ACIT, New Delhi V. Pernod Ricard (India) Pvt. Ltd., Gurgaon

ITA 2530/DEL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3322 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I2
• Next Hearing Date: 27-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T M SHIVAKUMAR
• Keywords: Business income; Transfer pricing; Opportunity of being heard; International transaction; Capital expenditure
• Section: 92B; 115JB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2 NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.3525/DEL/2009 AY: 20 04-05 ITA NO. 2770/DEL/2011 AY: 20 05-06 PERNOD RICARD INDIA PVT. LTD., VS DY. CIT, VICE PRESIDENT CORPORATE FLOOR 5, CIRCLE 8(1), NEW DELHI. TOWER A, GLOBAL BUSINESS PARK, MEHRAULI GURGAON ROAD, GURGAON. ITA NO. 2530/DEL/2011 AY: 20 05-06 ACIT, VS PERNOD RICARD INDIA PVT. LTD., CIRCLE 14(1), NEW DELHI NEW DELHI. ITA NO.3811/DEL/2009 AY: 20 04-05 DY.COMMISSIONER OF INCOME TAX, VS M/S SEAGRAM IN DIA PVT. LTD., NEW DELHI. (NOW PERNOD RICARD INDIA PVT. LTD.), 104, ASHOKA ESTATE, BARAKHAMBA ROAD, CONNAUGHT PLACE, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. DEEPAK CHOPRA, ADV. RESPONDENT BY : SHRI T.M. SHIVAKUMAR, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER 1.0 THE APPEAL IN I.T.A. NO. 3525/DEL/09 HAS BEEN P REFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT-XX, NEW D ELHI DATED I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 2 29.06.2009 FOR ASSESSMENT YEAR 2004-05 ON THE FOLLO WING GROUNDS:- 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) [CIT (A)], TO EXTENT PREJUDICIAL TO THE A SSESSEE, IS BAD IN LAW IN DESERVES TO BE SET ASIDE. 2. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN SUSTAINING THE ADDITION OF RS. 5,376,946 ON ACCOU NT OF THE ARMS LENGTH PRICE DETERMINED BY THE TRANSFER P RICING OFFICER IN RESPECT OF MARKETING SUPPORT SERVICES PR OVIDED BY THE APPELLANT TO SEAGRAM MARTELL DUTY FREE LTD. HONG KONG. 2.1 THAT THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ALLOCATION OF ADDITIONAL EXPENDITURE IN RESPECT OF THE MARKETING SUPPORT SERVICES PROVIDED BY THE APPELLANT FOR ITS ASSOCIATED ENTERPRISES. 2.2 THAT THE LD. CIT(A) GROSSLY ERRED IN INCLUDIN G THE REIMBURSED EXPENSES IN THE COST BASE FOR COMPUTING THE PROFIT MARGIN FROM THE MARKETING SUPPORT SERVICES PROVIDED BY THE APPELLANT FOR ITS ASSOCIATED ENTERP RISES. 2.3 THAT THE LD. CIT (A) GROSSLY ERRED IN REJECTING THE COMPARABLE DATA USED BY THE APPELLANT TO BENCH MARK ITS PROFITS MARGIN FROM THE MARKETING SUPPORT SERVICES PROVIDED BY THE APPELLANT TO ITS ASSOCIATE D ENTERPRISES. 2.4 THAT THE LD. CIT(A) ERRED IN LAW IN NOT ALLOW ING FOR A VARIATION / REDUCTION OF 5 PERCENT FROM ARITHMETI C MEAN TO ARRIVE AT THE ARMS LENGTH PRICE AS PER PROVISIO NS OF THE PROVISO TO SECTION 92C(2). 2.5 THAT THE LD. CIT(A) ERRED IN NOT FOLLOWING THE JURISDICTIONAL TRIBUNALS JUDGMENT IN THE CASE OF SO NY INDIA PVT. LTD. VS. DCIT (114 ITD 448) (DEL.) AND T HAT OF THE BANGALORE TRIBUNAL IN THE CASE OF PHILIPS SOFTW ARE VS. ACIT (119 TTJ 721) FOR ALLOWING THE 5% VARIATION I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 3 ADJUSTMENT. 3. THAT THE LD. CIT (A) GROSSLY ERRED IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 3,025,050 BEING PROVISION F OR TRANSIT BREAKAGES. 3.1 THAT THE LD. CIT(A) GROSSLY ERRED ON FACTS AND IN LAW GROSSLY ERRED ON FACTS AND IN LAW IN COMING TO THE CONCLUSION THAT THERE IS NO CERTAINTY THAT IF BREAK AGES HAVE OCCURRED IN THE PAST THEY WOULD OCCUR IN THE F UTURE ALSO. 3.2 THAT THE LD. CIT (A) GROSSLY ERRED IN LAW IN SUSTAINING THE DISALLOWANCE OF PROVISION FOR TRANSI T BREAKAGES AS THE SAME WAS MADE ON SCIENTIFIC BASIS AND WAS BASED UPON THE HISTORY OF BREAKAGES IN SUCH TERRITORIES IN THE PAST. 3.3 THAT THE LD.CIT(A) ERRED IN CONCLUDING THAT THE LIABILITY ON ACCOUNT OF TRANSIT BREAKAGES WAS ON AC COUNT OF A PROBABILITY AND AS SUCH WAS AN UNASCERTAINED LIABILITY. 4. THAT THE LD.CIT (A) ERRED IN NOT ALLOWING A DED UCTION OF RS. 1,921,790/- BEING PROVISION FOR COMMISSION O N SALES. 5. THAT THE LD. CIT (A) ERRED IN NOT ADJUDICATING ON THE GROUNDS OF APPEAL RAISED IN RESPECT OF THE ADJUSTME NTS MADE TO THE BOOK PROFIT OF THE APPELLANT UNDER SECT ION 115JB OF THE ACT. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUD ICE TO EACH OTHER. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER , AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR A T THE TIME OF HEARING OF THIS APPEAL. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 4 1.1 THE APPEAL IN I.T.A. NO. 3811/DEL/2009 HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-XX, NEW DELHI DATED 29.6.2009 ON THE FOLLOWING GROUNDS:- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWIN G A RELIEF OF RS.23,63,670/- (OUT OF TOTAL DISALLOWANCE OF RS.77,40,616/-) MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE AS DETERMINED BY THE TPO AND AS TAKEN BY THE ASSESSEE. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN DELETIN G THE ADDITION OF RS.13.24 CRORES MADE ON ACCOUNT OF BRAND BUILDING EXPENSES AS DETERMINED BY THE TPO. (3) ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN DELETIN G THE DISALLOWANCE OF RS.3,89,55,0707- BEING 10% OF BRAND EXPENSES TREATED AS EXPENDITURE OF CAPITAL NATURE B Y THE ASSESSING OFFICER. (4) THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 1.2 THE APPEAL IN I.T.A. NO. 2770/D/2011 HAS BEEN P REFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-XX, NE W DELHI DATED 28.2.2011 PERTAINING TO ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT (A) GROSSLY ERRED IN CONFIRMIN G THE DISALLOWANCE OF RS. 1,686,688 ON ACCOUNT OF PROVISI ON FOR TRANSIT BREAKAGES. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 5 1.1 THAT THE LD. CIT(A) GROSSLY ERRED IN LAW IN NO T APPRECIATING THAT THE PROVISION FOR TRANSIT BREAKAG ES WAS A LIABILITY IN PRASENTI , WHICH WAS TO BE DISCHARGED AT A FUTURE DATE. 1.2 THAT THE LD.CIT(A)GROSSLY ERRED IN CONCLUDING THAT THE PROVISION FOR TRANSIT BREAKAGES WAS AN UNASCERTAINE D LIABILITY, HENCE NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. 1.3 THAT THE LD.CIT (A) GROSSLY ERRED IN CONCLUDING THAT THE PROVISIONS FOR TRANSIT BREAKAGES WERE NOT CREATED O N A SCIENTIFIC BASIS AND HENCE WAS AN UNASCERTAINED LIA BILITY. 1.4 THAT THE LD. CIT (A) COMPLETELY FAILED TO APPR ECIATE THAT AS PER THE ACCOUNTING STANDARDS PRESCRIBED UND ER SECTION 145 OF THE ACT, THE APPELLANT WAS REQUIRED TO ACCOUNT FOR ALL KNOWN LIABILITIES. 2. THAT THE LD. CIT (A) GROSSLY ERRED IN SUSTAININ G AN ADJUSTMENT OF RS. 4,040,809 UNDER SECTION 92CA(3) ON ACCOUNT OF MARKETING SUPPORT SERVICES PROVIDED TO A N ASSOCIATED ENTERPRISE. 2.1 THAT THE LD. CIT(A) ERRED ON FACTS IN ALLOCA TING ADDITIONAL EXPENDITURE IN RESPECT OF THE SALES AND MARKETING ACTIVITY CARRIED OUT BY THE APPELLANT FOR ITS ASSOC IATED ENTERPRISES. 2.2 THAT THE LD. CIT(A) GROSSLY ERRED IN INCLUDING THE REIMBURSED EXPENSES IN THE COST BASE FOR COMPUTING THE PROFIT MARGIN FROM THE SALES AND MARKETING ACTIVITY CONDUCTED BY THE APPELLANT FOR ITS ASSOCIATED ENTER PRISES. 2.3 THAT THE LD. CIT(A) GROSSLY ERRED IN REJECTING THE COMPARABLE DATA USED BY THE APPELLANT TO BENCH MARK ITS PROFITS MARGIN FROM THE SALES AND MARKETING ACTIVIT Y PROVIDED BY THE APPELLANT TO ITS ASSOCIATED ENTERPR ISES. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 6 1.3 I.T.A. NO. 2530/DEL/11 HAS BEEN PREFERRED BY TH E REVENUE AGAINST THE ORDER OF CIT (A)-XX DATED 28.2.2011 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN ALLOWING A RELIEF OF RS.4,04,1 93/- OUT OF TOTAL DISALLOWANCE OF RS. 44,45,002/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE DETERMINED BY THE TPO AND TAKEN BY THE ASSESSEE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.8,93,95,976/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BRAND BUILDING EXPENSES AS DETERMINED BY THE TPO. 3. THAT ON THE FACTS AND CIRCUMSTANCESOF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.4,67,34,266/- BEING 10% OF BRAND EXPENSES TREATE D AS EXPENDITURE OF CAPITAL NATURE BY THE ASSESSING O FFICER. 4. THE APPELLANT CRAVES TO THE ALLOWED TO ADD, DEL ETE OR AMEND ANY OTHER GROUNDS OF APPEAL. 1.4 SINCE THE SAID APPEALS INVOLVE COMMON ISSUES, T HE SAME ARE BEING DISPOSED OFF TOGETHER BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS INCORPORATED ON SEPTEMBER 3, 1993 AS A SUBSIDIA RY OF PERI MAURITIUS. IN THE INITIAL YEARS OF ITS EXISTENCE TH E ASSESSEE ACTED I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 7 AS A HOLDING COMPANY FOR THE GROUPS INTERESTS IN I NDIA. TWO COMPANIES VIZ. SEAGRAM MANUFACTURING PVT. LTD. AND SEAGRAM DISTILLERIES PVT. LTD. WERE SUBSEQUENTLY INCORPORAT ED IN INDIA, BEING THE OPERATIONAL COMPANIES. WITH EFFECT FROM A PRIL 1, 2003 SEAGRAM MANUFACTURING PVT. LTD. VIDE ORDER DATED 03 -09-2003 OF HONBLE DELHI HIGH COURT MERGED WITH THE ASSESSEE C OMPANY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BLENDING , BOTTLING, AND TRADING OF INDIAN MADE FOREIGN LIQUOR (IMFL). T HE LIQUOR IS BOTTLED AND SOLD WITHIN INDIA THROUGH GOVERNMENT AG ENCIES AND PRIVATE DISTRIBUTORS AND ALSO EXPORTED OUT OF INDIA . 3.0 THE FIRST ISSUE RAISED IN THIS BATCH OF APPEALS PERTAINS TO DISALLOWANCE ON ACCOUNT OF TRANSIT BREAKAGES. BEFOR E THE ASSESSING OFFICER (AO), IT HAD BEEN SUBMITTED THA T THE ASSESSEE MAINTAINS A RUNNING ACCOUNT AND EVERY YEAR THE PROV ISION CREATED IN THE EARLIER YEAR IS REVERSED IN THE SUBS EQUENT YEAR AND THE ACTUAL EXPENSES ON THE BREAKAGES AND THE SHORTA GES ARE DEBITED TO THE CONCERNED ACCOUNT WHICH IS TAKEN TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER, FOR AY 2004-05 , VIDE ORDER DATED 28.12.2006, AND FOR AY 2005-06, VIDE ORDER DA TED 08.12.2008, DISALLOWED THE PROVISION MADE ON ACCOUN T OF TRANSIT BREAKAGES BEING IN THE NATURE OF UNASCERTAINED LIAB ILITY. THE LD. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 8 CIT (A) FOR AY 2004-05, VIDE ORDER DATED 26.09.2009 , AND FOR AY 2005-06, VIDE ORDER DATED 28.02.2011, UPHELD THE VI EW OF THE AO. HE, HOWEVER, ALLOWED THE AMOUNT OF ACTUAL BREAKAGES INCURRED AS AN EXPENSE. THE ASSESSEE IS AGGRIEVED BY THIS FINDI NG OF THE LD. CIT (A). 3.1 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LD. AR, IN ALL FAIRNESS, SUBMITTED THAT THE DISALLOWANCE HAS BEEN UPHELD BY THE HONBLE HIGH COURT OF DELHI VIDE THEIR ORDER DA TED 23.10.2015 IN ITA NO.237/2015 IN ASSESSEES OWN CASE FOR AY 20 01-02. IT WAS FURTHER SUBMITTED THAT THE HONBLE HIGH COURT, WHILE, RULING IN FAVOUR OF REVENUE GAVE THE FOLLOWING KEY FINDING S:- A. THE PROVISION FOR TRANSIT BREAKAGES CREATED DURING THE YEAR WAS TO BE DISALLOWED. B. ANY REVERSALS IN THE PROVISION AND THE ACTUAL AMOUN T WERE TO BE ALLOWED AS A DEDUCTION. 3.2 HENCE, THE LD. AR SUBMITTED THAT IN LIGHT OF DECISION OF HONBLE DELHI HIGH COURT REVERSAL OF PROVISION AND THE ACTUAL TRANSIT BREAKAGES SHOULD BE ALLOWED AS A DEDUCTION IN THE PRESENT CASE. IT WAS ALSO SUBMITTED THAT A PROVISIO N OF RS. 7,82,854/- WAS CREATED DURING THE AY 2003-04 WHICH WAS REVERSED DURING THE AY 2004-05. THEREFORE, IT WAS P RAYED THAT I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 9 ONLY THE NET PROVISION OF RS. 22,42,196/- COULD HA VE BEEN DISALLOWED, BEING PROVISION OF RS. 30,25,050/- CREA TED DURING AY 2004-05 LESS PROVISION OF RS. 7,82,854/- WHICH WAS CREATED DURING AY 2003-04 AND REVERSED IN AY 2004-05. SIMIL ARLY, IT WAS SUBMITTED THAT FOR AY 2005-06 THE AO/LD. CIT (A) HA VE DISALLOWED ONLY THE NET AMOUNT OF PROVISION VIZ., P ROVISION CREATED DURING AY 2005-06 OF RS 16,86,688/-, WHICH WAS INCORRECT. FOR AY 2005-06, IT WAS SUBMITTED THAT TH E PROVISION CREATED ON ACCOUNT OF TRANSIT BREAKAGES TO THE TUNE OF RS. 23,17,279/- SHOULD BE REDUCED BY THE PROVISION CREA TED FOR AY 2004-05 I.E. RS. 30,25,050/- LEADING TO NO DISALLOW ANCE. 3.3 IT WAS FURTHER SUBMITTED BY THE LD. AR THAT THE AFORESAID ORDER PASSED BY THE HONBLE HIGH COURT OF DELHI HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT VIDE ORDER D ATED 11.07.2016 PASSED IN SLP NO. 12104/2016, 12115/2016 , 12116/2016 AND 12132/2016. 3.4 THE LD. CIT DR PLACED RELIANCE ON THE FINDINGS OF THE AUTHORITIES BELOW AND ALSO ON THE FACT OF THE SLP B EFORE THE HONBLE APEX COURT BEING DECIDED IN THE FAVOUR OF T HE REVENUE. 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT RECORD. IN VIEW OF THE FACT THAT THIS ISS UE HAS BEEN I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 10 DECIDED AGAINST THE ASSESSEE BY THE HONBLE HIGH CO URT AND AGAINST WHICH SLP FILED BY THE ASSESSEE WAS ALSO DI SMISSED, WE DECIDE THE ISSUE AGAINST THE ASSESSEE AND AS SUCH T HESE GROUNDS OF APPEAL ARE DISMISSED. 4.0 THE SECOND ISSUE RAISED IN THIS BATCH OF APPEAL S PERTAINS TO THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF MARKE TING SUPPORT SERVICES PROVIDED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES. THE BRIEF FACTS INVOLVED HEREIN ARE THAT SEAGRAM MA RTELL AND PERNOD RICARDO GULF (ASSOCIATED ENTERPRISES OR A ES) ENTERED INTO A REPRESENTATION AGREEMENT DATED 15.06.2002 WI TH THE ASSESSEE PURSUANT TO WHICH THE ASSESSEE PROVIDED MA RKETING SUPPORT SERVICES TO SUCH AES DURING THE SUBJECT AY, TO PROMOTE DUTY FREE SALES TO BE UNDERTAKEN BY SUCH AES IN THE SAARC REGION. THE AES PAID A FIXED FEE PER MONTH AS COMPEN SATION FOR THE RENDERING OF SUCH SERVICES AND ALSO REIMBURSED RS. 5,66,11,006/- FOR AY 2004-05 AND RS. 6,70,87,680/- FOR AY 2005-06 AS THE ACTUAL MARKETING COST INCURRED BY TH E ASSESSEE. THE LD. TRANSFER PRICING OFFICER (TPO) VIDE ORDER DATED 18.12.2006 FOR AY 2004-05 AND VIDE ORDER DATED 16.1 0.2008 FOR AY 2005-06 FOLLOWED THE APPROACH AS TAKEN BY HIS PR EDECESSORS FOR EARLIER YEARS, WHILE RE-ALLOCATING EXPENSES TO THE MARKETING I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 11 SUPPORT SERVICES AND INCLUDING THE REIMBURSEMENT RE CEIVED BY THE ASSESSEE IN THE COST BASE, TO COMPUTE AN ADJUST MENT OF RS. 77,40,616/- AND RS. 44,45,002/- FOR AY 2004-05 AND AY 2005- 06 RESPECTIVELY. 4.1 THE LD. CIT (A) VIDE ORDER DATED 29.06.2009 FOR AY 2004-05 AND VIDE ORDER DATED 28.02.2011 FOR AY 2005-06, FOL LOWED THE APPROACH OF HIS PREDECESSOR TAKEN IN EARLIER YEARS, TO HOLD THAT REIMBURSEMENT RECEIVED BY THE ASSESSEE WAS TO BE AD DED BOTH ON THE INCOME AS WELL AS EXPENSES SIDE TO DETERMINE TH E NET COST PLUS MARGIN OF THE ASSESSEE FOR THE MARKETING SUPPO RT SERVICES SEGMENT. THE APPELLANT IS AGGRIEVED BY THIS FINDING OF THE CIT (A) HOWEVER, THE LD. CIT (A), WITH RESPECT TO THE RE-AL LOCATION OF EXPENSES, GRANTED PARTIAL RELIEF TO THE ASSESSEE, B Y ACCEPTING THE COST ALLOCATION ON THE HEAD COUNT BASIS IN RESPECT OF SOME ITEMS OF EXPENDITURE, THEREBY REDUCING THE QUANTUM OF ADJ USTMENT SUGGESTED BY THE LD. TPO TO RS. 53,76,946/- FOR AY 2004-05 AND RS. 40,40,809/- FOR AY 2005-06. THE DEPARTMENT IS A GGRIEVED BY THIS FINDING OF THE LD. CIT (A). 4.2 IT WAS SUBMITTED BY THE LD. AR THAT THIS TRIBUN AL VIDE ORDER DATED 12.04.2016 FOR AY 2002-03 AND 2003-04, UPHELD THE FINDINGS OF LD. CIT(A) SIMILAR TO THE FINDINGS OF L D. CIT(A) FOR AY I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 12 2004-05 AND AY 2005-06, THEREBY CONFIRMING THE PART IAL RELIEF GRANTED TO THE ASSESSEE IN RESPECT OF COST ALLOCATI ON. IT WAS FURTHER SUBMITTED THAT, HOWEVER, THE TRIBUNAL CONFI RMED LD. CIT (A)S FINDING THAT THE REIMBURSEMENT OF EXPENSES WE RE TO BE ADDED TO THE COST BASE . THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE HONBLE DELHI HIGH COURT AGAINST THE AFOREMENTIONED TRIBUNALS ORDER W HICH IS PENDING ADJUDICATION. 4.3 THE LD. CIT DR SUPPORTED THE ORDER OF THE AO/LD . TPO. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND WHILE R ESPECTFULLY FOLLOWING THE CO-ORDINATE BENCHES DECISION IN THE A SSESSEES OWN CASE WE DIRECT THAT THE REIMBURSEMENTS HAVE TO BE I NCLUDED IN THE COST BASE AND THE OPERATING MARGINS HAVE TO BE COMPUTED ACCORDINGLY. AS REGARDS THE GROUNDS OF APPEAL RAIS ED BY THE REVENUE AGAINST THE PARTIAL RELIEF GRANTED BY THE L D. CIT (A) TOWARDS ALLOCATION OF COSTS, NO SUSTAINABLE GROUND HAS BEEN PRESENTED BEFORE US BY THE REVENUE AND AS SUCH THE ORDER OF THE LD. CIT (A) IS CONFIRMED. HENCE, THESE GROUNDS OF APPEAL OF THE ASSESSEE AND THE REVENUE ARE DISPOSED OFF IN TERMS OF THESE DIRECTIONS. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 13 5.0 THE NEXT ISSUE RAISED IN THIS BATCH OF APPEALS PERTAINS TO TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF ADVERTISE MENT, MARKETING AND PROMOTIONAL (AMP) EXPENSES INCURRED BY THE ASSESSEE FOR PROMOTION OF ITS BRANDS IN INDIA. DURI NG THE COURSE OF PROCEEDINGS, THE LD. AR MADE DETAILED SUBMISSION S WHICH ARE AS FOLLOWS: FOR AY 2004-05: 1. THE APPELLANTS KEY BUSINESS ACTIVITIES IN INDIA CONSIST OF PROCESSING, BOTTLING AND SELLING OF SCOT CH AND INDIAN MADE FOREIGN LIQUOR (IMFL). IN THE MANUFACTURING SEGMENT THE APPELLANT IMPORTS CONCENTRATE ALCOHOLIC BEVERAGE (CAB) FROM CHIVAS BROTHER, UK. THE IMPORTED CAB IS SUBJECTED TO VARIO US PROCESSES, THE END PRODUCT WHEREOF KNOWN AS BOTTLED IN INDIA SCOTCH (BIIS) IS BOTTLED AND MADE AVAILABLE FOR SALE IN INDIA. BIIS CONSIST OF BRANDS LIKE PASSPORT , HUNDRED PIPERS AND SOMETHING SPECIAL 12 YEAR OLD. T HE IMPORTED CAB IS ALSO BLENDED WITH GRAIN NEUTRAL SPI RIT (GNS) AND THEN SUBJECTED TO VARIOUS PROCESSES, TH E END PRODUCT WHEREOF KNOWN AS IMFL IS BOTTLED AND MADE AVAILABLE FOR SALE IN INDIA AS WELL. IMFL CONS IST OF BRANDS LIKE BLENDERS PRIDE, OAKEN GLOW, ROYAL STAG, IMPERIAL BLUE, SEAGRAM EXTRA DRY GIN AND FLING VODK A. DUE TO INCREASE IN DEMAND FOR THE AFOREMENTIONED BRANDS AND SCARCITY OF INFRASTRUCTURE FOR BOTTLING, THE APPELLANT ENTERED INTO BOTTLING ARRANGEMENTS WITH T HIRD PARTY BOTTLERS TO MATCH THE DEMAND. 2. THE APPELLANT IN ORDER TO PROMOTE THE SALES OF T HE AFOREMENTIONED BRANDS, WHICH ARE OWNED BY APPELLANTS AES IN FOREIGN JURISDICTION, INCURRED A MP I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 14 EXPENSES IN INDIA. FOLLOWING ARE THE DETAILS OF CAB IMPORTED, TOTAL SALES AND AMP EXPENSES INCURRED BY THE APPELLANT DURING THE SUBJECT AY. S. NO PARTICULARS VALUE (IN INR) 1) TURNOVER: SALES 203,77,90,310 REVENUE FROM BOTTLING ARRANGEMENTS 1,01,68,86,804 305,46,77,114 2) CAB IMPORTED (PAGE 182 OF PAPERBOOK VOL I) 7,60,3 6,811 3) % OF CAB IMPORTED VIS--VIS TURNOVER 2.49% 4) BRAND EXPENSES (AMP) INCURRED 38,95,50,709 5) % OF BRAND EXPENSES VIS--VIS TURNOVER 12.76% 3. THE TPO VIDE ORDER DATED 18.12.2006 HELD THAT BY INCURRING SUCH AMP EXPENSES, THE APPELLANT CREATED MARKETING INTANGIBLE FOR THE AES WHO OWNED THE AFOREMENTIONED BRANDS AND THUS SUCH EXPENSES NEEDED TO BE SHARED BETWEEN THE APPELLANT AND THE AES. THE TPO ALSO HELD THAT THE AES ARE GETTING BENEFITS FRO M INDIA ON ACCOUNT OF INCREASED IMPORT OF RAW MATERIA LS BY THE APPELLANT AND THE BOTTLERS. THEREAFTER, THE TPO ADDED THE COST OF CAB IMPORTED BY THE APPELLANT AND THE REVENUE FROM BOTTLING ARRANGEMENTS TO USE AS TH E BASE LINE FIGURE IN CALCULATING THE BENEFIT THAT AE S WERE DERIVING BECAUSE OF SUCH BRAND EXPENSES INCURRED BY THE APPELLANT. HENCE THE TPO, ON AN IRRATIONAL BASI S, COMPUTED THE COST CONTRIBUTION OF AES TO THE AMOUNT OF INR 13.24 CRORE. WHILE COMING TO SUCH CONCLUSION, T HE TPO DID NOT ALLEGE THE EXISTENCE OF ANY ARRANGEMENT WHEREIN THE APPELLANT WAS TO INCUR AMP EXPENSES FOR AND ON BEHALF OF THE AES. 4. THE CIT(A) VIDE ORDER DATED 29.06.2009 NOTED THA T THE APPELLANT HAD A ROYALTY-FREE LICENSE WITH THE A ES FOR THE UTILIZATION OF THE AFOREMENTIONED BRANDS IN IND IA I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 15 AND THAT SUCH BRANDS WERE SPECIFIC ONLY TO THE INDI AN MARKET AND WERE NOT SIGNIFICANTLY SOLD OUTSIDE OF I NDIA. THE CIT (A) ALSO NOTED THAT THE COMPARABLES AVAILAB LE ALSO INCURRED ABOUT 12% (BRIGHT LINE) OF BRAND EX PENSES VIS--VIS TURNOVER WHILE EARNING A MEAN OPERATING P ROFIT ON SALES OF ONLY ABOUT 2% AS COMPARED WITH THE APPELLANT COMPANY WHICH HAD SPENT 12.49% ON BRAND EXPENSES AND EARNED SUPER NORMAL OPERATING PROFIT O N SALES OF 27.37%, WHICH WAS BROUGHT TO TAX IN INDIA. THEREFORE, THE CIT (A) HELD THAT BENEFIT, IF ANY, A RISING TO THE AE WAS PURELY INCIDENTAL AND THUS DELETED THE ADJUSTMENT PROPOSED BY THE TPO ON ACCOUNT OF AMP EXPENSES. THE REVENUE DEPARTMENT IS AGGRIEVED BY TH IS FINDING OF THE CIT (A) AND HENCE IS IN APPEAL BEFOR E YOUR HONOURS. 5. IN THIS REGARD, IT IS MOST HUMBLY SUBMITTED THAT THE CIT (A) IS WELL REASONED AND IN TUNE WITH THE RECEN T DEVELOPMENTS IN LAW ON THE ISSUE OF AMP EXPENSES. HONBLE JURISDICTIONAL DELHI HIGH COURT, IN THE CAS E OF MARUTI SUZUKI INDIA LTD. VS. CIT 381 ITR 117, WHIRL POOL OF INDIA LTD. VS. DCIT 381 ITR 154 AND BAUSCH & LO MB EYECARE (INDIA) PVT. LTD. VS. ACIT 381 ITR 227 HAS CLEARLY LAID DOWN THE JURISPRUDENCE ON THE ISSUE OF AMP EXPENSES UNDERTAKEN BY A MANUFACTURER AND HENCE ARE SQUARELY APPLICABLE TO APPELLANTS CASE AS WELL. 6. SUCH DECISIONS HAVE BEEN FOLLOWED BY THE HONBLE DELHI TRIBUNAL IN THE CASE OF GOODYEAR INDIA LTD. V S. DCIT [2016] 70 TAXMANN.COM 67, WHICH ALSO INVOLVED AN ASSESSEE WHO WAS A MANUFACTURER. THE TRIBUNAL HELD THAT THERE EXISTED NO INTERNATIONAL TRANSACTIO N BETWEEN THE AE AND ASSESSEE FOR BRAND BUILDING IN T HE ABSENCE OF AN EXPRESS AGREEMENT TO THAT EFFECT BETW EEN THE TWO AND THE CONTENTION OF THE REVENUE THAT AN I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 16 ABNORMAL INCREASE IN THE ADVERTISEMENT EXPENSES IN COMPARISON TO PRECEDING YEAR WOULD NOT RENDER ANY HELP TO THE REVENUE, KEEPING IN VIEW THE PROPORTION ATE RISE IN TURNOVER OF THE ASSESSEE. THIS RATIO ALSO S QUARELY APPLIES TO THE APPELLANTS CASE AS WELL. 7. THE HONBLE MUMBAI TRIBUNAL ALSO IN THE CASE OF DIAGEO INDIA PRIVATE LIMITED VS. DCIT ITA NO. 7545/MUM/2012 WHICH INVOLVED AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF VARIOUS INTERNATIONAL ALCOHOLIC BRANDS, AFTER RELYI NG UPON THE AFOREMENTIONED DELHI HIGH COURT DECISIONS, HELD THAT INCURRING OF AMP EXPENSES FOR THE BRANDS OWNED BY AES, IN THE ABSENCE OF AN EXPRESS AGREEMEN T TO THAT EFFECT, CANNOT BE LABELLED AS INTERNATIONAL TRANSACTION. THE FACTS OF THIS CASE ARE IDENTICAL T O THE FACTS OF THE APPELLANT BEING A MANUFACTURER OF VARI OUS ALCOHOLIC BRANDS. FOR AY 2005-06 : 1. THE APPELLANTS KEY BUSINESS ACTIVITIES IN INDIA CONSIST OF PROCESSING, BOTTLING AND SELLING OF SCOT CH AND INDIAN MADE FOREIGN LIQUOR (IMFL). IN THE MANUFACTURING SEGMENT THE APPELLANT IMPORTS CONCENTRATE ALCOHOLIC BEVERAGE (CAB) FROM CHIVAS BROTHER, UK. THE IMPORTED CAB IS SUBJECTED TO VARIO US PROCESSES, THE END PRODUCT WHEREOF KNOWN AS BOTTLED IN INDIA SCOTCH (BIIS) IS BOTTLED AND MADE AVAILABLE FOR SALE IN INDIA. BIIS CONSIST OF BRANDS LIKE PASSPORT , HUNDRED PIPERS AND SOMETHING SPECIAL 12 YEAR OLD. T HE IMPORTED CAB IS ALSO BLENDED WITH GRAIN NEUTRAL SPI RIT (GNS) AND THEN SUBJECTED TO VARIOUS PROCESSES, TH E END PRODUCT WHEREOF KNOWN AS IMFL IS BOTTLED AND MADE AVAILABLE FOR SALE IN INDIA AS WELL. IMFL CONS IST OF I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 17 BRANDS LIKE BLENDERS PRIDE, OAKEN GLOW, ROYAL STAG, IMPERIAL BLUE, SEAGRAM EXTRA DRY GIN AND FLING VODK A. DUE TO INCREASE IN DEMAND FOR THE AFOREMENTIONED BRANDS AND SCARCITY OF INFRASTRUCTURE FOR BOTTLING, THE APPELLANT ENTERED INTO BOTTLING ARRANGEMENTS WITH T HIRD PARTY BOTTLERS TO MATCH THE DEMAND. 2. THE APPELLANT IN ORDER TO PROMOTE THE SALES OF T HE AFOREMENTIONED BRANDS, WHICH ARE OWNED BY APPELLANTS AES IN FOREIGN JURISDICTION, INCURRED A MP EXPENSES IN INDIA. FOLLOWING ARE THE DETAILS OF CAB IMPORTED, TOTAL SALES AND AMP EXPENSES INCURRED BY THE APPELLANT DURING THE SUBJECT AY. S. NO PARTICULARS VALUE (IN INR) 1) TURNOVER: SALES 210,30,61,000 REVENUE FROM BOTTLING ARRANGEMENTS 116,46,80,000 326,77,41,000 2) CAB IMPORTED 8,29,11,124 3) % OF CAB IMPORTED VIS--VIS TURNOVER 2.54% 4) BRAND EXPENSES (AMP) INCURRED 46,79,78,320 5) % OF BRAND EXPENSES VIS--VIS TURNOVER 14.32% 3. THE TPO VIDE ORDER DATED 16.10.2008 HELD THAT BY INCURRING SUCH AMP EXPENSES, THE APPELLANT CREATED MARKETING INTANGIBLE FOR THE AES WHO OWNED THE AFOREMENTIONED BRANDS AND THUS SUCH EXPENSES NEEDED TO BE SHARED BETWEEN THE APPELLANT AND THE AES. THE TPO ALSO HELD THAT THE AES ARE GETTING BENEFITS FRO M INDIA ON ACCOUNT OF INCREASED IMPORT OF RAW MATERIA LS BY THE APPELLANT AND THE BOTTLERS. THEREAFTER, THE TPO ADDED THE COST OF CAB IMPORTED BY THE APPELLANT AND THE BOTTLERS TO THE SALES OF THE APPELLANT TO USE A S THE BASE LINE FIGURE IN CALCULATING THE BENEFIT THAT AE S WERE DERIVING BECAUSE OF SUCH BRAND EXPENSES INCURRED BY I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 18 THE APPELLANT. HENCE THE TPO, ON AN IRRATIONAL BASI S, COMPUTED THE COST CONTRIBUTION OF AES TO THE AMOUNT OF INR 8,93,95,976. WHILE COMING TO SUCH CONCLUSION, T HE TPO DID NOT ALLEGE THE EXISTENCE OF ANY ARRANGEMENT WHEREIN THE APPELLANT WAS TO INCUR AMP EXPENSES FOR AND ON BEHALF OF THE AES. 4. THE CIT(A) VIDE ORDER DATED 28.02.2011 NOTED THA T THE APPELLANT HAD A ROYALTY-FREE LICENSE WITH THE A ES FOR THE UTILIZATION OF THE AFOREMENTIONED BRANDS IN IND IA AND THAT SUCH BRANDS WERE SPECIFIC ONLY TO THE INDI AN MARKET AND WERE NOT SIGNIFICANTLY SOLD OUTSIDE OF I NDIA. THE CIT (A) ALSO NOTED THAT THE COMPARABLES AVAILAB LE ALSO INCURRED ABOUT 11% (BRIGHT LINE) OF BRAND EX PENSES VIS--VIS TURNOVER WHILE EARNING A MEAN OPERATING P ROFIT ON SALES OF ONLY ABOUT 5.18% AS COMPARED WITH THE APPELLANT COMPANY WHICH HAD SPENT ABOUT 14% ON BRAND EXPENSES AND EARNED SUPER NORMAL OPERATING PROFIT ON SALES OF 18.26%, WHICH WAS BROUGHT TO TAX IN INDIA. THEREFORE, THE CIT (A) HELD THAT BENEFIT, IF ANY, ARISING TO THE AE WAS PURELY INCIDENTAL AND THUS DELETED THE ADJUSTMENT PROPOSED BY THE TPO ON ACCOU NT OF AMP EXPENSES. THE REVENUE DEPARTMENT IS AGGRIEVE D BY THIS FINDING OF THE CIT (A) AND HENCE IS IN APPE AL BEFORE YOUR HONOURS. 5. IN THIS REGARD, IT IS MOST HUMBLY SUBMITTED THAT THE CIT (A) IS WELL REASONED AND IN TUNE WITH THE RECEN T DEVELOPMENTS IN LAW ON THE ISSUE OF AMP EXPENSES. HONBLE JURISDICTIONAL DELHI HIGH COURT, IN THE CAS E OF MARUTI SUZUKI INDIA LTD. VS. CIT 381 ITR 117, WHIRL POOL OF INDIA LTD. VS. DCIT 381 ITR 154 AND BAUSCH & LO MB EYECARE (INDIA) PVT. LTD. VS. ACIT 381 ITR 227 HAS CLEARLY LAID DOWN THE JURISPRUDENCE ON THE ISSUE OF AMP I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 19 EXPENSES UNDERTAKEN BY A MANUFACTURER AND HENCE ARE SQUARELY APPLICABLE TO APPELLANTS CASE AS WELL. 6. SUCH DECISIONS HAVE BEEN FOLLOWED BY THE HONBLE DELHI TRIBUNAL IN THE CASE OF GOODYEAR INDIA LTD. V S. DCIT [2016] 70 TAXMANN.COM 67, WHICH ALSO INVOLVED AN ASSESSEE WHO WAS A MANUFACTURER. THE TRIBUNAL HELD THAT THERE EXISTED NO INTERNATIONAL TRANSACTIO N BETWEEN THE AE AND ASSESSEE FOR BRAND BUILDING IN T HE ABSENCE OF AN EXPRESS AGREEMENT TO THAT EFFECT BETW EEN THE TWO AND THE CONTENTION OF THE REVENUE THAT AN ABNORMAL INCREASE IN THE ADVERTISEMENT EXPENSES IN COMPARISON TO PRECEDING YEAR WOULD NOT RENDER ANY HELP TO THE REVENUE, KEEPING IN VIEW THE PROPORTION ATE RISE IN TURNOVER OF THE ASSESSEE. THIS RATIO ALSO S QUARELY APPLIES TO THE APPELLANTS CASE AS WELL. 7. THE HONBLE MUMBAI TRIBUNAL ALSO IN THE CASE OF DIAGEO INDIA PRIVATE LIMITED VS. DCIT ITA NO. 7545/MUM/2012 WHICH INVOLVED AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF VARIOUS INTERNATIONAL ALCOHOLIC BRANDS, AFTER RELYI NG UPON THE AFOREMENTIONED DELHI HIGH COURT DECISIONS, HELD THAT INCURRING OF AMP EXPENSES FOR THE BRANDS OWNED BY AES, IN THE ABSENCE OF AN EXPRESS AGREEMEN T TO THAT EFFECT, CANNOT BE LABELLED AS INTERNATIONAL TRANSACTION. THE FACTS OF THIS CASE ARE IDENTICAL T O THE FACTS OF THE APPELLANT BEING A MANUFACTURER OF VARI OUS ALCOHOLIC BRANDS. 5.1 THE LD. CIT (DR) ON THE ISSUE OF TRANSFER PRICI NG ADJUSTMENT ON ACCOUNT OF AMP EXPENSES SUBMITTED AS FOLLOWS: I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 20 A.Y.2004-05 (APPEAL NO. ITA NO 3811/DEL/2009) 1. DURING THE YEAR UNDER CONSIDERATION THE APPELLA NT HAD INCURRED BRAND EXPENDITURE OF RS. 38,95,50,709/ - (PARA 13 OF TPO ON INTERNAL PAGE 21 FOR A.Y.2004-05 ). THE AO HAS HELD THAT THE ASSESSEE WAS NOT THE LEGAL OWNER OF THE BRANDS AND THEREFORE IT HAD TO BE COMPENSATED BY ITS AE FOR THE MARKETING INTANGIBLE BEING CREATED DUE TO BRAND EXPENDITURE INCURRED BY THE ASSESSEE. HE HAS CALCULATED THE BENEFIT DERIVED BY THE AE AT RS. 13.24 CRORES (PARA 13.5 ON INTERNAL PAGE 25 OF TPO) BY MULTIPLYING THE BRAND EXPENDITURE WITH RESU LT OF THE FOLLOWING RATIO: SUM OF BOTTLING INCOME PLUS RAW MATERIAL IMPORT ______________________________________ (TURNOVER OF TAXPAYER + SUM OF BOTTLING INCOME PLUS RAW MATERIAL IMPORT) 2. LD CIT (A) HAS DIS-AGREED WITH THE LD.AO. HE HA S COMPLETELY RELIED UPON THE SUBMISSIONS OF THE ASSES SEE MADE BEFORE HIM DURING THE APPEAL PROCEEDINGS. THE AVERMENTS MADE BY THE ASSESSEE HAVE NOT BEEN CROSS VERIFIED BY THE LD CIT(A). THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN ELABORATELY REPRODUCED BY LD CIT (A) AND AT THE END HE HAS HELD THAT THE BRAND EXPENDITURE INCURRED BY THE ASSESSEE HAS BEEN ON BRANDS THAT ARE ESSENTIALLY SPECIFIC TO THE INDIAN MARKET AND ARE NOT SIGNIFICANTLY KNOWN / SOLD OUTSIDE INDI A AND THAT FOREIGN AE IS NOT DERIVING ANY BENEFIT OUT OF IT. THIS FINDING OF LD CIT (A) IS WITHOUT ANY INDEPENDE NT BASIS. THERE ARE NO FACTS AND FIGURES / DATA AVAILA BLE ON RECORD TO SUPPORT SUCH FINDING OF THE LD CIT(A). INFACT THE FINDING IS DEFECTIVE IN AS MUCH AS IT IS COMPLE TELY CONTRARY TO THE FACTS OF THE CASE AS IS DISCUSSED B ELOW: 3. KIND REFERENCE IS INVITED TO PAGE.4 AND PAGE 5 OF THE ORDER OF LD CIT(A) WHERE IN AT PARA 5.5 AND 5.6 IT IS STATED THAT THE ASSESSEE MANUFACTURES AND SELLS THE I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 21 SCOTCH BRANDS (BOTTLED IN INDIA SCOTCH -BIIS) NAMEL Y, PASSPORT, HUNDRED PIPERS AND SOMETHING SPECIAL 12 YEAR OLD. THESE BRANDS ARE VERY MUCH INTERNATIONAL BRANDS AND LD CIT (A) HAS COMPLETELY MISSED (OR AVOIDED) TO REFER TO THESE BRANDS IN HIS FINDINGS. HE HAS ONLY TAKEN THE NAMES OF THE IMFL BRANDS LISTED AT P ARA 5.7 OF HIS ORDER AND STATED THAT THE BRAND EXPENDIT URE HAS BEEN INCURRED ONLY ON THEM WITHOUT ANY BASIS. T HIS IS FAR FROM TRUTH. IN FACT IT IS ALSO TRUE THAT THE RE WAS NO MATERIAL AVAILABLE ON RECORD TO CONCLUDE THAT SO AND SO BRANDS ARE NOT HAVING MARKET OUTSIDE INDIA. THER E WAS NO DATA OR MATERIAL AVAILABLE ON RECORD FOR THE LD CIT(A) TO DECIDE THAT THE OTHER BRANDS LISTED AT PA RA 5.7 ARE ONLY SOLD IN INDIA. THUS THE FINDINGS OF THE LD .CIT(A) ARE PERVERSE AS HE HAS COME TO A CONCLUSION WITHOUT ANY MATERIAL BASIS. 4. FURTHER, THE BOTTLERS ARE BUYING THE RAW MATERI AL FROM ASSESSEES PARENT COMPANY (AE) AS PER THE BILATERAL AGREEMENT BETWEEN BOTTLERS AND THE ASSESS EE. THE BOTTLERS ARE CONTRACTUALLY BOUND (KINDLY REFER TO FIRST POINT UNDER PARA 3.31 OF ASSESSEES LETTER TO THE T PO DATED 27TH NOV 2006 GIVEN AT PAGE 417 OF ASSESSEES PAPER BOOK) TO BUY THE RAW MATERIAL FROM ASSESSEES AE ONLY. THIS ARRANGEMENT DOES GIVE RISE TO INTERNATIO NAL TRANSACTION AS PER S.92B(2) OF THE ACT. THE BOTTLIN G REMUNERATION RECEIVED BY ASSESSEE HAS A COMPONENT O F REMUNERATION FROM THE AE WHO IS GETTING BENEFIT OF SELLING ITS RAW MATERIAL AND ALSO GETTING BENEFIT O F MARKETING INTANGIBLES CREATED BY ADVERTISEMENT SPEN D BY ASSESSEE. 5. THE ENTIRE BASIS FOR LD CIT(A)S DECISION IS TH AT THE ENTIRE AMP EXPENDITURE IS ON PROMOTING LOCAL BRANDS COMPLETELY FORGETTING THAT THERE IS NO MATERIAL BAS IS TO ARRIVE AT SUCH CONCLUSION AND ALSO THAT IT IS FACTU ALLY INCORRECT AS EXPLAINED AT PAR- 3 & 4 ABOVE. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 22 6. LD CIT(A) HAS ALSO BASED HIS JUDGMENT ON THE BRIGHT LINE TEST ADOPTED BY THE ASSESSEE BEFORE LD.CIT(A) TO ESTABLISH THE ABSENCE OF INTERNATIONAL TRANSACTION IN AMP. THE MODE AND VALIDITY OF SELECT ION OF COMPARABLES ETC SELECTED BY THE APPELLANT HAVE N OT BEEN SUBJECTED TO THE BARE MINIMUM SCRUTINY THAT IS WARRANTED IN ANY ASSESSMENT / APPEAL PROCEEDINGS. FURTHER THE LD CIT(A) HAS HELD THE PROFITS AS SUPER NORMAL MERELY ON THE SUBMISSIONS OF THE ASSESSEE WITHOUT ANY FURTHER SCRUTINY BY THE APPROPRIATE AUTHORITY AND SOLELY ON THE AVERMENTS OF THE ASSESS EE. 7. THE TPO/AO HAVE COMPLETED THE ASSESSMENT ON THE REASONING THAT AE HAS NOT COMPENSATED THE ASSESSEE FOR THE AMP SPEND THAT CONTRIBUTES TO ACCR UAL OF MARKETING INTANGIBLES TO THE AE THE LEGAL OWNE R OF THE BRANDS. HOWEVER, IN THE CASES OF SONY ERICSSON MOBILE COMMUNICATIONS PVT. LTD. VS. CIT REPORTED AT 374 ITR 118 AND MARUTI SUZUKI INDIA LTD. VS. CIT IN ITA NO. 110/214 AND 710/2015 ORDER DATED 11 DECEMBER, 2015 THE HONBLE HIGH COURT OF DELHI HAS HELD THAT TPO /AO CANNOT PRESUME THE EXISTENCE OF ARRANGEMENT / UNDERSTANDING BETWEEN AE AND THE TAXPAYER ON AMP, BUT THAT HE HAS TO PROVE IT WITHOUT THE HELP OF BLT . POST THESE DECISIONS, THE HONBLE HIGH COURT AND ALSO VARIOUS BENCHES OF HONBLE ITAT HAVE BEEN SETTING ASIDE THE AMP ISSUE TO THE FILE OF THE AO /TPO FOR FRESH ADJUDICATION IN THE LIGHT OF THE GUIDELINES AND RAT IO SET OUT IN THOSE DECISIONS OF THE HONBLE HIGH COURT. I N THE FOLLOWING CASES THE AMP ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO /TPO POST THE ABOVE CITED SONY ERICS SON AND MARUTHI DECISIONS. IT IS THEREFORE PRAYED THAT THE HONBLE BENCH MAY CONSIDER SETTING ASIDE THE ISSUE OF BENCHMARKING THE AMP EXPENDITURE TO THE FILE OF THE AO /TPO FOR FRESH CONSIDERATION. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 23 A. TOSHIBA INDIA PVT. LTD., NEW DELHI VS ASSESSEE ON 8 APRIL, 2016 - ITA NO. 944/DEL/2016 ASSESSMENT YEAR : 2011-12 DTD: 08 .04.2015 THE RELEVANT PARA ARE AS UNDER: 6. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE UNDER CONSIDERATION DESERVES TO BE SET ASIDE TO THE TPO/AO AS THE ISSUE NOW HAS BEEN SETTLED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS PVT. LTD. VS. CIT REPORTED AT 374 ITR 118 AND IN THE CASE OF MARUTI SUZUKI INDIA LTD. VS. CITIN ITA NO. 110/214 AND 710/2015 ORDER DATED 11 DECEMBER, 2015. IT WAS FURTHER SUBMITTED THAT THE AFORESAID ORDERS WERE NOT AVAILABLE TO THE T.P.O. / D.R.P. AT THE TIME OF PASSING OF THEIR RESPECTIVE ORDERS. IT WAS ALSO SUBMITTED THE TPO/AO/DRP (IN ITA NO. 944/DEL/2016) HAVE NOT BROUGHT ANY EVIDENCE ON RECORD TO DEMONSTRATE THE EXISTENCE OF ANY MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN THE ASSESSEE AND THE A.E. IT WAS STATED THAT THE DRP DECLINED TO APPLY THE DECISIONS OF M/S MARUTI SUZUKI INDIA LTD. VS. C.I.T. (SUPRA) ON THE GROUND THAT IT WAS GIVEN IN THE CONTEXT OF A MANUFACTURER AND NOT A DISTRIBUTOR, HOWEVER, SUBSEQUENT TO THE SAID DECISION THE HON'BLE JURISDICTIONAL H.C. IN TH E CASE OF WHIRLPOOL OF INDIA VS. DCOT IN I.T.A. 228/2015 & C.M.NO. 5751/2015 ORDER DATED 22.12.2015 AND IN THE CASE OF BAUSCH & LOMB EYECARE (INDIA) PVT. LTD. VS. A.C.I.T. IN I.T.A. NO . 643 & 675/14 ORDER DATED 23.12.2015 EXAMINED THIS ASPECT AND APPLIED THE SAME PRINCIPLE TO DISTRIBUTION BUSINESS AS WELL. IT WAS FURTHER I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 24 SUBMITTED THAT DRP AND THE TPO FAILED TO GIVE ANY COGENT REASON FOR DE-BUNDLING THE AMP FUNCTION OF THE ASSESSEE AS A SEPARATE TRANSACTION WHICH IS IN VIOLATION OF THE PRINCIPLES LAID DOWN IN THE CASE O F SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD REPORTED AT (2015) 55 TAXMAN.COM.240(DEL.) (SUPRA). 7. IN HIS RIVAL SUBMISSIONS, THE LD. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE T.P.O. PROPOSED THE ADJUSTMENT BY APPLYING THE 'BRIGHT LINE TEST', ON ACCOUNT OF EXCESSIVE AMP INCURRED BY THE ASSESSEE ON BEHALF OF THE A.E. BUT SUBSEQUENTLY THE D.R.P. HELD THAT THE APPLICATION OF 'BRIGHT LINE TEST' HAS BEEN OVER RULED IN THE CASE OF M/S. SONY ERICSSON MOBILE COMMUNICATION INDIA PVT. LTD. (SUPRA). HOWEVER, THE D.R.P. DECLINED TO APPLY THE DECISION OF MARUTI SUZUKI INDIA LTD. (SUPRA) ON THE GROUND THAT IT WAS RENDERED IN THE CONTEXT OF A MANUFACTURER AND NOT A DISTRIBUTOR. RECENTLY, THE HON'BLE DELHI HIGH COURT, SUBSEQUENT TO THE SAID (IN ITA NO. 944/DEL/2016) DECISION OF MARUTI SUZUKI INDIA LTD. (SUPRA), EXAMINED THIS ASPECT AND APPLIED THE SAME PRINCIPLE TO THE DISTRIBUTION BUSINESS ALSO IN THE CASES OF BAUSCH & LOMB EYECARE (INDIA) PVT. LTD. VS. A.C.I.T. (SUPRA) AND C.I.T. & ORS VS. WHIRLPOOL OF INDIA LTD. (SUPRA) VIDE ORDER DATED 23.12.2015 AND 22.12.2015 RESPECTIVELY. THESE DECISIONS OF THE HON'BLE JURISIDCTIONAL COURT WHICH ARE APPLICABLE TO THE FACTS OF THE PRESENT CASE WER E I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 25 NOT CONSIDERED BY THE T.P.O. AND THE D.R.P. SINCE THESE WERE NOT AVAILABLE TO THEM. WE, THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS AND THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE AFORESAID JUDICIAL PRONOUNCEMENTS, DEEM IT APPRECIATE TO SET ASIDE THE ISSUE RELATING TO THE ADJUSTMENT ON ACCOUNT OF AMP TO THE FILE OF THE TPO/AO TO BE DECIDED AFRESH IN ACCORDANCE WITH THE LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. B. INDIA MEDTRONIC P.LTD, MUMBAI VS ASSESSEE ON 31 DECEMBER, 2015 - I.T.A. NO.2168/M/2014 (ASSESSMENT YEAR: 2009- 2010) C.O. NO.213/M/2014 (ARISING OUT OF ITA NO.2121/M/2014) (AY 2009- 2010) THE RELEVANT PARA ARE AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IE DRP / TPO / AO AND PERUSED THE VOLUMINOUS PAPER BOOKS FILED BEFORE US. THE UNDISPUTED FACTS OF THE CASE INCLUDE THE BENCHMARKING ANALYSIS OF THE CORE INTERNATIONAL TRANSACTIONS WERE FOUND TO BE AT ARM S LENGTH. TPO DID NOT SUGGEST ANY ADDITION ON ACCOUNT OF THE IMPORT OF THE FINISHED GOODS. THERE IS NO DISTURBANCE IS CALLED FOR TO THE METHOD OF ACCOUNTING IE TNM METHOD ADOPTED BY THE ASSESSEE. IT IS A LEGALLY DECIDED ISSUE NOW BY VIRTUE OF THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON (SUPRA), THE SPECIAL BENCH DECISION IN THE CASE OF L.G. ELECTRONICS (SUPRA) STANDS REVERSED ON MANY ISSUES SUCH AS ADOPTING THE BRIGHT LINE METHOD I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 26 IN MATTERS OF BENCHMARKING THE AMP TRANSACTIONS. THE RELEVANT PARAS OF THE HON BLE DELHI HIGH COURT (SUPRA) WERE ALREADY EXTRACTED / CITED IN THE PRECEDING PARAGRAPHS OF THIS ORDER. FACTUALLY, THE SAID JUDGMENT OF THE DELHI HIGH COURT BEING DATED 16.3.2015, WAS NOT AVAILABLE DURING THE PROCEEDINGS BEFORE THE ASSESSING OFFICER DATED 29.1.2014. THEREFORE, WE FIND THAT IT IS FAIR TO GI VE AN OPPORTUNITY TO THE TPO / AO TO APPLY THE RATIO OF THE SAID JUDGMENT AND OTHERS, IF ANY, AND REMAND THIS ISSUE TO THE FILE OF THE AO CONSIDERING THE PLETHORA OF ORDERS OF THE TRIBUNAL REFERRED ABOVE IE THE CASE OF TOSHIBA INDIA (P) LTD VS. DCIT (SUPRA); (II) CASIO INDIA CO. (P) LTD VS. DCIT (SUP RA); (III) VALVOLINE CIMMINS (P) LTD VS. DCIT (SUPRA)AND (IV) REEBOK INDIA COMPANY VS. DCIT (SUPRA). C. JOHNSON & JOHNSON LTD. - ITA NO. 829/M/2014 A.Y.09-10 DATED 07.01.201 6 HONBLE MUMBAI TRIBUNAL, AFTER CONSIDERATION DECISI ON OF HONBLE HIGH COURT IN THE CASE OF SONY ERICSSON AND MARUTI SUZUKI, HAVE RESTORED THE MATTER BACK TO THE FILE OF TPO FOR DETERMINATION OF ALP ON AMP ISSUE. PARA 6 IS REPRODUCED BELOW: '6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF BENCHMARKING THE AMP EXPENSES QUA THE BRAND DEVELOPMENT AND FIND THE AO / TPO RELIED HEAVILY ON THE SPECIAL BENCH DECISION OF ITAT, DELHI IN THE CASE OF L.G. ELECTRONICS INDIA PVT LTD (SUPRA) IN MAKING THE ADJUSTMENTS AND IN APPLYING THE BLT IN BENCHMARKING THE AMP EXPENDITURE. IT IS AN UNDISPUTED FACT THAT THE HON BLE DELHI HIGH COURT HAS RENDERED A JUDGMENT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT LTD I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 27 (SUPRA), REVERSING THE SAID SPECIAL BENCH DECISION IN THE CASE OF L.G. ELECTRONICS (SUPRA). AS ON TODA Y, THE BLT IS NOT TO BE APPLIED IN SUCH BENCHMARKING EXERCISE OF THE AMP EXPENDITURE. AP / TPO IS STATUTORILY BOUND TO APPLY THE EXISTING METHODS MENTIONED IN THE IT ACT, 1961 / IT RULES, 1962. WE, ACCORDINGLY, REMAND THE ISSUE, THAT REVOLVES AROUND THE TP ADJUSTMENT OF RS. 133.02 (ROUNDED OF), TO THE FILE OF THE AO / TPO TO BENCHMARK THESE TRANSACTIONS, IF NECESSARY IN THE LIGHT OF THE GUIDELINES SPECIFIED IN THE PRECEDENTS ENUNCIATED BY THE DELHI HIGH COURT (SUPRA). FURTHER, TPO IS DIRECTED TO APPLY ALL THE PRINCIPLE S LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MARUTI SUZIKI INDIA LIMITED VS. CIT IN ITA NO. 110/ 2014 AND ITA 710/2015, DATED 11 TH DECEMBER, 2015 IN THE REMAND PROCEEDINGS IN THE MATTERS OF THE REQUIREMENT OF BENCHMARKING THE AMP TRANSACTIONS.' D. MOLSON COORS COBRA INDIA P.LTD DECIDED ON 10 FEBRUARY, 2016 - I.T.A. NO.7119/M/2012 ASSESSMENT YEAR: 2007-2008 THE RELEVANT PARA ARE AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD COUNSEL THAT UNDER THE FACTUAL MATRIX OF THIS CASE, THE ISSUE OF BENCHMARKING THE AMP TRANSACTIONS WAS REMANDED IN THE CASE OF M/S. JOHNSON & JOHNSON LIMITED (SUPRA) AND JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF PERFETTI VAN MELLE INDIA I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 28 PVT LTD VS. DCIT IN ITANO.407/DEL/2015 (AY 2010-2011), DATED 2.6.2015. THE UNDERSIGNED IS A PARTY TO THE SAID DECISION OF THE TRIBUNAL IN THE CASE OF M/S. JOHNSON & JOHNSON LIMITED (SUPRA). FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PARAS FROM THE SAID TRIBUNAL S ORDER DATED 7.1.2016 IS EXTRACTED AND PLACED AS UNDER:- '6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF BENCHMARKING THE AMP EXPENSES QUA THE BRAND DEVELOPMENT AND FIND THE AO / TPO RELIED HEAVILY ON THE SPECIAL BENCH DECISION OF ITAT, DELHI IN THE CASE OF L.G. ELECTRONICS INDIA PVT LTD (SUPRA) IN MAKING THE ADJUSTMENTS AND IN APPLYING THE BLT IN BENCHMARKING THE AMP EXPENDITURE. IT IS AN UNDISPUTED FACT THAT THE HON BLE DELHI HIGH COURT HAS RENDERED A JUDGMENT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT LTD (SUPRA), REVERSING THE SAID SPECIAL BENCH DECISION IN THE CASE OF L.G. ELECTRONICS (SUPRA). AS ON TODAY, THE BLT IS NOT TO BE APPLIED IN SUCH BENCHMARKING EXERCISE OF THE AMP EXPENDITURE. AP / TPO IS STATUTORILY BOUND TO APPLY THE EXISTING METHODS MENTIONED IN THE IT ACT, 1961 / IT RULES, 1962. WE, ACCORDINGLY, REMAND THE ISSUE, THAT REVOLVES AROUND THE TP ADJUSTMENT OF RS. 133.02 (ROUNDED OF), TO THE FILE OF THE AO / TPO TO BENCHMARK THESE TRANSACTIONS, IF NECESSARY IN THE LIGHT OF THE GUIDELINES SPECIFIED IN THE PRECEDENTS ENUNCIATED BY THE DELHI HIGH COURT (SUPRA). FURTHER, TPO IS DIRECTED TO APPLY ALL THE PRINCIPLES LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MARUTI SUZIKI INDIA LIMITED VS. CIT IN ITA NO. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 29 110/ 2014 AND ITA 710/2015, DATED 11 TH DECEMBER, 2015 IN THE REMAND PROCEEDINGS IN THE MATTERS OF THE REQUIREMENT OF BENCHMARKING THE AMP TRANSACTIONS.' 8. WE ALSO FIND THAT THE JUDGMENTS OF THE HON BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS PVT LTD (SUPRA) AND MARUTI SUZIKI INDIA LIMITED (SUPRA) ARE ALSO CONSIDERED WHILE REMANDING THE ABOVE CASE (M/S. JHONSON AND JHONSON) TO THE FILE OF THE AO FOR NECESSARY ADJUDICATION. WITH SIMILAR DIRECTIONS, WE REMAND GROUND NO.2 WITH ITS SUB-GROUNDS OF THE PRESENT APPEAL TO THE FILE OF THE AO FOR BENCHMARKING THE RELEVANT INTERNATIONAL TRANSACTIONS. ACCORDINGLY, GROUND NO.2 WITH ITS SUB-GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. I AM ALSO ENCLOSING THE LIST OF CASES WHERE THE MAT TER HAS BEEN SET ASIDE TO THE AO /TPO FOR REDOING AS ANNEXURE-A TO THIS SUBMISSION. A.Y.2005-06 (ITA NO 2530/DEL/2011): IT IS SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE AS FOUND IN ORDERS OF AO /TPO ARE SAME AS IN T HE CASE OF THE ASSESSEE FOR A.Y.2004-05. THE LD. CIT(A ) HAS ALSO GIVEN THE SAME REASONS AS GIVEN IN THE ORD ER OF LD.CIT(A) FOR A.Y.2004-05 WHILE DELETING THE ADDITI ON. HENCE FOR THE SAME REASONS AS SUBMITTED ABOVE FOR A.Y.2004-05, THE HONBLE BENCH MAY CONSIDER SETTING ASIDE THE ISSUE OF BENCHMARKING THE AMP EXPENDITURE TO THE FILE OF THE AO /TPO FOR FRESH CONSIDERATION. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 30 5.2 THE LD. CIT (DR) ALSO SUBMITTED A LIST OF CASES AS AFOREMENTIONED WHERE THE ISSUE RELATING TO AMP WAS RESTORED TO THE FILE OF THE LD. TPO/AO BUT THE SAME IS NOT BEING REPRODUCED HERE FOR THE SAKE OF BREVITY. 5.3 THE LD. AR, IN RESPONSE TO THE AFOREMENTIONED C IT (DR)S SUBMISSIONS, SUBMITTED AS FOLLOWS: THE CRUX OF THE MATTER IS THAT, IN TOTALITY OF THE CIRCUMSTANCES, THE REVENUE HAS NOT BEEN ABLE TO ESTABLISH THAT THERE WAS ANY INTERNATIONAL TRANSAC TION OR ANY ARRANGEMENT BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISE (AE) OF THE ASSESSEE FOR INCURRING OF AMP EXPENDITURE. WHAT THE CIT(DR) HAS COMPLETELY MISSED IS THAT THER E WAS A SEPARATE ARRANGEMENT BETWEEN THE ASSESSEE AND ITS AE FOR THE PURPOSES OF PROVIDING MARKETING SUPPORT SERVICES IN RESPECT OF THE INTERNATIONAL BR ANDS, WHICH WERE SOLD DIRECTLY BY THE AE TO INSTITUTIONS WITH THE ASSESSEE PLAYING NO ROLE IN THE SALE OF SUCH BR ANDS IN INDIA AND ALL SUCH EXPENDITURE RELATING THE ADVERTISEMENT AND MARKETING CONDUCTED BY THE ASSESSEE FOR THE AE STOOD COMPLETELY REIMBURSED. TH E TRANSFER PRICING OFFICER (TPO) WHILE DETERMINING THE ALP IN RESPECT OF THAT MARKETING ARRANGEMENT HAS INCLUDED THE ENTIRE MARKETING EXPENDITURE DONE FOR THE AE AND REIMBURSED BY THE AE AS PART OF THE COST BAS E, WHICH ACTION HAS BEEN CONFIRMED BY THE TRIBUNAL IN THE AY 2002-03 AND 2003-04 (ITA NOS. 4783/DEL/2007 AND 4784/DEL/2007 ENCLOSED AT PAGES 714-755 OF THE PAPERBOOK VOL III). AT THIS JUNCTURE, IT IS ALSO SU BMITTED I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 31 THAT THIS MARKETING ARRANGEMENT WITH THE AE, CATERE D TO THE FOREIGN BRANDS WHICH WERE TO BE SOLD IN INDIA T O INSTITUTIONS AND DUTY FREE SHOPS. THE CIT (DR) WHIL E REFERRING TO THE BRANDS HAS COMPLETELY MIXED UP THE WHOLE PROPOSITION AND HAS DRAWN ERRONEOUS CONCLUSIONS. IT IS RESPECTFULLY SUBMITTED THAT EVEN OTHERWISE TH E REVENUE HAS GROSSLY ERRED IN NOT DISCHARGING THE ON US RELATING TO EXISTENCE OF AMP AS AN INTERNATIONAL TRANSACTION DE HORS THE APPLICATION OF BRIGHT LINE TEST (BLT) METHOD WITH RESPECT TO THE ALLEGED AMP EXPENDITURE ISSUE, AS MANDATED BY THE JURISDICTIONA L HIGH COURT OF IN THE CASE OF MARUTI SUZUKI INDIA LT D. [2016] 381 ITR 117 (DELHI HIGH COURT). ON THE ISSUE OF AND THE REVENUES ENDEAVOUR TO HAVE THE MATTER REMANDED BACK, THE ASSESSEE SEEKS LIBERT Y TO POINT OUT THAT THE DELHI HIGH COURT IN SONY ERIC SSON MOBILE COMMUNICATIONS INDIA P. LTD. (2015) 374 ITR 118, FOLLOWED BY MARUTI SUZUKI INDIA LTD. (SUPRA) H AVE CLARIFIED THAT THE TRIBUNAL, IN THE FIRST INSTANCE, SHOULD DECIDE THE ISSUE ON MERITS RATHER THAN PASSING AN O RDER OF REMAND TO THE AO/TPO. IT WAS ALSO HELD IN MARUTI SUZUKI INDIA LTD. (SUPRA) THAT THE TRIBUNAL WAS NOT RIGHT IN DIRECTING A FRESH BENCHMARKING COMPARATIVE ANALY SIS THEREBY SETTING ASIDE THE REMAND ORDER OF THE ITAT WHILE DECIDING THE AMP ISSUE IN FAVOUR OF THE ASSES SEE. FURTHER, IN TERMS OF THE WRITTEN SUBMISSION FILED B Y THE CIT (DR), THE PARA WISE REPLY IS AS UNDER: 1. THE CONTENTS OF PARAGRAPH 1 OF CIT (DR)S NOTE S TATE FACTS AND FIGURE WHICH ARE A MATTER OF RECORD. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 32 2. THE CONTENTS OF PARAGRAPH 2 OF CIT(DR)S NOTE AR E UNTENABLE AND UNCALLED FOR IN THE ABSENCE OF ANY SPECIFIC GROUND OF APPEAL RAISED BY THE REVENUE DEPARTMENT IN THEIR APPEALS. MOREOVER, THE CIT(DR) HAS COMPLETELY FAILED TO DISCHARGE THE ONUS OF PRODUCIN G ANY MATERIAL ON RECORD IN SUPPORT OF HIS SUBMISSION S THAT COULD SUGGEST A MANIFEST ERROR ON PART OF THE CIT(A) SO THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF AO/TPO. 3. THE CONTENTS OF PARAGRAPH 3 OF CIT(DR)S NOTE AR E VAGUE AND WITHOUT CORROBORATING EVIDENCE, HENCE DENIED. RELIANCE PLACED ON PARA 5.5 TO 5.7 OF THE O RDER OF LD. CIT(A) IS MISCONCEIVED AND ON SELECTIVE READ ING OF FACTS, WHICH IS NOT PERMISSIBLE. EVEN OTHERWISE, IT IS RESPECTFULLY SUBMITTED THAT WHEN REVENUE HAS NOT CHALLENGED THE CONCLUSION DRAWN BY CIT(A) IN RESPEC T TO THESE FACTS [KINDLY REFER PARA 10.9 OF THE CIT(A) O RDER], THEN IT IS NOT OPEN FOR THE CIT(DR) TO RAISE SUCH UNILATERAL AVERMENTS (RELIANCE IS PLACED ON SETTLED LEGAL PRINCIPLE THAT WHAT CANNOT BE DONE DIRECTLY CANN OT BE DONE INDIRECTLY). WITHOUT PREJUDICE, IT IS NOW A SETTLED LEGAL PRINCI PLE THAT CIT(DR)S ARGUMENTS ARE TO BE CONFINED TO SUPPORT O R DEFEND THE AO/TPO/CIT(A) ORDER AND THAT HE CANNOT S ET UP AN ALTOGETHER DIFFERENT CASE [ACIT V. MS. AISHWA RYA K. RAI [2010] 2 ITR (TRIB) 644 (MUMBAI TRIBUNAL), I TO V. ANANT Y. CHAVAN (2009) 126 TTJ 984 (PUNE TRIBUNAL), MAHINDRA & MAHINDRA LTD. ITA NO. 2606/MUM/2000 (MUMBAI TRIBUNAL SPECIAL BENCH) AND DCIT V. M/S. ENVISION INVESTMENT & FINANCE PVT. LTD. ITA NO. 2138/MUM/2010 (MUMBAI TRIBUNAL)]. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 33 4. THE CONTENTS OF PARAGRAPH 4 OF CIT(DR)S REPLY A RE UNTENABLE, WITHOUT ANY BASIS AND ARE DENIED IN TOTO . THE CIT(DR)S ARGUMENT THAT THE BOTTLING ARRANGEMEN T BETWEEN THE ASSESSEE AND THIRD PARTY BOTTLERS CONSTITUTED AN INTERNATIONAL TRANSACTION UNDER SE CTION 92B OF THE INCOME TAX ACT IS COMPLETELY DEVOID OF M ERITS AS THE NECESSARY INGREDIENTS OF SECTION 92B ARE NOT MET. MOREOVER, THE CIT(DR) HAS FAILED TO APPRECIATE THAT THE REVENUE RECEIVED BY THE ASSESSEE AS PER THE BOTTLIN G ARRANGEMENTS IS WHOLLY TAXED IN INDIA AND ANY ENHANCED BOTTLING REVENUE AS A RESULT OF AMP EXPENDITURE INCURRED BY THE ASSESSEE WOULD NOT LEAD TO SHIFTING OF PROFITS OUTSIDE INDIA. 5. THE CONTENTS OF PARAGRAPH 5 AND 6 OF CIT(DR)S N OTE ARE UNTENABLE AND REPETITIVE. THE CIT(DR) HAS HIMSE LF FAILED TO SUBSTANTIATE HIS STAND BY NOT PRODUCING A NY EVIDENCE/MATERIAL TO SUPPORT HIS SUBMISSION THAT CO ULD RENDER THE FINDING OF CIT(A) PERVERSE, IN ORDER TO REMIT THE SUBJECT APPEALS BACK TO THE FILE OF AO/TPO. 6. THE CONTENTS OF PARAGRAPH 7 OF CIT(DR)S NOTE AR E UNTENABLE AS THE RECENT DECISION OF DELHI HIGH COUR T IN MARUTI SUZUKI INDIA LTD. (SUPRA) HAS CLEARLY HELD T HAT THE ONUS OF ESTABLISHING THE EXISTENCE OF INTERNATI ONAL TRANSACTION VIS--VIS AMP ISSUE IS ON THE REVENUE DEPARTMENT, FAILURE OF WHICH REQUIRES SETTING ASIDE OF ANY ADDITION ON ACCOUNT OF AMP ISSUE RATHER THAN REMANDING THE MATTER BACK TO THE AO/TPO. THE HIGH COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA) RELIED UP ON THE FINDINGS IN SONY ERICSSON MOBILE COMMUNICATIONS IND IA P. LTD. (2015) 374 ITR 118, WHICH ARE REPRODUCED AS FOLLOWS: I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 34 193. ... THE TRIBUNAL, AT THE FIRST INSTANCE, WOULD TRY AND DISPOSE OF THE APPEALS, RATHER THAN PASSING AN ORDER OF REMAND TO THE ASSESSING OFFICER/TPO. THE ENDEAVOUR SHOULD BE TO ASCERTAIN AND SATISFY WHETHER THE GROSS/NET PROFIT MARGIN WOULD DULY ACCOUNT FOR AMP EXPENSES. WHEN FIGURES AND CALCULATIONS AS PER THE TNM OR RP METHOD ADOPTED AND APPLIED SHOW THAT THE NET/GROSS MARGINS ARE ADEQUATE AND ACCEPTABLE, THE APPEAL OF THE ASSESSED SHOULD BE ACCEPTED IT IS ESSENTIAL TO POINT OUT HERE THAT THE DECISION OF MARUTI SUZUKI INDIA LTD. (SUPRA) IS SQUARELY APPLIC ABLE TO THE CURRENT SET OF FACTS AS THE ASSESSEE IN THAT CASE WAS ALSO A MANUFACTURER INCURRING AMP EXPENDITURE. FURTHERMORE, IT IS RESPECTFULLY SUBMITTED THAT THE DELHI HIGH COURT RECENTLY IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. VS. DCIT ITA 638/201 5, CASIO INDIA COMPANY PRIVATE LIMITED VS. DCIT ITA 309/2016 AND RAYBAN SUN OPTICS INDIA PVT LTD VS. CI T ITA 674 OF 2016 HAS SET ASIDE THE REMAND ORDER OF I TAT INVOLVING AMP ISSUE AND HAS DIRECTED THE ITAT TO ADJUDICATE SUCH AMP ISSUE WITHOUT REMANDING IT FURTHER. THEREFORE, IN ACCORDANCE WITH THE TREND SE T OUT BY THE HONBLE JURISDICTIONAL HIGH COURT, IT IS MOS T HUMBLY PRAYED THAT THE AMP ISSUE BE DECIDED BY THE HONBLE BENCH RATHER THAN REMANDING IT BACK TO THE AO/TPO. 7. IN FURTHERANCE OF CIT(DR)S EFFORTS TO HAVE THE MATTER REMANDED BACK, HE HAS RELIED UPON THE TRIBUNALS DECISIONS IN TOSHIBA INDIA PVT. LTD. V. DCIT ITA NO . I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 35 944/DEL/2016, INDIA MEDTRONIC PVT. LTD. V. DCIT ITA NO. 2168/MUM/2014, JOHNSON & JOHNSON LTD V. ACIT ITA NO. 829/MUM/2014 AND MOLSON COORS COBRA INDIA PVT. LTD. V. DCIT ITA NO. 7119/MUM/2012. IT IS RESPECTFULLY SUBMITTED THAT ALL THESE DECISIONS ARE DISTINGUISHABLE AND NONE OF THESE DECISIONS ARE APPLICABLE TO THE ASSESSEES CASE AS THEY ARE BASED ON DIFFERENT SET OF FACTS WITH DIFFERENT BUSINESS MODE L. THE DECISION OF JURISDICTIONAL HIGH COURT IN MARUTI SUZ UKI (SUPRA) HOLDS THE LEGAL FRONT AND RATIO LAID DOWN T HEREIN HAS TO BE FOLLOWED. 8. FURTHERMORE, THE CIT(DR) HAS ALSO SUBMITTED AN EXHAUSTIVE LIST OF CASES INVOLVING AMP ISSUE WHEREI N THE MATTER WAS REMANDED BACK TO THE FILE OF AO/TPO FOR FRESH DETERMINATION. THE APPELLANT MOST RESPECTFULL Y SUBMITS THAT NONE OF THE PRECEDENTS RELIED UPON BY THE CIT(DR) ARE APPLICABLE TO THE CURRENT SET OF FACTS. THE LIST OF CASES AS SUBMITTED BY THE CIT(DR) ALONG WITH APPELLANTS COMMENTS ARE ENCLOSED HEREWITH AS ANNEXURE - A. FURTHERMORE, THE APPELLANT SEEKS LIBE RTY TO SUBMIT A LIST OF CASES WHEREIN THE AMP ISSUE WAS DECIDED BY VARIOUS FORUMS ON MERITS. THE LIST OF CA SES RELIED UPON BY THE APPELLANT, APART FROM WHAT HAS ALREADY BEEN SUBMITTED BEFORE THE BENCH, IS ENCLOSE D HEREWITH AS ANNEXURE B. 5.4 THE LIST OF CASES SUBMITTED BY THE LD. AR AS AFOREMENTIONED IN THE SUBMISSIONS IS NOT BEING REPR ODUCED IN THIS ORDER FOR THE SAKE OF BREVITY. 5.5 WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR CON SIDERED OPINION THE CRUX OF THE MATTER IS THAT WE FIND FORC E IN THE I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 36 CONTENTIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT NO ADJUSTMENT WAS WARRANTED ON THE FACTS OF THE PRESENT CASE SINC E THE BRANDS FOR WHICH THE AMP EXPENDITURE WAS INCURRED WERE IND IA SPECIFIC. THIS CATEGORICAL FINDING HAS BEEN RECORDED BY THE L D. CIT(A) IN PARA 10.9 OF HIS ORDER FOR AY 2004-05 AND NO EVIDEN CE HAS BEEN BROUGHT ON RECORD BY THE LD. DR TO REPEL THIS FACTU AL FINDING. GIVEN THE ABOVE, WE FIND NO FORCE IN THE CONTENTION S OF THE DR THAT THE ISSUE BE REMANDED BACK TO THE LD. TPO FOR A FRESH CONSIDERATION. AS RIGHTLY POINTED OUT BY THE LD. C OUNSEL FOR THE ASSESSEE, THE JURISDICTIONAL HIGH COURT HAS TIME AN D AGAIN DIRECTED THE TRIBUNAL TO APPLY THE LAW AS LAID DOWN BY THE HIGH COURT AND ADJUDICATE THE MATTER. GIVEN THE FACT TH AT THE AMP SPEND WAS INDIA SPECIFIC AS THE SAID BRANDS WERE AL SO INDIA SPECIFIC WE FIND NO FORCE IN THE CONTENTIONS OF THE REVENUE THAT ANY BENEFIT COULD HAVE ARISEN TO THE NON-RESIDENT A E. IF THE PRODUCT MANUFACTURED AND SOLD BY THE ASSESSE IS IND IA SPECIFIC THEN IT CANNOT BE SAID THAT ANY BENEFIT COULD HAVE ACCRUED TO THE AE ON ACCOUNT THE AMP SPEND IN INDIA IN RESPECT OF SUCH BRANDS. 5.6 FURTHER, THE LD. COUNSEL OF THE ASSESSEE HAS AL SO SUBMITTED THAT THE ASSESSEE IS A FULL RISK BEARING MANUFACTURER I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 37 IN INDIA AND AS SUCH NO ADJUSTMENT IS WARRANTED ON ACCOUNT OF AMP EXPENDITURE SINCE THE BENEFIT OF SUCH EXPENDITU RE ACCRUES TO THE ASSESSEE ONLY. HOWEVER, WE ARE NOT OPINING ON THIS ISSUE AT THIS STAGE SINCE ON THE FACTS WE HAVE ALREADY HE LD THAT WHERE THE PRODUCTS ARE INDIA SPECIFIC THERE CANNOT BE ANY ADJUSTMENT IN RESPECT OF THE AMP EXPENDITURE SINCE NO BENEFIT ARISES TO THE AE ON ACCOUNT OF SUCH EXPENDITURE. ACCORDINGLY, TH ESE GROUNDS OF THE REVENUE ARE REJECTED AND ORDER OF THE LD. CI T (A) IS CONFIRMED. 5.7 WE FURTHER MAKE IT CLEAR THAT OUR ADJUDICATION ON THE ISSUE OF AMP IN THESE APPEALS IS CASE SPECIFIC AND WE ARE NOT ENUNCIATING A LEGAL PRINCIPLE TO BE FOLLOWED IN OTH ER CASES AS A PRECEDENT. OUR ADJUDICATION IN FAVOUR OF THE ASSESS EE IS GUIDED BY THE UNDISPUTED FACT THAT IN THE CASE OF THE ASSE SSEE THE AMP SPEND WAS INDIA SPECIFIC AS THE SAID BRANDS WERE AL SO INDIA SPECIFIC AND THERE IS NO POSSIBILITY THAT ANY BENEF IT COULD HAVE ARISEN TO THE NON-RESIDENT AE. IF THE PRODUCT MANU FACTURED AND SOLD BY THE ASSESSE IS INDIA SPECIFIC THEN IT CANNO T BE SAID THAT ANY BENEFIT COULD HAVE ACCRUED TO THE AE ON ACCOUNT THE AMP SPEND IN INDIA IN RESPECT OF SUCH BRANDS. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 38 6.0 THE NEXT ISSUE INVOLVED IN THE PRESENT BATCH OF APPEALS PERTAINS TO DISALLOWANCE OF DEDUCTION OF RS. 19,21, 790/- BEING PROVISION FOR COMMISSION ON SALES DURING AY 2004-05 . DURING THE COURSE OF PROCEEDINGS, IT WAS POINTED OUT BY TH E LD. AR THAT THERE WAS NO DISCUSSION ON THIS ISSUE IN THE AOS O RDER AND THAT ONLY WHILE COMPUTING THE TOTAL INCOME ON PAGE 12 OF THE AOS ORDER, A DISALLOWANCE OF RS. 19,21,790/- BEING PROV ISION FOR COMMISSION ON SALES WAS DISALLOWED. THE LD. CIT (D R) DID NOT OBJECT TO THIS FACT. THEREFORE, THE LD. AR PRAYED BEFORE US TO HAVE THIS ISSUE REMANDED BACK TO THE FILE OF THE AS SESSING OFFICER. THIS WAS ALSO NOT OPPOSED BY THE LD. DR. 6.1 IN VIEW OF THE ABOVE SINCE THERE IS NO DISCUSSI ON BY THE AO ON THE ISSUE AT HAND, WE DEEM IT FIT AND IN THE INT EREST OF JUSTICE TO SET ASIDE THE ADDITION AND REMAND THE MATTER TO THE FILE OF THE AO FOR A FRESH CONSIDERATION IN ACCORDANCE WITH LAW AND AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 7.0 THE NEXT ISSUE INVOLVED IN THE PRESENT BATCH OF APPEALS PERTAINS TO ADJUSTMENT MADE TO THE BOOK PROFITS OF THE ASSESSEE UNDER SECTION 115JB TO THE TUNE OF RS. 6,68,82,609/ -. DURING THE COURSE OF PROCEEDINGS, THE LD. AR SUBMITTED THA T AS THIS I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 39 ISSUE WAS PURELY ACADEMIC IN NATURE AND DID NOT IMP ACT THE ASSESSED INCOME / TAX LIABILITY OF THE ASSESSEE, TH E SAME WAS NOT BEING PRESSED. ACCORDINGLY, THE SAME IS DISMISSED IN LIMINE. 8.0 THE LAST ISSUE INVOLVED IN THE PRESENT BATCH OF APPEALS RAISED BY THE REVENUE PERTAINS TO DELETION OF ADDIT ION OF RS. 3,89,55,070/- IN AY 2004-05 AND RS. 4,67,32,266/- B EING 10% OF BRAND EXPENSES MADE BY THE AO TREATING THE SAME AS BEING CAPITAL IN NATURE. 8.1 THE BRIEF FACTS INVOLVED THEREIN ARE THAT THE A SSESSEE COMPANY HAD CLAIMED BRAND EXPENSES AMOUNTING TO RS. 38,95,50,709/- FOR AY 2004-05 AND RS. 46,73,42,660/ - FOR AY 2005-06. THESE EXPENSES COMPRISED OF EXPENDITURE O N EVENT MANAGEMENT, BUSINESS PROMOTION, MERCHANDISING, PRIN TING OF BROCHURES/MAILERS, MARKET RESEARCH ETC. TO DETERMIN E THE CONSUMER REACTION TO COMPANYS PRODUCTS. THE AO VI DE ORDER DATED 28.12.2006 FOR AY 2004-05 AND VIDE ORDER DATE D 08.12.2008 FOR AY 2005-06 DISALLOWED 10% OF SUCH EX PENDITURE AS BEING CAPITAL IN NATURE ON THE PREMISE THAT THE BENEFIT OF SUCH EXPENDITURE IS ENDURING IN NATURE AND AVAILABLE TO THE ASSESSEE OVER A PERIOD OF TIME THAN BEING RESTRICTED TO THE RELEVANT PREVIOUS I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 40 YEAR ALONE IN WHICH IT WAS INCURRED, THEREBY LEADIN G TO CREATION OF A TANGIBLE ASSET BEING GOODWILL, REPUTATION AND CRE DIBILITY. HOWEVER, THE LD. CIT (A) VIDE ORDER DATED 29.06.200 9 FOR AY 2004-05 AND VIDE ORDER DATED 28.02.2011 FOR AY 2005 -06 DELETED THE SAID DISALLOWANCE WHILE RELYING UPON HIS PREDEC ESSORS ORDER IN EARLIER YEARS AND NOTING THAT EXPENDITURE ON SAL ES AND MARKETING WAS REQUIRED TO REFRESH THE MEMORY OF THE CONSUMER OF THE PRODUCTS MANUFACTURED BY THE ASSESSEE AND HENCE THERE WAS NO ENDURING BENEFIT. THE REVENUE IS AGGRIEVED BY T HIS FINDING OF THE LD. CIT (A). 8.2 DURING THE COURSE OF PROCEEDINGS, THE LD. AR. P OINTED OUT THAT THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE VIDE THIS TRIBUNALS ORDER DATED 14.03.2016 PASSED IN AS SESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEARS, I.E., AY 2002-03 AND 2003-04. IT WAS FURTHER POINTED OUT THAT THE AFORE SAID ISSUE HAD ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HON BLE HIGH COURT OF DELHI VIDE ORDER DATED 6.04.2016 PASSED IN ITA N O. 224/2016 AND 225/2016 IN THE CASE OF ASSESSEES SISTER CONCE RN, VIZ., M/S SEAGRAM DISTILLERIES PVT LTD.. THE LD. AR ALSO CIT ED HINDUSTAN ALUMINIUM CORPORATION LIMITED V. CIT: 159 ITR 673, CIT V. I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 41 BERGER PAINTS (INDIA) LTD. (254 ITR 503), CIT V. SA LORA INTERNATIONAL (308 ITR 199) (DEL.), CIT V. CASIO IN DIA LTD. (335 ITR 196) (DEL) AND CIT V. ADIDAS INDIA MARKETING LTD. ( 195 TAXMAN 256) (DEL.) TO SUPPORT HIS CONTENTIONS. 8.3 THE LD. CIT (DR) SUPPORTED THE ORDER OF THE LD. TPO/AO. 8.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE JURISDICTIONAL HIGH COURT AND THAT OF THE CO -ORDINATE BENCHES. WE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE AS THERE IS A CLEAR FINDING THAT SUCH EXPENDITURE DOES NOT RESU LT IN ANY ENDURING BENEFIT. HENCE, THESE GROUNDS OF THE REVE NUE ARE DISMISSED AND THE ORDER OF THE LD. CIT (A) IS CONFI RMED. 9. IN THE FINAL RESULT, THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED AND THAT OF THE REVENUE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MAY, 2017. SD/- SD/- (J.S. REDDY) (SUDHANSHU SRIVASTA VA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 ND MAY 2017 GS I.T.A. 3811/D/09 & 3525/DEL/09 I.T.A. 2770/D/11, 2530/D/11 ASSESSMENT YEAR 2004-05, 05-06 42 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSTT. REGISTRAR ITAT NEW DELHI