rejecting the\n            same, the learned assessing officer recomputed\n            deductionu/s 35 (2AB)of The Act by reducing the\n            contract research income               and disallowed excess\n            deduction claimed on research and development\n            expenditure    u/s 35 [2AB] of the Act .                  Further, in\n            view of the adjustment of deduction with respect to\n            Research and Development (R &D) expenditure, the\n            computation of deduction underSection 80ICof the\n            Act was also revised.Page | 8\n                                             ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11011. Accordingly, the assessment order underSection 143(3)read withsection 147of the Act was passed on 27th\n     December, 2016 at ₹332,57,68,397/- and book profit\n     remain unchanged.012. Assessee aggrieved with Assessment order preferred\n     appeal before the learned CIT (A) contesting that action\n     underSection 147of the Act is bad in law as [1] it is\n     merely        on change of opinion, [2] no fresh tangible\n     material brought on record and [3] as reassessment is\n     beyond 4 years, no material has been brought on record\n     to show failure on part of the assessee for 'full and true'\n     disclosure.013. Assessee also challenged the disallowance of ₹86,05,000/-with respect to R & D expenditure.                     The assessee\n     submitted that the learned Assessing Officer should not\n     have reduced the receipt from contract research activities\n     from R & D which are eligible for deduction underSection\n     35(2AB)of the Act and further, the R & D expenditure on\n     which weighted deduction is claimed is at Sinnar unit\n     whereas the contract research activities is carried out at\n     Mahapae and there is no relation between these two units\n     so far as R & D activities are concerned.               The assessee\n     further contended that income from contract research has\n     already been offered for taxation and therefore, reducing\n     it from contract R & D expenditure amounts to double\n     addition.014. The learned CIT (A)\n                                                                            Page | 9\n                                               ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n       a. Upheld       action of learned Assessing Officer of\n          reopening of the assessment holding that the learned\n          Assessing Officer can go through the reasons from\n          the very same record and there is no change of\n          opinion. With respect to the full and true disclosure\n          also, he held that not every disclosure to be treated\n          as true and full. He further held that there is a prima\n          facie   material   available       for     reopening           of     the\n          assessment.     However, sufficiency or correctness of\n          the same cannot be decided.b. With respect to the deduction of research and\n          development expenditure, he rejected the action of\n          the learned Assessing Officer in reducing the contract\n          research income [stand of revenue] instead of\n          Contract research expenses [stand of Assessee]\n          from R & D expenditure.                  With respect to the\n          calculation of weighted deduction also and double\n          taxation on the same income, he held in favour of\n          the assessee.015. Therefore, the assessee is aggrieved with order of the\n     learned CIT (A) in upholding reassessment proceedings in\n     its CO whereas; the learned Assessing Officer in his appeal\n     is aggrieved with deletion of the disallowance of weighted\n     deduction of research and development expenditure.016. The learned Departmental Representative on the appeal of\n     the learned Assessing Officer relied upon the order of the\n     learned Assessing Officer.Page | 10\n                                                 ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11017. Learned Authorized Representative supported the order of\n     the learned Commissioner of income tax (Appeal) and\n     submitted a paper book         showing the R & D Expenditure.018. On the cross objection of the assessee on reopening of the\n     assessment,         the   learned     authorised            representative\n     referred to the reasons recorded at page no. 1 of the\n     assessment order and stated that on the reason no. 1 with\n     respect to the slump sale underSection 50Bof the Act, no\n     addition has been made, therefore, it is now not matter of\n     contention.    He submitted that the reason no. 2 clearly\n     shows that there is no tangible material coming into the\n     knowledge of the learned Assessing Officer for reopening\n     of the assessment. He referred to the reason and stated\n     that it is merely 'from the perusal of the records' which\n     already existed.      Further reopening of the assessment is\n     made by notice dated 30 March 2016 for A.Y. 2009-10 i.e.\n     after four years and there is no reference that what is the\n     failure on the part of the assessee to fully and truly\n     disclose the material.         He referred to the Paper Book\n     containing 174 pages. He also referred to the decision of\n     the Hon'ble Bombay High Court in case ofAsian Paints Ltd.\n     vs. DCIT(2009) 308 ITR 195, to                    contest that mere\n     change of opinion cannot allow the learned Assessing\n     Officer to reopen the concluded assessment. He referred\n     to Para no. 10 of that decision to support his case.019. The learned Departmental Representative supported the\n     order   of    the    learned   Commissioner            of     Income         tax\n                                                                            Page | 11\n                                                ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     (Appeal). He submitted that as per Guidelines issued by\n     DSIR, the contract research income should have been\n     reduced from the gross contract research expenditure\n     where as the assessee has reduced                            only contract\n     research expenditure, therefore, there is failure on part of\n     the assessee. Hence reopening is valid.020. We have carefully considered the rival contentions and the\n     orders of the lower authorities.          The fact shows that the\n     assessee filed originally its return of income on 25\n     September 2009, which was assessed underSection\n     143(3)of the Act on 30 November 2011.                       In paragraph\n     no. 6 of Assessment Order it is noted that deduction underSection 35(2AB)of the Act has been claimed amounting to\n     Rs. 10,04,36,556/-. In computation of income assessee\n     has claimed the capital expenditure on R&D as well as\n     Revenue expenditure on R&D both allowable as deduction\n     underSection 35(2AB)of the Act.             Report underSection\n     35(2AB)of the Act was also available before the learned\n     Assessing   Officer   along     with      details       of    expenditure\n     incurred on R & D centre as per Appendix-1 to Appendix-4\n     of auditor certification        dated 20 September 2010.\n     Thereafter reopening has been made.021. on the basis of above reasons recorded, on the first issue\n     refer to in paragraph no. 2 above no addition was made\n                                                                         Page | 12\n                                             ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     and learned Assessing Officer accepted on the same.\n     Therefore, it is not required to be discussed.022. With respect to Para no.3, the learned Assessing Officer\n     has noted about the claim of weighted R & D deduction.\n     The claim of the expenditure was Rs. 5,145 lacs.                        The\n     learned Assessing Officer noted that assessee is also\n     carrying on contract research on behalf of its AE, received\n     a remuneration of Rs. 5,231 lacs, and incurred an\n     expenditure of Rs.3, 600 lacs for rendering the above\n     services. Assessee has reduced Rs.3,600 lacs from R & D\n     expenditure of Rs.5,145 lacs and claimed on the balance\n     sum weighted deduction at the rate of 15% amounting to\n     Rs.2318 lacs.    The learned Assessing Officer was of the\n     view that assessee should have reduced Rs. 5,231 lacs\n     being contract research income from R & D expenditure\n     and thereafter, should have claimed deduction on net R &\n     D expenses. Thus, according to learned Assessing Officer\n     assessee   has   claimed   higher      weighted         deduction          at\n     Rs.1,631 lacs (being Rs. 5,231 lacs contract receipt and\n     3600 lacs contract expenditure). Thus, ₹2,447 lacs were\n     excess claimed by the assessee.          The learned Assessing\n     Officer noted that there is a failure on the part of the\n     assessee to disclose fully and truly all-material fact\n     necessary for its assessment.              He also noted that\n     considering the new credible information on record, he has\n     reason to belief about the escapement of income.Page | 13\n                                                  ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11023. On careful reading of the reasons, we find that in\n    Paragraph no. 3.1, the facts noted by the learned\n    Assessing Officer are available in the audited accounts and\n    supporting produced by the assessee during the original\n    assessment proceedings. In appendix -E attached to form\n    no. 3CEB dated 25th September, 2009, assessee has\n    disclosed that it is in receipt of contract research services\n    from Glenmark          Pharmaceutical SA amounting to Rs.\n    52,31,89,111/- as an international transaction which has\n    been   benchmarked        adopting         Transitional         Net      Margin\n    Method     as   the    most   appropriate            method.            In     the\n    computation of total income, the assessee has given a\n    breakup of claiming of weighted deduction underSection\n    35(2AB)of the Act.              