Question ID : 29616

Benefit to operate in Sikkim _pharmaceutical Company

One Pharmaceutical Company having marketing in Delhi area is operating since 2011 and having a good profit margin as the company get their products with the own brand name get third party manufactured at Rs.2 and sold at Rs.10. Now the company has started their own manufacturing unit at Sikkim and get produced all their existing brands from Sikkim Unit only and the same transfer to Delhi and sold from that places . Thus claiming benefit of Section 80IB tax holiday by charging all their marketing expenses in that account from Sikkim Unit and no benefit shown from existing marketing unit at Delhi. Now our confusion persist that whether Income tax department may claim that you have shifted your entire profit to Sikkim and may raise following issue - 1. why not company Sikkim unit profit based on Sale price of Rs.2 ( which is Sale price of third party manufacture ) not based on Sale Price of Rs. 10, should be allowed only as the Sikkim unit of company producemanufacture for the other companies as well at Rs.2. 2. Why the profit which may be generate with third party manufacture shall be claimed as deduction. 3. Why not it should be treated as that it is same business as no separate brands . The same brands is being sold and it may be treated as " it is formed by splitting up or reconstruction , of a business already in existence".