KELLOGG INDIA P.LTD, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 15(2)(1), MUMBAI

ITA 137/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7163 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2013-2014
• Appeal Filed On: 05-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR H ANSARILD
• Assessee Lawyers: D H ANESH BAFNA LD
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 143(3); 92B; 13; 92CA

Judgement Text

1 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , BEFORE HONBLE SHRI VIKAS AWASTHY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO. 137/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) KELLOG G INDIA PRIVATE L IMITED 1001-1002, 10TH FLOOR HIRANANDANI KNOWLEDGE PARK HIRANANDANI BUSINESS PARK, POWAI MUMBAI-400 076 / VS. A CIT - 1 5(2)(1) ROOM NO.357, 3RD FLOOR AAYKAR BHAVAN, M.K. ROAD, CHURCHGATE MUMBAI-400 020. ./ ./PAN/GIR NO. AAACK-1748-K ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DHANESH BAFNA-LD.AR / RESPONDENT BY : SHRI AKHTAR H. ANSARI-LD. DR / DATE OF HEARING : 02/09/2020 / DATE OF PRONOUNCEMENT : 07/09/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2013-14 CONTEST CERTAIN ADDITIONS AND TRANSFER PRICING (TP) ADJUSTMENTS MADE BY 2 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 LEARNED ASSESSING OFFICER (AO) IN FINAL ASSESSMENT ORDER DATED 30/10/2017 PASSED U/S. 143(3) R.W.S. 144C(13) PURSUANT TO THE DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL-1, MUMBAI [DRP] U/S 144C(5 ) DATED 06/09/2017. THE GROUNDS RAISED BY ASSESSEE READ AS UNDER: - GROUND NO 1; TRANSFER PRICING 1.1 THE LEARNED ASSESSING OFFICER (AO) / TRANSFER P RICING OFFICER (TPO) / DISPUTE RESOLUTION PANEL (DRP) ERRED IN LAW AND ON FACTS IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS.45,85,16,563 ON ACCOUNT OF REIMBUR SEMENT OF ADVERTISEMENT, MARKETING AND PROMOTIONAL (AMP) EXPENSES INCURRED B Y THE APPELLANT UNDER THE PRESUMPTION THAT THE APPELLANT HAS BENEFITED THE AS SOCIATED ENTERPRISES (AES) BY INCURRING THE SAID EXPENSES. IN DOING SO THE LEARNED DRP / TPO HAS GROSSLY ERRE D IN: A) CONSIDERING THAT AMP EXPENSES OF KELLOGG INDIA, WHICH IS INCURRED BY WAY OF PAYMENTS TO THIRD PARTIES FOR ITS DOMESTIC BUSINESS OPERATIONS, WITHIN THE REALM OF INTERNATIONAL TRANSACTION BASED ON HIS CONJECTURES AND SURMISES, VIOLATING SECTION 926 AND SECTION 92(1) OF THE INCOME-TAX ACT, 1961 (THE ACT); B) DISREGARDING THAT THE ISSUE OF MARKETING INTANGI BLES IS NOT RELEVANT FOR LICENSED MANUFACTURERS AS IN THE CASE OF THE APPELLANT, AS T HE ENTIRE MARKETING SPEND IS UNDERTAKEN SOLELY FOR THE BENEFIT OF THE APPELLANT; C) NOT APPRECIATING THAT THE APPELLANT IS AN ENTREP RENEUR AND IS SOLELY RESPONSIBLE FOR ITS BUSINESS OPERATIONS / RESULTS AND IS ENTITLED TO RE SIDUAL BUSINESS PROFITS/ LOSSES; D) PRESUMING, WITHOUT ANY DIRECT OR INDIRECT EVIDEN CE THAT THE APPELLANT WAS PERFORMING DEVELOPMENT, ENHANCEMENT, MAINTENANCE, PROTECTION A ND EXPLOITATION (DEMPE) FUNCTIONS AND THAT THE AMP INCURRED BY THE APPELLAN T BENEFITED THE AES; E) FAILING TO APPRECIATE THE FACT THAT AMP EXPENSES WERE INCURRED 'WHOLLY AND EXCLUSIVELY' FOR PURPOSE OF BUSINESS OF THE ASSESSE E IN INDIA AND NO BENEFIT WAS PASSED ON TO THE AE AND HENCE, THERE SHOULD NOT ANY REIMBU RSEMENT OF SUCH EXPENSES TO THE ASSESSEE; F) PRESUMING THAT THE AMP EXPENSES INCURRED BY KEL LOGG INDIA WERE ON ACCOUNT OF CREATION OF BRANDS AND NOT TOWARDS PROMOTING ITS PR ODUCTS; G) ALLEGING THAT THERE EXISTS AN ARRANGEMENT BETWEE N KELLOGG INDIA AND KELLOGG USA AND THEREBY ERRED IN CONTENDING THAT KELLOGG USA NE EDS TO COMPENSATE KELLOGG INDIA TOWARDS AMP EXPENSES; H) DISREGARDING THAT THE APPELLANT IS THE ECONOMIC OWNER OF THE BENEFITS OF SUCH AMP EXPENSES; AND I) NOT CONSIDERING THE DIRECTIONS OF LEARNED DRP FO R ASSESSMENT YEAR 2011-12 WHEREIN THE ADDITION ON ACCOUNT OF AMP WAS DELETED CONSIDER ING THE DECISION IN THE CASE OF MARUTI SUZUKI INDIA LIMITED (ITA 110/2014). THE APPELLANT THEREFORE PRAYS THAT THE ADDITION MAD E BY THE AO BE DELETED. 1.2 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO ERRED: 3 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 A) IN ALLEGING THAT BY INCURRING AMP EXPENSES, THE APPLICANT RENDERS SERVICES TO THE AE; B) CONTENDING THAT AE IS ACTIVELY PLANNING, SUPPORT ING, INTERVENING, GUIDING, DIRECTING INDIAN TAXPAYER AS STRATEGY OF MARKET DEVELOPMENT, BRAND POSITIONING, COMMUNICATION STRATEGY, GROWTH OF BUSINESS AND DERIVING PROFITS; C) IN MAKING AN ARBITRARY ADJUSTMENT TO THE AMP TO SALES RATIO OF SELECTED COMPARABLE COMPANIES TO ARRIVE AT THE PERCENTAGE OF AMP TO SAL ES OF 12.33% AS ORDINARY/ROUTINE AMP EXPENSES TO BE CONSIDERED FOR DETERMINING NON-R OUTINE AMP EXPENDITURE AND COMPUTATION OF COMPENSATION FOR DEMPE FUNCTIONS; D) IN ALLEGING THIS AS A BRAND PROMOTION, ADVERTISI NG, AND MARKETING SERVICES TRANSACTION AND THEREBY CONSIDERING A MARKUP AT THE RATE OF 11. 74% ALONG WITH REIMBURSEMENT OF AMP EXPENSES. THE APPELLANT THEREFORE PRAYS THAT THE ACTION OF TH E LEARNED AO BE HELD AS BAD IN LAW AND IS LIABLE TO BE QUASHED. GROUND NO.2: DISALLOWANCE OF PAYMENT TOWARDS COST O F INFRASTRUCTURE DEVELOPMENT 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO, UNDER THE DIRECTIONS ISSUED BY THE HON'BLE DRP, ERR ED IN CHARACTERIZING THE PAYMENT OF RS 8,20,00,000 TOWARDS THE COST OF INFRASTRUCTURE D EVELOPMENT AT SRI CITY AS AN UPFRONT LEASE CHARGE AND THEREBY, ALLOWING THE SAME AS DEDU CTIBLE BUSINESS EXPENDITURE OVER THE PERIOD OF LEASE. 2.2 THE APPELLANT PRAYS THAT THE LEARNED AO BE DIRE CTED TO TREAT PAYMENT OF RS.8,20,00,000 TOWARDS THE COST OF INFRASTRUCTURE D EVELOPMENT AS REVENUE EXPENDITURE. GROUND NO.3: INTEREST INCOME 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO, UNDER THE DIRECTIONS ISSUED BY THE HON'BLE DRP, ERR ED IN CLASSIFYING INTEREST INCOME OF RS.2,72,84,483 UNDER THE HEAD 'INCOME FROM OTHER SO URCES' WITHOUT APPRECIATING THE FACT THAT INTEREST INCOME EARNED IS INEXTRICABLY LI NKED TO THE BUSINESS. 3.2 THE APPELLANT PRAYS THAT THE LEARNED AO BE DIRECTED TO CLASSIFY THE INTEREST INCOME OF RS. 2,72,84,483 UNDER THE HEAD 'PROFITS A ND GAINS FROM BUSINESS AND PROFESSION'. GROUND NO.4: SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO ERRED IN NOT ALLOWING SET OFF OF BROUGHT FORWARD UN ABSORBED DEPRECIATION OF RS.4,62,00,217 PERTAINING TO AY 1997-98. 4.2 THE APPELLANT PRAYS THAT THE AO BE DIREC TED TO ALLOW THE SET OFF OF UNABSORBED DEPRECIATION OF RS. 4,62,00,217. GROUND NO.5: 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTI ON 271(1)(C) OF THE ACT IN RESPECT OF TRANSFER PRICING ADJUSTMENT, PAYMENT TOWARDS COST O F INFRASTRUCTURE DEVELOPMENT AND SET OFF OF UNABSORBED DEPRECIATION OF AY 1997-98. 5.2 THE APPELLANT PRAYS THAT THE LEARNED AO BE DIRECTED TO DROP THE PENALTY PROCEEDINGS. 4 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 SINCE GROUND NO.-5 IS PREMATURE AT THIS STAGE, THE SAME WOULD NOT REQUIRE ANY SPECIFIC ADJUDICATION ON OUR PART. 2.1 THE LEARNED AUTHORIZED REPRESENTATIVE FOR ASSES SEE (AR), SHRI DHANESH BAFNA, AT THE OUTSET, SUBMITTED THAT SUBSTA NTIAL ISSUES ARE COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE AND THEREFORE, FACTS BEING IDENTICAL, SAME VIEW MAY BE TAKEN IN TH E MATTER. THE COPIES OF THE ORDER HAVE BEEN PLACED BEFORE US, THE DETAILS O F WHICH ARE AS FOLLOWS: -. (I) ITA NOS. 2866 & 2888/MUM/2014, AY 2009-10 ORDER DATED 19/07/2019 (II) ITA NOS. 2314/MUM/2017 & ORS; AYS 2011-12 & 20 12-13, COMMON ORDER DATED 24/02/2020 2.2 ON THE OTHER HAND, LD. DR, SHRI AKHTAR H. ANSAR I, SUPPORTED THE STAND TAKEN BY LOWER AUTHORITIES AND PLEADED FOR CONFIRMA TION OF THE SAME. HOWEVER, THE APPLICABILITY OF THE AFORESAID ORDERS OF THE TRIBUNAL REMAIN UNCONTROVERTED BEFORE US. 2.3 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL IN RECORD INCLUDING THE EARLIER ORDERS OF TRIBUNAL AS CITED BEFORE US. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WO ULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. GROUND NO.1: TRANSFER PRICING ADJUSTMENT 3.1 THE MATERIAL ON RECORD WOULD SHOW THAT THE ASSE SSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN MANUF ACTURING, PACKAGING AND MARKETING OF READY-TO-EAT CEREAL PRODUCTS. THE ASSESSEE E-FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 29 /11/2013 DECLARING TOTAL INCOME AT NIL WHICH WAS SUBJECTED TO SCRUTINY ASSESSMENT BY REVEN UE 5 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 AUTHORITIES. THE ASSESSEES INCOME HAS FINALLY BEEN ASSESSED AT RS.5826.16 LACS UNDER NORMAL PROVISIONS IN FINAL AS SESSMENT ORDER DATED 30/10/2017. THE ASSESSEE IS STATED TO BE SUBSIDIARY ENTITY OF KELLOGG COMPANY. 3.2 THE ASSESSEE CARRIED OUT CERTAIN INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE) WHICH WERE SUBJECT MATT ER OF DETERMINATION OF ARMS LENGTH PRICE (ALP) BEFORE LD. TRANSFER PRICIN G OFFICER (TPO) VIDE ORDER U/S 92CA (3) DATED 28/10/2016. THESE TRANSACT IONS HAVE ALREADY BEEN ENUMERATED IN PARA-6 OF LD. TPOS ORDER. DURIN G PROCEEDINGS BEFORE LD. TPO, THE PERUSAL OF ASSESSEES FINANCIAL STATEM ENTS REVEALED THAT ASSESSEE INCURRED CERTAIN ADVERTISEMENT, MARKETING & PROMOTIONAL (AMP) EXPENDITURE AGGREGATING TO RS.11537.80 LACS DURING THE YEAR UNDER CONSIDERATION. THE TURNOVER, NET PROFIT, SELLING EX PENSES, AMP EXPENSES AND ROYALTY PAYMENT DATA FOR 5 YEARS HAS BEEN TABUL ATED IN PARA-7 OF LD. TPOS ORDER. THE AMP EXPENDITURE WAS ON ACCOUNT OF TELEVISION ADVERTISING, AGENCY FEES, RADIO, NEWSPAPER, OUTDOOR ADVERTISING PRODUCTION, EXPENDITURE, FREEBIES, SCHOOL PROMOTION S ETC. ACCORDINGLY, THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE ADJUSTMENT S HOULD NOT BE MADE ON ACCOUNT OF EXCESS EXPENDITURE INCURRED FOR DEVEL OPMENT, ENHANCEMENT, MAINTENANCE, PROTECTION AND EXPLOITATION (DEMPE) FU NCTIONS IN INDIA, ON BEHALF OF ITS AE. THE ASSESSEE, INTER-ALIA , PLEADED THAT THE AFORESAID PAYMENT WAS MADE TO THIRD PARTIES IN INDIA AND THEREFORE THESE TRANSACT IONS WOULD NOT CONSTITUTE 6 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 INTERNATIONAL TRANSACTIONS. HENCE, THESE WOULD NOT REQUIRE DETERMINATION OF ALP ON THE PART OF LD. TPO. 3.3 HOWEVER, LD. TPO OPINED THAT ASSESSEES AE WAS ACTIVELY PLANNING, SUPPORTING, INTERVENING, GUIDING, DIRECTING THE ASS ESSEE AS TO STRATEGY OF MARKET DEVELOPMENT, BRAND POSITIONING, COMMUNICATIO N STRATEGY, GROWTH OF BUSINESS ETC. AND DERIVING PROFITS THEREFROM AND HE NCE, THE ASSESSEE NEEDED TO BE COMPENSATED FOR THE SAME. TO SUPPORT T HE SAID OPINION, LD. TPO, REFERRING TO TECHNICAL AGREEMENT BETWEEN KELLO GG COMPANY AND THE ASSESSEE, OBSERVED THE INVOLVEMENT OF AE IN MANAGIN G THE ASSESSEES AFFAIRS TO DRIVE THE SALE OF KELLOGG PRODUCTS THROU GH STRATEGY PLANNING, PREPARING AND IMPLEMENTING CATEGORY DEVELOPMENT MOD ELS, TARGETED BRAND MESSAGING AND OTHER SIMILAR STRATEGIES. THEREFORE, THE ASSESSEE WAS CONTRACTUALLY REQUIRED TO PROMOTE THE SALE OF KELLO GG PRODUCTS IN INDIA. THE EFFORTS AND EXPENDITURE INCURRED BY THE ASSESSEE ON AMP AND MARKET DEVELOPMENT ON THE ADVICE AND GUIDANCE OF ITS PAREN T WOULD CONSTITUTE INTERNATIONAL TRANSACTION. IN THE ABOVE BACKGROUND, LD. TPO PROCEEDED TO DETERMINE THE ALP OF THE SAME USING OTHER METHOD SINCE THE ASSESSEE COULD NOT SUBMIT BENCHMARKING INFORMATION AS CALLED FOR BY LD. TPO . 3.4 IN WORKING OUT TP ADJUSTMENT, LD. TPO COMPUTED MEAN AMP EXPENDITURE AS PERCENTAGE OF SALES OF TWO COMPARABL E ENTITY AS 12.33% AND APPLYING THE SAME TO THE ASSESSEES TURNOVER, P ROPOSED TP ADJUSTMENT OF RS.4585.16 LACS IN ITS ORDER DATED 28/10/2016. I N OTHER WORDS, THE LD. TPO CHOSE TO BENCHMARK THE SAME PRIMARILY BY USING BRIGHT LINE TEST (BLT) METHOD. THE WORKING OF THE ADJUSTMENT HAS BE EN PROVIDED IN PARA- 7 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 18 OF LD. TPOS ORDER. THE TP ADJUSTMENT, THUS PROP OSED, WERE INCORPORATED IN DRAFT ASSESSMENT ORDER DATED 29/12/ 2016 WHICH WERE SUBJECTED TO ASSESSEES OBJECTIONS BEFORE LD. DRP. 3.5 THE LD. DRP CONFIRMED THE TP ADJUSTMENTS PRIMAR ILY RELYING UPON THE DIRECTIONS GIVEN BY PREDECESSOR DRP IN AY 2012-13. IT IS EVIDENT FROM PARA 4.6 OF LD. DRPS ORDER THAT FACTS OF THE CASE AS WE LL AS THE ARGUMENTS RAISED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION ARE STATED TO BE SAME AS FOR AY 2012-13. AGGRIEVED AS AFORESAID, THE ASSESSEE IS UNDER FURTH ER APPEAL BEFORE US BY WAY OF ELABORATE GROUND NO.1 AND ASSAILS THE TP ADJ USTMENTS SO MADE. 4.1 AS RIGHTLY POINTED OUT BY LD. AR, THIS ISSUE ST OOD COVERED IN ASSESSEES FAVOR BY THE ORDER OF COORDINATE BENCH O F THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 (LEAD CASE ON TH E ISSUE), CROSS APPEALS ITA NOS. 2866 & 2888/MUM/2014 COMMON ORDER DATED 19/07/2019 WHEREIN THE ISSUE HAS BEEN DECIDED IN ASSESSEES FA VOR BY OBSERVING AS UNDER: - 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. UNDI SPUTED FACTS ARE, THE ASSESSEE IS NOT MERELY A DISTRIBUTOR OF THE PRODUCTS MANUFACTURED B Y THE AE BUT THE ASSESSEE ITSELF MANUFACTURES ITS OWN PRODUCTS IN INDIA UNDER LICENS E FROM THE AE. IT IS ALSO A FACT THAT FOR MARKETING AND PROMOTION OF ITS MANUFACTURED PRO DUCTS IN INDIA, ASSESSEE HAS INCURRED AMP EXPENDITURE BY MAKING PAYMENTS TO THIR D PARTIES IN INDIA. THEREFORE, THE BASIC ISSUE WHICH ARISES FOR CONSIDERATION IS, WHET HER THE AMP EXPENDITURE INCURRED BY THE ASSESSEE IN INDIA CAN COME WITHIN THE PURVIEW O F INTERNATIONAL TRANSACTION AS DEFINED UNDER SECTION 92B OF THE ACT. IN THIS REGAR D, THE CONTENTION OF THE ASSESSEE BEFORE THE TRANSFER PRICING OFFICER WAS, SINCE THE ASSESSEE HAS INCURRED THE AMP EXPENDITURE FOR PRODUCTS MANUFACTURED AND SOLD BY I T IN INDIA, IT DOES NOT COME WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION. FURTHER, THE ASSESSEE HAS ALSO SUBMITTED THAT SINCE THERE IS NO ARRANGEMENT/AGREEMENT BETWEEN THE ASSESSEE AND THE AE FOR INCURRING SUCH EXPENDITURE TO PROMOTE THE BRAND OF THE AE, IT CANNOT BE SAID THAT THERE 8 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 IS AN INTERNATIONAL TRANSACTION RELATING TO AMP EXP ENDITURE. IT IS WORTH MENTIONING, THE TRANSFER PRICING OFFICER HAS ALSO AGREED WITH THE A SSESSEE THAT THE AMP EXPENDITURE WAS INCURRED WITH THE THIRD PARTIES IN INDIA, HENCE , DO NOT CONSTITUTE INTERNATIONAL TRANSACTION. HAVING HELD SO, THE TRANSFER PRICING O FFICER HAS STILL PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE OF THE AMP EXPENDI TURE ON THE REASONING THAT THE COMPENSATION REQUIRED IN THE ARRANGEMENT BETWEEN TH E ASSESSEE AND THE AE FOR IMPROVING THE BRAND INTANGIBLE OF THE OWNER HAS TO BE DETERMINED. FURTHER, HE HAS OBSERVED THAT THE AMP EXPENDITURE INCURRED BY THE A SSESSEE NOT ONLY BENEFITS THE ASSESSEE BUT ALSO THE AE IN TERMS OF INCREASE IN TH E BRAND VALUE OF KELLOGG. THUS, THE TRANSFER PRICING OFFICER HAS INFERRED THAT THERE IS AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE WITH REGARD TO PROMOTION OF THE BRAND OF THE AE BY INCURRING AMP EXPENDITURE. HOWEVER, HE HAS NOT PROVIDED ANY FACTU AL BASIS ON WHICH HE HAS DRAWN SUCH INFERENCE. BY MERELY STATING THAT THERE IS AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE, THE TRANSFER PRICING OFFICER CANNOT BRI NG THE AMP EXPENDITURE WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION. IF THE TRANSF ER PRICING OFFICER ALLEGES THAT THE AMP EXPENDITURE COMES WITHIN THE PURVIEW OF INTERNATION AL TRANSACTION BY VIRTUE OF AN ARRANGEMENT BETWEEN THE RELATED PARTIES, THE BURDEN IS ENTIRELY UPON THE TRANSFER PRICING OFFICER TO DEMONSTRATE THE EXISTENCE OF SUC H ARRANGEMENT. A CAREFUL READING OF THE IMPUGNED ORDER OF THE TRANSFER PRICING OFFICER DOES NOT REVEAL ANY SUCH FACTUAL BASIS WHICH CAN DEMONSTRATE THE EXISTENCE OF AN ARR ANGEMENT BETWEEN THE ASSESSEE AND THE AE FOR INCURRING AMP EXPENDITURE TO PROMOTE THE BRAND OF THE AE. THAT BEING THE CASE, THE ENTIRE APPROACH OF THE TRANSFER PRICI NG OFFICER IN DETERMINING THE ARM'S LENGTH PRICE OF AMP EXPENDITURE IS FALLACIOUS. 7. MOREOVER, THERE IS NO DOUBT THAT THE TRANSFER PR ICING OFFICER HAS DETERMINED THE ARM'S LENGTH PRICE OF AMP EXPENDITURE BY APPLYING B LT METHOD. WHILE DOING SO, HE HAS HEAVILY RELIED UPON THE SPECIAL BENCH DECISION OF T HE TRIBUNAL, IN LG ELECTRONICS INDIA PVT. LTD. (SUPRA). NOW, IT IS FAIRLY WELL ESTABLISH ED THAT DETERMINATION OF ARM'S LENGTH PRICE OF AMP EXPENDITURE BY APPLYING BLT METHOD IS NOT VA LID. IN A CATENA OF DECISIONS, THE HON'BLE DELHI HIGH COURT WHILE DISAPPROVING THE DEC ISION OF THE TRIBUNAL IN L.G. ELECTRONICS INDIA PVT. LTD. (SUPRA) HAVE HELD THAT BLT METHOD IS INVALID AS IT IS NOT PRESCRIBED IN THE STATUTE. IN THIS CONTEXT, WE MAY REFER TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA ). FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN MARUTI SUZUKI INDIA LTD . (SUPRA) AND VARIOUS OTHER DECISIONS, DIFFERENT BENCHES OF THE TRIBUNAL HAVE ALSO HELD TH AT IN ABSENCE OF AN EXPRESS ARRANGEMENT/AGREEMENT BETWEEN THE ASSESSEE AND THE AE FOR INCURRING AMP EXPENDITURE TO PROMOTE THE BRAND OF THE AE, AMP EXP ENDITURE INCURRED BY MAKING PAYMENT TO THIRD PARTIES FOR PROMOTING AND MARKETIN G THE PRODUCT MANUFACTURED BY THE ASSESSEE, DOES NOT COME WITHIN THE PURVIEW OF INTER NATIONAL TRANSACTION. 8. AT THIS STAGE, IT IS RELEVANT TO OBSERVE, WHILE DECIDING IDENTICAL NATURE OF DISPUTE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 201112 , LEARNED DRP IN DIRECTION DATED 28TH DECEMBER 2015, HAVE DELETED THE ADJUSTMENT MAD E BY THE TRANSFER PRICING OFFICER ON ACCOUNT OF AMP EXPENDITURE BY RECORDING A FACTUA L FINDING THAT THE TRANSFER PRICING OFFICER HAS FAILED TO DEMONSTRATE THAT THERE IS AN AGREEMENT/ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE FOR INCURRING AMP EXPENDITURE. WHILE DOING SO, LEARNED DRP HAS 9 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA). THUS, VIEWED IN THE LIGHT OF THE RATIO LAI D DOWN IN THE DECISIONS CITED BY THE LEARNED AUTHORISED REPRESENTATIVE, INCLUDING THE DE CISION OF THE HON'BLE DELHI HIGH COURT IN MARTUTI SUZUKI INDIA LTD. (SUPRA), IT HAS TO BE CONCLUDED THAT THE AMP EXPENDITURE INCURRED BY THE ASSESSEE IN INDIA CANNO T COME WITHIN THE PURVIEW OF THE INTERNATIONAL TRANSACTION. HENCE, THE TRANSFER PRIC ING OFFICER HAS NO JURISDICTION TO DETERMINE THE ARM'S LENGTH PRICE OF AMP EXPENDITURE . 9. HAVING HELD SO, IT IS NOW NECESSARY TO DEAL WITH THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR KEEPING IT PENDING TILL THE ISSUE IS SETTLED BY THE HON'BLE SU PREME COURT. IN OUR VIEW, THE AFORESAID CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE IS NOT ACCEPTABLE. AS PER THE PREVAILING LEGAL POSITION, THE AMP EXPENDITURE INCU RRED BY THE ASSESSEE IN INDIA CANNOT COME WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTIO N. THAT BEING THE CASE, THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER CAN NOT SURVIVE. THEREFORE, WE DO NOT FIND ANY NECESSITY TO RESTORE THE ISSUE TO THE ASSE SSING OFFICER. GROUNDS ARE ALLOWED. THE AFORESAID DECISION HAS SUBSEQUENTLY BEEN FOLLOW ED BY ANOTHER COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2011 -12 IN REVENUES APPEAL ITA NO.1906/MUM/2016 AND ALSO IN ASSESSEES APPEAL FOR AY 2012- 13 ITA NO. 2314/MUM/2017; COMMON ORDER DATED 24/02/ 2020. 4.2 IT WAS OBSERVED BY THE BENCH IN AY 2009-10 THAT THE ASSESSEE WAS NOT MERELY A DISTRIBUTOR OF THE PRODUCTS MANUFACTUR ED BY ITS AE BUT THE ASSESSEE ITSELF WAS MANUFACTURING ITS OWN PRODUCTS IN INDIA UNDER LICENSE FROM THE AE. FURTHER, WITH A VIEW TO MARKET AND PRO MOTE ITS OWN MANUFACTURED PRODUCTS, THE ASSESSEE INCURRED AMP EX PENDITURE BY MAKING PAYMENTS TO THIRD PARTIES IN INDIA. THERE WAS NO EX PRESS ARRANGEMENT / AGREEMENT BETWEEN THE ASSESSEE AND THE AE FOR INCUR RING SUCH EXPENDITURE TO PROMOTE THE BRAND OF THE AE AND THER EFORE, THE SAID TRANSACTIONS WOULD NOT CONSTITUTE INTERNATIONAL TRA NSACTION RELATING TO AMP EXPENDITURE. IT WAS ALSO OBSERVED THAT BLT METHOD A S ADOPTED BY LD. TPO WAS NOT A VALID METHOD TO BENCHMARK THE TRANSACTION S. THE TECHNICAL 10 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 COLLABORATION AGREEMENT AS REFERRED TO BY LD. TPO D ID NOT ENVISAGE ANY SUCH EXPRESS ARRANGEMENT / AGREEMENT BETWEEN THE AS SESSEE AND ITS AE AND THEREFORE, THE SAME COULD NOT SUPPORT THE CASE OF THE REVENUE. THEREFORE, FACTS BEING PARI-MATERIA THE SAME, RESPE CTFULLY FOLLOWING THE AFORESAID DECISIONS OF TRIBUNAL IN ASSESSEES OWN C ASE, WE DELETE THE IMPUGNED TP ADJUSTMENT AGAINST AMP EXPENDITURE AND ALLOW GROUND NO.1 OF THE APPEAL. GROUND NO.2: DISALLOWANCE OF COST OF INFRASTRUCTURE DEVELOPMENT 5.1 FACTS TO THE ISSUE ARE THAT DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE OBTAINED LEASE OF A PLOT OF LAND FOR A PER IOD OF 99 YEARS FROM SRI CITY PRIVATE LIMITED (LESSOR/ DEVELOPER / SCPL) FOR SETTING UP A MANUFACTURING FACILITY. FURTHER, THE ASSESSEE ALSO ENTERED INTO AN INFRASTRUCTURE DEVELOPMENT AGREEMENT ON 06/06/2012 FOR THE PURPOSE OF AVAILING CERTAIN SERVICES TO BE PROVIDED BY THE DEV ELOPER AS COMMON FACILITIES. UNDER THE TERMS OF DEVELOPMENT AGREEMEN T, IN CONSIDERATION FOR PAYMENT OF RS.820 LACS (AS ASSESSEES CONTRIBUTION) , THE DEVELOPER AGREED TO DEVELOP CERTAIN COMMON INFRASTRUCTURE FAC ILITIES SUCH AS (I) ROADS (II) WATER SUPPLY SYSTEMS, PIPELINE, PUMPING STATIO NS (III) DRAINAGE, SEWERAGE LINES, SEWERAGE TREATMENT PLANTS (IV) ELEC TRICITY LINES (V) WATER TREATMENT FACILITIES, GARBAGE DISPOSAL, TELECOMMUNI CATION CONNECTIVITY ETC. OUTSIDE AND UP TO THE PLOT OF LAND AS LEASED TO THE ASSESSEE. SUCH INFRASTRUCTURE FACILITIES WERE STATED TO BE OWNED B Y THE LESSOR AND THE ASSESSEE DID NOT HAVE ANY OWNERSHIP OR SIMILAR RIGH TS OVER THE SAME. THE SAID FACILITIES WERE STATED TO BE ESSENTIAL FOR THE FUNCTIONING OF THE 11 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 ASSESSEES FACTORY ON THE LEASEHOLD LAND. THE ASSES SEE PAID ONE-TIME CONSIDERATION OF RS.820 LACS TO SCPL TOWARDS INFRAS TRUCTURE DEVELOPMENT. THE INFRASTRUCTURE AGREEMENT WAS STATED TO BE CO-EX ISTED AND CO-TERMINUS TO THE LEASE DEED DATED 06/06/2012 ENTERED INTO BY THE ASSESSEE WITH M/S SCPL FOR LEASE OF LAND. 5.2 DURING ASSESSMENT PROCEEDINGS, LD. AO TOOK A VI EW THAT THE SAID ONE-TIME EXPENDITURE WOULD CONSTITUTE CAPITAL EXPEN DITURE WHICH WAS REBUTTED BY THE ASSESSEE, INTER-ALIA, BY SUBMITTING THAT THE FACILITIES WERE ESSENTIAL FOR EFFICIENT RUNNING OF THE COMPANYS PL ANT. THE FACILITIES WERE EXCLUSIVELY OWNED BY SCPL AND THE ASSESSEE DID NOT HAVE ANY OWNERSHIP RIGHTS / LICENCE IN THE SAID INFRASTRUCTURAL FACILI TIES. SINCE THE PAYMENT WAS NOT FOR THE PURPOSE OF ACQUIRING ANY ASSET BUT ESSE NTIAL FOR EFFICIENT RUNNING OF THE PLANT, THE SAID EXPENDITURE WOULD BE REVENUE IN NATURE. HOWEVER, THE SAID SUBMISSIONS / PLEAS WERE REJECTED BY OBSERVING THAT THE EXPENDITURE WAS TOWARDS FIXED ASSETS WHICH WERE EXPECTED TO BE PRODUCTIVE ASSETS FOR A LONG PERIOD OF TIME. THEREFORE, THE EXPENDITURE WAS TO BE TREATED AS CAPITAL EXPENDITURE AND HENCE, NOT ALLOWABLE TO THE ASSESSE E DURING THE YEAR UNDER CONSIDERATION. 5.3 BEFORE LD. DRP, THE ASSESSEE SUPPORTED ITS CASE BY REITERATING THAT THE SINCE THE ASSETS WERE NOT OWNED BY THE ASSESSEE , THE EXPENDITURE WOULD BE REVENUE IN NATURE. THE ASSESSEE DID NOT RE CEIVE ANY ENDURING BENEFITS AND THE EXPENDITURE WAS MERELY FOR FACILIT ATING EFFICIENT CONDUCT OF THE BUSINESS. THE BENEFITS RECEIVED WERE NOT IN CAP ITAL FIELD. RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS (AS ENUME RATED IN LD. DRPS 12 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 DIRECTIONS) IN SUPPORT OF SUBMISSION THAT THE EXPEN DITURE WOULD BE REVENUE IN NATURE PARTICULARLY WHEN THE EXPENDITURE DID NOT RESULT INTO ANY ADVANTAGE TO THE ASSESSEE IN CAPITAL FIELD BUT WHICH MERELY E NABLED THE ASSESSEE TO CARRY ON BUSINESS OPERATIONS MORE EFFICIENTLY. AS A N ALTERNATIVE, THE ASSESSEE PLEADED FOR ALLOWANCE OF THE SAME OVER THE PERIOD OF AGREEMENT. 5.4 THE LD. DRP AGREED THAT OWNERSHIP OF SUCH RIGHT S BELONGED TO THE DEVELOPER ONLY AND THE ASSESSEE WOULD NOT BE ENTITL ED FOR DEPRECIATION ON THE SAME. FURTHER, THE EXPENDITURE WOULD NOT BECOME CAPITAL EXPENDITURE SINCE NO NEW ASSET WAS ACQUIRED BY THE ASSESSEE. TH E INFRASTRUCTURAL FACILITY ONLY ENABLED THE ASSESSEE TO RUN ITS BUSIN ESS PROPERLY AND EFFICIENTLY. 5.5 HOWEVER, AS PER THE SEZ / DTZ POLICY OF THE GOV ERNMENT, THE AFORESAID DEVELOPMENT ACTIVITIES WOULD BE THE RESPO NSIBILITY OF SEZ / DTZ DEVELOPER AND THE ASSESSEE AS A LESSEE WOULD NOT BE NORMALLY REQUIRED TO SPEND HUGE AMOUNTS FOR INFRASTRUCTURAL SUPPORT. ANO THER OBSERVATION WAS THAT THE ASSESSEE OBTAINED LEASE FOR 20 YEARS WHICH WAS LONG TERM IN NATURE. THE INFRASTRUCTURE DEVELOPMENT WOULD BE ESS ENTIAL AND BARE MINIMUM TO ENSURE THAT THE ASSESSEE COULD UTILISE T HE PLOT OF LAND FOR BUSINESS ACTIVITIES. SUCH AN EXPENDITURE WOULD BE T HE RESPONSIBILITY OF THE LESSOR AND THEREFORE, THE AFORESAID PAYMENT HAD DIR ECT CONNECTION TO THE OBTAINING OF LEASE AND ESSENTIALLY IN THE NATURE OF UPFRONT LEASE CHARGES. THEREFORE, THE EXPENDITURE SHOULD BE AMORTIZED OVER THE PERIOD OF LEASE. AGGRIEVED AFORESAID, THE ASSESSEE IS IN FURTHER APP EAL BEFORE US. IT APPEARS THAT THE REVENUE HAS NOT CHALLENGED THE FINDINGS OF LD. DRP. 13 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 5.6 THE LD. AR, SUPPORTING THE CASE OF THE ASSESSEE , ADVANCED ARGUMENTS WHICH ARE MORE OR LESS ON SIMILAR LINES A S MADE BEFORE LD. AO AS WELL AS BEFORE LD. DRP. RELIANCE HAS BEEN PLACED ON CERTAIN JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE SUBMISSIONS THAT T HE TEST OF ENDURING BENEFIT WOULD NOT BE CONCLUSIVE TO DETERMINE THE AL LOWABILITY OF THE EXPENDITURE. OUR ATTENTION HAS ALSO BEEN DRAWN TO T HE FACT THAT THE PERIOD OF LEASE AGREEMENT WAS 99 YEARS AND NOT 20 YEARS, AS W RONGLY NOTED BY LD. DRP. PER CONTRA, LD. DR SUBMITTED THAT ADEQUATE REL IEF HAS ALREADY BEEN GRANTED BY LD. DRP AND THEREFORE, THE FINAL ASSESSM ENT ORDER WOULD NOT REQUIRE ANY INTERFERENCE ON OUR PART. 6.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD. WE HAVE GONE THROUGH T HE TERMS OF INFRASTRUCTURE DEVELOPMENT AGREEMENT DATED 06/06/20 12 ENTERED INTO BY THE ASSESSEE WITH M/S SCPL, AS PLACED BEFORE US. AS PER THE RECITALS OF THE AGREEMENT, THE DEVELOPER HAS GIVEN ON LEASE 20 ACRE S OF LAND TO THE ASSESSEE IN CERTAIN DTZ OUT OF LARGE PARCEL OF LAND SITUATED IN THE STATE OF ANDHRA PRADESH. THE LEASE DEED IS STATED TO BE CO-E XISTENT, CO-TERMINUS AND INTEGRAL PART AND PARCEL OF INFRASTRUCTURE DEVE LOPMENT AGREEMENT. THE AGREEMENT OBLIGATES THE DEVELOPER TO CREATE /PROVID E CERTAIN INFRASTRUCTURE FACILITY FOR AND ON BEHALF OF THE ASSESSEE AGAINST CERTAIN CONSIDERATION. THESE FACILITIES ARE ENUMERATED IN CLAUSE-3 OF THE AGREEMENT AND WOULD, INTER-ALIA, INCLUDE CONSTRUCTION OF ACCESS ROAD, CREATION OF PO WER INFRASTRUCTURE, WATER & SEWAGE FACILITIES ETC. THE COST OF THE SAID FACILITIES WAS TO BE BORNE BY THE ASSESSEE. IN CASE OF DEFAULT BY THE DEVELOPER TO 14 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 CARRY OUT THE STATED OBLIGATIONS, THE ASSESSEE HAD THE OPTION TO NEGOTIATE WITH DEVELOPER FOR COMPLETION OF INFRASTRUCTURE FAC ILITIES OR TERMINATE THE AGREEMENT ALONG WITH LEASE AGREEMENT AND THE DEVELO PER WAS TO REFUND THE ENTIRE AMOUNTS PAID UNDER THIS AGREEMENT AS WELL AS UNDER LEASE AGREEMENT. 6.2 UPON PERUSAL OF THE TERMS OF THE AGREEMENT, IT IS QUITE DISCERNIBLE THAT THE PAYMENT MADE BY THE ASSESSEE WAS NOT TOWARDS AC QUISITION OF ANY ASSET BUT TOWARDS PROVISION OF INFRASTRUCTURE FACIL ITIES WHICH WOULD ENABLE THE ASSESSEE TO RUN ITS BUSINESS OPERATIONS MORE EF FICIENTLY AND WITHOUT ANY HINDERANCE. THE BENEFIT MAY BE ENDURING IN NATURE A ND THE SAME WOULD HAVE BENEFITTED THE ASSESSEE OVER SEVERAL YEARS BUT NEVERTHELESS, THE NATURE OF EXPENDITURE WAS REVENUE IN NATURE AS IS E VIDENT FROM THE TERMS OF THE AGREEMENT. TO RECHRISTENED THE SAME AS UPFRONT LEASE PAYMENTS AS DONE BY LD. DRP WAS BEYOND THE SCOPE OF TERMS OF TH E AGREEMENT AND THE SAID CONCLUSION WAS BEREFT OF ANY MATERIAL EVIDENCE ON RECORD. QUITE CLEARLY, THE FACILITIES WERE OBTAINED ON PLOT OF LA ND UNDER LEASE AND THE ASSESSEE WAS NOT THE OWNER OF SAID INFRASTRUCTURAL FACILITIES. IN SUCH A SCENARIO, THE EXPENDITURE BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND BEING REVENUE IN NATURE, WA S ALLOWABLE AS DEDUCTION U/S 37(1). 6.3 THE HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. V/S CIT (3 TAXMAN 69) HELD THAT THERE MAY BE CASES WHERE EXPENDITURE, EV EN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFI T, MAY, NONETHELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAKDOWN. IT IS 15 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN T HIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMER CIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT TH E EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S BUSINESS OPERATIONS OR ENABLING MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIE D ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNT OUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANT AGE MAY ENDURE FOR AN INDEFINITE FUTURE. CONSIDERING THE SAME, HONBLE SUPREME COURT IN THE CASE OF L.H.SUGAR FACTORY & OIL MILLS P. LTD. V/S CIT 125 I TR 293 HELD THAT CONSTRUCTION OF APPROACH ROADS TO THE FACTORY WERE UNDOUBTEDLY ADVANTAGEOUS TO THE BUSINESS OF THE ASSESSEE AS THE Y FACILITATED THE TRANSPORTATION OF GOODS FROM FACTORY TO MARKET AND VICE VERSA. THEREFORE, THERE COULD BE NO DOUBT THAT THE CONSTRUCTION OF RO ADS FACILITATED THE BUSINESS OPERATIONS OF THE ASSESSEE AND ENABLED THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY AND PROFITABLY. FURTHER, THERE COULD BE NO DOUBT THAT T HE ADVANTAGE SECURED FOR THE BUSINESS OF THE ASSESSEE WAS OF A LONG DURATION INASMUCH AS IT WOULD LAST SO LONG AS THE ROADS CONTINUED TO BE IN MOTORA BLE CONDITION, BUT IT WAS NOT AN ADVANTAGE IN THE CAPITAL FIELD, BECAUSE NO T ANGIBLE OR INTANGIBLE ASSET WAS ACQUIRED BY THE ASSESSEE, NOR WAS THERE A NY ADDITION TO OR EXPANSION OF THE PROFIT-MAKING APPARATUS OF THE ASS ESSEE. THEREFORE, THE EXPENDITURE WOULD BE FOR THE PURPOSE OF FACILITATIN G THE CONDUCT OF THE 16 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 BUSINESS OF THE ASSESSEE AND MAKING IT MORE EFFICIE NT AND PROFITABLE AND THEREFORE, CLEARLY AN EXPENDITURE ON REVENUE ACCOUN T. 6.4 ANOTHER ASPECT IS THAT THE INCOME TAX ACT, UNLE SS SPECIFICALLY PROVIDED IN THE PROVISIONS, DO NOT RECOGNISE THE CO NCEPT OF DEFERRED REVENUE EXPENDITURE. IF THE EXPENDITURE QUALIFIES F OR DEDUCTION U/S 37(1), THE SAME WOULD BE AN ALLOWABLE EXPENDITURE IN ITS ENTIR ETY IN THE YEAR IN WHICH IT HAS BEEN INCURRED, IF THE ASSESSEE CHOOSES TO CLAIM THE SAME AT ONE GO. THE SAID PROPOSITION STEM FROM ANOTHER DECISION OF HONBLE APEX COURT IN TAPARIA TOOLS LIMITED V/S JCIT 372 ITR 605. 6.5 VIEWING FROM ANY ANGLE, WE ARE OF THE CONSIDERE D OPINION THAT THE AFORESAID EXPENDITURE, BEING REVENUE IN NATURE WOUL D BE AN ALLOWABLE EXPENDITURE IN ITS ENTIRETY DURING THIS YEAR. ACCOR DINGLY, THE GROUND RAISED STAND ALLOWED. GROUND NO.3: TREATMENT OF INTEREST INCOME 7.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED INTEREST INCOME OF RS.272.84 LACS AND OFFERE D THE SAME AS BUSINESS INCOME. THE REASONING ADDUCED WAS THAT THE ASSESSEE RECEIVE D FAVORABLE CREDIT PERIOD FROM THE VENDORS OF RAW MAT ERIAL AND PACKAGING MATERIAL. THE SURPLUS FUNDS GENERATED OUT OF INCOME RECEIVED FROM SALE TO DISTRIBUTORS AND NOT IMMEDIATELY REQUIRED IN THE BU SINESS WERE INVESTED IN SHORT TERMS DEPOSITS WITH THE BANK. SINCE INTEREST INCOME HAD IMMEDIATE NEXUS WITH THE BUSINESS OF THE COMPANY, THE SAME WA S TO BE TREATED AS BUSINESS INCOME. HOWEVER, LD. AO OPINED THAT EARNIN G OF INTEREST WAS NOT THE BUSINESS OF THE ASSESSEE AND THEREFORE, THE INT EREST INCOME WAS TO BE 17 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 TAXED AS INCOME FROM OTHER SOURCES. THE LD. DRP, RELYING UPON PREDECESSOR DRPS DIRECTION IN AY 2009-10, CONFIRME D THE STAND OF LD.AO. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7.2 WE FIND THAT THIS ISSUE, FOLLOWING THE ORDERS F OR AYS 2007-08 & 2008- 09, HAS BEEN RESTORED BACK BY THE TRIBUNAL IN AY 20 09-10, ITA NOS. 2866 & 2888/MUM/2014 ORDER DATED 19/07/2019 BY OBSERVING A S UNDER: - 47. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIAL ON RECORD. IT IS OBSERVED THAT WHILE DECIDING IDENTICAL ISSUE IN ASS ESSEES OWN CASE FOR THE ASSESSMENT YEAR 200708 AND 200809 (SUPRA), THE TRIBUNAL HAS HELD AS UNDER: 6.2 AO NOTED THAT THE IMPUGNED INTEREST INCOME WAS EARNED BY THE ASSESSEE AND CONSIDERING THE NATURE OF ASSESSEE'S BUSINESS, THE SAME WAS ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES AGAINST W HICH SET-OFF OF BROUGHT FORWARD BUSINESS LOSSES WAS NOT PERMISSIBLE. THE AS SESSEE ATTRIBUTED THE SAME TO THE 'CREDIT FLOAT' ENJOYED BY THE ASSESSEE. THE SURPLUS FUNDS OUT OF BUSINESS OPERATIONS WERE INVESTED IN SHORT TERM DEPOSITS WIT H THE BANK. RELIANCE WAS PLACED ON THE JUDGMENT OF BOMBAY HIGH COURT IN LOK HOLDINGS 309 ITR 356. HOWEVER, THE SAME GOT REJECTED BY AU ON THE PREMISE THAT SUCH INTEREST INCOME WAS NOT DERIVED FROM THE BUSINESS ACTIVITY OF THE A SSESSEE. CIT(A) ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE BY RELYING UPON VARIOUS JUDICIAL PRONOUNCEMENTS. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. AR H AS CONTENDED THAT THERE IS COMPLETE NEXUS OF INTEREST INCOME WITH THE BUSINESS ACTIVITY OF THE ASSESSEE AND THE SAME HAS ACCRUED ONLY DUE TO PARKING OF SURPLUS FUNDS IN NORMAL COURSE OF BUSINESS IN SHORT TERM BANK DEPOSITS. PER QUERY FRO M THE BENCH, THE LD. AR PLACED A NOTE ON INTEREST INCOME QUA ITS NEXUS WITH BUSINESS ACTIVITY OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS O F MANUFACTURING AND DISTRIBUTION OF READY TO EAT CEREALS. IT PROCURES R AW MATERIAL AND NECESSARY INGREDIENTS FROM VENDORS AND SELLS MANUFACTURED PRO DUCTS TO DISTRIBUTORS. THE AR HAS CONTENDED THAT THE ASSESSEE COLLECTS SALES PROC EEDS WITHIN A WEEK'S TIME WHEREAS IT ENJOYS CREDIT PERIOD OF MORE THAN 45 DAY S FROM ITS VENDORS. IT ENJOYS A LONGER CREDIT PERIOD FROM ITS VENDORS AS AGAINST SH ORTER CREDIT PERIOD GIVEN TO ITS CUSTOMERS. THE RESULTANT FLOAT IS PARKED IN SHORT T ERM BANK DEPOSITS. THE PERIOD OF THESE DEPOSITS RANGES FROM 30 TO 90 DAYS. RELIAN CE HAS BEEN PLACED ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. LOK HOLDINGS 308 ITR 356. IT IS ALSO OBSERVED THAT NO DETAILS OF BAN K DEPOSITS COULD BE PROVIDED BY AR DESPITE SPECIFIC REQUEST BEING MADE BY THE BENCH DUE TO WHICH WE ARE UNABLE TO ASCERTAIN THE FACT THAT WHETHER THESE DEP OSITS HAVE DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE, THE LD. AR HAS ATTRIB UTED THE PARKING OF FUNDS TO GENERAL CREDIT FLOAT ENJOYED BY THE ASSESSEE WITHOU T BRINING ANYTHING ON RECORD TO SUBSTANTIATE THE SAME. HENCE, WE DEEM IT FIT TO RES TORE THE MATTER BACK TO THE FILE 18 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 OF AO TO EXAMINE THE NATURE OF BANK FDR PARTICULARL Y THE TENURE OF THE DEPOSIT AND ALSO VERIFY THE FACT OF 'CREDIT FLOAT' ENJOYED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE I S DIRECTED TO COOPERATE WITH THE LOWER AUTHORITIES FORTHWITH TO SUBSTANTIATE HIS SUBMISSIONS. THE GROUND OF REVENUE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 48. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING T HE AFORESAID DECISION OF THE CO ORDINATE BENCH, WE RESTORE THE ISSUE TO THE ASSESSI NG OFFICER. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. SIMILAR DIRECTIONS HAVE BEEN GIVEN FOR AYS 2011-12 & 2012-13. THEREFORE, FACTS BEING PARI-MATERIA THE SAME, THE ISSUE STAND RESTORED BACK TO THE FILE OF LD. AO ON SIMILAR LINES. THIS GROUND STAND ALLOW ED FOR STATISTICAL PURPOSES. GROUND NO.4: SET-OFF OF BROUGH FORWARD UNABSORBED D EPRECIATION 8.1 IT TRANSPIRED THAT THE ASSESSEE CLAIMED SET-OFF OF DEPRECIATION OF RS.462 LACS PERTAINING TO AY 1997-98. THE SAID ADJU STMENT, AS PER THE AMENDMENT TO SEC.32(2) AS MADE BY FINANCE ACT 1996, COULD BE CARRIED FORWARD ONLY UP-TO A MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED. THE SAME WAS IN LINE WITH CBDT CIRCULAR NO. 762 DATED 18/02/1998 WHICH STATED THAT DEPRECIATION OF EARLIE R YEARS WOULD BE ADDED TO DEPRECATION FOR AY 1997-98 AND THE PERIOD OF 8 Y EARS WOULD BEGIN FROM AY 1997-98 ONWARDS. THE SUBSEQUENT AMENDMENT MADE B Y FINANCE ACT 2001 W.E.F. AY 2002-03 RESTORED THE POSITION AND TH E PERIOD OF 8 YEARS WAS DONE AWAY WITH. THE SAID AMENDMENT WAS STATED TO BE EFFECTIVE FROM AY 2002-03. ACCORDINGLY, A VIEW WAS TAKEN BY LD.AO THA T THE SUBSEQUENT AMENDMENT WAS NOT APPLICABLE TO CARRY FORWARD OF UN ABSORBED DEPRECIATION OF 5 YEARS FROM AYS 1997-98 TO 2001-02 WHICH WAS AL LOWED TO BE CARRIED FORWARD FOR 8 SUCCEEDING YEARS ONLY. ALTHOUGH THE A SSESSEE RELIED UPON THE 19 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 DECISION OF HONBLE GUJRAT HIGH COURT IN GENERAL MOTORS PRIVATE LIMITED V/S DCIT, THE SAME WAS STATED TO BE NOT APPLICABLE DUE TO DI FFERENCE IN JURISDICTION. FINALLY, THE ADJUSTMENT OF THE SAME W AS DENIED TO THE ASSESSEE. 8.2 THE LD. DRP, RELYING UPON PREDECESSOR DRPS DIR ECTION IN AY 2012- 13, REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8.3 WE FIND THAT THIS ISSUE HAS BEEN DECIDED IN ASS ESSEES FAVOR BY THE TRIBUNAL IN AY 2012-13, ITA NO. 2314/MUM/2014 BY OB SERVING AS UNDER: - 22. THE GROUND NO.3 OF THE APPEAL IS QUA SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS.7,15,99,575/- PERTAINING TO ASSE SSMENT YEAR 1997-98. THE DRP IN ASSESSMENT YEAR 2011-12 HAS DECIDED THIS ISSUE IN F AVOUR OF THE ASSESSEE. THE DRP IN THE ASSESSMENT YEAR UNDER APPEAL HAS DECIDED THIS I SSUE AGAINST THE ASSESSEE MERELY TO KEEP THE ISSUE ALIVE AS AFTER THE AMENDMENT, THE DEPARTMENT CANNOT FILE APPEAL AGAINST THE DIRECTIONS OF DRP. WE FIND THAT THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN UNILEVER LTD. (SUPRA) FOLLOWIN G THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA LTD. (SUPRA) HAS ALLOWED THE ASSESSEE TO SET OFF UNABSORBED DEPRECIATION IN ACCORDANCE WITH THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT. AS PER AMENDED PROVISION OF SECTI ON 32(2), THE UNABSORBED DEPRECIATION CAN BE CARRY FORWARD AND SET OFF WITHO UT ANY TIME LIMIT. THUS, IN THE LIGHT OF THE SETTLED POSITION WE FIND MERIT IN THE CONTENTIO NS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW SET OFF OF BROUGHT FORWA RD UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 2007-08 AGAINST THE PROFITS OF T HE CURRENT YEARS ASSESSMENT. FACTS BEING IDENTICAL, WE DIRECT LD. AO TO ALLOW TH E SET-OFF OF THE SAME. THIS GROUND STAND ALLOWED. 20 ITA NO.137/MUM/2018 KELLOGG INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 CONCLUSION 9. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 07 TH SEPTEMBER, 2020. D SD/- SD/- (VIKAS AWASTHY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07/09/2020 SR.PS:-JAISY VARGHESE !' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. $ ( ) / THE CIT(A) 4. $ / CIT CONCERNED 5. %& ''( , ( , / DR, ITAT, MUMBAI 6. & *+, / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.