With respect to the Revenue\n    expenditure     and    capital     expenditure.              Assessee         has\n    reduced Rs. 36,28,54,000/- being R & D expenditure\n    incurred by the assessee with respect to the contract\n    research    income.        Thus        from       the      total      research\n    expenditure,     the   contract       research         expenditure           with\n    respect to which the income has been earned by the\n    assessee has already been reduced in the original claim.\n    Assessee also disclosed in the computation of business\n    income the amount of deduction is claimed. The tax audit\n    report in Annexure-6 with respect to the clause 15, the\n    disclosure with respect to the amount of claim made by\n    the assessee was also shown. A note thereon also stated\n    cost incurred by the assessee for providing contract\n    research services is not part of the R & D expenditure\n                                                                           Page | 14\n                                               ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     incurred by the assessee and therefore, those are reduced\n     from the same.       Therefore, amount of contract research\n     income, the expenses incurred on rendering of contract\n     research services and the net claim of the assesseeu/s 35\n     (2AB)of the act was already on the record before the\n     learned Assessing Officer during the course of original\n     assessment proceedings.024. Further, in assessment year 2012 - 13, on identical issue\n     actionu/s 263of the act was initiated by the CIT (LTU)\n     Mumbai     stating   that   the   deduction         claimed         by     the\n     assessee should have been reduced by the contract\n     research   income     and   not    by     the     contract        research\n     expenditure.     The matter was challenged before the\n     coordinate bench wherein in order dated 30/9/2019 in ITA\n     number     2944/M/2018,       relying      on      the      decision         of\n     Wockhardt Limited, held that the deduction claimed by the\n     assessee by reducing the R and D expenditure only by the\n     amount of R and D expenditure incurred and not by R&D\n     income is in accordance with the provisions of the act.\n     Hence, the orderu/s 263of the act was quashed.025. We have also been shown that honourable Karnataka High\n     Court in CIT versus micro labs Ltd 383 ITR 490, the\n     guidelines of DSIR are extracted in paragraph number 3\n     which speaks that only when certain assets are used for\n     research and development activities, which have been\n     sold, the R&D expenditure should be reduced from the\n     sales realization or arising out of asset sold. Therefore, it\n                                                                            Page | 15\n                                                ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     does not speak that income arising from the business\n     activity carried on by the assessee for research and\n     development on behalf of other party should be reduced\n     and not the expenditure incurred for rendering such\n     services.   Therefore, the guidelines are not applicable in\n     the present case.026. In the reasons recorded, the learned Assessing Officer in\n     paragraph no. 3.3 has categorically stated that on the\n     perusal of the records he is of the opinion that assessee\n     has claimed higher deduction.              The learned Assessing\n     Officer was also of the view that assessee has failed to\n     disclose fully and truly all material facts necessary for its\n     assessment.     The disclosure made by the assessee has\n     already been extracted above in earlier paragraphs.\n     However, reasons recorded          did not say that what is the\n     information other than those already disclosed should\n     have further been disclosed by the assessee to make it full\n     and true. Merely, saying that assessee failed to dispose of\n     its obligation does not prove that the failure of disclosure\n     is on part of the assessee. Further, as the reassessment\n     proceedings were initiated after the period of four years, it\n     is mandatory for the learned Assessing Officer to show\n     that what are the facts       assessee has failed to disclose\n     'fully and truly'.     Even the paragraph no. 3.1 of the\n     reasons recorded, the learned Assessing Officer has taken\n     all   the   material   only   from        the     audited         accounts,\n     computation, and reports furnished by the assessee before\n     him, which were available during the course of original\n                                                                         Page | 16\n                                             ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     assessment proceedings.        