DCIT, New Delhi V. M/s. Michelin India Pvt. Ltd., Faridabad

ITA 3125/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0559 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) (THROUGH VIDEO CONFERENCE ) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER A ND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 5774/DEL./2014 A. Y. : 2009-10 M/S. MICHELIN INDIA PVT. LTD. VS. DCIT (FORMERLY KNOWN AS MICHELIN CIRCLE-6(1) INDIA TYRES P. LTD.) 3RD FLOOR, ORCHID BUSINESS PARK, NEW DELHI GURGAON STAY NO. 288/DEL/2020 (ITA NO. 5774/DEL./2014) A. Y. : 2009-10 M/S. MICHELIN INDIA PVT. LTD. VS. DCIT (FORMERLY KNOWN AS MICHELIN CIRCLE-6(1) INDIA TYRES P. LTD.) 3RD FLOOR, ORCHID BUSINESS PARK, NEW DELHI GURGAON ITA NO.6128/DEL./2014 A.Y. : 2 009-10 DCIT VS. M/S. MICHEL IN INDIA TYRES P. LTD. CIRCLE-6(1) D LF TOWERS, JASOLA DISTRICT CENTER, NEW DELHI NEW DELHI-110025 ITA NO.3167/DEL./2017 A.Y. : 20 10-11 M/S. MICHELIN INDIA P. LTD. VS. AC IT ORCHID BUSINESS PARK, RA NGE-6 SECTOR-48, SOHANA ROAD ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 2 GURGAON NEW DELHI ITA NO.3125/DEL./2017 A.Y. : 20 10-11 DCIT VS. MICHELIN INDIA P. LTD. CIRCLE-16(2) 7 TH FLOOR, THE PINNACLE NEW DELHI BUSINESS TOWER, FARIDABAD PAN : AADCM8454G (APPELLANT) ( RESPONDENT) ASSESSEE BY : SHRI NAGESHWAR RAO, ADV. REVENUE BY : SHRI AJIT KR. SINGH, CIT-DR DATE OF HEARING : 08.12.2020 DATE OF ORDER : 24 .12.20 20 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER SINCE COMMON QUESTION OF FACTS AND LAW IS INVOLVED IN ALL THE AFORESAID CROSS APPEALS, THE SAME ARE TAKEN UP TOGETHER FOR DISPOSAL BY WAY OF COMPOSITE ORDER TO AVOID REPETIT ION OF DISCUSSION. 2. APPELLANT, M/S. MICHELIN INDIA PVT. LTD. (HEREIN AFTER REFERRED TO AS TAXPAYER) AND APPELLANT, DY. COMM ISSIONER OF INCOME TAX, CIRCLE 6(1) (HEREIN AFTER REFERRED TO A S REVENUE) BY FILING THE PRESENT CROSS APPEALS SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 04.08.2014 AND 07.11.2016 FOR A.Y. 20 09-10 AND 2010-11 RESPECTIVELY PASSED BY LD. CIT(A) CHALLENGI NG THE ORDER ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 3 PASSED BY AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. TPO UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) ON THE GROUNDS INTER ALIA THAT :- ITA NO. 5774/DEL/2014, A.Y.2009-10 ASSESSEES APPE AL THE FOLLOWING GROUNDS OF APPEAL ARE MUTUALLY EXCLUS IVE AND WITHOUT PREJUDICE TO EACH ANOTHER. 1. THAT ON THE FACTS AND IN LAW, THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS)-XX, NEW DELHI (HEREINAFTER REF ERRED TO AS THE HONBLE CIT(A)/ LEARNED ASSESSING OFFIC ER (HEREINAFTER REFERRED TO AS LD. AO) ERRED IN ASSE SSING THE INCOME OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR AT RS. 15,33,85,193 AS AGAINST THE RETURNED INCOME OF RS. 1,47,91,724. 2. GROUNDS PERTAINING TO CORPORATE TAX 2.1 THAT THE HONBLE CIT(A) / LD. AO HAVE ERRED ON FACTS AND IN LAW IN DISALLOWING THE MANAGEMENT FEE AMOUNT ING TO RS. 54,698,578 PAID BY THE APPELLANT AND QUESTIO NING THE NEED FOR AVAILING SUCH SERVICES FROM ITS ASSOCIATED ENTERPRISE, THEREBY CHALLENGING THE COMMERCIAL EXPE DIENCY OF THE SERVICES AVAILED. THE HONBLE CIT(A) / LD. A O HAVE FAILED TO GIVE DUE COGNIZANCE TO THE DETAILED SUBMI SSIONS FILED BY THE APPELLANT WHICH CLEARLY DEMONSTRATE TH E NATURE SERVICES AVAILED, NEED OF THE APPELLANT AND THE BEN EFIT REAPED THEREFROM, AND HAVE INSTEAD SUBJECTIVELY DIS ALLOWED THE EXPENDITURE PURELY BASED ON PRESUMED DISPOSITIO N. 2.2 THAT THE HONBLE CIT(A) / LD. AO ERRED IN MINDLESSL Y DISALLOWING MANAGEMENT FEE PAID BY THE APPELLANT WI THOUT APPRECIATING THE PRIME FACTS APPLICABLE TO THE APPE LLANTS BUSINESS OPERATIONS AND THEREBY CAUSING DOUBLE TAXA TION IN THE HANDS OF APPELLANT. 2.3 WITHOUT PREJUDICE, THE HON'BLE CIT(A) / LD. AO HAS ERRED IN DISALLOWING MANAGEMENT FEES PAID BY THE AP PELLANT TO ITS AE WITHOUT APPRECIATING THAT THE EXPENDITURE IS AN INTERNATIONAL TRANSACTION AND HAS ALREADY BEEN SUBJ ECTED TO DETAILED SCRUTINY BY THE LD. TRANSFER PRICING OFFIC ER PURSUANT TO A REFERENCE MADE BY THE LD. AO UNDER S ECTION 92CA(1) OF THE ACT. 2.4 THAT THE HONBLE CIT(A) / LD. AO ERRED IN FAC TS AND LAW IN DISALLOWING THE APPELLANTS CLAIM OF BROUGHT FORWARD LOSSES AMOUNTING TO RS. 6,50,98,677 COLLECTIVELY FO R THE AY 2005-06 AND AY 2006-07, THEREBY IGNORING THE FACT THAT THE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 4 MATTER IS PENDING BEFORE THE HONBLE TRIBUNAL FOR D ISPOSAL. 2.5 THAT THE LD. AO ERRED IN LEVYING INTEREST UNDER SE CTION 234C OF THE ACT. 2.6 THAT THE LD. AO HAS ERRED IN FACTS AND CIRCUMSTANCE S OF THE CASE BY INITIATING PENALTY PROCEEDINGS UNDER SE CTION 271(1)(C) OF THE ACT, WHICH IS BAD IN LAW. 3. GROUNDS PERTAINING TO TRANSFER PRICING MATTERS 3.1 THAT THE HONBLE CIT(A) / LD. TPO ERRED IN L AW AND ON FACTS IN INAPPROPRIATELY APPLYING TRANSFER PRICI NG PROVISIONS TO BENCHMARK SPECIFIC DOMESTIC EXPENSES INCURRED TO FULFILL APPELLANTS OWN BUSINESS INTERE STS, AND WITHOUT APPRECIATING THAT SUCH UNILATERAL ACTION OF THE APPELLANT (TO INCUR SUCH EXPENSE) CANNOT BE REGARDE D AS AN INTERNATIONAL TRANSACTION AS PER THE PROVISION OF SECTION 92B OF THE ACT. 3.2 THAT THE HONBLE CIT(A) / LD. TPO ERRED IN L AW AND ON FACTS WHILE BENCHMARKING THE IMPUGNED TRANSACTIO N OF THE APPELLANT WITHOUT CONCLUSIVELY DETERMINING A M ETHOD PRESCRIBED UNDER THE ACT AND USED THE BRIGHTLINE APPROACH, WHICH IS NOT A METHOD UNDER THE ACT. 3.3 THAT THE HONBLE CIT(A) / LD. TPO ERRED IN ADOPTING A MYOPIC VIEW OF THE EXPENSE TRENDS OF THE APPELLAN T, AND HAS INSTEAD DELIBERATELY NOT GIVEN ANY CREDENCE TO THE FACT THAT THE APPELLANT (BEING THE SOLE DISTRIBUTOR OF M ICHELIN PRODUCTS IN INDIA) IS THE PRIMARY AND ONLY DIRECT B ENEFICIARY OF THE ADVERTISEMENT, MARKETING AND PROMOTION (AMP ) EXPENSES INCURRED LOCALLY, AND ANY BENEFIT WHAT-SO- EVER WHICH MAY HAVE BEEN DERIVED BY THE AES IS PURELY INCIDENTAL. 3.4 WITHOUT PREJUDICE, THE HONBLE CIT(A) / LD. TPO FAILED TO APPLY THE INTERNATIONAL GUIDANCE AS ESPOU SED IN THE CASE OF M/S DHL INCORPORATED AND IN THE DECISIO N OF THE HONBLE SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF M/S L.G. ELECTRONICS INDIA PRIVATE LIMITED PROVIDIN G SPECIFIC GUIDELINES ON THE MANNER IN WHICH BRIGHTL INE APPROACH MAY BE APPLIED. 3.5 THAT THE HONBLE CIT(A) / LD. TPO ERRED ON FACTS AND IN CIRCUMSTANCES OF THE INSTANT CASE BY CONVENI ENTLY IGNORING THAT THE APPELLANT (WHICH OPERATES AS A LI MITED RISK DISTRIBUTOR) IS REIMBURSED / REMUNERATED FOR A LL ITS COSTS (INCLUDING PERSONNEL COST, AMP EXPENSES, FINANCE CO ST ETC.) ALONG WITH AN APPROPRIATE / ARMS LENGTH MARK-UP. 3.6 WITHOUT PREJUDICE, THE HONBLE CIT(A) / LD. T PO ERRED ON FACTS IN HOLDING THAT DEALERS INCENTIVE, COMMISSION AND DISCOUNTS/REBATES LEADS TO CREATION OF MARKETING INTANGIBLES. LD. TPO/ HONBLE CIT(A) ER RED IN INCLUDING SUCH EXPENSES FOR THE PURPOSE OF DETER MINING ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 5 THE AMP EXPENSE OF THE APPELLANT, THEREBY ERRONEOUS LY ASSUMING SUCH EXPENSE LEADS TO CREATION OF MARKET N ETWORK THROUGH DEALERS AND CUSTOMERS. 3.7 WITHOUT PREJUDICE, THE HONBLE CIT(A) ERRED CONFIRMING THE LD. TPOS APPROACH OF DRAWING A SUBJ ECTIVE COMPARISON OF THE APPELLANTS AMP/ SALES RATIO WITH THE AMP/SALES RATIO WHICH ARE INEXACT AND HIGHLY INAPPROPRIATE COMPARABLE COMPANIES . LD. TPO/ HONB LE CIT(A) HAS CHOSEN TO COMPLETELY IGNORE THE GUIDANCE ON THE ISSUE OF CHOICE OF APPROPRIATE COMPARABLE COMPA NIES FOR A BRIGHTLINE ANALYSIS, AS HAS BEEN LAID OUT I N THE DECISION OF HONBLE SPECIAL BENCH OF THE DELHI TRIB UNAL IN THE CASE OF M/S L.G. ELECTRONICS INDIA PRIVATE LIMI TED. 3.8 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, L D. TPO/ HONBLE CIT(A) ERRED IN FACTS AND CIRCUMSTANCES IN CONCLUDING THAT THE APPELLANT HAS EFFECTIVELY PROVI DED A BRAND BUILDING SERVICES/CREATION OF MARKETING INTAN GIBLE TO ITS AES, WITHOUT GIVING ANY SPECIFIC FINDING / REAS ON TO SUPPORT SUCH ERRONEOUS CLAIM AND HAVE COMMITTED ANO THER ABSURDITY BY APPLYING A MARK-UP 15% USING HIGHLY INAPPROPRIATE DATA POINTS. ITA NO.6128/DEL./2014, A.Y. 2009-10- REVENUES APPE AL 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE FACTS & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS. 5,31,75,329 1- ON ACCOUNT OF ADVERTISING AND PUBLICITY EXPENSES STATING THAT THESE EXPENSES ARE REVENUE IN NATURE BY COMPLETELY IGNORING THE DETAILED REASONS GIVEN B Y AO AND WITHOUT APPRECIATING THAT THE FACTS THAT ABOVE EXPE NDITURE WAS NOT UNCURED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE FOR THE PURPOSE OF BUSINESS AND WAS ALSO CAPITAL IN NAT URE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE FACT S & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS. 12,83,663/- ON ACCOUNT OF IMPAIRMENT OF STOCK IGNOR ING THE FACTS THAT AO HAS ESTABLISHED THAT ASSESSEE HAS TRI ED TO CLAIM A PROVISION, WHICH IS NEITHER ASCERTAINED NOT IS IN FACT, LIABILITY OF ASSESSEE? 3. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR FOREGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. ITA NO.3167/DEL./2017, A.Y. 2010-11-ASSESSEES APPE AL ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 6 THE FOLLOWING GROUNDS OF APPEAL ARE MUTUALLY EXCLU SIVE AND WITHOUT PREJUDICE TO EACH ANOTHER. 1. IMPUGNED ORDER DATED 07 NOVEMBER 2016 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-44, NEW DE LHI (HEREINAFTER REFERRED TO AS THE LD. CIT(A) IS BAD IN LAW. 2. GROUNDS PERTAINING TO CORPORATE TAX MATTER 2.1 THAT THE LD. CIT(A) / AO ERRED ON FACTS AND IN LAW BY MAKING THE ADJUSTMENT AMOUNTING TO RS. 8,17,64,4 29 IN RELATION TO MANAGEMENT FEE PAID BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE (AE). 2.1.1. THAT THE LD. CIT(A) / AO FAILED TO GIVE DUE COGNIZANCE TO THE DETAILED SUBMISSIONS AND EVIDENCE S FILED BY THE APPELLANT WHICH CLEARLY DEMONSTRATE THE NATURE OF SERVICES AVAILED, NEED OF THE APPELLANT OF AVAILING SUCH SERVICES AND THE BENEFIT REAPED THEREFROM, AND INST EAD SUBJECTIVELY DISALLOWED THE EXPENDITURE PURELY BASE D ON PRESUMED DISPOSITION. 2.1.2. THAT THE LD. CIT(A) / AO GROSSLY ERRED BY MA KING THE ADJUSTMENT IN RELATION TO MANAGEMENT FEE PAID BY TH E APPELLANT TO THE AE WITHOUT APPRECIATING THAT THE L EARNED TRANSFER PRICING OFFICER (LD. TPO) HAS ALREADY AC CEPTED THAT THE MANAGEMENT SERVICES RENDERED BY THE APPELL ANT ARE AT ARMS LENGTH PRICE. 2.1.3. AT THE LD. CIT(A) / AO GROSSLY ERRED BY MAKING THE ADJUSTMENT IN RELATION TO MANAGEMENT FEE PAID BY TH E APPELLANT TO THE AES IN VIOLATION OF PROVISIONS OF SECTION 92C(4) OF THE ACT WITHOUT APPRECIATING THAT SUCH TR ANSACTION HAS ALREADY BEEN ANALYSED BY THE LD. TPO AND NO ADV ERSE INFERENCE HAS BEEN DRAWN THEREFROM. 2.1.4. 2.1.4 THAT THE LD. CIT(A) / AO GROSSLY ERRED BY N OT APPRECIATING THAT THE APPELLANT INDEED OPERATES UND ER A MARKET - MINUS PRICING MODEL, WHEREIN THE APPELLA NT IS ASSURED OF A GUARANTEED RETURN ON ITS ENTIRE COST O F DOING BUSINESS (INCLUDING PERSONNEL COST, ADVERTISING EXP ENSES, MANAGEMENT FEE, FINANCE COST ETC.) BY WAY OF REDUCT ION IN PURCHASE PRICE OF GOODS IMPORTED FROM THE AES. 2.1.5. THAT THE LD. CIT(A) / AO GROSSLY ERRED IN NOT APPLYING RELEVANT DECISIONS OF THE HONBLE JURISDIC TIONAL TRIBUNAL AND MAKING A DISALLOWANCE LEADING TO DOUBL E TAXATION WHICH IS CONTRARY TO THE BASIC PRINCIPLES OF TAXATION, THUS BAD IN LAW. 2.2 THAT THE LD. CIT(A) / AO ERRED IN FACTS AND LAW BY CONSIDERING THE LICENSE FEES PAID TOWARDS PURCHASE OF COMPUTER SOFTWARE (TO FACILITATE INVENTORY, SALES O RDER AND SUB-CONTRACT MANAGEMENT ETC.) AS AN INTANGIBLE ASSE T I.E. ACQUISITION OF RIGHT TO USE THE APPLICATION, THER EBY ALLOWING DEPRECIATION AT THE RATE OF 25% AS AGAINST THE APPELLANTS CLAIM OF 60% IN THE RETURN OF INCOME. 2.3 THAT THE LD. CIT(A) / AO GROSSLY ERRED BY DISALLOWING THE APPELLANTS CLAIM OF BROUGHT FORWAR D LOSSES ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 7 AMOUNTING TO RS. 26,85,56,128 COLLECTIVELY FOR AY 2 006-07 AND AY 2007-08, THEREBY IGNORING THE FACT THAT THE MATTER IS PENDING BEFORE THE HONBLE TRIBUNAL FOR DISPOSAL. 2.4 THAT THE LD. AO GROSSLY ERRED IN NOT GIVING THE FUL L CREDIT FOR TAX WITHHELD AT SOURCE AND SELF- ASSESSM ENT TAX DEPOSITED BY THE APPELLANT WHILE COMPUTING THE TAX DEMAND DUE FROM THE APPELLANT. 2.5 THAT THE LD. AO ERRED ON FACTS AND IN LAW BY LEVYIN G INTEREST UNDER SECTION 234B AND SECTION 234C OF THE ACT. 2.6 THAT THE LD. AO ERRED ON FACTS AND IN LAW BY INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(L) (C) OF THE ACT, WHICH IS BAD IN LAW. 3. GROUNDS PERTAINING TO TRANSFER PRICING MATTERS 3.1 THAT THE LD. CIT(A) / TPO ERRED IN NOT FOLLOWING TH E CENTRAL BOARD OF DIRECT TAXES (CBDT) INSTRUCTION 3/ 2016 AND MAKING A TRANSFER PRICING ADJUSTMENT UNDER CHAP TER X OF THE ACT IN RESPECT OF SPECIFIC DOMESTIC EXPENSES RELATING TO ADVERTISING, MARKETING AND PROMOTION (AMP) 3.1.1. THAT THE LD. CIT(A) / AO ERRED IN IGNORING THE FACT THAT THE APPELLANT (BEING THE SOLE DISTRIBUTOR OF M ICHELIN PRODUCTS IN INDIA) IS THE PRIMARY AND ONLY DIRECT B ENEFICIARY OF THE AMP EXPENSES INCURRED BY IT AND ANY BENEFIT WHAT-SO- EVER WHICH MAY HAVE BEEN DERIVED BY THE AES IS PURE LY INCIDENTAL. 3.1.2. THAT THE LD. CIT(A) / TPO ERRED ON FACTS AND IN LAW BY CONVENIENTLY IGNORING THAT THE APPELLANT (WHICH OPERATES AS A LIMITED RISK DISTRIBUTOR) OPERATES UNDER A MA RKET - MINUS PRICING MODEL, WHEREIN IT IS REIMBURSED / REMUNERATED FOR ALL ITS COSTS (INCLUDING PERSONNEL COST, AMP EXPENSES, FINANCE COST ETC.) ALONG WITH AN APPROPRI ATE / ARMS LENGTH MARK-UP. 3.1.3. THAT THE LD. CIT(A) GROSSLY ERRED IN NOT APPLYING RELEVANT DECISIONS OF HONBLE HIGH COURT AND FURTHER IN APPLYING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON MOBIL E PRIVATE LIMITED (ITA NO. 16/2014) AND ISSUING DIREC TIONS TO RE-COMPUTE THE ARMS LENGTH ADJUSTMENT IN RESPECT O F IMPORT OF FINISHED GOODS FOR RESALE FROM THE AES AFTER INC LUDING THE AMP EXPENDITURE LOCALLY INCURRED BY THE APPELLANT, WITHOUT APPRECIATING THAT THE TRANSACTION RELATING TO IMPOR T OF FINISHED GOODS HAS ALREADY BEEN ANALYZED BY THE LD. TPO AND NO ADVERSE INFERENCE HAS BEEN DRAWN THEREFROM. 3.1.4. THAT THE LD. CIT(A) GROSSLY ERRED BY DIRECTI NG THE LD. AO / TPO TO ADJUST THE FREIGHT EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT OF THE APPELLANT, TO COMPUTE THE ADJUS TED GROSS PROFIT MARGIN IN RELATION TO THE TRANSACTION OF IMP ORT OF FINISHED GOODS FOR RESALE, IGNORING THE PROVISIONS OF ACCOUNTING STANDARD (AS) - 2. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 8 THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMI T OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. ITA NO.3125/DEL./2017, A.Y. 2010-11-REVENUES APPEA L 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING THAT RESALE PRICE METH OD (RPM) WAS MOST APPROPRIATE METHOD WITHOUT APPRECIATING A FACT THAT GROSS PROFIT AS DISCLOSED IN THE ANNUAL REPORT OF THE COMPANIES INC LUDING ASSESSEE AND COMPARABLES WERE COMPUTED WITHOUT CONSIDERING A DVERTISEMENT, MARKETING AND BUSINESS PROMOTION EXPENDITURE (AMP E XPENDITURE) AND APPLICATION OF RPM WOULD REQUIRE MULTIPLE COMPA RABILITY ADJUSTMENTS LEADING TO UNRELIABLE ARM'S LENGTH PRIC E? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING RPM AS MOST APPROPRIAT E METHOD TO COMPUTE THE ARMS LENGTH PRICE OF AMP EXPENDITURE W ITHOUT TAKING INTO ACCOUNT THAT AMP EXPENDITURE ADDS VALUE TO THE PRODUCT BY ENHANCING ITS SALEABIL TY ACCORDINGLY, RPM WAS NOT MOST APPROPRIATE METHOD TO DETERMINE ARMS LENGTH PRICE (ALP) OF AMP EXPENDITURE I.E. MARKETING INTANGIBLES? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING RPM AS MOST APPROPRIAT E METHOD TO DETERMINE ALP OF AMP EXPENDITURE EVEN WHEN THE AMP EXPENDITURE EFFECTS NET PROFIT INSTEAD OF GROSS PROFIT? 4. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING RPM AS MOST APPROPRIAT E METHOD WITHOUT CONSIDERING THE AMENDED PROVISIONS OF SECTION 92 OF THE INCOME TAX ACT, 1961 (THE ACT) WHICH MAKES A DEPARTURE FROM PR OFIT DETERMINATION TO PRICE DETERMINATION AND THAT AMP S ERVICES RENDERED BY THE AE NEEDS TO BE BENCHMARKED SEPARATELY? 5. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. C1T(A) IS LEGALLY JUSTIFIED IN REJECTING THE BRIGHT LINE TEST (BLT) IN BENCHMARKING THE AMP EXPENDITURE WITHOUT CONSIDERIN G A FACT THAT BLT WAS NOT USED AS METHOD TO DETERMINE ARMS LENGT H PRICE BUT WAS USED AS ECONOMIC TOOL TO COMPUTE THE COST OF SERVIC ES RENDERED BY THE ASSESSEE REQUIRING ARMS LENGTH REMUNERATION? 6. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN OBSERVING THAT BENEFIT TO THE AE DUE TO AMP EXPENDITURE IS ONLY INCIDENTAL AND NOT INTENTIONAL? 7. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING THAT IF MI COMPARISON, THE GROSS PROFIT ARE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 9 FOUND TO BE COMPARABLE THEN NO ADJUSTMENT IS WARRAN TED ON ACCOUNT OF AMP EXPENDITURE BY IGNORING A LEGAL POSITION THA T SEPARATE BENCHMARKING OF EACH INTERNATIONAL TRANSACTION IS S TIPULATED UNDER THE TRANSFER PRICING PROVISION AS WELL AS UNDER INT ERNATIONAL GUIDANCE? 8. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN IGNORING A IEGA POSITION THAT PROVISIONS OF SERVICES OF MARKET DEVELOPMENT (SERVICES OF CARRYING OUT ADV ERTISEMENT, MARKETING AND BUSINESS PROMOTION) ARE INTERNATIONAL TRANSACTIONS UNDER SUBCLAUSE (D) OF CLAUSE (I) OF EXPLANATION TO SECTION 92B(2) OF THE ACT ARE INTENDED TO PROMOTE T IE BRAND AS WELL AS SALE OF PRODUCT REQUIRING DETERMINATION OF ARMS LENGTH PRICE OF PR OVISION OF THESE SERVICES SEPARATELY? 9. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. C1T(A) IS LEGALLY JUSTIFIED IN HOLDING THAT SU E DI SCOUNT/ TRADE DISCOUNT ARE NOT COVERED UNDER SUB-CLAUSE (D) OF CLAUSE (I) OF EXPLANATION TO SECTION 92B(2) OF THE ACT BY IGNORING A FACT THAT SALE DISCOUNT/ TRADE DISCOUNT WERE INTENDED TO PROMOTE THE BRAND OF PRODUCT AS WELL AS ITS SALE BY CREATING DISTRIBUTOR'S LOYALTY ACCORDINGLY THESE EXPENDITURES WERE SQUARELY COVERED UNDER THE PROVIS IONS OF MARKET DEVELOPMENT SERVICES LEADING TO GENERATION O F MARKETING INTANGIBLES UNDER EXPLANATION BELOW SECTI ON 9213(2) OF THE ACT? 10. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE C ASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANC E OF RS. 4,78,89,110/- U/S 37(1) OF THE ACT ON ACCOUNT OF AD VERTISING AND PUBLICITY EXPENSES EVEN WHEN THE ASSESSEE HAD N OT DISCHARGED ITS INITIAL ONUS U/S 37(1) OF THE ACT TH AT EXPENDITURE WAS NOT CAPITAL IN NATURE? 11.WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E, LD. C1T(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 4 ,78,89,110/- U/S 37(1) OF THE ACT ON ACCOUNT OF ADVERTISING AND PUBL ICITY EXPENSES IGNORING THE FACT THAT THE EXPENSES INCURRED BY THE ASSESSEE HAVE CREATED MARKETING INTANGIBLES THE CAPITAL ASSET AS DEFINED UNDER EXPLANATION BELOW SECTION 92B(2) OF THE ACT? 12.WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E, LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 9 ,90,383/- ON ACCOUNT OF PROVISION FOR IMPAIRMENT OF STOCKS IGNO RING THE FACT THAT THE EXPENSES CLAIMED IN PROFIT & LOSS ACCOUNT WERE IN NATURE OF UNCERTAIN LIABILITY AND HENCE, WAS NOT ALLOWABLE U/ S 37(1) OF THE ACT? 13. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND , ALTER OR FORGO ANY GROUND/S OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING TO APPEAL. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 10 BRIEF FACTS ITA NO. 5774/DEL/2014 OF A.Y. 2009-10- TAXPAYERS APPEAL AND ITA NO. 6128/DEL/2014 OF A.Y. 2009-10- REVENUES APPEAL 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. MICHELIN INDIA PVT. LTD. IS INTO IMPORT AND RESALE (OR TRADING) OF TYRES FOR PASSENG ER CARS, TRUCKS AND BUSES UNDER THE BRAND NAME MICHELIN. DURING T HE YEAR UNDER ASSESSMENT, THE TAXPAYER ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERPRISES (AE) AS UNDER :- SL. NO NATURE OF TRANSACTION VALUE OF TRANSACTION BENCHMA RKING BY THE ASSESSEE 1. IMPORT OF FINISHED GOODS FOR RESALE 1147841543 RPM - THE GP/SALES OF THE ASSESSEE HAS BEEN WORKED OUT AT 40.29% 2. PROVISION OF MARKETING SUPPORT SERVICES 41813397 TNMM-OP/OC HAS BEEN WORKED OUT TO BE 12.07% AS AGAINST 8.69% OF THE COMPARABLES 3. AVAILING OF MANAGERIAL SERVICES FROM AES 54698578 AES HAVE BEEN CHOSEN AS THE TESTED PARTY AND OP/OC HAS BEEN WORKED OUT AT 2% AS AGAINST 16.18% OF COMPARABLES IN THE ASIA PACIFIC REGION. 4. REIMBURSEMENT OF EXPENSES BY AE TO ASSESSEE 2763814 NO BENCHMARKING REQUIRED AS COST RECHARGE ONLY 5. REIMBURSEMENT OF EXPENSES BY ASSESSEE TO AES 4005143 6. EXPORT OF FINISHED GOODS TO AES 4364120 NO BENCHMARKING REQUIRED 4. THE LD. TPO HAS NOT DRAWN ANY ADVERSE INFERENCE ON THE ECONOMIC AND FUNCTIONAL ANALYSIS OF THE TAXPAYER QU A THE AFORESAID TRANSACTIONS AND FOUND THE SAME AND ARMS LENGTH. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 11 5. HOWEVER, THE LD. TPO NOTICED THAT THE TAXPAYER H AS INCURRED HUGE ADVERTISEMENT, MARKETING AND PROMOTIONAL (AMP) EXPENSES TO EXPAND THE REACH OF THE AES BRAND IN INDIA. THE TAXPAYER HAS ALSO CREATED MARKETING INTANGIBLE IN FAVOUR OF ITS AE AND CALLED UPON THE TAXPAYER TO EXPLAIN AS TO WHY THE HUGE AMP EXPENSES SHOULD NOT BE SUBJECTED TO BENCHMARKING AS INTERNAT IONAL TRANSACTION. 6. DECLINING THE CONTENTIONS RAISED BY THE TAXPAYER , THE LD. TPO REACHED THE CONCLUSION THAT ASSESSEE BEING A DI STRIBUTOR HAS UNDERTAKEN THE MARKETING ACTIVITIES ON BEHALF OF IT S AE TO CREATE INTANGIBLE IN ITS FAVOUR AND HAS NOT PAID ANY ROYAL TY AND AFTER APPLYING THE RESALE PRICE METHOD (RPM) ON THE TRADI NG ACTIVITIES TREATED THE INCURRING OF AMP EXPENSES AND THE RESUL TANT CREATION OF MARKETING INTANGIBLES AS A SEPARATE INTERNATIONAL T RANSACTION AND BENCHMARKED THE SAME SEPARATELY. LD. TPO SELECTED T HREE COMPANIES IN A.Y. 2009-10 AS COMPARABLES NAMELY ; DUNLOP INDIA LTD.; T V S SRICHAKRA LTD. ; KRYPTON INDUST RIES LTD. HAVING AMP/ SALES RATIO OF 4.79% AS AGAINST 11.30% IN CASE OF THE TAXPAYER WHICH IS INTO SIMILAR ACTIVITIES. 7. LD. TPO APPLIED BRIGHT LINE TEST AND COMPUTED TH E ARMS LENGTH OF AMP I.E. THE BRIGHT LINE AT 4.79% OF SALE S. THE TAXPAYER SPENT AMP EXPENSES TO THE TUNE OF RS. 25,08,53,510/ - AND LD. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 12 TPO COMPUTED THE AMOUNT IN EXCESS OF THE ARMS LEN GTH AMOUNT OF AMP AT RS. 144,586,263/-. THE LD. TPO HAS ALSO A PPLIED THE MARK-UP OF 13% ON THE COST OF CPM (15% ASSURED MARK UP ON ALL COSTS MINUS 2% = 13%) AND COMPUTED ARMS LENGTH PR ICE OF AMP EXPENSES AS UNDER :- ARMS LENGTH MARGIN FOR MARKUP ARMS LENGTH AMP EXPENSES (A) 10,62,67,247 AMP EXPENSES INCURRED BY THE ASSESSEE(B) 25,08,53,510 EXPENDITUR INCURRED ONCREATION OF INTANGIBLES (B - A) 14,45,86,263 MARK UP @ 15% 2,16,87,939 ALP OF AMP EXPENSES 16,62,74,202 REIMBURSEMENT ASSURED 14,74,77,988.3 DIFFERENCE 1,87,96,214 8. ASSESSING OFFICER WHILE EXAMINING THE CORPORATE TAX PERUSED THE NOTES TO ACCOUNT AND PROFIT AND LOSS ACCOUNT AN D NOTICED THAT THE TAXPAYER HAS PAID RS. 54,698,578/- AS MANAGEME NT FEE TO ITS AE I.E. MICHELIN ASIA PACIFIC PTE. LTD. (MAP). AO PERUSED THE SERVICE AGREEMENT TO KNOW THE NATURE OF THE SERVICE S PROVIDED BY MAP TO THE TAXPAYER AND REACHED THE CONCLUSION THAT THE ASSESSEE HAS INCURRED HUGE BROUGHT FORWARD COST AND ESTABLIS HMENT COST WHICH INCLUDE SALARY AND WAGES OF 14.60 CRORE AS CO MPARED TO 9.21 CRORE OF LAST YEAR. TAXPAYER HAS ALSO INCURRED LEGA L AND PROFESSIONAL EXPENSES OF RS. 2.58 CRORE AS AGAINST 1.43 CRORE OF LAST YEAR, ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 13 TRAVELLING EXPENSES OF DIRECTORS AND OTHERS TO THE TUNE OF RS. 6.85 CRORE. ALL THESE FACTS GOES TO PROVE THAT THE TAXPA YER HAS FULL TEAM OF MANAGEMENT AND HAS INCURRED HUGE EXPENSES ON THE M AND THEY ARE TAKING CARE OF DIFFERENT DEPARTMENTS. AS SUCH P AYMENT OF MANAGEMENT FEE IS CLEAR DIVERSION OF INCOME AND AS SUCH IS NOT A GENUINE BUSINESS CLAIM BUT PUT FORTH TO AVOID THE T AX LIABILITY AND THEREBY DISALLOWED THE SAME. 9. AO ALSO DISALLOWED TAXPAYERS CLAIM OF BROUGHT F ORWARD LOSSES TO THE TUNE OF RS. 6,50,98,677/- COLLECTIVEL Y FOR A.Y. 2005- 06 AND 2006-07. 10. ASSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.5,31,75,329/- BEING 50% OF THE EXPENDITURE CLAIM ED BY THE TAXPAYER ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY EXPENSES BY TREATING THE SAME CAPITAL IN NATURE. AO ALSO MADE D ISALLOWANCE OF RS. 12,83,663/- ON ACCOUNT OF IMPAIRMENT OF STOCK ON THE GROUND THAT CLAIM OF A PROVISION WHICH IS NEITHER ASCERTAI NED NOR IS IN FACT THE LIABILITY OF THE TAXPAYER. BRIEF FACTS ITA NO. 3125/DEL/2017 OF A.Y. 2010-11 REVENUES APPEAL AND ITA NO. 3167/DEL/2017 OF A.Y. 2010-11 TAXPAYERS APPEAL 11. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : M/S. MICHELIN INDIA PVT. LTD. IS INTO ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 14 IMPORT AND RESALE (OR TRADING) OF TYRES FOR PASSENG ER CARS, TRUCKS AND BUSES UNDER THE BRAND NAME MICHELIN. DURING T HE YEAR UNDER ASSESSMENT, THE TAXPAYER ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERPRISES (AE) AS UNDER :- SL. NO NATURE OF TRANSACTION VALUE OF TRANSACTION BENCHMA RKING BY THE ASSESSEE 1. IMPORT OF FINISHED GOODS FOR RESALE 1,807,259,401 RPM- THE GP/SALES OF THE ASSESSEE HAS BEEN WORKED OUT AT 40.11% VIS--VIS THE COMPARABLE COMPANIES AT 9.19% 2. PROVISION OF MARKETING SUPPORT SERVICES 27,197,616 TNMM-OP/OC HAS BEEN WORKED OUT TO BE 10% AS AGAINST 7.32% OF THE COMPARABLES 3. AVAILING OF MANAGERIAL SERVICES FROM AES 81,764,429 AES HAVE BEEN CHOSEN AS THE TESTED PARTY AND OP/OC HAS BEEN WORKED OUT AT 2% AS AGAINST 16.33% OF COMPARABLES IN THE ASIA PACIFIC REGION. 4. REIMBURSEMENT OF EXPENSES BY AE TO ASSESSEE 1,455,243 NO BENCHMARKING REQUIRED AS COST RECHARGE ONLY 5. REIMBURSEMENT OF EXPENSES BY ASSESSEE TO AES 22,584,909 12. THE LD. TPO HAS NOT DRAWN ANY ADVERSE INFERENCE ON THE ECONOMIC AND FUNCTIONAL ANALYSIS OF THE TAXPAYER QU A THE AFORESAID TRANSACTIONS AND FOUND THE SAME AND ARMS LENGTH. 13. HOWEVER, THE LD. TPO NOTICED THAT THE TAXPAYER HAS INCURRED HUGE ADVERTISEMENT, MARKETING AND PROMOTIONAL (AMP) EXPENSES TO EXPAND THE REACH OF THE AES BRAND IN INDIA. THE TAXPAYER HAS ALSO CREATED MARKETING INTANGIBLE IN FAVOUR OF ITS AE AND CALLED UPON THE TAXPAYER TO EXPLAIN AS TO WHY THE HUGE AMP EXPENSES ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 15 SHOULD NOT BE SUBJECTED TO BENCHMARKING AS INTERNAT IONAL TRANSACTION. 14. DECLINING THE CONTENTIONS RAISED BY THE TAXP AYER, THE LD. TPO REACHED THE CONCLUSION THAT ASSESSEE BEING A DISTRI BUTOR HAS UNDERTAKING THE MARKETING ACTIVITIES ON BEHALF OF I TS AE TO CREATE INTANGIBLE IN ITS FAVOUR AND HAS NOT PAID ANY ROYAL TY AND AFTER APPLYING THE RESALE PRICE METHOD (RPM) ON THE TRADI NG ACTIVITIES TREATED THE INCURRING OF AMP EXPENSES AND THE RESUL TANT CREATION OF MARKETING INTANGIBLES AS A SEPARATE INTERNATIONAL T RANSACTION AND BENCHMARKED THE SAME SEPARATELY. LD. TPO SELECTED F IVE COMPANIES IN A.Y. 2010-11 AS COMPARABLES NAMELY DUNLOP INDIA LTD. ; T V S SRICHAKRA LTD. ; KRYPTON INDUSTRIES LT D. ; ECO WHEELS PRIVATE LIMITED ; FALCON TYRES LIMITED. HAVING AMP/ SALES RATIO OF 3.05% AS AGAINST 11.30% IN CASE OF T HE TAXPAYER WHICH IS INTO SIMILAR ACTIVITIES. 15. LD. TPO APPLIED BRIGHT LINE TEST AND COMPUTED T HE ARMS LENGTH OF AMP I.E. THE BRIGHT LINE AT 3.05% OF SALE S. THE TAXPAYER SPENT AMP EXPENSES TO THE TUNE OF RS.335,999,199/- AND LD. TPO COMPUTED THE AMOUNT IN EXCESS OF THE ARMS LENGTH AMOUNT OF AMP AT RS. 222,416,487/-. THE LD. TPO HAS ALSO APPL IED THE MARK-UP OF 12.88% ON THE COST OF CPM (14.88%- ASSU RED MARKUP ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 16 ON ALL COSTS MINUS 2% = 12.88%) AND COMPUTED ARMS LENGTH PRICE OF AMP EXPENSES AS UNDER :- ARMS LENGTH MARGIN FOR MARKUP 14.88% ARMS LENGTH AMP EXPENSES (A) 113,582,711 AMP EXPENSES INCURRED BY THE ASSESSEE(S) 335,999,199 EXPENDITURE INCURRED ON CREATION OF INTANGIBLES (B-A) 222.417.498 MARK UP @ (12.88%=14.88% - 2%) 28,647,243 16. ASSESSING OFFICER DISALLOWED THE CLAIM OF PAYME NT OF MANAGEMENT FEE OF RS. 8,17,64,429/- EXCLUDING TAX A ND CESS MADE TO M/S. MICHELIN ASIA PACIFIC PTE LTD. (AE) U/S 37( 1) ON THE GROUND THAT AFORESAID EXPENDITURE HAS NOT BEEN INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 17. ASSESSING OFFICER ALSO DISALLOWED TAXPAYERS CL AIM OF BROUGHT FORWARD LOSSES TO THE TUNE OF RS. 26,85,56, 128/- COLLECTIVELY FOR AY 2005-06 AND 2006-07. ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.4,78,89,110/- CLAIMED BY THE TAXPAYER ON A/C OF ADVERTISEMENT AND PUBLICITY EXPE NSES U/S 37(1) OF THE ACT BEING 50% OF RS.9,57,98,219/- BY TRE ATING THE SAME BEING CAPITAL IN NATURE ON THE GROUND THAT THE SAME IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AS IT IS BENEFITING THE ASSESSEE IN THE LONG RUN. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 17 18. AO HAS ALSO MADE DISALLOWANCE OF RS. 9,90,383/- CLAIMED BY THE TAXPAYER AS PROVISION FOR IMPAIRMENT ON THE GRO UND THAT THE SAME IS NOT ASCERTAINED LIABILITY AND ALSO ON THE G ROUND THAT THE TAXPAYER HAS TRIED TO TAKE OVER THE RESPONSIBILITY OF ITS MANUFACTURER I.E. ITS AE. 19. THE TAXPAYER CARRIED THE MATTER BEFORE LD. CIT( A) BY WAY OF FILING APPEALS IN A.Y. 2009-10 AND 2010-11 WHO HAS PARTLY ALLOWED APPEAL FOR BOTH THE YEARS. FEELING AGGRIEVED THE TA XPAYER AS WELL AS REVENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE CROSS APPEALS. 20. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. CORPORATE TAX GROUNDS GROUND NO. 1 OF ITA NO. 5774/DEL/2014, A.Y. 2009-10 AND - TAXPAYERS APPEA L ITA NO. 3167/DEL/2017, A.Y.2010-11 21. AFORESAID GROUNDS NO. 1 OF BOTH THE APPEALS ARE GENERAL IN NATURE, HENCE, NEED NO SPECIFIC FINDINGS. GROUND NO. 2.1, 2.2, 2.3 OF ITA NO. 5774/DEL/2014, A.Y. 2009-10 AND TAXPAYER S APPEAL GROUND NO. 2.1, 2.1.1, 2.1.2, 2.1.3, 2.1.4, 2.1.5 OF ITA NO. 3167/DEL/2017, A.Y. 2010-11 ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 18 22. LD. AR FOR THE TAXPAYER CHALLENGING THE IMPUG NED DISALLOWANCE OF MANAGEMENT FEE OF RS. 5,46,98,578/- AND RS. 8,17,64,492/- OF AY. 2009-10 AND 2010-11 RESPECTIVE LY BY THE LD. CIT(A)/ AO CONTENDED THAT THIS ISSUE HAS ALREADY BE EN DECIDED IN FAVOUR OF TAXPAYER IN ITS OWN CASE IN ITA NO. 2415/DEL/2014, A.Y. 2008-09. HOWEVER, LD. DR FOR THE REVENUE FILED WRITTEN SUBMISSIONS WHICH HAVE BEEN MADE PART OF THE JUDICI AL FILE CONTENDED THAT FACTS OF CASES AT HAND ARE LARGELY D ISTINGUISHABLE THAN THE CASE DECIDED IN AY 2008-09 AND FURTHER CON TENDED THAT THE DEFICIENCY AND SHORTCOMINGS BROUGHT OUT BY THE DEPARTMENT IN THE DOCUMENTS/ EVIDENCES IN FORM OF SERVICE AGREEME NT AND MAIL EXCHANGES FURNISHED BY THE ASSESSEE HAVE NOT BEEN A PPRECIATED BY THE TRIBUNAL. HOWEVER, ON PUTTING SPECIFIC QUERIES THE LD. DR HAS FAILED TO BRING ON RECORD DISTINGUISHABLE FACTS OF THE CASES AT HANDS VIS--VIS CASE OF THE TAXPAYER OF A.Y. 2008-09. 23. WE HAVE PERUSED THE ORDER PASSED BY THE TRIBUNA L IN ASSESSEES OWN CASE IN A.Y. 2008-09 AND FACTS ARE I DENTICAL. COORDINATE BENCH OF TRIBUNAL VIDE ORDER DATED 22 ND JUNE, 2020 PASSED IN ITA NO. 2415/DEL/2014, A.Y. 2008-09 DELETED THE DISALLOWANCE OF MANAGEMENT FEE MADE BY THE LD. CIT( A)/AO BY RETURNING FOLLOWING FINDINGS :- ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 19 8. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION HAD FILED ORIGINAL RETURN OF IN COME ON 30.09.2008 DECLARING TOTAL INCOME AT NIL. THE ASSES SEE THEN FILED REVISED RETURN OF INCOME ON 14.10.2008 DECLAR ING TOTAL INCOME OF RS.13,12,461/-. THE ASSESSEE COMPANY WAS INCORPORATED ON 12.11.2003 AS A RESULT OF JOINT VEN TURE BETWEEN THE MICHELIN GROUP, FRANCE AND APPOLO TYRES LTD. IN INDIA. THE SAID JOINT VENTURE WAS FORMED TO CARRY OUT THE BUSINESS OF MANUFACTURING AND TRADING OF TYRES AND TUBES FOR TR UCKS AND BUSES AND PASSENGERS CARS. THE ASSESSING OFFICER MA DE REFERENCE TO THE TRANSFER PRICING OFFICER (IN SHORT TPO) U/S 92CA(1) OF THE ACT. THE TPO PASSED THE ORDER U/S 92 CA(3) OF THE ACT AND NO TRANSFER PRICING ADJUSTMENT WAS PROP OSED. THE ASSESSING OFFICER THEREAFTER, NOTED THAT THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION HAD PAID MANAGEMENT FEES O F RS.1.76 CRORES (APPROX.) TO ITS ASSOCIATED ENTERPRISES (IN SHORT AE) MICHELIN ASIA PACIFIC PTE. LTD. (IN SHORT MAP). T HE ASSESSING OFFICER FURTHER NOTED THAT DURING THE PRE CEDING YEAR, THE AMOUNT OF EXPENDITURE DEBITED WAS RS.1.39 CRORE S (APPROX.). ANOTHER ASPECT WHICH WAS NOTED BY THE AS SESSING OFFICER WAS THAT THE ASSESSEE WAS INCURRING HUGE OP ERATING EXPENSES I.E. SALARY AND WAGES OF RS.9.21 CRORES, P ROFESSIONAL AND LEGAL CHARGES OF RS.1.43 CRORES AND ALL KIND OF OTHER MANAGERIAL AND ESTABLISHMENT EXPENSES, WHICH WERE I NCLUDED IN TOTAL OPERATING EXPENSES OF RS.49.96 CRORES. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF MANAGEMENT SERVICES PROVIDED BY MAP SINGAPORE ALONGWITH THE COPY OF AGR EEMENT AND DATE-WISE ACTIVITIES TO ESTABLISH ITS CASE OF S ERVICES BEING PROVIDED BY THE SAID CONCERN. IN RESPONSE THEREOF, THE ASSESSEE POINTED OUT THAT IT HAD AVAILED CERTAIN MANAGEMENT SUPPORT SERVICES FROM ITS AE. THE SAID SERVICES ARE ENLISTE D AT PAGE 2 & 3 OF THE ASSESSMENT ORDER. THE ASSESSEE STRESSED TH AT THE MANAGERIAL SERVICES AVAILED CONSTITUTE RELEVANT BUS INESS ASSISTANCE RECEIVED BY THE ASSESSEE FROM MAP SINGAP ORE TO UNDERTAKE ITS OPERATION IN A MORE EFFICIENT WAY. 9. RELIANCE WAS PLACED ON VARIOUS DECISIONS FOR THE ALLOWABILITY OF THE SAID CLAIM. THE ASSESSING OFFICER NOTES AS U NDER:- .IN THE ABOVE MENTIONED AGREEMENT, IT APPEARS THAT THE ASSESSEE HAS RECEIVED ADVICES IN T HE MATTER OF VARIETY OF FIELDS, WHICH INCLUDE GENERAL BUSINESS AND ADMINISTRATION SERVICE, ECONOMIC PLANNING AND ACCOUNTING SERVICES, INDUSTRIAL ASSESSMENT SERVICES , MARKETING TRAINING AND PLANNING, TRAINING AND PERSO NNEL SERVICES, FINANCIAL ADVISORY SERVICES, ECONOMIC AND INVESTMENT RESEARCH AND ANALYSIS, CREDIT CONTROL AN D ADMINISTRATION, PRODUCT DISTRIBUTION PLANNING AND LOGISTICS SERVICES, QUALITY CONTROL SERVICES, LEGAL SERVICES, INFORMATION & TELECOMMUNICATION SERVICES.. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 20 10. THE ASSESSING OFFICER OBSERVED THAT SUBMISSIONS OF THE ASSESSEE WERE NOT CORRECT AS THE ASSESSEE HAD INCUR RED HUGE PERSONNEL COST AND ESTABLISHMENT COST. HE ALSO OBSE RVED THAT FROM THE DETAILS FILED, IT APPEARS THAT THE ASSESSEE HAD FULL TEAM OF MANAGEMENT CONSISTING OF MR. JEAN PAUL CAYLAR AS DI RECTOR AND MR. HERVE DUB, AS DIRECTOR. THE ASSESSEE HAD INCURR ED HUGE EXPENSES ON THEIR SALARIES AND OTHER PERQUISITES. T HE ASSESSING OFFICER FURTHER OBSERVED THAT AGAINST TOTAL TURNOVE R OF RS.132.81 CRORES, THE ASSESSEE HAD INCURRED OPERATING EXPENSE S OF RS.49.97 CRORES WHERE THE ASSESSEE WAS ONLY A TRADING COMPAN Y AND HAD NOT ESTABLISHED ANY MANUFACTURING PLANT IN INDIA SO FAR . THE CLAIM OF THE ASSESSEE IN THE FORM OF MANAGEMENT FEE WAS NOT GENUINE CLAIM AS PER THE ASSESSING OFFICER. IT WAS HELD TO BE A C LEAR DIVERSION OF INCOME AND THE CLAIM OF THE ASSESSEE WAS HELD TO BE NON GENUINE BUSINESS CLAIM AND THE SAME WAS DISALLOWED AND ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. ANOTHER POINT WHICH WAS RAI SED BY THE ITA NOS.2415 & 2946/DEL/2014 ASSESSMENT YEAR 2008-09 6 ASSESSING OFFICER RELYING ON DIFFERENT DECISIONS AND IT WAS O BSERVED THAT THE PAYMENTS MADE TO THE RELATED PARTIES SHOULD BE REAS ONABLE IN ACCORDANCE TO THE MARKET CONDITIONS. 11. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSE SSEE THAT THE MANAGERIAL SERVICES CONSTITUTES GENUINE BUSINESS AS SISTANCE NEEDED BY THE ASSESSEE TO CONDUCT ITS BUSINESS OPERATIONS IN MORE EFFICIENT WAY. IT WAS ALSO POINTED OUT THAT OVER THE PERIOD O F YEARS, THERE WAS CONSISTENT REDUCTION IN LOSS RECORDED BY THE ASSESS EE AND IT RESULTED IN PROFITABILITY DURING THE YEAR WHICH WAS BECAUSE OF THE BENEFITS DERIVED BY THE ASSESSEE FROM THE SUPPORT SERVICES A VAILED FROM THE GROUP CONCERNS. IT WAS ALSO EXPLAINED THAT THE MANA GEMENT SERVICES WERE AVAILED IN THE FORM OF ONLINE SERVICES THROUGH E-MAIL OR ONLINE ACCESS AND WORKSHOP/CONFERENCES ORGANIZED BY THE AE FOR THE INDIAN ENTITY. THE CIT(A) WAS OF THE VIEW THAT THE ISSUE RAISED IN THE PRESENT APPEAL STANDS COVERED BY THE ORDER OF C IT(A) IN ASSESSMENT YEAR 2007-08 AND SINCE THE ASSESSEE HAS NOT FURNISHED SUFFICIENT DOCUMENTS TO PROVE ITS AVAILMENT OF BENE FIT, THE EXPENDITURE NEEDS TO BE ADDED IN THE HANDS OF THE A SSESSEE. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 12. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS A TRADING COMPANY AND ITS OPERATING EXPENSES WERE TO THE TUNE OF 40% OF THE TOTAL TURNOVER. IN PARA 3.2 OF THE ASSESSMEN T ORDER, THE ASSESSING OFFICER TALKS ABOUT THE NATURE OF EXPENSE S INCURRED BY THE ASSESSEE. THE LD.AR FOR THE ASSESSEE STRESSED THAT ROUTINE SUPPORT SERVICES WERE PROVIDED BY THE AE TO THE ASSESSEE FO R BETTER MANAGEMENT OF THE BUSINESS AND SUFFICIENCY AND BENE FIT OF SUCH SERVICES PROVIDED BY THE AE, COULD NOT BE SEEN OR G ONE INTO BY THE ASSESSING OFFICER. HE FURTHER STRESSED THAT THE TPO HAD ACCEPTED THE TRANSACTION TO BE AT ARMS LENGTH. IT WAS FURTH ER POINTED OUT BY THE LD.AR THAT THE EXPENSES WERE INCURRED FROM YEAR TO YEAR; AND ONCE THE EXPENDITURE HAS BEEN INCURRED, IT IS NOT N ECESSARY TO PROVE WHETHER ANY BENEFIT AROSE TO THE ASSESSEE OR NOT. H E FURTHER POINTED OUT THAT THE DEPARTMENT CASE WAS THAT THE EVIDENCES FILED BY THE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 21 ASSESSEE FOR AVAILMENT OF SUPPORT SERVICES WERE NOT SUFFICIENT AND ADEQUATE. IN SUCH SCENARIO, HE STRESSED THAT THE SA ME DOES NOT WARRANT ENTIRE DISALLOWANCE OF EXPENSES. HE FURTHER STATED THAT THE LOSSES HAD REDUCED OVER THE PERIOD OF YEARS HENCE, THE ASSESSEE HAD BENEFITED FROM AVAILMENT OF SUCH SUPPORT SERVICES F ROM ITS AE. THE LD.AR THEN REFERRED TO THE ADDITIONAL EVIDENCE FILE D BY THE ASSESSEE. HE ALSO POINTED OUT THAT THOUGH THE TRIBUNAL HAD DE CIDED THE ISSUE AGAINST THE ASSESSEE BUT THE SAME WAS ON THE PREMIS ES THAT ONLY ONE BILL FOR THE MONTH OF MARCH 2008 WAS FILED. HE ALSO BROUGHT TO OUR NOTICE THAT MISCELLANEOUS APPLICATION WAS FILED AND PENDING AGAINST THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YE AR 2007-08. HOWEVER, HE STATED THAT HE WAS READY TO ARGUE THE A PPEAL FOR THE INSTANT ASSESSMENT YEAR. 13. THE LD.DR FOR THE REVENUE POINTED OUT THAT UNDO UBTEDLY TPO HAD EXAMINED THE ARMS LENGTH PRICE OF INTERNATIONA L TRANSACTION BUT THE ASSESSING OFFICER CAN ALSO CONDUCT INQUIRY AND CARRY OUT THE EXERCISE AS HE WAS WITHIN HIS RIGHTS TO DO SO. REPL YING TO THE PLEA OF THE ASSESSEE THAT THE REDUCTION IN LOSSES ARE ALSO ATTRIBUTABLE TO THE SUPPORT SERVICES AVAILED BY THE ASSESSEE, THE LD. D R FOR THE REVENUE POINTED OUT THAT THESE WERE CORROBORATING STATEMENT . REFERRING TO THE ORDER OF CIT(A), THE LD.DR POINTED OUT THAT IT HAS BEEN NOTED THAT THE EXISTENCE OF SERVICES WAS NOT DOUBTED BUT THE QUESTION WAS WHETHER SERVICES WERE AVAILED OR NOT AND SUCH AVAIL MENT OF SERVICES WAS QUESTIONED BY THE AUTHORITIES BELOW. 14. THE LD.AR IN REPLY POINTED OUT THAT DOCUMENTS W ERE BEFORE THE AUTHORITIES BELOW AND THE SAME SUPPORT THE AVAILMEN T OF SERVICES AND THE SUPPORT THE CLAIM OF SERVICES FROM THE AE. HE AGAIN POINTED OUT THAT WHERE SUFFICIENCY OF THE AVAILMENT OF SERV ICES AND ITS PRICE HAD BEEN EXAMINED BY THE TPO, THERE WAS NO MERIT IN THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD. 15. WHEN THE MATTER WAS FIXED FOR CERTAIN CLARIFICA TION BEFORE THE BENCH, THE LD.AR FOR THE ASSESSEE POINTED OUT THAT TRIBUNAL IN MA NO 479/DEL/2019, VIDE ITS ORDER DATED 19.02.2020 HA D RECALLED ITS OWN ORDER RELATING TO ASSESSMENT YEAR 2007-08, ON T HE GROUND THAT MULTIPLE FACTUAL ERRORS HAD CREPT IN THE ORDER; HEN CE, THERE WAS MISTAKE APPARENT ON RECORD AND THE ORDER OF THE TRI BUNAL WAS THUS RECALLED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL FILED BY TH E ASSESSEE IS AGAINST THE DEDUCTION CLAIMED ON ACCOUNT OF MANAGEM ENT FEE PAID TO MAP, SINGAPORE AT RS.1.76 CRORES (APPROX.). THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH MAP, SINGAPORE, FOR AVAILING THE SERVICES. AVAILMENT OF SERVICES FROM AE WERE IN THE FOLLOWING FIELDS:- GENERAL BUSINESS AND ADMINISTRATION SERVICES: ASSISTANCE IN THE FIELD OF GENERAL BUSINESS AND COR PORATE AFFAIRS AND FACILITATES INTERNAL AND EXTERNAL CONTA CTS. ECONOMIC PLANNING AND ACCOUNTING SERVICES: ASSIST ANCE IN ECONOMIC PLANS, ACCOUNTING AND RESULTS ANALYSIS. AS AN ENTERPRISES FUNCTIONING IN THE HIGHLY COMPETITIVE T YRE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 22 INDUSTRY, THE ASSESSEE REQUIRES EXTERNAL ASSISTANCE TO MEET ITS GOALS, AND IMPROVE PROFITABILITY. INDUSTRIAL ASSESSMENT SERVICES OTHER THAN TECHNIC AL ASSISTANCE: MANAGEMENT OF THE CREATION MODIFICATION AND MAINTENANCE OF INDUSTRIAL TOOLS. MARKETING TRAINING AND PLANNING: ASSISTANCE IN DEVELOPING MARKETING STRATEGY AND DETERMINING ACTIO NS TO BE TAKEN. TRAINING AND PERSONNEL SERVICES: ASSIST ANCE IN ENSURING PROPER RECRUITMENT, TRAINING AND HUMAN RESOURCES MANAGEMENT. FINANCIAL ADVISORY SERVICES: EXPERTISE IN ALL THE FINANCIAL ASPECTS OF THE BUSINESS OF THE BENEFICIAR Y. ECONOMIC AND INVESTMENT RESEARCH AND ANALYSIS: ASSISTANCE IN FINANCIAL AND ECONOMIC ANALYSIS. CREDIT CONTROL AND ADMINISTRATION: ASSISTANCE IN THE SELECTION OF SOURCE OF FUNDS. PRODUCT DISTRIBUTION PLANNING AND LOGISTICS SERV ICES: ASSISTANCE IN THE MANAGEMENT OF PRODUCTS FLOWS, DETERMINE RESOURCES NECESSARY TO ENSURE THE EFFICIE NT SUPPLY OF PRODUCTS IN A TIMELY MANNER. QUALITY CONTROL SERVICES: EXPERTISE ON QUALITY AS SURANCE IN ALL THE FIELDS OF ACTIVITY FROM THE DEVELOPMENT OF PRODUCTS TO THE SERVICE TO FINAL CLIENT. LEGAL SERVICES: LEGAL SERVICES IN ALL MATTERS INC LUDING BUT NOT LIMITED TO CORPORATE, TAX, INTELLECTUAL PRO PERTY. COMMERCE, FINANCE, PARTNERSHIP, ALL LEGAL ASPECTS O F BUSINESS. INFORMATION AND TELECOMMUNICATION SERVICES: ASSISTANCE IN TECHNICAL DEFINITION, IMPLEMENTATION AND MAINTENANCE OF COMPUTERS AND TELECOMMUNICATION SYSTEMS. SUPPORT OPERATIONS MANAGEMENT IN IDENTIFYI NG PROCESS EVALUATION REQUIREMENTS AND IN IMPLEMENT ORGANIZATIONAL CHANGES. 17. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT THE SAID MANAGERIAL SERVICES WERE AVAILED BY THE ASSESSEE FROM ITS AE I N ORDER TO ENABLE IT TO UNDERTAKE ITS OPERATION IN MORE EFFICIENT WAY . THE CASE OF THE REVENUE ON THE OTHER HAND IS THAT THE ASSESSEE HAD RECEIVED ADVISE IN THE MATTER OF VARIETY OF FIELDS, WHICH INCLUDE G ENERAL BUSINESS AND ADMINISTRATIVE SERVICE, ECONOMIC PLANNING AND A CCOUNTING SERVICES, INDUSTRIAL ASSESSMENT SERVICES, MARKETING TRAINING AND PLANNING, TRAINING AND PERSONNEL SERVICES, FINANCIA L ADVISORY SERVICES, ECONOMIC AND INVESTMENT RESEARCH AND ANAL YSIS, CREDIT CONTROL AND ADMINISTRATION, PRODUCT DISTRIBUTION PL ANNING AND LOGISTICS SERVICES, QUALITY CONTROL SERVICES, LEGAL SERVICES, INFORMATION & TELECOMMUNICATION SERVICES. ON THE OT HER HAND, THE ASSESSING OFFICER ALSO NOTES THAT THE ASSESSEE HAD INCURRED HUGE PERSONNEL COST AND ESTABLISHMENT COST OF RS.9.21 CR ORES (APPROX.), LEGAL AND PROFESSIONAL OF RS.1.34 CRORES (APPROX.), TRAVELLING EXPENSES OF DIRECTORS AND OTHERS OF RS.4.91 CRORES (APPROX.). ANOTHER POINT WHICH WAS THE BASIS FOR DISALLOWANCE IN THE HANDS OF ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 23 THE ASSESSEE, WAS THE MANAGERIAL SALARY AND PERQUIS ITE PAID BY THE ASSESSEE TO ITS DIRECTORS. THE ASSESSING OFFICER HA S TIME AND AGAIN POINTED OUT THAT THE OPERATING EXPENSES WERE TO THE TUNE OF 40% AND OVER WHICH AGAIN THE ASSESSEE HAS CLAIMED THE MANAG EMENT FEE OF RS.1.76 CRORES (APPROX.). THE ASSESSING OFFICER HOL DING THAT PAYMENT OF MANAGEMENT FEE WAS CLEAR DIVERSION OF PA YMENT ALSO OBSERVED THAT THE GROUP COMPANY WERE PAID IN THE NA ME OF MANAGEMENT FEE THOUGH THERE WERE SUFFICIENT MANAGEM ENT DIRECTORS IN THE ASSESSEES COMPANY. HE WAS OF THE VIEW THAT THOUGH IT IS CLAIMED AS A CHARGE ON THE TAXABLE INCOME BUT INFACT IT WAS APPLICATION OF INCOME AND THE SAID CLAIM WAS NOT GE NUINE BUSINESS CLAIM. 18. AT THIS JUNCTURE, WE NEED TO SEE WHETHER THE AS SESSING OFFICER HAD EXCEEDED THE JURISDICTION CAST UPON HIM, WHILE DECIDING THE ISSUE OF ALLOWABILITY OF CLAIM OF MANAGEMENT FEES P AID BY THE ASSESSEE TO ITS AE. IN THE FIRST INSTANCE, IT IS FO R THE BUSINESSMAN TO DECIDE ITS COURSE OF CARRYING ON THE BUSINESS AND I N SUCH COURSE, FOR AVAILING MANAGEMENT SERVICES FROM ITS AE. THE ASSES SING OFFICER CANNOT SIT IN JUDGMENT, WITH SUCH DECISION OF BUSIN ESSSMAN TO HOLD THAT THE GROUP COMPANIES WERE BEING PAID IN THE NAM E OF MANAGEMENT FEE, THOUGH THERE WERE SUFFICIENT MANAGE MENT PERSONNEL AVAILABLE. SUCH OBSERVATION CANNOT BE THE BASIS FOR BENCHMARKING THE ALLOWABILITY OF THE EXPENDITURE IN THE CASE OF THE ASSESSEE. THE BENEFIT, IF ANY, ARISING TO THE ASSES SEE AGAINST THE AVAILMENT OF SUCH SUPPORT SERVICES IS NOT NECESSARY TO BE PROVED BY THE ASSESSEE. THE ASSESSEE IN ITS WISDOM TO CARRY O N ITS BUSINESS, WHERE THE BUSINESS HAS WORLDWIDE PRESENCE, NEEDS TO KEEP ITS STANDARDS HIGH AND TO MAINTAIN SIMILAR TERMS AND CO NDITIONS, NOT ONLY FOR RUNNING BUSINESS BUT FOR PROVIDING SERVICE S TO CUSTOMERS, HAS TO AVAIL SUCH MANAGEMENT ADVICES AND SERVICES F ROM ITS AE. IN THE PRESENT SCENARIO WHERE THE ASSESSEE IS DEALING IN ITEMS, WHICH WERE AVAILABLE IN INTERNATIONAL MARKET ALSO, THEN S AME PRACTICE HAS TO BE ADOPTED WORLDWIDE AND HENCE THE NECESSITY OF AVAILMENT OF MANAGEMENT SERVICES. MERELY BECAUSE THE ASSESSEE WA S INCREASING EXPENDITURE ON ITS PERSONNEL AND OTHER EXPENSES, CA NNOT BE THE YARDSTICK FOR DECIDING WHETHER ASSESSEE HAD ANY NEE D TO AVAIL THE SERVICES. IT IS OUTSIDE THE DOMAIN OF ASSESSING OFF ICER TO TRAVERSE IN SUCH DIRECTION. THE ASSESSING OFFICER CATEGORICALLY STATES THAT ASSESSEE HAD AVAILED SERVICES IN VARIOUS FIELDS, BU T IT IS OUTSIDE HIS DOMAIN TO DECIDE WHETHER THERE WAS ANY NECESSITY TO AVAIL SUCH SERVICES OR NOT. THE ASSESSEE HAVING AVAILED THE SU PPORT SERVICES FOR ITS DAY TO DAY RUNNING OF BUSINESS, IS ENTITLED TO CLAIM THE EXPENDITURE. HENCE, WE HOLD SO. IN THIS REGARD, WE MUST ALSO LOOK TO THE OTHER SIDE OF THE PICTURE THAT THE LOSSES ARISI NG TO THE ASSESSEE IN THE EARLIER YEAR/S HAVE CONSISTENTLY REDUCED AND HA D RESULTED IN PROFITABILITY DURING THE YEAR, WHICH IS CLEARLY APP ARENT FROM THE FOLLOWING CHART:- ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 24 ASSESSMENTYEAR (LOSS)/INCOME AS PER BOOK RETURNED ( LOSS)/INCOME 2006-07 (28.11) CRORES (24.18) CRORES 2007-08 (16.05) CRORES (8.42) CRORES 2008-09 11.10 CRORES 0.13 CRORES 19. THE INCREASE IN THE PROFITABILITY OF THE ASSESS EE DURING THE YEAR ITSELF ESTABLISHES THE CASE OF THE ASSESSEE THAT TH E AVAILMENT OF SUPPORT SERVICES FROM THE AE HAS BENEFITTED THE BUS INESS OF ASSESSEE AND HENCE EXPENDITURE IS BUSINESS EXPENDITURE. NOW, COMING TO THE NEXT ASPECT OF THE ASSESSEE I.E. THE EVIDENCES OF A VAILMENT OF SUPPORT SERVICES FROM THE AE. THE ASSESSEE BEFORE US HAS FU RNISHED EVIDENCES IN THE FORM OF ADDITIONAL EVIDENCES TO ES TABLISH ITS CASE OF AVAILMENT OF SERVICES. SUCH EVIDENCES ARE AVAILABLE AT PAGES 1 TO 66 OF THE PAPER BOOK FILED BY THE ASSESSEE IN THIS REG ARD. THE ASSESSEE HAD ALSO FILED EVIDENCES BEFORE ASSESSING OFFICER/C IT(A) WHICH ARE NOTED BY THEM. THE SUFFICIENCY OF AVAILMENT OF SERV ICES CAN BE GONE INTO BY ASSESSING OFFICER, BUT WHERE EVIDENCES HAVE BEEN FILED, THE ASSESSING OFFICER CANNOT SIT IN JUDGEMENT AS TO ALL OWABILITY OF EXPENDITURE ON THE SURMISE THAT ASSESSEE IS ALREADY INCREASING EXPENDITURE UPTO 40%. THERE IS NO MERIT IN THE STAN D OF THE AUTHORITIES BELOW. THUS, GROUNDS OF APPEAL NO.2 & 3 RAISED BY THE ASSESSEE ARE ALLOWED. 24. SO, FOLLOWING THE ORDER PASSED BY THE CO-ORDIN ATE BENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT WH EN THE ASSESSEE HAS PROVED ON FILE THAT IT HAS AVAILED OFF THE SUPP ORT SERVICES FROM ITS AE TO RUN ITS BUSINESS, IT IS ENTITLED TO CLAIM EXPENDITURE. A.O./ CIT(A) WAS NOT EMPOWERED TO DECIDE IF THERE WAS ANY NECESSITY FOR THE TAXPAYER TO AVAIL SUCH SERVICES. SO THE GRO UND RAISED BY TAXPAYER IN ITS APPEAL FOR A.Y. 2009-10 AND 2010-11 ARE ALLOWED AND DISALLOWANCE MADE STANDS DELETED. GROUND NO. 2.4 OF ITA NO. 5774/DEL/2014, A.Y. 2009-10 TAXPAYERS APPEAL 25. AO/ CIT(A) HAVE DISALLOWED SET OFF OF BROUGHT F ORWARD LOSSES TO THE TUNE OF RS. 6,50,98,677/- COLLECTIVEL Y FOR A.Y. 2005- 06 AND A.Y. 2006-07. AO/CIT(A) HAVE DISALLOWED SET OFF LOSSES ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 25 BY IGNORING THE FACT THAT THE MATTER IS PENDING BEF ORE THE TRIBUNAL FOR DISPOSAL. SO, THIS ISSUE IS REMITTED BACK TO TH E AO TO VERIFY THE FACTS AND GRANT THE SET OFF CLAIMED BY THE ASSESSEE IF ADMISSIBLE. GROUND NO. 2 OF ITA NO. 6128/DEL/2014, A.Y. 2009-10 AND REVE NUES APPEAL GROUND NO. 12 OF ITA NO. 3125/DEL/2017, A.Y. 2010-1 1, 26. LD. DR FOR THE REVENUE CHALLENGED THE IMPUGNED DELETION OF ADDITION OF RS. 12,83,663/- AND RS. 9,90,383/- FOR A.Y. 2009-10 AND 2010-11 RESPECTIVELY BY THE LD. CIT(A) BY RELYI NG ON THE ORDER PASSED BY THE TRIBUNAL. HOWEVER, LD. AR FOR T HE TAXPAYER BROUGHT TO THE NOTICE OF THE BENCH THAT THIS ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN TAXPAYERS OWN CASE IN A .Y. 2009-10. THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. DR. 27. WE HAVE PERUSED THE ORDER OF THE CO-ORDINATE B ENCH OF TRIBUNAL PASSED IN ASSESSEES OWN CASE BEARING ITA NO. 2946/DEL./2014 FOR A.Y. 2008-09 IN FAVOUR OF THE TAXPAYER BY UPHOLDING THE ORDER PASSED BY LD. CIT(A) BY RETURNI NG FOLLOWING FINDINGS : 21. THE FIRST ISSUE RAISED BY THE REVENUE VIDE GRO UND OF APPEAL NO.1 IS AGAINST THE DELETION OF DISALLOWANCE MADE O F RS.27,83,732/- ON ACCOUNT OF IMPAIRMENT OF STOCK. 22. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE I N THE BOOKS OF ACCOUNTS HAD BEEN RECORDING THE VALUE OF CLOSING ST OCK AS PER ACCOUNTING STANDARD- 2 (IN SHORT AS-2) I.E. STOCK TO BE VALUED AT NET REALIZABLE VALUE COST, WHICHEVER IS LOWER. THE SAID ACCOUNTING TREATMENT WAS FOLLOWED BY THE ASSESSEE SINCE COMMEN CEMENT OF ITS BUSINESS ACTIVITIES. THE ASSESSING OFFICER DISALLOW ED THE SAID CLAIM VIDE PARA 4 OF THE ASSESSMENT ORDER; THE PROVISION FOR IMPAIRMENT ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 26 OF STOCK OF RS.27,83,732/- ON THE GROUND THAT THIS WAS NOT A ASCERTAINED LIABILITY. THE ASSESSING OFFICER ALSO N OTED THAT SIMILAR DISALLOWANCE WAS MADE IN THE EARLIER YEARS AND HENC E DISALLOWED THE AMOUNT IN THE YEAR UNDER CONSIDERATION. 23. THE CIT(A) NOTED THAT THE DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2007-08 HAS BEEN DELETED BY THE CIT (A) AND ALSO NOTED FROM THE DETAILS THAT AS PER AS-2, THE ASSESS EE HAD BOOKED COST OR REALIZABLE VALUE WHICHEVER WAS LESS AND THE NET REALIZABLE VALUE WAS BASED ON LAST ACTUAL SALE PRICE OF THE PR ODUCT. FURTHER, WEIGHTED AVERAGE COST WAS COMPUTED BY THE ASSESSEE. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AGAINST WHICH THE REVENUE IS IN APPEAL. 24. THE LD.DR FOR THE REVENUE POINTED OUT THAT BEFO RE THE CIT(A), CERTAIN DETAILS WERE FILED WHICH WAS NOT EXAMINED B Y THE ASSESSING OFFICER. THE LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT NOTHING FRESH WAS FILED DURING THE YEAR AND THE SAI D PROVISION WAS MADE AS WAS BEING MADE IN THE EARLIER YEARS. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. WHERE THE ASSESSEE IS FOLLOWING THE SYSTEMIZED WAY OF RECOGNIZING THE VALUE OF STOCK AT THE CLOSE OF THE YEAR I.E. AS PER AS-2 OF ACCOUNTING STANDARD AND THE COST OF THE CLOSING STO CK IS DECLARED ON THE BASIS OF COST OR NET REALIZABLE VALUE, WHICH EVER IS LESS. HENCE, THERE IS NO MERIT IN THE AFORESAID DISALLOWA NCE MADE IN THE HANDS OF THE ASSESSEE. WE UPHOLD THE ORDER OF THE C IT(A). GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS THUS DISMIS SED. 28. AO HAS DISALLOWED THIS CLAIM MADE BY THE TAXPAY ER ON THE GROUND THAT THE PROVISION FOR IMPAIRMENT OF STOCK W AS NOT ASCERTAINED LIABILITY. FOLLOWING THE ORDER PASSED B Y CO-ORDINATE BENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIE W THAT WHEN THE AO HAS NOT QUESTIONED THE METHOD OF RECOGNIZING THE VALUE OF STOCK AT THE CLOSE OF THE YEAR I.E AS PER AS-2 OF A CCOUNTING STANDARD AND THE STOCK OR NET REALIZABLE VALUE, WHI CHEVER IS LESS, THE DISALLOWANCE ON THE BASIS OF SURMISES IS NOT PE RMISSIBLE. HENCE, WE FIND NO SCOPE TO INTERFERE INTO THE FINDI NGS RETURNED BY ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 27 LD. CIT(A) AND ACCORDINGLY, AFORESAID GROUNDS IN A. Y. 2009-10 AND A.Y. 2010-11 RAISED BY THE REVENUE ARE DISMISSE D. GROUND. NO. 1 OF ITA NO. 6128/DEL/2014, A.Y. 2009-10 REVENUES APPEAL AND GROUND NO. 10 & 11 OF ITA NO. 3125/DEL/2017 A.Y. 2010-11 29. REVENUE HAS CHALLENGED THE DELETION OF ADDITIO N OF RS.5,31,75,329/- AND RS. 4,78,89,110/- FOR A.Y. 200 9-10 AND 2010- 11 RESPECTIVELY BY LD. CIT(A) MADE BY THE AO ON AC COUNT OF ADVERTISING AND PUBLICITY EXPENSES BY TREATING THE SAME AS REVENUE IN NATURE. LD. AR FOR THE ASSESSEE CONTENDED THAT T HIS ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY THE TRIBU NAL IN TAXPAYERS OWN CASE FOR A.Y. 2008-09 IN ITA NO. 2415/DEL/2014 AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. DR. 30. WE HAVE PERUSED THE ORDER PASSED BY THE CO-ORD INATE BENCH BY THE TRIBUNAL IN A.Y. 2008-09 DELETING THE ADDITI ON BY THE LD. CIT(A) MADE BY THE AO ON ACCOUNT OF AMP EXPENSES BY TREATING THE SAME AS CAPITAL EXPENSES. THE LD. CIT(A) IN 200 8-09 HAS DELETED THE ADDITION BY TREATING THE EXPENDITURE BE ING REVENUE IN NATURE, WHICH ORDER HAS BEEN UPHELD BY THE CO-ORDIN ATE BENCH OF TRIBUNAL BY RETURNING FOLLOWING FINDINGS :- 26. THE SECOND ISSUE RAISED BY THE REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.3.36 CRORES ( APPROX.) MADE ON ACCOUNT OF AMP EXPENSES. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CLAIMED EXPENSES OF RS.6.72 CRORE S (APPROX.) ON ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 28 ACCOUNT OF ADVERTISEMENT AND PUBLICITY, AS AGAINST THE CLAIM OF RS.4.44 CRORES (APPROX.) MADE IN THE LAST YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVIDE THE REQUISITE DETAILS AS TO WHETHER THE SAID EXPENSES WOULD LEAD TO ESTABLISHME NT AND PROMOTION OF MICHELIN BRAND IN INDIA. THE ASSESSI NG OFFICER WAS OF THE VIEW THAT WHERE THE BRAND IS OWNED BY TH E PARENT COMPANY, THEN THEY SHOULD CONTRIBUTE TOWARDS ADVERT ISEMENT AND MARKETING EXPENSES INCURRED BY THE ASSESSEE, ON THE SURMISES THAT EXPENSES WERE INCURRED FOR ESTABLISHMENT AND PROMOT ION OF THE INTERNATIONAL BRAND MICHELIN WHICH WAS NOT THE PR OPERTY OF THE ASSESSEE. REFERENCE WAS MADE TO THE OECD GUIDELINES IN THIS REGARD AND SINCE THE ASSESSEE HAD NOT RECEIVED ANY COMPENSATION FROM ITS AE AND THE ADVERTISEMENT WAS GENERATING BE NEFITS TO THE AE WHO OWNED THE BRAND; THE ASSESSING OFFICER HELD THAT 50% OF THE EXPENSES SHOULD BE DISALLOWED IN THE HANDS OF T HE ASSESSEE AS CAPITAL IN NATURE. THE ASSESSING OFFICER HELD THE D ISALLOWANCE IS TO BE MADE ON ACCOUNT OF TWO REASONS, FIRST IT IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE AND SECOND, IT IS BENEFITTING THE ASSESSEE IN LONG RUN AND HENCE CAPITAL IN NATURE. 27. THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT EVEN IF SOME ENDURING BENEFI T AROSE OUT ON SUCH EXPENDITURE BUT WITHOUT SPECIFICALLY ESTABLISH ING THE FACT, THE ADDITION COULD NOT BE MADE ON THE BASIS OF PRESUMPT ION. RELIANCE WAS PLACED ON THE DECISION OF CIT VS BERGER PAINTS (2002) 254 ITR 503 (CAL.) AND THE ADDITION MADE BY THE ASSESSING O FFICER WAS DELETED. THE ASSESSEE HAD ALSO RELIED ON THE DECISI ON OF TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. VS DCIT [2009] 27 SOT 9 (DELHI), WHICH WAS UPHELD BY THE HONBLE DELHI HIGH COURT WH EREIN THE ADVERTISEMENT EXPENSES WERE TREATED AS REVENUE EXPE NSES. THE CIT(A) APPLIED THE SAID RATIO ALSO AND ALLOWED THE CLAIM OF THE ASSESSEE. 28. THE LD. DR FOR THE REVENUE POINTED OUT THAT IN ASSESSMENT YEAR 2007- 08, THE DISALLOWANCE WAS MADE IN THE HAN DS OF THE ASSESSEE ON ACCOUNT OF TP ADJUSTMENT WHEREAS IN THE PRESENT CASE, THE AFORESAID DISALLOWANCE WAS MADE U/S 37(1) OF TH E ACT HENCE, THE DECISION OF TRIBUNAL FOR THE PRECEDING YEAR IS NOT BINDING. 29. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED WAS WHETHER ANY ADHOC DISALLOWANCE CAN BE MADE IN T HE HANDS OF THE ASSESSEE OUT OF ADVERTISEMENT AND PUBLICITY EXP ENSES WHICH HAD BEEN STRUCK DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF NESTLE INDIA LTD. VS DCIT (SUPRA). 30. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE TRADING OF WORLD RE NOWNED TYRES OF CARS AND THE EXPENDITURE MADE BY THE ASSESSEE BE NEFITTED ITS BUSINESS IN INDIA. THE ISSUE WHICH ARISES VIDE GROU ND NO.2 RAISED BY THE REVENUE IS AGAINST THE ALLOWANCE OF PARTICUL AR EXPENDITURE OR ITS PART DISALLOWANCE AS MADE BY THE ASSESSING O FFICER. THE EXPENDITURE IN QUESTION WAS ADVERTISEMENT EXPENSES, WHEREIN THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CL AIMED ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 29 EXPENDITURE TOTALING TO RS.6.72 CRORES (APPROX.) AS AGAINST RS.4.44 CRORES (APPROX.). THE ASSESSEE IS A TRADER IN TYRES OF MICHELIN BRAND IN INDIA. THE ASSESSEE CLAIMED THAT IT WAS IN CURRING SAID EXPENDITURE WHOLLY AND EXCLUSIVELY FOR CARRYING ON ITS BUSINESS IN INDIA. SIMILAR EXPENSES TO THE TUNE OF RS.4.44 CROR ES (APPROX.) WERE ALSO INCURRED IN THE EARLIER YEARS AND NO DISA LLOWANCE U/S 37(1) OF THE ACT WAS MADE IN THE HANDS OF THE ASSES SEE IN THE EARLIER YEARS. HOWEVER, TRANSFER PRICING ADJUSTMENT WAS MADE ON ACCOUNT OF AFORESAID EXPENDITURE INCURRED ON ADVERT ISEMENT AND PUBLICITY. THE TRIBUNAL IN ASSESSEES OWN CASE RELA TING TO ASSESSMENT YEAR 2007-08 IN ITA NOS.3166 & 3306/DEL/ 2013 VIDE ORDER DATED 30.04.2019 HAS DELETED THE AFORESAID AD JUSTMENT ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY. IN THE INST ANT ASSESSMENT YEAR, THE ASSESSING OFFICER HOWEVER, WAS OF THE VIE W THAT THE EXPENDITURE INCURRED BY THE ASSESSEE NEEDS TO BE DI SALLOWED ON TWO COUNTS I.E. FIRST IT WAS NOT INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS AND SECOND IT WAS BENEFITING TH E ASSESSEE IN LONG RUN HENCE, CAPITAL IN NATURE. THE LIMITED ISSU E WHICH ARISES IS WHETHER THE SAID EXPENSES ARE TO BE ALLOWED IN ENTI RETY IN THE HANDS OF THE ASSESSEE. 31. THE AFORESAID EXPENDITURE UNDER THE HEAD ADVERT ISEMENT & PUBLICITY HAS BEEN INCURRED BY THE ASSESSEE FOR THE FOLLOWING PURPOSES:- I. DEALER SIGNAGE AND BOARDS; II. PRINTING OF BROCHURES, TYRE TECHNICAL GUIDES, M ERCHANDISE; III. PRODUCT LAUNCHES; IV. PRINT ADVERTS IN NEWSPAPERS AND MAGAZINES; V. SEMINARS AND EXHIBITIONS; VI. HORDING ETC; 32. THIS FACT WAS BROUGHT TO THE KNOWLEDGE OF THE A SSESSING OFFICER, BUT HAS NOT BEEN CONSIDERED BY THE ASSESSI NG OFFICER. LOOKING AT THE NATURE OF EXPENSES INCURRED, IT IS A PPARENT THAT THE SAME PRIMARILY PERTAIN, TO SALES PROMOTION OF THE P RODUCTS IN INDIAN MARKET. THE EXPENDITURE BEING ESSENTIALLY IN CURRED WITH THE OBJECT TO BOOST THE SALES OF THE ASSESSEE THOUGH TH E BRAND IS OWNED BY THE AE DOES NOT WARRANT ANY DISALLOWANCE IN THE HANDS OF THE ASSESSEE. WHETHER THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, HONBLE AP EX COURT IN THE CASE OF CHANDULAL KESHAVLAL 38 ITR 601, HAD OBSERVE D AS UNDER:- IN DECIDING WHETHER A PAYMENT OF MONEY IS A DEDU CTIBLE EXPENDITURE, ONE HAS TO TAKE INTO CONSIDERATION QUE STIONS OF COMMERCIAL EXPERIENCE AND PRINCIPLE OF ORDINARY COM MERCIAL TRADING. ANOTHER TEST IS WHETHER THE TRANSACTION IS PROPERLY ENTERED INTO AS A PART OF THE ASSESSEE LEGITIMATE COMMERCIA L UNDERTAKING IN ORDER TO FACILITATE THE CARRYING ON OF ITS BUSINESS AND IT IS IMMATERIAL THAT THE THIRD PARTY ALSO BENEFITS THERE BY..; 33. FURTHER, THE DELHI TRIBUNAL OF ITAT IN NESTLE I NDIA LTD. VS DCIT 111 TTJ 498 (DEL. TRIB.) HAD HELD AS UNDER:- 22.. THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY ON ADVERTISEMENT/SALES PROMOTION O F ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 30 SOME NESTLE PRODUCTS IN INDIA MAY GIVE RISE TO CERT AIN BENEFIT TO NESTLE SA, BUT THIS CANNOT BE A GROUND T O DISALLOW THE CLAIM OF THE ASSESSEE, ONCE IT IS ESTABLISHED T HAT THE EXPENDITURE IN QUESTION HAS BEEN INCURRED BY THE AS SESSEE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE IN AS M UCH AS THE EXPENDITURE BY THE ASSESSEE ON ADVERTISEMENT/SA LES PROMOTION HAS DIRECT NEXUS WITH THE EARNING OF INCO ME BY THE ASSESSEE. THE APPEAL OF THE REVENUE AGAINST THE SAME HAS BEEN DISMISSED BY HONBLE DELHI HIGH COURT. 34. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ENTIRE EXPENSES ON ADVERTISEMENT AND PUBLICITY NEED TO BE ALLOWED IN THE HANDS AS BUSINESS EXPENDITURE OF THE ASSESSE E. 31. FOLLOWING THE ORDER PASSED BY CO-ORDINATE BENCH OF TRIBUNAL AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSING OFFICER HAS MERE LY MADE DISALLOWANCE BY FOLLOWING ORDER PASSED IN A.Y. 2008 -09 IN WHICH TAXPAYER HAS INCURRED IDENTICAL AMP EXPENDITURE FO R THE PURPOSE OF DEALER SIGNAGE AND BOARDS; PRINTING OF BROCHURE S, TYRE TECHNICAL GUIDES, MERCHANDISE; PRODUCT LAUNCHES; PRINT ADVERT ISEMENTS IN NEWSPAPERS AND MAGAZINES; SEMINARS AND EXHIBITIONS; HOARDINGS, ETC. WHICH WAS DELETED BY THE LD. CIT(A) AND ORDER OF LD. CIT(A) WAS UPHELD BY THE TRIBUNAL. WE FIND NO SCOPE TO INT ERFERE INTO THE FINDINGS RETURNED BY LD. CIT(A). MOREOVER, IT IS BE YOND COMPREHENSION AS TO HOW THE AO QUANTIFIED 50% OF TH E AMP EXPENSES AS CAPITAL IN NATURE AND REMAINING 50% AS REVENUE IN NATURE. SO, AFORESAID GROUNDS A.Y. 2009-10 AND A.Y . 2010-11 RAISED BY THE REVENUE ARE HEREBY DISMISSED. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 31 GROUND NO.2.2 OF ITA NO. 3167/DEL/2017, A.Y. 2010-1 1 TAXPAYERS APPEAL 32. TAXPAYER HAS CHALLENGED GRANT OF DEPRECIATION O N COMPUTER SOFTWARE @ 25 % AS AGAINST TAXPAYERS CLAIM OF 60% IN THE RETURN OF INCOME ON THE GROUND THAT AO/ CIT(A) HAVE ERRED IN CONSIDERING THE LICENSE FEES PAID TOWARDS THE COMPU TER SOFTWARE PURCHASE AS AN INTANGIBLE ASSETS I.E. ACQUISITION O F RIGHT TO USE THE APPLICATION. THE LD. AR FOR THE TAXPAYER CONTENDED THAT DEPRECIATION @ 60% ON THE LICENSE FEE PAID TO ORACL E IS TOWARDS COMPUTER SOFTWARE PROVIDED BY ORACLE TO FACILITATE INVENTORY MANAGEMENT, ORDER MANAGEMENT, SUB-CONTRACT MANAGEME NT ETC. AND IS ELIGIBLE FOR DEPRECIATION @ 60% AS PER APPEN DIX 1 OF THE RULE 5 OF INCOME TAX RULES WHICH INCLUDE COMPUTER S OFTWARE IN THE DEPRECIATION OF COMPUTER. BECAUSE SOFTWARE CONT AINED IN A DISK IS TANGIBLE PROPERTY BY ITSELF. SINCE THE TAXPAYER S OWNERSHIP OF LIMITED RIGHT OVER THE COMPUTER SOFTWARE PURCHASED FROM ORACLE BY MAKING PAYMENT OF LICENSE FEE IS A TANGIBLE ASSETS, IT IS ENTITLED FOR DEPRECIATION @ 60% AS PER DEFINITION OF PLANT GIV EN IN NEW APPENDIX 1 OF RULE 5 EFFECTIVE FROM A.Y. 2006-07 OF THE INCOME TAX RULE, 1962. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 32 33. SO, WE ARE OF THE CONSIDERED VIEW THAT AO/CIT(A ) HAVE ERRED IN ALLOWING THE DEPRECIATION ON THE LICENSE F EE PAID TOWARDS COMPUTER SOFTWARE @ 25% AS AGAINST 60% . SO, AO IS DIRECTED TO GRANT DEPRECIATION @ 60% ON THE LICENSE FEE PAID T O ORACLE BY CLUBBING THE SAID PAYMENT WITH COMPUTER AND SOFTWAR E. SO, GROUND NO. 2.2 OF ITA NO. 3167/DEL/2017, A.Y. 2010-11 RAIS ED BY THE TAXPAYER IS ALLOWED. GROUND NO. 2.4 OF ITA NO. 3167/DEL/2017, A.Y. 2010- 11 TAXPAYERS APPEAL 34. LD. AR FOR THE TAXPAYER CONTENDED THAT AO HAS N OT GIVEN THE FULL CREDIT FOR TAX DEDUCTED AT SOURCE (TDS) AND SE LF-ASSESSMENT TAX DEPOSITED WHILE COMPUTING THE TAX DEMAND. WE ARE OF THE CONSIDERED VIEW THAT WHEN TAXPAYER HAS BROUGHT ON RECORD THE EVIDENCE FOR DEDUCTING THE TDS AND SELF TAX DEPOSIT ED WHILE COMPUTING THE TAX DEMAND THE AO IS DIRECTED TO VERI FY THE FACTS AND TO PROVIDE FULL CREDIT OF TDS AND SELF-ASSESSME NT TAX DEPOSITED BY THE TAXPAYER IN ITS COMPUTATION OF INCOME. CONSE QUENTLY, GROUND NO. 2.4 ITA NO. 3167/DEL/2017, A.Y. 2010-11, TAXPAYERS APPEAL IS DETERMINED IN FAVOUR OF THE A SSESSEE. TRANSFER PRICING ISSUES GROUND NO. 3.1 TO 3.8 OF ITA NO. 5774/DEL/2014, AND TAXPAYERS APPEAL GROUND NO. 3.1, 3.1.1 TO 3.1.4 OF ITA NO. 3167/DEL/ 2017, A.Y. 2009-10 AND A.Y. 2010-11 RESPECTIVELY GROUND NO. 1 TO 9 OF ITA NO. 3125/DEL/2017, REVENUES APPEAL ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 33 A.Y. 2010-11 35. TAXPAYER IN ITA NO. 5774/DEL/2014, A.Y. 2009-10 BY MOVING TWO SEPARATE APPLICATIONS FOR ADMITTING ADDI TIONAL SUPPORTING EVIDENCE TO INTRODUCE RESALE PRICE METHO D (RPM) ANALYSIS AS PER THE ORDER PASSED BY LD. CIT(A) IN A SSESSEES OWN CASE FOR A.Y. 2010-11 AND FOR ADMISSION OF ADDITION AL GROUND NO. 3.9, WHICH IS AS UNDER : 3.9 WITHOUT PREJUDICE TO ANY OTHER GROUND AND ALS O TO OUR CONTENTION THAT NO ADDITION ON ACCOUNT OF ADVERTISE MENT, MARKETING AND PROMOTION (AMP) EXPENSES IS JUSTIFIED IN APPELLANTS CASE, AUTHORITIES HAVE FAILED TO ADOPT SIMILAR METHODOLOGY AS APPLIED BY HONBLE CIT(A) FOR A.Y. 2 010-11 ON THE GROUNDS INTER ALIA THAT U/S 255 OF THE INCOM E TAX ACT, READ WITH RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL R ULES, 1963, TRIBUNAL IF SO REQUIRES ENTERTAIN ADDITIONAL EVIDEN CE AND THAT ADDITIONAL GROUND SOUGHT TO BE RAISED IS REGARDING ISSUES WHICH ARE FOUND NECESSARY FOR ADJUDICATION OF THE ISSUE AT HA ND. 36. THE LD. DR FOR THE REVENUE OPPOSED BOTH THE APP LICATIONS MOVE BY THE TAXPAYER FOR LEADING ADDITIONAL EVIDENC E AND FOR RAISING ADDITIONAL GROUND ON THE GROUND THAT THIS E VICENCE WAS WELL WITHIN THE NOTICE OF THE TAXPAYER, SINCE VERY BEGIN NING AND THAT THE EVIDENCE SOUGHT TO BE BROUGHT ON RECORD BY THE TAXP AYER HAS NEVER BEEN PUT UP BEFORE THE LD. TPO/CIT(A) AND THAT MERE LY ON THE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 34 BASIS OF RULE OF CONSISTENCY ADDITIONAL GROUND CANN OT BE RAISED AND MADE A REQUEST FOR DISMISSAL OF BOTH THE APPLICATIO NS. 37. WE ARE OF THE CONSIDERED VIEW THAT SO FAR AS TH E QUESTION OF ADMITTING THE ADDITIONAL EVIDENCE BROUGHT ON RECORD BY THE TAXPAYER IS CONCERNED WHEN REVENUE ON ITS OWN IN A. Y. 2010-11 IN TAXPAYERS OWN CASE ON IDENTICAL FACTS HAVE DECIDED THE RPM ANALYSIS, THE WORKING BASED ON RPM METHOD IS NECESS ARY TO ADJUDICATE AT THE CONTROVERSY AT HAND ONCE FOR ALL OTHERWISE IT WILL LEAD TO MULTIPLICITY OF THE PROCEEDINGS. 38. THE CONTENTION OF THE LD. DR THAT THIS EVIDENCE WAS NOT EXAMINED BY TPO IS NOT SUSTAINABLE BECAUSE EVERY AD DITIONAL EVIDENCES, IF ADMITTED, IS REQUIRED TO BE EXAMINED BY THE TPO/AO TO DECIDE THE ISSUE AT CONTROVERSY. SO FAR AS QUEST ION OF ENTERTAINING THE ADDITIONAL GROUND RAISED BY THE TAXPAYER IS CON CERNED AGAIN, WE ARE OF THE CONSIDERED VIEW THAT FOR COMPLETE APPREC IATION OF FACTS ON RECORD AND DECIDING THE ISSUE IN CONTROVERSY ADD ITIONAL GROUND RAISED, WHICH HAS ARISEN ONLY AFTER THE ORDER PASSE D BY THE TRIBUNAL IN A.Y. 2010-11 IN TAXPAYERS OWN CASE IN THE SIMIL AR SET OF FACTS AND CIRCUMSTANCES, IS ALLOWED. SO, BOTH THE APPLIC ATIONS MOVED BY TAXPAYER ARE ALLOWED WITHOUT PREJUDICE TO THE MERIT S OF THIS CASE. 39. SO FAR AS GROUND NO. 3.1 TO 3.8 AND ADDITIONAL GROUND NO. 3.9 RAISED BY TAXPAYER IN A.Y. 2009-10 ARE CONCERN ED THE TAXPAYER ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 35 HAS BROUGHT ON RECORD ADDITIONAL EVIDENCE GIVING WO RKING OF ADJUSTMENT ON THE BASIS OF RPM ANALYSIS BY FOLLOWIN G ORDER PASSED BY CIT(A) IN A.Y. 2010-11 BY RELYING UPON DECISION OF SONI ERICSSON MOBILE PVT. LTD. 374ITR 118, RENDERED BY HONBLE DELHI HIGH COURT WHICH NEED TO BE EXAMINED BY THE T PO. SINCE, REVENUE IS REQUIRED TO FOLLOW THE RULE OF CONSISTEN CY IN THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE THESE GROUNDS A RE REMITTED BACK TO THE TPO TO DECIDE AFRESH IN VIEW OF ADDITIONAL E VIDENCE BROUGHT ON RECORD BY THE ASSESSEE BY FOLLOWING ORDER PASSED BY LD. CIT(A) IN TAXPAYERS OWN CASE FOR A.Y. 2010-11 WHICH IS BA SED UPON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN CA SE OF SONI ERICSSON (SUPRA). 40. HOWEVER, THE LD. AR FOR THE TAXPAYER CONTENDED THAT FREIGHT NEED NOT CONSIDERED FOR ADJUSTMENT AS IT IS OUTWARD FREIGHT AND NOT FREIGHT FOR IMPORT OF MATERIAL DISTRIBUTED, HENCE N OT OPERATING FROM TRANSACTION PERSPECTIVE. WE ARE OF THE CONSIDERED V IEW THAT OUTWARD FREIGHT FOR IMPORT OF MATERIAL DISTRIBUTED CAN ONLY BE CONSIDERED FOR ADJUSTMENT AND NOT OUTWARD FREIGHT I N INDIA. LD.TPO IS TO VERIFY THIS FACT AND IF THE FREIGHT IS FOR OUTWARD FREIGHT IN INDIA IT NEED NOT BE CONSIDERED FOR ADJUSTMENT. CONSEQUENTLY, GROUND NO. 3.1 TO 3.8 RAISED BY THE ASSESEE IN A.Y. 2009-10 ARE ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 36 41. TAXPAYER RAISED GROUNDS NO. 3.1, 3.1.1 TO 3.1.4 IN A.Y. 2010- 11 FOR DIRECTING THE TPO BY LD. CIT(A) TO ADJUST TH E SEPARATE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT OF THE TAXPAYER IN ORDER TO COMPUTE THE ADJUSTED PROFIT MARGIN IN RELATION T O TRANSACTION OF IMPORT OF FINISHED GOODS FOR RESALE BY IGNORING THE PROVISION OF ACCOUNTING STANDARD AS-2. WE ARE OF THE CONSIDERE D VIEW THAT WHEN THE TAXPAYER CLAIMED THAT THE FREIGHT NEED NOT BE CONSIDERED FOR ADJUSTMENT AS IT IS OUTWARD FREIGHT IN INDIA AN D NOT FREIGHT FOR IMPORT OF MATERIAL DISTRIBUTED, IT IS NOT TO BE CON SIDERED FOR ADJUSTMENT AS DIRECTED BY LD. CIT(A). AO/ TPO IS TO VERIFY THIS FACT AND PROVIDE ADJUSTMENT OF THE FREIGHT EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE TAXPAYER TO COMPUTE THE ADJUSTED GROSS MARGIN ONLY IF IT RELATES TO IMPORT OF FINISH ED GOODS FOR RESALE. CONSEQUENTLY, GROUND NO. 3.1 AND 3.1.1 TO 3 .1.4 ARE DETERMINED IN FAVOUR OF THE TAXPAYER. 42. REVENUE BY RAISING GROUND NO. 1 TO 9 IN ITA NO. 3125/DEL/2017, A.Y. 2010-11 CHALLENGED THE ORDER OF LD. CIT(A) IN APPLYING THE RESALE PRICE METHOD (RPM) AS RPM WA S NOT THE MOST APPROPRIATE METHOD (MAM) TO DETERMINE ARMS L ENGTH PRICE (ALP) OF AMP EXPENDITURE I.E. MARKETING INTANGIBLES . REVENUE HAS ALSO CHALLENGED THE REJECTION OF BRIGHT LINE TEST ( BLT) IN BENCHMARKING THE AMP EXPENDITURE WITHOUT. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 37 43. WE HAVE PERUSED PARA 11.3 OF THE ORDER PASSED B Y THE LD. CIT(A) QUA THE GROUNDS RAISED BY THE REVENUE BEFORE THE TRIBUNAL DIRECTING THE AO/TPO TO RECOMPUTE THE ARMS LENGTH ADJUSTMENT IN RESPECT OF IMPORT OF FINISHED GOODS FOR RESALE FROM THE AE TAKING RPM AS THE MOST APPROPRIATE METHOD WHICH ARE AS UND ER :- I HAVE CONSIDERED THE FINDINGS OF THE AO, WRITTEN SUBMISSION AND ORAL ARGUMENTS OF THE LD. AR CAREFULLY. FROM THE FACTS OF THE CASE IT IS EVIDENT THE APPELL ANT IS ENTERING HUGE AMP EXPENDITURE WHICH WILL DEFINITELY LEAD TO STRENGTHENING BRAND BUILDING NAMELY MICHELIN INDIA OWNED BY THE AE. I A M NOT GOING INTO THE QUESTION AS TO WHETHER AMP EXPENDITURE CAN BE C ONSIDERED AS INTERNATIONAL TRANSACTION AS PER THE DECISION OF HO NBLE DELHI HIGH COURT IN VARIOUS DECISION SUCH AS WHIRLPOOL INDIA ( ITA NO. 228/2015). I AM RELYING ON THE DECISION ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERACSSION MOBILE PVT. LTD. CITED A T 374/14- 12-11 WHERE HONBLE HIGH COURT HAS HELD THAT GROSS PROFIT MARGI N SHOULD BE COMPUTED AFTER INCLUDING AMP EXPENDITURE WHEN RPM I S CONSIDERED AS MOST APPROPRIATE METHOD. IN PRESENT CASE ALSO RPM I S CONSIDERED AS THE MOST APPROPRIATE METHOD FOR IMPORT SEGMENT FOR RESA LE. ACCORDINGLY THE DECISION OF HON DELHI HIGH COURT IN THE PRESENT CAS E WILL APPLY. THE RELEVANT PORTION OF HIGH COURT IS REPRODUCED AS UND ER:- 'HOWEVER, IT WOULD BE WRONG TO ASSERT AND ACCEPT TH AT GROSS PROFIT MARGINS WOULD NOT INEVITABLY INCLUDE COST OF AMP EXPENSES. THE GR OSS PROFIT MARGINS COULD REMUNERATE AN AE PERFORMING MARKETING AND SELLING F UNCTIONS. THIS HAS TO BE TESTED AND EXAMINED WITHOUT ANY ASSUMPTION AGAINST THE ASS ESSED. A FINDING ON THE SAID ASPECT WOULD REQUIRE DETAILED VERIFICATION AND ASCE RTAINMENT. AN EXTERNAL COMPARABLE SHOULD PERFORM SIMILAR AMP F UNCTIONS. SIMILARLY THE COMPARABLE SHOULD NOT BE THE LEGAL OWNER OF THE BRA ND NAME, TRADE MARK ETC. IN CASE A COMPARABLE DOES NOT PERFORM AMP FUNCTIONS IN THE MARKETING OPERATIONS, A FUNCTION WHICH IS PERFORMED BY THE TESTED PARTY, TH E COMPARABLE MAY HAVE TO BE DISCARDED. COMPARABLE ANALYSIS OF THE TESTED PARTY AND THE COMPARABLE WOULD INCLUDE REFERENCE TO AMP EXPENSES. IN CASE OF MISMATCH, ADJ USTMENT COULD BE MADE WHEN THE RESULT WOULD BE RELIABLE AND ACCURATE. OTHERWISE, A MP METHOD SHOULD NOT BE ADOPTED. IF ON COMPARABLE ANALYSIS, INCLUDING AMP EXPENSES, GROSS PROFIT MARGINS MATCH OR ARE WITHIN THE SPECIFIED RANGE; NO TRANSFER PRICING ADJUSTMENT IS REQUIRED. IN SUCH CASES THE GROSS PROFIT MARGIN INCLUDES THE MARGIN O R COMPENSATION FOR THE AMP ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 38 EXPENSES INCURRED. ROUTINE OR NO ROUTINE AMP EXPENS ES WOULD NOT MATERIALLY AND SUBSTANTIALLY AFFECT THE GROSS PROFIT MARGINS WHEN THE TESTED PARTY AND THE COMPARABLE UNDERTAKE SIMILAR AMP FUNCTIONS. WHILE COMPUTING AMP EXPENSES I DIRECT THE AO/TPO TO EXCLUDE SALES DISCOUNT/ TRADE DISCOUNT GIVEN TO SUB DISTRIBUTORS OR RETAILERS. AS PER DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERACSSION MOBILE COMMUNICATIONS PVT. LTD. FURTHER, I HAVE PER USED AUDITED FINANCIALS OF THE COMPANY WHICH IS A PART OF THE PA PER BOOK. AS PER SCHEDULE 13. THE APPELLANT HAS INCURRED EXPENSES OF RS. 18,70,40,561/- AS FREIGHT WHICH ARE MOSTLY RELATED TO IMPORTS OF GOOD S. THEREFORE, I DIRECT AO /TPO TO TREAT FREIGHT EXPENSES FOR COMPUTING GRO SS PROFIT MARGIN. SIMILAR ITEMS SHOULD BE GIVEN SAME TREATMENT WHILE COMPUTING GROSS PROFIT MARGIN OF THE COMPARABLES. AO/TPO IS DIRECTED TO RECOMPUTE ARMS L ENGTH ADJUSTMENT IN RESPECT OF IMPORT OF FINISHED GOODS FOR RESALE FROM THE AE TAKING RPM AS THE MOST APPROPRIATE METHOD. AS A RESULT ALL GROUND S OF APPEALS ARE PARTLY ALLOWED. 44. WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) H AS PASSED ORDER FOLLOWING THE DECISION RENDERED BY HONBLE DE LHI HIGH COURT IN CASE OF SONI ERICSSION MOBILE PVT. LTD. (SUPRA) WHEREIN IT IS HELD THAT GROSS PROFIT MARGIN SHOULD BE COMPUTED AF TER INCLUDING AMP EXPENDITURE AND RPM IS CONSIDERED AS THE MOST A PPROPRIATE METHOD FOR IMPORT SEGMENT FOR RESALE. SO FAR AS QUE STION OF REJECTING BRIGHTLINE TEST (BLT) BY THE LD. CIT(A) I N A.Y. 2010-11 IS CONCERNED IT HAS BEEN REJECTED IN A NUMBER OF J UDGMENTS BY THE HONBLE HIGH COURTS ON THE GROUND THAT BRIGHTLINE TEST HAS NO STATUTORY MANDATE FOR BENCHMARKING AMP EXPENSES. 45. SO, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO SCOPE TO INTERFERE IN THE FINDING RETURNED BY LD. CIT(A) BY FOLLOWING THE ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 39 DECISION RENDERED BY JURISDICTIONAL HIGH COURT IN C ASE OF SONI ERICSSON MOBLE PVT. LTD. (SUPRA). HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT AS DISCUSSED IN THE PRECEDING PARA OUTWARD FREIGHT IN INDIA EXCEPT THE FREIGHT FOR IMPORT OF M ATERIAL DISTRIBUTED BE NOT CONSIDERED FOR ADJUSTMENT AS IT IS NOT OPERA TING FROM TRANSACTION PERSPECTIVE. SO GROUND NO. 1 TO 9 RAIS ED BY THE REVENUE IN ITA NO. 3125/DEL/2017 OF A.Y. 2010-11 AR E DISMISSED. 46. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2009-10 AND 2010-11 ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES AND APPEAL FILED BY THE REVENU E FOR A.Y. 2009- 10 AND 2010-11 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24 TH DECEMBER, 2020 SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH DECEMBER, 2020 *BINITA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. ITA NO. 5774/DEL/2014, 6128/DEL/2014 ITA NO. 3167/DEL/2017, 3125/DEL/2017 M/S. MIC HELIN INDIA PVT. LTD. 40 DATE OF DICTATION 11 - 1 5 /12/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17/12/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER