UCB India Private Limited Vs DCIT (ITAT Mumbai)
TPO’s 99:1 Prescription Fails the Clinical Trial: ₹357-Crore Adjustment u/s 92CA Deleted for Ignoring Methods u/s 92C
Two Agreements & ₹800-Crore Consideration
UCB India, a wholly owned subsidiary of Belgium-based UCB SA, manufactured & distributed pharmaceutical products of the UCB Group.
During FY 2015-16, UCB India transferred an identified pharmaceutical business to Dr. Reddy’s Laboratories Ltd., an unrelated party, under a Business Transfer Agreement dated 1 April 2015. It received approximately ₹440.80 crore, though ₹434.65 crore was reported in Form 3CEB, and offered the capital gain u/s 50B.
Separately, DRL entered into a Trademark Assignment Agreement with UCB Farchim SA, Switzerland & UCB Biopharma SPRL, Belgium, for acquiring intellectual property relating to the transferred business. UCB Global received ₹359.20 crore.
Thus, out of the overall negotiated consideration of ₹800 crore, UCB India received 55.10%, while UCB Global received 44.90%.
TPO Rewrites the Deal 99:1
Independent valuation reports valued UCB India’s identified business at ₹116.89 crore & UCB Global’s intellectual property at ₹543.22 crore. Despite this valuation-based entitlement of only 17.71%, UCB India had actually received 55.10% of the overall consideration.
The TPO nevertheless attributed ₹792 crore, representing 99%, to UCB India & allowed merely ₹8 crore, or 1%, to UCB Global. The allocation was primarily based on advertisement, marketing & promotion expenditure incurred by UCB India, which supposedly established its economic ownership of marketing intangibles.
