SABMILLER INDIA LTD, MUMBAI V. ASST CIT CIR 11(1)(2), MUMBAI

ITA 1205/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4992 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 08-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Double taxation relief; Advance ruling; Corroborative evidences; Commercial expediency; TDS
• Section: 92C; 143(3); 40(a)(ia); 10B; 195; 13; 22; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1205 / MUM . /201 6 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 11(1)(2), MUMBAI . APPELLANT V/S ANHEUSER BUSCH INBEV INDIA LTD. (EARLIER KNOWN AS SABMILLER INDIA LTD. ) UNIT NO.301/302, 3 RD FLOOR DYNASTY BUSINESS PARK, B WING ANDHERI KURLA ROAD, ANEHERI (E) MUMBAI 400 059 PAN AAICS2238R . RESPONDENT ITA NO. 1738 /MUM. /2016 ( ASSESSMENT YEAR : 20 11 12 ) ANHEUSER BUSCH INBEV INDIA LTD. (EARLIER KNOWN AS SABMILLER INDIA LTD. ) UNIT NO.301/302, 3 RD FLOOR DYNASTY BUSINESS PARK, B WING ANDHERI KURLA ROAD, ANEHERI (E) MUMBAI 400 059 PAN AAICS2238R . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 11(1)(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI RAJAN R. VORA A/W SHRI HEMEN CHANDARIYA REVENUE BY : SHRI ANAND MOHAN DATE OF HEARING 20.11.2019 DATE OF ORDER 18.02.2020 2 SABMILLER INDIA LTD. O R D E R PER SAKTIJIT DEY. J.M. TH ESE CROSS APPEAL S ARISE OUT OF ASSESSMENT ORDER DATED 28 TH JANUARY 2016, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) IN PU RSUANCE TO THE DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL (DRP) 2, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2011 12 . ITA NO.1205/MUM./2016 ASSESSEES APPEAL 2. GROUND NO.1, RELATES TO THE ADDITION OF ` 26,22,23,865, ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT MADE ON PAYMENT OF MANAGEMENT FEE TO THE ASSOCIATED ENTERPRISE (A E). 3. BRIEF FACTS ARE, THE ASSESSEE, FORMERLY KNOWN AS SABMILLER INDIA LTD. , IS A RESIDENT COMPANY AND IS ENGAGED IN THE BUSINESS OF BREWING, PACKAGING, DISTRIBUTION, MARKETING AND SELLING OF BEER. IT IS STATED THAT THIS GROUP CREATED ITS PRESENCE IN INDIA IN THE YEAR 2002 THROUGH THE ASSESSEE. THEREAFTER, THE GROUP MADE VARIOUS ACQUISITION S OF LOCAL OPERATIONAL AND NON OPERATIONAL BREW ERIES IN INDIA INCLUDING THE INDIAN SUBSIDIARY OF THE F OSTER S GROUP. THE ACQUIRED BREWERIES WERE LATER MERGED / DE MERGED INTO THE ASSESSEE COMPANY. FOLLOWING THE PROCESS OF VARIOUS BUSINESS ACQUISITIONS, THE ASSESSEE HAD ENTERED INTO 3 SABMILLER INDIA LTD. A TECHNOLOGY TRANSFE R A GREEMENT (TTA) WITH SABMILLER MANAGEMENT (IN ) B.V. WITH THE SOLE OBJECT OF OBTAINING THE TECHNICAL KNOWHOW AND TO SUPPORT THE TECHNICAL NEEDS FOR BREWING AND MANUFACTURING OF BEER DURING THE INITIAL YEARS OF ITS OPERATIONS IN INDIA. AS PER THE TERMS OF TTA, THE ASSESSEE WAS SUPPOSED TO RECEIVE TECHNICAL KNOWHOW IN THE FORM OF METHODS, PROCEDURE, PROCESS, FORMULA E , SPECIFICATIONS, INCLUDING TECHNICAL AND ENGINEERING SPECIFICATION, RECIPES, TRADE SECRETS, TECHNOLOGY MANUALS, TECHNICAL INFORMATION WHICH ENA BLES THE ASSESSEE TO BREWING AND MANUFACTURING BEER. OVER A PERIOD OF TIME, THE ASSESSEE ACQUIRED VARIOUS BREWERIES IN INDIA AND UPGRADED ITS FACILITIES IN ACCORDANCE WITH THE BUSINESS STRATEGY IN INDIA. IN THE MEANWHILE, THE INDIAN COMPANIES HAD STARTED M ANUFACTURING AND BREWING CERTAIN LOCAL INDIAN BRANDS FOR WHICH NO TECHNICAL KNOWHOW WAS REQUIRED FROM THE SABMILLER GROUP. CONSIDERING THE FACT THAT THERE WAS CONTINUOUS GROWTH OF THE INDIAN BUSINESS AND SUBSTANTIAL CAPITAL INVESTMENT MADE BY THE ASSESSEE OVER THE YEARS, THE NEED FOR TECHNICAL SUPPORT FROM THE SABMILLER GROUP WAS SUBSTANTIALLY REDUCED AND ULTIMATELY THE TTA WAS TERMINATED IN THE FINANCIAL YEAR 2009 10. BASED ON THE TERMINATION OF THE TTA, THE ASSESSEE AND SABMILLER GROUP ENTERED INTO A GENE RAL SERVICE A GREEMENT (GSA) FOR OBTAINING VARIOUS BUSINESS SERVICES ON A CENTRALIZED BASIS CONSISTENT WITH THE ST ANDARD PRACTICE ADOPTED BY THE G ROUP FOR OTHER COUNTRIES. AS PER THE 4 SABMILLER INDIA LTD. TERMS OF THE AGREEMENT, THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION P AID AN AMOUNT OF ` 26,22,23,865, T O ITS AE TOWARDS PROVISION OF VARIOUS SERVICES , SUCH AS , GENERAL, MANAGERIAL AND CONSULTANCY SERVICES, TECHNICAL SERVICES AND INFORMATION TECHNOLOGY RELATE D SERVICE S . ON A REFERENCE BEING MADE BY THE ASSESSING OFFICER, TH E TRANSFER PRICING OFFICER WANTED TO VERIFY THE ARM'S LENGTH NATURE OF THE PAYMEN T MADE BY THE ASSESSEE TO ITS A E TOWARDS THE AFORESAID INTRA GROUP SERVICE S . IN RESPONSE TO THE QUERY RAISED BY THE TRANSFER PRICING OFFICER, IT WAS SUBMITTED BY T H E ASSESSEE THAT THE PAYMENT TOWARDS INTRA GROUP SERVICE S WAS MADE AS PER THE GROUP TRANSFER PRICING POLICY AND THE COST HAS BEEN ALLOCATED ON A REASONABLE BASIS OF TIME SPENT, HEAD COUNT, NUMBER OF USERS (FOR INFORMATION TECHNOLOGY RELATED SERVICES), ETC. AND CHARGED TO THE ASSESSEE ON A COST PLUS MARK UP BASIS. IT WAS SUBMITTED , THE COST BASE RELATING TO THE SERVICE PROVIDED TO THE ASSESSEE HAS BEEN CLARIFIED AND CERTIFIED BY THE INDEPENDENT AUDITOR AND WAS FOUND TO BE AT ARM'S LENGTH UNDER TRANSACTIONAL NET MARGIN METHOD BY TREATING TH E AE AS THE TESTED PARTY. IT WAS SUBMITTED , THE AE S OPERA TING PROFIT TO OPERATING COST IS 3% AS AGAINST THE MARGIN OF THE COMPAR ABLES @ 4.87% IN RESPECT OF INFORMATION TECHNOLOGY SERVICE S . WHEREAS, IN RESPECT OF NON IT SERVICES ASSESSEES MARGIN IS 5% AS AGAINST THE MARGIN OF THE COMPARABLES AT 5.75%. AFTER PERU SING THE SUBMISSIONS OF THE 5 SABMILLER INDIA LTD. ASSESSEE, THE TRANSFER PRICING OFFICER OBSERVED THAT BEFORE ACCEPTING ASSESSEES CLAIM THAT THE PAYMENT MADE TOWARDS INTRA GROUP SERVICES IS AT ARM'S LENGTH, THE ASSESSEE HAS TO JUSTIFY THE BENEFITS DERIVED BY IT AND AL SO HAS T O FURNISH THE COST BASE OF THE COST ON WHI CH MARK UP WAS CHARGED BY THE A E. TO PROVE THE BENEFIT TEST, THE TRANSFER PRICING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE FOLLOWING DETAILS: I) WHETHER THE SERVICES WERE REQUESTED FOR; II) WHEN AND HOW THEY WERE RENDERED BY THE A.E; III) COPY OF THE WRITTEN AGREEMENT; AND IV) AT WHAT RATE THE SERVICES ARE AVAILABLE IN LOCAL MARKET. 4. FURTHER, HE CALLED UPON THE ASSESSEE TO FURNISH REAL TIME SERVER DATA TO SUBSTANTIATE THE RECEIPT OF SERVICE S . AS OBSERVED BY THE ASSESSING O FFICER, THE ASSESSEE VIDE SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015, EXPLAINED THE NATURE OF SERVICE RECEIVED AND THE BENEFITS DERIVED THEREFROM. FURTHER, THE ASSESSEE SUBMITTED , COPIES OF E MAIL CORRESPONDENCES, GROUP PRESENTATIONS, COST CENTER REPORTS, MARGIN VARIANCE ANALYSIS, ETC. TO PROVE THE COST ALLOCATION AND RECEIPT OF SERVICE. FURTHER, THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM AN INDEPEND ENT AUDITOR CERTIFYING THE B ASIS OF ALLOCATION OF CO ST AND APPROPRIATE ALLOCATION KEYS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER WAS, HOWEVER, NOT CONVINCED AND DIRECTED THE ASSESSEE TO CO RELATE THE COST OF SPECIFIC ACTIVITY 6 SABMILLER INDIA LTD. CONDUCTED BY THE AE FOR TH E BENEFIT OF THE ASSESSEE. FURTHER, HE CALLED UPON THE ASSESSEE TO DEMONSTRATE THE BASIS OF ALLOCATION OF COST , THE ACTIVITY FOR WHICH THEY WERE INCURRED AND THE BENEFIT ACCRUING TO THE ASSESSEE. T HE TRANSFER PRICING OFFICER OBSERVED , SOME OF THE E MAIL CO RRESPONDENCE SHOW THAT SOME SERVICES HAVE BEEN RENDERED, BUT IT IS NOT CLEAR WHETHER SUCH