Therefore, we do not find any\n     escapement of income, if at all, is not because of failure\n     on part of the assessee to disclose fully and truly all\n     material facts.027. Further, the learned Assessing Officer has stated that\n     based on this 'new credible information' on record, he has\n     a reason to believe     about escapement of income.                     The\n     learned Assessing Officer has not referred to any new\n     tangible   material,   which    is   mandatory          condition        for\n     reopening of the assessment.         We     find that there is no\n     new tangible material available with the learned Assessing\n     Officer for reopening of the assessment.                  The learned\n     Assessing Officer has merely perused the existing material\n     available on record and has reopened the assessment.\n     Therefore, on careful perusal of the reasons recorded it\n     clearly shows that now the learned Assessing Officer\n     would like to change his opinion that for granting of\n     weighted deduction underSection 35(2AB)of the Act\n     whether the expenditure incurred by the assessee on\n     contract research services should have been reduced or\n     the   remuneration        generated        by      incurring         those\n     expenditure should be reduced.          Thus, now the learned\n     Assessing Officer want to reduce the R & D expenditure by\n     the cost incurred as well as the profit margin earned on\n     this expenditure. It is an established principle of law that\n     reopening merely on change of the opinion is not\n     permitted.    Further to reopen the case, the learned\n     Assessing Officer should have a tangible material and it\n                                                                         Page | 17\n                                             ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     cannot be the same stale      material, which was available\n     before him at the time of making original assessment.028. Hon'ble Bombay High Court in case of Asian Paints Ltd.(supra) has categorically held that the power underSection 147cannot be used to review the order. Here the\n     learned Assessing Officer is clearly making an attempt to\n     review his decision whether excluding the cost of R & D\n     contract or the gross receipt earned by the assessee\n     should be reduced from such expenditure.                     He merely\n     applies his mind afresh to information already available on\n     record.029. Accordingly, we are of the view that learned CIT(A) has\n     erred in upholding the action of the learned Assessing\n     Officer of reopening of the assessment.                   The learned\n     CIT(A) has held that a partial disclosure may very often be\n     a misleading one. There cannot be any quarrel on this but\n     how the disclosure made by the assessee is partial has not\n     been demonstrated by him. It may also be true that it is\n     not necessary that tangible material should always be\n     from outside record of the assessee. However, what are\n     the new material that Assessing Officer has seen which\n     were not available or could not be seen by him in the\n     original assessment is required be demonstrated by\n     learned Assessing Officer. This is missing in the reasons\n     recorded by the learned Assessing Officer as well as in the\n     order of the learned CIT(A) upholding such reasons.Page | 18\n                                             ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11030. In the result, we are not upholding the action of the\n     learned Assessing Officer in reopening of the assessment\n     as well as the order of the learned CIT(A) in upholding the\n     action of the learned Assessing Officer.            Accordingly, the\n     reopening made by the learned Assessing Officer deserves\n     to be quashed.     Solitary ground of cross objection is\n     allowed.031. In view of our decision in the cross objection filed by the\n     assessee which   goes to root of the matter.                We do not\n     find it necessary to decide the issue involved in the appeal\n     of the learned Assessing Officer.        . However, for sake of\n     completeness, whether the claim of the assessee underSection 35(2AB)of the Act is correct or not. In paragraph\n     no. 6.3 of the order, the learned CIT(A) noted that the\n     income from contract research has been offered for\n     taxation, the cost of contract research has not been\n     claimed by the assessee for weighted deduction. The\n     expenditure incurred by the assessee for mahapae unit\n     were properly used by the above expenditure on contract\n     research work, the Sinnar unit has nothing to do with the\n     same. The learned Assessing Officer is incorrect in\n     reducing the income of contract research activity from the\n     eligible claim. Certain judicial precedent including the\n     decision of Hon'ble Karnataka High Court was followed. He\n     has   also dealt with the issue that after the income and\n     expenditure are adjusted it would amount to double\n     taxation of income. In the result, we do not find any\n     infirmity in the order of the learned CIT(A) in deleting the\n                                                                                Page | 19\n                                                    ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     disallowance of deduction underSection 35(2AB)of the\n     Act. Accordingly, the solitary ground of appeal raised by\n     the learned Assessing Officer is dismissed.032. For assessment year 2009 - 10, accordingly, the appeal of\n     the learned Assessing Officer is dismissed and the CO of\n     the assessee for A.Y. 2009-10 is allowed.033. Now coming to the appeals of assessment year 2010 - 11,\n     the   learned     assessing   officer          has      filed    ITA     number\n     7582/M/2019 against the order of the Commissioner of\n     income tax (appeals) - 1, Mumbai dated 28/10/2019\n     challenging the deletion of the disallowance of weighted\n     deduction claimedu/s 35 (2AB)of the act in the reopened\n     assessment proceedingsu/s 147of the act. The assessee\n     has   filed    appeal   challenging            the      reopening        of     the\n     assessment upheld by the learned CIT - A.034. The facts in the case of the assessee for A.Y. 2010-11 are\n     identical. The brief facts shows that assessee filed its\n     return of income on 30th September, 2010 at Rs. Nil and\n     book profit at Rs. 122,67,14,960/-. Assessment underSection 143(3)read withsection 144C (3)of the Act was\n     made on 7th March, 2014 at Rs.18,26,47,390/- as per\n     normal        computation     and         at        a     book       profit       of\n     Rs.129,91,06,538/-.         The     case       of       the     assessee       was\n     reopened by issue of notice underSection 148of the Act\n     on 21st March, 2017. The assessee requested for accepting\n     the original return filed in response to that notice . The\n     reasons were given to the assessee on 23rd May, 2017, the\n                                                                               Page | 20\n                                                   ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n     reasons are identical to the reason recorded in the reasons\n     of reopening for A.Y. 2009-10 i.e. for computation of\n     weighted deduction underSection 35(2AB)of the Act. The\n     reopening is also beyond the period of four years. The\n     reasons    are     identically    worded        except        the     amounts\n     incorporated for this year. Assessee raised objection on\n     21st august, 2017, which was disposed off, identically by\n     the learned Assessing Officer and the deduction of\n     research     and     development          expenditure            claimed         of\n     Rs.4,605/- lacs is lower than the contract receipt income,\n     therefore,   he     held   that     No      deduction         is    allowable.\n     Assessment order underSection 143(3)read withsection\n     147of the Act was passed on 26 December 2017,\n     determining the total income of the assessee at Rs. Nil.035. On appeal before the learned CIT(A), the action underSection 147of the Act was upheld and deduction underSection 35(2AB)of the Act was allowed.036. Identically, the learned Assessing Officer is aggrieved with\n     the allowance deduction underSection 35(2AB)of the Act\n     and   assessee      is   aggrieved       where        reopening         of     the\n     assessment is upheld.037. Both the parties confirmed that there is no change in the\n     facts of the case are identical for this year compared to\n     that assessment year 2009-10. Therefore, as per the\n     reason given by us in cross objection of the assessee for\n     A.Y. 2009-10, whether reverse the orders of the lower\n     authorities on the issue of reopening of the assessment\n                                                                                   Page | 21\n                                                       ITA Nos. 7742, 7582, 7933/Mum/2019CO No. 62/Mum/2021Glenmark Pharmaceuticals Ltd. ; A.Ys. 09-10 & 10-11\n\n\n               and quash the action of reopening. On the merits, we\n               confirm the order of the learned CIT(A) in                       allowing\n               deduction underSection 35(2AB)of the Act.038. Accordingly, the appeal of the learned Assessing Officer is\n               dismissed and cross objection of the assessee is allowed.039. Accordingly, all these four appeals are disposed off.Order pronounced in the open court on 18.07.2022.Sd/-                                              Sd/-\n        (SANDEEP SINGH KARHAIL)                            (PRASHANT MAHARISHI)\n          (JUDICIAL MEMBER)                               (ACCOUNTANT MEMBER)\nMumbai, Dated: 18. 07.2022\nSudip Sarkar, Sr.PS\nCopy of the Order forwarded to :\n 1. The Appellant\n  2. The Respondent\n  3. The CIT(A)\n  4. CIT\n  5. DR, ITAT, Mumbai\n  6. Guard file.\n                                                                            BY ORDER,\n\n            True Copy//Sr. Private Secretary/ Asst. Registrar\n                                      Income Tax Appellate Tribunal, Mumbai