ASST CIT (LTU)1, MUMBAI V. JOHNSON & JOHNSON LTD, MUMBAI

ITA 2547/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8915 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Keywords: Depreciation; Transfer pricing; International transaction; Onus to prove
• Section: 10B; 32; 145

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL K BENCH MUMB AI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 2547/MUM/2017 (ASSESSMENT YEAR 2005-06 ) ACIT (LTU)-1, WORLD TRADE CENTRE, CENTRE-1, 29 TH FLOOR, CUFFE PARADE, MUMBAI-400005. VS. M/S JOHNSON & JOHNSON PVT. LTD.(FORMERLY KNOWN AS JOHNSON & JOHNSON LTD.) 501, ARENA SPACE, OFF JVLR, OPP: MAJAS BUS DEPOT, JOGESHWARI (E), MUMBAI. PAN: AAACJ0866E APPELLANT RESPONDE NT CROSS OBJECTION NO. 47/MUM/2018 (ASSESSMENT YEAR 20 05-06 ) M/S JOHNSON & JOHNSON PVT. LTD.(FORMERLY KNOWN AS JOHNSON & JOHNSON LTD.) 501, ARENA SPACE, OFF JVLR, OPP: MAJAS BUS DEPOT, JOGESHWARI (E), MUMBAI. PAN: AAACJ0866E VS. ACIT (LTU)-1, WORLD TRADE CENTRE, CENTRE-1, 29 TH FLOOR, CUFFE PARADE, MUMBAI-400005. APPELLANT RESPONDE NT APPELLANT BY : SHRI JAYANT KUMAR (DR) RESPONDENT BY : SHRI RAJAN VORA WITH SHRI PRANAY GANDHI (AR ) DATE OF HEARING : 15.10.2018 DATE OF PRONOUNCEMEN T : 26.12.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSE SSEE UNDER SECTION 253 OF INCOME-TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-56, MUMBAI DATED 29.12.2016 FOR ASSESSMENT YEAR 2005-06 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF INCOME T AX ON BRAND USAGE ROYALTY WITHOUT APPRECIATING THE FACT THAT AS PER ARTICLE 1 3 OF THE AGREEMENT FOR PAYMENT OF ROYALTY, NO CONDITION EXISTS FOR ROYALTY BEING N ET OF TAXES AND APPROVAL TAKEN FROM RBI CANNOT BE CONSIDERED TO BE AUGMENTING THE TERMS OF AGREEMENT WITH THE PRINCIPAL. ' 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF SERVICE TAX PAID BY THE ASSESSEE ON BRAND USAGE ROYALTY WITHOUT APPRECIATING THE FACT T HAT APPROVAL TAKEN FROM RBI CANNOT BE TAKEN TO BE AUGMENTING THE TERMS OF AGREE MENT WITH THE PRINCIPAL. ' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF SERVICE TAX PAID BY THE ASSESSEE ON KNOW-HOW ROYALTY WITHOUT APPRECIATING THE FACT THAT APPROVAL TAKEN FROM RBI CANNOT BE TAKEN TO BE AUGMENTING THE TERMS OF AGREE MENT THE PRINCIPAL. ' 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF PAYMENT OF ROYALTY ON TRADED FINISHED GOODS MADE BY THE ASSESSEE TO J & J, US.' 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE TECHNICAL KNOW-HOW ROYALTY PAYMENT @ 2 % / 4% INSTEAD OF 1 % AS DONE BY THE TPO.' 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF TAX, R & D CESS ON KNOW-HOW, ROYALTY ON TRADED FINISHED GOODS AND MANUFACTURED P RODUCTS. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT MADE ON ACCOUNT OF SALES AN D PROMOTION EXPENSES, SIMPLY RELYING ON THE ORDER OF HON'BLE ITAT IN THE CASE OF ASSESSEE FOR A.Y. 2006-07.' 8. 'ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,28,58,798/- ON ACCOUNT OF UNACCOUNTED PRODUCTION AND SALE.' 9. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO GRANT C REDIT IN RESPECT OF RETAINED MODVAT CREDIT RELATING TO OPENING STOCK.' ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 3 10. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION ON TESTING EQUIPMENT PROVIDED TO LABORATORIES AND HOSPITALS FREE OF CHARGE EVEN THOUGH SUCH TESTING I NSTRUMENTS WERE NOT USED BY THE ASSESSEE.' 11. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,79,646/-, M ADE ON ACCOUNT OF PAYMENT TO M/S CRAWFORD BAILEY & CO U/S 40A(2)(B) OF THE ACT, THOUGH THE ASSESSEE HAS NOT DISCHARGED ITS ONUS TO PROVE THE REASONABLENESS. CROSS OBJECTION NO. 47/MUM/2018 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, JOHNSON & JOHNSON PVT. LTD. (HEREINAFTER REFERRED TO AS 'THE RESPONDE NT' OR 'ASSESSEE' OR 'J&J INDIA') RESPECTFULLY CRAVES LEAVE TO PREFER CROSS-OBJECTION S AGAINST THE APPEAL FILED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME-TAX ('AO') BEFORE THE HON'BLE INCOME- TAX APPELLATE TRIBUNAL ('HON'BLE ITAT) AGAINST THE ORDER PASSED BY THE HON'BLE COMMISSIONER OF INCOME-TAX (APPEALS) ['HON'BLE CIT( A)'], MUMBAI. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW, THE LEARNED AO: GENERAL GROUND 1. ERRED BY NOT ACCEPTING THE ORDER PASSED BY THE C IT(A) AND BY FILING AN APPEAL AGAINST THE ORDER OF CIT(A) WHICH IS BASED ON RULIN GS OF THE HON'BLE JURISDICTIONAL TRIBUNAL AND HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE AND HENCE, THE APPEAL OUGHT TO BE DISMISSED; TRANSFER PRICING GROUNDS WITHHOLDING TAX ON BRAND USAGE ROYALTY OF RS. 1.16 CRORE 2. ERRED IN OBJECTING TO THE HON'BLE CIT(A) ORDER W ITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF H ON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE, WHEREIN TRANSFER PRICING AD JUSTMENT ON WITHHOLDING- TAX ON BRAND USAGE ROYALTY WAS DELETED; SERVICE TAX ON BRAND USAGE ROYALTY OF RS. 0.50 CROR E 3. ERRED IN OBJECTING HON'BLE CIT(A) ORDER WITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF HON'BLE JU RISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE, WHEREIN TRANSFER PRICING ADJUS TMENT ON TAX PAID ON BRAND USAGE ROYALTY WAS DELETED; PAYMENTS OF ROYALTY ON SALE OF TRADED FINISHED GOOD S OF RS. 8.28 CRORE 4. ERRED IN OBJECTING HON'BLE CIT(A) ORDER WITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF HON'BLE JU RISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE WHEREIN THE TRANSFER PRICING AD JUSTMENT ON ACCOUNT OF ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 4 PAYMENT OF ROYALTY ON TRADED GOODS FOR RECEIPT OF T ECHNICAL KNOW-HOW WAS DELETED; DISALLOWANCE OF RS. 18.33 CRORE ON ACCOUNT OF RESTR ICTION OF TECHNICAL/ MARKETING ROYALTY RATE AT 1 % 5. ERRED IN OBJECTING TO THE HON'BLE CIT(A) ORDER W ITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF H ON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE, WHEREIN THE TRANSFER PRICIN G ADJUSTMENT WAS DELETED AND THE HON'BLE TRIBUNAL ALLOWED THE PAYMENT OF ROYALTY FOR TECHNICAL/ MARKETING KNOW-HOW AT 2%/4% INSTEAD OF 1 % AS APPLIED BY THE LEARNED AO/ TPO. DISALLOWING THE CORRESPONDING WITHHOLDING TAX AND R &D CESS ON DISALLOWED TECHNICAL/ MARKETING KNOW-HOW ROYALTY OF RS. 5.31 C RORE 6. ERRED IN OBJECTING TO THE HON'BLE CIT(A) ORDER W ITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF H ON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE, WHEREIN THE TRANSFER PRICIN G ADJUSTMENT WAS DELETED. SERVICE TAX ON THE TECHNICAL/MARKETING KNOW-HOW ROY ALTY OF RS.1.35 CRORES 7. ERRED IN OBJECTING TO THE HON'BLE CIT(A) ORDER W ITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF H ON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE, WHEREIN THE TRANSFER PRICIN G ADJUSTMENT ON ACCOUNT OF SERVICE TAX ON TECHNICAL/ MARKETING KNOW-HOW ROYALT Y WAS DELETED DISALLOWING PUBLICITY AND SALES PROMOTION EXPENSES OF RS. 0.60 CRORES 8. ERRED IN OBJECTING TO THE HON'BLE CIT(A) ORDER W ITHOUT APPRECIATING THE FACT THAT THE HON'BLE CIT(A) HAS FOLLOWED THE ORDER OF H ON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2006-07, WHEREIN THE ADJUSTMENT ON ACCOUNT OF EXCESS PUBLICITY AND SALES PROMOTION EXPENSES WAS D ELETED ON THE GROUND THAT THE SAME HAS BEEN MADE WITHOUT FOLLOWING ONE OF THE PRE SCRIBED METHODS AS PER SECTION 92C(1) OF THE ACT. CORPORATE TAX GROUNDS ADDITION ON ACCOUNT OF UNACCOUNTED PRODUCTION AND S ALE OF RS.4,28,58,798 9. ERRED IN OBJECTING THE HON'BLE CIT(A)'S ORDER WI THOUT APPRECIATING THE FACT THAT THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE J URISDICTIONAL TRIBUNAL BOTH IN ASSESSEE'S OWN CASE HAS DELETED THE ADDITION MADE B Y THE ASSESSING OFFICER AND ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF PRO DUCTION LOSS; ADJUSTMENT OF MODVAT EXCISE DUTY CREDIT TO OPENING STOCK 10. ERRED IN OBJECTING TO THE HON'BLE CIT(A)'S ORDE R WHICH IS BASED ON RULINGS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE J URISDICTIONAL TRIBUNAL BOTH IN ASSESSEE'S OWN HOLDING THAT IF ADJUSTMENTS ARE MADE TO CLOSING STOCK THEN THE CORRESPONDING ADJUSTMENT SHOULD ALSO BE MADE IN THE OPENING STOCK; DISALLOWANCE OF DEPRECIATION ON TESTING EQUIPMENTS OF RS 53,48,110/- 11. ERRED IN OBJECTING TO THE HON'BLE CIT(A)'S ORDE R WHICH IS BASED ON RULINGS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE J URISDICTIONAL TRIBUNAL BOTH IN ASSESSEE'S OWN CASE THAT DEPRECIATION CLAIMED ON TE STING EQUIPMENT INSTALLED AT VARIOUS PATHOLOGIES AND HOSPITALS UNDER SECTION 32 OF THE ACT AMOUNTING TO RS.53,48,110/- IS TO BE ALLOWED; ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 5 PAYMENTS MADE TO PERSON SPECIFIED UNDER SECTION 40A (2)(B) OF RS. 2,79,646 12. ERRED IN OBJECTING TO THE HON'BLE CIT(A)'S ORDE R WHICH IS BASED ON RULINGS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE J URISDICTIONAL TRIBUNAL BOTH IN ASSESSEE'S OWN HOLDING PAYMENTS MADE TO MIS CRAWFOR D BAILEY & CO OF RS 2,79,646 IS NOT EXCESSIVE OR UNREASONABLE AND HENCE , NO DISALLOWANCE IS REQUIRED UNDER SECTION 40A(2)(B); ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW, THE HON'BLE CIT(A): ADJUSTMENT IN ACCORDANCE WITH SECTION 145A IN TOTO 13. ERRED IN CONFIRMING THE ACTION OF THE LEARNED A O OF ADDING PROPORTIONAL MODVAT CREDIT ATTRIBUTABLE TO CLOSING STOCK WITHOUT APPRECIATING THE FACT THAT EVEN IF ADJUSTMENT UNDER SECTION 145 ARE MADE IN CA SE OF THE ASSESSEE ON INCLUSIVE BASIS (I.E. INVENTORY, PURCHASES AS WELL AS SALES ARE TAKEN INCLUSIVE OF TAX) THE IMPACT TO TAXABLE PROFITS WOULD BE NIL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS 75% SUBSIDIARY OF JOHNSON & JOHNSON, USA. THE ASSESSEE-COMPANY IS ENG AGED IN THE BUSINESS OF MANUFACTURING OF CONSUMER CARE, HEALTH CARE, DIAGNOSTIC PRODUCTS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 31.10.2005 DECLARING TOTAL INCOME AT RS. 183,93,59, 200/-. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED REPORT IN FORM NO. 3CEB WHEREIN, THE ASSESSEE REPORTED INTERNATIONAL TRANSACTION WIT H ITS ASSOCIATED ENTERPRISES (AE). THEREFORE, A REFERENCE WAS MADE T O TPO FOR COMPUTATION OF ARMS LENGTH PRICE (ALP). THE TPO VIDE ITS ORDER DATED 29.01.2018 SUGGESTED TRANSFER PRICING ADJUSTMENT IN RESPECT OF BRAND USAGES ROYALTY AND TECHNICAL NO HOW OF RS. 35.53 CRORE. THE T.P. A DJUSTMENT CONSIST OF RS. 1.66 CRORE ON TAX AND SERVICE ON BRAND ROYALTY, RS. 8.28 CRORE ROYALTY ON SALES OF TRADED FINISHED GOODS, RS. 18.33 CRORE BY RESTRICTION OF ROYALTY TO 1% OF MANUFACTURED GOODS, RS. 6.66 CRORE BY DISA LLOWING TAX R &D CESS AND SERVICE TAX AND RS. 60 LAKHS PARTIAL DISAL LOWANCE ON PUBLICITY AND ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 6 SALE PROMOTION EXPENSES. ON APPEAL BEFORE THE LD. C IT(A), ENTIRE T.P. ADJUSTMENT WAS DELETED. HENCE, AGGRIEVED BY THE ORD ER OF LD. CIT(A), THE REVENUE HAS FILED PRESENT APPEAL. ON SERVICE OF NOT ICE OF APPEAL, THE ASSESSEE HAS FILED ITS CROSS OBJECTION IN SUPPORT O F ORDER OF LD. CIT(A). 4. WE HAVE HEARD THE SUBMISSION OF LD. AR OF THE ASSES SEE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITS THAT AL L THE GROUNDS OF APPEAL RAISED BY REVENUE ARE COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY VARIOUS DECISION OF TRIBUNAL IN ASSESSEES OWN C ASE FOR EARLIER ASSESSMENT YEAR. THE LD. AR OF THE ASSESSEE FURNISH ED THE DETAILED CHART NARRATING THE VARIOUS GROUND AND THE REFERENCE OF D ECISION OF TRIBUNAL WHEREIN THE GROUNDS OF APPEAL RAISED BY REVENUE ARE COVERED. 5. ON GOING THROUGH THE DETAILS ON THE CHART WITH REGA RD TO GROUNDS OF APPEAL, THE LD. DR FOR THE REVENUE SUBMITS THAT THE GROUNDS OF APPEAL ARE COVERED IN FAVOUR OF ASSESSEE. THE LD. DR FURTHER SUBMITS T HAT HE RELIED UPON THE ORDER OF ASSESSING OFFICER/TPO. IN THE REJOINDER SU BMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL IN CROSS OBJECTION FILED BY ASSESSEE ARE IN SUPPORT OF THE ORDER OF THE LD. CIT (A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. 7. GROUND NO. 1 RELATES TO DISALLOWANCE OF TAX ON BRAN D USAGE ROYALTY AMOUNTING TO RS. 1.16 CRORES. THE LD. AR OF THE ASS ESSEE SUBMITS THAT THIS ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 7 GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEES OWN CASE FOR AY 2002- 03 IN ITA NO. 4092/MUM/2007 DATED 28 TH AUGUST 2013 AND AGAIN IN ASSESSEES OWN CASE FOR A.Y. 2006-07, A.Y. 2008-09, A.Y. 2009-10 WHEREIN THE TRIBUNAL DELETED THE ADJUSTMENT BASED O N THE PRINCIPLE LAID DOWN BY TRIBUNAL IN ITS ORDER FOR A.Y. 2002-03. THE LD. AR FURTHER SUBMITS THAT THE FACTS IN THE YEAR UNDER CONSIDERATION ARE SAME AS OF PREVIOUS YEAR AND THE APPEAL OF THE REVENUE IS DISMISSED. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 8. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE NOTED THAT SIMILAR GROUND OF APPEAL WAS RAISED BEFORE TRIBUNAL IN ASSESSEES OWN CASE F OR A.Y. 2002-03 IN ITA NO. 4092/MUM/2007 AND THE CO-ORDINATE BENCH OF TRIB UNAL PASSED THE FOLLOWING ORDER: 34. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND ALSO THE COPY OF AGREEMENT SUBMITTE D ALONGWITH APPLICATION TO RBI AS EXHIBITED AT PAGES 1143 TO 1145 OF THE PAPER BOOK. WE FIND THAT THE APPLICATION MADE BY THE ASSESSEE TO RBI FOR BRAND U SAGE AGREEMENT SPECIFICALLY MENTIONS THAT THE ROYALTY TO BE REMITTED IS NET OF TAXES. FURTHER, THE APPROVAL WAS RECEIVED FROM THE RBI TO REMIT THE ROYALTY ON BRAND USAGE BY THE ASSESSEE @ 1% NET OF TAXES. CONSIDERING THE BRAND USAGE AGREEMENT VIS--VIS THE APPROVAL GRANTED BY RBI, IT CAN BE SAFELY INFERRED THAT TAXE S WERE LIABILITY OF J&J INDIA UNDER THE TERMS OF AGREEMENT. THE ASSESSEE HAS ENTE RED INTO A COMMERCIAL ARRANGEMENT WITH J&J US AND IT HAS BEEN SO ARRANGED THAT THE PAYMENT OF TAXES HAVE TO BE BORNE BY THE ASSESSEE BEING A COMMERCIAL ARRANGEMENT, THE SAME SHOULD NOT BE QUESTIONED WHILE CALCULATING ARM'S LE NGTH PRICE. RELIANCE BY THE ASSESSEE ON THE DECISION OF THE TRIBUNAL IN THE CAS E OF DRESSER RAND INDIA PVT. LTD. IN ITA NO. 3509/M/08 IS WELL FOUNDED. CONSIDER ING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE BRAND USAGE AGREEMENT AND THE APPROVAL OF THE RBI, THE FINDINGS OF THE LD. CIT(A) IS SET ASIDE. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 60,00,000/-. GROUND NO. 13 IS ALLOW ED. ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 8 9. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 WHICH WAS FOLLOWED IN A.Y. 2006-07 IN ITA NO. 83 /MUM/2011, FOR A.Y. 2008-09 IN ITA NO. 7133/MUM/2012 AND FURTHER I N A.Y. 2009-10 IN ITA NO. 829/MUM/2014, ON IDENTICAL GROUND, WE CONFI RMED THE ORDER OF LD. CIT(A). IN THE RESULT, GROUND NO.1 OF THE APPEAL IS DISMISSED. 10. GROUND NO.2 & 3 RELATES TO DELETING THE DISALLOWANC E MADE ON ACCOUNT OF SERVICE TAX PAID BY THE ASSESSEE ON BRAND USAGE ROY ALTY AND DISALLOWANCE OF SERVICE TAX PAID ON NO HOW ROYALTY. THE LD. AR OF T HE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSES SEES OWN CASE FOR AY 2002-03 IN ITA NO. 4092/MUM/2007 DATED 28 TH AUGUST 2013 AND AGAIN IN ASSESSEES OWN CASE FOR A.Y. 2006-07 AND AGAIN ON 2 008-09 IN ITA NO. 133/MUM/2012 & 2009-10 IN ITA NO.829/MUM/2014. THE LD. AR FURTHER SUBMITS THAT THE FACTS IN THE YEAR UNDER CONSIDERAT ION ARE SAME AS OF PREVIOUS YEAR AND THE APPEAL OF THE REVENUE IS DISM ISSED. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 11. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE NOTED THAT SIMILAR GROUND OF APPEAL WAS RAISED BEFORE TRIBUNAL IN ASSESSEES OWN CASE F OR A.Y. 2006-07 IN ITA NO. 83/MUM/2011 DATED 05.02.2014 AND THE CO-ORDINAT E BENCH PASSED THE FOLLOWING ORDER: 34. IN RESPECT OF GROUND TAKEN BY ASSESSEE FOR MAKI NG DISALLOWANCE ON ACCOUNT OF TAX, SERVICE TAX PAID BY ASSESSEE ON THE PAYMENT OF ROYALTY, WE OBSERVE THAT THE SAID ISSUE HAS ALREADY BEEN CONSIDERED BY TRIBU NAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2002-03 (SUPRA) AND THE TRIBUNA L HAS HELD AFTER CONSIDERING ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 9 THE AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AN D J&J US AND ALSO THE DECISION IN THE CASE OF DRESSER RAND INDIA P. LTD. (SUPRA) THAT THE TAXES WERE LIABILITY OF THE ASSESSEE- COMPANY UNDER THE TERMS OF AGREEMENTS AND ACCORDINGLY DISALLOWANCE MADE BY AO WERE DELETED. F URTHER, WE ALSO OBSERVE THAT LIABILITY OF PAYMENT OF SERVICE TAX IS OF RECI PIENT OF SERVICES AND SINCE ASSESSEE IS THE RECEIVER OF SERVICES, IT IS THE LIA BILITY OF THE ASSESSEE COMPANY TO BEAR SERVICE TAX. HENCE WE HOLD THAT TPO WAS NOT JU STIFIED TO STATE THAT LIABILITY OF BEARING SERVICE TAX WAS OF ASSESSEE-COMPANY. IN VIEW OF ABOVE, WE HOLD THAT DISALLOWANCES MADE BY TPO ON ACCOUNT OF TAXES, SERV ICES TAX IS NOT JUSTIFIED AND WE DIRECT TO DELETE THE SAME. HENCE, GROUND NOS.12, 13 AND 17 OF THE APPEAL TAKEN BY ASSESSEE ARE ALLOWED. 12. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006- 07 IN ITA NO. 83/MUM/2011, WHICH WAS FOLLOWED IN A. Y. 2008-09 IN ITA NO.133/MUM/2012 AND IN A.Y. 2009-10 IN ITA NO. 829/ MUM/2014, ON IDENTICAL GROUND, WE CONFIRMED THE ORDER OF LD. CIT (A). IN THE RESULT, GROUND NO.2 & 3 OF THE APPEAL ARE DISMISSED. 13. GROUND NO.4 RELATES TO DELETING THE NO HOW ROYALTY PAID ON TRADED FINISHED GOODS. THE LD. AR SUBMITS THAT THIS GROUND OF APPEA L IS ALSO COVERED BY THE DECISION OF TRIBUNAL IN A.Y. 2002-03 IN ITA NO. 409 2/MUM/2007 AND ITA NO. 4070/MUM/2007 DATED 28.08.2013, WHICH WAS FOLLO WED BY TRIBUNAL IN A.Y. 2006-07, 2007-08 AND 2009-10. THE LD. DR RELIE D ON THE ORDER OF ASSESSING OFFICER. 14. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D FIND THAT IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 409 2/MUM/2007 AND ITA NO. 4070/MUM/2007, THE TRIBUNAL PASSED THE FOLL OWING ORDER: 49. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT ON RE CORD IN THE FORM OF PAPER BOOK. IN ASSESSEE'S APPEAL, WE HAVE ALREADY HELD TH AT THE AGREEMENTS BETWEEN J&J INDIA AND J&J USA FOR PAYMENT OF ROYALTY HAS TO BE CONSIDERED IN THE LIGHT OF THE APPROVAL OF THE RBI. WE DO NOT FIND ANY SUBS TANCE IN THE FINDINGS OF THE TPO THAT THERE IS NO NEED FOR PAYING ROYALTY FOR TE CHNICAL/MARKETING KNOW-HOW. ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 10 WE ALSO DO NOT FIND ANY FORCE IN THE FINDINGS OF TH E TPO THAT THIS ROYALTY IS DEEMED TO BE INCLUDED IN BRAND ROYALTY. THE LD. CIT (A) HAS RIGHTLY CONSIDERED THE RELEVANT CLAUSES OF THE AGREEMENT BETWEEN J&J I NDIA AND J&J USA. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 15. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 IN ITA NO. 4092/MUM/2007 AND IN ITA NO. 4070/MUM /2007, WHICH WAS FOLLOWED IN A.Y. 2006-07 IN ITA NO.83/MUM/2011 AND IN A.Y. 2008- 09 AND A.Y. 2009-10 IN ITA NO. 829/MUM/2014, ON IDE NTICAL GROUND, WE CONFIRMED THE ORDER OF LD. CIT(A). IN THE RESULT, G ROUND NO.4 OF THE APPEAL IS DISMISSED. 16. GROUND NO.5 RELATES TO RESTRICTING TECHNICAL NO HOW AND MARKET SERVICES ROYALTY @ 1% FOR MANUFACTURED GOODS. THE LD. AR OF THE ASSESSEE SUBMITS THAT SIMILAR GROUND OF APPEAL WAS ADJUDICATED BY TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 83/MUM/2011 AN D IN A.Y. 2002-03 IN ITA NO. 4092/MUM/2007 AND ITA NO. 4070/MUM/2007. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 17. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D FIND THAT IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 409 2/MUM/2007 AND ITA NO. 4070/MUM/2007, THE TRIBUNAL PASSED THE FOLL OWING ORDER: 55. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS. AS WE HAVE ALREADY HELD HEREINABOVE THAT THE PAYMENT OF ROYALT Y HAS TO BE CONSIDERED IN THE LIGHT OF THE AGREEMENT BETWEEN THE ASSESSEE AND J & J USA, FOR THE SAME REASONS, WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE FINDINGS OF THE LD. CIT(A). 18. FURTHER, ON SIMILAR ISSUE FOR A.Y. 2006-07 IN ITA N O. 83/MUM/2011 DATED 05.02.2014 THE TRIBUNAL PASSED THE FOLLOWING ORDER: ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 11 55. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS. AS WE HAVE ALREADY HELD HEREINABOVE THAT THE PAYMENT OF ROYALT Y HAS TO BE CONSIDERED IN THE LIGHT OF THE AGREEMENT BETWEEN THE ASSESSEE AND J&J USA, FOR THE SAME REASONS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. 19. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 IN ITA NO. 4092/MUM/2007 AND IN ITA NO. 4070/MUM /2007, WHICH WAS FOLLOWED IN A.Y. 2006-07 IN ITA NO.83/MUM/2011 AND IN A.Y. 2008- 09 AND A.Y. 2009-10 IN ITA NO. 829/MUM/2014, ON IDE NTICAL GROUND, WE CONFIRMED THE ORDER OF LD. CIT(A). IN THE RESULT, G ROUND NO.5 OF THE APPEAL IS DISMISSED. 20. GROUND NO.6 RELATES TO DISALLOWANCE OF WITHHOLDING OF TAX AND RESEARCH AND DEVELOPMENT CESS. THE LD. AR OF THE ASSESSEE SUBMIT S THAT SIMILAR GROUND OF APPEAL WAS ADJUDICATED BY TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 83/MUM/2011 AND IN A.Y. 2002-03 IN ITA NO. 4092/MUM/2007 AND ITA NO. 4070/MUM/2007, WHICH WAS FURTHER FOLLOWED THE A.Y. 2006-07, A.Y. 2008-09 & A.Y. 2009 -10. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 21. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D FIND THAT IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 409 2/MUM/2007 AND ITA NO. 4070/MUM/2007, THE TRIBUNAL PASSED THE FOLL OWING ORDER: 42. ...... AS WE HAVE ALREADY HELD ELSEWHERE THAT R OYALTY PAYMENTS HAS BEEN APPROVED BY RBI AND THEREFORE DESERVES TO BE ALLOWE D. ACCORDINGLY AS THE PAYMENTS HAVE BEEN MADE IN THE LIGHT OF THE AGREEME NT WITH J&J US AND AS PER THE APPROVAL/GUIDELINES OF THE RBI, WE DO NOT FIND ANY REASON TO DISALLOW THE TAX AND R&D CESS PAID ON TECHNICAL ROYALTY. WE ACCORDIN GLY DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS ACCOUNT. ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 12 22. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 IN ITA NO. 4092/MUM/2007 AND IN ITA NO. 4070/MUM /2007, WHICH WAS FOLLOWED IN A.Y. 2006-07 IN ITA NO.83/MUM/2011 AND IN A.Y. 2008- 09 AND A.Y. 2009-10 IN ITA NO. 829/MUM/2014, ON IDE NTICAL GROUND, WE CONFIRMED THE ORDER OF LD. CIT(A). IN THE RESULT, G ROUND NO.6 OF THE APPEAL IS DISMISSED. 23. GROUND NO.7 RELATES TO DISALLOWANCE OF PART OF PUBL ICITY AND SALE PROMOTION EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT T HIS GROUND OF APPEAL IS COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES O WN CASE FOR A.Y. 2006- 07 IN ITA NO. 83/MUM/2011. THE LD. AR FURTHER SUBM ITS THAT LD. CIT(A) DELETED THE ADDITION BY FOLLOWING THE DECISION OF T RIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07. THE LD. DR RELIED ON THE ORD ER OF ASSESSING OFFICER. 24. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D FIND THAT IN ASSESSEES OWN CASE FOR A.Y. 2006-07 ON SIMILAR GRO UND IN ITA NO. 83/MUM/2011, THE TRIBUNAL PASSED THE FOLLOWING ORDE R: 40. WE HAVE CONSIDERED THE ORDER OF THE TPO/AO AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. WE OBSERVE THAT THE TPO HAS SUGGESTED DISALLOWANCE ON THE GROUND THAT THE AE OF THE ASSES SEE VIZ J&J US IS REAPING THE BENEFIT OF HIGHER ROYALTY AMOUNT AS A RESULT OF HIG HER SALES REALIZED BY ASSESSEE BY INCURRING HIGHER EXPENSES BY WAY OF PUBLICITY AN D SALES PROMOTION UNDERTAKEN BY ASSESSEE AND THEREFORE THE PARENT COM PANY OF THE ASSESSEE- COMPANY SHOULD SHARE SOME OF THE EXPENSES. IT IS A FACT THAT TPO WHILE SUGGESTING ANY DISALLOWANCE/ADJUSTMENT HAS TO STATE THAT THE TRANSACTIONS BETWEEN THE ASSESSEE-COMPANY AND ITS AE IS NOT AT A RM'S LENGTH. THE TPO IS TO DETERMINE THE ARM'S LENGTH BY FOLLOWING ONE OF THE METHOD AND /OR MOST APPROPRIATE METHOD AS PRESCRIBED IN SECTION 92C(1) OF THE ACT. THE TPO CANNOT SUGGEST ADJUSTMENT/DISALLOWANCE ON THE BASIS OF HIS ASSUMPTIONS THAT THE PAYMENT IS EXCESSIVE THOUGH IT IS AT ARM'S LENGTH. SIMILAR ISSUE WAS ALSO CONSIDERED BY ITAT MUMBAI BENCH IN THE CASE OF KODA K INDIA PVT. LTD.(SUPRA). FURTHER, RULE 10B SPECIFICALLY PROVIDES THE PROCEDU RE TO BE FOLLOWED FOR ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 13 DETERMINING ARM'S LENGTH PRICE. WE OBSERVE THAT THE TPO WHILE SUGGESTING THE DISALLOWANCE OF 200.82 LAKHS OUT OF THE EXPENSES IN CURRED BY ASSESSEE ON PUBLICITY AND SALES PROMOTION HAS NOT FOLLOWED ANY OF THE METHOD AND THEREFORE THE SAID ADJUSTMENT/DISALLOWANCE SUGGESTED BY TPO I S OUTSIDE ITS JURISDICTION. DURING THE COURSE OF HEARING, LD. DR SUBMITTED THAT THE MATTER COULD BE RESTORED TO TPO TO DECIDE AFRESH AFTER CONSIDERING THE GUIDE LINES LAID DOWN BY SPECIAL BENCH (DELHI) IN THE CASE OF L.G. ELECTRONICS INDIA (P.) LTD. (SUPRA). SINCE NO SPECIFIC SUBMISSIONS WERE MADE AND CONSIDERING THE FACT THAT THE ASSESSEE JUSTIFIED THE PAYMENT OF TECHNICAL KNOW-HOW ROYALTY AT THE RATE OF 4% OF NET SALES WHICH IS LOWER THAN ARM'S LENGTH RATE OF 4.84 % AND THE SAID FACT, WE HAVE ALSO DISCUSSED HEREIN ABOVE IN PARA 33 OF THIS ORDE R, THAT THE PAYMENT OF ROYALTY BY ASSESSEE TO ITS PARENT COMPANY IS AT ARM'S LENGT H, WE DO NOT FIND ANY JUSTIFICATION TO MAKE THE SAID DISALLOWANCE OF RS.2 00.82 LAKHS AS SUGGESTED BY TPO TOWARDS THE SHARES TO BE CONTRIBUTED BY AE OF T HE ASSESSEE-COMPANY. THEREFORE, WE DELETE THE SAID DISALLOWANCE MADE BY AO BY ALLOWING GROUND NO.18 OF THE APPEAL TAKEN BY ASSESSEE. 25. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006- 07 IN ITA NO.83/MUM/2011, ON IDENTICAL GROUND, WE C ONFIRMED THE ORDER OF LD. CIT(A). IN THE RESULT, GROUND NO.7 OF THE AP PEAL IS DISMISSED. 26. GROUND NO.8 RELATES TO DELETING THE ADDITION ON ACC OUNT OF UNRECORDED PRODUCTION. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 4.28 CRORE BY REJECTING ACTUAL WASTAGE PERCENTAGE AND ADOPTING AD-HOC WASTAGE PERCENTAGE AS ACCEPTABLE WO RK AND MADE ADDITION ON ACCOUNT OF UNACCOUNTED SALE. THE LD. CIT(A) DELE TED THE ADDITION BY FOLLOWING THE ORDER OF EARLIER YEARS AS ASSESSING O FFICER HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT LOSS INCURRED BY AS SESSEE IS EXCESSIVE. THE LD. AR SUBMITS THAT A SIMILAR ISSUE CAME UP IN ASSE SSEES OWN CASE FOR A.Y. 1993-94, WHEREIN THE THEN ASSESSING OFFICER DIRECTE D FOR SPECIAL AUDIT. THE SPECIAL AUDITOR AFTER EXTENSIVE STUDY OF PRODUCTION PROCESS DID NOT FIND ANY ISSUE AGAINST THE ASSESSEE. BASED ON THE AUDIT REPO RT, NO ADDITION WAS MADE IN A.Y. 1993-94. COPY OF ASSESSMENT ORDER AND AUDIT REPORT IS ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 14 PLACED ON RECORD. FURTHER, BASED ON THE SAID AUDIT REPORT, NO ADDITION WAS MADE IN A.Y. 1993-94. THE LD. AR FURTHER SUBMITS TH AT SIMILAR ADDITION WAS MADE FOR A.Y. 2002-03 AND THE TRIBUNAL ON THE BASIS OF DECISION OF A.Y. 1991-92 DELETED THE ADDITION. BY FOLLOWING THE ORDE R OF TRIBUNAL, SIMILAR ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE BY TRIBUNAL IN A.Y. 2003-04 & A.Y. 2004-05. COPY OF WHICH PLACED ON RECORD. THE L D. DR FOR THE REVENUE AFTER GOING THROUGH THE VARIOUS AS REFERRED BY LD. AR NOT DISPUTED THE FACTUAL POSITION CANVASSED BY LD. AR OF THE ASS ESSEE. 27. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES A ND FIND THAT IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 409 2/MUM/2007, THE TRIBUNAL PASSED THE FOLLOWING ORDER: 62. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE ORDER O F THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y. 1991-92 IN ITA NO. 1146/M/97 WHER EIN THE TRIBUNAL HAS HELD THAT THE PRODUCTION LOSS DEPENDS ON NUMBER OF FACTORS AND IN ABSENCE OF ANY COMPARABLE TO SHOW THAT THE LOSS SHOWN BY THE ASSES SEE IS EXCESS AND DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE. WE FIND THAT NO EVIDENCE OF PURCHASE/SALES OUTSIDE THE BOOKS OF ACCOUNT HAVE BEEN BROUGHT ON R ECORD. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF T HE LD. CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. 28. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 IN ITA NO.4092/MUM/2007, IDENTICAL GROUND, WE CO NFIRMED THE ORDER OF LD. CIT(A). IN THE RESULT, GROUND NO.8 OF THE APPEA L IS DISMISSED. 29. GROUND NO.9 RELATES TO MODVAT CREDIT RELATING TO OP ENING STOCK. THE LD. AR OF THE ASSESSEE SUBMITS THAT IT IS SETTLED LEGAL POSITION THAT TO GIVE IMPACT TO THE PROVISION OF SECTION 145A, IN CASE TA X, DUTY, CESS OR FEES ARE ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 15 ADDED TO THE VALUE OF CLOSING STOCK THAN OPENING ST OCK ALSO WOULD HAVE TO BE GROSSED UP WITH EXCISE DUTY. OTHERWISE, IT WOULD RESULT INTO FOLLOWING A HYBRID SYSTEM OF ACCOUNTING I.E. NEITHER THE EXCLUS IVE METHOD NOR INCLUSIVE METHOD. THE LD. AR SUBMITS THAT IN ASSESSEES OWN C ASE FOR A.Y. 1999- 2000 IN ITA NO. 2680/MUM/2003, THE SIMILAR ISSUE WA S RESTORED BACK TO THE FILE OF ASSESSING OFFICER VIDE ORDER DATED 18.0 1.2013. AGAINST THE ORDER OF TRIBUNAL, THE REVENUE FILED APPEAL BEFORE THE JU RISDICTIONAL HIGH COURT AND THE SAME HAS BEEN REJECTED VIDE ORDER DATED 28. 03.2016 IN ITA NO. 2197 OF 2013 BY FOLLOWING THE RATIO LAID DOWN BY HI GH COURT IN MAHALAXMI GLASS WORKS PVT. LTD. [318 ITR 116]. THE LD. AR FUR THER SUBMITS THAT BY FOLLOWING THE DECISION OF TRIBUNAL AND HIGH COURT I N ASSESSEES OWN CASE, SIMILAR RELIEF WAS GRANTED TO THE ASSESSEE FOR A.Y. 2000-01, A.Y. 2001-02 IN ITA NO. 3289/MUM/2004 AND ITA NO. 9437/MUM/2004 AND FURTHER IN A.Y. 2002-03 IN ITA NO. 4092/MUM/2008, IN A.Y. 2006 -07 IN ITA NO. 83/MUM/2011, FOR A.Y. 2008-09 & A.Y. 2009-10. THE L D. CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE FOLLOWING THE EARLI ER YEARS ORDER. 30. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF ASSESSING OFFICER. 31. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDER OF LOWER AUTHORITIES. THE LD. CIT(A) ALLO WED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE HIGH COURT IN MAHALAXMI GLASS WORKS (SUPRA), WHICH WAS ALSO FOLLOWED BY HIS PREDE CESSORS IN A.Y. 2003- ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 16 04 & A.Y. 2004-05. CONSIDERING THE CONSISTENT VIEW ON THE ISSUE WHICH WAS FOLLOWED BY LD. CIT(A), THEREFORE, WE DO NOT FI ND ANY JUSTIFICATION TO INTERFERE IN HIS ORDER. 32. GROUND NO. 10 RELATES TO DISALLOWANCE OF DEPRECIAT ION ON TESTING EQUIPMENT. THE LD. AR SUBMITS THAT THIS GROUND OF A PPEAL IS ALSO COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 IN ITA NO. 9437/MUM/2004 VIDE ORDER DATED 05.02.2013. THE REVENUE FILED APPEAL BEFORE HONBLE BOMBAY HIGH COURT AND THE SAME WAS D ISMISSED VIDE ORDER DATED 04.07.2016 IN ITA NO. 2441 OF 2013. BY FOLLOW ING THE DECISION OF TRIBUNAL AND HONBLE HIGH COURT, THE ASSESSEE WAS A LLOWED SIMILAR RELIEF IN A.Y.2002-03, A.Y.2006-07, A.Y. 2008-09 & A.Y.2009-1 0. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 33. WE HAVE CONSIDERED THE SUBMISSION OF PARTIES AND FI ND THAT IN A.Y. 2000- 01 IN ITA NO. 3287/MUM/2004, THE CO-ORDINATE BENCH OF TRIBUNAL PASSED THE FOLLOWING ORDER: 21. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT SIMILAR ISSUE WAS RAISED IN THE CASE OF ASSESSEES SISTER CONCERN, NA MELY, NR JET ENTERPRISES LIMITED AND THE TRIBUNAL VIDE ITS ORDER DATED 28 TH MAY, 2008 IN ITA NO. 4474/MUM/2004 HAS HELD THAT DEPRECIATION SHOULD BE ALLOWED ON THE TESTING EQUIPMENT PROVIDED TO LABORATORIES AND HOSPITALS FR EE OF CHARGE AS THE SAID EQUIPMENTS HAVE BEEN PROVIDED TO THE LABORATORIES A ND HOSPITALS FOR MAKING PROFIT FROM THE SALE OF SLIDES. THE LEARNED DEPARTM ENTAL REPRESENTATIVE DID NOT CONTRAVENE THIS POSITION. RESPECTFULLY FOLLOWING TH E TRIBUNAL ORDER PASSED IN ANOTHER GROUP CONCERN OF THE ASSESSEE, WHOSE FACTS HAVE NOT BEEN DISTINGUISHED BY THE LD. DR, WE UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 17 34. BY FOLLOWING THE DECISION OF AY 2000-01, SIMILAR RE LIEF WAS ALLOWED TO THE ASSESSEE IN AYS 2001-02, 2002-03, 2006-07, 2008-09 AND 2009-10. THEREFORE, KEEPING IN VIEW THAT CONSISTENT VIEW WAS TAKEN BY THE TRIBUNAL, THEREFORE, WE CONFIRM THE ORDER OF LD. CIT(A). 35. GROUND NO.11 RELATES TO DISALLOWANCE OF 10% OF PA YMENT MADE TO CRAWFORD BAILEY & CO., THE LD. AR OF THE ASSESSEE S UBMITS THAT ASSESSING OFFICER DISALLOWED 10% OF THE PAYMENT MADE TO CRAWF ORD BAILEY & CO. UNDER SECTION 40A(2)(B) ON THE GROUND BEING EXCESSI VE AND UNREASONABLE. THE LD. AR SUBMITS THAT THE PAYMENTS WERE MADE TO T HE INDEPENDENT COUNSEL ARE NOT COVERED BY THE PROVISION OF 40A(2)( B). THE LD. AR OF THE ASSESSEE ALSO SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y . 2002-03 IN ITA NO. 4070/MUM/2007 DATED 28.08.2013. THE REVENUE FILED T HE APPEAL AGAINST THE ORDER OF TRIBUNAL FOR A.Y. 2002-03 AND THE SAME HAS BEEN DISMISSED BY HONBLE HIGH COURT IN ITA NO. 1030/2014 DATED 07.03 .2017. AND FOLLOWING THE DECISION OF A.Y. 2002-03, THE SIMILAR RELIEF WAS GIVEN TO ASSESSEE IN A.Y. 2006-07, A.Y. 2003-04 & A.Y. 2004- 05. THE LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 36. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES A ND HAVE GONE THROUGH THE ORDER OF LOWER AUTHORITIES BELOW. WE HAVE NOTED THAT ON SIMILAR GROUND FOR A.Y. 2002-03, THE TRIBUNAL PASSED THE FOLLOWING ORDER: ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 18 72. SIMILAR ISSUE CAME UP FOR HEARING IN ASSESSEE'S APPEAL BEFORE THE TRIBUNAL IN A.Y. 2001-02 IN ITA NO. 9437/M/04 WHEREIN THE TRIBU NAL HAS DELETED THE ADDITION MENTIONING THAT IN ORDER TO MAKE ANY DISAL LOWANCE U/S. 40A(2)(B), IT IS FOR THE AO TO BRING ON RECORD SOME MATERIAL TO INDI CATE THAT THE PAYMENT WAS IN FACT EXCESSIVE HAVING REGARD TO THE FAIR MARKET VAL UE OF GOODS OR SERVICES FOR THE LEGITIMATE NEEDS OF THE BUSINESS. WE FIND THAT DURI NG THE YEAR UNDER CONSIDERATION, THE AO HAS DISALLOWED INVOKING PROVI SIONS OF SEC. 40A(2)(B) ON FEES PAID FOR LEGAL COUNSELING. WE FIND THAT THE LD . CIT(A) HAS DELETED THE ADDITION HOLDING THAT FOR THE PAYMENTS FOR LEGAL CO UNSELING, IT IS FUTILE TO THINK OF COMPARABLES BECAUSE COUNSELS MAY NOT CHARGE STANDAR D FEE BUT MAY CHARGE ACCORDING TO THE ISSUE INVOLVED. THE LD. CIT(A) FUR THER OBSERVED THAT IF THE AO WANTED TO DISALLOW ON THE GROUND OF EXCESSIVE PAYME NT, HE OUGHT TO HAVE ESTABLISHED EXCESSIVENESS OF THE PAYMENT. THIS HAS NOT BEEN DONE. CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE , IN THE LIGHT OF THE OBSERVATIONS MADE BY THE LD. CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 7 I S ACCORDINGLY DISMISSED. 37. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002- 03 IN ITA NO.4092/MUM/2007, WHICH WAS FOLLOWED IN A .Y. 2006-07, A.Y. 2003-04 & A.Y. 2004-05, WE CONFIRM THE ORDER OF LD. CIT(A). IN THE RESULT, GROUND NO.11 OF THE APPEAL IS DISMISSED. C.O. NO. 47/MUM/2018 BY ASSESSEE 38. CONSIDERING THE FACT THAT WE HAVE DISMISSED ALL GRO UNDS OF APPEAL RAISED BY REVENUE, THE GROUNDS OF CROSS OBJECTION RAISED BY A SSESSEE HAVE BECOME INFRUCTUOUS. HENCE, DISMISSED. 39. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJE CTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/12/2018. SD/- SD/- R.S. SHARMA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 26.12.2018 SK ITA NO. 2547 MUM 2017 & C.O. 47 MUM 2018-M/S JOHNSO N & JOHNSON PVT. LTD. 19 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI