Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 0346 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 year(s) 2 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-06-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I2
Next Hearing Date
10-07-2017
Assessment Year
2008-2009
Appeal Filed On
21-04-2014
Judgement Text
, -2, IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI , ! #$%&'()*+,* BEFORE MS. SUSHMA CHOWLA, V.P & SHRI PRASHANT MAHAR ISHI, AM - / ITA NO.2415/DEL/2014 . ( ( / ASSESSMENT YEAR 2008-09 MICHELIN INDIA PVT. LTD., (FORMERLY KNOWN AS MICHELIN INDIA TYRES PVT.LTD.) 3 RD FLOOR, ORCHID BUSINESS PARK, SECTOR-48, SOHNA ROAD, GURGAON-122002. PAN-AADCM8454G. .......... /0 /APPELLANT VS THE JCIT (OSD), CIRCLE-6(1), NEW DELHI. . #1/0 / RESPONDENT - / ITA NO.2946/DEL/2014 . ( ( / ASSESSMENT YEAR 2008-09 DCIT, CIRCLE-6(1), NEW DELHI. .......... /0 /APPELLANT VS MICHELIN INDIA TYRES PVT.LTD., UNIT-401, 404, 4 TH FLOOR, COPIA CORPORATE SUITES, JASOLA DISTRICT CENTRE, NEW DELHI-110076. PAN-AADCM8454G. . #1/0 / RESPONDENT /023* / APPELLANT BY : SH. NAGESHWAR RAO, ADV. & SH. SHATAWIK CHAKRABARTY, ADV. #1/023* / RESPONDENT BY : MS. NIDHI SHARMA, SR.DR 2%+ / DATE OF HEARING : 12.03.2020 45 2%+ / DATE OF PRONOUNCEMENT: 22 .06.2020 ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 2 *$ / ORDER PER SUSHMA CHOWLA,VP THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE ARE AGAINST ORDER OF JCIT(OSD), NEW DELHI DATED 16.12.2011 RELATING TO A SSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF T HE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE PRESENT CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2415/DEL/2014 [ASSESSEES APPEAL] ASSESSMENT YEAR 2008-09 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THAT ON THE FACTS AND IN LAW, THE HONBLE COMMI SSIONER OF INCOME TAX -(APPEALS) - IX, NEW DELHI (HEREINAFTER REFERRED TO AS HONBLE CIT(A)) / LEARNED ASSESSING OFFICER (HEREINAFTER R EFERRED TO AS LD. AO) ERRED IN ASSESSING THE INCOME OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR AT RS.19,108,755 AS AGAINST THE RET URNED INCOME OF RS.1,312,461. 2. THE HONBLE CIT(A) / LD. AO HAS ERRED ON FACTS AND IN LAW IN DISALLOWING THE MANAGEMENT FEE AMOUNTING TO RS.17,5 86,958 PAID BY THE APPELLANT, AND QUESTIONING THE NEED FOR AVAILIN G SUCH SERVICES FROM ITS ASSOCIATED ENTERPRISE, THEREBY FURTHER QUESTION ING THE COMMERCIAL EXPEDIENCY OF THE SERVICES AVAILED. THE HONBLE CIT (A) / LD. AO HAVE FAILED TO GIVE DUE COGNIZANCE TO THE DETAILED SUBMI SSIONS FILED BY THE APPELLANT WHICH CLEARLY DEMONSTRATE THE NATURE SERV ICES AVAILED, NEED OF THE APPELLANT AND THE BENEFIT REAPED THEREFROM., AND HAVE INSTEAD SUBJECTIVELY DISALLOWED THE EXPENDITURE PURELY BASE D ON PRESUMED DISPOSITION. 3. THE HONBLE CIT(A) / LD. AO ERRED IN MINDLESSLY DISALLOWING MANAGEMENT FEE PAID BY THE APPELLANT WITHOUT APPREC IATING THE PRIME FACTS APPLICABLE TO THE APPELLANTS BUSINESS OPERAT IONS AND THEREBY CAUSING DOUBLE TAXATION IN THE HANDS OF APPELLANT. ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 3 4. WITHOUT PREJUDICE, THE DISALLOWANCE CONFIRMED B Y THE HONBLE CIT(A) / LD. AO IN RELATION TO MANAGEMENT FEES PAID BY THE APPELLANT, IS IN CONTRADICTION TO THE FINDING OF THE LD. TPO AND NOT SUPPORTED BY ANY COGENT FACTS OR EVIDENCE TO HOLD SUCH A CONTRARY VI EW. THE HONBLE CIT(A) / LD. AO HAS ERRED IN NOT APPRECIATING THAT PAYMENT OF MANAGEMENT FEE IS AN INTERNATIONAL TRANSACTION AND HAS ALREADY BEE N ACCEPTED TO BE AT ARMS LENGTH SUBJECT TO DETAILED SCRUTINY BY THE LD . TPO PURSUANT TO A REFERENCE MADE BY THE LD.AO UNDER SECTION 92CA(1) O F THE ACT. 5. THE LEARNED CIT (A) HAS ERRED IN DISMISSING AS I NFRUCTUOUS THE GROUNDS OF APPEAL WHICH CONTENDED THAT THE AO HAS E RRED IN LAW AND FACTS IN INITIATING PENALTY PROCEEDINGS UNDER SECTI ON 271B, WITHOUT APPRECIATING THAT THE APPELLANT HAS MAINTAINED PROP ER BOOKS OF ACCOUNTS AND TAX AUDIT REPORT WHICH WERE DULY AUDIT ED BY CHARTERED ACCOUNT WITHIN THE TIME LINES PRESCRIBED UNDER SECT ION 44AB. 6. THE LEARNED CIT(A) HAS ERRED IN DISMISSING AS IN FRUCTUOUS THE GROUNDS OF APPEAL WHICH CONTENDED THAT THE AO HAS E RRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN INITIATING PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AGAINST THE APPELLANT, WHICH I S BAD IN LAW. 4. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE HENCE, DOES NOT REQUIRE ANY ADJUDICATION. 5. THE ISSUE RAISED IN GROUND NOS. 2 & 3 IS AGAINST THE DISALLOWANCE OF MANAGEMENT FEE PAID AMOUNTING TO RS.1,75,86,958/-. 6. THE GROUND OF APPEAL NOS. 4 & 5 ARE NOT PRESSED HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 7. THE GROUND OF APPEAL NO.6 IS PRE-MATURE HENCE, T HE SAME IS ALSO DISMISSED. 8. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION HAD FILED ORIGINAL RETURN OF INCOME O N 30.09.2008 DECLARING TOTAL INCOME AT NIL. THE ASSESSEE THEN FILED REVIS ED RETURN OF INCOME ON 14.10.2008 DECLARING TOTAL INCOME OF RS.13,12,461/- . THE ASSESSEE COMPANY ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 4 WAS INCORPORATED ON 12.11.2003 AS A RESULT OF JOINT VENTURE BETWEEN THE MICHELIN GROUP, FRANCE AND APPOLO TYRES LTD. IN IND IA. THE SAID JOINT VENTURE WAS FORMED TO CARRY OUT THE BUSINESS OF MAN UFACTURING AND TRADING OF TYRES AND TUBES FOR TRUCKS AND BUSES AND PASSENG ERS CARS. THE ASSESSING OFFICER MADE REFERENCE TO THE TRANSFER PRICING OFFI CER (IN SHORT TPO) U/S 92CA(1) OF THE ACT. THE TPO PASSED THE ORDER U/S 9 2CA(3) OF THE ACT AND NO TRANSFER PRICING ADJUSTMENT WAS PROPOSED. THE ASSE SSING OFFICER THEREAFTER, NOTED THAT THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION HAD PAID MANAGEMENT FEES OF RS.1.76 CRORES (APPROX.) TO ITS ASSOCIATED ENTERPRISES (IN SHORT AE) MICHELIN ASIA PACIFIC PTE. LTD. (IN SHO RT MAP). THE ASSESSING OFFICER FURTHER NOTED THAT DURING THE PRECEDING YEA R, THE AMOUNT OF EXPENDITURE DEBITED WAS RS.1.39 CRORES (APPROX.). ANOTHER ASPECT WHICH WAS NOTED BY THE ASSESSING OFFICER WAS THAT THE ASSESSE E WAS INCURRING HUGE OPERATING EXPENSES I.E. SALARY AND WAGES OF RS.9.21 CRORES, PROFESSIONAL AND LEGAL CHARGES OF RS.1.43 CRORES AND ALL KIND OF OTH ER MANAGERIAL AND ESTABLISHMENT EXPENSES, WHICH WERE INCLUDED IN TOTA L OPERATING EXPENSES OF RS.49.96 CRORES. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF MANAGEMENT SERVICES PROVIDED BY MAP SINGAPORE ALONG WITH THE COPY OF AGREEMENT AND DATE-WISE ACTIVITIES TO ESTABLISH ITS CASE OF SERVICES BEING PROVIDED BY THE SAID CONCERN. IN RESPONSE THEREOF, THE ASSESSEE POINTED OUT THAT IT HAD AVAILED CERTAIN MANAGEMENT SUPPORT SERV ICES FROM ITS AE. THE SAID SERVICES ARE ENLISTED AT PAGE 2 & 3 OF THE ASS ESSMENT ORDER. THE ASSESSEE STRESSED THAT THE MANAGERIAL SERVICES AVAI LED CONSTITUTE RELEVANT ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 5 BUSINESS ASSISTANCE RECEIVED BY THE ASSESSEE FROM M AP SINGAPORE TO UNDERTAKE ITS OPERATION IN A MORE EFFICIENT WAY. 9. RELIANCE WAS PLACED ON VARIOUS DECISIONS FOR THE ALLOWABILITY OF THE SAID CLAIM. THE ASSESSING OFFICER NOTES AS UNDER:- .IN THE ABOVE MENTIONED AGREEMENT, IT APPEA RS THAT THE ASSESSEE HAS RECEIVED ADVICES IN THE MATTER OF VARI ETY OF FIELDS, WHICH INCLUDE GENERAL BUSINESS AND ADMINISTRATION SERVICE , ECONOMIC PLANNING AND ACCOUNTING SERVICES, INDUSTRIAL ASSESSMENT SERV ICES, MARKETING TRAINING AND PLANNING, TRAINING AND PERSONNEL SERVI CES, FINANCIAL ADVISORY SERVICES, ECONOMIC AND INVESTMENT RESEARCH AND ANALYSIS, CREDIT CONTROL AND ADMINISTRATION, PRODUCT DISTRIBU TION PLANNING AND LOGISTICS SERVICES, QUALITY CONTROL SERVICES, LEGAL SERVICES, INFORMATION & TELECOMMUNICATION SERVICES.. 10. THE ASSESSING OFFICER OBSERVED THAT SUBMISSIONS OF THE ASSESSEE WERE NOT CORRECT AS THE ASSESSEE HAD INCURRED HUGE PERSO NNEL COST AND ESTABLISHMENT COST. HE ALSO OBSERVED THAT FROM THE DETAILS FILED, IT APPEARS THAT THE ASSESSEE HAD FULL TEAM OF MANAGEMENT CONSI STING OF MR. JEAN PAUL CAYLAR AS DIRECTOR AND MR. HERVE DUB, AS DIRECTOR. THE ASSESSEE HAD INCURRED HUGE EXPENSES ON THEIR SALARIES AND OTHER PERQUISITES. THE ASSESSING OFFICER FURTHER OBSERVED THAT AGAINST TOT AL TURNOVER OF RS.132.81 CRORES, THE ASSESSEE HAD INCURRED OPERATING EXPENSE S OF RS.49.97 CRORES WHERE THE ASSESSEE WAS ONLY A TRADING COMPANY AND H AD NOT ESTABLISHED ANY MANUFACTURING PLANT IN INDIA SO FAR. THE CLAIM OF THE ASSESSEE IN THE FORM OF MANAGEMENT FEE WAS NOT GENUINE CLAIM AS PER THE ASS ESSING OFFICER. IT WAS HELD TO BE A CLEAR DIVERSION OF INCOME AND THE CLAI M OF THE ASSESSEE WAS HELD TO BE NON GENUINE BUSINESS CLAIM AND THE SAME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ANOTHER POINT WHICH WAS RAISED BY THE ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 6 ASSESSING OFFICER RELYING ON DIFFERENT DECISIONS AN D IT WAS OBSERVED THAT THE PAYMENTS MADE TO THE RELATED PARTIES SHOULD BE REAS ONABLE IN ACCORDANCE TO THE MARKET CONDITIONS. 11. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSE SSEE THAT THE MANAGERIAL SERVICES CONSTITUTES GENUINE BUSINESS AS SISTANCE NEEDED BY THE ASSESSEE TO CONDUCT ITS BUSINESS OPERATIONS IN MORE EFFICIENT WAY. IT WAS ALSO POINTED OUT THAT OVER THE PERIOD OF YEARS, THE RE WAS CONSISTENT REDUCTION IN LOSS RECORDED BY THE ASSESSEE AND IT RESULTED IN PROFITABILITY DURING THE YEAR WHICH WAS BECAUSE OF THE BENEFITS DERIVED BY T HE ASSESSEE FROM THE SUPPORT SERVICES AVAILED FROM THE GROUP CONCERNS. IT WAS ALSO EXPLAINED THAT THE MANAGEMENT SERVICES WERE AVAILED IN THE FORM OF ONLINE SERVICES THROUGH E-MAIL OR ONLINE ACCESS AND WORKSHOP/CONFERENCES OR GANIZED BY THE AE FOR THE INDIAN ENTITY. THE CIT(A) WAS OF THE VIEW THAT THE ISSUE RAISED IN THE PRESENT APPEAL STANDS COVERED BY THE ORDER OF CIT(A ) IN ASSESSMENT YEAR 2007-08 AND SINCE THE ASSESSEE HAS NOT FURNISHED SU FFICIENT DOCUMENTS TO PROVE ITS AVAILMENT OF BENEFIT, THE EXPENDITURE NEE DS TO BE ADDED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE IS IN APPEAL A GAINST THE ORDER OF CIT(A). 12. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS A TRADING COMPANY AND ITS OPERATING EXPENSES WERE TO THE TUNE OF 40% OF THE TOTAL TURNOVER. IN PARA 3.2 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER TALKS ABOUT THE NATURE OF EXPENSES INCURRED BY THE ASSESS EE. THE LD.AR FOR THE ASSESSEE STRESSED THAT ROUTINE SUPPORT SERVICES WER E PROVIDED BY THE AE TO THE ASSESSEE FOR BETTER MANAGEMENT OF THE BUSINESS AND SUFFICIENCY AND ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 7 BENEFIT OF SUCH SERVICES PROVIDED BY THE AE, COULD NOT BE SEEN OR GONE INTO BY THE ASSESSING OFFICER. HE FURTHER STRESSED THAT THE TPO HAD ACCEPTED THE TRANSACTION TO BE AT ARMS LENGTH. IT WAS FURTHER POINTED OUT BY THE LD.AR THAT THE EXPENSES WERE INCURRED FROM YEAR TO YEAR; AND ONCE THE EXPENDITURE HAS BEEN INCURRED, IT IS NOT NECESSARY TO PROVE WHE THER ANY BENEFIT AROSE TO THE ASSESSEE OR NOT. HE FURTHER POINTED OUT THAT T HE DEPARTMENT CASE WAS THAT THE EVIDENCES FILED BY THE ASSESSEE FOR AVAILM ENT OF SUPPORT SERVICES WERE NOT SUFFICIENT AND ADEQUATE. IN SUCH SCENARIO , HE STRESSED THAT THE SAME DOES NOT WARRANT ENTIRE DISALLOWANCE OF EXPENS ES. HE FURTHER STATED THAT THE LOSSES HAD REDUCED OVER THE PERIOD OF YEAR S HENCE, THE ASSESSEE HAD BENEFITED FROM AVAILMENT OF SUCH SUPPORT SERVICES F ROM ITS AE. THE LD.AR THEN REFERRED TO THE ADDITIONAL EVIDENCE FILED BY T HE ASSESSEE. HE ALSO POINTED OUT THAT THOUGH THE TRIBUNAL HAD DECIDED TH E ISSUE AGAINST THE ASSESSEE BUT THE SAME WAS ON THE PREMISES THAT ONL Y ONE BILL FOR THE MONTH OF MARCH 2008 WAS FILED. HE ALSO BROUGHT TO OUR NO TICE THAT MISCELLANEOUS APPLICATION WAS FILED AND PENDING AGAINST THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2007-08. HOWEVER, HE STATED THA T HE WAS READY TO ARGUE THE APPEAL FOR THE INSTANT ASSESSMENT YEAR. 13. THE LD.DR FOR THE REVENUE POINTED OUT THAT UNDO UBTEDLY TPO HAD EXAMINED THE ARMS LENGTH PRICE OF INTERNATIONAL TR ANSACTION BUT THE ASSESSING OFFICER CAN ALSO CONDUCT INQUIRY AND CARR Y OUT THE EXERCISE AS HE WAS WITHIN HIS RIGHTS TO DO SO. REPLYING TO THE PL EA OF THE ASSESSEE THAT THE REDUCTION IN LOSSES ARE ALSO ATTRIBUTABLE TO THE SU PPORT SERVICES AVAILED BY ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 8 THE ASSESSEE, THE LD. DR FOR THE REVENUE POINTED OU T THAT THESE WERE CORROBORATING STATEMENT. REFERRING TO THE ORDER OF CIT(A), THE LD.DR POINTED OUT THAT IT HAS BEEN NOTED THAT THE EXISTENCE OF SE RVICES WAS NOT DOUBTED BUT THE QUESTION WAS WHETHER SERVICES WERE AVAILED OR N OT AND SUCH AVAILMENT OF SERVICES WAS QUESTIONED BY THE AUTHORITIES BELOW. 14. THE LD.AR IN REPLY POINTED OUT THAT DOCUMENTS W ERE BEFORE THE AUTHORITIES BELOW AND THE SAME SUPPORT THE AVAILMEN T OF SERVICES AND THE SUPPORT THE CLAIM OF SERVICES FROM THE AE. HE AGAI N POINTED OUT THAT WHERE SUFFICIENCY OF THE AVAILMENT OF SERVICES AND ITS PR ICE HAD BEEN EXAMINED BY THE TPO, THERE WAS NO MERIT IN THE ORDER OF THE ASS ESSING OFFICER IN THIS REGARD. 15. WHEN THE MATTER WAS FIXED FOR CERTAIN CLARIFICA TION BEFORE THE BENCH, THE LD.AR FOR THE ASSESSEE POINTED OUT THAT TRIBUNA L IN MA NO 479/DEL/2019, VIDE ITS ORDER DATED 19.02.2020 HAD RECALLED ITS OWN ORDER RELATING TO ASSESSMENT YEAR 2007-08, ON THE GROUND THAT MULTIPLE FACTUAL ERRORS HAD CREPT IN THE ORDER; HENCE, THERE WAS MIS TAKE APPARENT ON RECORD AND THE ORDER OF THE TRIBUNAL WAS THUS RECALLED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL FILED BY THE AS SESSEE IS AGAINST THE DEDUCTION CLAIMED ON ACCOUNT OF MANAGEMENT FEE PAID TO MAP, SINGAPORE AT RS.1.76 CRORES (APPROX.). THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 9 MAP, SINGAPORE, FOR AVAILING THE SERVICES. AVAILME NT OF SERVICES FROM AE WERE IN THE FOLLOWING FIELDS:- GENERAL BUSINESS AND ADMINISTRATION SERVICES: ASSI STANCE IN THE FIELD OF GENERAL BUSINESS AND CORPORATE AFFA IRS AND FACILITATES INTERNAL AND EXTERNAL CONTACTS. ECONOMIC PLANNING AND ACCOUNTING SERVICES: ASSISTAN CE IN ECONOMIC PLANS, ACCOUNTING AND RESULTS ANALYSIS. A S AN ENTERPRISES FUNCTIONING IN THE HIGHLY COMPETITIVE TYRE INDUSTRY, THE ASSESSEE REQUIRES EXTERNAL ASSISTANCE TO MEET ITS G OALS, AND IMPROVE PROFITABILITY. INDUSTRIAL ASSESSMENT SERVICES OTHER THAN TECHNICAL ASSISTANCE: MANAGEMENT OF THE CREATION MODIFICATION AND MAINTENANCE OF INDUSTRIAL TOOLS. MARKETING TRAINING AND PLANNING: ASSISTANCE IN DEVE LOPING MARKETING STRATEGY AND DETERMINING ACTIONS TO BE TA KEN. TRAINING AND PERSONNEL SERVICES: ASSISTANCE IN ENSU RING PROPER RECRUITMENT, TRAINING AND HUMAN RESOURCES MA NAGEMENT. FINANCIAL ADVISORY SERVICES: EXPERTISE IN ALL THE F INANCIAL ASPECTS OF THE BUSINESS OF THE BENEFICIARY. ECONOMIC AND INVESTMENT RESEARCH AND ANALYSIS: ASSISTANCE IN FINANCIAL AND ECONOMIC ANALYSIS. CREDIT CONTROL AND ADMINISTRATION: ASSISTANCE IN THE SELECTION OF SOURCE OF FUNDS. PRODUCT DISTRIBUTION PLANNING AND LOGISTICS SERVI CES: ASSISTANCE IN THE MANAGEMENT OF PRODUCTS FLOWS, DET ERMINE RESOURCES NECESSARY TO ENSURE THE EFFICIENT SUPPLY OF PRODUCTS IN A TIMELY MANNER. QUALITY CONTROL SERVICES: EXPERTISE ON QUALITY AS SURANCE IN ALL THE FIELDS OF ACTIVITY FROM THE DEVELOPMENT OF PRODUCTS TO THE SERVICE TO FINAL CLIENT. LEGAL SERVICES: LEGAL SERVICES IN ALL MATTERS INC LUDING BUT NOT LIMITED TO CORPORATE, TAX, INTELLECTUAL PROPERT Y. COMMERCE, FINANCE, PARTNERSHIP, ALL LEGAL ASPECTS OF BUSINESS . INFORMATION AND TELECOMMUNICATION SERVICES: ASSIS TANCE IN TECHNICAL DEFINITION, IMPLEMENTATION AND MAINTENANC E OF COMPUTERS AND TELECOMMUNICATION SYSTEMS. SUPPORT OP ERATIONS ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 10 MANAGEMENT IN IDENTIFYING PROCESS EVALUATION REQUIR EMENTS AND IN IMPLEMENT ORGANIZATIONAL CHANGES. 17. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT THE SAID MANAGERIAL SERVICES WERE AVAILED BY THE ASSESSEE FROM ITS AE IN ORDER T O ENABLE IT TO UNDERTAKE ITS OPERATION IN MORE EFFICIENT WAY. THE CASE OF THE R EVENUE ON THE OTHER HAND IS THAT THE ASSESSEE HAD RECEIVED ADVISE IN THE MA TTER OF VARIETY OF FIELDS, WHICH INCLUDE GENERAL BUSINESS AND ADMINISTRATIVE S ERVICE, ECONOMIC PLANNING AND ACCOUNTING SERVICES, INDUSTRIAL ASSESS MENT SERVICES, MARKETING TRAINING AND PLANNING, TRAINING AND PERSONNEL SERVI CES, FINANCIAL ADVISORY SERVICES, ECONOMIC AND INVESTMENT RESEARCH AND ANAL YSIS, CREDIT CONTROL AND ADMINISTRATION, PRODUCT DISTRIBUTION PLANNING AND L OGISTICS SERVICES, QUALITY CONTROL SERVICES, LEGAL SERVICES, INFORMATION & TEL ECOMMUNICATION SERVICES. ON THE OTHER HAND, THE ASSESSING OFFICER ALSO NOTES THAT THE ASSESSEE HAD INCURRED HUGE PERSONNEL COST AND ESTABLISHMENT COST OF RS.9.21 CRORES (APPROX.), LEGAL AND PROFESSIONAL OF RS.1.34 CRORES (APPROX.), TRAVELLING EXPENSES OF DIRECTORS AND OTHERS OF RS.4.91 CRORES (APPROX.). ANOTHER POINT WHICH WAS THE BASIS FOR DISALLOWANCE IN THE HANDS O F THE ASSESSEE, WAS THE MANAGERIAL SALARY AND PERQUISITE PAID BY THE ASSESS EE TO ITS DIRECTORS. THE ASSESSING OFFICER HAS TIME AND AGAIN POINTED OUT TH AT THE OPERATING EXPENSES WERE TO THE TUNE OF 40% AND OVER WHICH AGAIN THE AS SESSEE HAS CLAIMED THE MANAGEMENT FEE OF RS.1.76 CRORES (APPROX.). THE AS SESSING OFFICER HOLDING THAT PAYMENT OF MANAGEMENT FEE WAS CLEAR DIVERSION OF PAYMENT ALSO OBSERVED THAT THE GROUP COMPANY WERE PAID IN THE NA ME OF MANAGEMENT FEE THOUGH THERE WERE SUFFICIENT MANAGEMENT DIRECTORS I N THE ASSESSEES ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 11 COMPANY. HE WAS OF THE VIEW THAT THOUGH IT IS CLAI MED AS A CHARGE ON THE TAXABLE INCOME BUT INFACT IT WAS APPLICATION OF INC OME AND THE SAID CLAIM WAS NOT GENUINE BUSINESS CLAIM. 18. AT THIS JUNCTURE, WE NEED TO SEE WHETHER THE AS SESSING OFFICER HAD EXCEEDED THE JURISDICTION CAST UPON HIM, WHILE DECI DING THE ISSUE OF ALLOWABILITY OF CLAIM OF MANAGEMENT FEES PAID BY TH E ASSESSEE TO ITS AE. IN THE FIRST INSTANCE, IT IS FOR THE BUSINESSMAN TO D ECIDE ITS COURSE OF CARRYING ON THE BUSINESS AND IN SUCH COURSE, FOR AVAILING MA NAGEMENT SERVICES FROM ITS AE. THE ASSESSING OFFICER CANNOT SIT IN JUDGME NT, WITH SUCH DECISION OF BUSINESSSMAN TO HOLD THAT THE GROUP COMPANIES WERE BEING PAID IN THE NAME OF MANAGEMENT FEE, THOUGH THERE WERE SUFFICIENT MAN AGEMENT PERSONNEL AVAILABLE. SUCH OBSERVATION CANNOT BE THE BASIS FO R BENCHMARKING THE ALLOWABILITY OF THE EXPENDITURE IN THE CASE OF THE ASSESSEE. THE BENEFIT, IF ANY, ARISING TO THE ASSESSEE AGAINST THE AVAILMENT OF SUCH SUPPORT SERVICES IS NOT NECESSARY TO BE PROVED BY THE ASSESSEE. THE AS SESSEE IN ITS WISDOM TO CARRY ON ITS BUSINESS, WHERE THE BUSINESS HAS WORLD WIDE PRESENCE, NEEDS TO KEEP ITS STANDARDS HIGH AND TO MAINTAIN SIMILAR TER MS AND CONDITIONS, NOT ONLY FOR RUNNING BUSINESS BUT FOR PROVIDING SERVICE S TO CUSTOMERS, HAS TO AVAIL SUCH MANAGEMENT ADVICES AND SERVICES FROM ITS AE. IN THE PRESENT SCENARIO WHERE THE ASSESSEE IS DEALING IN ITEMS, WH ICH WERE AVAILABLE IN INTERNATIONAL MARKET ALSO, THEN SAME PRACTICE HAS T O BE ADOPTED WORLDWIDE AND HENCE THE NECESSITY OF AVAILMENT OF MANAGEMENT SERVICES. MERELY BECAUSE THE ASSESSEE WAS INCREASING EXPENDITURE ON ITS PERSONNEL AND OTHER ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 12 EXPENSES, CANNOT BE THE YARDSTICK FOR DECIDING WHET HER ASSESSEE HAD ANY NEED TO AVAIL THE SERVICES. IT IS OUTSIDE THE DOMA IN OF ASSESSING OFFICER TO TRAVERSE IN SUCH DIRECTION. THE ASSESSING OFFICER CATEGORICALLY STATES THAT ASSESSEE HAD AVAILED SERVICES IN VARIOUS FIELDS, BU T IT IS OUTSIDE HIS DOMAIN TO DECIDE WHETHER THERE WAS ANY NECESSITY TO AVAIL SUC H SERVICES OR NOT. THE ASSESSEE HAVING AVAILED THE SUPPORT SERVICES FOR IT S DAY TO DAY RUNNING OF BUSINESS, IS ENTITLED TO CLAIM THE EXPENDITURE. HE NCE, WE HOLD SO. IN THIS REGARD, WE MUST ALSO LOOK TO THE OTHER SIDE OF THE PICTURE THAT THE LOSSES ARISING TO THE ASSESSEE IN THE EARLIER YEAR/S HAVE CONSISTENTLY REDUCED AND HAD RESULTED IN PROFITABILITY DURING THE YEAR, WHIC H IS CLEARLY APPARENT FROM THE FOLLOWING CHART:- ASSESSMENT YEAR (LOSS)/INCOME AS PER BOOK R ETURNED (LOSS)/INCOME 2006-07 (28.11) CRORES (24.18) CROR ES 2007-08 (16.05) CRORES (8.42) CRORE S 2008-09 11.10 CRORES 0.13 CRORES 19. THE INCREASE IN THE PROFITABILITY OF THE ASSESS EE DURING THE YEAR ITSELF ESTABLISHES THE CASE OF THE ASSESSEE THAT THE AVAIL MENT OF SUPPORT SERVICES FROM THE AE HAS BENEFITTED THE BUSINESS OF ASSESSEE AND HENCE EXPENDITURE IS BUSINESS EXPENDITURE. NOW, COMING TO THE NEXT A SPECT OF THE ASSESSEE I.E. THE EVIDENCES OF AVAILMENT OF SUPPORT SERVICES FROM THE AE. THE ASSESSEE BEFORE US HAS FURNISHED EVIDENCES IN THE FORM OF AD DITIONAL EVIDENCES TO ESTABLISH ITS CASE OF AVAILMENT OF SERVICES. SUCH EVIDENCES ARE AVAILABLE AT PAGES 1 TO 66 OF THE PAPER BOOK FILED BY THE ASSESS EE IN THIS REGARD. THE ASSESSEE HAD ALSO FILED EVIDENCES BEFORE ASSESSING OFFICER/CIT(A) WHICH ARE ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 13 NOTED BY THEM. THE SUFFICIENCY OF AVAILMENT OF SER VICES CAN BE GONE INTO BY ASSESSING OFFICER, BUT WHERE EVIDENCES HAVE BEEN FI LED, THE ASSESSING OFFICER CANNOT SIT IN JUDGEMENT AS TO ALLOWABILITY OF EXPEN DITURE ON THE SURMISE THAT ASSESSEE IS ALREADY INCREASING EXPENDITURE UPTO 40% . THERE IS NO MERIT IN THE STAND OF THE AUTHORITIES BELOW. THUS, GROUNDS O F APPEAL NO.2 & 3 RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.2946/DEL/2014 (REVENUES APPEAL) ASSESSMENT YEAR 2008-09 20. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF A N AMOUNT OF RS. 27,83,732/- ON ACCOUNT OF IMPAIRMENT OF STOCK ENTIR ELY RELYING ON THE SUBMISSION OF THE ASSESSEE BY COMPLETELY IGNORING T HE DETAILED REASONS GIVEN BY THE A.O? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 3,36 ,30,823/- ON ACCOUNT OF AMP EXPENSES BY COMPLETELY IGNORING THE DETAILED REASONS GIVEN BY THE A.O. AND WITHOUT APPRECIATING THE FACT THAT THE ABOVE EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE BY BUSINESS OF THE ASSESSEE? 3. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 21. THE FIRST ISSUE RAISED BY THE REVENUE VIDE GROU ND OF APPEAL NO.1 IS AGAINST THE DELETION OF DISALLOWANCE MADE OF RS.27, 83,732/- ON ACCOUNT OF IMPAIRMENT OF STOCK. 22. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE I N THE BOOKS OF ACCOUNTS HAD BEEN RECORDING THE VALUE OF CLOSING STOCK AS PE R ACCOUNTING STANDARD- 2 (IN SHORT AS-2) I.E. STOCK TO BE VALUED AT NET RE ALIZABLE VALUE COST, WHICHEVER ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 14 IS LOWER. THE SAID ACCOUNTING TREATMENT WAS FOLLOW ED BY THE ASSESSEE SINCE COMMENCEMENT OF ITS BUSINESS ACTIVITIES. THE ASSES SING OFFICER DISALLOWED THE SAID CLAIM VIDE PARA 4 OF THE ASSESSMENT ORDER; THE PROVISION FOR IMPAIRMENT OF STOCK OF RS.27,83,732/- ON THE GROUND THAT THIS WAS NOT A ASCERTAINED LIABILITY. THE ASSESSING OFFICER ALSO NOTED THAT SIMILAR DISALLOWANCE WAS MADE IN THE EARLIER YEARS AND HENC E DISALLOWED THE AMOUNT IN THE YEAR UNDER CONSIDERATION. 23. THE CIT(A) NOTED THAT THE DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2007-08 HAS BEEN DELETED BY THE CIT(A) AND ALSO NOT ED FROM THE DETAILS THAT AS PER AS-2, THE ASSESSEE HAD BOOKED COST OR REALIZ ABLE VALUE WHICHEVER WAS LESS AND THE NET REALIZABLE VALUE WAS BASED ON LAST ACTUAL SALE PRICE OF THE PRODUCT. FURTHER, WEIGHTED AVERAGE COST WAS COMPUT ED BY THE ASSESSEE. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AGAINST WH ICH THE REVENUE IS IN APPEAL. 24. THE LD.DR FOR THE REVENUE POINTED OUT THAT BEFO RE THE CIT(A), CERTAIN DETAILS WERE FILED WHICH WAS NOT EXAMINED BY THE AS SESSING OFFICER. THE LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT NOT HING FRESH WAS FILED DURING THE YEAR AND THE SAID PROVISION WAS MADE AS WAS BEING MADE IN THE EARLIER YEARS. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WHERE THE ASSESSEE IS FOLLOWING THE SYSTEMIZED WAY OF REC OGNIZING THE VALUE OF STOCK AT THE CLOSE OF THE YEAR I.E. AS PER AS-2 OF ACCOUN TING STANDARD AND THE COST ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 15 OF THE CLOSING STOCK IS DECLARED ON THE BASIS OF CO ST OR NET REALIZABLE VALUE, WHICHEVER IS LESS. HENCE, THERE IS NO MERIT IN THE AFORESAID DISALLOWANCE MADE IN THE HANDS OF THE ASSESSEE. WE UPHOLD THE O RDER OF THE CIT(A). GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS THUS DISMISSED. 26. THE SECOND ISSUE RAISED BY THE REVENUE IS AGAIN ST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.3.36 CRORES (APPROX. ) MADE ON ACCOUNT OF AMP EXPENSES. THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION HAD CLAIMED EXPENSES OF RS.6.72 CRORES (APPROX.) ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY, AS AGAINST THE CLAIM OF RS.4.44 CRORES ( APPROX.) MADE IN THE LAST YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVIDE THE REQUISITE DETAILS AS TO WHETHER THE SAID EXPENSES WOULD LEAD TO ESTABLISHMENT AND PROMOTION OF MICHELIN BRAND IN INDIA. THE ASSESS ING OFFICER WAS OF THE VIEW THAT WHERE THE BRAND IS OWNED BY THE PARENT CO MPANY, THEN THEY SHOULD CONTRIBUTE TOWARDS ADVERTISEMENT AND MARKETI NG EXPENSES INCURRED BY THE ASSESSEE, ON THE SURMISES THAT EXPENSES WERE INCURRED FOR ESTABLISHMENT AND PROMOTION OF THE INTERNATIONAL BR AND MICHELIN WHICH WAS NOT THE PROPERTY OF THE ASSESSEE. REFERENCE WA S MADE TO THE OECD GUIDELINES IN THIS REGARD AND SINCE THE ASSESSEE HA D NOT RECEIVED ANY COMPENSATION FROM ITS AE AND THE ADVERTISEMENT WAS GENERATING BENEFITS TO THE AE WHO OWNED THE BRAND; THE ASSESSING OFFICER HELD THAT 50% OF THE EXPENSES SHOULD BE DISALLOWED IN THE HANDS OF THE A SSESSEE AS CAPITAL IN NATURE. THE ASSESSING OFFICER HELD THE DISALLOWANC E IS TO BE MADE ON ACCOUNT OF TWO REASONS, FIRST IT IS NOT INCURRED W HOLLY AND EXCLUSIVELY FOR THE ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 16 PURPOSES OF THE BUSINESS OF THE ASSESSEE AND SECOND , IT IS BENEFITTING THE ASSESSEE IN LONG RUN AND HENCE CAPITAL IN NATURE. 27. THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT EVEN IF SOME ENDURING BENEFIT AROSE O UT ON SUCH EXPENDITURE BUT WITHOUT SPECIFICALLY ESTABLISHING THE FACT, THE ADDITION COULD NOT BE MADE ON THE BASIS OF PRESUMPTION. RELIANCE WAS PLACED O N THE DECISION OF CIT VS BERGER PAINTS (2002) 254 ITR 503 (CAL.) AND THE ADD ITION MADE BY THE ASSESSING OFFICER WAS DELETED. THE ASSESSEE HAD AL SO RELIED ON THE DECISION OF TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. VS DCI T [2009] 27 SOT 9 (DELHI), WHICH WAS UPHELD BY THE HONBLE DELHI HIGH COURT WH EREIN THE ADVERTISEMENT EXPENSES WERE TREATED AS REVENUE EXPE NSES. THE CIT(A) APPLIED THE SAID RATIO ALSO AND ALLOWED THE CLAIM O F THE ASSESSEE. 28. THE LD. DR FOR THE REVENUE POINTED OUT THAT IN ASSESSMENT YEAR 2007- 08, THE DISALLOWANCE WAS MADE IN THE HANDS OF THE A SSESSEE ON ACCOUNT OF TP ADJUSTMENT WHEREAS IN THE PRESENT CASE, THE AFORESA ID DISALLOWANCE WAS MADE U/S 37(1) OF THE ACT HENCE, THE DECISION OF TR IBUNAL FOR THE PRECEDING YEAR IS NOT BINDING. 29. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED WAS WHETHER ANY ADHOC DISALLOWANCE CAN BE MADE IN THE H ANDS OF THE ASSESSEE OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES WHICH H AD BEEN STRUCK DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF NESTLE INDIA LTD. VS DCIT (SUPRA). ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 17 30. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE TRADING OF WORLD RENOWN ED TYRES OF CARS AND THE EXPENDITURE MADE BY THE ASSESSEE BENEFITTED ITS BUS INESS IN INDIA. THE ISSUE WHICH ARISES VIDE GROUND NO.2 RAISED BY THE REVENUE IS AGAINST THE ALLOWANCE OF PARTICULAR EXPENDITURE OR ITS PART DIS ALLOWANCE AS MADE BY THE ASSESSING OFFICER. THE EXPENDITURE IN QUESTION WAS ADVERTISEMENT EXPENSES, WHEREIN THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION HAD CLAIMED EXPENDITURE TOTALING TO RS.6.72 CRORES (APPROX.) A S AGAINST RS.4.44 CRORES (APPROX.). THE ASSESSEE IS A TRADER IN TYRES OF M ICHELIN BRAND IN INDIA. THE ASSESSEE CLAIMED THAT IT WAS INCURRING SAID EXPENDI TURE WHOLLY AND EXCLUSIVELY FOR CARRYING ON ITS BUSINESS IN INDIA. SIMILAR EXPENSES TO THE TUNE OF RS.4.44 CRORES (APPROX.) WERE ALSO INCURRED IN THE EARLIER YEARS AND NO DISALLOWANCE U/S 37(1) OF THE ACT WAS MADE IN TH E HANDS OF THE ASSESSEE IN THE EARLIER YEARS. HOWEVER, TRANSFER PRICING ADJ USTMENT WAS MADE ON ACCOUNT OF AFORESAID EXPENDITURE INCURRED ON ADVERT ISEMENT AND PUBLICITY. THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASS ESSMENT YEAR 2007-08 IN ITA NOS.3166 & 3306/DEL/2013 VIDE ORDER DATED 30.04 .2019 HAS DELETED THE AFORESAID ADJUSTMENT ON ACCOUNT OF ADVERTISEMENT AN D PUBLICITY. IN THE INSTANT ASSESSMENT YEAR, THE ASSESSING OFFICER HOWE VER, WAS OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE NEEDS TO B E DISALLOWED ON TWO COUNTS I.E. FIRST IT WAS NOT INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS AND SECOND IT WAS BENEFITING THE ASSESSEE IN LONG RUN HENCE, CAPITAL IN NATURE. THE LIMITED ISSUE WHICH ARISES IS WHETHER THE SAID EXPENSES ARE TO BE ALLOWED IN ENTIRETY IN THE HANDS OF THE ASSESSEE. ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 18 31. THE AFORESAID EXPENDITURE UNDER THE HEAD ADVERT ISEMENT & PUBLICITY HAS BEEN INCURRED BY THE ASSESSEE FOR THE FOLLOWING PURPOSES:- I. DEALER SIGNAGE AND BOARDS; II. PRINTING OF BROCHURES, TYRE TECHNICAL GUIDES, MERCH ANDISE; III. PRODUCT LAUNCHES; IV. PRINT ADVERTS IN NEWSPAPERS AND MAGAZINES; V. SEMINARS AND EXHIBITIONS; VI. HORDING ETC; 32. THIS FACT WAS BROUGHT TO THE KNOWLEDGE OF THE A SSESSING OFFICER, BUT HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. LOOKING AT THE NATURE OF EXPENSES INCURRED, IT IS APPARENT THAT THE SAME PRI MARILY PERTAIN, TO SALES PROMOTION OF THE PRODUCTS IN INDIAN MARKET. THE EX PENDITURE BEING ESSENTIALLY INCURRED WITH THE OBJECT TO BOOST THE S ALES OF THE ASSESSEE THOUGH THE BRAND IS OWNED BY THE AE DOES NOT WARRANT ANY D ISALLOWANCE IN THE HANDS OF THE ASSESSEE. WHETHER THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, HONBL E APEX COURT IN THE CASE OF CHANDULAL KESHAVLAL 38 ITR 601, HAD OBSERVED AS UNDER:- IN DECIDING WHETHER A PAYMENT OF MONEY IS A DEDU CTIBLE EXPENDITURE, ONE HAS TO TAKE INTO CONSIDERATION QUESTIONS OF COM MERCIAL EXPERIENCE AND PRINCIPLE OF ORDINARY COMMERCIAL TRADING. ANOTHER T EST IS WHETHER THE TRANSACTION IS PROPERLY ENTERED INTO AS A PART OF T HE ASSESSEE LEGITIMATE COMMERCIAL UNDERTAKING IN ORDER TO FACILITATE THE C ARRYING ON OF ITS BUSINESS AND IT IS IMMATERIAL THAT THE THIRD PARTY ALSO BENEFITS THEREBY..; 33. FURTHER, THE DELHI TRIBUNAL OF ITAT IN NESTLE I NDIA LTD. VS DCIT 111 TTJ 498 (DEL. TRIB.) HAD HELD AS UNDER:- ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 19 22.. THE EXPENDITURE INCURRED BY THE ASSESSE E COMPANY ON ADVERTISEMENT/SALES PROMOTION OF SOME NE STLE PRODUCTS IN INDIA MAY GIVE RISE TO CERTAIN BENEFIT TO NESTLE SA, BUT THIS CANNOT BE A GROUND TO DISALLOW THE CLAIM OF THE ASSESSEE, ONCE IT IS ESTABLISHED THAT THE EXPENDITURE IN QUESTION HAS BE EN INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF THE ASS ESSEE IN AS MUCH AS THE EXPENDITURE BY THE ASSESSEE ON ADVERTISEMENT /SALES PROMOTION HAS DIRECT NEXUS WITH THE EARNING OF INCO ME BY THE ASSESSEE. THE APPEAL OF THE REVENUE AGAINST THE SAME HAS BEEN DISMISSED BY HONBLE DELHI HIGH COURT. 34. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ENTIRE EXPENSES ON ADVERTISEMENT AND PUBLICITY NEED TO BE ALLOWED IN THE HANDS AS BUSINESS EXPENDITURE OF THE ASSESSEE. GROUND OF AP PEAL NO.2 RAISED BY THE REVENUE IS THUS DISMISSED. 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 ND JUNE, 2020. SD/- SD/- (PRASHANT MAHARISHI) (SUSHMA CHOWLA) *+ , / ACCOUNTANT MEMBER / VICE PRESIDENT / DATED : 22 ND JUNE, 2020 * AMIT KUMAR *
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