SERVICES HAVE ANY VALUE AND IF SO, THE COST INCURRED FOR THAT AND THE BENEFIT DERIVED BY THE ASSESSEE. FURTHER, HE OBSERVED , THE ASSESSEE HAS TO DEMONSTRATE THAT THE PAYMENT MADE BY THE ASSESSEE TOWARDS SERVICES RECEIVED WOULD BE SIMILAR TO THE PAYMENT AN INDEPENDENT ENTITY WOULD HAVE PAID FOR SUCH SERVICES. AS ALLEGED BY THE TRANSFER PRICING OFFICER, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO CLARIFY THE ISSUE S RA ISED BY HIM. HE OBSERVED , THE ASSESSEE COULD NOT FURNISH ANY REAL TIME DATA TO PROVE THAT THE SERVICES WERE ACTUALLY RECEIVED. THUS, ULTIMATELY, RELYING UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT V/S CUSHMAN AND WAKEFIELD INDIA PVT. LTD., ITA NO.475 OF 2012, DATED 23 RD MAY 2014, HE DETERMINED THE ARMS LENGTH PRICE OF THE TRANSACTION RELATING TO THE PAYMENT MADE TOWARDS INTRA GROUP SERVICE AS NIL AND THE ENTIRE PAYMENT OF ` 26,22,23,865, WAS SUGGESTED AS ADJUSTMENT TO THE ARMS LENGTH PRICE. O N THE BASIS OF TRANSFER PRICING ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER FRAMED THE ASSESSMENT ORDER ADDING BACK THE AMOUNT OF ` 26,22,23,865. AGAINST THE DRAFT 7 SABMILLER INDIA LTD. ASSESSMENT ORDER SO PASSED, THE ASSESSEE RAISED OBJECTI ONS BEFORE THE DRP. HOWEVER, LEARNED DRP DID NOT INTERFERE WITH THE FINDINGS OF THE TRANSFER PRICING OFFICER. 5. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE TRANSFER PRICING OFFICER WHILE DETERMINING THE ARMS LENGTH PRICE OF THE INTRA GROUP SERVICES AT NIL HAS NOT APPLIED ANY ONE OF THE PRESCRIBED METHODS. HE SUBMITTED , UN DER THE GROUP SERVICE AGREEMENT THE ASSESSEE HAS RECEIVED VARIOUS SERVICES RELATING TO GENERAL, MANAGERIAL AND CONSULTANCY SERVICES, TECHNICAL SERVICES, INFORMA TION TECHNOLOGY SERVICES, ETC. H E SUBMITTED , AS PER THE TERMS OF THE AGREEMENT, SABMILLER GROUP PROVIDES SPECIALIZED SERVICE S AS WELL AS GLOBAL STRATEGIES AND POLICIES THAT ARE AIMED AT ASSISTING ITS OPERATIONS IN ACCORDANCE WITH LOCAL REVENUES. HE SUBMITTED , AS PER THE GROUP TRANSFER PRICING POLICY , COST HAD BEEN ALLOCATED ON A REASONABLE BASIS , SUCH AS , TIME SPENT, HEAD COUNT, NUMBER OF USERS, ETC., AND CHARGEABLE TO THE ASSESSEE ON FULL COST PLUS MARK UP BASIS, HOWEVER, ULTIMATELY NO MARK UP WAS CHARGED. HE SUBMITTED , IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER, THE ASSESSEE HAD SUBMITTED THAT SUPPORTING D OCUMENTS / EVIDENCES TO DEMONSTRATE THAT MANAGEMENT GROUP SERVICES HAVE ACTUALLY BEEN RENDERED AS WELL AS RECEIVED. FURTHER, HE SUBMITTED , THE ASSESSEE HAS ALSO DEMONSTRATED THAT AVAILING GROUP SERVICES HAVE RESULTED IN BENEFITS ACCRUING TO THE 8 SABMILLER INDIA LTD. ASSESSEE AN D THE COST ALLOCATION METHODOLOGY ADOPTED BY THE GROUP IS GENUINE, SCIENTIFIC, LOGICAL AND REASONABLE AND HAS BEEN AU DITED AND CERTIFIED BY AN INDEPENDENT ACCOUNTANT. HE SUBMITTED , WHILE MAKING SUCH PAYMENT TO THE GROUP, THE ASSESSEE HAS ALSO DEDUCTED TAX A T SOURCE UNDER SECTION 195 OF THE ACT . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE SERVICES PROVIDE D BY THE GROUP INCLUDING BROAD GUIDELINES ON WAYS OF WOR KING TO ENSURE STANDARD APPROACHES FOR FUNCTIONS AT OPERATIONAL LEVEL WITH THE AIM OF ACHIE VING OPTIMAL EFFICIENCY. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE SERVICES RENDERED ARE FINANCIAL CONSULTING, IMPROVED PERSONNEL STRATEGY, BUSINESS ADVISORY SERVICE S , CORPORATE AFFAIRS, MARKETING, TECHNICAL CONSULTING, COMPUTER ADVISORY SERVICE S AND DATA PROCESSING, INTELLECTUAL PROPERTY SERVICE S , ETC. HE SUBMITTED , THE PAYMENT MADE BY THE ASSESSEE TOWARDS INTRA GROUP SERVICES WAS ON ACTUAL BASIS AS PER THE COST INCURRED AND ON ACTUAL UTILIZATION OF SERVICES. HE SUBMITTED , COST HAS BEEN ALLOCATE D ON THE BASIS OF ALLOCATION KEYS AND ALL EVIDENCES RELATING TO COST B ASE AS WELL AS ALLOCATION KEYS WERE FILED BEFORE THE TRANSFER PRICING OFFICER / DRP. HE SUBMITTED , THE ASSESSEE CANNOT AVAIL THESE SERVICE S FROM ANY OUTSIDE AGENCY FOR MAINTAINING CONFID ENTIALITY. TO SUPPORT HIS ARGUMENT, THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE GSA, THE DETAILS OF COST ALLOCATION ALONG WITH ALLOCATION KEYS. FURTHER, HE SUBMITTED , AN 9 SABMILLER INDIA LTD. INDEPENDENT AUDITOR AFTER VERIFYING THE COST BASE AND ALLOCATION F EES HAS ALSO CERTIFIED IT. HE SUBMITTED , THOUGH , AS PER THE TERMS OF GSA, THE COST CHARGED IS TO BE WITH A MARK UP BUT SUBSEQUENTLY MARK UP HAS BEEN REVERSED AND THE PAYMENT HAS BEEN MADE ON THE BASIS OF ACTUAL COST INCURRED BY THE GROUP. THE LEARNED AUTHO RISED REPRESENTATIVE SUBMITTED , VARIOUS EVIDENCES FURNISHED BY THE ASSESSEE WERE EITHER NOT LOOKED INTO OR WERE REJECTED WITHOUT PROPER EXAMINATION AND APPLICATION OF MIND. HE SUBMITTED , AS PER THE STATUTORY PROVISIONS, THE MANDATE OF THE TRANSFER PRICING OFFICER IS TO ONLY DETERMINE THE ARM'S LENGTH PRICE OF A PARTICULAR TRANSACTION. HE SUBMITTED , THE TRANSFER PRICING OFFICER CANNOT STEP INTO THE SHOES OF THE ASSESSING OFFICER TO EITHER LOOK INTO THE COMMERCIAL EXPEDIENCY OR BENEFIT DERIVED. HE SUBMITTED , WHILE THE ASSESSEE HAS BENCH MARKED THE TRANSACTION APPLYING TNMM, THE TRANSFER PRICING OFFICER HAS DETERMINED THE ARMS LENGTH PRICE AT NIL WITHOUT FOLLOWING ANY METHOD AT ALL. HE SUBMIT TED , IF THE TRANSFER PRICING OFFICER W AS NOT SATISFIED WITH THE BENCH MARKING OF THE ASSESSEE, HE SHOULD HAVE DETERMINED THE ARMS LENGTH PRICE BY APPLYING ANY OTHER APPROPRIATE METHOD , WHICH IS NOT THE CASE. THUS, HE SUBMITTED , THE DETERMINATION OF ARMS L ENGTH PRICE BY THE TRANSFER PRICING OFFICER AT NIL IS WITHOUT AUTHORITY OF LAW. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE MANAGEMENT GROUP SERVICE S WERE NOT ONLY RENDERED BUT ALSO RECEIVED 10 SABMILLER INDIA LTD. BY THE ASSESSEE . FURTHER, HE SUBMITTED , THE SERVICES REC EIVED BY THE ASSESSEE HAVE RESULTED IN BENEFIT . HE SUBMITTED , THE ASSESSEE DID NOT OPT FOR AVAILING THE SERVICE S FROM A THIRD PARTY AS THE PROCESS ES AND SERVICE S ARE UNIQUE TO SABMILLER GROUP AND CONFIDENTIALITY HAS TO BE MAINTAINED. HE SUBMITTED , THE SERV ICES ARE ESSENTIAL FOR SMOOTH RUNNING OF THE BUSINESS. IN CASE, THE ASSESSEE WOULD HAVE AVAILED SUCH SERVICES FROM A THIRD PARTY, IT WOULD HAVE TO PAY MORE AND MORE OVER THE THIRD PARTY VERY LIKELY MAY NOT HAVE THE SPECIALIZED KNOWLEDGE IN COMPARISON TO TH E QUALITY OF SERVICES RENDERED BY THE GROUP. THUS, HE SUBMITTED , IN THE GIVEN CIRCUMSTANCES, THE AMOUNT PAID BY THE ASSESSEE SHOULD BE CONSIDERED TO BE AT ARM'S LENGTH. WITHOUT PREJUDICE, HE SUBMITTED , WHILE COMPUTING A RM'S LENGTH PRICE THE TRANSFER PRICIN G OFFICER CANNOT QUESTION THE COMMERCIAL WISDOM OF THE ASSESSEE AND MUST RESTRICT HIM TO DETERMINE THE ARM'S LENGTH PRICE OF THE TRANSACTION. HE SUBMITTED , IT IS TOTALLY IRRELEVANT ON THE PART OF THE TRANSFER PRICING OFFICER TO EXAMINE WHETHER THE ASSESSEE BENEFITS FROM SUCH SERVICES OR NOT. FINALLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, IN CASE OF ASSESSEES AE THE AUTHORITY FOR ADVANCE RULING (AAR) HAS GIVEN A RULING HOLDING THAT IT HAS PROVIDED TECHNICAL AND MANAGERIAL SERVICES. IN SUPPORT, TH E LEARNED AUTHORISED REPRESENTATIVE ALSO RELIED UPON THE FOLLOWING DECISIONS: I) CIT V/S EKL APPLIANCES LTD. [2012] 345 ITR 241 (DEL. HC); 11 SABMILLER INDIA LTD. II) KNORR - BREMSE INDIA (P) LTD. V/S ACIT, [2016] 380 ITR 307 (P&H); III) MERCK LIMITED V/S DCIT, ITA NO.1946/MUM./2014) DATED 31 ST MARCH 2016; IV) DET NORSKE VERITAS A/S V/S ADIT, ITA NO.200/MUM./2014, DATED 29.02.2016; V) DIMENSION DATA INDIA PVT. LTD. V/S DCIT, ITA NO.2280/ MUM./2016) DATED 16 TH AUGUST 2017; VI) UCB INDIA PVT. LTD. V/S DCIT (ITA NO.1218/MUM./2014, DATED 18.05.2016 ; VII) SCHNEIDER ELECTRIC INDIA PVT. LTD. V/S DCIT, ITA NO.209/ AHD./2015 DATED 31.05.2017; VIII) FESTO CONTROLS PVT. LTD. V/S DCIT [2014] 150 ITD 305; IX) DRESSER - RAND INDIA PVT. LTD. V/S ACIT, [2011] 141 TTJ 385 ; X) TNS INDIA PVT . LTD . V/S ACIT, ITA NO.944/HYD./20 07, DATED 22.01. 