HEINZ INDIA P.LTD, MUMBAI V. DCIT RG 6(3), MUMBAI

ITA 1210/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3856 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 16-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Transfer pricing; International transaction; Earning of tax free income
• Section: 92C; 92D; 92B; 92F; 92E; 92

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C.N. PRA SAD,JUDICIAL MEMBER ./I.T.A./7732/MUM/2012, /ASSESSMENT YEAR: 2008-09 M/S. HEINZ INDIA PRIVATE LIMITED 7TH FLOOR, DSHIVSAGAR ESTATE, DR. ANNIE BESANT ROAD,WORLI, MUMBAI-400 018. PAN: AAACH 0667 B VS. ADDL. CIT, RANGE-6(3) 505, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400020. ./I.T.A./1210/MUM/2014, /ASSESSMENT YEAR: 2009-10 M/S. HEINZ INDIA PRIVATE LIMITED WORLI, MUMBAI-400 018. VS. ADDL. CIT, RANGE-6(3) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 ./I.T.A./1167/MUM/2014, /ASSESSMENT YEAR: 2009-10 DYCIT,CIRCLE-7(1)(2) AAYAKAR BHAVAN,M.K. ROAD, MUMBAI-20. VS. M/S. HEINZ INDIA PRIVATE LIMITED WORLI, MUMBAI-400 018. ./I.T.A./393/MUM/2015, /ASSESSMENT YEAR: 2010-11 M/S. HEINZ INDIA PRIVATE LIMITED WORLI, MUMBAI-400 018. VS. DY. CIT,CIRCLE-7(1)(2) AAYAKAR BHAVAN, M.K. ROAD,MUMBAI-20. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI G.M. DOSS ASSESSEE BY: SHRI P.J. PARDIWALA / DATE OF HEARING: 18.04.2016 / DATE OF PRONOUNCEMENT: 27.04.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 30/10/2012,PASSED BY TH E ASSESSING OFFICER(AO)U/S.143 (3) R.W.S. 144C(13) OF THE ACT, IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL (DRP), THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE- COMPANY,ENGAGED IN THE BUSINESS OF FOOD- PROCESSING,FILED ITS RETURN OF INCOME ON 29/09/2008 ,DECLARING TOTAL INCOME AT RS. 79.01 CRORES. THE AO COMPLETED THE ASSESSMENT,DETERMINING THE INC OME OF THE ASSESSEE AT RS.2,33,72,12, 160/-. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT TRANSFER PRICING(TP)ADJUSTMENTS.DURING THE ASSESS - MENT PROCEEDINGS,THE AO FOUND THAT ASSESSEE HAD ENT ERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE.S).HE MADE A REFERENCE T O THE TRANSFER PRICING OFFICER(TPO) U/S.92CA(1)OF THE ACT FOR DETERMINING THE ARMS LEN GTH PRICE(ALP)OF THE TRANSACTIONS-IN- QUESTION.THE TPO,VIDE ITS ORDER DATED 31/10/2011,PR OPOSED SUBSTANTIAL ADJUSTMENT TOWARDS BRAND VALUE PROMOTION FOR THE BRANDS OWNED BY THE PARENT OVERSEAS AE.S. THE ASSESSEE FIL ED OBJECTIONS BEFORE THE DRP WITH REGARD TO THE PROPOS ED DRAFT ASSESSMENT ORDER. 2.1. THE TPO FOUND THAT ASSESSEE HAD ADOPTED TRANSACTION AL NET MARGIN METHOD(TNMM),AS THE MOST APPROPRIATE METHOD FOR DECIDING THE ALP FOR TH E INTERNATIONAL TRANSACTIONS ENTERED IN TO, THAT IT HAD CARRIED OUT SEVERAL INTERNATIONAL TRANS ACTIONS WITH ITS AE.S,NAMELY IMPORT OF FINISHED 7732&ORS-HEINZ GROUP 2 GOODS(RS.5.20 CRORES),EXPORT OF FINISHED GOODS(RS. 2.54 CRORES)ROYALTY PAYMENT (RS.5.51CRORES) PAYMENT FOR SUPPORT SERVICES(RS.1.47CRORES)REIMBURS EMENT RECEIVED(RS.68.75 LACS) AND REIMBU -RSEMENT OF EXPENSES(RS.1.94 CRORES).IT WAS FURTHER FOUND THAT THE ASSESSEE HAD SPLIT UP THE FINANCIAL INTO MANUFACTURING AND DISTRIBUTION SEGME NTS,THAT IT HAD SHOWN SALES OF RS.631.24 CRORES AND RS.6.97 CRORES UNDER THE RESPECTIVE HEAD S,THAT THE INTERNATIONAL TRANSACTIONS IN BOTH THE SEGMENTS WERE SEPARATELY BENCH-MARKED,THAT IT U SED THE TNMM WITH OPERATING PROFIT TO SALES AS THE PROFIT LEVEL INDICATOR (PLI), THAT IT HAD SE LECTED 13 COMPANIES AS COMPARABLES,THAT THE PLI WAS WORKED OUT ON THE BASIS OF THE DATA OF THE LAST THREE YEARS,THAT IN THE MANUFACTURING SEGMENT THE PLI OF THE COMPANY WAS ARRIVED AT 10.72% AS AGA INST THE PLI OF COMPARABLES COMPUTED AT 4.96%,THAT IN THE DISTRIBUTION SEGMENT THE PLI WAS ARRIVED AT 4.83% AS AGAINST THE PLI OF THE COMPARABLES COMPUTED AT 4.32%. HOWEVER, THE TPO HEL D THAT DUE TO NON-AVAILABILITY OF THAT DATA,ON UNCONTROLLED ENTERPRISES WHICH DEVELOPED AN D PROMOTED INTANGIBLES BUT WERE NOT THE OWNERS OF THOSE INTANGIBLES,THE METHOD ADOPTED BY T HE ASSESSEE WAS NOT APPROPRIATE,THAT THE VARIOUS BRANDS MANUFACTURED AND SOLD BY THE ASSESSE E WERE OWNED BY THE AES.,THAT THERE WAS AN ARRANGEMENT BETWEEN THE ASSESSEE AND ITS AES BY VIR TUE OF IT THE ASSESSEE INCURRED EXCESSIVE ADVERTISEMENT,MARKETING AND PROMOTION (AMP) EXPENSE S, THAT IT PROMOTED THE BRANDS OWNED BY THE AES WITHOUT RECEIVING ANY COMPENSATION, THAT TH E ASSESSEE AND THE AES WERE DEVELOPING THE BRANDS JOINTLY,THAT THE PROFIT SPLIT METHOD(PSM)WAS THE MOST APPROPRIATE METHOD.RELYING ON THE DECISION OF THE ITAT DELHI,IN THE CASE OF ROLLS-ROY CE PLC.,THE TPO HELD THAT THE CONSOLIDATED PROFITS OF THE HEINZ GROUP COULD BE ATTRIBUTED TO T HREE MAJOR ACTIVITIES NAMELY MANUFACTURING (50%),RESEARCH AND DEVELOPMENT(15%)AMP(35%).THEREAF TER, HE COMPUTED 35% OF GLOBAL PROFIT OF HEINZ GROUP AT RS.2188.85 CRORES. AS THE AMP EXP ENDITURE BY THE ASSESSEE WAS 8.12% OF THE TOTAL AMP EXPENSES OF THE GROUP,HE HELD THAT PROFIT OF RS. 177.79 CRORES WAS ATTRIBUTABLE TO THE ASSESSEE ON ACCOUNT OF AMP EXPENSES.SINCE THE ASSES SEE HAD ALREADY DECLARED CORPORATE PROFIT OF RS. 68 CRORES,THE TPO DEDUCTED 35% OF SUCH PROFITS FROM THE SUM COMPETED BY HIM AND FINALLY ARRIVED AT RS.153.99 CRORES AS THE COMPENSATION REC EIVED BY THE ASSESSEE FOR PROMOTING AND ENHANCING THE BRANDS OWNED BY THE AES.THE SUM WAS D ETERMINED AT ADJUSTMENT REQUIRED TO BE MADE TO THE ASSESSEES INCOME. ALTERNATIVELY,HE APPLIED THE BRIGHT LINE TEST(BLT)F OR DETERMINING THE PROPORTION OF AMP THAT COULD BE HELD TO BE NON-ROUTINE AND INCURRED FOR BR AND BUILDING PURPOSES.WHILE APPLYING THE BLT,HE REJECTED 11 OF THE 13 COMPARABLES USED BY TH E ASSESSEE ON THE GROUND THAT TURNOVER OF THOSE COMPANIES WAS VERY SMALL AND THAT IN SOME OF THE CASES THE AMP EXPENSES WERE NEGLIGIBLE.HE ALSO MADE HIS OWN SEARCH FOR COMPARAB LES AND FINALLY OPTED FOR SIX COMPARABLES WITH THEIR AMP EXPENSES AS A PERCENT OF THE NET SAL ES.AT THIS JUNCTURE, THE ASSESSEE SUBMITTED A LIST OF EIGHT OTHER COMPARABLES WITH A REQUEST TO C ONSIDER THEM AS VALID COMPARABLES.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE OBSER VED THAT THE COMPARABLES CHOSEN BY HIM WOULD BE INCURRING AMP EXPENSES FOR THE PURPOSE OF THE BRANDS OWNED BY THEM, THAT THE AVERAGE AMP OF 6.25% WOULD BE ADJUSTED TO 4% OF NET SALES.T HEREAFTER,HE COMPUTED THE AMP EXPENSES IN THE CASE OF THE ASSESSEE, AFTER EXCLUDING THE EX PENSES INCURRED FOR THE NYCIL BRAND,OWNED BY THE ASSESSEE,AND ARRIVED AT AMP EXPENDITURE OF RS. 63.48 CRORES ON TOTAL SALES OF RS.535.32 CRORES GIVING A RATIO OF 11.86%. THE AMP EXPENSES I N EXCESS OF THE BLM WERE COMPUTED AT RS.42.07 CRORES. HE THEN APPLIED A MARKUP OF 10% ON THE BASIS OF THE OPENING MARGIN OF CERTAIN ADVERTISING COMPANIES AND COMPUTED THE ADJUSTMENT A T RS. 46.27 CRORES. 3. AGGREIVED BY THE PROPOSED DRAFT ORDER OF THE AO, TH E ASSESSEE FILED OBJECTIONS BEFORE THE DRP. IT WAS CONTENDED THAT THE AMP EXPENSES,INCURRED BY THE ASSESSEE,WAS NOT AN INTERNATIONAL 7732&ORS-HEINZ GROUP 3 TRANSACTION AT ALL,THAT IT HAD MADE PAYMENT FOR AMP EXPENSES TO THIRD PARTIES IN INDIA,THAT THERE WAS NO ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE IN RESPECT OF BRAND BUILDING OR AMP EXPENSES,THAT THE AMP EXPENSES WERE INCURRED BY THE ASSESSEE IN THE COURSE OF CARRYING ON ITS BUSINESS IN INDIA,THAT THE EXPENDITURE WAS NOT INCU RRED AT THE INSTANCE OF THE OVERSEAS AES, THAT IT WAS A UNILATERAL ACTION ON THE PART OF HEINZ INDIA, THAT AGREEMENTS WITH AES HAD BEEN ENTERED INTO ON PRINCIPAL TO PRINCIPAL BASIS FOR GRANT OF R IGHT TO USE BRANDS AND TECHNOLOGY,THAT THERE WAS NO JOINT DEVELOPMENT OF BRANDS,THAT BENEFITS OF AMP EXPENSES WERE SOLELY DERIVED BY THE ASSESSEE AND NO BENEFIT WAS DERIVED BY THE AES,THAT THE BRANDS UNDER CONSIDERATION WERE PRIMARILY SOLD ONLY BY THE ASSESSEE AND NOT BY ANY OTHER HEINZ GROUP ENTITY ACROSS THE WORLD, THAT THE ASSESSEE WAS AN INDEPENDENT RISK BEARING ENTITY AND ANY COST INCURRED TOWARDS AMP WAS FOR THE SOLE BENEFIT OF ASSESSEE, THAT THE AMP EXPENSES RESULTED IN INCREASE OF SALES OF PRODUCTS, THAT THE EXPENDITURE WAS INCURRED IN INDIA ESSENTIALLY T O CREATE PRODUCTS AWARENESS,THAT SUCH EXPENDITURE COULD NOT BE ANY WAY LINKED TO ALLEGED DEVELOPMENT OF BRAND,THAT FMCG INDUSTRY WAS HIGHLY COMPETITIVE AND RESPONSIVE TO AGGRESSIVE MARKETING STRATEGIES,THAT THE BENCH-MARKING EXERCISE CARRIED OUT BY THE ASSESSEE,USING TNMM,HAD COMPUTED MARGINS WHICH TOOK INTO ACCOUNT THE AMP EXPENSES AND THEREFORE NO SEPARATE BENCHMARKING OF THE AMP WAS REQUIRED, THAT THE TNMM ADOPTED BY THE ASSESSEE WAS WRONGLY R EJECTED, THAT COMPARABLES LIKE GLAXO SMITH KLINE,COLGATE,CADBURY AND RECKITT BENCKISER(I NDIA)LTD.HAD BEEN HELD BY THE TPO HIMSELF TO BE SIMILARLY PLACED, THAT THE PSM HAD BEEN WRONG LY APPLIED BY THE TPO, THAT IT WAS NOT THE MOST APPROPRIATE METHOD AND NOT AT ALL APPLICABLE T O THE CASE UNDER CONSIDERATION,THAT THE OPERATION OF THE ASSESSEE AND ITS AES WERE DISTINCT AND INDEPENDENT,THAT IT IS A FULL-FLEDGED ENTREPRENEUR AND THE AES ONLY OWNED THE BRANDS,THAT THE COMBINE NET PROFIT RELATED TO THE BRANDS UNDER CONSIDERATION REPRESENTED THE AGGREGATE PROFI TS BEING GENERATED BY THE ASSESSEE AND ITS AES ON MANUFACTURE AND TRADING PRODUCTS SOLD IN IND IA,THAT THE PROFIT WAS OF ASSESSEE ALONE,THAT THE INTERNATIONAL TRANSACTIONS SHOULD NOT BE CONFIN ED TO THE COMBINED NET PROFITS ARISING FROM PRODUCTS SOLD IN INDIA,THAT THE DECISION OF ROLLS-R OYCE WAS NOT APPLICABLE IN THE GIVEN FACTS OF THE CASE, THAT WHILE COMPUTING THE ADJUSTMENT THE T PO HAD WRONGLY INCLUDED SALES PROMOTION EXPENSES AS WELL AS AMP EXPENSES ON NYCIL AND ON OT HER TRADED PROTECTS, THAT SUCH EXPENSES WERE NOT CONNECTED AT ALL TO THE DEVELOPMENT OF THE BRANDS UNDER CONSIDERATION, THAT APPLICATION OF BLT WAS NOT CORRECT, THAT AN INTERNATIONAL TRANS ACTION CANNOT BE BENCHMARK USING A METHOD OTHER THAN THE FIVE METHOD IS PRESCRIBED IN THE ACT ,THAT COMPANIES SELECTED BY THE TPO TO COMPARE AMP EXPENSES WERE NOT COMPARABLES TO THE AS SESSEE AND WERE CHERRY PICKED,THAT THE BRANDS/PRODUCTS SELECTED WERE NOT COMPARABLES TO TH OSE OF THE ASSESSEE,THAT THE TPO HAD REJECTED ADDITIONAL EIGHT COMPARABLES PROVIDED BY THE ASSESS EE WITHOUT ASSIGNING ADEQUATE REASONS, THAT THAT THE TPO IGNORED AN INTERNAL CUP IN FORM OF AMP INCURRED ON NYCIL OF 10.61% OF SALES OF NYCIL, THAT APPROACH OF THE TPO IN ARRIVING AT TWO ALTERNATE ALV OF A TRANSACTION AND ADOPTING TWO DIFFERENT METHODS WAS INAPPROPRIATE AND BAD IN LAW. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE AVAILABLE MATERIAL,THE DRP HELD THAT THE ARGUMENT OF THE ASSESSEE THAT AMP EXPENSES DID NOT CONSTITUTE AN INTERNATIONAL TRANSACTION WAS MISCONCEIVED,THAT IT WAS NOT THE ACTUAL PAYMENT OF ADVERTISING CHARGES TO THIRD PARTIES THAT HAD BEEN CONSIDERED BY THE TPO AS AN INTERNATIONAL TRAN SACTION,THAT THE RELEVANT TRANSACTION WAS THE BENEFIT CONFERRED BY THE ASSESSEE ON ITS AES I.E.HE INZ USA AND HEINZ ITALY BY WAY OF PROMOTING THE BRANDS AND INCREASING THE VALUE OF SUCH BRANDS OWNED BY THOSE AES,THAT SECTION92 B OF THE ACT INCLUDED ANY TRANSACTION HAVING A BEARING ON TH E PROFITS AND INCOME OF THE CONCERNED ENTERPRISES AND INCLUDED AN ARRANGEMENT BETWEEN THE AES FOR ALLOCATION OF COSTS INCURRED IN CONNECTION WITH A BENEFIT,SERVICE/FACILITY PROVIDED TO ONE OR MORE SUCH ENTERPRISES.THE DRP 7732&ORS-HEINZ GROUP 4 REFERRED TO THE DEFINITION OF WORD TRANSACTION,AS A PPEARING IN THE SECTION 92F OF THE ACT AND HELD THAT THE BENEFIT OF BRAND PROMOTION AND BRAND VALUE AUGMENTATION HAD BEEN PROVIDED BY THE ASSESSEE WITHOUT RECEIVING ANY COMPENSATION FOR THE SAME,THAT THE PROMOTIONAL EFFORTS IN A COUNTRY OF THE SIZE OF INDIA WOULD CONTRIBUTE SIGNI FICANTLY IN THE INCREASE OF SUCH BRAND VALUE, THAT THE ROYALTY BEING PAID BY THE ASSESSEE FOR THE USE OF TRADEMARKES WAS NOT RELEVANT,THAT ON THE CONTRARY IT INDICATED THE DIRECT RELATIONSHIP BETWE EN IT AND THE AES IN THE CONTEXT OF BRAND BUILDING,THAT BRAND BUILDING CARRIED OUT BY THE IT FOR ITS AE THROUGH AMP EXPENSES WAS AN INTERNATIONAL TRANSACTION,THAT THE ASSESSEE WAS ENT ITLED TO A REASONABLE COMPENSATION FOR SUCH AMP EXPENSES,THAT BRAND PROMOTION AND BRAND VALUE A UGMENTATION CONSTITUTED A SIGNIFICANT FALLOUT OF THE AMP EXPENSES OF THE ASSESSEE,THAT TH E BRAND NAME WAS PROMINENTLY DISPLAYED IN ALL THE ADVERTISEMENTS,THAT THE ORDER OF THAT TPO W AS BASED ON THE FACT THAT THE EXPENSES INCURRED ALSO CONTRIBUTED TO ENHANCING THE BRAND VALUE OF TH E BRAND OWNED BY THE AES,THAT THE ENTIRE BUSINESS OF A GROUP LIKE HEINZ WAS HEAVILY DEPENDEN T ON BRAND RECOGNITION AND BRAND RECALL.THE DRP REFERRED TO THE JUDGMENT OF THE HONBLE DELHI H IGH COURT,DELIVERED IN THE CASE OF MARUTI SUZUKI INDIA LTD.(328ITR210)AND HELD THAT EVEN IN T HE CASE OF MANUFACTURING AMP EXPENDITURE INCURRED IN EXCESS OF WHAT A COMPARABLE INDEPENDENT ENTITY PLACED IN THE SAME POSITION WOULD HAVE INCURRED WOULD DESERVE SOME COMPENSATION FROM THE BRAND OWNER UNLESS IT WAS SHOWN THAT THE ASSESSEE HAD OBTAINED SOME OTHER CONCESSION OR SUBSIDY FROM THE AE IN SOME FORM OR THE OTHER WHICH COULD OFFSET THE EXTRA AMP EXPENSES OF THE ASSESSEE.FINALLY,THE DRP HELD THAT A PORTION OF AMP EXPENSES ACTUALLY CONFERRED A BENEFI T ON THE AE.S WHICH CONSTITUTED AN INTERNATIONAL TRANSACTION FOR WHICH THE ASSESSEE WA S ENTITLED TO COMPENSATION. WITH REGARD TO BENCH-MARKING,THAT DRP HELD THAT THE AO HAD GIVEN REASONS FOR REJECTING THE TNMM,THAT AN INTERNATIONAL TRANSACTION IN THE FORM OF BRAND BUILDING HAD BEEN CONSIDERED BY THE TPO IN ADDITION TO THE TRANSACTIONS REPORTED BY THE ASSESSEE,THAT THE ASSESSEE HAD NOT CONSIDERED THE TRANSACTION AT ALL IN THE TP STUDY R EPORT,THAT THE TPO WAS JUSTIFIED IN ATTEMPTING TO FIND A BETTER METHODOLOGY,THAT HE HAD STATED,WHILE CONCLUDING HIS ORDER,THAT ALL INTERNATIONAL TRANSACTIONS OTHER THAN THE BENEFIT EVEN THROUGH BR AND BUILDING HAD BEEN ACCEPTED BY HIM AT BEING AT ARMS LENGTH, THAT RSP METHOD, ADOPTED BY THE TPO, WAS NOT STRICTLY IN ACCORDANCE WITH THE MANNER IN WHICH PSM OR RESIDUAL PSM WAS TO BE A PPLIED AS SPECIFIED IN RULE 10(B)(1)(D), THAT PSM WAS NORMALLY APPLIED WHEN INTERNATIONAL TR ANSACTIONS INVOLVE A NUMBER OF INTERLINKED TRANSACTIONS AND OR A SET OF UNIQUE INTANGIBLES WHI CH WOULD MAKE IT DIFFICULT FOR THE ARMS LENGTH PRICE OF ANY PARTICULAR TRANSACTION TO BE EVALUATED ON A STAND-ALONE BASIS,THAT THE PSM EMPLOYED BY THE TPO WOULD NOT PROVIDE AN ARMS LENGTH RESULT OF THE COMPENSATION RECEIVED BY THE ASSESSEE FOR PROMOTING THE BRANDS OF AES.THE DRP FU RTHER OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT BLM COULD NOT BE USED AS IT WAS NOT O NE OF THE PRESCRIBED METHODS WAS ENTIRELY WITHOUT MERIT,THAT THE BRIGHT LINE WAS ONLY A STAND ARD WHICH WAS USED TO JUST THE REASONABLE LEVEL OF EXPENDITURE THAT WOULD BE REQUIRED TO BE INCURRE D BY AN ENTERPRISE FOR ITS OWN RISK BEARING ACTIVITIES,THAT IT WAS NOT A METHOD EMPLOYED TO DET ERMINE THE ALP OF THE BENEFIT CONFERRED THROUGH DEVELOPMENT OF BRAND INTANGIBLE,THAT IN THE CASE UNDER CONSIDERATION THE INTERNATIONAL TRANSACTION WAS NOT THE AMP EXPENDITURE PER SE BUT THE BENEFIT CONFERRED ON THE AES IN FORM OF PROMOTION AND BRAND VALUE AUGMENTATION OF THE BRAND S OWNED BY THEM THROUGH THE INCURRING OF EXCESSIVE AMP,THAT IT IS NOT THAT TNMM THAT HAD NOT BEEN USED IN THE CASE, THAT CONTENTION OF THE ASSESSEE THAT RELEVANT INDICATOR FOR PURPOSE OF BRIGHT LINE SHOULD BE TAKEN AS ABILITY TO SPEND AND NOT THE ACTUAL AMP EXPENDITURE WAS NOT ACCEPTAB LE,THAT THE ADVERTISING EXPENDITURE DID NOT DEPEND SOLELY ON THE PROFITABILITY OR THE AMOUNT OF PROFITS AVAILABLE,THAT IT WAS THE TOTAL TURNOVER THAT WAS RELEVANT FACTORS FOR PLANNING AMP EXPENDIT URE,THAT THE TPO WAS JUSTIFIED IN APPLYING 7732&ORS-HEINZ GROUP 5 BRIGHT LINE STANDARD FOR DETERMINING THE EXCESS AMP EXPENDITURE,THAT THE COMPARABLES REQUIRED IN THE CASE UNDER CONSIDERATION FOR CONSTRUCTING TH E BRIGHT LINE WOULD HAVE TO BE THE COMPANIES WHOSE AMP EXPENDITURE WAS ENTIRELY FOR THEIR OWN SE LLING EFFORT WITHOUT ANY INVOLVEMENT OF BRAND PROMOTION AND PRESERVATION, THAT THE TPO HAD NOT FOUND SUCH COMPARABLES,THAT HE HAD DONE THE NEXT BEST THING BY SELECTING COMPANIES DEA LING IN SIMILAR PRODUCTS WHO OWNED THE BRANDS AND THEN MAKING AN ADJUSTMENT,THAT THE TPO H AD GIVEN ADEQUATE REASONS FOR REJECTING 11 OF THE ASSESSEES COMPARABLES,THAT THE INTERNAL CUP , AS SUGGESTED BY THE ASSESSEE, IN FORM OF AMP EXPENDITURE ON THE OWN BRAND NYCIL,COULD NOT BE CON SIDERED,THAT FOUR OF THE COMPANIES SELECTED BY THE TPO DID NOT OWN THE BRANDS THAT THEY WERE SE LLING GOODS MANUFACTURED BY THEMSELVES, THAT THOSE COMPANIES COULD NOT BE ACCEPTED AS COMPA RABLES FOR THE PURPOSE OF CONSTRUCTING THE BRIGHT LINE IN THE MANNER DONE BY THE TPO.THE DRP D IRECTED THE AO TO INCLUDE TWO COMPARABLES AND RE-COMPUTE THE AVERAGE AMP EXPENDITURE OF COMPA RABLES ACCORDINGLY.COMING TO THE ISSUE OF ADJUSTMENTS MADE BY THE TPO TO THE AVERAGE AMP E XPENDITURE OF THE COMPARABLES, THE DRP HELD THAT THE RECORDS DID NOT SHOW ANY BASIS AT ALL FOR REDUCING THE AVERAGE AMP EXPENDITURE @.25%,THAT THE ASSESSEE WAS PRIMARILY A MANUFACTURE R AND SOLD ALMOST ITS ENTIRE PRODUCTION IN INDIA AND ASIA PACIFIC REASON,THAT SOME OF THE BRAN DS BEING MANUFACTURED BY THE ASSESSEE WERE NOT MANUFACTURED BY ANY OTHER ENTERPRISE OF THE GRO UP,THAT THOSE TRADEMARKS WERE NOT USED BY THE AE.S,THAT IF AN ADJUSTMENT WAS TO BE MADE FOR THE F ACT THAT THE COMPARABLES WOULD BE PROMOTING THEIR OWN BRANDS AN ADJUSTMENT WOULD ALSO BE REQUIR ED TO TAKE INTO ACCOUNT THE ABOVE-MENTIONED PECULIAR FACTS OF THE CASE UNDER CONSIDERATION,THAT BOTH THOSE ADJUSTMENTS WERE DIFFICULT TO COMPUTE,THAT IN THE INTEREST OF JUSTICE NO ADJUSTME NT SHOULD BE MADE TO THE AVERAGE AMP EXPENDITURE COMPUTED IN RESPECT OF COMPARABLES SELE CTED. THE DRP FURTHER HELD THAT AMP EXPENSES OF 6.47 CRORES ON NYCIL AND RS. 0.09 CRORE S ON THE TRADED PRODUCTS FOR THE PURPOSE OF THE BRIGHT LINE HAD TO BE EXCLUDED,THAT REBATES AND DISCOUNTS AND SUCH OTHER INCENTIVE EXPENSES COULD NOT BE CONSIDERED AS INCURRED FOR PROMOTING O R DEVELOPING BRANDS.HE DIRECTED THE AO TO VERIFY THE DETAILS OF EXPENSES(RS.9.46 CRORES)AND E XCLUDE THE SAME FROM THE AMP EXPENSES,IF THEY WERE FOUND TO BE OF THE ABOVE SAID NATURE.WITH REGARD TO MARK OF 10% ON THE AMP COST,THE DRP OBSERVED THAT THE TPO HAD GIVEN ADEQUATE REASON S FOR THE SAME, THAT THE FIGURE ARRIVED AT BY HIM FOR THAT PURPOSE WAS 9.8% AND NOT 10%.THE AO WA S DIRECTED TO VERIFY THE CALCULATION AND APPLIED THE MARKUP ACCORDINGLY.FINALLY,THE DRP DIRE CTED THE AO TO RE-COMPUTE ARMS LENGTH COMPENSATION FOR THE BENEFIT CONFERRED ON AE.S IN T HE FORM OF BRAND DEVELOPMENT AND BRAND VALUE AUGMENTATION USING BRIGHT LINE STANDARD. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT THE TRANSACTION IN QUESTION WAS NOT AN INTERNATIONAL TRANSACTION,THAT THE ASSESSEE HAD INC URRED THE EXPENSES FOR PROMOTING ITS OWN BUSINESS AND FOR PROMOTING THE BUSINESS OF THE AE.S ,THAT THE AMOUNT OF RS.71.04 CRORES SHOWN AS ADVERTISEMENT AND MARKETING EXPENDITURE INCLUDED A SUBSTANTIAL AMOUNT OF EXPENDITURE WHICH COULD NOT BE SAID TO BE FOR PROMOTING ANY OF THE BR ANDS OWNED BY THE AES,THAT AN AMOUNT OF RS. 9.46 CRORES SHOULD NOT BE CONSIDERED AS INCURRED FO R BRAND DEVELOPMENT, THAT IT WAS IN THE NATURE OF DISCOUNT AND REBATE GIVEN TO THE RETAILERS, THAT EXPENSES INCURRED ON NYCIL AND ON OTHER TRADED PRODUCTS SHOULD ALSO BE EXCLUDED.HE REFERRED TO THE JUDGMENTS OF MARUTI SUZUKI(64TAXMANN. COM.150),WHIRLPOOL OF INDIA LTD.(64 TAXMANN.324),BA USCH & LOMB EYECARE(INDIA)PVT.LTD(65 TAXMANN.COM 141)HE FURTHER ARGUED THAT EVEN IF THE TRANSACTION IS CONSIDERED AN INTERNATIONAL TRANSACTION,PSM WAS NOT APPLICABLE,THAT BRIGHT LINE WAS NOT ONE OF THE RECOGNISED METHODS FOR DECIDING THE ALP AS PER THE PROVISIONS OF SECTION 9 2 OF THE ACT.THE DEPARTMENTAL REPRESENTATIVE (DR)CONTENDED THAT THE TPO WAS JUSTIFIED IN TREATIN G THE AMP EXPENSES AS INTERNATIONAL 7732&ORS-HEINZ GROUP 6 TRANSACTION,THAT THE DRP HAD REJECTED THE PSM.HE RE FERRED TO THREE CASES DELHI TRIBUNAL WHEREIN SIMILAR ISSUE WAS SENT BACK TO THE FILE OF THE AO.H E STATED THAT THE MATTER SHOULD BE RESTORED TO THE FILE OF THE AO.S.IN THE REJOINDER,THE AR CONTEN DED THAT THE ORDERS OF THE DELHI TRIBUNAL WERE DELIVERED BEFORE THE LATEST JUDGMENT OF MARUTI SUZU KI(SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ENTERED IN TO INTERN ATIONAL TRANSACTIONS WITH ITS AE.S LOCATED IN USA AND ITALY,THAT IT HAD DETERMINED THE ALP OF SUC H TRANSACTION ADOPTING TNMM,THAT THE TPO ACCEPTED THE VALUATION OF THE THOSE TRANSACTION,THA T HE FURTHER HELD THAT THE AMP EXPENSES INCURRED BY THE ASSESSEE WERE TO BE EXAMINED AS PER THE PROVISIONS OF SECTION 92 OF THE ACT,THAT HE HELD THE ASSESSEE CONTRIBUTED TO ENHANCE THE BRA ND VALUE OF THE BRAND OWNED BY THE AE.S.HE ALSO HELD THAT THE ASSESSEE WAS ENTITLED TO COMPENS ATION FOR THE EXPENSES INCURRED UNDER THE HEAD AMP.IN SHORT,HE HELD THAT BENEFIT CONFERRED BY THE ASSESSEE ON ITS AE.S,BY WAY OF PROMOTING THE BRANDS AND INCREASING VALUE OF THEIR BRANDS,WAS AN INTERNATIONAL TRANSACTION AND ALP OF SAID TRANSACTION HAD TO BE DETERMINED.HE ADOPTED PSM AND DETERMINED ALP AT RS.153.99 CRORES. ALTERNATIVELY,HE HELD THAT BLT WAS TO BE ADOPTED FO R ADOPTING ALP.ACCORDINGLY,UPWARD ADJUSTMENT OF RS.47.07 CRORES WAS PROPOSED.THE DRP PARTLY UPHELD THE ORDER OF THE TPO.IT WAS OF THE OPINION THAT AMP EXPENSES INCURRED BY THE AS SESSEE FELL WITHIN THE PARAMETERS OF INTERNATIONAL TRANSACTION,THAT PSM ADOPTED BY THE T PO WAS NOT A PROPER METHOD TO DETERMINE THE TRANSACTION.DRP DIRECTED THE AO TO RE-COMPUTE THE A DJUSTMENT USING BEST LINE STANDARD. 5.1. WE FIND THAT THE ASSESSEE HAD BEEN GRANTED TRADEMAR K LICENCES INCLUDING COMPLAN,GLUCON-D, SAMPRITI GHEE BY ITS 100% HOLDING COMPANY,I.E. HEIN Z ITALY AND TRADEMARK/TECHNOLOGY LICENCES, INCLUDING HEINZ TOMATO KETCHUP,BY ITS ULTIMATE HOLD ING COMPANY,HEINZ USA.THE FACT-THAT THE LICENSE AGREEMENTS BETWEEN THE ASSESSEE AND ITS AE. S WERE ON PRINCIPAL TO PRINCIPAL BASIS FOR PAYMENT OF ROYALTY FOR USE OF BRANDS OF THE AE.S-WA S NOT CHALLENGED BY THE TPO.IN OUR, OPINION, OBSERVATION OF THE DRP THAT ROYALTY PAYMENT WAS NOT A RELEVANT POINT TO DECIDE THE ISSUE IS NOT PROPER.BECAUSE,ROYALTY PAYMENT IS ONE OF THE CRITER IAS TO HOLD THAT THE ASSESSEE IS AN INDEPENDENT UNIT.IT IS ALSO NOT DENIED THAT THE ASSESSEE IS HAV ING A FULLY OPERATIONAL MANUFACTURING, MARKETING AND DISTRIBUTION SYSTEM IN INDIA.THE MANUFACTURING UNIT OF THE ASSESSEE HAD SHOWN A HUGE TURNOVER(RS.631.24 CRORES).THUS,WE DO NOT FIND FORC E IN THE ARGUMENTS OF THE TPO /DRP THAT AMP EXPENSES INCURRED BY THE ASSESSEE WERE PRIMARIL Y OR SECONDARILY AIMED TO BENEFIT THE AE.S.AND THAT IT WAS ENTITLED TO A REASONABLE COMPE NSATION FOR SUCH AMP EXPENSES.THE EXPENSES WERE INCURRED BY THE ASSESSEE TO PROMOTE ITS OWN BU SINESS INTERESTS. 5.2. WE ALSO FIND THAT THE TPO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE ASSESSEE HAD RENDERED ANY SERVICES TO ITS AE.S UNDER THE HEA D AMP.ON THE CONTRARY,PAYMENT ON ACCOUNT OF ADVERTISEMENTS ETC.(RS.71.04 CRORES)WAS MADE TO UNRELATED DOMESTIC THIRD PARTIES.IN OUR OPINION,THESE BASIC FACTS COMPELLED THE TPO TO HOLD THAT IN THE CASE UNDER CONSIDERATION THE INTERNATIONAL TRANSACTION WAS NOT THE ACTUAL AMP EX PENDITURE,BUT THE BENEFIT CONFERRED BY IT TO ITS AE.S IN FORM OF PROMOTION AND BRAND VALUE AUGMENTAT ION OF THE BRANDS OWNED BY THEM.SO,THE FUNDAMENTAL QUESTION TO BE ANSWERED IS TO DECIDE AS TO WHETHER IN ABSENCE OF ANY AGREEMENT FOR PAYMENT OF AMP EXPENSES TO THE AE.S CAN IT BE HELD THAT THERE WAS AN INTERNATIONAL TRANSACTION ONLY ON THE BASIS THAT AMP EXPENDITURE,INCURRED BY THE ASSESSEE,WOULD HAVE BENEFITTED THE AE.S.,WHO OWNED THE BRANDS USED BY THE ASSESSEE.IN OUR OPINION,THE ARGUMENTS SUFFERS FROM THE VERY BASIC FLAW THAT AN ASSESSEE DOES NOT INCURS A MP TO INCREASE ITS SALES,BUT TO BENEFIT THE 7732&ORS-HEINZ GROUP 7 AE.S.IN OTHER WORDS,THE TPO HAS FAILED TO PROVE THA T THE REAL INTENTION OF THE ASSESSEE IN INCURRING ADVERTISEMENT AND MARKETING EXPENSES WERE TO BENEFIT THE AE.S.AND NOT TO PROMOTE ITS OWN BUSINESS.THE TURNOVER OF THE ASSESSEE PROVES TH AT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DONE A REASONABLY GOOD BUSINESS,AS STA TE EARLIER.THE RESULTANT PROFIT WAS OFFERED FOR TAXATION IN INDIA.THEREFORE,TRANSFERRING OF PROFIT FROM INDIA,THE BASIC INGREDIENT TO INVOKE THE PROVISIONS OF SECTION 92 OF THE ACT,REMAINS UNPROVE D. 5.3. HERE,WE WOULD LIKE TO REFER TO THE CASE OF MARUTI S UZUKI(SUPRA)OF THE HONBLE DELHI HIGH COURT.(SUPRA).IN THAT MATTER ALL THE ARGUMENTS RAIS ED BY THE TPO HAVE BEEN DISCUSSED AT LENGTH. SIMILAR JUDGMENTS WERE DELIVERED IN THE CASES WHIRL POOL OF INDIA LTD.(SUPRA),BAUSCH & LOMB EYECARE(INDIA)PVT.LTD(SUPRA),YUM RESTAURANTS (INDIA ) PVT.LTD.(ITA NO.349/2015 DATED 13/01/ 2016).IN THE ABOVE-MENTIONED DECISIONS,THE ISSUE OF THE VERY EXISTENCE OF INTERNATIONAL TRANSACTION ON INCURRING AMP EXPENDITURE AND THE M ETHOD OF DETERMINATION OF ALP HAD ARISEN. THE HON'BLE DELHI HIGH COURT HAD CATEGORICALLY HELD THAT IN THE ABSENCE OF AGREEMENT BETWEEN INDIAN ENTITY AND FOREIGN AE WHEREBY THE INDIAN ENT ITY WAS OBLIGED TO INCUR AMP EXPENDITURE OF A CERTAIN LEVEL FOR FOREIGN ENTITY FOR THE PURPOSE OF PROMOTING THE BRAND VALUE OF THE PRODUCTS OF THE AE.S,NO INTERNATIONAL TRANSACTION CAN BE PRESUM ED.IT WAS FURTHER HELD THAT THE FACT THAT THERE WAS AN INCIDENTAL BENEFIT TO THE FOREIGN AE,IT COUL D NOT BE CONCLUDED THAT AMP EXPENDITURE INCURRED BY AN INDIAN ASSESSEE WAS FOR PROMOTING BR AND OF FOREIGN AE.THE HONBLE COURT FURTHER HELD THAT IN THE ABSENCE OF MACHINERY PROVISIONS, B RINGING AN IMAGINED TRANSACTION TO TAX WAS NOT POSSIBLE.WHILE COMING TO THIS CONCLUSION, THE HON'B LE HIGH COURT HAD PLACED RELIANCE ON THE DECISIONS OF B.C.SRINIVASA SETTY (128 ITR 294) AND PNB FINANCE LTD.(307 ITR 75). WE FIND THAT IN THE CASE OF BAUSCH & LOMB EYECARE ( INDIA) (P)LTD.(SUPRA),THE HON'BLE DELHI HIGH COURT,AFTER REFERRING TO ITS EARLIER DECISIONS IN THE CASES OF MARUTI SUZUKI INDIA LTD.(SUPRA) AND WHIRLPOOL OF INDIA (P) LTD.(SUPRA),HAS CONSIDE RED THE QUESTION OF EXISTENCE OF THE INTER - NATIONAL TRANSACTION AND COMPUTATION OF ALP THEREON .WE WOULD LIKE TO REPRODUCE RELEVANT PORTION OF THE ORDER AND SAME READ AS UNDER: 53.A READING OF THE HEADING OF CHAPTER X['COMPUTAT ION OF INCOME FROM INTERNATIONAL TRANSACTIONS HAVING REGARD TO ARM'S LENGTH PRICE']A ND SECTION 92 (1) WHICH STATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION S HALL BE COMPUTED HAVING REGARD TO THE ALP AND SECTION 92C (1) WHICH SETS OUT THE DIFFERENT M ETHODS OF DETERMINING THE ALP, MAKES IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT IS MADE BY SU BSTITUTING THE ALP FOR THE PRICE OF THE TRANSACTION. TO BEGIN WITH THERE HAS TO BE AN INTE RNATIONAL TRANSACTION WITH A CERTAIN DISCLOSED PRICE.THE TRANSFER PRICING ADJUSTMENT ENVISAGES THE SUBSTITUTION OF THE PRICE OF SUCH INTERNATIONAL TRANSACTION WITH THE ALP. 54. UNDER SECTIONS 92B TO 92F, THE PRE-REQUISITE FO R COMMENCING THE TP EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. THE NEX T STEP IS TO DETERMINE THE PRICE OF SUCH TRANSACTION. THE THIRD STEP WOULD BE TO DETERMINE T HE ALP BY APPLYING ONE OF THE FIVE PRICE DISCOVERY METHODS SPECIFIED IN SECTION 92C. THE FO URTH STEP WOULD BE TO COMPARE THE PRICE OF THE TRANSACTION THAT IS SHOWN TO EXIST WITH THAT OF THE ALP AND MAKE THE TP ADJUSTMENT BY SUBSTITUTING THE ALP FOR THE CONTRACT PRICE. 55. SECTION 928 DEFINES 'INTERNATIONAL TRANSACTION' AS UNDER: 'MEANING OF INTERNATIONAL TRANSACTION. 928.(1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92, 92C, 92D AND 92E ,'INTERNATIONAL TRANSACTION MEAN S A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS; IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PRO VISION OF SERVICES, OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTION HAVING A BEARING O N THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH 7732&ORS-HEINZ GROUP 8 ENTERPRISES, AND SHALL INCLUDE A MUTUAL AGREEMENT O R ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR APPOR TIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST. OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTIO N WITH A BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRIS ES. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES 'OF SUB- SECTION (1), BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO' THE RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCI ATED ENTERPRISE.' 56.THUS, UNDER SECTION 92B(1) AN 'INTERNATIONAL TR ANSACTION' MEANS- (A) A TRANSACTION BETWEEN TWO OR MORE AES, EITHER OR BOTH OF WHOM ARE NON-RE SIDENT (B) THE TRANSACTION IS IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY OR PROVISION OF SERVICE OR LENDING OR BORROWING MONEY OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOMES OR LOSSES OF SUCH ENTERPRISES, AND (C) SHALL INCLUDE A MUTUAL A GREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE AES FOR ALLOCATION OR APPORTIONMENT OR CONTRIBUTIO N TO THE ANY COST OR EXPENSES INCURRED OR TO BE INCURRED IN CONNECTION- WITH THE - BENEFIT, SERV ICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ONE OR MORE OF SUCH ENTERPRISES. 57. CLAUSES (B) AND (C) ABOVE CANNOT BE READ DISJU NCTIVELY. EVEN IF RESORT IS HAD TO THE RESIDUARY PART OF CLAUSE (B) TO CONTEND THAT THE AMP SPEND O F BLI IS 'ANY OTHER TRANSACTION HAVING A BEARING' ON ITS 'PROFITS, INCOMES OR LOSSES, FOR A 'TRANSACTION' THERE HAS TO BE TWO PARTIES. THEREFORE FOR THE PURPOSES OF THE 'MEANS' PART OF CLAUSE (B) AND THE 'INCLUDES' PART. OF CLAUSE (C), THE REVENUE HAS TO SHOW THAT THERE EXISTS AN 'AGRE EMENT' OR 'ARRANGEMENT' OR' 'UNDERSTANDING' BETWEEN BLI -AND B&L, USA WHEREBY BLI IS OBLIGED TO SPEND EXCESSIVELY ON AMP IN ORDER TO PROMOTE THE BRAND OF B&L, USA. AS FAR AS THE LEGIS LATIVE INTENT IS CONCERNED, IT IS SEEN THAT CERTAIN TRANSACTIONS LISTED IN THE EXPLANATION UND ER CLAUSES (I) (A) TO (E) TO SECTION 92B ARE DESCRIBED AS AN 'INTERNATIONAL TRANSACTION'. THIS M IGHT BE ONLY AN ILLUSTRATIVE LIST, BUT SIGNIFICANTLY' IT DOES NOT LIST AMP SPENDING AS ONE SUCH TRANSACTION. 58. IN MARUTI SUZUKI INDIA LTD. (SUPRA), ONE OF TH E SUBMISSIONS OF THE REVENUE WAS: 'THE MERE FACT THAT THE SERVICE OR BENEFIT HAS BEEN PROVIDED BY ONE PARTY TO THE OTHER WOULD BY ITSELF CONSTITUTE A TRANSACTION IRRESPECTIVE OF WHETHER TH E CONSIDERATION FOR THE SAME HAS BEEN PAID OR REMAINS PAYABLE OR THERE IS A MUTUAL AGREEMENT TO NOT CHARGE ANY COMPENSATION FOR THE SERVICE OR BENEFIT. THIS WAS NEGATIVED BY THE COURT BY PO INTING OUT; 'EVEN IF THE WORD 'TRANSACTION' IS GIVEN ITS WIDEST CONNOTATION, AND NEED NOT INVOLVE ANY TRANSFER OF MONEY OR A WRITTEN AGREEMENT AS SUGGESTED BY THE REVENUE, AND EVEN IF RESORT IS HAD TO SECTION 92F (V), WHICH DEFINES 'TRANSACTION' TO INCLUDE 'ARRANGEMENT', 'UNDERSTAN DING' OR 'ACTION IN CONCERT', 'WHETHER FORMAL OR IN WRITING', IT IS STILL INCUMBENT ON THE REVENUE T O SHOW THE EXISTENCE OF AN 'UNDERSTANDING' OR AN 'ARRANGEMENT' OR 'ACTION IN CONCERT' BETWEEN MSIL A ND SMC AS REGARDS AMP SPEND FOR BRAND PROMOTION. IN OTHER WORDS, FOR BOTH THE 'MEANS', P ART AND THE 'INCLUDES' PART OF SECTION 928 (1) WHAT HAS TO BE DEFINITELY SHOWN IS THE EXISTENCE O F TRANSACTION WHEREBY MSIL HAS BEEN OBLIGED TO INCUR AMP OF A CERTAIN LEVEL FOR SMC FOR THE PU RPOSES OF PROMOTING THE BRAND OF SMC.' 59. IN WHIRLPOOL OF INDIA LTD. (SUPRA), THE COURT INTERPRETED THE EXPRESSION 'ACTED IN CONCERT' AND IN THAT CONTEXT REFERRED TO THE DECISION OF THE SUPREME COURT IN DAIICHI SANKYO COMPANY LTD. V.. JAYARAM CHIGURUPATI 2010(6)MANU/SC/0454/2010, WHICH AROSE IN THE CONTEXT OF ACQUISITION OF SHARES OF ZENOTECH LABORATORY LTD. BY THE RANBA XY GROUP. THE QUESTION THAT WAS EXAMINED WAS WHETHER AT THE RELEVANT TIME THE APPELLANT, I .E., 'DAIICHI SANKYO COMPANY AND RANBAXY WERE 'ACTING IN CONCERT' WITHIN THE MEANING OF REG ULATION 20(4) (B) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION O F SHARES AND TAKEOVERS) REGULATIONS, 1997. IN. PARA 44, IT WAS OBSERVED AS UNDER: 'THE OTHER LIMB OF THE CONCEPT REQUIRES TWO OR MORE PERSONS JOINING TOGETHER WITH THE SHARED COMMON OBJECTIVE AND PURPOSE OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF A- CERTAIN TARGET COMPANY, THERE CAN BE NO 'PERSONS A CTING IN CONCERT' UNLESS THERE IS A 7732&ORS-HEINZ GROUP 9 SHARED COMMON OBJECTIVE OR PURPOSE BETWEEN TWO OR MORE PERSONS OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF THE TARGET COMPANY, FOR, DE HORS THE ELEMENT OF THE SHARED COMMON OBJECTIVE' OR PURPOSE THE IDEA OF 'PERSON AC TING IN CONCERT' IS AS MEANINGLESS AS CRIMINAL CONSPIRACY WITHOUT ANY AGREEMENT TO COMMI T A CRIMINAL OFFENCE. THE IDEA OF 'PERSONS ACTING IN CONCERT' IS NOT ABOUT A FORTUITO US RELATIONSHIP COMING INTO EXISTENCE BY ACCIDENT OR CHANCE. THE RELATIONSHIP' CAN COME INTO BEING ONLY BY DESIGN, BY MEETING OF MINDS BETWEEN TWO OR MORE PERSONS LEADING TO THE SH ARED COMMON OBJECTIVE OR PURPOSE OF ACQUISITION OF SUBSTANTIAL ACQUISITION OF SHARE S ETC. OF THE TARGET COMPANY. IT IS ANOTHER MATTER THAT THE COMMON OBJECTIVE OR PURPOSE MAY BE IN PURSUANCE OF AN AGREEMENT' OR AN UNDERSTANDING, FORMAL OR INFORMAL; 'THE ACQUISITION OF SHARES ETC. MAY BE DIRECT OR INDIRECT OR THE PERSONS ACTING IN CONCERT MAY COOP ERATE IN ACTUAL ACQUISITION OF SHARES ETC. OR THEY MAY AGREE TO, COOPERATE IN SUCH ACQUI SITION. NONETHELESS, THE ELEMENT OF THE SHARED COMMON OBJECTIVE OR PURPOSE IS THE SINE QUA NON FOR THE RELATIONSHIP OF 'PERSONS ACTING IN CONCERT' TO COME INTO BEING. ' 60. THE TRANSFER PRICING ADJUSTMENT IS NOT EXPECTED TO BE MADE BY DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESSIVE' AMP EXPENDITURE INCURRED B Y THE ASSESSEE AND THE AMP EXPENDITURE OF A COMPARABLE ENTITY THAT AN INTERNATIONAL TRANSACT ION EXISTS AND THEN PROCEEDING TO MAKE THE ADJUSTMENT OF THE DIFFERENCE IN ORDER TO DETERMINE THE VALUE OF SUCH AMP EXPENDITURE INCURRED , FOR THE AE. IN ANY EVENT, AFTER THE DECISION IN SON Y ERICSSON (SUPRE), -- THE QUESTION OF APPLYING THE BLT TO DETERMINE THE EXISTENCE-OF AN-INTERNATI ONAL TRANSACTION INVOLVING AMP EXPENDITURE DOES NOT ARISE. 61. THERE IS MERIT IN THE CONTENTION OF THE ASSESS EE THAT A DISTINCTION IS REQUIRED TO BE DRAWN BETWEEN A 'FUNCTION' AND A 'TRANSACTION' AND THAT EVERY EXPENDITURE FORMING PART OF THE FUNCTION, CANNOT BE CONSTRUED AS A 'TRANSACTION'. FURTHER, T HE- REVENUE'S ATTEMPT AT RE-CHARACTERISING THE AMP EXPENDITURE INCURRED AS A TRANSACTION BY ITSEL F WHEN IT HAS NEITHER BEEN IDENTIFIED AS SUCH BY THE ASSESSEE OR LEGISLATIVELY RECOGNISED IN THE EXPLANATION TO SECTION 92 B RUNS COUNTER TO LEGAL POSITION EXPLAINED IN CIT VS. EKL APPLIANCES LTD. (SUPRA) WHICH REQUIRED A TPO 'TO EXAMINE THE 'INTERNATIONAL TRANSACTION' AS HE ACTU ALLY FINDS THE SAME.' 62. IN THE PRESENT CASE, THE MERE FACT THAT B&L, US A THROUGH B&L, SOUTH ASIA, INC HOLDS 99.9% OF THE SHARE OF THE ASSESSEE WILL NOT IPSO FACTO L EAD TO THE CONCLUSION THAT THE MERE INCREASING OF AMP EXPENDITURE BY THE ASSESSEE INVOLVES AN INTERN ATIONAL TRANSACTION IN THAT REGARD WITH B&L, USA. A SIMILAR CONTENTION BY THE REVENUE, NAMELY TH E FACT THAT EVEN IF THERE IS NO EXPLICIT ARRANGEMENT, THE FACT THAT THE BENEFIT OF SUCH AMP EXPENSES WOULD ALSO ENCURE TO THE AE IS ITSELF SELF SUFFICIENT TO INFER THE EXISTENCE OF AN INTERN ATIONAL TRANSACTION HAS BEEN NEGATIVED BY THE COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA) AS UNDER : '68. THE ABOVE SUBMISSIONS PROCEED PURELY ON SURM ISES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD TO SENDING THE TAX AUTHORITIES T HEMSELVES ON A WILD-GOOSE CHASE OF WHAT CAN AT BEST BE DESCRIBED AS A 'MIRAGE'. FIRST OF ALL, THERE HAS TO BE A CLEAR STATUTORY MANDATE FOR SUCH AN EXERCISE. THE COURT IS UNABLE TO FIND ONE. TO THE QUESTION WHETHER THERE IS ANY 'MACHINERY' PROVISION FOR DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES, MR. SRIVASTAVA ONLY REFERRED TO SECTION 92F (II) WHICH DEFINES ALP TO MEAN A PRICE 'WHICH IS APPLIE D OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN AES IN UNCON TROLLED CONDITIONS', SINCE THE REFERENCE IS TO 'PRICE' AND TO 'UNCONTROLLED CONDI TIONS' IT IMPLICITLY BRINGS INTO PLAY THE BLT. IN OTHER WORDS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETHING OTHER THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FROM ANOTHE R IN UNCONTROLLED SITUATIONS THEN THAT WOULD BE THE ALP. THE COURT DOES NOT SEE THIS AS A MACHINERY PROVISION PARTICULARLY - IN-LIGHT OF THE FACT THAT -THE-BLT HAS BEEN EXPRES SLY NEGATIVED BY THE COURT IN SONY ERICSSON. THEREFORE, THE EXISTENCE OF AN INTERNATIO NAL TRANSACTION WILL HAVE TO BE ESTABLISHED DE HORS THE BLT, 7732&ORS-HEINZ GROUP 10 70. WHAT IS CLEAR IS THAT IT. IS THE 'PRICE' OF AN INTERNATIONAL TRANSACTION WHICH IS REQUIRED TO BE ADJUSTED: THE VERY EXISTENCE OF AN INTERNAT IONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THA T SINCE IT IS NOT AN ALP, AN ADJUSTMENT HAD TO BE MADE. THE -BURDEN IS ON THE REVENUE TO F IRST SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. NEXT, TO ASCERTAIN THE DISCLOSED 'PRICE' OF SUCH TRANSACTION AND THEREAFTER ASK WHETHER IT IS AN ALP. IF THE ANSWE R TO THAT IS IN THE NEGATIVE THE TP ADJUSTMENT SHOULD FOLLOW. THE OBJECTIVE OF CHAPTER X IS TO MAKE ADJUSTMENTS TO THE PRICE OF AN INTERNATIONAL TRANSACTION WHICH THE AE S INVOLVED MAY SEEK TO SHIFT FROM ONE JURISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CANNOT FORM THE REASON FOR MAKING AN ALP ADJUSTMENT. ' 71- SINCE A QUANTITATIVE ADJUSTMENT IS NOT PERMISSI BLE FOR THE PURPOSES OF A TP ADJUSTMENT UNDER CHAPTER X, EQUALLY IT CANNOT BE P ERMITTED IN RESPECT OF AMP EXPENSES EITHER. AS ALREADY NOTICED HEREINBETORE, WHAT THE REVENUE HAS SOUGHT TO DO IN THE PRESENT. CASE IS TO RESORT TO A QUANTITATIVE ADJUS TMENT BY FIRST DETERMINING WHETHER THE AMP SPEND OF THE ASSESSEE ON- APPLICATION OF THE. BL T, IS EXCESSIVE, THEREBY EVIDENCING THE EXISTENCE OF AN INTERNATIONAL TRAN SACTION INVOLVING THE AE. THE QUANTITATIVE DETERMINATION FORMS THE VERY BASIS FO R THE ENTIRE TP EXERCISE IN THE PRESENT CASE. 74. THE PROBLEM WITH THE REVENUE'S APPROACH IS THAT IT WANTS EVERY INSTANCE OF AN AMP SPEND BY AN INDIAN ENTITY WHICH HAPPENS TO USE THE BRAND OF A FOREIGN AE TO BE PRESUMED TO INVOLVE AN INTERNATIONAL TRANSACTION. AND THIS, NOTWITHSTANDING THAT THIS IS NOT ONE OF THE DEEMED INTERNATIONAL TRANSACTIONS L ISTED UNDER THE EXPLANATION TO SECTION 928 OF THE ACT. THE PROBLEM DOES NOT STOP HERE. EV EN IF A TRANSACTION INVOLVING AN AMP SPEND FOR A FOREIGN AE IS ABLE TO BE LOCATED IN SO ME AGREEMENT, WRITTEN (FOR E.G., THE SAMPLE AGREEMENTS PRODUCED BEFORE THE COURT BY THE REVENUE) OR OTHERWISE, HOW SHOULD A TPO PROCEED TO BENCHMARK THE PORTION OF S UCH AMP SPEND THAT THE INDIAN ENTITY SHOULD BE COMPENSATED FOR? 63. FURTHER, IN MARUTI SUZUKI INDIA LTD. '(SUPRA) THE COURT FURTHER EXPLAINED THE ABSENCE OF A 'MACHINERY PROVISION QUA AMP EXPENSES BY THE FOLLO WING ANALOGY: '75. AS AN ANALOGY; AND FOR-NO OTHER PURPOSE; IN TH E- CONTEXT OF A DOMESTIC TRANSACTION INVOLVING TWO OR MORE RELATED PARTIES, REFERENCE M AY' BE MADE TO SECTION 40 A (2) (A) UNDER WHICH CERTAIN TYPES OF EXPENDITURE INCURRED BY WAY OF PAYMENT TO RELATED PARTIES IS NOT DEDUCTIBLE WHERE THE AO IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALU E OF THE GOODS.' IN SUCH EVENT, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' THE AO IN SUCH AN INSTANCE DEPLOYS THE 'BEST JUDGMENT' ASSESSMENT AS A DEVICE TO DISALLOW WHAT HE CONSIDE RS TO BE AN EXCESSIVE EXPENDITURE. THERE IS NO CORRESPONDING 'MACHINERY' PROVISION IN CHAPTER X WHICH ENABLES' AN AO TO DETERMINE WHAT SHOULD BE THE FAIR 'COMPENSATION' A N INDIAN ENTITY WOULD BE ENTITLED TO IF IT IS FOUND' THAT THERE IS AN INTERNATIONAL TRANSA CTION IN THAT REGARD. IN PRACTICAL TERMS, ABSENT A CLEAR STATUTORY GUIDANCE, THIS MAY ENCOUN TER FURTHER DIFFICULTIES. THE STRENGTH OF A BRAND,WHICH COULD BE PRODUCT SPECIFIC, MAY BE 'IM PACTED BY NUMEROUS OTHER IMPONDERABLES NOT LIMITED TO THE NATURE OF THE INDU STRY, THE GEOGRAPHICAL PECULIARITIES, ECONOMIC TRENDS BOTH INTERNATIONAL AND DOMESTIC, TH E CONSUMPTION PATTERNS, MARKET BEHAVIOUR AND SO ON. A SIMPLISTIC APPROACH USING ON E OF THE MODES SIMILAR TO THE ONES CONTEMPLATED BY SECTION 92C MAY NOT ONLY BE LEGALL Y IMPERMISSIBLE BUT WILL LEND ITSELF TO ARBITRARINESS. WHAT IS THEN NEEDED IS A CLEAR S TATUTORY SCHEME ENCAPSULATING THE LEGISLATIVE POLICY AND MANDATE WHICH PROVIDES THE NECESSARY CHECKS AGAINST ARBITRARINESS WHILE AT THE SAME TIME ADDRESSING THE APPREHENSION OF TAX AVOIDANCE. 64. IN THE ABSENCE OF ANY MACHINERY PROVISION, BRI NGING AN IMAGINED TRANSACTION TO TAX IS NOT POSSIBLE. THE DECISIONS IN CIT V. B.C. SRINIVASA SE TTY (1981) 128 ITR 294 (SC) AND PNB FINANCE 7732&ORS-HEINZ GROUP 11 LTD. V, CIT (2008) 307 ITR 75 (SC) MAKE THIS POSIT ION EXPLICIT. THEREFORE, WHERE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE WITH AN ASCERTAINABLE PRICE IS- UNABLE TO BE SHOWN TO EXIST, EVEN IF SUCH PRICE IS NIL, CHAPTER X PROVISIONS CANNOT BE INVOKED TO UNDERTAKE A TP ADJUSTMENT EXERCISE. 65. AS ALREADY MENTIONED, MERELY BECAUSE THERE IS A N INCIDENTAL BENEFIT TO THE FOREIGN AE, IT CANNOT BE SAID THAT THE AMP EXPENSES INCURRED BY T HE INDIAN ENTITY WAS FOR PROMOTING THE BRAND OF THE FOREIGN AE. AS MENTIONED-IN- SASSOON -J DAV ID-(SUPRA)-'THE--FACT THAT- SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITTED BY THE EXPEND ITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING 'ALLOWED BY WAY OF A DEDUCTION UN DER SECTION 10 (2) (XV) OF THE ACT (INDIAN INCOME TAX ACT, 1922) IF IT SATISFIES OTHERWISE TH E TESTS LAID DOWN BY THE LAW'. CONSIDERING THE FACTS-LIKE ABSENCE OF AN AGREEMENT BETWEEN THE ASSESSEE AND THE AE.S. FOR SHARING AMP EXPENSES,PAYMENT OF RS.71. 04 CRORES TO DOMESTIC PARTIES BY THE ASSESSEE,FAILURE OF THE TPO PROVE THAT EXPENSES WERE NOT FOR THE BUS INESS CARRIED OUT BY THE ASSESSEE IN INDIA-AND FOLLOWING THE JUDGMENTS OF THE HONBLE DELHI HIGH COURT DELIVERED IN THE CASE OF BAUSCH AND LOMB(INDIA)PVT.LTD(SUPAR),WE ARE OF THE OPINION THA T THE TRANSACTION IN QUESTION WAS NOT AN INTERNATIONAL TRANSACTION AND THAT THE TPO HAD WRON GLY INVOKED THE PROVISIONS OF CHAPTER X OF THE ACT FOR THE SAID TRANSACTION.AS WE HAVE DECIDED THE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE,SO,WE ARE NOT ADJUDICATING THE ISSUES RAIS ED WITH REGARD TO THE METHODOLOGY ADOPTED BY THE TPO I.E.THE CONTROVERSY OF FOLLOWING THE TNMM A ND BLT.FIRST EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE ADDITIONS MADE BY THE AO ARE DIRECTED TO BE DELETED. 6. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE MADE BY THE AO U/S.14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD EARNED EXEMPT DIVIDEND INCOME OF RS.8.98 CRORES,THAT IN THE COMPETITION IT HAD ADDED BACK A SUM OF RS. 5.56 LAKHS AS DISALLOWANCE U/S.14A OF THE ACT,THAT THE AMOUNT WAS CALCULATED O N THE BASIS OF THE SALARY PAID TO THREE EMPLOYEES WHO WERE STATED TO BE INVOLVED IN MANAGIN G INVESTMENTS TOGETHER WITH SOME AD HOC AMOUNT.IT WAS ARGUED BEFORE THE AO THAT NO DISALLOW ANCE U/S.14A COULD BE MADE WITHOUT FINDING OF EXPENSES DIRECTLY INCURRED FOR EARNING THE EXEMP T INCOME.HOWEVER,THE AO NOTED THAT OUT OF TOTAL ASSET OF RS.277.30 CRORES SHOWN IN THE BALANC E SHEET THE MUTUAL FUND INVESTMENT EARNING EXEMPT DIVIDEND WERE OF RS.69.25 CRORES IN 10 NEW D IFFERENT SCHEMES,THAT THE CORRESPONDING FIGURE AS ON 31/03/2007WAS RS.99.20 CRORES.HE CONCL UDED THAT SINCE THE INVESTMENTS WERE SIZEABLE THEY MUST HAVE ENTAILED CRITICAL INVESTMEN T ANALYSIS AND MANAGERIAL DECISIONS,THAT ONLY THREE EMPLOYEES COULD NOT HAVE BEEN INVOLVED, THAT PROVISIONS OF RULE 8D OF THE INCOME TAX RULES,1962 WERE APPLICABLE.HE MADE A DISALLOWANCE O F RS.45.67 LAKHS. 7. THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO,BEFORE THE DRP. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE DRP HELD THAT A DISALLOW ANCE U/S.14A WAS WARRANTED,THAT IT WAS NOT DENIED BY THE ASSESSEE THAT SOME INDIRECT EXPENSES COULD BE ATTRIBUTED TO ITS EXEMPT INCOME, THAT A DISALLOWANCE HAD BEEN COMPUTED IN THE RETURN BY T HE ASSESSEE ITSELF, THAT ONCE A PROXIMATE CAUSE WAS ESTABLISHED BETWEEN THE EARNING OF EXEMPT INCOME AND THE INDIRECT EXPENSES,THE COMPUTATION OF DISALLOWANCE HAD TO BE MADE IN ACCOR DANCE WITH RULE 8D OF THE RULES.FINALLY,THE DRP RESTRICTED THE DISALLOWANCE TO RS. 42.11 LAKHS. 8. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT THE MATTER COULD BE DECIDED ON MERITS.THE DR SUPPORTED THE ORDER OF THE DRP. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE THE AO HAD MADE DISALLOWANCE OF RS.45.67 LAKHS INV OKING THE PROVISIONS OF SECTION 14 A OF THE ACT,THAT IT ON ITS OWN,THE ASSESSEE HAD MADE A DISA LLOWANCE OF RS.5.56 LAKHS,THAT THE DRP REDUCED THE DISALLOWANCE TO RS. 42.11 LAKHS.WE FIND THAT THE AO HAD APPLIED THE PROVISIONS OF 7732&ORS-HEINZ GROUP 12 RULE 8D OF THE RULES IN A MECHANICAL MANNER.IN EACH AND EVERY CASE DISALLOWANCE @ HALF A PERCENT OF THE AVERAGE INVESTMENT FOR THAT YEAR CAN NOT BE APPLIED.BUT,IT IS ALSO A FACT THAT THE ASSESSEE ITSELF HAD ADMITTED THAT CERTAIN DISALLOWA NCE HAD TO BE MADE U/S.14 OF THE ACT.AS AN AD HOC DISALLOWANCE IS TO BE MADE,SO,WE ARE OF THE OPI NION THAT INTEREST OF JUST WILL MEET IF THE DISALLOWANCE IS RESTRICTED TO RS.10 LAKHS.GROUND NO .2 IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. ITA NO.1167/MUM/2014( AY.2009-10) 9 .NOW,WE WOULD BE TAKING UP THE APPEALS FOR THE REMA INING TWO AY.S.THE DETAILS OF INCOMES RETURNED,ASSESSED INCOMES ETC.CAN BE SUMMARISED AS UNDER: A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF ORDERS OF DCIT(TP) 2009-10 30/09/2009 123,08,21,313/- 24.12.2013 153,2 0,01,120/- 30/01/2013 2010-11 01/10/2010 165,55,34,722/- 08.12.2014 248,9 6,17,590/- 24/10/2014 10 .EFFECTIVE GROUND OF APPEAL FILED BY THE AO,IS ABOU T DIRECTION OF THE DRP GIVEN WITH REGARD TO TP ADJUSTMENTS UNDER THE HEAD AMP EXPENSES.IN THE E ARLIER PART OF OUR ORDER,WE HAVE HELD THAT AMP EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT AN INTERNATIONAL TRANSACTION AND THAT PROVISIONS OF SECTION 92 OF THE ACT WERE NOT APPLIC ABLE.THEREFORE,THE ISSUE RAISED BY THE AO WITH REGARD TO THE METHODOLOGY ADOPTED BY THE DRP HAVE T O DISMISSED. ITA NO.1210/MUM/2014 ( AY.2009-10) 11 .IN THE CROSS APPEAL,THE EFFECTIVE GROUND OF APPEAL IS SAME AS THE EFFECTIVE GROUND OF AY.2008- 09.FOLLOWING OUR ORDER,FOR THAT YEAR WE DECIDE THE GROUND OF AMP EXPENSES IN FAVOUR OF THE ASSESSEE. ITA NO.393/MUM/2015 (AY.2010-11) 12 .FIRST EFFECTIVE GROUND OF AMP EXPENDITURE IS DECID ED IN FAVOUR OF THE ASSESSEE,FOLLOWING OUR EARLIER YEARS ORDERS.ADDITIONAL GROUND RAISED BY TH E ASSESSEE IS ABOUT DEDUCTION CLAIMED U/S.80IC OF THE ACT. BEFORE US,THE AR AND THE DR AGREED THAT CONSIDERING THE PECULIAR FACTS OF THE ISSUE INVOLVED THE ISSUE REQUIRED FURTHER INVESTIGATION AND THE MATTER HAD TO BE ADJUDICATED AFRESH.ACCORDINGLY,WE RESTORE THE ISSUE TO THE FILE OF THE AO.HE IS DIREC TED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING THE ASSESSEE BEFORE DECIDING THE MATTER.ADDITIONAL GROUND,RAISED BY THE ASSESSEE IS PARTLY ALLOWED. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR THE A Y.S.2008-09 AND 2010-11 STAND PARTLY ALLOWED AND THE APPEAL FOR THE AY.2009-10 IS ALLOWED.APPEAL FILED BY THE AO FOR THE AY.2009-10 STANDS DISMISSED. . . 2008-09 2010-11 . . 2009-10 . . . 2009-10 . ORDER PRONOUNCED IN TH E OPEN COURT ON 27 TH APRIL, 2016. 27 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27.04.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 7732&ORS-HEINZ GROUP 13 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.