CADBURY INDIA LTD, MUMBAI V. ADDL CIT RG 5(1), MUMBAI

ITA 2214/MUM/2014

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3590 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL JHA
• Assessee Lawyers: JEHANGIR MISTRY; HITEN CHANDE ARS
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Earning of tax free income; Additional evidence; Fair market value; Valuation report; TDS; Rule 8D; Set aside
• Section: 92C; 143(3); 92B; 92F; 142(1); 92E; 14A; 201; 143(2); 43; 48; 13; 119; 22; 92

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY , JM & SHRI S. RIFAUR RAHMAN, AM ./ I.T.A. NO . 2214/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) M/S MONDELEZ INDIA FOODS PVT. LTD. UNIT NO. 2001, 20 TH FLOOR , TOWER - 3 (WING C), INDIA BULLS FINANCE CENTRE, PAREL, MUMBAI - 400 013 / VS. THE ACIT RANGE - 5(1), M. K. ROAD, AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN NO. A AAC O 0460H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JEHANGIR MISTRY & SHRI HITEN CHANDE, ARS. / RESPONDENTBY : SHRI SUNIL JHA , DR / DATE OF HEARING : 02 .12 .2020 / DATE OF PRONOUNCEMENT : 17/02/2021 / O R D E R PER S. RIFAUR RAHMAN (ACCO UNTANT MEMBER) : THE PRESENT A PPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF DISPUTE RESOLUTION PANEL III, MUMBAI DATED 16.12.2013 FOR ASSESSMENT YEAR 2009 - 10 U/S 144C(5) OF THE ACT. 2 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 2 . THE BRIEF FACTS OF THE CASE ARE , ASSESSE E FIL ED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 1,18,32,50,940/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE WERE ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE, AR OF THE ASSESSEE FI LED THE RELEVANT INFORMATION AS CALLED FOR. 3. ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF MALTED FOOD DRINKS, COCOA POWDER, ETC AND ITS FACTORIES AT THANE, INDURI, MALANPUR, BADDI AND BANGALORE AND MARKETING BRANCHES AT DELHI, K OLKATA, CHENNAI AND MUMBAI. THE GP DISCLOSED DURING THE YEAR WORKS OUT TO 42.67% ON A TURNOVER OF RS. 1,824.38 CRORES AS AGAINST THE LAST YEARS CORRESPONDING FIGURE OF 42.84% ON A TURNOVER OF RS. 1,505.67 CRORES. THE VARIOUS ISSUES INVOLVED IN THE ASSESSM ENT OF THE ASSESSEE WERE DISCUSSED IN DETAIL. 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, AO PASSED ASSESSMENT ORDER U/S 143(3) DETERMINING THE TO TAL INCOME OF RS. 1,94,37,06,345 / - THEREBY MAKING DISALLOWANCES ON VARIOUS HEADS. 3 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 5 . FURTHER, THE M ATTER REACHED BEFORE LD. DRP AND LD. DRP AFTER CONSIDERING THE DETAIL ED SUBMISSION OF THE ASSESSEE, UPHOLD THE ACTION OF AO VIDE ORDER U/S 144C(5) OF THE ACT 1961 6 . NOW BEFORE US, THE ASSESSEE HAS PREFE RRED THE APPEAL CHALLENGING THE ORDER OF LD. DRP ON V ARIOUS G ROUNDS. THEREFORE, WE ARE DEALING ISSUES GROUND - WISE RAISED BY ASSESSEE. GROUND NO. 1 - TRANSFER PRICING ADJUSTMENTS. 7 . THIS GROUND IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. GROUND NO. 2 TO 7 DISALLOWANCE OF PAYMENT OF RO YALTY ON TRADEMARKS PAID TO CADBURY SCHWEPPES OVERSEAS LTD, ROYALTY ON TECHNOLOGY PAID TO CADBURY ADAMS USA LLC AND CADBURY ENTERPRISES PVT. LTD. 8 . BEFORE US, LD. AR BRO UGHT TO OUR NOTICE PARA 1.4.1 TO 1.4.3 OF TPO ORDER AND PARA 3.2, 4.2, 5.2 & 6.2 OF D RP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2008 - 09 (ITA NO. 7539/MUM/2012 ) ON MERITS IN FA VOUR OF THE ASSESSEE. HE ALSO RELIED ON VARIOUS DECISIONS OF 4 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. COORDINATE BENCH OF ITAT PASSED IN FAVOUR OF THE ASSE SSEE ON MERITS. 9 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES , HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 10 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RE CORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINA TE BENCH OF ITAT IN ITA NO. 7539/MUM/2012 FOR AY 2008 - 09 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, THE SAME IS REP RODUCED BELOW: - WITH REGARD TO DISALLOWANCE OF PAYMENT OF ROYALTY ON TRADEMARKS PAID TO CADBURY SCHWEPPES OVERSEAS LTD 3.3.2 IT IS ADMITTED POSITION THAT THE ISSUE STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE DECISION OF THIS VERY BENCH IN ASSESSEES OWN CASE FOR AY 2006 - 07 WHEREIN THE MATTER HAS BEEN CONCLUDED IN THE FOLLOWING MANNER: - 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE ORDER OF THE TRANSFER PRICING OFFICER, HE HAS DETERMINED THE ARM'S LENGTH PRICE OF ROYALTY PAYMENT ON TRADEMARK TO SCOL AT ZERO. IN OTHER WORDS, HE HAS DISALLOWED ROYALTY PAYMENT ON TRADEMARK AT 1% WHILE ALLOWING ROYALTY PAYMENT ON TECHNICAL KNOWHOW AT 1.25% OF NET SALES. THE REASONING ON WHICH THE ASSESSING OFFICER HAS D ENIED ROYALTY PAYMENT ON TRADEMARK ARE BASICALLY THAT AS PER THE TERMS OF EARLIER AGREEMENT 5 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. APPROVED BY THE GOVERNMENT, THE ASSESSEE CAN PAY ROYALTY FOR TECHNICAL KNOWHOW AT THE MAXIMUM RATE OF 2%, WHEREAS, THE ASSESSEE HAS PAID ROYALTY BOTH FOR TECHNICAL KNOWHOW AND TRADEMARK AGGREGATING TO 2.25%. HE HAS ALSO REFERRED TO THE PRESS NOTE ISSUED BY THE GOVERNMENT CLARIFYING THAT ROYALTY PAYMENT CANNOT EXCEED 2% AND FURTHER THE ROYALTY PAYMENT FOR TECHNICAL KNOWHOW SUBSUMES ROYALTY PAYMENT FOR TRADEMARK. IN TH IS CONTEXT, THE TRANSFER PRICING OFFICER HAS ALSO REFERRED TO SIMILAR DISPUTE ARISING IN THE PRECEDING ASSESSMENT YEARS. IT IS EVIDENT THAT THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE DISALLOWANCE OF ROYALTY PAYMENT OF TRADEMARK SIMPLY RELYING UPON T HE ORDER PASSED BY HIM IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 06. AS COULD BE SEEN FROM THE MATERIAL AVAILABLE ON RECORD, THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH ITS CURRENT COMPANY IN THE YEAR 1993, FOR AVAILING TECHNICAL KNOWHOW FOR WHICH I T WAS REQUIRED TO PAY ROYALTY @ 2%. SUBSEQUENTLY, THE ASSESSEE HAS ENTERED INTO FRESH AGREEMENTS WITH THE PARENT COMPANY FOR TRANSFER OF TECHNICAL KNOWHOW AS WELL AS USE OF TRADE MARK FOR WHICH ASSESSEE IS REQUIRED TO PAY ROYALTY @ 1.25% AND 1% OF THE NET SALES RESPECTIVELY. AS COULD BE SEEN FROM THE MATERIALS PLACED ON RECORD, THE PAYMENT OF ROYALTY FOR TECHNICAL KNOWHOW @ 1.25% HAS BEEN APPROVED BY THE MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA, VIDE LETTER DATED 14TH SEPTEMBER 2000 (COPY IS P LACED AT PAGE 85 OF THE PAPER BOOK). SIMILARLY, PAYMENT OF ROYALTY FOR TRADEMARK @ 1% HAS BEEN APPROVED BY THE RESERVE BANK OF INDIA, VIDE LETTER DATED 25TH JUNE 2001, COPY AT PAGE 119 OF THE PAPER BOOK. THUS, AS COULD BE SEEN, PAYMENT OF ROYALTY FOR TRADE MARK AT 1% OVER AND ABOVE THE ROYALTY PAID AT 1.25% FOR TECHNICAL KNOWHOW HAS BEEN APPROVED BY THE RESERVE BANK OF INDIA. THOUGH, THE TRANSFER PRICING OFFICER HAS RELIED UPON PRESS NOTE DATED 3RD JANUARY 2002, TO OBSERVE THAT IN CASE OF TECHNOLOGY TRANSFER PAYMENT OF ROYALTY SUBSUMES THE PAYMENT FOR ROYALTY FOR USE OF TRADEMARK, HOWEVER, IN A SUBSEQUENT PRESS NOTE ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY, 6 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. GOVERNMENT OF INDIA, VIDE NO.5(5)/2003 FC, DATED 24TH JUNE 2003, HAS PERMITTED ROYALTY PAYMENT U P TO 8% ON EXPORT SALES AND 5% ON DOMESTIC SALES. IT IS ALSO RELEVANT TO NOTE, THE FACT THAT THE ROYALTY PAID BY THE ASSESSEE @ 2.25% BOTH FOR TECHNICAL KNOWHOW AND TRADEMARK IS LESSER THAN THE ROYALTY PAID BY OTHER COMPARABLES AND EVEN GROUP COMPANIES HAS NOT BEEN DISPUTED EITHER BY THE TRANSFER PRICING OFFICER OR BY THE LEARNED COMMISSIONER (APPEALS). IT IS ALSO RELEVANT TO NOTE, IDENTICAL DISPUTE RELATING TO PAYMENT OF ROYALTY FOR TRADEMARK AT 1% OVER AND ABOVE ROYALTY PAID FOR TECHNICAL KNOWHOW AT 1.25% AND ITS ALLOWABILITY CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002 03 TO 2005 06. WHILE DECIDING THE ISSUE IN THE AFORESAID ASSESSMENT YEARS, THE TRIBUNAL HELD THAT THE PAYMENT OF ROYALTY ON TRADEMARK TO CSO L AT 1% OF SALES IS ALLOWABLE AND AT ARM'S LENGTH. IN FACT, DECISION OF THE TRIBUNAL HAS ALSO BEEN ACCEPTED BY THE REVENUE. IN THIS CONTEXT, WE MAY REFER TO THE RELEVANT OBSERVATIONS OF THE TRIBUNAL WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 06, IN ITA NO.5470/MUM/2012, DATED 18TH MAY 2016, WHICH IS AS UNDER: 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE DECIDING THE APPEAL FOR AY 2002 - 03(SUPRA) THE TRIBUNAL HAS DECIDE D THE ISSUE AS UNDER: - 37. WE HAVE HEARD THE DETAILED ARGUMENTS FROM BOTH THE SIDES. THE BASIC ISSUE IS THE CORRECTNESS OF ALP ON THE ROYALTY PAYMENTS MADE BY THE ASSESSEE COMPANY TO ITS PARENT AE ON ACCOUNT OF TECHNICAL KNOWHOW AND TRADEMARK USAGE. 38. FROM THE ARGUMENTS OF THE DR, MADE ON BEHALF OF THE TPO, THE AGREEMENT FOR PAYING ROYALTY ON TECHNICAL KNOW - HOW AT 1.25% AND TRADEMARK USAGE AT 1.25%, WERE OVERLAPPING AND THUS, TNMM METHOD USED BY THE ASSESSEE WAS INCORRECT. ACCORDING TO THE TPO, THE BEST METHOD TO ASCERTAIN ALP IN THE INTEREST 7 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. CASE WAS CUP, AS THE TRANSACTIONS WERE CONTROLLED. THIS WAS REASONABLE, AS NO DATA WAS AVAILABLE FROM INDEPENDENT SOURCE TO BENCHMARK THE TRANSACTIONS. 