2014; XI) TNS INDIA PVT . LTD . V/S DCIT , ITA NO. 604/HYD. /2014, DATED 13 .02.2015; AND XII) KNORR - BREMSE INDIA (P) LTD . V/S ACIT , ITA NO. 5886/DEL. / 2012, DATED 23 .08.2016. XIII) INA BEARINGS INDIA PVT. LTD. V/S DCIT, [2019] 108 TAXMANN. COM 198 (PUNE) (TRIB.). XIV) M/S. IPSOS RESEARCH PVT. LTD. V/S ACIT, ITA NO.1361/MUM/ 2017 DATED. 11.12.2019, 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THOUGH , THE RE IS AN AGREEMENT BETWEEN THE ASSE SSEE AND ITS A ES TOWARDS RENDERING OF SERVICES AND THE PAYMENT TO BE MADE FOR SUCH SERVICES HAVE BEEN SPECIFIED, HOWEVER, THE QUESTION WHICH REQUIRES TO BE 12 SABMILLER INDIA LTD. EXAMINED IS, WHETHER SUCH AN ARRANGEMENT OR AGREEMENT BETWEEN THE ASSESSEE AND THE A ES WOULD OVERRIDE THE TRANSFER PRICING PROVISIONS AS CONTAINED IN CHAPTER X OF THE ACT. DRAWING OUR ATTENTION TO SUB SECTION (2) OF SECTION 92 OF THE ACT, HE SUBMITTED , IT EMPOWERS THE ASSESSING OFFICER TO DETERMINE THE ARM'S LENGTH PRICE OF BENEFIT, SERVICE OR FACILITIES. HE SUBMITTED , THERE IS NO RESTRICTION IMPOSED ON THE TRANSFER PR ICING OFFICER TO ONLY DETERMINE THE ARM'S LENGTH PRICE OR COST OF EXPENDITURE ALLOCATED. HE SUBMITTED , THE COST OR EXPENDITURE ALLOCATED OR APPORTIONED AS A RESULT OF ANY AGREEMENT HAS TO BE DETERMINED HAVING REGARD TO THE ARM'S LENGTH PRICE OF THE BENEFIT, SERVICES OR FACILITIES PROVIDED TO ANY AE. THEREFORE, THE TRANSFER PRI CING OFFICER HAS NO ALTERNATIVE BUT TO ASCERTAIN THE BENEFIT DERIVED FROM THE ENTIRE ARRANGEMENT ENTERED INTO BY THE ASSESSEE AS W ELL AS THE ACTU AL SERVICES RECEIVED FROM THE A E. HE SUBMITTED , UNLESS THE RECEIPT OF SERVICE AS WELL AS BENEFIT ACCRUING IS ASCERTAINED, THE TRANSFER PRICING OFFICER CANNOT DETERMINE THE ARM'S LENGTH PRICE VIS A VIS AN INDEPENDENT ENTERPRISE. THEREFORE, IT WOULD BE WRONG TO SAY THAT THE TRANSFER PRICING OFFICER CANNOT ENTER INTO THE ARENA OF ACTUAL RECEIPT OF SERVICE OR THE BENEFIT DERIVED THEREFROM. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN SONY ERICSON M OBILE COMMUNICATIONS INDIA PVT. LTD. V/S CIT, [2015] 55 TAXMANN.COM 240 (DEL.). THE LEARNED DEPARTMENTAL REPRESENTATIVE 13 SABMILLER INDIA LTD. SUBMITTED , MERELY BECAUSE THE ASSESSEE AND THE AE HAVE ENTERED INTO AN AGREEMENT AND THE PAYMENTS HAVE BEEN MADE IN TERMS OF THE AGREEME NT, IT CANNOT DEBAR THE TRANSFER PRICING OFFICER FROM MAKING ADJUSTMENT ON THE BASIS OF TRANSFER PRICING PROVISIONS. HE SUBMITTED , THOUGH , IT MAY BE A FACT THAT THE ASSESSEE HAS FURNISHED VOLUMINOUS DETAILS RELATING TO INTRA GROUP SERVICE S , HOWEVER, BOTH T HE TRANSFER PRICING OFFICER AND THE DRP AFTER CLOSELY EXAMINING SUCH EVIDENCES, HAVE CONCLUDED THAT THE ARM'S LENGTH PRICE OF SUCH SERVICES HAS TO BE DETERMINED AT NIL. HE SUBMITTED , THE NATURE OF EVIDENCES FURNISHED BY THE ASSESSEE IN THE FORM OF E MAIL, DEBIT NOTES , ETC., ARE ACTUALLY GENERAL CORRESPONDENCES, NOTICE AND EXCHANGE OF INFORMATION BETWEEN THE ASSESSEE AND THE A ES. THEY DO NOT SHOW ANY SPECIFIC AND DISTINCT INSTANCE S OF SERVICES RENDERED BY THE A ES REQUIRING SEPARATE PAYMENT TO BE MADE BY THE ASSESSEE. HE SUBMITTED , NONE OF THE EVIDENCES FURNISHED BY THE ASSESSEE DEMONSTRATE ANY BENEFIT RECEIVED FROM SUCH SERVICES RENDERED BY THE A E. HE SUBMITTED , THE ASSESSEE EVEN HAS NOT FURNISHED QUANTIFICATION OF SERVICES TO JUSTIFY THE PRICE PAID IN AN ARM 'S LENGTH SITUATION. HE SUBMITTED , THE ASSESSEE WAS UNABLE TO PROVIDE DETAILS OF COST PAID FOR EACH SERVICES STATED TO HAVE BEEN AVAILED. HE SUBMITTED , ALT HOUGH THE ASSESSEE HAS STATED THAT THE COST INCURRED BY THE AE HAS BEEN REIMBURSED ON PR E DEFINED ALL OCATION BASIS HOWEVER IT 14 SABMILLER INDIA LTD. DOES NOT RELATE TO SERVICE RENDERED. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) CIT V/S CUSHMAN AND WAKEFIELD INDIA PVT. LTD., [2014] 46 TAXMANN.COM 317 (DEL.); AND II) FOSROC CHEMICALS INDIA PVT. LTD., [2015] 58 TAXMANN.COM 85 (BANG.). 7. PROCEEDING FURTHER, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , AS PER THE OECD GUIDELINES, THE ASPECTS WHICH REQUIRE EXAMINATION ARE, WHETHER INTRA GROUP SERVICES IN FACT HAVE BEE N PROVIDED AND SECONDLY, WHAT SHOULD BE THE INTRA GROUP CHARGE FOR SUCH SE RVICES FOR TAX PURPOSE WITH REGARD TO THE ARM'S LENGTH PRINCIPLE. HE SUBMITTED , T HE ASSESSEE FIRSTLY HAS TO PROVE THAT THE SERVICES WERE ACTUALLY RENDERED AND RECEIVE D AND SECONDLY, THE QUANTIFICATION OF SUCH SER VICES IN TERMS OF ACTU AL EXPENDITURE INCURRED AND COMMENSURATE BENEFIT THEREFROM HAS BEEN DONE ON A PROPER BASIS. AT THE THIRD STAGE, IT REQUIR ES TO BE SEEN IF THE PAYMENT MADE BY THE ASSESSEE IS AT ARM'S LENGTH. HE SUBMITTED , IF THE ASSESSEE FAILS AT THE FIRST OR SECOND STAGE OF PROVIDING ACTUAL RENDERING AND RECEIVING OF SERVICES AND QUANTIFICATION OF SUCH SERVICES IN TERMS O F ACTUAL EXPENDITURE INCURRED AND COMMENSURATE BENEFIT DERIVED THEREFROM, IT IS NOT NECESSARY FOR THE TRANSFER PRICING OFFIC ER TO PR OCEED TO THE THIRD STAGE OF DETERMINING THE ARM'S LENGTH PRICE AS HE WILL BE UNABLE TO DO SO. IN 1 5 SABMILLER INDIA LTD. SUPPORT OF SUCH CONTENTION, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS: I) SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. V/S CIT, [2015] 55 TAXMANN.COM 240 (DEL.); II) CIT V/S CUSHMAN AND WAKEFIELD INDIA PVT. LTD., [2014] 46 TAXMANN.COM 317 (DEL.); III) DELOITTE CONSULTING INDIA PVT. LTD. V/S DCIT, [2012] 22 TAXMANN.COM 107 (MUM.); AND IV) FOSROC CHEMICALS INDIA PVT. LTD. V/S DCIT, [2 015] 58 TAXMANN.COM 85 (BANG.) (TRIB.). 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGHT OF THE DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD. THE FACT CULLED OUT FROM RECORD WOULD REVEAL THAT THE ASSESSEE HAS ENTERED INTO A GROUP SERVICE AGRE EMENT (GSA) WITH SABMILLER MANAGEMENT (IN) B.V., FOR AVAILING CERTAIN SERVICES. AS COULD BE SEEN FROM THE AFORESAID AGREEMENT, A COPY OF WHICH IS PLACED IN THE PAPER BOOK , COMPANIES OF THE G ROUP AVAILED SUCH SERVICES RELATING TO FINANCIAL CONSULTING, IMPRO VED PERSONNEL STRATEGY, BUSINESS ADVISORY SERVICES, CORPORATE AFFAIRS, MARKETING, TECHNICAL CONSULTING, COMPUTER ADVISORY SERVICES AND DATA PROCESSING AND INTELLECTUAL PROPERTY SERVICE S , ETC. THE AGREEMENT ALSO PROVIDES THAT SUCH SERVICES CAN BE PROVIDED BY PROCURING THEM FROM OTHER COMPANIES IN THE GROUP OR EVEN FROM THIRD PARTY. IT IS ALSO MENTIONED IN THE AGREEMENT THAT THE PROVISION OF SUCH SERVICE WOULD BE AT THE REQUEST OF THE RECIPIENT. AS PER THE TERMS OF 16 SABMILLER INDIA LTD. AGREEMENT, THE COST OF SERVICE PROVIDED TO DIFFERENT ENTITIES IN THE GROUP WOULD BE CHARGED WITH A MARK UP AND THE ALLOCATION OF SUCH EXPENDITURE TO THE RECIPIENT SHOULD BE ON THE BASIS OF ALLOCATION KEYS WHICH COULD VARY ACCORDING TO THE NATURE OF SERVICE BEING PROVIDED. THE AGREEMENT ALSO PROVIDE S, ALL INFORMATION WHETHER TANGIBLE OR INTANGIBLE INCLUDING ANY FORMULA, PATTERN, COMPILATION, METHOD, TECHNIQUE OR PROCESS RELATING TO THE SERVICE RENDERED WHICH IS NOT GENERAL LY KNOW N TO THE PUBLIC WOULD BE TREATED AS CONFIDENTIAL. THE AGREEMENT ALSO PRO VIDES THAT IN CONSIDERATION OF THE SUPPLY OF SERVICE, A FEE WOULD BE CHARGED ON THE BASIS OF COST INCURRED TOGETHER WITH A MARK UP TO BE DETERMINED AS PER SCHEDULE (II) OF THE AGREEMENT AND ON THE BASIS OF INVOICE RAISED BY THE SERVICE PROVIDER. 9. THUS, FR OM THE AFORESAID FACTS, IT IS CLEAR THAT THE NATURE OF SERVICE S TO BE PROVIDED AT THE REQUEST OF THE SERVICE RECIPIENT AS WELL AS THE PAYMENT TO BE MADE FOR SUCH SERVICE IS REGULATED BY THE TERMS OF THE AGREEMENT. IN FACT, THE TRANSFER PRICING OFFICER HAS ALSO NOT DISPUTED THE AFORESAID FACTUAL POSITION. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE IN ITS TRANSFER PRICING STUDY REPORT HAS CONDUCTED ECONOMIC ANALYSIS OF THE PRICE PAID TO THE A.E. TOWARDS SERVICE RECEIVED BY ADOPTING TNMM AS THE MOST APPROPR IATE METHOD. FURTHER, THE ASSESSEE HAS UNDERTAKEN COMPARABILITY ANALYSIS BY SELECTING INDEPE NDENT COMPARABLES FROM THE DATA BASE AND CONSIDERING THE 17 SABMILLER INDIA LTD. MARGIN OF THE COMPARABLES VIS A VIS THE MARGIN SHOWN BY THE ASSESSEE , PRICE PAID FOR THE TRANSACTION WAS FOU ND TO BE AT ARM'S LENGTH. APPARENTLY, THE TRANSFER PRICING OFFICER HAS NOT ACCEPTED THE ECONOMIC ANALYSIS OF THE ASSESSEE AND HAS DETERMINED THE ARM'S LENGTH PRICE OF THE TRANSACTION AT NIL PRIMARILY ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE ACTUA L RECEIPT OF SERVICE AND THE BENEFIT ACCRUED / DERIVED FROM SUCH SERVICE AS WELL AS THE VALUE OF SERVICE RENDERED. WE HAVE NOTED THAT IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSF ER PRICING OFFICER, THE ASSESSEE HAS FURNISHED VOLUMINOUS DOCUMENTS IN THE F ORM OF CORRESPONDENCE, NOTES, E MAILS, INVOICE RAISED, ETC., TO PROVE NOT ONLY THE ACTUAL RENDITION OF SERVICE, BUT ALSO THE BENEFIT DERIVED. IN FACT, BEFORE US, THE ASSESSEE IN THE WRITTEN NOTE HAS ENUMERATED THE EXACT NATURE OF SERVICES RENDERED IN TERMS OF THE AGREEMENT AS WELL AS THE BENEFIT DERIVED WITH REFERENCE TO THE DOCUMENTARY EVIDENCE FILED BEFORE THE TRA NSFER PRICING OFFICER . FOR BETTER APPRECIATION, WE THINK IT APPROPRIATE TO REPRODUCE THE SAME HEREUNDER: DESCRIPTION OF SERVICES DESCRIPTION OF THE DOCUMENT BENEFITS DERIVED BY SABMILLER INDIA PAPER BOOK REFERENCE FINANCIAL CONSULTING PRESENTATION OUTLINING GROUP APPROACH FOR FINANCIAL CAPABILITY ASSESSMENT AND IMPROVEMENT PLANNING. THE DOCUMENT PROVIDES A DETAILED PLAN TO ASSESS THE ABILITIES OF THE FINANCE TEAM PROVIDES SABMILLER INDIA WITH THE TEMPLATES TO BE USED FOR CAPTURING AND CALCULATING THE CAPABILITY LEVEL OF THE TEAM. THE PROVISION OF TEMPLATES MEANS SABMILLER INDI A DOES NOT HAVE TO INCUR 590 - 613 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 18 SABMILLER INDIA LTD. IN INDIA AND HOW TO IMPROVE WHAT THE TEAM CAN ACHIEVE IN THE FUTURE. TIME AND RESOURCE TO CREATE THEM. THE TEMPLATES HAVE SUPPORTED FINANCE TEAM DEVELOPMENT IN INDIA AS THEY MAKE COMMERCIAL DECISIONS. 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 554 RESPECTIVELY) IMPROVED PERSONNEL STRATEGY AS PART OF ORGANIZATIONAL DEVELOPMENT THERE IS A TRAINING PROGRAM, GLOBAL ACTION LEARNING PROGRAM (GALP), AND DEREK JONES, THE INDIAN MARKETING DIRECTOR ATTENDED PART OF A 3 WEEK LONG GLOBAL LEADERSHIP PROGRAM WITH APPROX. 35 PARTICIPANTS. THE WORKSHOP ADDRESSED 5 REAL STRATEGIC CHALLENGES FACED BY THE SABMILLER EXCOM. AS ONE EXAMPLE, DEREK ATTENDED A TRAINING SESSION ON WHAT CA PABILITY NEEDS TO BE BUILT TO BECOME A BEST PRACTICE POINT OF PURCHASE OFF TRADE EXECUTOR. IN PARTICULAR HOW THIS CAPABILITY IS GOING TO BE CREATED WITHIN SABMILLER AND WITH 3RD PARTIES. ATTACHMENT 2.4 SHOWS THE ATTENDEE LIST FOR THE GALP TRAINING SESSIO NS AS WELL AS SLIDES DESCRIBING THE INITIATIVE. THIS TRAINING PROGRAM HAS BEEN USED BY SABMILLER INDIA TO IMPROVE THE OFF - TRADE POSITION OF THE COMPANY WHICH HELPS SABMILLER INDIA INCREASE REVENUE COMPARED TO THE MARKET SEGMENT. THIS TYPE OF TRAINING IS HIGHLY BESPOKE AND ONLY COMES FROM HAVING THESE CENTRES OF EXCELLENCE AND SHARING GROUP LEARNINGS. 854 - 856 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOO K AT PAGE NO.394 AND 554 RESPECTIVELY) MARKETING MILLER HIGH LIFE BRAND DEVELOPMENT SABMILLER GROUP HELPS SABMILLER INDIA IN UNDERTAKING A MARKET STUDY FOR A PRODUCT LAUNCH OF MILLER HIGH LIFE IN INDIA. GROUP MARKETING HELPS SABMILLER INDIA IN UNDERTAKING A MARKET STUDY IN ORDER TO ASCERTAIN THE NEED FOR INTRODUCING A GLOBAL BRAND IN INDIA, UNDERSTANDING THE PREFERRED TASTES OF THE 871 - 896 FOR OTHER S UPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS 19 SABMILLER INDIA LTD. THE ATTACHMENTS PROVIDED BY GROUP MARKETING OUTLINE THE ACTION PLAN TO INTRODUCE MILLER HIGH LIFE INTO INDIA INCLUDE PRICING, HOW TO LAUNCH AND WHERE TO POSITION THE PRODUCT. CUSTOMERS AND ACCORDINGLY, ANALYSIS OF THE RIGHT INGREDIENT MIX, PROVIDING GUIDANCE ON THE PACKAGING, PRICING RANGE AND IDENTIFICATION OF THE MARKET WHERE THESE PRODUCTS CAN BE LAUNCHED INITIALLY ET C. GROUP MARKETING PROVIDE THE BEST LAUNCH PLAN FOR MILLER HIGH LIFE. THIS LAUNCH HAS BEEN DEVELOPED WITH HUGE LEVELS OF ASSISTANCE FROM GROUP. ULTIMATELY THE LAUNCH WILL INCREASE THE SALES GROWTH AND PROFITABILITY PROSPECTS IN INDIA. ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 554 RESPECTIVELY) TECHNICAL CONSULTING THE WATER RISK ASSESSMENT IS A CRITICAL PART OF BREWING BE ERS. IN THIS REGARD, THE GROUP FACILITATES FREQUENT ASSESSMENTS AND REVIEWS OF SABMILLER INDIAS BREWERIES OF VULNERABILITIES AND HELPS IN DEVELOPING SPECIFIC CONCRETE ACTION PLANS FOR EACH PRIORITIZED RISK. THE ATTACHMENTS INCLUDE: A PRESENTATION FROM A WATER RISK ASSESSMENT WORKSHOP FOR THE HBL BREWERY. THE PURPOSE WAS TO SHARE AND CONFIRM TOP WATER RISKS IDENTIFIED FOR THE BREWERY AND DEVELOP A MITIGATION PLAN A LIST OF KEY STAKEHOLDERS WHO WOULD BE AFFECTED BY THE RISKS IDENTIFIED. WATER IS A CRITICAL ISSUE AS IT IS LINKED TO A WIDE RANGE OF ENVIRONMENTAL, BUSINESS AND SOCIAL ASPECTS OF A REGION. THE PROBLEMS RE LATED TO WATER AVAILABILITY, QUALITY AND REPUTATION REPRESENT A SIGNIFICANT RISK TO SABMILLER INDIAS BUSINESS. THE BENEFITS OF THIS TOOL INCLUDE IMPROVING WATER EFFICIENCY WITHIN THE OPERATIONS OF SABMILLER INDIA AND ALSO MITIGATING THE WATER RISKS FACED BY THE COMMUNITY. THE TECHNICAL ASSESSMENTS OF VULNERABILITIES HELPS SABMILLER INDIA IN DEVELOPING ACTION PLANS FOR EACH PRIORITIZED RISK SIGNED OFF BY TECHNICAL DIRECTOR. 1019 - 1112 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 554 RESPECTIVELY) 20 SABMILLER INDIA LTD. THE WATER RISK ASSESSMENT TOOL (EXCEL WORKBOOK) WHICH PROVIDES A VERY DETAILED ASSESSMENT OF THE WATER RISKS EXPOSURE TO SABMILLER INDIA. COMPUTER ADVISORY & DATA PROCESSING SERVICES * APPLICATIONS USED BY SABMILLER INDIA. THE WORKSHEET PROVIDED SHOWS AN EXAMPLE OF THE A PPLICATIONS USED BY INDIA DURING F11. AS DETAILED ABOVE, APPLICATIONS ARE DESIGNED TO MEET THE NEEDS OF FUNCTIONS WITHIN THE BUSINESS AND ULTIMATELY RELY ON THE INFRASTRUCTURE SET - UP BY GIS. AN EXAMPLE OF AN APPLICATION IS HYPERION WHICH IS SABMILLERS PL ATFORM FOR ADVANCED REPORTING AND CONSOLIDATION TOOL USED FOR FINANCIAL & INTERNAL FINANCIAL MANAGEMENT REPORTING. ANOTHER EXAMPLE OF AN APPLICATION IS WEBREW, WHICH IS THE GLOBAL INTRANET FOR SABMILLER. THIS ENABLES SABMILLER INDIA TO ACCESS DATA, KEEP I N CONTACT WITH CASE STUDIES. SUCH A WEBSITE PROVIDING BEER INDUSTRY DATA FOR ALL COMMERCIAL FUNCTIONS WOULD NOT BE POSSIBLE, OR WOULD COME AT SIGNIFICANT COST IF ACQUIRED THROUGH A THIRD PARTY. SABMILLER INDIA IS THEREFORE PREPARED TO PAY FOR SUCH A WEBS ITE AND FOR ACCESS TO IT. 1221 - 1224 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 554 RESPECTIVELY) CORPORATE SERVICES & INTELLECTUAL PROPERTY SERVICES ATTACHED IS AN EXAMPLE OF OUTPUT FROM THE GLOBAL SUSTAINABILITY ASSESSMENT MATRIX (SAM) TOOL WITH A DETAILED ASSESSMENT FOR INDIA. SAM IS A BENCHMARKING TOOL TO MEASURE PROGRESS AGAINST SABMILLERS 10 SUSTAINABLE DEVELOPM ENT PRIORITIES. THE SAM TOOL BENEFITS THE GROUP THROUGH PROVIDING A BENCHMARKING PLATFORM TO IDENTIFY MARKETS WHICH NEED ADDITIONAL SUPPORT WITH SUSTAINABLE DEVELOPMENT PRIORITIES. FURTHER SABMILLER INDIA BENEFITS FROM BEING GIVEN CLEAR 1263 - 1320 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 21 SABMILLER INDIA LTD. BENCHMARKING DATA WHICH THEY CAN THEN TARGET TO REDUCE COSTS AND ENVIRONMENTAL IMPACT - INCLUDING BEING GIVEN SUGGESTIONS THAT HAVE BEEN IDENTIFIED ELSEWHERE IN THE GROUP. 554 RESPECTIVELY) BUSINESS ADVISORY SERVICES AN ENGINEERING NOTE ON ENVIRONMENTAL AND HEALTH ISSUES WITH RESPECT TO PAINT COATINGS WHICH ARE USED TO PROTECT STEEL STRUCTURES. SUP PORTS SABMILLER INDIA BUSINESS IN SECURING THE INPUTS THAT ARE NEEDED WHILE BUILDING AND PROVIDES GUIDANCE ON ENERGY AND CLIMATE SECURITY BY IMPROVING THE MANAGEMENT OF INTERNAL RESOURCES. 1381 - 1392 FOR OTHER SUPPORTING EVIDENCES, PLEASE REFER SUBMISSIONS DATED 11 TH NOVEMBER 2014 AND 19 TH JANUARY 2015 (ENCLOSED AS ITEM 8 AND 10 OF THE PAPER BOOK AT PAGE NO.394 AND 554 RESPECTIVELY) 10. FURTHER, IT IS NOTICED, UNDER THE COMPUTER ADVISORY AND DATA SERVICE S SPECIFIC APPLICATION S ARE DESIGNED TO MEET THE NEEDS O F FUNCTIONS WITHIN THE BUSINESS AND ULTIMATELY RELY ON THE INFRASTRUCTURE SET UP BY GLOBAL INFORMATION SYSTEM. B ASED ON THE NEEDS OF THE ASSESSEE AND OTHER INDIAN GROUP COMPANIES, ACCESS TO THESE APPLICATIONS IS GRANTED UNDER THE GSA TO THE IDE NTIFIED USER S. T HE APPLICATIONS WHICH WERE RECOMMENDED TO THE ASSESSEE ARE AS UNDER: APPLICATION SERVICE D ESCRIPTION ACTIVITY LEARNING DATABASE (ALD) ALD IS USED TO ENABLE THE MARKETING INSIGHTS TEAM TO USE LESSONS FROM PREVIOUS ACTIVATES TO INFORM FUTURE OBJECTIVE AND ACTIVITY PLANNING. IT IS AN APPLICATION THAT CAPTURES INFORMATION AS A PART OF THE CYCLE PLANNING PROCESS FROM BOTH GROUP AND LOCAL COUNTRY MARKETING TEAMS CAREER FRAMEWORK THE CAREER FRAMEWORK PROJECT IS USED TO ALLOW INDIVIDUALS TO PLOT T HEIR FUTURE CAREERS USING PRE - MAPPED CAREER MODELS FOR EACH FUNCTIONAL AREA (AS APPROVED BY FUNCTIONAL LEADERS AND SMES). IT IS A MODEL WHEREBY EMPLOYEES CAN DEFINE THE SHAPE OF THEIR CURRENT AND ASPIRED - TO - ROLES. 22 SABMILLER INDIA LTD. FINANCIAL CONTROLS MANAGEMENT (FCM) FCM I S USED AS THE CENTRAL REPOSITORY FOR DOCUMENTATION AND PROCESSES THAT RELATE TO INTERNAL CONTROLS. IT IS A WEB - BASED APPLICATION THAT FACILITATES COMPLIANCE WITH SARBANES - OXLEY. IT IS USED IN SITES THAT DO NOT HAVE THE GLOBAL TEMPLATE AS THEIR CORE FINANC IAL CONTROLS SYSTEM KNOWLEDGE LIBRARY KNOWLEDGE LIBRARY IS USED TO PROVIDE A CENTRAL FOCAL POINT FOR MEMBERS OF THE SABMILLER MARKETING COMMUNITY TO SHARE KNOWLEDGE WITH THE REST OF THAT COMMUNITY. IT IS HOSTED ON SHAREPOINT MANUFACTURING KPI GLOBAL EVALUATION MANUFACTURING (GEM) IS USED TO ENSURE ALIGNMENT AND COMPLIANCE TO THE PRINCIPLES OF THE MANUFACTURING WAY AND IS OWNED BY GROUP TECHNICAL. IT IS A WEB BASED APPLICATION FOR TRACKING BEST PRACTICES ACROSS BREWERIES. MEDIA LIBRARY 'MEDIA LIBRARY IS USED TO STORE IMAGES AND VIDEO CLIPS TO BE USED FOR COMPETITION AND REPORTING PURPOSES. THIS IS AN EXTERNALLY HOSTED SITE AND CAN BE ACCESSED BY SABMILLER EMPLOYEES WORLDWIDE VIA SINGLE SIGN ON FUNCTIONALITY ADDED TO SHAREPOINT OFFICE COMMUNICATOR 'OF FICE COMMUNICATOR IS USED TO PROVIDE PRESENCE AWARENESS AND INSTANT MESSAGING FUNCTIONALITY THROUGHOUT THE SABMILLER ORGANIZATION TO USERS WHO HAVE BEEN ENABLED ON AD. IT IS AN APPLICATION THAT IS BUILT IN TO YOUR LAPTOP SET UP SUPPLIER AUDIT SYSTEM 'SAS PROVIDES A SINGLE SOURCE OF MASTER REFERENCE DATA TO BE USED FOR THE GENERATION OF AUDIT SCORECARD EXCEL TEMPLATES AND A CENTRAL ONLINE STORE OF COMPLETED AUDIT SCORECARDS FOR GLOBAL REPORTING. IT IS A CENTRALIZED SYSTEM THAT CAN BE ACCESSED GLOBALLY WITH IN SABMILLER TECHNICAL DMS 'TECH DMS IS USED TO MANAGE DOCUMENTS USING AN AUTOMATED PROCESS FOR THE APPROVAL AND PUBLICATION OF CONTROLLED AND PART CONTROLLED DOCUMENTS AS DEFINED BY ISO9001. IT IS A SECURE SYSTEM FOR THE TECHNICAL DEPARTMENT 11. IT IS FURTHER RELEVANT TO OBSERVE , THE ASSESSEE HAD FURNISHED DOCUMENTARY EVIDENCES BEFORE US WHICH CLEARLY DEMONSTRATE THAT IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER, THE ASSESSEE HAD NOT ONLY FURNISHED THE DETAILS OF SERVICES RENDERED UN DER THE GSA, BUT THE BREAK UP AND QUANTIFICATION OF SUCH EXPENDITURE WITH SPECIFIC ALLOCATION K EYS. IN CONTRAST TO THE DETAILS/ INFORMATION FURNISHED BY THE ASSESSEE, INCLUDING THE INDEPEN DENT BENCH MARKING DONE IN THE TRANSFER PRICING STUDY REPORT BY FOLLOW ING AN APPROVED METHOD, ON A PERUSAL OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE 23 SABMILLER INDIA LTD. TRANSFER PRICING OFFICER, IT IS VERY MUCH CLEAR THAT THE TRANSFER PRICING OFFICER HAS NOT DONE ANY INDEPENDENT BENCH MARKING AS PER THE MANDATE OF SECTION 92C R/W RULE 10B EVEN AFTER REJECTING THE TRANSFER PRICING ANALYSIS OF THE ASSESSEE UNDER TNMM. FURTHER, THE FINDING OF THE TRANSFER PRICING OFFICER IS NOT ONLY AMBIGUOUS, BUT CONTRADICTORY AS , THOUGH , HE HIMSELF HAS STATED THAT COPY OF E MAILS AND REPORTS FIL ED BEFORE HIM SHOW THAT SOME SERVICES HAVE BEEN RENDERED , HOWEVER, IN THE SAME BREATH HE SAYS THAT WHETHER SUCH SERVICES HAVE ANY VALUE AND , IF SO , THE COST INCURRED FOR THAT AND THE BENEFIT DERIVED BY THE ASSESSEE HAS NOT BEEN PROVED. THE TRANSFER PRICING OFFICER WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE TRANSACTION AT NIL HAS APPARENTLY NOT FOLLOWED ANY ONE OF THE PRESCRIBED METHOD UNDER SECTION 92C R/W RULE 10B . RATHER , HE HAS DETERMINED THE ARM'S LENGTH PRICE AT NIL ON A PURELY AD HOC AND PRESUMPT IVE BASIS BY STATING THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THE RENDITION OF SERVICE AND BENEFIT DERIVED BY IT AS WELL AS THE QUANTIFICATION OF SUCH SERVICES. 12. IT IS TRITE LAW , AS PER THE MANDATE OF CHAPTER X OF THE ACT , THE TRANSFER PRICING OFFICER I S REQUIRED TO DETERMINE THE ARM'S LENGTH PRICE OF A SPECIFIC INTERNATIONAL TRA NSACTION. SECTION 92C OF THE ACT PRESCRIBES CERTAIN METHODS FOR DETERMINING THE ARM'S LENGTH PRICE. WHEREAS, RULE 10B LAYS DOWN THE MODE AND MANNER OF COMPUTATION OF ARM'S LENGTH PRICE UNDER DIFFERENT METHODS PRESCRIBED UNDER SECTION 24 SABMILLER INDIA LTD. 92C OF THE ACT. A CAREFUL READING OF THE ORDER PASSED BY THE TRANSFER PRICING OFFICER WOULD MAKE IT CLEAR THAT , WHILE DETERMINING THE ARM'S LENGTH PRICE OF INTRA GROUP SERVICES AT NIL HE HAS NOT FOLLO WED ANY ONE OF THE PRESCRIBED METHODS. THEREFORE, THE DETERMINATION OF ARM'S LENGTH PRICE AT NIL CANNOT BE ACCEPTED, AS IT IS NOT IN ACCORDANCE WITH THE STATUTORY PROVISIONS WHICH THE TRANSFER PRICING OFFICER IS DUTY BOUND TO FOLLOW. MORE SO, WHEN THE TRAN SFER PRICING OFFICER HIMSELF HAS ADMITTED THAT THE EVIDENCE ON RECORD DO ES SHOW THAT SOME SERVICES HAVE BEEN RENDERED. IF THE TRANSFER PRICING OFFICER WAS NOT CONVINCED WITH THE B ENCH MARKING DONE BY THE ASSESSEE UNDER THE TNMM, AFTER REJECTING THE SAME HE SHOULD HAVE CONDUCTED AN INDEPENDENT BENCH MARKING BY FOLLOWING ANY ONE OF THE PRESCRIBED METHODS TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTRA GROUP SERVICES WHICH HE HIMSELF, TO SOME EXTENT, ACKNOWLEDGES TO HAVE BEEN RECEIVED BY THE ASSESSEE. 13. I T IS R ELEVANT TO OBSERVE , THE HONBLE DELHI HIGH COURT IN EKL APPLIANCES (SUPRA), HAS HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY LEGITIMATE EXPENDITURE INCURRED BY IT WAS ALSO INCURRED OUT OF NECESSITY. IT IS ALSO NOT NECESSARY FOR THE ASSES SEE TO SHOW THAT ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF BUSINESS CARRIED ON BY HIM HAS ACTUALLY RESULTED IN PROFIT OR INCOME EITHER IN THE SAME YEAR OR IN ANY OF THE SUBSEQUENT YEARS. THE BURDEN IS INITIALLY ON 25 SABMILLER INDIA LTD. THE ASSESSEE TO DETERMINE THE ARM 'S LENGTH PRICE. WHEN THE ASSESSEE DE TERMINES THE ARM'S LENGTH PRICE FOLLOWING ONE OF THE METHODS, THE TRANSFER PRICING OFFICER HAS TO DETERMINE THE ARM'S LENGTH PRICE BY FOLLOWING ANY ONE OF THE METHODS IF H E DOES NOT AGREE WITH THE BENCH MARKING OF THE AS SESSEE. IN THE AFORESAID DECISIO N, THE HONBLE HIGH COURT HAS ALSO TAKEN NOTE OF THE DECISION RENDERED THE HONBLE PUNJAB & HARYANA HIGH COURT IN CUSHMAN AND WA KEFIELD INDIA PVT. LTD. (SUPRA). THE CO ORDINATE BENCH IN MERC K LTD. (SUPRA), AFTER ANALYZING THE FACTS HELD THAT IF THE MATERIAL ON RECORD SHOW THAT THE ASSESSEE IN TERMS OF THE AGREEMENT WAS ENTITLED TO RECEIVED A PACKAGE OF SERVICES AND IN FACT SUCH SERVICES WERE RECEIVED , JUST BECAUSE THE SERVICE S WERE TOO GENERAL IN THE PERCEPTION O F THE TRANSFER PRICING OFFICER OR JUST BECAUSE THE ASSESSEE DID NOT AVAIL THEM FROM OUTSIDE AGENCY , CANNOT BE A REASON TO HOLD THAT SERVICES WERE NOT RENDERED AT ALL. THE BENCH HELD THAT WHEN IT IS ESTABLISHED THAT UNDER THE AGREEMENT, THE ASSESSEE HAD RIGHT TO RECEIVE SERVICES AS AND WHEN REQUIRED AND RECEIPT OF SERVICE IS REASONABLY ESTABLISHED , THE PAYMENT MADE IS FOR THE RIGHTS ACCRUING TO THE ASSESSEE FOR THE BUNDLED SERVICES UNDER THE CONTRA CT AND NOT FOR EACH SERVICE ON A LA KA R TE BASIS. THE BENCH HELD THAT IN CASE THE TRANSFER PRICING OFFICER IS ABLE TO DEMONSTRATE THAT THE CONSIDERATION FOR SIMILAR SERVICE UNDER THE CUP METHOD IS NIL, HE CAN VERY WELL DO SO. H OWEVER, WHEN THE ASSESSEE 26 SABMILLER INDIA LTD. BENCHMARKS THE TRANSACTION UNDER TNMM BASIS, U NLESS THE REVENUE AUTHORITIES CAN DEMONSTRATE THAT SOME OTHER METHOD OF ASCERTAINING THE ARM'S LENGTH PRICE WOULD BE MORE APPROPRIATE METHOD, THEY CANNOT DISCARD THE METHOD ADOPTED BY THE ASSESSEE AND DETERMINE THE ARM'S LENGTH PRICE AT NIL WITHOUT FOLLOWI NG ANY METHOD. ULTIMATELY, THE BENCH FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN EKL APPLIANCES (SUPRA) HELD THAT ARM'S LENGTH PRICE ADJUSTMENT MADE BY BEING CONTRARY TO THE SCHEME OF THE ACT CANNOT BE SUSTAINED. I N CASE OF CIT V/S JOHNSON & JOHNSON LTD., ITA NO. 1030/2014, DATED 7 TH MARCH 2017, THE HON'BLE JURISDICTIONAL HIGH COURT HAS REITERATED THE SAME LEGAL PROPOSITION BY HOLDING THAT THE TRANSFER PRICING OFFICER IS MANDATED BY LAW TO DETERMINE THE ARM'S LENGTH PRICE BY FOLLOWING ONE OF T HE METHODS PRESCRIBED UNDER SECTION 92C R/W RULE 10B. 14. IN THE FACTS OF THE PRESENT CASE, THE TRANSFER PRICING OFFICER ADMITS THAT THE EVIDENCES BROUGHT ON REC ORD DEMONSTRATE THAT SOME SERVICES WERE ACTUALLY RECEIVED BY THE ASSESSEE. HOWEVER , HE HAS FAILED TO DETERMINE THE ARM'S LENGTH PRICE BY FOLLOWING ANY ONE OF THE PRESCRIBED METHOD. THUS, FOR THE AFORESAID REASON, THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER CANNOT BE SUSTAINED. IN FACT, VERY RECENTLY IN INA BEARINGS INDIA PVT. LTD. V/S DCIT, (S UPRA) AND IN CASE OF M/S. IPSOS RESEARCH PVT. LTD. V/S ACIT, (SUPRA) , THE TRIBUNAL HAS AGAIN DISAPPROVED THE DETERMINATION OF ARM'S LENGTH PRICE AT NIL BY THE 27 SABMILLER INDIA LTD. TRANSFER PRICING OFFICER WITHOUT FOLLOWING ANY ONE OF THE METHODS PRESCRIBED UNDER THE STATUTE. T HUS, KEEPING IN PERSPECTIVE THE RATIO LAID DOWN IN THE JUDICIAL PRECEDENTS CITED BEFORE US, WE HAVE TO HOLD THAT THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER BY DETERMINING THE ARM'S LENGTH PRICE OF INTRA GROUP SERVICES AT NIL IS CONTRARY TO THE STA TUTORY PROVISION S , HENCE, CANNOT BE SUSTAINED. 15. IT IS WORTH MEN TIONING , ASSESSEES AE, SABMILLER MANAGEMENT (IN ) B.V. HAD A PPROACHED THE AAR SEEKING RULING ON VARIOUS ISSUES RELATING TO THE NATURE AND CHARACTER OF SERVICES RENDERED UNDER THE GSA. AFTER ANALYZING THE TERMS AND CONDITIONS OF THE ERSTWHI LE TTA AND THE PRESENT GSA AS WELL AS VARIOUS EVIDENCES AVAILABLE ON RECORD, THE AAR FOUND THA T THERE IS NOT MUCH DIFFERENCE BETWEEN THE NATURE OF SERVICE S PROVIDED UNDER THE TTA AND GS A. THE AAR HAS OBSERVED THAT SABMILLER MANAGEMENT (IN ) B.V. , (THE A E) , IS PROVIDING SPECIALIZED SERVICE S TO FULFILL THE EXCLUSIVE NEEDS OF THE INDIAN COMPANIES FO R M ANUFACTURE OF BEER UNDER ITS BRAND NAME AND NOT OFFERING A STANDARD SERVICE FOR GENERAL USE . THE AAR HAS OBSERVED THAT THE AE IS PROVIDING TECH NICAL CONSULTING AND SETTING UP/ UP GRADATION OF THE MANUF ACTURING FACILITIES AND BREWING/ MANUFACTURE OF BEER AS A LSO PROCUREMENT OF RAW MATERIAL AND IDENTIFYING MARKETS, ETC., WHICH A RE THE CORE ACTIVITIES OF THE AE AND ITS INDIAN COMPANIES. THE AAR HAS ALSO OBSERVED THAT WHILE PROV IDING TECHNICAL SERVICES, THE AE HAS PROVIDED SUCH SERVICE THROUGH 28 SABMILLER INDIA LTD. HUMAN INTERVENTION BY TRAINING THE PERSONNEL OF INDIAN COMPANIES THROUGH VARIOUS PROGRAMS, MODELS AND BY ALLOWING ONLINE ACCESS TO SECRET INFORMATION. THE AAR HAS OBSERVED THAT THE SERVICES RENDERED BY THE AE ARE NOT MERELY MANAGERIAL, BUT ARE ALSO TECHNICAL SERVICE. THE AAR HAS OBSERVED THAT IT IS INCONCEIVABLE THAT WORLD CLASS BEER CAN BE MANUFACTURED AND PLANT AND MACHINERY UP GRADED AND MAINTAINED BY MERE MANAGERIAL / ADMINISTRATIVE INSTRUCTIONS. IT WAS ALSO OBSERVED THAT THE AE NOT ONLY HOLDS TRAINING PROGRAM, BUT THROUG H COMPUTER ADVISORY SERVICES AND SECURE DATABASES IT ALLOWS RESTRICTED ACCESS TO THE PERSONNEL OF THE INDIA COMPANIES TO STREAMLINE THEIR BUSINESS ACTIVITIES. THE AAR HAS OBSERVED THAT THE SERVICES PROVIDED BY THE AE BOTH UNDER THE TTA AS WELL AS GSA SPECI ALIZED AND TECHNICAL SERVICE S FOR THE SETTING UP OF AND MAINTENANCE OF PLANT AND MACHINERY SPECIFIC TO THE BEER INDUSTRIES AS WELL AS BREWING OF BEER THROUGH TECHNICAL CONSULTANCY SERVICES. THE AAR OBSERVED , AS PER THE GSA, THE FOREIGN AE PROVIDES THE INDIAN COM PANY ACCESS TO ONLINE DATABASES AND THROUGH SECRET PASSWORDS FOR UTILIZING THE RESOURCES. THE ACCESS TO IT ONLINE PLATFORM PROVIDED TO THE INDIAN COMPANIES CONVEYS PRIVILEGED SE CRET INFORMATION TO WHICH THE AC CESS CONTROL STANDARD A PPLIES AND IS PROVIDED TO DEFINE D USER S WITH UNIQUE USER I D. THEY HAVE ALSO OBSERVED THAT A E IS ALSO PROVIDING ENGINEERING SUPPORT S ERVICES THROUGH ONLINE LINKS. THE AAR OBSERVE D, VARIOUS SERVICES RENDERED 29 SABMILLER INDIA LTD. UNDER THE GSA CAN BE CLASSIFIED AS TECHNICAL SERVI CES AND FEE IS CHARGE D AS CONSIDERATION FOR THE PROVISION OF TECHNICAL AND CONSULTANCY SERVICES, SKILL, KNOWLEDGE, KNOWHOW, PROCESS, ETC., MADE AVAILABLE TO THE INDIAN COMPANIES. THUS, AFTER THREADBARE ANALYSIS OF THE TTA AND GSA AS WELL AS OTHER MATERIAL ON RECORD, THE AAR ULTIMATELY IN RULING DATED 6 TH JUNE 2018, IN AAR NO.1199 OF 2011, HAS HELD AS UNDER: 11. IN VIEW OF THE FOREGOING DISCUSSION, THE QUESTIONS POSED TO US FOR A RULING ARE ANSWERED AS UNDER: 1. THE AMOUNT RECEIVABLE BY THE APPLICANT FROM SKOL BREWERIES LIMITED AND SABMILLER BREWERIES PRIVATE LIMITED (I.E., INDIAN COMPANIES) UNDER THE GROUP SERVICE AGREEMENT TOWARDS FINANCIAL CONSULTING, IMPROVED PERSONAL STRATEGY, BUSINESS ADVISORY SERVICES, CORPORATE AFFAIRS, MARKETING, TECHNICAL CONSULTI NG, COMPUTER ADVISORY SERVICES AND DATA PROCESSING AND INTELLECTUAL PROPERTY SERVICES ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, WITHIN THE MEANING OF THE TERM IN ARTICLE 12 OF THE DTAA BETWEEN INDIA AND THE NETHERLANDS. 2. THE AMOUNT RECEIVABLE BY THE APPLICANT FROM INDIAN COMPANIES FOR COMPUTER ADVISORY AND DATA PROCESSING SERVICES IS ALSO CHARGEABLE TO TAX AS ROYALTY UNDER THE DTAA BETWEEN INDIA AND THE NETHERLANDS. 16. THUS, FROM THE AFORESAID RULING OF THE AAR, IT BECOMES ABSOL UTELY CLEAR THAT NOT ONLY THE AE HAS RENDERED SERVICES TO THE ASSESSEE UNDER GSA, BUT THE ASSESSEE IS ALSO IN RECEIPT OF SUCH SERVICES AND HAS ALSO BENEFITED BY SUCH SERVICES. IN FACT, IT HAS BEEN SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT WHILE MAKING PAYMEN T TOWARDS INTRA GROUP SERVICE S , THE ASSESSEE HAS ALSO DEDUCTED TAX AT SOURCE 30 SABMILLER INDIA LTD. UNDER SECTION 195 OF THE ACT. TH US, ALL THESE FACTS CLEARLY GO TO PROVE THAT THE ASSESSEE , INDEED , HAS RECEIVED CERTAIN SPECIFIED SERVI CES FROM THE AE AND PAYMENTS HAVE BEEN MADE IN CONSIDERATION OF SUCH SERVICES. THEREFORE, THE SERVICES RENDERED BY THE AE TO THE ASSESSEE CERTAINLY HAVE SOME VALUE ATTACHED TO IT WHICH REQUIRES BENCHMARKING UNDER ANY OF THE METHODS PRESCRIBED UNDER THE S TATUTE. IT IS MANIFEST, THOUGH, TRAN SFER PRICI NG OFFICER ACCEPTS THAT SOME SERVICES HAVE BEEN RENDERED, HOWEVER, HE HAS MADE A GENERAL OBSERVATION THAT SUCH SERVICES DO NOT HAVE ANY VALUE AND HAS PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE ON A PURELY ON AD HOC BASIS. WHEREAS, THE READING OF THE AAR RULING , REFERRED TO ABOVE , CLEARLY DEMONSTRATE THAT HIGHLY SPECIALIZED SERVICES , IN FACT , WERE RENDERED BY THE AE TO ITS INDIAN SUBSIDIARY. THUS, ON THE BASIS OF FACTS AVAILABLE ON RECORD, WE HAVE NO HESITATION IN HOLDING THAT THE DETERMINATION OF ARM'S L ENGTH PRICE AT NIL IS WITHOUT ANY LEGAL SANCTITY, HENCE, CANNOT BE SUSTAINED. ACCORDINGLY, FOLLOWING THE JUDICIAL PRECEDENTS CITED BEFORE US, WE DELETE THE ADDITION MADE IN THIS REGARD. 17. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 34, 81,60,500, UNDER SECTION 40(A)(IA) OF THE ACT. 18. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 31 SABMILLER INDIA LTD. 70,84,40,897, TO ITS PROFIT & LOSS ACCOUNT AS SALES SCHEME EXPENDITURE. AFTER CAL LING FOR NECESSARY DETAILS AND EXAMINING THEM, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DISCOUNT OFFERED TO DISTRIBUTOR S HAS TO BE TREATED AS COMMISSION AND SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON SUCH AMOUNT, IT HAS TO BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE AMOUNT OF ` 34,81,60,500. THOUGH, T HE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE BY SUBMITTING THAT THE PAYMENT MADE IS NOT IN THE NATURE OF COMMISSION, HENCE, NOT COVERE D UNDER SECTION 194H OF THE ACT, H OWEVER, REJECTING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER DISALLOWED THE AMOUNT UNDER DISPUTE UNDER SECTION 40(A)(IA) OF T HE ACT. WHILE CONSIDERING ASSESS EES OBJECTION ON THE ISSUE, LEARNED DRP NOTED THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007 08 AND 2008 09, THE TRIBUNAL HAS RE STORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. STATING THAT THE ASSESSEE HAS NOT BROUGHT TO ITS NOTICE ANY RECORD AND MATERIAL IN SUPPORT OF ITS CLAIM OF GIVING DISCOUNT TO THE DISTRIBUTOR S DULY APPROVED B Y THE BOARD OF DIRECTORS, THEY H ELD THAT ASSESSEES CLAIM IS INADMISSIBLE. 19. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007 32 SABMILLER INDIA LTD. 08, 2008 09 AND 2009 10, THE TRIBUNAL HAS GIVEN A CLEAR FINDING THAT THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND DISTRIBUTORS AND REMANDED THE MATTER BACK TO THE ASSESSING OFFICER TO VERIFY AND EXAMINE THE RELEVANT RECORD AND THEN TO DECIDE THE ISSUE AS PER LAW. HE SUBMITTED , WHILE GIVING EFFE CT TO THE AFORESAI D DIRECTION OF THE TRIBUNAL, THE ASSESSING OFFICER HAS ALLOWED ASSESSEES CLAIM IN ASSESSMENT YEAR 2007 08, VIDE ORDER DATED 30 TH DECEMBER 2016. FURTHER, HE SUBMITTED , IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2013 14, AFTER OBTAINING THE REMAND REPOR T FROM THE ASSESSING OFFICER THE DRP HAS ALLOWED ASSESSEES CLAIM REGARDING DISCOUNT GIVEN TO THE DISTRIBUTORS. THUS, HE SUBMITTED , THE ADDITION MADE HAS TO BE DELETED. FURTHER, IN SUPPORT OF HIS CONTENTION THAT THE DISCOUNT GIVEN TO THE DISTRIBUTOR IS AN ALLOWABLE EXPENDITURE, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S INTERVET INDIA PVT. LTD., [2014] 364 ITR 238 (BOM.). 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE THE REL EVANT FACTS RELATING TO THE EXISTENCE OF A DISCOUNT SCHEME AND OTHER RELEVANT MATERIALS HAVE TO BE BROUGHT ON RECORD AND EXAMINE D , CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN ASSESSMENT YEAR S 2007 08, 2008 09 AND 2009 10, THE ISSUE MAY BE RESTORED BA CK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 33 SABMILLER INDIA LTD. 21. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT , THE DISCOUNT GIVEN TO THE DISTRIBUTORS WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT PRIMARILY FOR THE REASON T HAT IT IS IN THE NATURE OF COMMISSION, HENCE, COMES WITHIN THE PURVIEW OF SECTION 194H OF THE ACT, REQUIRING DEDUCTION OF TAX AT SOURCE. AS NOTED BY US , THOUGH , LEARNED DRP HAS STATED THAT WHILE DECIDING SIMILAR ISSUE IN ASSESSEES OWN CASE, THE TRIBUNAL H AS RESTORED THE MATTER TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION, HOWEVER, THE Y ULTIMATELY HELD THE CLAIM OF THE ASSESSEE INADMISSIBLE. UNDISPUTEDLY, IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007 08, 2008 09 AND 2009 10. WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2007 08 IN ITA NO.6175/MUM./2011, DATED 18 TH JANUARY 2013, THE TRIBUNAL HAS RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. IDENTICAL VIEW WAS EXPRESSED BY THE T RIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR S 2008 09 AND 2009 10. PERTINENTLY, WHILE IMPLEMENTING THE DIRECTION OF THE TRIBUNAL IN ASSESSMENT YEAR 2007 08, THE ASSESSING OFFICER VIDE ORDER DATED 30 TH DECEMBER 2016, HAS ALLOWED ASSESSEES CLAIM OF D ISCOUNT GIVEN TO THE DIST RIBUTORS WHICH IS EVIDENT FROM THE C OPY OF THE ORDER PLACED IN THE PAPER BOOK. IT IS ALSO THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THOUGH SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR S 2013 14 AND 2014 15, 34 SABMILLER INDIA LTD. HOWEVER, THE DRP HAS ALLOWED ASSESSEES CLAIM BY DELETING THE DISALLOWANCE. CONSIDERING THE FACT THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 08, 2008 09 AND 2009 10, THE TRIBUNAL HAS R ESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH SPECIFIC DIRECTION, WE ARE INCLINED TO FOLLOW THE SAME AND RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH SIMILAR DIRECTION. SUFFICE TO SAY, IF SIMILAR CLAIM MAD E BY THE ASSESSEE WAS ALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007 08 AND BY THE DRP IN ASSESSMENT YEAR S 2013 14 AND 20 14 15, THEN THERE SHOULD NOT BE ANY DIFFICULTY IN ALLOWING ASSESSEES CLAIM. 22. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF COMMISSION PAID FOR AN AMOUNT OF ` 2,30,66,201. 23. BRIEF FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 19,07,53,069, TO THE PROFIT & LOSS ACCOUNT TOWARDS COMMIS SION ON SALES. AFTER CALLING FOR NECESSARY DETAILS AND EXAMINING THEM, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED REQUISITE DETAILS SHOWING DEDUCTION OF TAX AT SOURCE. FURTHER, HE OBSERVED THAT AS PER ASSESSEES SUBMISSIONS, THE COM MISSION OF ` 19,07,53,069, INCLUDES ACCRUALS AT THE YEAR END AMOUNTING TO ` 35 SABMILLER INDIA LTD. 2,30,66,201. BEING OF THE VIEW THAT THE AMOUNT OF ` 2,30,66,201, BEING A COMMISSION ON SALES IS SUBJECT TO DEDUCTION OF TAX AT SOURCE , WHICH THE ASSESSEE HAS NOT DONE, THE ASSESSING OFFICER DISALLOWED THE AMOUNT UNDER SECTION 40(A)(IA) OF THE ACT. 24. THE DRP ALSO SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 25. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN THE SUBSEQUENT YEARS, THE ASSESSEE HAS DULY DEDUCTED AND DEPOSITED THE APPLICABLE TDS UPON RECEIPT OF INVOICE FROM THE AGENTS. THUS, HE REQUEST ED FOR RESTORATION OF THE ISSUE TO THE ASSESSING OFFICER FOR VERIFICATION AND NECESSARY ADJUDICATION. 26. THE LE ARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION FOR RESTORATION OF THE ISSUE TO THE ASSESSING OFFICER. 27. HAVING CONSIDERED RIVAL SUBMISSI ONS, WE ARE OF THE VIEW THAT ASSESSEES CLAIM THAT THE ACCRUALS OF ` 2,30,66,201, WAS SUBJECTED TO DEDUCTION OF TAX A T SOURCE ON RECEIPT OF INVOICE IN SUBSEQUENT YEARS REQUIRES FACTUAL VERIFICATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER VERIFYING THE MATERIAL AVAILABLE ON RECORD OR TO B E FILED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER 36 SABMILLER INDIA LTD. DUE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 28. IN GROUND NO.4, THE ASSESSEE HAS RAISED THE ISSUE OF SHORT GRANT OF TDS CREDITED FOR AN A MOUNT OF ` 33,558. 29. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE TDS AS PER FORM NO.26AS, AND GRANT CREDIT TO THE ASSESSEE IN ACCORDANCE WITH LAW. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 30. IN THE R ESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO.1738/MUM./2016 REVENUES APPEAL 31. IN GROUND NO.1, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF ` 12,13,48,125, UNDER SECTION 40(A)(IA) OF THE ACT. 32. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE FINANCIAL YEAR 2006 07, THE ASSESSEE CLAIMED TO HAVE PURCHASED FOSTERS BRAND FROM F OSTERS AUSTRALIA, AND HAS CAPITALIZED THE SAME IN THE FIXED ASSETS SCHEDULED UNDER THE HEAD TRADEMARKS / BRANDS. IN THE SUBSEQUENT YEAR, THE ASSESSEE CONTINUED TO CLAIM DEPRECIATION @ 25% ON THE SAID ASSET. HE OBSERVED THAT WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 08, THE COST 37 SABMILLER INDIA LTD. OF BRAND WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT AND ACCORDINGLY , DEPRECIATION CLAIMED OF ` 12,13,48,125 WAS ALSO DISALLOWED . WHILE DECIDING ASSESSEES OBJECTION ON THE ISSUE, THE DRP HAVING FOUND THAT WHILE DECIDIN G ASSESSEES APPEAL ON IDENTICAL ISSUE IN ASSESSMENT YEAR 2007 08, 2008 09 AND 2009 10, CLAIM OF DEPREC IA TION HAS BEEN ALLOWED, FOLLOWED THE SAME AND ALLOWED ASSESSEES CLAIM OF DEPRECIATION. 33. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. LEARNED COUNSELS APPEARING FOR THE PARTIES HAVE FAIRLY SUBMITTED BEFORE US THAT SIMILAR DISALLO WANCE MADE BY THE ASSESSING OFFICER IN THE PRECEDING ASSESSMENT YEAR S HAVE BEEN DELETED BY THE TRIBUNAL WHILE DECIDING THE APPEALS FILED BY THE ASSESSEE. ON A PERUSAL OF THE RELEVANT ORDERS PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEARS 2007 08, 2008 09 A ND 2009 10 IN ASSESSEES OWN CASE, AS PLACED IN THE PAPER BOOK, WE FIND THAT IDENTICAL DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE PRECEDING ASSESSMENT YEAR S HAVE BEEN DELETED. FACTS BEING IDENTICAL, FOLLOWING THE CONSISTENT VIEW OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007 08, 2008 09 AND 2009 10, WE UPHOLD THE DECISION OF LEARNED DRP ON THE ISSUE. THIS GROUND IS DISMISSED. 38 SABMILLER INDIA LTD. 34. I N GROUNDS NO.2 AND 3, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF TAX DEDUCTED ON INTEREST EXPENDITURE INCURRED IN FOREIGN CURRENCY AMOUNTING TO ` 78,03,184. 35. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 11,53,60,052, TO THE PROFIT & LOSS ACCOUNT TOWARDS INTEREST ON EXTERNAL COMMERCIAL BORROWINGS (ECB). FURTHER, FROM THE AUDIT REPORT HE FOUND THAT THE AUDITOR HAS CLAR IFIED THAT THE AFORESAID AMOUNT INCLUDES WITH HELD TAX OF ` 78,03,184. BEING OF THE VIEW THAT THE TAX WITHHELD CANNOT BE CLAIMED AS EXPENDITURE, THE ASSESSING OFFICER DISALLOWED THE SAME. 36. WHILE DECIDING THE OBJECTION ON THE ISSUE, THE DRP FOLLOWING THE DECISION OF THE TRIBUNAL IN CIT V/S BOB CARDS L TD., [2013] 56 SOT 232 (MUM.), HELD THAT SINCE THE ASSESSEE HAS AGREED TO BORNE THE TAX LIABILITY OF THE PAYEE, IT HAS TO BE ALLOWED AS EXPENDITURE. ACCORDINGLY, THE DRP DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 37. THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUBMITTED , THE FACTS RELATING TO THE ISSUE HAVE NOT BEEN PROPERLY EXAMINED AS NEITHER THE ASSESSING OFFICER NOR THE DRP HAS EXAMINED WHETHER THERE WAS ANY AGREEMENT BETWEEN THE ASSESSEE AND THE PAYEES TOWARDS INCURRING THE TAX LIABILITY OF THE PAYEE . HE SUBMITTED , IT ALSO NEEDS TO BE 39 SABMILLER INDIA LTD. EXAMINED WHETHER THE TDS AMOUNT BORNE BY THE ASSESSEE WAS INCLUDED IN THE INCOME OF THE PAYEE. THUS, HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 38. THE LEARNED AUTHORISED R EPRESENTATIVE ON THE OTHER HAND STRONGLY SUPPORTING THE DECISION OF THE DRP SUBMITTED THAT THERE IS AN AGREEMENT WITH THE PAYEE AND ALL THE FACTS AND MATERIAL RELATING TO WITHHOLDING OF TAX WAS SUBMITTED BEFORE THE ASSESSING OFFICER AS WELL AS THE TRANSFER PRICING OFFICER. THEREFORE, THERE IS NO NEED FOR RESTORATION OF ISSUE TO THE ASSESSING OFFICER AGAIN. 39. WE HAVE CONSIDERED RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN, THE ASSESSEE HAD ENTERED INTO A BORROWING ARRANGEMENT WITH STA NDARD CHARTERED BANK ON A NET OF TAX BASIS. AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE HAS COMPUTED TDS ON A NET OF TAX BASIS AND NO TAX HAS BEEN SEPARATELY DEBITED TO THE PROFIT & LOSS ACCOUNT. IT IS ALSO A FACT ON RECORD THAT AS PER THE BORROWING AR RANGEMENT, THE TAX LIABILITY, IF ANY, ON PAYMENT OF INTEREST HAS TO BE BORNE BY THE ASSESSEE. THEREFORE, THE TAX WITHHELD HAS TO BE ALLOWED AS EXPENDITURE TO THE ASSESSEE. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE DIRECTIONS OF THE DRP. GROUND IS DISMISSED. 40 SABMILLER INDIA LTD. 40. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 41. TO SUM UP, ASSESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 18.02.2020 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 18.02.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI