DCIT 7(3), MUMBAI V. UCB INDIA LTD, MUMBAI

ITA 1218/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3467 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 24-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Additional evidence; Wholly owned subsidiary; Revenue expenditure; Capital expenditure
• Section: 92F

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C.N. PRASAD,JUDICIAL MEMBER ./I.T.A./1218/MUM/2014, /ASSESSMENT YEAR: 2009-10 DY. CIT-7(3) ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. UCB INDIA LTD. 504, PENINSULA TOWERS, G.K. MARG,LOWER PAREL,MUMBAI-400 013. PAN:AAACU 1627 L ( /APPELLANT ) ( / RESPONDENT) ./I.T.A./1422/MUM/2014, /ASSESSMENT YEAR: 2009-10 M/S. UCB INDIA LTD. MUMBAI-400 013. VS. DY. CIT-7(3) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N.K. CHAND ASSESSEE BY: S/SHRI M.P. LOHIA & PRANAY GANDHI / DATE OF HEARING: 27.04.2016 / DATE OF PRONOUNCEMENT: 18.05.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !' PER RAJENDRA, AM - CHALLENGING THE DIRECTIONS OF THE DISPUTE RESOLUTIO N PANEL(DRP)- III,MUMBAI,DATED 25.11. 2013,THE ASSESSING OFFICER( AO)HAS FILED THE PRESENT APPEAL.THE ASSESSEE HAS FILED THE CROSS-APPEAL FOR THE YEAR UNDER APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING OF PHARMACEUTICAL PRODUCTS, FILED ITS RETURN OF INCOME ON 30.9.2007,DECLARING TOTAL INCOME OF RS.18.47 CRORES. DURING THE ASSESSMENT PR OCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TR ANSACTIONS(IT.S)WITH ITS ASSOCIATED ENTERPRISES(AE).SO,HE MADE A REFERENCE T O THE TRANSFER PRICING OFFICER (TPO) TO DETERMINE THE ARMS LENGTH PRICE(A LP) OF SUCH TRANSACTIONS. AFTER RECEIVING THE ORDER OF THE TPO THE AO ISSUED A DRAFT ORDER TO THE ASSESSEE WHO CHALLENGED THE SAME BEFORE THE DRP.IN PURSUANCE OF THE DIRECTIONS OF THE DRP,THE AO PASSED AN ORDER U/S.143 (3)R.W.S.144C(5) OF THE ACT ON 27. 12. 2013. ITA/1218/MUM/2014: 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 2 2. FIRST EFFECTIVE GROUND OF APPEAL,RAISED BY THE AO,I S ABOUT REJECTION OF CUP AS MOST APPROPRIATE METHOD FOR DETERMINING THE ARMS LE NGTH PRICE OF TRANSACTION OF IMPORT OF ACTIVE PHARMACEUTICAL INGREDIENT (API ). DURING THE TP PROCEEDINGS,THE TPO FOUND THAT THE AS SESSEE-COMPANY IS A 100% SUBSIDIARY OF M/S.UCB SA,BELGIUM,THAT IT HAD IMPORT ED API.S(INCLUDING PIRACETAM)FROM ITS AE.S FOR MANUFACTURE AND SALE OF (FINISHED DRUG FORMULA - TION) FDF.S IN INDIA, THAT IT HAD BENCHMARKED THE T RANSACTION USING TRANSACTIONAL NET MARGIN METHOD(TNMM),THAT THE VALUE OF IT WAS RS .5.80 CRORES, THAT THE OPERATING MARGIN ON REVENUE WAS CLAIMED TO BE AT 16 .53%, THAT THE OPERATING MARGIN OF THE COMPARABLES CLAIMED TO BE AT 16.31%.T HE ASSESSEE CLAIMED THAT THE OPERATING MARGIN WAS HIGHER THAN THAT OF THE CO MPARABLE COMPANIES, THE TRANSACTIONS WERE AT ARMS LENGTH.HOWEVER,THE TPO H ELD THAT THE BENCH - MARKING ANALYSIS CONDUCTED BY THE ASSESSEE WAS NOT SHOWING PROPER RESULTS.SO, ADOPTING CUP METHOD,HE DETERMINED ALP OF IMPORT PRI CE OF THE SAME API.S. HE COLLECTED DATA FROM THE COMPETITORS OF THE ASSES SEE.THE DIFFERENCE BETWEEN THE WEIGHTED AVERAGE PURCHASE PRICE THE COMPETITOR S AND THAT PAID BY UCB TO ITS AE WAS ADDED TO THE TOTAL INCOME OF THE ASSESSE E.AS A RESULT,FOLLOWING ADJUSTMENTS WERE MADE: ACTIVE INGREDIENT QTY. PURCHASED RATE OF PURCHASE(RS./KG) COMPARAB-LE PRICE(RS./KG) DIFFERENCE(RS./KG) ADJUSTEMT(RS.) PIRACETAM 28,334 1,334.59 423.45 911.06 2,58,14,134 2,58,14,134 THE AO INCORPORATED THE SAID FIGURE IN ITS DRAFT AS SESSMENT ORDER. 3. AGGRIEVED BY THE ORDER OF THE AO AND THE TPO,THE AS SESSEE FILED OBJECTIONS BEFORE THE DRP.BEFORE IT,THE ASSESSEE ARGUED THAT T HE AO/TPO ERRED IN NOT ACCEPTING THE TNMM AS MOST APPROPRIATE METHOD(MAM), THAT THEY HAD WRONGLY ADOPTED THE CUP METHOD TO DETERMINE THE ALP IN CONN ECTION WITH THE IMPORT OF API,THAT INFORMATION SUBMITTED BY THE ASSESSEE IN R ESPECT OF INTERNAL CUP, BEING PRICES AT WHICH THE AE HAD SOLD THE SAME API TO THIRD PARTY IN ASIA PACIFIC REGION AND EMERGING MARKETS WAS NOT CONSIDE RED, THAT THE DEDUCTION OF 5% FROM ALP PERMITTED UNDER THE PROVISIONS OF SECTI ON 92C(2) OF THE ACT WAS 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 3 NOT CONSIDERED, THAT TO CONSTITUTE A VALID CUP IT W AS NECESSARY TO ESTABLISH THAT THE UNCONTROLLED TRANSACTION WAS IN A PRODUCT THAT WAS THE SAME AND IDENTICAL IN ALL RESPECTS TO THE IT BEING COMPARED, THAT THE SAM PLE INVOICE OBTAINED BY THE TPO,U/S.133(6) OF THE ACT, DID NOT DISCLOSE CRUCIAL PARAMETERS SUCH AS PURITY STANDARDS, QUANTITY OF PRODUCTION AND SALES MANUFAC TURING PROCESS AND EFFICACY OF PRODUCTS ETC. SO AS TO ENABLE A VALID COMPARISON . AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ORDER OF THE TPO/AO THE DRP HELD THAT THE TPO HAD NOT MADE AVAILABLE AN Y INFORMATION ABOUT THE UNCONTROLLED TRANSACTION,THAT HE HAD NOT COMMUNICAT ED THE INFORMATION ABOUT THE SAID TRANSACTION TO THE ASSESSEE,THAT WITHOUT E STABLISHING THE CLOSE SIMILARITY BETWEEN THE PRODUCT IMPORTED BY THE COMPARABLE AND THE ONE BY THE ASSESSEE- COMPANY IT WOULD NOT BE POSSIBLE TO CONSIDER THE IM PORT BY MICRO LAB LTD.(MLL)AS A VALID CUP,THAT THE TNMM USED BY THE A SSESSEE WAS THE MOST APPROPRIATE METHOD SUITED TO THE FACTS AND CIRCUMST ANCES OF THE CASE,THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY.S.2002-03 A ND 03-04 HAD REJECTED THE SIMILAR CUP ADOPTED BY THE DEPARTMENT, THAT THE TRI BUNAL HAD FOUND THAT THE TNMM APPLIED BY THE ASSESSEE AT THE ENTITY LEVEL WA S NOT CORRECT,THAT FOR THE PERIOD UNDER CONSIDERATION IT HAD CONDUCTED ITS TP STUDY AT THE SEGMENTAL LEVEL,THAT THE OBSERVATION OF THE TPO THAT THE FACT S FOR THE PERIOD UNDER APPEAL WERE DIFFERENT TO THOSE OF THE EARLIER YEARS WAS NO T APPROPRIATE, THAT THE PATENT OF THE API HAD EXPIRED EVEN BEFORE AY.2002-03, THAT TH E ASSESSEE HAD PLACED RELIANCE ON AN INTERNAL CUP,THAT THE AE HAD SOLD TH E API TO THE PARTIES IN PAKISTAN AND INDONESIA AT A PRICE HIGHER THAN THOSE OF ITS SALE TO THE ASSESSEE, THAT THOSE GEOGRAPHIES AND MARKET CONDITIONS WERE C OMPARABLE TO THE IT OF THE AE WITH THE ASSESSEE,THAT IN ANY TP ANALYSIS INTERN AL CUP WOULD BE PREFERABLE OVER AN EXTERNAL CUP, THAT THE CUP WAS NOT MAM CONS IDERING THE FACTS OF THE CASE.THE DRP DIRECTED THE AO/TPO TO VERIFY THE SEGM ENTAL ANALYSIS DONE BY THE ASSESSEE UNDER TNMM AND TO QUANTIFY THE TP ADJU STMENT ON SUCH VERIFICA - TION. 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 4 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARMEN TAL REPRESENTATIVE(DR) ARGUED THAT THE TPO HAD DECIDED THE ISSUE AFTER COL LECTING DATA OF MLL,THAT THE BENCHMARKING DONE BY HIM WAS BASED ON A VALID COMPA RABLE,THAT THERE WAS NO JUSTIFICATION FOR REJECTING THE METHOD ADOPTED BY H IM. THE AUTHORISED REPRESENTATIVE(AR) CONTENDED THAT CO MMERCIAL ARRANGEMENT FOR SERVICES AVAILED COULD NOT BE QUESTIONED WHILE BENCHMARKING INTERNATIONAL TRANSACTION,THAT TP ADJUSTMENT COULD ONLY BE MADE B Y ADOPTING ONE OF THE FIVE METHODS,THAT BUNDLED APPROACH UNDER TNMM CAN BE USE D FOR BENCHMARK - ING,THAT WHILE DECIDING THE APPEAL FOR AY.S.2002-03 AND 2003-04(ITA/428-429/ MUM/2007)THE TRIBUNAL HAD REJECTED THE CUP AND CON SIDERED SEGMENTAL TNMM AS THE MOST APPROPRIATE METHOD,THAT THE DRP HA D REJECTED THE CUP AND CONSIDERED SEGMENTAL TNMM AS THE MAM FOR THE AY.S 0 6-07,08-09 AND 09- 10,THAT THE TPO HAD NOT MADE ANY ADJUSTMENT WHILE D ECIDING THE SUBSEQUENT AY.S 2010-11 TO 2012-13. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE MANUFACTURES FDF.S NOOTROPIL FOR USE IN THE TREATMENT OF CENTRAL NERVOUS SYSTEM DISORDERS,THAT IT IS MANUFAC TURED FROM THE API PIRACETAM WHICH IS PURCHASED BY THE ASSESSEE ONLY F ROM ITS AE, THAT THE AE DOES NOT SELL PIRACETAM TO ANY OTHER ENTITY IN INDI A, THAT THE ASSESSEE BENCHMARK -ED ITS IT.S BY FOLLOWING TNMM FOR COMPUTATION OF A LP, THAT THE PROFIT LEVEL INDICATOR(PLI) USED BY THE ASSESSEE WAS OPERATING P ROFIT TO OPERATING INCOME, THAT 15 COMPANIES WERE IDENTIFIED AS COMPARABLES,TH AT THE ASSESSEES PLI WAS 16.53%, THAT THE ARITHMETIC MEAN OF THE COMPARABLES WAS 6.31%,THAT THE UPDATED PLI OF THE COMPARABLES FOR THE RELEVANT PER IOD WAS FOUND TO BE AT 4. 64%, THAT THE TPO HELD THAT THE TNMM USED BY THE AS SESSEE WAS NOT A CORECT METHOD,THAT IT ONLY EVALUATED THE EFFECT OF IT.S ON PROFITS, THAT THE TPO COLLECTED INFORMATION FROM MLL,THAT MLL HAD IMPORTED API I.E. PIRACETAM FROM A CHINESE MANUFACTURER AT AVERAGE PRICE OF 423.53 PER KG AS AGAINST ASSESSEES 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 5 IMPORT PRICE OF 1,334.59 /KG.ACCORDINGLY, THE TPO C OMPUTED THE DIFFERENCE AND PROPOSED AN ADJUSTMENT OF RS.2.58 CRORES, THAT THE ASSESSEE OBJECTED THAT ADOPTION OF EXTERNAL CUP,THAT THE DRP DIRECTED TO D ELETE THE ADJUSTMENT PROPOSED BY THE TPO.WHETHER MLL WAS SIMILAR TO THE ASSESSEE AS PER THE FAR ANALYSIS WAS NOT PROVED BY HIM.THE QUALITY,POTENCY AND OTHER PARAMETERS OF PURCHASE FROM MLL HAS NOT BEEN COMMENTED UPON.THE A SSESSEE HAD GIVEN DETAILS OF SALE PRICE OF THE API.S(SAME ITEM)SOLD T O PAKISTAN.BUT,THE TPO DECIDED TO IGNORE THE SAME FOR THE REASONS BEST KNO WN TO HIM. PROVISIONS OF RULE 10 B OF THE RULES INDICATES THAT A COMPARISON OF PRICE OF A CONTROLLED TRANSACTION COULD BE MADE WITH A PRICE O F A COMPARABLE UNCONTROLLED TRANSACTION.AS PER THE SETTLED PRINCIPLES GOVERNING CUP THE COMPARABLE SHOULD BE PERFECT OR REALISTIC AND IF NOT IT SHOULD ALLOW REASONABLE AND ACCURATE ADJUSTMENT.IF THE METHOD IS UNABLE TO ACHIEVE THE S AID GOAL,IT HAS TO BE REJECTED. IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY ( 107 ITD 141),THE TRIBUNAL HAS DEALT THE ISSUE OF USE OF CUP METHOD AS UNDER: 116. MEANING OF ARM'S LENGTH PRICE IS GIVEN IN CLAU SE (II) OF SECTION 92F AS UNDER: 92F (II)'ARM'S LENGTH PRICE' MEANS A PRICE WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN ASSOCIATED ENTERPRISES IN UNCONTROLLED CONDITIONS; 117. THUS WHATEVER METHODOLOGY IS CHOSEN FOR THE PU RPOSE OF DETERMINATION OF ARM'S LENGTH PRICE UNDER SECTION 92C, THESE CRITERIA, AS SPECIFIED IN THE ACT AND THE RULES HAVE TO FORM A BASIS OF JUDGING THE COMPARABILITY. THUS THERE SHOULD BE A PROPER ANALYSIS OF SUCH TRANSACTIONS WITH RESPECT TO, THE FUNCTIONS PERFORMED, THE ASSETS EMPLOYED AND THE RISK ASSUMED BY THE RESPECTIVE PAR TIES WITH REFERENCE TO THE TRANSACTION IN QUESTION. THIS CAN BE TERMED AS FUNC TIONAL, ASSET, RISK ANALYSIS I.E. FAR ANALYSIS. ALL THE THREE INGREDIENTS OF FAR HAVE DIR ECT BEARING ON THE PRICING OF PRODUCTS / SERVICES. THE PROVISION ALSO PROVIDES SC OPE FOR CARRYING OUT ADJUSTMENTS IN CASES WHERE THERE ARE SOME DIFFERENCES OR VARIATION S TO MAKE TWO TRANSACTIONS COMMERCIALLY COMPARABLE, FOR THE PURPOSE OF BENCHMA RKING. IN OTHER WORDS, AN UNCONTROLLED TRANSACTION SELECTED FOR BENCHMARKING SHOULD BE ADJUSTED BY EMPLOYING CERTAIN TECHNIQUES LIKE FAR ANALYSIS, TO BE SELECTE D ON ITS PECULIAR FACTUAL MATRIX, FOR THE PURPOSE OF ENABLING COMPARISON OF THE SAME WITH A CONTROLLED INTERNATIONAL TRANSACTION SO THAT THE DIFFERENCES OR VARIATIONS A RE IRONED OUT OR MINIMIZED. THE UNDERLYING PRINCIPLE BEING THAT ONLY LIKES CAN BE C OMPARED WITH LIKE. THE ADJUSTMENTS ARE SUGGESTED TO ACHIEVE THE OBJECT OF TESTING AND TRYING TO SEE IF BOTH THE PARTIES OR / AND THE TRANSACTIONS ARE SIMILAR OR NEARLY SIMILAR. AT TIMES EVEN AFTER ADJUSTMENTS, THE TRANSACTION/S OR PARTIES SOUGHT TO BE COMPARED MAY NOT BE IDENTICAL OR THERE MIGHT NOT BE A POSSIBILITY OF ADJUSTMENT. THIS IS A VERY SUBJECTIVE EXERCISE AND FACT BASED. 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 6 XXXXXXXXXXXXX XXXX 119. THE VARIOUS METHODS ARE NOW DISCUSSED HEREUNDE R: (A) COMPARABLE UNCONTROLLED PRICE METHOD (CUP): CUP IS DESCRIBED IN RULE 10B(A) AS FOLLOWS: (A) COMPARABLE UNCONTROLLED PRICE METHOD, BY WHICH, -- (I) THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFER RED OR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION, OR A NUMBER OF SUCH TRANSACTIONS, IS IDENTIFIED; (II) SUCH PRICE IS ADJUSTED TO ACCOUNT FOR DIFFEREN CES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERI ALLY AFFECT THE PRICE IN THE OPEN MARKET; (III) THE ADJUSTED PRICE ARRIVED AT UNDER SUB-CLAUS E (II) IS TAKEN TO BE AN ARM'S LENGTH PRICE IN RESPECT OF THE PROPERTY TRANSFERRED OR SER VICES PROVIDED IN THE INTERNATIONAL TRANSACTION. CUP IS APPLIED WHEN A PRICE IS CHARGED FOR A PRODUC T OR SERVICE. THIS IS ESSENTIALLY COMPARISON OF PRICES CHARGED FO R THE PROPERTY OR SERVICES TRANSFERRED IN A CONTROLLED TRANSACTION TO A PRICE CHARGED FOR PROPERTY OR SERVICES TRANSFERRED IN A COMPARABLE UNCONTROLLED TRANSACTIO N. THE BEDROCK OF THIS METHOD IS THE IDENTIFICATION OF AN IDENTICAL TRANSACTION, IN A SITUATION WHERE A PRICE IS CHARGED FOR PRODUCTS OR SERVICES BETWEEN UNRELATED PARTIES. WHILE APPLYING CUP THE COMPARABILITY BETWEEN CONTRO LLED AND UNCONTROLLED TRANSACTIONS SHOULD NOT BE ONLY JUDGED FROM THE POI NT OF PRODUCT COMPARABILITY, BUT SHOULD ALSO TAKE INTO CONSIDERATION THE EFFECT ON P RICE OF OTHER BROADER BUSINESS FUNCTIONS. EVEN MINOR DIFFERENCES IN CONTRACTUAL TE RMS OR ECONOMIC CONDITIONS, GEOGRAPHICAL AREAS, RISKS ASSUMED, FUNCTIONS ASSUME D ETC. COULD AFFECT THE AMOUNT CHARGED IN AN UNCONTROLLED TRANSACTION. COMPARABILITY UNDER THIS METHOD DEPENDS ON CLOSE SIMILARITIES WITH RESPECT TO VARIOUS FACTO RS.(EMPHASIS ADDED) THE CUP CAN BE INTERNAL OR EXTERNAL. THE INTERNAL C UP IS THE PRICE THAT THE ASSESSEE HAS PAID/CHARGED IN A COMPARABLE UNCONTROLLED TRANS ACTION WITH AN INDEPENDENT PARTY WHEN COMPARED TO THE PRICE PAID / CHARGED IN A CONTROLLED TRANSACTION. EXTERNAL CUP IS A PRICE CHARGED IN COMPARABLE UNCONTROLLED T RANSACTIONS BETWEEN THIRD PARTIES WHEN COMPARED TO THE PRICE OF A CONTROLLED TRANSACTION. HOWEVER, WHERE CUP METHOD IS TO BE APPLIED ON THE BASIS OF PUBLIC DATA , IT IS PROVIDED IN REGULATION 1.482- 3(B)(5) THAT FOLLOWING REQUIREMENTS MUST BE MET : THE DATA IS WIDELY AND ROUTINELY USED IN ORDINARY C OURSE OF BUSINESS IN THE INDUSTRY TO NEGOTIATE PRICES FOR UNCONTROLLED SALES. THE DATA IS USED TO SET PRICES IN THE CONTROLLED TR ANSACTION IN THE SAME WAY THAT IT IS USED BY UNCONTROLLED TAXPAYERS IN THE INDUSTRY; AND THE AMOUNT CHARGED IN THE CONTROLLED TRANSACTION IS ADJUSTED TO REFLECT PRODU CT AND SERVICE VARIATIONS. XXXXXXXXXX XXXXXXX 135. ON CONSIDERATION OF THE RELEVANT PROVISIONS, I T IS EVIDENT THAT IN THE PROCESS OF DETERMINING ARM'S LENGTH PRICE, THE FIRST IMPORTANT FACTOR TO CONSIDER IS THE SPECIFIC CHARACTERISTICS OF SERVICES RENDERED BOTH IN THE IN TERNATIONAL TRANSACTION AS ALSO IN THE UNCONTROLLED TRANSACTION. NEXT IMPORTANT ASPECT REQUIRED TO BE CONSIDERED IS AMOUNT OF ASSETS EMPLOYED, RISK INVOLVED, BOTH IN C ONTROLLED AND UNCONTROLLED TRANSACTIONS. IF THERE ARE SUCH DIFFERENCES BETWEEN TRANSACTIONS TAKEN FOR COMPARISON, 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 7 WHICH ARE LIKELY TO AFFECT THE PRICE OR COST CHARGE ETC IN THE OPEN MARKET THEN REASONABLE AND ACCURATE EVALUATION IS TO BE DONE AN D ADJUSTMENT MADE. RELIABILITY OF UNCONTROLLED TRANSACTION WOULD DEPEND UPON THE DEGR EE OF COMPARABILITY. THE UNCONTROLLED TRANSACTION MAY NOT BE TAKEN 'AS COMPA RABLE' IF THERE ARE SUCH MATERIAL DIFFERENCES AS CAN NOT BE ADJUSTED. IF DATA FOUND S ATISFY ABOVE REQUIREMENTS THEN FURTHER PROCEEDINGS TO FIND THE MOST APPROPRIATE ME THOD, BEST SUITED TO THE FACTS AND CIRCUMSTANCES OF A PARTICULAR INTERNATIONAL TRANSAC TION IS TO BE SELECTED. IN OTHER WORDS, MOST APPROPRIATE METHOD WOULD BE THE METHOD WHICH PROVIDES MOST REASONABLE RESULTS HAVING REGARD TO THE DATA AVAILA BLE FOR DETERMINING ARM'S LENGTH PRICE. IF THERE ARE MORE THAN ONE ALPS DETERMINED O N THE APPLICATION OF MOST APPROPRIATE METHOD THEN ARITHMETICAL MEAN OF SUCH P RICES OR PRICE AT OPTION OF THE ASSESSEE WITHIN 5% VARIATION IS TO BE ADOPTED (PROV ISO TO SECTION 92C(2) ). XXXXXXXXXXXXXXXXX 166. REGARDING APPLICATION OF CUP METHOD, OECD REP ORTS IN PARA 303 OF INTERNATIONAL TRANSFER PRICING, 2006 PUBLISHED BY P RICE WATER HOUSE COOPERS, PROPER ADJUSTMENT OF DATA HAS BEEN EMPHASIZED AS UN DER: THE OECD REPORT STATES THAT, IF IT CAN BE USED, 'TH E CUP METHOD IS PREFERABLE OVER ALL OTHER METHODS'. IN PRACTICE, THIS METHOD IS OFTEN V ERY DIFFICULT TO APPLY AS IT IS UNUSUAL FOR MULTINATIONALS TO HAVE THE DETAILS ON APPROPRIA TELY COMPARABLE TRANSACTIONS. IN RESPONSE TO THIS, THE OECD REPORT SUGGESTS THAT MUL TINATIONALS AND TAX AUTHORITIES SHOULD TAKE A MORE ADAPTABLE APPROACH TO THE USE OF THIS METHOD, POSSIBLY WORKING WITH DATA PREPARED FOR CUP PURPOSES SUPPLEMENTED BY OTHER APPROPRIATE METHODS. THE EXTENT OF THE OECD'S SUPPORT FOR THE CUP METHOD CAN BE SEEN FROM THE COMMENT THAT 'EVERY EFFORT SHOULD BE MADE TO ADJUST THE DAT A SO THAT IT MAY BE USED APPROPRIATELY IN A CUP METHOD'. 167. IN THE SAME PUBLICATION AND WITH REFERENCE TO OECD REPORTS, THE VARIOUS DIFFICULTIES WHICH ARE FELT WHILE MAKING ADJUSTMENT OR ADJUSTMENTS ARE MADE IMPOSSIBLE ARE STATED TO BE ON ACCOUNT OF THE FOLLO WING DIFFERENCES: DIFFERENCES IN THE QUALITY OF THE PRODUCTS; DIFFERENCES IN THE GEOGRAPHIC MARKETS; DIFFERENCES IN THE LEVEL OF THE MARKET; AND DIFFERE NCES IN THE AMOUNT AND TYPE OF INTANGIBLE PROPERTY INVOLVED IN THE SALE. WE FIND THAT WHILE ADJUDICATING THE APPEALS FOR THE ASSESSMENT YEARS 2002-03 AND 2003 -04,THE TRIBUNAL HAD REJECTED THE CUP METH OD ADOPTED BY THE TPO,THAT HE HAD NOT PROPOSED ADJUSTMENT IN THE SUBSEQUENT YE ARS I.E. ASSESSMENT YEARS 2010-11 TO 2012-13.GROUND NO.1 IS DECIDED AGAINST T HE AO. 6. NEXT EFFECTIVE GROUND OF APPEAL PERTAINS TO ADJUSTM ENT ON ACCOUNT OF ALLOCATION OF E-CONNECTIVITY COST.DURING THE COURSE OF TP PROCEEDINGS THE TPO FOUND THAT AN AMOUNT OF RS.4,73,59,894/- WAS DEBITE D TO THE P&L A/C TOWARDS E-CONNECTIVITY CHARGES.HE DIRECTED THE ASSESSEE TO SPELL OUT THE NATURE OF THE 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 8 EXPENSES AND ALSO TO REASON OUT AS TO WHY THE SAME WAS NOT TO BE TREATED AS CAPITAL IN NATURE.THE ASSESSEE CONTENDED THAT IN TH E EARLIER YEARS THE AO HAD DISALLOWED EXPENDITURE ON E-CONNECTIVITY BY TREATIN G THE SAME AS ACQUISITION FOR COMPUTER SOFTWARE AND THEREFORE, CAPITAL IN NATURE, THAT THE SAID EXPENDITURE WERE NEITHER IN NATURE OF EXPENSES FOR ACQUISITION OF SOFTWARE NOR WAS IT A CAPITAL EXPENDITURE. 7. AGGRIEVED BY THE ORDER OF THE AO/TPO THE ASSESSEE F ILED OBJECTIONS BEFORE THE DRP.DURING THE COURSE OF HEARING BEFORE THE DRP FOLLOWING ADDITIONAL EVIDENCES WERE PRODUCED I)SCREEN SHOTS OF SYSTEM/MODULES TO WHICH ACCESS WA S PROVIDED BY THE AE TO THE ASSESSEE (PG-121-125 OF THE PB)II)INCIDENT LOG PROVIDING LIST OF COMPANY RECEIVED BY THE EMPLOYEE OF THE ASSESSEE (PB126-136 );(III) CERTIFICATE FROM THE AUDITOR,VERIFYING THE ALLOCATION KEY AND COST ALLOC ATED TO THE ASSESSEE(PG.137- 143PB).THE DRP SENT THOSE EVIDENCES TO THE TPO FOR EXAMINATION.DURING THE REMAND PROCEEDINGS THE ASSESSEE MADE FURTHER SUBMIS SIONS BEFORE HIM. THE ASSESSEE FILED REBUTTAL BEFORE THE DRP AFTER RECEIV ING A COPY OF THE REMAND REPORT.THE DRP AFTER CONSIDERING THE MATERIAL AVAIL ABLE WITH IT, HELD THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ITS AE FOR PROVISIONS OF VARIOUS SERVICES, THAT IT AVAILED THE SERVICES TO SUPPORT I TS PHARMA-BUSINESS IN INDIA,THAT THE TPO QUESTIONED THE NEED FOR SUCH SERVICES, THAT THE SERVICES BROADLY CATEGORISED AS E-CONNECTIVITY CHARGES WERE NECESSAR Y FOR THE EFFICIENCY OF THE ASSESSEES BUSINESS IN INDIA, THAT IT COULD HAVE AR RANGED FOR SUCH SERVICES DIRECTLY FROM THIRD PARTIES,THAT IT CHOSE TO CENTRA LISE THE ACQUISITION OF THE CONCERNED SERVICES BY THE AE,THAT THE COST OF SUCH ACQUISITION WAS ALLOCATED TO ALL THE ENTITIES OF THE GROUND BASED ON USES OF SUC H SERVICES MADE BY EACH OF THEM,THAT THE PRICING OF INTRA GROUP SERVICES WERE FIXED AS PER THE OCED GUIDELINES, THAT THE OPERATING MARGIN EARNED BY THE ASSESSEE WAS AT ARMS LENGTH, THAT THE COST ALLOCATED TO IT BY ITS AE WOULD ALSO COME WITHIN THE CATEGORY OF 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 9 BEING ARMS LENGTH.THE DRP DIRECTED THE AO TO DELET E THE TP ADJUSTMENT OF 7.3 CRORES. 8. BEFORE US,THE DR SUPPORTED THE ORDER OF THE TPO.THE AR CONTENDED THAT ALL THE MATERIAL WAS MADE AVAILABLE TO THE TPO,THAT THE RE WAS NO DOUBT ABOUT AVAILING OF SERVICES OF THE AE,THAT ALLOCATION WAS ON SCIENTIFIC BASIS. 9. WE FIND THAT THE ASSESSEE HAD ENTERED INTO AGREEMEN T WITH ITS AE FOR E- CONNECTIVITY,DT. 1.1.2004,TO RECEIVED SAP SERVICES, E-CONNECTIVITY SERVICES AND PEOPLE SOFT SERVICES,THAT IN THE TP STUDY THE COST INCURRED BY THE AE IN PROVIDING SERVICES BY THE AE.S TO THE ASSESSEE ON T HE BASIS OF NUMBER OF USERS, THAT THE OPERATING MARGIN OF THE ASSESSEE FROM ALL OTHER TRANSACTION WAS HIGHER THAN OF THE COMPARABLES, THAT THE ASSESSEE CLAIMED THAT TRANSACTION WAS AT ARMS LENGTH BECAUSE OF THE COST ALLOCATION METHODOLOGY A DOPTED BY AE, THAT THE TPO MADE AN ADJUSTMENT OF RS.4.73 CRORES BY DETERM INING THE ALP AS NIL, THAT HE HELD THAT THE ASSESSEE DID NOT FURNISH COPY OF T HE AGREEMENT OR ANY PROOF OF REQUESTING FOR SUCH SERVICES,THAT HE FURTHER HELD T HAT ASSESSEE DID NOT DEMONSTRATE AS TO HOW THE COST BENEFITED IT, THAT I T DID NOT PROVIDE ANY PROOF OF ANY EXACT NUMBER OF USERS AND THEIR ALLOCATION, THA T THE DRP CALLED FOR A REMAND REPORT FROM THE TPO AFTER ADMITTING ADDITIONAL EVID ENCE,THAT DRP DIRECTED THE TPO/AO TO DELETE THE PROPOSED ADJUSTMENT.WE ARE OF THE OPINION THAT TPO IS NOT EMPOWERED TO DETERMINE THE ALP OF AN IT AT NIL, THAT IN THE CASE UNDER CONSIDERATION HE HAD MADE ADJUSTMENT WITHOUT ADOPTI NG ANY OF THE PRESCRIBED METHODS.IT IS A FACT THAT THE ASSESSEE HAD SATISFIE D ALL THE NECESSARY TESTS FOR THE PURPOSE OF AVAILING SERVICES FROM ITS AE.IN THESE C IRCUMSTANCES,WE HOLD THAT THE APPROACH OF THE ASSESSEE IN BENCHMARKING THE TRANSA CTION UNDER THE HEAD AVAILING E-CONNECTIVITY SERVICES UNDER COMBINED TRA NSACTION APPROACH WAS AT ARMS LENGTH.CONSIDERING THE ABOVE,WE CONFIRM THE O RDER OF THE DRP AND DECIDE GROUND NO.2 AGAINST THE AO. ITA/1422/MUM/2009: 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 10 10. SOLITARY GROUND OF APPEAL RAISED BY THE ASSESSEE DE ALS WITH TREATING THE EXPENDITURE INCURRED FOR E-CONNECTIVITY AS CAPITAL EXPENDITURE.DURING THE ASSESSMENT PROCEEDINGS,THE AO HELD THAT THE ASSESSE E HAD ACQUIRED COMPUTER SOFTWARE AS TRANSPIRED FROM THE AGREEMENT,THAT IT W AS A CAPITAL EXPENDITURE.THE DRP HELD THAT IDENTICAL ISSUE WAS DECIDED IN THE EA RLIER YEARS AGAINST THE ASSESSEE,THAT THE EXPENDITURE INCURRED BY THE ASSES SEE WAS CAPITAL IN NATURE.ACCORDINGLY,THE AO HELD THAT THE EXPENSES HA VE BEEN INCURRED FOR ACQUISITION OF SOFTWARE AND SAME SHOULD BE CAPITALI SED IN THE BOOKS OF ACCOUNT HE ALLOWED DEPRECIATION @ 60% AND TREATED THE EXPEN SES AS BEING INCURRED FOR ACQUISITION OF SOFTWARE.THE DRP,WHILE DEALING WITH THE OBJECTIONS UPHELD THE ORDER OF THE TPO. 11. BEFORE US, THE AR CONTENDED THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE ENABLED THE PROFIT-MAKING STRUCTURE TO WORK MORE EF FICIENTLY LEAVING THE SOURCE OF PROFIT-MAKING STRUCTURE UNTOUCHED,THAT THE EXPEN DITURE WAS A REVENUE EXPEND -ITURE,THAT FINE TUNING BUSINESS OPERATIONS TO ENAB LE THE MANAGEMENT TO RUN ITS BUSINESS EFFECTIVELY,EFFICIENTLY AND PROFITABLY, LE AVING THE FIXED ASSETS UNTOUCH - ED WOULD BE AN EXPENDITURE IN THE NATURE OF REVENUE EVEN THOUGH THE ADVANTAGES MIGHT LAST FOR AN INDEFINITE PERIOD. HE RELIED UPON THE CASES OF R R KABEL LTD. (54 SOT 74)AMWAY INDIA ENTERPRISES (140 TTJ 476) GE CAPITAL SERVICES LTD (300 ITR 420). 12. WE FIND THAT THE ASSESSEE HAD BEEN INCURRED E-CONNE CTIVITY CHARGES OF RS. 4. 73 CRORES, BEING ALLOCATED TO IT BY ITS PARENT COMP ANY ANNUALLY FOR PROVIDING THE E-CONNECTIVITY AND SYSTEM SERVICES I.E. SAP SERVICE S,E-CONNECTIVITY SERVICES AND PEOPLE SOFT SERVICES, THAT THE AO HELD THAT THE SAI D EXPENDITURE WAS INCURRED FOR ACQUISITION OF SOFTWARE, HE FUTHER HELD THAT THE AS SESSEE WAS NOT IN THE BUSINESS OF SOFTWARE AND THAT IT WAS ACQUIRING OF THE CONNEC TIVITY AND INFORMATION SYSTEM SERVICE TO SUPPORT ITS PHARMACEUTICAL BUSINESS,THAT IT WAS A CAPITAL EXPENDITURE, THAT HE ALLOWED DEPRECIATION AT THE RATE OF 60% ON THE SAID EXPENDITURE HOLDING THE SAME AS BEING INCURRED FOR ACQUISITION OF SOFTW ARE, THAT THE DRP FOLLOWING 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 11 THE ORDER FOR THE AY.BY 2008-09 UPHELD THE FINDING OF THE AO THAT THE EXPENSES WERE BEING INCURRED FOR ACQUISITION OF SOFTWARE. HERE,WE WOULD LIKE TO REFER TO THE PARA 1.1 OF THE CONTRACT WHICH DEALS WITH THE SCOPE OF CONTRACT AND READS AS UNDER: UCB SHALL EXIT THE STATION PERFORMED DEVELOPMENT W ORK ON SOFTWARE OR NEW FUNCTIONALITIES WHICH SHALL BE OFFERED TO UCB COMPA NY.. A PERUSAL OF THE ABOVE CLAUSE OF THE AGREEMENT MAKE S IT CLEAR THAT THE ASSESSEE HAD NOT GET ANY OWNERS RIGHT TO ANY SOFTWARE,SERVE R, PROCESSES OR CONNECTIONS, THAT THE ASSESSEE WOULD MERELY RECEIVE SERVICES REL ATED TO THE SOFTWARE,THAT IT WOULD COSTS/CHARGES FOR USES OF THE LEASED LINE SEP ARATELY, THAT THE PARENT COMPANY WOULD PROVIDE THE SERVICES TO THE ASSESSEE AS ANY OTHER PARTY WOULD PROVIDE.WE FIND THAT THE ALLOCATION OF EXPENSES BY THE PARENT COMPANY HAS NOT BEEN CHALLENGED BY THE AO,THAT THE AO AND THE DRP H AD NOT BEEN ABLE TO PROVE THAT THE EXPENSES WERE NOT IN NATURE OF PERIODIC CH ARGES(ANNUAL CHARGES) AND WERE ONE-TIME COSTS.IT IS ALSO A FACT THAT IN CASE OF FAILURE TO PAY THE COSTS IT WOULD NOT BE ABLE TO HAVE THE BENEFIT OF THE SERVIC ES. CUMULATIVELY,ALL THESE FACTS PROVE THAT THE ASSESSEE HAD NEITHER ACQUIRED ANY ENDURING BENEFIT NOR DID ANY CAPITAL ASSET CAME INTO EXISTENCE.HERE,WE WOULD LIKE TO REFER TO THE CASE OF ASAHI SAFETY GLASS LTD (346 ITR 329) BELIEVED BY TH E HONORABLE DELHI HIGH COURT AND SAME READS AS UNDER: IT IS NOW SOMEWHAT TRITE TO SAY THAT THE TEST OF E NDURING BENEFIT IS NOT A CERTAIN OR A CONCLUSIVE TEST WHICH THE COURTS CAN APPLY ALMOST B Y ROTE. WHAT IS REQUIRED TO BE SEEN IS THE REAL INTENT AND PURPOSE OF THE EXPENDITURE A ND WHETHER THE EXPENDITURE RESULTS IN CREATION OF FIXED CAPITAL FOR THE ASSESSEE. IT I S IMPORTANT TO BEAR IN MIND THAT WHAT IS REQUIRED TO BE SEEN IS NOT WHETHER THE ADVANTAGE OBTAINED LASTS FOREVER BUT WHETHER THE EXPENSE INCURRED DOES AWAY WITH A RECURRING EXP ENSE(S) DEFRAYED TOWARDS RUNNING A BUSINESS AS AGAINST AN EXPENSE UNDERTAKEN FOR THE BENEFIT OF THE BUSINESS AS A WHOLE. IN OTHER WORDS, THE EXPENDITURE WHICH IS I NCURRED, WHICH ENABLES THE PROFIT- MAKING STRUCTURE TO WORK MORE EFFICIENTLY LEAVING T HE SOURCE OF THE PROFIT-MAKING STRUCTURE UNTOUCHED, WOULD BE AN EXPENSE IN THE NAT URE OF REVENUE EXPENDITURE. FINE TUNING BUSINESS OPERATIONS TO ENABLE THE MANAGEMENT TO RUN ITS BUSINESS EFFECTIVELY, EFFICIENTLY AND PROFITABLY, LEAVING THE FIXED ASSET S UNTOUCHED WOULD BE AN EXPENDITURE IN THE NATURE OF REVENUE EXPENDITURE EVEN THOUGH TH E ADVANTAGE MAY LAST FOR AN INDEFINITE PERIOD. TEST OF ENDURING BENEFIT OR ADVA NTAGE WOULD THUS COLLAPSE IN SUCH LIKE CASES. IT WOULD BE ONLY TRUER IN CASES WHICH D EAL WITH TECHNOLOGY AND SOFTWARE 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 12 APPLICATION, WHICH DO NOT IN ANY MANNER SUPPLANT TH E SOURCE OF INCOME OR ADD TO THE FIXED CAPITAL OF THE ASSESSEE. THE TRIBUNAL, WHICH IS DECIDEDLY THE FINAL FACT-FIN DING AUTHORITY HAS AFTER NOTICING THE MATERIAL ON RECORD OBSERVED THAT THE EXPENDITURE WA S INCURRED UNDER VARIOUS SUB- HEADS, WHICH INCLUDED LICENCE FEE, ANNUAL TECHNICAL SUPPORT FEE, PROFESSIONAL CHARGES, DATA ENTRY OPERATOR CHARGES, TRAINING CHARGES AND T RAVELLING EXPENSES. THE FINAL FIGURE WAS A CONSOLIDATION OF EXPENSES INCURRED UND ER THESE SUB-HEADS. THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT NONE OF THESE R ESULTED IN EITHER CREATION OF A NEW ASSET OR BROUGHT FORTH A NEW SOURCE OF INCOME FOR T HE ASSESSEE. THE TRIBUNAL CLASSIFIED THE SAID EXPENSES AS BEING RECURRING IN NATURE TO UPGRADE AND/OR TO RUN THE SYSTEM. IN THE BACKGROUND OF THE AFOREMENTIONED FIN DINGS, IT CANNOT BE SAID THAT THE EXPENSES BROUGHT ABOUT AN ENDURING BENEFIT TO THE A SSESSEE. THE AO WAS PERHAPS SWAYED BY THE FACT THAT IN THE SUCCEEDING FINANCIAL YEAR, I.E., 1997-98 (ASST. YR. 1998- 99), THE AMOUNT SPENT WAS LARGE. FIRST OF ALL, THE EXTENT OF THE EXPENDITURE CANNOT BE A DECISIVE FACTOR IN DETERMINING ITS NATURE. . THE R ATIONALE SUPPLIED BY THE AO IN SUPPORT OF ITS ORDER WHICH FOUND RESONANCE IN SUBMI SSIONS OF THE COUNSEL FOR THE REVENUE IS, FLAWED AND, HENCE IT WOULD HAVE TO BE R EJECTED. WHAT THE ASSESSEE ACQUIRED THROUGH AA WAS AN APPLIC ATION SOFTWARE WHICH ENABLED IT TO EXECUTE TASKS IN THE FIELD OF ACCOUNTING, PURCHA SES AND INVENTORY MAINTENANCE. THE FACT THAT THE APPLICATION SOFTWARE WOULD HAVE TO BE UPDATED FROM TIME TO TIME BASED ON THE REQUIREMENTS OF THE ASSESSEE IN THE CONTEXT OF THE ADVANCEMENT OF ITS BUSINESS AND/OR ITS DIVERSIFICATION, IF ANY, THE CHANGES BRO UGHT ABOUT DUE TO STATUTORY AMENDMENTS BY LAW OR BY PROFESSIONAL BODIES LIKE TH E ICAI, WHICH ARE GIVEN THE RESPONSIBILITY OF CONCEIVING AND FORMULATING THE AC COUNTING STANDARDS FROM TIME TO TIME, AND PERHAPS ALSO, BY REASON OF THE FACT THAT EXPENSES MAY HAVE TO BE INCURRED ON ACCOUNT OF CORRUPTION OF THE SOFTWARE DUE TO UNINTE NDED OR INTENDED INGRESS INTO THE SYSTEMOUGHT NOT GIVE A COLOUR TO THE EXPENDITURE I NCURRED AS ONE EXPENDED ON CAPITAL ACCOUNT. GIVEN THE FACT THAT THERE ARE MYRI AD FACTORS WHICH MAY CALL FOR EXPENSES TO BE INCURRED IN THE FIELD OF SOFTWARE AP PLICATIONS, IT CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENSE BEI NG INCURRED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOULD BE CONCLUSIVELY DETERMI NATIVE OF ITS NATURE. THE AO HAS ERRED PRECISELY FOR THESE VERY REASONS. THE CONTENTION RAISED BY THE COUNSEL FOR THE REVENU E THAT IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAD NOT WRITTEN OFF THE EXPENSE IN ISS UE, WHILE IN THE SUCCEEDING ASSESSMENT YEAR ONLY A PART OF THE EXPENSE HAD BEEN WRITTEN OFF AND, THEREFORE, THE ASSESSEES OWN UNDERSTANDING OF THE NATURE OF THE E XPENSE INVOLVED WAS THAT IT WAS EXPENDED ON CAPITAL ACCOUNT IS ONLY TO BE STATED TO BE REJECTED. THE REASON BEING THAT THE TREATMENT OF A PARTICULAR EXPENSE OR, A PROVISI ON IN THE BOOKS OF ACCOUNTS CAN NEVER BE CONCLUSIVELY DETERMINATIVE OF THE NATURE O F THE EXPENSE. AN ASSESSEE CANNOT BE DENIED A CLAIM FOR DEDUCTION WHICH IS OTHERWISE TENABLE IN LAW ON THE GROUND THAT THE ASSESSEE HAD TREATED IT DIFFERENTLY IN ITS BOOK S. CASES RELIED UPON BY THE AR ALSO SUPPORT THE STAND TAKEN BY THE ASSESSEE. SO, WE ARE OF THE OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON E- CONNECTIVITY IS INCURRED FOR DAY-TO-DAY RUNNING OF ITS BUSINESS WITHOUT CREATING ANY ASSET AND THEREFORE SAME IS ALLOWABLE AS REVENU E EXPENDITURE. EFFECTIVE GROUND OF APPEAL, RAISED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR. 1218/M/14 &1422/M/14-UCB INDIAP.LTD. 13 AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OP EN COURT ON 18 TH MAY, 2016. 18 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 18.05.2016. JV.SR.PS. # $ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / !'#$ 2. RESPONDENT / %&#$ 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.