39.ON GOING THROUGH THE RECORDS AND THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND THAT IN SO FAR AS THE PAYMENT OF ROYALTY ON TECHNICAL KNOWHOW CONCERNED, THE ASSESSEE HAS BEEN PAYING TO ITS PARENT AE RIGHT FROM 1993, AS, OTHER GROUP COMPANIES ARE PAYING ACROSS THE GLOBE. IT HAS BEEN ACCEPTED BY THE TPO THAT THE PAY MENT DOES NOT EFFECT THE PROFITABILITY OF THE ASSESSEE, IF WE ARE TO EXAMINE THE ISSUE FROM THAT ANGLE AS WELL. IN ANY CASE THE PAYMENT OF ROYALTY ON TECHNICAL KNOWHOW IS AT PAR WITH THE SIMILAR PAYMENTS FROM THE GROUP COMPANIES IN OTHER COUNTRIES & REGION . BESIDES THIS, THE PAYMENT IS MADE AS PER THE APPROVAL GIVEN BY THE RBI AND SIA, GOVERNMENT OF INDIA. HENCE THERE CANNOT BE ANY SCOPE OF DOUBT THAT THE ROYALTY PAYMENT ON TECHNICAL KNOWHOW IS NOT AT ARM S LENGTH. 40.COMING TO THE ISSUE OF ROYALTY PAYMENT ON TRADEMARK USAGE, WE FIND THAT THE ASSESSEE, IN FACT IS PAYING A LESSER AMOUNT, IF THE PAYMENTS ARE COMPARED WITH THE PAYMENTS TOWARDS TRADEMARK USAGE, BY THE OTHER GROUP COMPANIES USING THE BRAND CAD BURY IN OTHER PARTS OF THE WORLD. ON THE OTHER HAND, IF WE EXAMINE THE ARGUMENT TAKEN BY THE TPO WITH REGARD TO OECD GUIDELINES. ON THIS POINT THE ASSESSEE S PAYMENT IS COMING TO A LESSER FIGURE, AS DISCUSSED IN DETAIL BY THE CIT(A). 41.WE ARE NOT GOIN G INTO THE ARGUMENTS ADVANCED BY THE DR/TPO ON GEOGRAPHICAL DIFFERENCES, AND PAYMENTS MADE TO HARSHEY, AS THESE ARGUMENTS GETS MERGED IN THE INTERPRETATION AND DETAILS AVAILABLE IN THE TABLE SUPPLIED BY THE ASSESSEE AND TAKEN NOTE OF BY THE TPO AND THE CIT (A). 42.WE ARE ALSO NOT REFERRING TO THE CASE OF MARUTI SUZUKI LTD. AS WE FIND THAT IN SO FAR AS THE INSTANT CASE IS CONCERNED, THERE IS REALLY NO RELEVANCE. 8 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 43.ON THE BASIS OF THE ABOVE OBSERVATIONS, WE ARE OF THE OPINION THAT THE ROYALTY PAYMENT ON TRA DEMA RK USAGE IS WITHIN THE ARMS LENGTH AND DOES NOT CALL FOR ANY ADJUSTMENT. RESPECTFULLY, FOLLOWING THE ABOVE ORDER, AND THE ORDER FOR SUBSEQUENT AY.S WE DECIDE THE GROUND OF APPEAL NO.1 IN FAVOUR OF THE ASSESSEE. 8. THERE BEING NO DIFFERENCE IN FACT UAL POSITION IN THE IMPUGNED ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL ON IDENTICAL ISSUE IN ASSESSEES OWN CASE AS REFERRED TO ABOVE, WE HOLD THAT THE ROYALTY PAYMENT ON TRADE MARK TO SCOL @ 1% OF NET SALES IS AT ARM'S LE NGTH, HENCE, NO FURTHER ADJUSTMENT IS REQUIRED. ACCORDINGLY, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. GROUND RAISED IS ALLOWED. RESPECTFULLY FOLLOWING THE AFORESAID VIEW OF TRIBUNAL IN ASSESSEES OWN CASE, WE DELETE THE IMPUGNED ADJUSTMEN T OF RS.1300.22 LACS AS MADE BY LD. AO IN THE FINAL ASSESSMENT ORDER. NOTHING HAS BEEN SHOWN TO US THAT THE AFORESAID RULING IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. GROUND NO.3 STAND ALLOWED. WITH REGARD TO DISALLOWANCE OF PAYMENT OF ROYALTY O N ON TECHNOLOGY PAID TO CADBURY ADAMS USA LLC 3.4.2 WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THIS TRIBUNAL FOR AY 2006 - 07 WHEREIN IT HAS BEEN HELD AS UNDER: - 22. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPU TEDLY, THE ASSESSEE HAS PAID ROYALTY TO CAUSA @ 2.7% OF NET SALES AS PER THE AGREEMENT EXECUTED ON 1ST JUNE 2006. IT IS THE CLAIM OF THE ASSESSEE THAT THE PAYMENT OF ROYALTY IS FOR USE OF TRADEMARK AS WELL AS TECHNICAL KNOWHOW. HOWEVER, THE TRANSFER PRICIN G OFFICER AFTER EXAMINING THE AGREEMENT BETWEEN THE ASSESSEE AND 9 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. CAUSA HAS OPINED THAT THE AGREEMENT ONLY PROVIDED FOR USE OF TRADEMARK AND IT DOES NOT PROVIDE FOR USE OF TECHNICAL KNOWHOW. IT IS THE SAY OF THE TRANSFER PRICING OFFICER THAT SINCE AS PER TH E GOVERNMENT GUIDELINES, PAYMENT OF ROYALTY ON TRADE MARK UNDER THE AUTOMATIC ROUTE IS FIXED AT THE MAXIMUM RATE OF 1%. ROYALTY PAID FOR TRADEMARK AT 2.7% IS NOT AT ARM'S LENGTH. ACCORDINGLY, HE HAS ALLOWED PAYMENT OF ROYALTY FOR TRADEMARK AT 1%. WHILE DOI NG SO, THE TRANSFER PRICING OFFICER HAS ALSO OBSERVED THAT THE AGREEMENT EXECUTED IN DECEMBER 2007, AMENDING THE TERMS OF THE ORIGINAL AGREEMENT HAVING COME IN TO EXISTENCE AFTER EXPIRY OF RELEVANT FINANCIAL YEAR WOULD NOT BE APPLICABLE FOR A TRANSACTION U NDERTAKEN IN THE RELEVANT FINANCIAL YEAR. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO ENDORSED THE AFORESAID VIEW OF THE TRANSFER PRICING OFFICER. NO DOUBT, ON A PERUSAL OF THE AGREEMENT DATED 1ST JUNE 2006 BETWEEN THE ASSESSEE AND CAUSA IT APPEARS THAT TH E SAID AGREEMENT HAS BEEN TERMED AS TRADEMARK LICENSE AGREEMENT. HOWEVER, READING THE AGREEMENT AS A WHOLE AND MORE PARTICULARLY, CLAUSE 7(B) OF THE SAID AGREEMENT, IT BECOMES CLEAR THE LICENSEE (THE ASSESSEE) SHALL MANUFACTURE LICENSED PRODUCT USING ANY T ECHNOLOGY OF THE LICENSOR PROVIDED TO THE LICENSEE IN ACCORDANCE WITH ALL SPECIFICATIONS AND INSTRUCTIONS PROVIDED BY THE LICENSOR FROM TIME TO TIME. IT IS NOT THE CASE OF THE REVENUE THAT IN THE RELEVANT PREVIOUS YEAR ASSESSEE HAS NEITHER MANUFACTURED NOR SOLD HALLS BRAND PRODUCTS IN INDIA. THUS, IT IS NECESSARY TO PONDER WHETHER IN ABSENCE OF NECESSARY TECHNICAL KNOWHOW/KNOWLEDGE IT WOULD HAVE BEEN POSSIBLE FOR THE ASSESSEE TO MANUFACTURE THE AFORESAID PRODUCTS? IN OUR VIEW, THE ANSWER WOULD BE NO. FURT HER, THE ASSESSEE AND CAUSA HAVE ENTERED INTO ONE MORE AGREEMENT ON 24TH DECEMBER 2007, AMENDING THE TERMS OF THE ORIGINAL AGREEMENT. AS PER THE AFORESAID AGREEMENT, CERTAIN TERMS OF THE ORIGINAL AGREEMENT WAS AMENDED TO INCLUDE LICENSING / SUB LICENSING O F TECHNOLOGY. IT IS THE CONTENTION OF THE LEARNED SR. COUNSEL FOR THE ASSESSEE THAT THE AMENDMENT AGREEMENT EXECUTED ON 10 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 24TH DECEMBER 2007, SHALL OPERATE RETROSPECTIVELY FROM 1ST JANUARY 2006, TO EMPHASIZE THIS FACT, THE LEARNED SR. COUNSEL FOR THE ASSESSE E HAS SOUGHT TO PRODUCE LETTER DATED 26TH APRIL 2016, ISSUED BY MONDELEZ INTERNATIONAL AS ADDITIONAL EVIDENCE. FROM A PERUSAL OF THE AFORESAID LETTER, IT APPEARS THAT IT HAS BEEN ISSUED TO CLARIFY THAT AS PER THE ORIGINAL AGREEMENT EXECUTED ON 1ST JUNE 200 6, EFFECTIVE FROM 1ST JANUARY 2006, THE PARTIES TO THE AGREEMENT INTENDED TO TRANSFER AND AVAIL TECHNICAL KNOWHOW / KNOWLEDGE RELATING TO THE LICENSED PRODUCT ALONG WITH TRADEMARK. CONSIDERING THE SUBMISSIONS OF THE LEARNED SR. COUNSEL FOR THE ASSESSEE THA T IN SUBSEQUENT ASSESSMENT YEARS ROYALTY PAID BY THE ASSESSEE @ 2.7% OF SALES WAS ACCEPTED BY THE TRANSFER PRICING OFFICER, THE LETTER DATED 26TH APRIL 2016, SOUGHT TO BE PRODUCED BY THE ASSESSEE AS ADDITIONAL EVIDENCE, IN OUR VIEW, IS OF MUCH SIGNIFICANCE SINCE IT WILL HAVE A CRUCIAL BEARING IN DETERMINING WHETHER CAUSA HAS AUTHORISED THE ASSESSEE TO USE TECHNICAL KNOWHOW ALONG WITH TRADEMARK, HENCE, IS ADMITTED AS ADDITIONAL EVIDENCE. EVEN, WITHOUT TAKING COGNIZANCE OF THE AFORESAID ADDITIONAL EVIDENCE, T HE ORIGINAL AS WELL AS AMENDED AGREEMENT MAKE IT ABUNDANTLY CLEAR THAT ASSESSEE HAS ALSO AVAILED TECHNICAL KNOWHOW FROM CAUSA. FURTHER, THE DEPARTMENTAL AUTHORITIES DON DISPUTE THE GENUINENESS OR AUTHENTICITY OF THE AMENDED AGREEMENT. WHAT THEY ARE DISPUTI NG IS THE DATE FROM WHICH THE AMENDED AGREEMENT IS EFFECTIVE. IF THE DEPARTMENTAL AUTHORITIES IN THE SUBSEQUENT ASSESSMENT YEARS HAVE ALLOWED PAYMENT OF ROYALTY BOTH FOR TRADEMARK AND TECHNICAL KNOWHOW, THERE IS NO REASON WHY IT SHOULD NOT BE ALLOWED IN TH E IMPUGNED ASSESSMENT YEAR, SINCE, IT CANNOT BE SAID THAT THE ASSESSEE WAS MANUFACTURING HALLS BRAND PRODUCTS WITHOUT OBTAINING THE REQUIRED TECHNICAL KNOWHOW. ACCORDINGLY, WE HOLD THAT PAYMENT OF ROYALTY TO CAUSA IS AT ARMS LENGTH. THE GROUND IS ALLOWE D. 11 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE IMPUGNED ADDITION OF RS.87.61 LACS. GROUND NO.4 STAND ALLOWED. WITH REGARD TO DISALLOWANCE OF PAYMENT OF ROYALTY ON ON TECHNOLOGY PAID TO CADBURY ENTERPRISES PVT. LTD. 3.5.1 IT WAS NOTED THAT THE ASSESS EE ENTERED INTO TECHNICAL COLLABORATION AGREEMENT DATED 28/06/2007 WITH CEPT TO AVAIL THE BENEFITS OF TECHNICAL KNOW - HOW, TRADE SECRETS ETC. FOR MIXED FRUIT FLAVORED AND STRAWBERRY FLAVORED SUGAR NON - COATED CENTER FILLED BUBBLE GUMS / CHEWING GUMS. ANOTHER AGREEMENT WAS ENTERED INTO WITH THE SAME ENTITY FOR TRADEMARKS AND COPYRIGHT LICENSES IN RESPECT OF PRODUCTS BUBBALOO, BUBBA THE CAT & ADAMS. AS PER AGREEMENT, THE ASSESSEE PAID TECHNICAL ROYALTY @4% AND TRADEMARK ROYALTY @1%. APPLYING THE SAME REASONING, IT WAS HELD THAT CEPT WAS AUTHORIZED TO SUB - LICENSE THE RIGHTS OF THE TRADEMARK ONLY AND THERE WAS NO REFERENCE TO PRESUME THAT THE SAME INCLUDED THE RIGHT TO SUB - LICENSE THE TECHNOLOGY AND KNOW - HOW RELATED TO THE PRODUCTS, AN ADJUSTMENT OF RS.142.51 LAC S WAS PROPOSED BY LD. TPO. THE LD. DRP, FINDING THE ADJUSTMENT QUITE SIMILAR TO AS MADE FOR ROYALTY PAYMENT TO CAUSA, ENDORSED LD. TPOS ACTION. 3.5.2 SINCE FACTS AS WELL AS REASONING OF LOWER AUTHORITIES ARE QUITE SIMILAR AS IN THE CASE OF ROYALTY PAYMEN T MADE BY ASSESSEE TO CAUSA, APPLYING THE SAME ANALOGY, WE DELETE THE IMPUGNED ADDITION. ONE MORE REASON TO DELETE THE ADJUSTMENT IS THAT THE ASSESSEE HAS ENTERED INTO TWO SEPARATE AGREEMENT FOR PAYMENT OF TRADEMARK ROYALTY & TECHNICAL ROYALTY AND THEREFOR E, THE MATTER WOULD STAND ON A BETTER FOOTING. HENCE, GROUND NO. 5 STAND ALLOWED. 9 . 11. T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN TURN RELYING ON THE DECISION OF ASSESSMENT YEAR 2008 - 09. THESE IS SUE S ARE SETTLED IN 12 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISS ION OF LD. AR. ACCORDINGLY, THESE GROUND S RAISED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 8 - 10 DISALLOWANCE OF SERVICE FEES PAID TO CADBURY SCHWEPPES ASIA PACIFI C PVT. LTD. 12 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 3.2 OF TPO ORDER AND PARA 7.2 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2008 - 09 (ITA NO. 7539/MUM/2012) ON MERITS IN FAVOUR OF THE ASSESSEE. HE ALSO RELIED ON VARIOUS DECISIONS OF COORDINATE BENCH OF ITAT REMITTED THIS ISSUE TO THE FILE OF AO. HE FURTHER SUBMITTED THAT THE AO HAS PASSED CONSEQUENTIAL ORDER IN ASSESSMENT YEAR 2006 - 07 & 200 7 - 08 AND HE PRAYED THAT THIS ISSUE NEED NOT BE REMITTED BACK INSTEAD THE ISSUE SHOULD DECIDED ON MERITS. 13 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER THIS YEAR, ASSESSEE HAS FILED THE DOCUMENT ON THE ISSUE COMP ARED THE EARLIER YEAR, THE DOCUMENTS 13 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. WERE IMPROPER. HE FURTHER SUBMITTED THAT THIS ISSUE MAY BE REMITTED BACK TO AO FOR PROPER VERIFICATION. 14 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 7539/MUM/2012 FOR AY 2008 - 09 IN ASSESSEES OWN CASE ON MERITS IN WHICH ITAT HAS RESTORED THE MATTER BACK TO THE FILE OF AO WITH DIRECTION TO ENABLE THE REVENUE TO TAKE A CONSISTENT STAND IN THE MATTER AND ALSO TO FOLLOW THE ITAT ORDER FOR ASSESSMENT YEAR 2006 - 07. WE DRAW STRENGTH FROM THE FOLLOWING DECISIONS IN WHICH MATTER CANNOT BE RE MANDED BACK WHEN THE TPO HAS FAILED TO FOLLOW THE PRESCRIBED METHOD U/S 92C: - I) KODAK INDIA PVT. L TD. (2013) 37 TAXMANN.COM (MUM) II) BARCLAYS BANK PLC VRS. ADIT (90 TAXMANN.COM 378) (MUM) III) VEDANTA LTD. VRS. PCIT (ITA 303/2018, C.M.APPL. 10257/2018). 14 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 15. FOR THE SAKE OF CLARITY, THE DECISION OF ITAT IN THE CASE OF KODAK INDIA PVT. LTD. IS REPRODUCE D BELOW: - I. SECTION 92B, READ WITH SECTION 92C, OF THE INCOME - TAX ACT, 1961 - TRANSFER PRICING - MEANING OF INTERNATIONAL TRANSACTION - ASSESSMENT YEAR 2008 - 09 - ASSESSEE, AN INDIAN COMPANY SOLD ITS MEDICAL IMAGING BUSINESS TO 'C' LTD. ANOTHER INDIAN COMP ANY FOR USD 13.543 MILLION - BEING DOMESTIC TRANSACTION, ASSESSEE RETURNED ITS INCOME, DISCLOSING SALE TRANSACTION AS A NORMAL DOMESTIC TRANSACTION - ASSESSING OFFICER FOUND THAT SALE TRANSACTION OF IMAGING BUSINESS BY ASSESSEE TO 'C' LTD. WAS PURSUANT TO A LARGER SALE TRANSACTION, ON GLOBAL BASIS, WHEREIN HOLDING COMPANY OF ASSESSEE SOLD ITS IMAGING BUSINESS TO 'C' INC. I.E., HOLDING COMPANY OF 'C' LTD. ON GLOBAL BASIS - THUS, ON SUO MOTO ASSUMPTION OF JURISDICTION OVER IMPUGNED TRANSACTION, TPO, PROCEEDED TO DETERMINE ALP - TPO DETERMINED ALP, BASED ON WORLDWIDE REVENUE BREAK UP AMONGST COUNTRIES AND CONCLUDED THAT INDIA ACCOUNTED FOR 1.4 PER CENT THEREOF, WHICH CAME TO USD 32.9 MILLION AS AGAINST USD 13.54 MILLION SHOWN BY ASSESSEE - ACCORDINGLY, AN ADJUST MENT OF RS. 79.96 CRORE WAS MADE - WHETHER SINCE TRANSACTIONS ENTERED INTO BY HOLDING FOREIGN COMPANIES AND SUBSIDIARY INDIAN COMPANIES WERE INDEPENDENT OF EACH OTHER AND THERE WAS NO INTERNATIONAL ELEMENT INVOLVED IN SALE OF IMAGING SEGMENT BY ASSESSEE OF ITS BUSINESS TO 'C' LTD., AUTHORITIES BELOW WERE NOT JUSTIFIED IN INVOKING TRANSFER PRICING PROVISIONS IN RESPECT OF ASSESSEE'S TRANSACTION - HELD, YES - WHETHER, THEREFORE, IMPUGNED ADJUSTMENT MADE BY REVENUE AUTHORITIES WAS TO BE SET ASIDE - HELD, YES [ PARAS 49 AND 63] [IN FAVOUR OF ASSESSEE] SECTION 92C OF THE INCOME - TAX ACT, 1961 - TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE [OTHERS] - ASSESSMENT YEAR 2008 - 09 - WHETHER WHILE DETERMINING ALP OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY ASSESSE E, TPO CANNOT ADOPT ANY OTHER METHOD EXCEPT METHODS PRESCRIBED IN SECTION 92C(1) - HELD, YES [PARA 66] 15 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. II. SECTION 92C OF THE INCOME - TAX ACT, 1961 - TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE [SAFE HARBOUR RULES] - ASSESSMENT YEAR 2008 - 09 - ASSES SEE HAD INCURRED CERTAIN EXPENSES ON BEHALF OF ITS AE - AS SAID EXPENSES WERE TO BE REIMBURSED TO ASSESEE RECEIPTS ON ACCOUNT OF REIMBURSEMENT WAS RECOVERED ON COST PLUS 10 PER CENT MARK UP TPO PROPOSED MARK UP AT THE RATE 12.5 PER CENT AND MADE AN ADJUSTM ENT ACCORDINGLY - WHETHER SINCE ADJUSTMENT SOUGHT BY TPO AND SUSTAINED BY DRP WAS FALLING WITHIN MARGIN OF +/ - 5 PER CENT AS PROVIDED BY PROVISO TO SECTION 92C(2), SAME WAS NOT SUSTAINABLE - HELD, YES [PARA .84] [IN FAVOUR OF ASSESSEE] 16 . T HEREFORE , RESPE CTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH WHICH ARE SIMILAR TO THE FACTS OF PRESENT CASE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 11 TO 13 DISALLOWANCE OF SERVICES FEES PAID TO CADBURY HOLDINGS LTD. 1 7. BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 4.1 OF TPO ORDER AND PARA 8.2 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ASSESSEES OWN CA SE FOR ASSESSMENT YEAR : 2008 - 09 (ITA NO. 7539/MUM/2012) ON MERITS IN FAVOUR OF THE ASSESSEE. 16 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 18 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 19 . CON SIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 7539/MUM/2012 FOR AY 2008 - 09 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 3.7.1 IN GROUND NOS. 9 TO 11, THE ASSESSEE IS SIMILARLY AGGRIEVED BY TP ADJUSTMENT OF RS.207.02 LACS STATED TO BE PAID AS SERVICE FEES TO ANOTHER AE VIZ. CHL. THE ASSESSEE IS STATED TO HAVE RECEIVED TECHNICAL SERVI CES FROM CHL WHICH WAS SIMILARLY BENCHMARKED USING ENTITY LEVEL TNMM. THE LD. TPO, ON MORE OR LESS SAME REASONING, REACHED A CONCLUSION THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE SERVICES SO AGREED HAVE BEEN RENDERED BY AE AND RENDERED AT REQUISITE AMO UNT. THEREFORE, THE ASSESSEE FAILED BENEFIT TEST. ACCORDINGLY, THE ALP OF THE TRANSACTIONS WAS CONSIDERED AS NIL RESULTING INTO ADJUSTMENT OF RS.207.02 LACS. THE LD. DRP CONFIRMED THE ADJUSTMENT ON SAME LOGIC, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEA L BEFORE US. 3.7.2 SINCE FACTS AS WELL AS OBSERVATIONS OF LOWER AUTHORITIES ARE PARIMATERIA THE SAME AS MADE BY SERVICES FEES PAID BY THE ASSESSEE TO CSAPL, TAKING SIMILAR VIEW, WE RESTORE THE MATTER BACK TO THE FILE OF LD. TPO / LD. AO FOR RE - ADJUDICATION ON SIMILAR LINES. THESE GROUNDS MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 17 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 20 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN TURN RELYING ON THE DECISION OF ASSESSMENT YEAR 2008 - 09. THESE ISSUE S ARE SETTLED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 14 TO 23 ADJUSTMENT ON ACCOUNT OF ADVERTISING, MARKETING AND PROMOTION (AM P) EXPENSES. 21 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 9.2 TO 9.4 O F DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2006 - 07 (ITA NO. 1512 /MUM/ 201 3 ) ON MERITS IN FAVOUR OF THE ASSESSEE. 22 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIE S, HOWEVER HE CONCEDED THAT THESE GROUND S ARE COVERED BY THE ORDER OF ITAT. 23 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED O N RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA 18 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. NO. 1512 /MUM/ 2013 FOR AY 2006 - 07 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 14. WE H AVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, AS COULD BE SEEN FROM THE MATERIAL ON RECORD, IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE TRANSFER PRICING OFFICER THE ASSESSEE HAD SPECIFICALLY SUBMITTED THAT THERE IS NO ARRANGEMENT OR AGREEMENT WITH THE OVERSEAS A.E. FOR INCURRING AMP EXPENDITURE. IT IS ALSO APPARENT THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR MARKETING ASSESSEES OWN PRODUCTS AND THE PAYMENT WAS MADE TO THIRD PARTIES IN INDIA. THEREFORE, I T IS OUTSIDE THE PURVIEW OF INTERNATIONAL TRANSACTION AS DEFINED UNDER SECTION 92B OF THE ACT. AS COULD BE SEEN, THE TRANSFER PRICING OFFICER IGNORING THE SUBMISSIONS MADE BY THE ASSESSEE HAD ASSUMED THAT A BENEFIT HAS ACCRUED TO THE OVERSEAS A.E. ON ACCOU NT OF AMP EXPENDITURE INCURRED BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE ADJUSTMENT / ADDITION PROPOSED BY THE TRANSFER PRICING OFFICER SIMPLY RELYING UPON HIS ORDER PASSED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 06. NOTABL Y, WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005 06 THE TRIBUNAL VIDE ORDER PASSED IN ITA NO. 5470/MUM./2012, DATED 18TH MAY 2016, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: 3.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL BEFORE US. BEFORE PROCEEDING FURTHER,IT WOULD BE USEFUL TO UNDERSTAND THE PHILOSOPHY AND TO CONSIDER THE HISTORICAL BACKGROUND OF THE TP PROVISIONS.IT IS SAID THAT THE PURPOSE AND OBJECT OF INTRODUCTION OF THE PROVISIONS CONTAINED IN CH APTER X IS TO PREVENT AN ASSESSEE FROM AVOIDING PAYMENT OF TAX BY TRANSFERRING INCOME YIELDING ASSETS TO NON - RESIDENTS EVEN WHILE RETAINING THE POWER TO ENJOY THE FRUITS OF SUCH TRANSACTIONS I.E. THE INCOME SO GENERATED.AS A CONCEPT,IT IS NOT TOTALLY A NEW IDEA.A REFERENCE TO THE PROVISIONS OF SECTION 42(2)TO THE INDIAN INCOME TAX ACT,1922,COULD BE MADE IN THIS 19 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. REGARD - AS IT WAS A SOMEWHAT SIMILAR SECTION AND DEALT WITH THE TRANS - BORDER TRANSACTIONS.THE PROVISIONS OF THE SAID SECTION BROADLY PROVIDED THAT WH ERE A NONRESIDENT CARRIED OUT BUSINESS WITH THE PERSON RESIDENT IN THE TAXABLE TERRITORY AND IT APPEARED TO THE AO THAT ON ACCOUNT OF A CLOSE CONNECTION BETWEEN SUCH PERSONS THE BUSINESS WAS SO ARRANGED THAT THE BUSINESS CONDUCTED BY THE RESIDENT WITH THE NON - RESIDENT EITHER YIELDED NO PROFIT OR,LESS THAN ORDINARY PROFIT,WHICH MAY BE EXPECTED TO ARISE IN THAT BUSINESS THEN,THE AO WAS EMPOWERED TO TAX PROFITS WHICH WERE DERIVED OR WHICH MAY REASONABLY BE DEEMED TO BE DERIVED FROM THE BUSINESS IN THE HANDS OF A PERSON RESIDENT IN THE TAXABLE TERRITORY.THUS,IT CAN SAFELY BE CONCLUDED THAT TP PROVISIONS WERE PART OF TAX ADMINISTRATION EVEN DURING THE 1922 ACT DAYSTHOUGH AT INFANCY STAGE.THE PRESENT PROVISIONS WERE BEEN INCORPORATED VIDE FINANCE ACT,2001.SAME WER E FURTHER AMENDED VIDE FINANCE ACT,2002 AND ARE BEING AMENDED FROM TIME TO TIME TO MEET THE NEW CHALLENGES THROWN UP BY THE DYNAMISM OF THE CURRENT COMMERCIAL AND BUSINESS REALITIES. HAVING REGARD TO THE OBJECT FOR WHICH PROVISIONS HAVE BEEN ENACTED, APPLI CABILITY OF THE SAID PROVISIONS HAS TO BE LIMITED TO SITUATIONS WHERE THERE IS DIVERSION OF PROFITS OUT OF INDIA OR WHERE THERE MAY BE EROSION OF TAX REVENUE IN INTRA GROUP TRANSACTION. SO,INTRA - GROUP TRANSACTION IS THE FIRST PRE - CONDITION FOR INVOKING THE TP PROVISIONS.CALCULATION OF ALP IS THE NEXT AND LOGICAL STEP.BUT,IF THE FIRST STEP ITSELF IS MISSING,THE AO CANNOT GO TO THE SECOND STAGE.IN OTHER WORDS,THE AOS CANNOT CLIMB THE SECOND STOREY OF A BUILDING WITHOUT REACHING TO THE FIRST STOREYIF THE EXIST ENCE OF AN IT AND CALCULATION OF ALP CAN BE COMPARED WITH A DOUBLESTOREYED BUILDING. 3.4.1.WE FIND THAT THE ASSESSEE IS THE MARKET LEADER OF THE CHOCOLATE MARKET IN INDIA,THAT IT WAS COMMANDING 70% OF THE MARKET SHARE IN THE YEAR UNDER APPEAL,THAT IT HAD DEBITED AMP EXPENSES,AMOUNTING TO RS.85.15CRORES TO ITS P& L.A/C,THAT THE NET TURNOVER OF THE ASSESSEE WAS OF RS.766.21CRORES,THAT IT WAS 20 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 11.11% OF THE SALES RECORDED BY THE ASSESSEE DURING THE YEAR,THAT IT HAD ALSO PAID ROYALTY AMOUNTING TO RS.13.56 CRORE S FOR THE SAME PERIOD,THAT THE TPO COMPUTED RS.1.52 CRORES(1.78%) AS THE COST APPORTIONED/ALLOCABLE OUT OF THE A&M COST INCURRED BY THE ASSESSEE FOR THE BENEFIT ACCRUING TO THE AE,THAT HE RESTRICTED THE COST TO RS.71 LAKHS(BEING0.87% OF RS.85.15CRORES)IN V IEW OF THE DISALLOWANCE/ ADJUSTMENT IN INCOME MADE ON ACCOUNT OF ROYALTY FOR TRADE MARK,THAT THE AVERAGE AMP EXPENDITURE BY THE LEADING FMCG COMPANIES FOR THE PERIOD 2001 - 05 WAS 10.28%,THAT THE AMP EXPENDITURE INCURRED BY THE ASSESSEE DURING THE SAME PERIO D WAS 10.45%,THAT THE ASSESSEE HAD CONTENDED THAT ITS PROFITABILITY(PBT TO SALES RATIO) @10.85%WAS MUCH HIGHER COMPARED TO THE AVERAGE PROFITABILITY OF THE COMPARABLES AT THE RATE OF 3.57%,THAT THE FAA HAD HELD THAT HIGHER RATE PROFITABILITY COULD NOT BE A JUSTIFICATION OF THIS PROPORTIONATE EXPENDITURE, THAT IN THE APPELLATE PROCEEDINGS THE FAA HAD PROPOSED FURTHER ADDITION,THAT FINALLY HE UPHELD THE ORDER OF THE TPO AND CONFIRMED THE ADDITION OF RS.71 LAKHS,THAT THERE WAS NO CONTRACTUAL OBLIGATION TO RECO VER MONEY FROM THE AE,THAT IT WAS SEPARATELY PAYING ROYALTY FOR USE OF BRAND AND TRADEMARK. THERE IS NO REASON FOR NOT HOLDING THAT THE INCREASED AMP EXPENDITURE LED TO ENHANCED SALES AND PROFITABILITY,THAT FOR THE PURPOSE OF ANALYSING THE AMP EXPENDITURE INCURRED BY AND THE COMPARABLES IT IS NECESSARY TO CONSIDER VARIOUS FACTORS.IF FACTORS LIKE GROWTH RATE, NATURE OF BUSINESS,NUMBER OF PRODUCTS LAUNCHED,TERRITORIES SERVICED AND TURNOVER/PROFITS ACHIEVED HAVE NECESSARILY TO BE CONSIDERED FOR DETERMINING THE AMP EXPENSES.THE ENTIRE EXPENDITURE WAS FOCUSED ON THE INDIAN CONSUMER AND IT IS EVIDENT FROM THE LOCAL FLAVOUR/ LANGUAGE/CONCEPTS.IT IS ALSO AN UNDENIABLE FACT THAT NEW PLAYERS WERE ENTERING INDIA AFTER LIBERALISATION - ERA STARTED.IF THE EXPENDITURE INCUR RED BY THE ASSESSEE IS CONSIDERED IN THE BACK GROUND OF THE GROWTH ACHIEVED BY IT ONE HAS TO AGREE WITH THE ARGUMENT OF THE ASSESSEE THAT IT MADE RAPID PROGRESS 21 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. IN THE INDIAN MARKET POST LIBERALISATION PERIOD AND AMP PLAYED AN IMPORTANT ROLE IN IT. HERE, WE WOULD ALSO LIKE TO MENTION THAT THERE EXISTS A FUNDAMENTAL AND BASIC DISTINCTION BETWEEN THE PROVISIONS OF SECTION 37 AND SECTION 92 OF THE ACT - AS THE FIRST IS EXPENSE ORIENTED AND THE SECOND IS PRICING ORIENTED.THE FAA TRIED TO INCORPORATE THE INGREDIE NTS OF SECTION 37 WHILE DEALING WITH THE TP ADJUSTMENTS, WHEN HE TALKED OF THEHIGHER EXPENDITURE AND JUSTIFICATIONOF SUCH EXPENDITURE. IN OUR OPINION,THE APPROACH OF THE FAA WAS NOT IN ACCORDANCE WITH THE BASIC PHILOSOPHY OF TP PROVISIONS.IN OUR OPINIO N,IT IS THE ASSESSEE WHO HAS TO DECIDE HOW MUCH TO SPEND FOR EARNING HIS INCOME.THE TAX AUTHORITIES ARE PREVENTED FROM ENTERING INTO THE PROVERBIAL SHOES OF THE ASSESSEE TO DECIDE THE JUSTIFICATION OF THE EXPENDITURE.THE ACT STIPULATES THAT IN CERTAIN COND ITIONS ONLY THE SOCALLED HIGHER EXPENDITURE CAN BE QUESTIONED.THE FAA HAD NOT PROVED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR ADVERTISEMENT ETC.WAS COVERED BY THOSE SECTIONS.IF IT WAS THE CASE THEN THE TRANSACTION WOULD NOT FALL UNDER SECTION 92 O F THE ACT.THEREFORE, IN OUR OPINION HE HAD ADOPTED A TOTALLY INCORRECT APPROACH, WHILE DEALING THE ALLOWABILITY OF AMP EXPENDITURE. 3.4.2.WE FURTHER HOLD THAT THE CLAIM OF THE ASSESSEE IS FACTUALLY CORRECT THAT IT HAD INCURRED THE AMP EXPENDITURE FOR CREA TING PRODUCT AWARENESS AND TO RECALL THE VALUE OF EXISTING PRODUCTS AND THAT IT HAD A LOCAL MARKETING STRATEGY OF MAKING ADVERTISEMENT/SLOGANS IN THE LOCAL LANGUAGE.IN OUR OPINION,KUCH MEETHA HO JAY CAMPAIGN PROVES THE CLAIM MADE BY THE ASSESSEE.THE TPO HA D IGNORED THE FACT THAT FILMS/TV ADVERTISEMENTS OF THE ASSESSEE HAD THE LOCAL MESSAGING CONCEPT.SUCH LOCAL ADVERTISEMENT CAMPAIGNS CAN NEVER BE HELD TO BE DRIVEN TOWARDS SERVING THE INTERESTS OF THE AE.IT IS ALSO A FACT THAT NEW MULTINATIONAL PLAYERS IN TH E INDUSTRY HAD ENTERED THE INDIAN MARKET.THE COMMERCIAL WISDOM OF ANY ASSESSEE,IN SUCH A 22 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. SITUATION,WOULD COMPEL IT TO BE INNOVATIVE AND TO SPENT REASONABLE EXPENDITURE FOR MAINTAINING ITS POSITION IN THE MARKET.THE TPO/FAA HAD NOT CONTROVERTED THE FACT THA T THE AE WAS THE OWNER OF INTELLECTUAL PROPERTY OF THE CADBURYBRAND AND THAT IT WAS RESPONSIBLE FOR PROMOTING THE BRAND ALL OVER THE GLOBE AND THAT THE BRAND RELATED EXERCISE AT THE COST OF THE AE FOR THE OVERALL BRAND POSITIONING AND MANAGEMENT BENEFITE D THE ASSESSEE ALSO IN AN INDIRECT MANNER.NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE ASSESSEE WAS DIRECTLY OR INDIRECTLY PROMOTING THE GLOBAL BRAND RATHER THAN PROMOTING ITS OWN PRODUCTS.IN OUR OPINION, THERE EXISTS A FINE BUT VERY IMPORTANT DIST INCTION BETWEEN PRODUCTS PROMOTED AND NURTURED BY AN ASSESSEE AND THE BRAND OWNED AND SUPPORTED BY ITS AE.IN THE MODERN WORLD BOTH EXIST AND PLAY DIFFERENT AND SPECIFIED ROLES.THEREFORE,UNTIL AND UNLESS SOME - THING POSITIVE IS BROUGHT ON RECORD ABOUT SHARI NG/INCURRING AMP EXPENDITURE UNDER THE HEAD BY AN ASSESSEE ON BEHALF OF ITS AE,IT CANNOT BE HELD THAT IT SHOULD HAVE RECOVERED SOME AMOUNT FROM THE AE AS THE EXPENDITURE BY IT INDIRECTLY HELPED IN AUGMENTING THE BRAND VALUE OWNED BY ITS OVERSEAS AE.IN THE CASE UNDER CONSIDERATION,THE ASSESSEE WAS INCURRING EXPENDITURE FOR ITS PRODUCTS WHEREAS THE AE WAS LOOKING AFTER THE GROUND AT GLOBAL LEVEL.IF THE AMP EXPENDITURE INCURRED BY THEM BENEFITED INDIRECTLY IN THE LOCAL/ INTERNATIONAL MARKET IT WOULD NOT MEAN T HAT IT WAS AN IT. THE BASIC PURPOSE OF INTRODUCING THE VARIOUS PROVISIONS OF CHAPTER X,AS STATED EARLIER,WAS TO PREVENT TAX EVASION IN THE TRANSACTIONS UNDERTAKEN BETWEEN AN INDIAN ENTITY AND ITS OVERSEAS AE.IN OUR OPINION,A PERCEIVED/NOTIONAL INDIRECT BEN EFIT TO THE AE,DUE TO INCURRING OF CERTAIN EXPENDITURE BY AN ASSESSEE IN INDIA, IS NOT COVERED BY THE TP PROVISIONS. IT IS A FACT THAT THE PAYMENT UNDER THE HEAD AMP EXPENDITURE WAS MADE TO THIRD PARTIES AND THAT THOSE PARTIES WERE LOCATED IN INDIA. 3.4.3 .WE FIND THAT IN THE CASES OF MARUTI SUZUKI(SUPRA),WHIRLPOOL INDIA(SUPRA), BAUSCH & LOMB EYECARE(INDIA)PVT.LTD(ITA 643 OF 2014 OF 23 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. HONBLE DELHI HC), THE ISSUE OF AMP EXPENSES HAD BEEN DELIBERATED UPON EXTENSIVELY AND EACH AND EVERY ARGUMENT RAISED BY THE T PO/DRP HAVE BEEN ANALYSED THREAD BARE.WE WOULD LIKE TO REPRODUCE RELEVANT PORTION OF THE JUDGMENT OF BAUSCH & LOMB EYECARE(INDIA) PVT.LTD.(SUPRA) AND SAME READS AS UNDER: 53.A READING OF THE HEADING OF CHAPTER X['COMPUTATION OF INCOME FROM INTERNATIONAL TRANSACTIONS HAVING REGARD TO ARM'S LENGTH PRICE']AND SECTION 92 (1) WHICH STATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ALP AND SECTION 92C (1) WHICH SETS OUT THE DIFFERENT METHODS OF DETERMINING T HE ALP, MAKES IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT IS MADE BY SUBSTITUTING THE ALP FOR THE PRICE OF THE TRANSACTION. TO BEGIN WITH THERE HAS TO BE AN INTERNATIONAL TRANSACTION WITH A CERTAIN DISCLOSED PRICE.THE TRANSFER PRICING ADJUSTMENT ENVISAGE S THE SUBSTITUTION OF THE PRICE OF SUCH INTERNATIONAL TRANSACTION WITH THE ALP. 54. UNDER SECTIONS 92B TO 92F, THE PRE - REQUISITE FOR COMMENCING THE TP EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. THE NEXT STEP IS TO DETERMINE THE PRI CE OF SUCH TRANSACTION. THE THIRD STEP WOULD BE TO DETERMINE THE ALP BY APPLYING ONE OF THE FIVE PRICE DISCOVERY METHODS SPECIFIED IN SECTION 92C. THE FOURTH 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 ,'INT ERNATIONAL TRANSACTION MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NONRESIDENTS; 24 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES, AND SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CON TRIBUTION TO, ANY COST. OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRISES. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER THAN AN AS SOCIATED 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 ASS OCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE.' 56.THUS, UNDER SECTION 92B(1) AN 'INTERNATIONAL TRANSACTION' MEANS - (A) A TRANSACTION BETWEEN TWO OR MORE AE S, EITHER OR BOTH OF WHOM ARE NON - RESIDENT (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, IN COMES OR LOSSES OF SUCH ENTERPRISES, AND (C) SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE AES FOR ALLOCATION OR APPORTIONMENT OR CONTRIBUTION TO THE ANY COST OR EXPENSES INCURRED OR TO BE INCURRED IN CONNECTION - WITH THE - BENEFIT, S ERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ONE OR MORE OF SUCH ENTERPRISES. 57. CLAUSES (B) AND (C) ABOVE CANNOT BE READ DISJUNCTIVELY. EVEN IF RESORT IS HAD TO THE RESIDUARY PART OF CLAUSE (B) TO CONTEND THAT THE AMP SPEND OF BLI IS 'ANY OTHER TRAN SACTION HAVING A BEARING' ON ITS 'PROFITS, INCOMES OR LOSSES, FOR A 'TRANSACTION' THERE 25 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 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 A N 'AGREEMENT' 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 LEGISLATIVE INTENT IS CONCERNED, IT IS SEEN THAT CERTAIN TRANSACTIONS L ISTED IN THE EXPLANATION UNDER CLAUSES (I) (A) TO (E) TO SECTION 92B ARE DESCRIBED AS AN 'INTERNATIONAL TRANSACTION'. THIS MIGHT BE ONLY AN ILLUSTRATIVE LIST, BUT SIGNIFICANTLY' IT DOES NOT LIST AMP SPENDING AS ONE SUCH TRANSACTION. 58. IN MARUTI SUZUKI I NDIA LTD. (SUPRA), ONE OF THE 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 THE CONSIDERATION FOR THE SAME HAS BEEN PA ID 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 POINTING OUT; 'EVEN IF THE WORD 'TRANSACTION' IS GIVEN ITS WIDEST CONNOTATION, AND NEED NOT INVOLVE ANY TRAN SFER 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', 'UNDERSTANDING' OR 'ACTION IN CONCERT', 'WHETHER FORMAL OR IN WRITING', IT IS STILL INCUMB ENT ON THE REVENUE TO SHOW THE EXISTENCE OF AN 'UNDERSTANDING' OR AN 'ARRANGEMENT' OR 'ACTION IN CONCERT' BETWEEN MSIL AND SMC AS REGARDS AMP SPEND FOR BRAND PROMOTION. IN OTHER WORDS, FOR BOTH THE 'MEANS', PART AND THE 'INCLUDES' PART OF SECTION 928 (1) W HAT HAS TO BE DEFINITELY SHOWN IS THE EXISTENCE OF TRANSACTION WHEREBY MSIL HAS BEEN OBLIGED TO INCUR AMP OF A CERTAIN LEVEL FOR SMC FOR THE PURPOSES OF PROMOTING THE BRAND OF SMC.' 59. IN WHIRLPOOL OF INDIA LTD. (SUPRA), THE COURT INTERPRETED THE EXPRESS ION 'ACTED IN CONCERT' AND IN THAT CONTEXT REFERRED TO THE DECISION OF THE SUPREME 26 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 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 RANBAXY 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 REGULATION 20(4) (B) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBS TANTIAL ACQUISITION OF 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 ACTING IN CONCERT' UNLESS THERE IS A 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 ACTING IN CONCERT' IS AS MEANINGLESS AS CRIMINAL CONSPIRACY WITHOUT ANY AGREEMENT TO COMMIT A CRIMINAL OFFENCE. THE IDEA OF 'PERSONS ACTING IN CONCERT' IS NOT ABOUT A FORTUITOUS RELATIONSHIP C OMING 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 SHARED COMMON OBJECTIVE OR PURPOSE OF ACQUISITION OF SUBSTANTIAL ACQUISITION OF SHARES 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 COOPE RATE IN ACTUAL ACQUISITION OF SHARES ETC. OR THEY MAY AGREE TO, COOPERATE IN SUCH ACQUISITION. 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. 27 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. ' 60. THE TRANSFER PRICING ADJUSTMENT IS NOT EXPECTED TO BE MADE BY DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESSIVE' AMP EXPENDITURE INCURRED BY THE ASSESSEE AND THE AMP EXPENDITURE OF A COMPARABLE ENTITY THAT AN INTERNATIONAL TRANSACTION 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 SONY ERICSSON (SUPRE), -- THE QUESTION OF APPLYING THE BLT TO DETERMINE THE EXISTENCE - OF AN - INTERNATIONAL TRANSACTION INVOLVING AMP EXPENDITURE DOES NOT ARISE. 61. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE 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, THEREVENUE'S ATTEMPT AT RE - CHARACTERISING THE AMP EXPENDITURE INCURRED AS A TRANSACTION BY ITSELF WHEN IT HAS NEITHER BEEN IDENTIFIED AS SUCH BY THE ASSESSEE OR LEGISLATIVELY RECOGNISED IN THE EXP LANATION 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 ACTUALLY FINDS THE SAME.' 62. IN THE PRESENT CASE, THE MERE FACT THAT B&L, USA THROUGH B&L, SOUTH ASIA, INC HOLDS 99.9% OF THE SHARE OF THE ASSESSEE WILL NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE MERE INCREASING OF AMP EXPENDITURE BY THE ASSESSEE INVOLVES AN INTERNATIONAL TRANSACTION IN THAT REGARD WITH B&L, USA. A SIMILAR CONTE NTION BY THE REVENUE, NAMELY THE 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 INTERNATIONAL TRANSACTION HAS BEEN NEGATI VED BY THE COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA) AS UNDER: ' 28 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 68. THE ABOVE SUBMISSIONS PROCEED PURELY ON SURMISES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD TO SENDING THE TAX AUTHORITIES THEMSELVES 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 TRANSACTIO N INVOLVING AMP EXPENSES, MR. SRIVASTAVA ONLY REFERRED TO SECTION 92F (II) WHICH DEFINES ALP TO MEAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN AES IN UNCONTROLLED CONDITIONS',SINCE THE REFERENCE IS TO ' PRICE' AND TO 'UNCONTROLLED CONDITIONS' 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 ANOTHER IN UNCONTROLLED SITUATIONS THEN THAT WOULD B E THE ALP. THE COURT DOES NOT SEE THIS AS A MACHINERY PROVISION PARTICULARLY - IN - LIGHT OF THE FACT THAT - THE - BLT HAS BEEN EXPRESSLY NEGATIVED BY THE COURT IN SONY ERICSSON. THEREFORE, THE EXISTENCE OF AN INTERNATIONAL TRANSACTION WILL HAVE TO BE ESTABLISHE D DE HORS THE BLT. 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 INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THAT SI NCE IT IS NOT AN ALP, AN ADJUSTMENT HAD TO BE MADE. THE - BURDEN IS ON THE REVENUE TO FIRST 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 ANSW ER 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 AES INVOLVED MAY SEEK TO SHIFT FROM ONE JURISDICTION TO ANOTHER.AN 'ASSUMED' PRICE CANNOT FORM THE REASON FOR MAKING AN ALP ADJUSTMENT. ' 29 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 71 - SINCE A QUANTITATIVE ADJUSTMENT IS NOT PERMISSIBLE FOR THE PURPOSES OF A TP ADJUST - MENT UNDER CHAPTER X,EQUALLY IT CANNOT BE PERMITTED IN RESPECT OF AMP EXPENSES EITHER. AS ALREADY NOTICED HEREINBETOR E,WHAT THE REVENUE HAS SOUGHT TO DO IN THE PRESENT. CASE IS TO RESORT TO A QUANTITATIVE ADJUSTMENT BY FIRST DETERMINING WHETHER THE AMP SPEND OF THE ASSESSEE ONAPPLICATION OF THE BLT,IS EXCESSIVE,THEREBY EVIDENC - ING THE EXISTENCE OF AN INTERNATIONAL TRAN SACTION INVOLVING THE AE. THE QUANTITATIVE DETERMINATION FORMS THE VERY BASIS FOR 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 U SE 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 LISTED UNDER THE EXPLANATION TO SECTION 928 OF THE ACT.THE PROBLEM DOES NOT STOP HE RE.EVEN IF A TRANSACTION INVOLVING AN AMP SPEND FOR A FOREIGN AE IS ABLE TO BE LOCATED IN SOME 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 SUCH 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 FOLLOWING ANALOGY: ' 75. AS AN ANALOGY; AND FOR - N O OTHER PURPOSE; IN THE - CONTEXT OF A DOMESTIC TRANSACTION INVOLVING TWO OR MORE RELATED PARTIES, REFERENCE MAY' 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 VALUE OF THE GOODS.' IN SUCH EVENT, SO MUCH OF THE 30 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 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 CONSIDERS TO BE AN EXCESSIVE EXPENDITURE. THERE IS NO CORRESPONDING 'MACHINERY' PROVISION IN CHAPTER X WHICH ENABLES' AN AO TO DETERMINE WHAT SHO ULD BE THE FAIR 'COMPENSATION' AN INDIAN ENTITY WOULD BE ENTITLED TO IF IT IS FOUND' THAT THERE IS AN INTERNATIONAL TRANSACTION IN THAT REGARD. IN PRACTICAL TERMS, ABSENT A CLEAR STATUTORY GUIDANCE, THIS MAY ENCOUNTER FURTHER DIFFICULTIES. THE STRENGTH OF A BRAND,WHICH COULD BE PRODUCT SPECIFIC, MAY BE 'IMPACTED BY NUMEROUS OTHER IMPONDERABLES NOT LIMITED TO THE NATURE OF THE INDUSTRY, THE GEOGRAPHICAL PECULIARITIES, ECONOMIC TRENDS BOTH INTERNATIONAL AND DOMESTIC, THE CONSUMPTION PATTERNS, MARKET BEHAVIOUR AND SO ON.A SIMPLISTIC APPROACH USING ONE OF THE MODES SIMILAR TO THE ONES CONTEMPLATED BY SECTION 92C MAY NOT ONLY BE LEGALLY IMPERMISSIBLE BUT WILL LEND ITSELF TO ARBITRARINESS. WHAT IS THEN NEEDED IS A CLEAR STATUTORY SCHEME ENCAPSULATING THE LEGISLATI VE 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, BRINGING AN IMAGINED TRANSACTION TO TAX IS NOT POSSIBLE. T HE DECISIONS IN CIT V. B.C. SRINIVASA SETTY (1981) 128 ITR 294 (SC) AND PNB FINANCE LTD. V, CIT (2008) 307 ITR 75 (SC) MAKE THIS POSITION EXPLICIT. THEREFORE, WHERE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE WITH AN ASCERTAINABLE P RICE 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 AN INCIDENTAL BENEFIT TO THE FOREIGN AE, IT CANNOT BE SAID THA T THE AMP EXPENSES INCURRED BY THE INDIAN ENTITY WAS FOR PROMOTING THE BRAND OF THE FOREIGN AE. AS MENTIONED - IN - SASSOON - J DAVID - (SUPRA) - 'THE -- FACT 31 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. THAT - SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITTED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING 'ALLOWED BY WAY OF A DEDUCTION UNDER SECTION 10 (2) (XV) OF THE ACT (INDIAN INCOME TAX ACT, 1922) IF IT SATISFIES OTHERWISE THE 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 MADE BY THE ASSESSEE UNDER THE HEAD AMP TO THE DOMESTIC PARTIES,FAILURE OF THE TPO PROVE THAT EXPENSES WERE NOT FOR THE BUSINESS 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(SUPRA),WE ARE OF THE OPINION THAT THE TRANSACTION - IN - QUESTION WAS NOT AN INTERNATIONAL TRANSACTION AND THAT THE TPO HAD WRONGLY INVOKED THE PROVISIONS OF CHAPTER X OF THE ACT FOR THE SAID TRANSACTION. 3.4.4.WITH REGARD TO THE SUBMISSIONS OF THE AR THAT THE ISSUE OF AMP SHOULD BE RESTORED BACK TO THE FILE OF THE AO,WE WANT TO MENTION THAT LAW AS A CONCEPT IS SUPPOSED TO EVOLVE WITH PASSAGE OF TIME - IT CANNOT BE STATIC ALWAYS.NONAVAILABILITY OF A PARTICULAR DECISION OF THE HIGHER FORUM CANNOT JUSTIFY THE RESTORA - TION OF ISSUE/CASES TO THE FILE OF AO IN EACH AND EVERY CASE.UNNECESSARY LITIGATION HAS TO BE AVOIDED AND ISSUES HAVE TO BE SETTLED FOR ONCE AND ALL.WE ARE OF THE OPINION THAT AFTER THE JUDGMENTS OF MARUTI SUZUKI AND BAUSCH & LOMB (SUPRA)THERE IS NO SCOPE OF ANY OTHER INTERPRETATION ABOUT THE AMP EXPENDITURE. IN THE CASE UNDER CONSIDERATION,THE AO/TPO HAS NOT BROUGHT ANYTHING ON RECORD 5470 & ORS.CADBURY 21 THAT THERE EXISTED AND AGRE EMENT,FORMAL OR INFORMAL,BETWEEN THE ASSESSEE AND THE AE TO SHARE/REIMBURSE THE AMP EXPENSES INCURRED BY THE ASSESSEE IN INDIA. IN ABSENCE OF SUCH AN AGREEMENT THE FIRST AND PRIMARY PRECONDITION OF TREATING THE TRANSACTION - IN - QUESTION AN IT REMAINS UNFULFI LLED. CONDUCTING FAR ANALYSIS OR ADOPTING AN APPROPRIATE 32 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. METHOD IS THE SECOND STAGE OF TP ADJUSTMENTS. THE FIRST THING IS TO FIND OUT WHETHER THE DISPUTED TRANSACTION IN IS IT OR NOT.WITHOUT CROSSING THE FIRST THRESHOLD SECOND CANNOT BE APPROACHED,AS STATE D EARLIER.IN THE CASE UNDER CONSIDERATION,WE ARE OF THE OPINION THAT AMP EXPENDITURE IS NOT AN IT AND THEREFORE WE ARE NOT INCLINED TO RESTORE BACK THE ISSUE TO THE FILE OF THE AO.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION,WE A RE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE TPO.THEREFORE,REVERSING HIS ORDER,WE DECIDE SECOND GROUND IN FAVOUR OF THE ASSESSEE. 15. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO ORDINAT E BENCH IN ASSESSEES OWN CASE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPENDITURE. GROUND RAISED IS ALLOWED. 24 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN TURN RELYING ON THE DECISION OF ASSESSMENT YEAR 200 6 - 07 . THESE ISSUES ARE SETTLED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLO WED . GROUND NO. 25 DISALLOWANCE OF DEPRECIATION ON MARKETING KNOW HOW. 25 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 5.1 TO 5.4 OF AO ORDER AND PARA 10 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH 33 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2008 - 09 (ITA NO. 7539/MUM/2012) ON MERITS IN FAVOUR OF THE ASSESSEE. 26 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERE D BY THE ORDER OF ITAT. 27 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 7539/MUM/2012 FOR AY 2008 - 09 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 4. THE FACTS ARE THAT DURING PREVIOUS YEAR RELEVANT TO AY 2002 - 03, THE ASSESSEE ACQUIRED ON - GOING CHOCOLATE CONFECTIONARY BUSINESS OF WARNER LAMBERT (I) PVT. LTD. PURSUANT TO THE WO RLD - WIDE STOCK AND ASSET PURCHASE AGREEMENT BETWEEN PFIZER AND CADBURY SCHWEPPES PLC OF UK (THEIR RESPECTIVE PARENT COMPANY). AS A PART OF SALE CONSIDERATION, THE ASSESSEE ALLOCATED CERTAIN AMOUNT TO MARKETING KNOW - HOW AND CLAIMED DEPRECIATION ON THE SAME, TREATING THE SAME TO BE INTANGIBLES. THE ALLOCATION WAS BASED ON VALUATION REPORT OF AN INDEPENDENT VALUER. HOWEVER, THE CLAIM WAS NOT ACCEPTED BY THE DEPARTMENT IN AY 2003 - 04 AND ACCORDINGLY, FOLLOWING THE SAME, SIMILAR DEPRECIATION OF RS.12.79 LACS CLAI MED DURING THE YEAR WAS DISALLOWED. THE LD. DRP, OBSERVING THAT THE ISSUE UNDER EARLIER YEARS WAS BEING CONTESTED BEFORE TRIBUNAL, THE ASSET COULD NOT BE CATEGORIZED AS AN ASSET ELIGIBLE FOR DEPRECIATION U/S 32 AND THEREFORE, UPHELD THE STAND OF LD. 34 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. AO. WE FIND THAT TRIBUNAL, IN AY 2003 - 04, AT PARA - 17 ALLOWED DEPRECIATION CLAIM APPLYING THE RATIO OF DECISION OF HONBLE SUPREME COURT RENDERED IN M/S SMIFS SECURITIES LTD. [2012 348 ITR 302]. SIMILAR VIEW HAS BEEN TAKEN IN SUBSEQUENT YEARS. THEREFORE, RESPECT FULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL ON THIS ISSUE IN ASSESSEES OWN CASE, WE ALLOW ASSESSEES CLAIM OF DEPRECIATION. GROUND NO. 13 STANDS ALLOWED. 28 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH IN ASSESSEES O WN CASE IN TURN RELYING ON THE DECISION OF ASSESSMENT YEAR 2008 - 09. THESE ISSUES ARE SETTLED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSI ON OF LD. AR. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 26 DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.R. 8D. 29 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 6.1 TO 6.10 OF AO ORDER AND PARA 11 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2008 - 09 (ITA NO. 7539/MUM/2012) ON MERITS IN FAVOUR OF THE ASSESSEE. 35 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 30 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDE R OF ITAT. 31 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 7539/MUM/2012 FOR AY 2008 - 09 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 5.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE EARNED EXEMPT INCOME OF RS.16.18 CRORES WHICH MAINLY COMPRISED - OFF OF DIVIDEND ON MUTUAL FUNDS. THE ASSESSEE, INTER - ALIA, SUBMI TTED THAT RULE 8D WAS NOT APPLICABLE TO YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED THAT ASSESSEES SURPLUS FUNDS WERE INVESTED IN LIQUID MUTUAL FUND AND THE SAME WERE WITHDRAWN AS PER BUSINESS REQUIREMENTS. THE ATTENTION WAS ALSO DRAWN TO THE FACT THE RE WERE TWO PERSONS IN THE TREASURY DEPARTMENT TO MANAGE MUTUAL FUNDS INVESTMENT ON REGULAR BASIS AND THE TOTAL SALARY PAID TO THEM WAS RS.9.20 LACS THEREFORE, A PART OF THE SAME COULD BE DISALLOWED. THE ARGUMENTS WERE ALSO RAISED TO SUBMIT THAT INVESTMENT S WERE MADE OUT OF RESERVES AND SURPLUS. HOWEVER, NOT SATISFIED, LD. AO, APPLYING RULE 8D, WORKED OUT AGGREGATE DISALLOWANCE OF RS.233.04 LACS WHICH COMPRISED - OFF OF DIRECT DISALLOWANCE U/R 8D(2)(I) FOR RS.9.20 LACS, INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.80.56 LACS AND INDIRECT EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.143.28 LACS. THE DIRECT EXPENSE DISALLOWANCE U/R 8D(2)(I) FOR RS.9.20 LACS IS THE SAME DISALLOWANCE WHICH HAS BEEN OFFERED BY THE ASSESSEE AGAINST TREASURY DEPARTMENT EXPENSES. THE DIS ALLOWANCE, 36 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. UPON CONFIRMATION BY LEARNED DRP, IS UNDER APPEAL BEFORE US. 5.2 THE ARGUMENTS OF LD. SR. COUNSEL ARE TWO - FOLD VIZ. (I) LD. AO HAS NOT RECORDED REQUISITE SATISFACTION BEFORE PROCEEDING TO COMPUTE DISALLOWANCE AS PER RULE 8D; (II) THE ASSESSEE HA D SURPLUS FUNDS TO MAKE THE INVESTMENTS AND THEREFORE, THE PRESUMPTION THAT THE INVESTMENTS WERE OUT OF SURPLUS FUNDS STOOD IN ASSESSEES FAVOR BY THE JUDGMENTS OF HONBLE BOMBAY HIGH COURT RENDERED IN IN HDFC BANK LTD. V/S CIT (2016 95 CCH 61) & CIT V/S H DFC BANK LTD. (2014 366 ITR 505) . 5.3 WE HAVE CONSIDERED THE SAME. UPON PERUSAL OF FINANCIAL STATEMENTS, WE FIND THAT OWN FUNDS IN THE SHAPE OF SHARE CAPITAL & FREE RESERVES AT YEAREND STOOD AT RS.46266.97 LACS AS AGAINST INVESTMENT OF RS.31228.98 LACS. N OTHING HAS BEEN BROUGHT ON RECORD BY LD. AO TO ESTABLISH THE NEXUS OF INVESTMENTS WITH BORROWED FUNDS. IN FACT, OPENING INVESTMENTS STOOD AT RS.26663.91 LACS AND THE ASSESSEE EARNED PROFIT AFTER TAX FOR RS.15094.68 LACS DURING THE YEAR UNDER CONSIDERATION WHICH IS MORE THAN INCREMENTAL INVESTMENTS. THEREFORE, APPLYING THE RATIO OF CITED DECISIONS, WE HOLD THAT NO INTEREST DISALLOWANCE WOULD BE JUSTIFIED ON THE FACTS AND CIRCUMSTANCES. WE ORDER SO. SO FAR AS THE DISALLOWANCE OF DIRECT / INDIRECT EXPENSES IS CONCERNED, WE ARE OF THE VIEW THAT SINCE RULE 8D WAS APPLICABLE TO THIS AY, THE FINDINGS GIVEN IN EARLIER ORDERS OF TRIBUNAL WOULD NOT APPLY TO THIS YEAR AND THE DISALLOWANCE HAS TO BE WORKED OUT IN TERMS OF THE RULE 8D. THE LD. AO, IN DRAFT ASSESSMENT ORD ER, AT PARA 6.4, HAS NOTED THAT THE SUBMISSIONS MADE BY ASSESSEE IN DEFENSE OF SUO - MOTO DISALLOWANCE COULD NOT BE ACCEPTED AS AGAINST THE SUBMISSIONS OF THE LD. SR. COUNSEL THAT THE REQUISITE SATISFACTION WAS NOT RECORDED BY LD. AO BEFORE PROCEEDING TO AP PLY RULE 8D. WE ARE OF THE CONSIDERED OPINION THAT THERE WAS NO PARTICULAR METHOD OF RECORDING SATISFACTION IN THE QUANTUM ASSESSMENT ORDER AND THEREFORE, UNABLE TO ACCEPT THIS SPECIFIC PLEA OF LD. SR. COUNSEL. HOWEVER, KEEPING IN VIEW THE FACTUAL MATRIX A S WELL AS SUBMISSIONS MADE BEFORE US, WE DEEM IT FIT TO RESTORE THE MATTER OF DIRECT / INDIRECT EXPENSE DISALLOWANCE TO THE FILE OF LD. AO 37 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. FOR RE - ADJUDICATION IN THE LIGHT OF SUO - MOTO DISALLOWANCE OFFERED BY THE ASSESSEE. AS HELD EARLIER, NO INTEREST DISAL LOWANCE WOULD BE JUSTIFIED, KEEPING IN VIEW THE ASSESSEES FINANCIAL PARAMETERS. GROUND NO. 14 STAND PARTLY ALLOWED. 32 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN TURN RELYING ON THE DECISION OF A SSESSMENT YEAR 2008 - 09. THESE ISSUES ARE SETTLED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 27 DISALLOWANCE OF FOREIGN EXCHANGE LO SS . 33 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 7 .1 TO 7 .11 OF AO ORDER AND PARA 1 2 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF LONDON STAR DIAMOND CO. (I) PVT. LTD. VRS. DCIT (2013) 38 TAXMANN.COM 338 (MUM - TRIB) ON MERITS IN FAVOUR OF THE ASSESSEE. 34 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 38 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 35 . CONSIDERED THE R IVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF LONDON STAR DIAMOND CO. (I) PVT. LTD. VRS. DCIT (2013) 38 TAXMANN.COM 338 (MUM - TRIB) ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 35. THE SUBDIVISIONS OF THE LOSS OF RS. 4,69,42,680/ - : WE HAVE ALREADY TABULATED ABOVE THE THREE SUBDIVISIONS OF THE IMPUGNED LOSSES BASED ON THE TIMING OF THE CANCELLATION OF THE FCS. BROAD LY THE LOSS IS DIVIDED INTO TWO TYPES AND THE ADJUDICATION OF THE EACH SUBDIVISION OF LOSS IS GIVEN AS UNDER: (A) LOSS ON CANCELLATION OF MATURED FCS AMOUNTING TO RS 4,14,88,805/ - RELATES TO THE FCS CANCELLED OR TERMINATED ON OR AFTER THE DUE DATE. IN OTH ER WORDS, THE FCS BOOKED AS INTEGRAL PART OF THE EXPORT INVOICES LIVED ITS BOOKING PERIOD IN FULL AND THEY WERE EITHER TERMINATED BY THE BANK ON OR AFTER DUE DATE OF MATURITY DATE OF THE CONTRACT AS THE ACTUAL REALIZATION WERE NOT RECEIVED IN TIME. THESE A RE NOT PREMATURE CANCELLATIONS BY THE ASSESSEE AND THEREFORE, IN OUR CONSIDERED VIEW, THE SAID LOSS OF RS 4,14,88,805/ - , BEING RELATED TO THE FCS WHICH ARE INTEGRAL OR INCIDENTAL TO THE EXPORTS OF THE DIAMONDS, SHOULD BE ALLOWED AS BUSINESS LOSS IN VIEW OF THE BINDING HIGH COURT OR TRIBUNAL DECISIONS/JUDGMENTS IN THE CASE OF D KISHORE KUMAR AND CO (SUPRA), BADRIDAS GAURIDU PVT LTD (SUPRA), SOORAJ MUILL MAGARMULL, (SUPRA) ETC. THUS, LOSS ARISING FROM CANCELLATION OF THE MATURED CONTRACTS IS ALLOWED IN FAVOUR OF THE ASSESSEE. THUS, THIS PART OF THE GROUND OF THE ASSESSEE IS ALLOWED. 39 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. T HEREFORE , RESPECTFULLY FOLLOWING THE ABO VE DECISION OF COORDINATE BENCH THAT THE IDENTICAL ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ACCEPT THE S UBMISSION OF LD. AR. ACCORDINGLY, TH IS GROUND RAISED BY THE ASSESSEE IS ALLOWED . GROUND NO. 28 DISALLOWANCE ON ALLOCATION OF EXPENDITURE AT BADDI UNIT. 36 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 8.1 TO 8.8 OF AO ORDER AND PARA 13 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR : 2007 - 08 AND 2008 - 09 (ITA NO. 4225/MUM/2014 & 7539/MUM/2012) ON MERITS IN FAVOUR OF THE ASSESSEE. 3 7. ON THE OTHER H AND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 3 8. CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINA TE BENCH OF ITAT IN ITA 40 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. NO. 4225/MUM/2014 FOR AY 2007 - 08 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 30. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICE R HAS ALLOCATED FOLLOWING ITEMS TO BADDI UNIT ON THE BASIS OF SALES RATIO AS UNDER : - (I) INTEREST (II) OPERATION AND ESTABLISHMENT EXPENSES (III)VOLUNTARY RETIREMENT EXPENSES (IV) DECREASE IN STOCK 131. AS REGARDS DECREASE IN STOCK, LEARNED COU NSEL OF THE ASSESSEE SUBMITTED THAT THIS IS ACTUALLY CHANGE IN INVENTORY AT BADDI UNIT AND IT IS SUBMITTED THAT THERE IS NO QUESTION OF ANY ALLOCATION OF SALES RATIO. AS REGARDS VOLUNTARY RETIREMENT SCHEME EXPENSES, LEARNED COUNSEL CONTENDED THAT BADDI UNIT WAS A NEW UNIT AND NONE OF THE EMPLOYEE AT BADDI UNIT HAS OPTED FOR VRS, HENCE HE SUBMITTED THAT THERE CANNOT BE ANY ALLOCATION. HOWEVER, LEARNED COUNSEL AGREED THAT FOR ACTUALLY VERIFYING THIS ASPECT THIS MATTER CAN BE REMITTED TO THE FILE OF THE ASSESSING OFFICER . AS REGARDS INTEREST EXPENDITURE LEARNED COUNSEL SUBMITTED THAT THERE ARE NO FINANCIAL CHARGES ATTRIBUTABLE TO BADDI UNIT. HE SUBMITTED THAT FINANCIAL CHARGES COMPRISE MAJORITY OF BILL DISCOUNT, LETTER OF CREDIT CHARGES, BANK CHARGES ETC. THEY CANNOT BE A LLOCATED TO BADDI UNIT SINCE BADDI UNIT IS A CASH SURPLUS UNIT. AS REGARDS ALLOCATION OF OPERATION AND ESTABLISHMENT COST, LEARNED COUNSEL MADE FOLLOWING WRITTEN SUBMISSIONS : - COST AS PER MIFPL'S ALLOCATION KEYS DIRECT EXPENSES SUCH AS POWER & FUEL, FR EIGHT, CONSUMABLE REPAIRS AND OTHER SIMILAR DIRECT FACTORY COSTS ACTUAL EXPENDITURE INCURRED AT BADDI 41 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. DIRECT MARKETING COSTS PROPORTION OF SALE VALUE OF BOURNVITA AND CADBURY DIARY MILK MANUFACTURED AT BADDI TO TOTAL SALES OF THE COMPANY SELLING AND DISTRIBUTION EXPENDITURE PROPORTION OF SALES VOLUME OF BOURNVITA AND CADBURY MILK MANUFACTURED AT BADDI TO TOTAL SALES OF THE COMPANY. ROYALTY AND TECHNICAL FEES ROYALTY PERCENTAGE OF SALES OF BOURNVITA AND CADBURY MILK MANUFACTURED AT BADDI TO TOTAL SALES OF THE COMPANY. OTHER OVERHEADS (WHICH INCLUDES DIRECT RELATED EXPENSES) BASED ON SALES RATIO, PRODUCTION RATIO, FULL TIME EQUIVALENT MIFPL MANUFACTURES BOURNVITA AND CADBURY DAIRY MILK AT ITS BADDI FACTORY WHILE IT MANUFACTURES ONLY CHOCOLATES AT OTHER FACTORIES. BECAUSE OF THE PRODUCT MIX, COST OF THE MATERIAL FOR BOURNVITA IS LOWER THAN THE COST OF THE MATERIALS FOR MANUFACTURING CHOCOLATES. IN BOURNVITA, THE MATERIALS USED ARE MALT EXTRACT, DAIRY FAT, SKIMMED MILK POWDER, LIQUID GLUCOSE, SUGAR, COCOA POWDER ETC. WHILE IN CHOCOLATES THE MATERIALS USED ARE CRUMB (WHICH IS AN EXTRACT OF COCOA, MILK AND SUGAR OF WHICH IS HIGHER) COCOA, SUGAR, DRY FRUITS, WAFERS ETC. DEPENDING O N THE QUALITY OF CHOCOLATE. THE EMPLOYEE COST IN BADDI FACTORY IS LESSER THAN OTHER UNITS SINCE BADDI FACTORY IS SITUATED IN BACKWARD AREA AND THEREFORE, LABOUR COST IS CHEAPER. FURTHER, NEW STAFF AND LABOUR ARE APPOINTED IN BADDI WHILE IN OTHER UNITS, OLD STAFF AND LABOUR ARE WORKING SINCE LONG AND HAVE PROPORTIONATELY HIGHER SALARY. EXCISE EXEMPTION IS AVAILABLE TO BADDI UNIT UNDER EXCISE LAW. ACCORDINGLY, THE SALE PRICE AT BADDI UNIT IS TOTAL SALE PRICE WHILE IN OTHER FACTORIES, SALE PRICE IS SA LE PRICE MINUS EXCISE DUTY AND THEREBY, THE RATIO OF COST ON SALE IS LOWER AT THE BADDI FACTORY. DUE TO THE EXCISE EXEMPTION, THE NET PROFIT AT BADDI UNIT IS 42 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. GREATER BY APPROXIMATELY 10 - 12% THAN OTHER UNITS (AFTER CONSIDERING THE CENVAT CREDIT WHICH IS AVA ILABLE ONLY TO OTHER UNITS). THE COST OF PACKING MATERIALS OF CHOCOLATES IS HIGHER THAN PACKING MATERIALS FOR BOURNVITA SINCE DIFFERENT TYPES OF WRAPPERS ARE REQUIRED FOR CHOCOLATES. THE OPERATION AND ESTABLISHMENT EXPENSES ARE LESSER AT BADDI AS C OMPARED TO WARNA DUE TO THE FOLLOWING REASONS : - I) THE BADDI FACTORIES ARE SITUATED IN BACKWARD AREAS AND OPERATION AND ESTABLISHMENT COST ARE COMPARATIVELY LOWER AS COMPARED TO WARNA. II) THE FACTORIES LOCATED AT OTHER UNITS ARE OLD. HENCE, THE OPERATION AND ESTABLISHMENT EXPENSES INCREASE ON YEAR ON YEAR BASIS. III) FURTHER, BADDI UNIT ENJOYS A SCALE BENEFIT SINCE THE PRODUCTION OF BOURNVITA AT BADDI UNIT IS MUCH HIGHER THAN PRODUCTION OF BOURNVITA IN WARNA. THEREFORE THE UNIT FIXED COST AT BADDI IS MOWE R RESULTING IN HIGHER PROFIT PERCENTAGE. III) THUS THE RATIO OF ESTABLISHMENT EXPENSES HAS DECREASED DUE TO INCREASE IN SALES AT BADDI FACTORY LEADING TO HIGHER MARGIN AT BADDI UNIT. 32. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORD, WE AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE, AS REGARDS ALLOCATION OF // INTEREST, VOLUNTARY RETIREMENT SCHEME AND DECREASE IN STOCK. AS AGREED BY LEARNED COUNSEL ABOVE THE FACT THAT NO VRS EXPENDITURE PERTAINS TO THE EMPLOYEES OF BADDI UNIT MAY BE CHECKED BY THE ASSESSING OFFICER. 33. AS REGARDS OPERATION/ESTABLISHMENT EXPENSES, WE FIND CONSIDERABLE COGENCY IN THE ALLOCATION KEY USED BY THE ASSESSEE FOR DIRECT EXPENSES, DIRECT MARKETING COST AND SELLING AND DISTRIBUTION EXPENDITURE, ROYALTY AND TECHNICAL 43 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. FEES. WE APPROVE THE SAME SUBJECT TO FACTUAL VERIFICATION BY THE ASSESSING OFFICER. WE FIND THAT THE METHOD OF ALLOCATION OF OTHER OVERHEAD AS MENTIONED ABOVE APPEARS TO BE OPAQUE. WE REMIT THE SAME TO THE ASSESSING OFFICER VERIFICATION. T HEREF ORE , RESPECTFULLY FOLLOWING THE ABO VE DECISION OF COORDINATE BENCH THAT THE IDENTICAL ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE. WE NOTICE THAT THE COORDINATE BENCH HAS ACCEPTED THE METHOD OF ALLOCATION WITH REGARD TO INTEREST, VRS DECREASE IN STOCK, DIRE CT EXPENSES, DIRECT MARKETING COST AND SELLING & DISTRIBUTION EXPENSES, ROYALTY AND TECHNICAL FEES. THE BENCH HAS REMITTED BACK TO AO ONLY THE OTHER OVERHEAD. ACCORDINGLY, WE DEEM IT FIT TO REMIT ONLY THE VERIFICATION OF ALLOCATION OF OTHER OVERHEAD TO THE FILE OF AO. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS PARTLY A LLOWED . GROUND NO. 29 CHARACTERIZING BUYBACK OF SHARES AS DISTRIBUTION OF DIVIDEND AND LEVYING DIVIDEND DISTRIBUTI ON TAX ON SUCH BUY BACK. 39 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 9.1 TO 9.19 OF AO ORDER AND PARA 1 4 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF GOLDEN SACHS (INDIA) SE CURITIES PVT. LTD. 44 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. VRS. ITO (2016) 70 TAXMANN.COM 46 (MUM TRIB) AND HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CAPGEMINI INDIA PVT. LTD. (2016) 67 TAXMANN.COM 1 (BOM) ON MERITS IN FAVOUR OF THE ASSESSEE. 40 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDE RS PASSED BY REVENUE AUTHORITIES. HE SUBMITTED THAT HE RELIED ON FIDELITY BUSINESS SERVICE (INDIA) PVT. LTD. 80 TAXMAN.COM 236 DECISION IN WHICH THE ITAT HAS REFERRED GOLDEN SACHS (INDIA) SECURITIES PVT. LTD DECISION AND CBDT CIRCULAR. FURTHER, HE SUBMITTE D THAT THE HONBLE KARNATAKA HIGH COURT UPHELD THE VIEW IN 95 TAXMAN.COM 253 (2018). BY FOLLOWING THE DECISION, THE ISSUE MAY BE REMITTED BACK TO AO FOR VERIFICATION OF THE FACTS. 41. IN REJOINDER, LD. AR SUBMITTED THAT IN THE CASE OF FIDELITY BUSINESS SE RVICE (INDIA) PVT. LTD, THE ITAT HAS FOUND THAT THE PURCHASE OF BUY BACK OF SHARES ARE NOT GENUINE, WHEREAS IN THE GIVEN CASE, THE TRANSACTION IS GENUINE, AND ACCORDINGLY THE CASE OF FIDELITY IS NOT APPLICABLE. 45 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 42 . CONSIDERED THE RIVAL SUBMISSION AND MATE RIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF GOLDEN SACHS (INDIA) SECURITIES PVT. LTD. VRS. ITO (2016) 70 TAXMANN.COM 46 (MUM TRIB) AND HONBLE HIGH COU RT OF BOMBAY IN THE CASE OF CAPGEMINI INDIA PVT. LTD. (2016) 67 TAXMANN.COM 1 (BOM) ON MERITS. FOR THE SAKE OF CLARITY, ITAT ORDER IS REPRODUCED BELOW: - 5.3.WE WOULD ALSO LIKE TO DISCUSS THE ISSUE OF THE ALLEGED COLOURABILITY OF THE TRANSACTION. WE FIND THAT IN THE MATTER OF CAPGEMINI INDIA PRIVATE LIMITED(SUPRA),THE HONBLE BOMBAY HIGH COURT HAS DELIBERATED UPON THE ALMOST IDENTICAL FACTS AND CIRCUMSTANCES AND HAS HELD AS UNDER: 6. ACCORDING TO THE REGIONAL DIRECTOR IF THE SCHEME IS SANCTIONED IT WILL A MOUNT TO EVASION OF INCOME TAX AND OUTFLOW OF FOREIGN EXCHANGE TO THE TUNE OF RS.248 CRORES AND THEREFORE ON THIS GROUND THE SCHEME SHOULD BE REJECTED. THE REGIONAL DIRECTOR HAS NOT FURNISHED ANY PARTICULARS IN SUPPORT OF THE AFORESAID CONTENTION. BE THAT AS IT MAY, IF THE LAW PERMITS A COMPANY TO BUY BACK BACK ITS SHARES IN MORE THAN ONE WAY; THE COMPANY CANNOT BE COMPELLED TO FOLLOW ONLY THE METHOD THAT RESULTS IN PAYMENT OF INCOME TAX. IT IS WELL SETTLED THAT AN ASSESSEE CAN ALWAYS MANAGE HIS AFFAIRS IN A MANNER SO AS TO AVOID PAYMENT OF TAX. IN THE PRESENT CASE SINCE IT IS LEGALLY PERMISSIBLE FOR THE COMPANY TO BUY BACK ITS SHARES BY FOLLOWING THE PROCEDURE UNDER SECTION 391 READ WITH SECTIONS 100 TO 104 OF THE 1956 ACT, THE FACT THAT THE SAME MAY NOT AT TRACT INCOME TAX WILL NOT AMOUNT TO IT BEING A DEVICE TO EVADE TAX. 46 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 7. EVEN THE ARGUMENT OF THE REGIONAL DIRECTOR THAT FOREIGN EXCHANGE AMOUNTING TO RS.248 CRORES WILL BE DRAINED AWAY IF THE SCHEME IS SANCTIONED, IS OF NO AVAIL ONCE IT IS HELD THAT THE PR OCEDURE ADOPTED BY THE COMPANY IS PERMISSIBLE IN LAW. MOREOVER, THE REGIONAL DIRECTOR HAS NOT SHOWN THAT THE LAW PROHIBITS THE TRANSFER OF SHARES BY A NON - RESIDENT TO RESIDENT. IN FACT, HE DOES NOT DISPUTE THAT THE SAME IS PERMISSIBLE. THE PETITIONER HAS P LACED ON RECORD RBI'S CIRCULAR NO.49 DATED 4TH MAY 2010 WHICH PROVIDES THAT SHARES OF AN UNLISTED INDIAN COMPANY CAN BE TRANSFERRED BY A NON - RESIDENT TO A RESIDENT UNDER THE GENERAL PERMISSION OF THE RBI IF THE TRANSFER PRICE DOES NOT EXCEED THE FAIR MARKE T VALUE AS DETERMINED BY A CHARTERED ACCOUNTANT OR A SEBL REGISTERED MERCHANT BANKER AS PER THE DCF METHOD. IN THE PRESENT CASE THE TRANSFER PRICE HAS BEEN ARRIVED AT IN ACCORDANCE WITH THE AFORESAID CIRCULAR OF THE RBI. THE REGIONAL DIRECTOR HAS NOT DISPU TED THE FAIR MARKET VALUE OF THE SHARES SO DETERMINED. IN THESE CIRCUMSTANCES IT IS CLEAR THAT THE BUYBACK OF SHARES UNDER THE SCHEME IS IN ACCORDANCE WITH THE RBI GUIDELINES AND THAT BEING SO, THERE IS NO QUESTION OF THERE BEING ANY DRAINING AWAY OF FOREI GN EXCHANGE. 8. IN VIEW OF THE ABOVE AND PARTICULARLY THE FACT THAT IN LAW THE PETITIONER IS ENTITLED TO BUY BACK ITS OWN SHARES BY MEANS OF A SCHEME UNDER SECTION 391 READ WITH SECTIONS 100 - 104OF THE 1956 ACT, THE SCHEME CANNOT BE SAID TO BE A COLORABLE D EVICE TO EVADE INCOME TAX. IT IS A LEGALLY PERMISSIBLE PROCEDURE WHICH THE PETITIONER IS ENTITLED TO FOLLOW TO BUY BACK ITS SHARES. FOLLOWING THE ABOVE ORDER,WE HOLD THAT TRANSACTION IN QUESTION WOULD NOT FALL UNDER THE CATEGORY OF COLOURABLE DEVICE.IF A N ASSESSEE ENTERS INTO A DEAL WHICH DOES NOT VIOLATE ANY PROVISION OF THE ACT OF APPLICABLE TO A PARTICULAR AY.THE DEAL CANNOT BE TERMED A COLOURABLE DEVICE,IF IT RESULT IN NON - PAYMENT OR LESSER PAYMENT OF TAXES IN THAT YEAR.THE WHOLE EXERCISE SHOULD NOT L EAD TO TAX EVASION.NON - PAYMENT OF TAXES BY AN ASSESSEE IN GIVEN 47 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. CIRCUMSTANCES COULD BE A MORAL OR ETHICAL ISSUE.BUT,FOR THAT THE ASSESSEE CANNOT BE PENALISED.IN LIGHT OF THE ABOVE DISCUSSION,WE ARE REVERSING THE DECISION OF THE FAA AND DECIDING THE EFFECTI VE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 43. T HEREFORE , RESPECTFULLY FOLLOWING THE ABO VE DECISION OF COORDINATE BENCH THAT THE IDENTICAL ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE. AS SUBMITTED BY LD. AR, THE CASE REFERRED BY LD. DR TO THE CASE OF M /S FIDELITY BUSINESS IS DISTINGUISHABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED . GROUND NO. 30 DISALLOWANCE ON ACCOUNT OF ANNUAL INFO RMATION REPOT. 44 . BEFORE US, LD. AR BROUGHT TO OUR NOTICE PARA 10.1 TO 10.3 OF AO ORDER AND PARA 15 OF DRP ORDER AND SUBMITTED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF BASANT KUMAR IN ITA NO. 4679/DEL/ 2012) ON MERITS IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT THE SAME WAS OFFERED IN THE NEXT YEAR. 45 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER S PASSED BY REVENUE AUTHORITIES. 48 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. 46 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE N OTICE FROM THE RECORDS THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN THE CASE OF BASANT KUMAR IN ITA NO. 4679/DEL/2012) ON MERITS. FOR THE SAKE OF CLARITY, ITAT ORDER IS REPRODUCED BELOW: - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. IT IS ONLY ELEMENTARY THAT INFORMATION AS PER DATABASE OF THE REVENUE AUTHORITIES CANNOT BE, BY ITSELF, A LEGALLY SUST AINABLE BASIS FOR ADDITION BEING MADE TO THE INCOME OF AN ASSESSEE AND THAT SUCH INPUTS ARE AT BEST STARTING POINTS FOR APPROPRIATE INQUIRIES. THERE IS NOTHING MORE THAN THESE INFORMATION INPUTS WHICH HAVE BEEN PUT AGAINST THE ASSESSEE. WE HAVE ALSO NOTED THAT, AS EVIDENT FROM AFFIDAVIT A COPY OF WHICH IS PLACED BEFORE US AT PAGE 26 OF THE PAPER BOOK, THE ASSESSEE HAS CATEGORICALLY STATED THAT THE IMPUGNED AMOUNT OF RS.58,78,256 SHOWN IN FORM NO. 26AS WAS NEITHER RECEIVED BY ME NOR RECEIVABLE TO ME AND TH AT THE ABOVE STATED AMOUNT OF RS.58,78,256/ - WAS DIRECTLY PAID BY THE VODAFONE ESSAR DIGILINK LTD TO THE RETAILERS OF THE COMPANY, A COMPLETE LIST OF WHICH IS PROVIDED BY THE COMPANY AND PLACED ON FILE. WE HAVE FURTHER NOTED THAT VIDE LETTER DATED 15.12. 2011 (DULY ACKNOWLEDGED BY THE OFFICE ON 23.12.2011 EVIDENCE PLACED ON RECORD AT PAGE 27 OF THE PAPER BOOK), VODAFONE DIGILINK LTD HAS GIVEN A COMPLETE BREAK UP OF RS.58,78,256 AND GIVEN DETAILS OF THE RETAILERS TO WHOM THE RELATED PAYMENTS HAVE BEEN MAD E. THERE IS NO MATERIAL TO COME TO THE CONCLUSION THAT ASSESSEE EVER RECEIVED ANY SUCH COUPONS OR PAYMENTS NOR THE SAME ARE REFLECTED IN HIS BOOKS OF ACCOUNTS OR BANK STATEMENTS. THE FACT THAT THESE PAYMENTS ARE MADE BY COUPONS AND VOUCHERS ETC. CAN ALSO N OT BE PUT AGAINST THE ASSESSEE SINCE THE ASSESSEE NEVER 49 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. RECEIVED THE SAME AND THERE IS NO EVIDENCE TO THE CONTRARY. APPARENTLY, ENTIRE CONFUSION HAS STARTED FROM THE FACT THAT, PERHAPS AS A MEASURE OF ABUNDANT CAUTION, VODAFONE DEDUCTED TAX AT SOURCE IN RESPECT OF THE VOUCHERS ETC AND, FOR WHATEVER REASONS, STATED, THE NAME OF DISTRIBUTOR AS COLLECTIVE RECIPIENT OF ENTIRE SUM. ON THESE FACTS, IN OUR CONSIDERED VIEW, LEARNED CIT(A) WAS QUITE JUSTIFIED IN DELETING THE IMPUGNED ADDITION OF RS.58,78,256. WE APPROVE HIS CONCLUSIONS, AND DECLINE TO INTERFERE IN THE MATTER. 47 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABO VE DECISION OF COORDINATE BENCH THAT THE IDENTICAL ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE AND AS SUBMITTED BY LD. AR, THE ASSESSEE HAS DECLARED THE SAME IN THE SUBSEQUENT ASSESSMENT YEAR, THERE IS NO LOSS AS SUCH TO THE REVENUE . THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THIS GROUND RAISED BY THE A SSESSEE IS ALLOWED . GROUND NO. 31 IN RESPECT OF SHORT GRANT OF TDS CREDIT. 4 8 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE LD. AO HAS GRANTED CREDIT FOR TDS ONLY TO THE EXTENT OF RS. 1,69,04,517/ - AS RS. 2,99,18,916/ - AGAINST CLAIMED IN THE RETURN OF INCOME FILE. THEREFORE, WE ARE DIRECTING AO TO VERIFY THE CLAIM OF THE ASSESSEE AND ACCORDINGLY ALLOW THE TDS CREDIT BASED ON THE RECORD 50 I.T.A. NO. 2214/MUM/2014 M/S MONDELEZ INDIA FOODS PVT. LTD. SUBMITTED BEFORE HIM. ACCORDINGLY, THIS GROUND RAISED BY THE AS SESSEE IS ALLOWED. 49 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT 17/02/ 2021 . SD/ SD/ ( VIKAS AWASTHY ) (S. RIFAUR RAHMAN ) JUD ICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 17/02/2021 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / TH E CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI