M/s GlaxoSmithKline Consumer Healthcare Ltd., Gurgaon V. ACIT, Chandigarh

ITA 346/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6623 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S KAHLON
• Keywords: Depreciation; Transfer pricing; Business expenditure; International transaction; Tangible material; Capital receipt; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 92B; 234B; 37(1); 27; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.105/CHD/2016 (ASSESSMENT YEAR : 2011-12) M/S GLAXOSMITHKLINE CONSUMER VS. THE A.C.I.T., HEALTHCARE LTD., 24-25 FLOOR, CIRCLE 4(1), ONE HORIZON CENTRE, CHANDIGARH. GOLF COURSE ROAD, DLF PHASE-5, GURGAON (HARYANA). PAN: AACCS0144E ITA NO.257/CHD/2016 (ASSESSMENT YEAR : 2011-12) THE A.C.I.T., VS. M/S GLAXOSMITHKLINE CONSUMER CIRCLE 4(1), HEALTHCARE LTD., 24-25 FLOOR, CHANDIGARH. ONE HORIZON CENTRE, GOLF COURSE ROAD, DLF PHASE-5, GURGAON (HARYANA). PAN: AACCS0144E AND ITA NO.346/CHD/2017 (ASSESSMENT YEAR : 2012-13) M/S GLAXOSMITHKLINE CONSUMER VS. THE A.C.I.T., HEALTHCARE LTD., 24-25 FLOOR, CIRCLE 4(1), ONE HORIZON CENTRE, CHANDIGARH. GOLF COURSE ROAD, DLF PHASE-5, GURGAON (HARYANA). PAN: AACCS0144E (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI NEERAJ JAIN & ABHISHEK AGGARWAL RESPONDENT BY : SHRI J.S. KAHLON, DR DATE OF HEARING : 20.09.2017 DATE OF PRONOUNCEMENT : 17.11.2017 ORDER PER ANNAPURNA GUPTA, A.M.: THE APPEALS IN ITA NO.105/CHD/2016 AND ITA NO.257/CHD/2016 HAVE BEEN PREFERRED BY THE ASSESSEE AND 2 THE REVENUE AGAINST THE ORDER PASSED BY THE ASSESSI NG OFFICER U/S 143(3) R.W.S 144C OF THE ACT RELATING T O ASSESSMENT YEAR 2011-12. THE APPEAL IN ITA NO.346/CHD/2017 HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER U/S 143 (3) R.W.S 144C OF THE ACT RELATING TO ASSESSMENT YEAR 2012-13 . SINCE COMMON ISSUES WERE INVOLVED IN THE APPEALS OF BOTH THE YEARS, THEY WERE HEARD TOGETHER AND ARE BEING DISPO SED OFF BY WAY OF THIS COMMON ORDER. WE SHALL FIRST BE TAKING UP THE APPEAL FILED BY T HE ASSESSEE IN ITA NO.105/CHD/2017. ITA NO.105/CHD/2017(ASSESSEES APPEAL)(A.Y 2011-12) : 2. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UNDE R: 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPLETING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT (THE ACT) AT AN INCOME OF RS.778,82,25,462 AS AGAINST THE RETURNED INCOME OF RS.495,71,00,175. THE ABOVE GROUND RAISED BY THE ASSESSEE BEING GENER AL IN NATURE NEEDS NO ADJUDICATION AND HENCE IS TREATE D AS DISMISSED. 3. GROUND NO.2-2.4 RAISED BY THE ASSESSEE READS AS UNDER: TRANSFER PRICING ISSUES. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN L AW IN MAKING ADDITION OF RS. 255,00,90,173 ON ACCOUNT OF ARM'S LENGTH PRICE OF ALLEGED INTERNATIONAL TRANSACTI ONS RESULTING FROM ADVERTISEMENT, MARKETING AND SALES PROMOTION EXPENSES ('AMP EXPENSES') INCURRED BY THE APPELLANT ON THE BASIS OF THE .ORDER PASSED BY THE TP O UNDER SECTION 92CA(3) OF THE ACT. 3 2.1 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE AMP EXPENSES, ETC., UNILATERALL Y INCURRED BY THE APPELLANT IN INDIA COULD NOT BE CHARACTERIZED AS AN INTERNATIONAL TRANSACTION AS PE R SECTION 92B, IN THE ABSENCE OF ANY PROVED UNDERSTANDING/ARRANGEMENTL OO BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE, SO AS TO INV OKE THE PROVISIONS OF SECTION 92 OF THE ACT. 2.2 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ONLY TRANSFER PRICING ADJUSTMEN T PERMITTED BY CHAPTER X OF THE ACT WAS IN RESPECT OF THE DIFFERENCE BETWEEN THE ARM'S LENGTH PRICE (ALP) AND THE CONTRACT OR DECLARED PRICE, BUT THE SAID PROVISION COULD NOT BE INVOKED TO DETERMINE THE 'QUANTUM' / EXTENT OF BUSINESS EXPENDITURE. 2.3 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN HOLDIN G THAT EXPENDITURE INCURRED BY THE APPELLANT WHICH INCIDENTALLY RESULTED IN BRAND BUILDING FOR THE FOREIGN AE, WAS A TRANSACTION OF CREATING AND IMPROVING MARKETING INTANGIBLES FOR AND ON BEHALF OF ITS FORE IGN AE AND FURTHER THAT SUCH A TRANSACTION WAS IN THE NATURE OF PROVISION OF A SERVICE BY THE APPELLANT TO THE AE. 2.5 WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON FAC TS AND IN LAW, IN NOT APPRECIATING THAT THE AMP EXPENSES INCURRED BY THE APPELLANT WAS APPROPRIATELY ESTABLISHED TO BE AT ARM'S LENGTH APPLYING TNMM. 2.4 WITHOUT PREJUDICE, THE TPO/DRP ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT MARKUP, IF AT ALL, HAD TO BE RESTRICTED TO THE VALUE ADDED EXPENSES INCURRED BY THE APPELLANT FOR PROVIDING THE ALLEGED SERVICE IN THE NATURE OF BRAND PROMOTION. 4. ALL THE ABOVE GROUNDS RAISED ARE AGAINST THE ADD ITION OF RS.255,00,90,173/- ON ACCOUNT OF BENCHMARKING O F THE ARMS LENGTH PRICE(ALP) OF INTERNATIONAL TRANSACTION RELATING TO ADVERTISEMENT, MARKETING AND SALES PROMOTION (AM P). 5. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SEL LING OF MALTED NUTRITIONAL FOOD PRODUCTS AND DRINKS UNDER T HE BRAND NAMES, HORLICKS, MALTOVA, VIVA AND BOOST AND IS A PART OF GLAXOSMITHKLINE GROUP REPRESENTED BY 4 GLAXOSMITHKLINE PLC., UK (GSK PLC.) HAVING WORLDWID E PRESENCE IN PHARMACEUTICALS AND NUTRITIONAL FOODS PRODUCTS. 43% OF THE EQUITY SHAREHOLDING OF THE AS SESSEE COMPANY IS HELD BY HORLICKS LTD. UK, SUBSIDIARY COM PANY OF GSK PLC., UK AND BALANCE SHARES ARE HELD BY PUBLIC AND FINANCIAL INSTITUTIONS. IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS OF EXPORT AND IMPORT OF GOODS/SERVICES WITH THE ASSOCIATED ENTERPRISES WHICH WERE BENCHMARKED APPLYING TNMM AS THE MOST APPROPRIATE METHOD AND ACCEPTED BY THE TPO TO BE AT ARMS LENGTH PRICE. HOWEVER, THE TPO UNDERTOOK BEN CH MARKING ANALYSIS OF THE ADVERTISEMENT, MARKETING AN D SALES PROMOTION (AMP) EXPENSES INCURRED BY THE ASSESSEE F OR THE PRODUCTS HAVING BRAND NAME HORLICKS AGGREGATING T O RS.21,837.72 LACS WHICH INCLUDED THE UNDER: I) ADVERTISEMENT EXPENSES RS.21,505.23 LACS II) SALES PROMOTION RS. 332.49 LACS TOTAL: RS. 21,837.72 LACS FOR THE BENCHMARKING ANALYSIS HE CONSIDERED TEN COMPANIES AS APPROPRIATE COMPARABLE COMPANIES WITH AVERAGE AMP EXPENSES AS A PERCENTAGE OF SALES AT 1. 84%. ACCORDINGLY, THE ARMS LENGTH OF AMP EXPENSES INCU RRED BY THE ASSESSEE WAS DETERMINED AT RS.352,534,616/-APPL YING 1.84% TO THE TOTAL REVENUE OF THE ASSESSEE FOR HOR LICKS AND REDUCING THE SAME FROM THE ACTUAL EXPENSES INCU RRED ON AMP OF RS.2,183,772,000/-, ARRIVED AT EXPENSES INCURRED ON CREATION OF MARKETING INTANGIBLES AT RS.1,831,237,384/-. APPLYING THERETO A MARK-UP OF 1 0.84%. 5 THE TPO ARRIVED AT THE ADJUSTMENT TO BE MADE ON ACC OUNT OF AMP EXPENSES AT RS.2,029,743,516. THE ASSESSEE RAI SED OBJECTIONS AGAINST THE SAME BEFORE THE DRP, WHO VID E THEIR DIRECTIONS DATED 13.11.2015 GAVE THE FOLLOWING DIRE CTIONS: 1) INCURRING OF AMP EXPENSES BY THE ASSESSEE CONSTITUTED INTERNATIONAL TRANSACTIONS. 2) BLT WAS NOT AN APPROPRIATE METHOD FOR THE PURPOSE OF BENCH MARKING THE TRANSACTIONS OF AMP EXPENSES. 3) SELLING AN DISTRIBUTION EXPENSES WERE TO BE EXCLUDED FROM THE AMBIT OF AMP EXPENSES AFTER VERIFICATION OF SUCH EXPENSES BY THE TPO. 4) THE MARK-UP EQUIVALENT TO OP/OC RATIO OF THE ASSESSEE SHOULD BE APPLIED ON THE ENTIRE AMP EXPENSES INCURRED BY THE ASSESSEE. ACCORDINGLY, THE TPO AFTER GIVING EFFECT TO THE DIRECTIONS OF THE DRP RECOMPUTED THE ADJUSTMENT TO RS.255,00,90,173/-AS AGAINST RS.202,97,43,516/- PROPOSED BY THE ASSESSING OFFICER AS UNDER: PARTICULARS AMOUNT IN INR AMP EXPENSE INCURRED BY THE ASSESSEE 218,37,72,000 LESS: EXPENDITURE INCURRED - ON SELLING 3,32,49,000 ADVERTISEMENT EXPENDITURE, INCURRED ON CREATI ON OF MARKETING INTANGIBLES 215,05,23,000 MARK UP AT 18.58% 39,95,67,173 REVISED ADJUSTMENT 255,00,90,173 6. BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTESTE D THE ADDITION MADE ON SEVERAL GROUNDS. BRIEF SYNOPSIS O F THE ARGUMENTS ON THE ISSUE WERE FILED BEFORE US IN WRIT ING. RELYING UPON THE SAME THE LD. COUNSEL FOR ASSESSEE ARGUED THAT THE ADDITION MADE WAS UNSUSTAINABLE FOR THE FO LLOWING REASONS: THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT IN OR DER TO CONSTITUTE AN INTERNATIONAL TRANSACTION IN TERMS OF SECTION 92B OF THE ACT, AN ARRANGEMENT, UNDERSTANDI NG OR 6 ACTION IN CONCERT MUST BE SHOWN TO EXIST BETWEEN TH E ASSESSEE AND ITS AE, WHICH HAS NOT BEEN ESTABLISHED IN THE PRESENT CASE. THE LD. COUNSEL FOR ASSESSEE CONTEND ED THAT AMP EXPENSES HAD BEEN INCURRED UNILATERALLY BY THE ASSESSEE ON ITS OWN DISCRETION THROUGH UNRELATED IN DIAN PARTIES FOR THE PURPOSE OF ITS OWN BUSINESS IN ORDE R TO CATER TO LOCAL MARKET NEEDS AND SAID EXPENSE WAS NOT INCU RRED AT THE INSTANCE OF AE. RELIANCE IN THIS REGARD WAS PL ACED ON A NUMBER OF DECISIONS AS UNDER: 1) MOSER BAER INDIA LTD. V. ADDL. CIT [2009] 316 ITR 1 2) MARUTI SUZUKI INDIA LTD. VS. CIT, ITA NO.110/2014 & ITA NO.710/2015 3) CIT VS. WHIRLPOOL OF INDIA LTD., ITA NO.610/201 4 4) HONDA SIEL POWER PRODUCTS LTD. VS. DCIT, ITA NO.346/2015 5) BAUSCH & LOMB EYECARE (INDIA) VS. ADDL.CIT, ITA NO.543/2014 6) PR.CIT VS. GOODYEAR INDIA LIMITED ITA NO. 77/2017 AND VARIOUS OTHER CASE LAWS AS REPRODUCED IN THE SYNOPSIS FILED BEFORE US. 7. THE LD. COUNSEL FOR ASSESSEE FURTHER CONTENDED T HAT RELIANCE PLACED BY THE TPO/DRP ON THE OBSERVATIONS MADE IN THE CASE OF SONY ERICSSION MOBILE COMMUNICATIONS INDIA PVT. LTD. FOR INFERRING THE EXPENSES AS AN INTERNAT IONAL TRANSACTION IN THE CASE OF THE ASSESSEE WAS MISPLAC ED SINCE THE OBSERVATION MADE IN THE SAID CASE WAS ONLY FOR TAX PAYERS ENGAGED IN THE BUSINESS OF DISTRIBUTION AND MARKETING WHILE THE ASSESSEE WAS A MANUFACTURER. I T WAS ALSO CONTENDED THAT THE AMP EXPENSES INCURRED BY TH E ASSESSEE WERE NOT CONTROLLED OR INFLUENCED BY THE A E. THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE ADJUSTM ENT 7 MADE ON ACCOUNT OF AMP EXPENSES WAS A QUANTITATIVE ADJUSTMENT WHEREIN A QUANTUM OF AMP EXPENSES INCURR ED BY THE ASSESSEE WAS SOUGHT TO BE COMPARED WITH THE QUANTUM OF AMP EXPENSES INCURRED BY COMPARABLE COMPANIES AND ADJUSTMENT MADE WITH REGARD TO THE AL LEGED EXCESS QUANTUM OF SUCH EXPENSES INCURRED BY THE ASS ESSEE. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT SUCH QUANTITATIVE ADJUSTMENT HAS BEEN HELD TO BE NOT PER MISSIBLE WITHIN THE FRAME WORK OF CHAPTER-X BY THE HON'BLE D ELHI HIGH COURT IN THE CASE OF MARUTI SUZUKI INDIA LTD. (SUPRA). THE LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD GAINED ECONOMIC OWNERSHIP OF THE TRADE MARK OF HORLICKS AND IN VIEW OF THE DECISION OF THE HON' BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON COMMUNICATI ON NO TRANSFER PRICING ADJUSTMENT IN RESPECT OF AMP EXPEN SES COULD BE MADE WHERE THE ASSESSEE HAD SUCH ECONOMIC OWNERSHIP OF THE TRADEMARK. IT WAS ALSO CONTENDED THAT THE METHODOLOGY ADOPTED FOR BENCHMARKING OF AMP EXPENSE S WAS NOT BASED ON ANY OF THE METHODS PRESCRIBED IN T HE TRANSFER PRICING REGULARLY. THE LD. COUNSEL FOR AS SESSEE CONTENDED THAT THE AMP EXPENSES WAS A NECESSARY COS T INCURRED TO PROMOTE SALE OF PRODUCTS OF THE ASSESSE E AND WAS CLOSELY INTERLINKED WITH ITS ENTIRE SALES. THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT BENCHMARKING OF AMP EXPENSES COULD, THEREFORE, BE APPROPRIATELY DETERMI NED BY APPLYING TNMM METHOD AS THE MOST APPROPRIATE METHOD . RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SONI ERICSSON VS. CIT, 37 4 ITR 8 118 AND DECISION OF THE HON'BLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF KNORR BREMSE PVT. LTD. VS. ACI T, 380 ITR 307. 8. THE LD. DR, ON THE OTHER HAND, CONTENDED THAT IN THE VARIOUS DECISIONS RELIED UPON BY THE LD. COUNSEL FO R ASSESSEE, NO DISTINCTION HAD BEEN BROUGHT OUT BETWE EN THOSE RELATING TO DISTRIBUTORS AND THOSE TO MANUFA CTURERS. THE LD. DR FURTHER REQUESTED THAT THE ISSUE BE RE STORED BACK TO THE TPO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW. THE LD. COUNSEL FOR ASSESSEE DID NOT OBJECT T O THE SAME. 9. IN VIEW OF THE ABOVE WE CONSIDER IT FIT TO RESTO RE THE ISSUE BACK TO THE FILE OF THE AO/TPO FOR DECIDING IT AFRESH IN ACCORDANCE WITH LAW. WE MAY ADD THAT THE ASSESS EE BE GIVEN DUE OPPORTUNITY OF HEARING IN THIS REGARD. GROUND OF APPEAL NO.2-2.4 THEREFORE STANDS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE RE ADS AS UNDER: CORPORATE TAX ISSUES: 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN DISALLOWING CONSUMER MARKET RESEARCH EXPENSES OF RS.17,50,77,000 UNDER SECTION 37(1) OF THE ACT, ALLEGING THE SAME TO BE CAPITAL IN NATURE. 11. BRIEFLY STATED THE ASSESSING OFFICER PROPOSED T O DISALLOW CLAIM OF MARKET RESEARCH EXPENSES AMOUNT ING TO RS.17,50,77,000/- INCURRED BY THE ASSESSEE ON CONSU MER PRODUCT RESEARCH, DATA ANALYSIS OF COMPETITIVE COMP ANIES 9 AND PRODUCTS, PRODUCT DESIGNING, ETC. AS DETAILED I N THE ASSESSMENT ORDER AT PARA 8, PAGE 60, TREATING THEM TO BE CAPITAL IN NATURE. THE ASSESSEES OBJECTION TO THE SAME BEFORE THE DRP WAS REJECTED HOLDING IT TO BE A LEGA CY ISSUE AND FOLLOWING ITS ORDER FOR THE PRECEDING YEAR,I.E. ASSESSMENT YEAR 2010-11, THE DISALLOWANCE PROPOSED BY THE ASSESSING OFFICER WAS DIRECTED TO BE MADE BY THE DR P. FOLLOWING THE DIRECTIONS OF THE DRP THE DISALLOWANC E OF MARKET RESEARCH EXPENSES AMOUNTING TO RS.17,50,77,000/-WAS CONFIRMED BY THE ASSESSING OFF ICER. 12. BEFORE US, THE LD. COUNSEL FOR ASSESSEE AT THE OUTSET POINTED OUT THAT IDENTICAL ISSUE HAD BEEN DECIDED A LL ALONG IN FAVOUR OF THE ASSESSEE BY THE I.T.A.T. IN PRECED ING YEARS RIGHT FROM ASSESSMENT YEAR 1998-99 TO 2010-11. IN ADDITION, A BRIEF SYNOPSIS OF ITS ARGUMENTS WERE AL SO FILED. 13. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS DRP. 14. HAVING HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDERS OF THE I.T. A.T. IN THE CASE OF THE ASSESSEE FOR PRECEDING YEARS, WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. TH E I.T.A.T. HELD THESE EXPENSES TO BE REVENUE IN NATURE IN ITS ORDER PASSED FOR ASSESSMENT YEAR 2007-08, FOLLOWING THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF L.G. ELECTRONICS (P) LTD. VS. ACIT, WHICH HELD THAT EXPE NSES IN CONNECTION WITH SALES DO NOT LEAD TO BRAND PROMOTIO N. THE 10 RELEVANT FINDINGS OF THE I.T.A.T. AT PARAS 26 TO 29 OF THE ORDER ARE AS UNDER: 26. THE NEXT SET OF GROUNDS OF APPEAL ARE GROUND NOS.2.14 TO 2.16 WHEREIN THE ASSESSEE HAS RAISED THE ISSUE THAT THE EXPENDITURE RELATING TO MARKET RESEARCH SERVICE CHARGES PAID TO SELLING AGENTS AND DISCOUNT ON SALES ARE TO BE EXCLUDED FROM THE ALLEGED AMP EXPENDITURE AS BEING NOT RELATABLE TO ADVERTISEMENT AND MARKETING EXPENDITURE. THE CLAIM OF THE LEARNED A.R. FOR THE ASSESSEE IS THAT THE SAID ISSUE IS ALSO COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL (MAJORITY VIEW) IN M/S L.G. ELECTRONICS INDIA (P) LTD. VS. ACIT (SUPRA) VIDE PARAS 18.5 AND 18.6 OF THE DECISION. THE RELEVANT PARAS ARE AS UNDER: 18.5. WE DO NOT FIND ANY FORCE IN THE CONTENTION OF T HE LEARNED DR MADE IN THIS REGARD. THE LOGIC IN THE EXERCISE OF FINDING OUT THE AMP EXPENSES TOWARDS CREATION OF MARKETING INTANGIBLES FOR THE FOREIGN AE STARTS WITH THE EXPENSES WHICH ARE OTHERWISE IN THE NATURE OF ADVERTISEMENT, MARKETING AND PROMOTION. IF AN EXPENDITURE ITSELF IS NOT IN THE NATURE OF ADVERTISI NG, MARKETING OR PROMOTION, THAT OUGHT TO BE EXCLUDED AT T HE VERY OUTSET. WE, THEREFORE, REJECT THIS CONTENTION RA ISED BY THE LEARNED DR. 18.6. AS WE ARE PRESENTLY CONSIDERING THE TERM `ADVERTISEMENT MARKETING AND PROMOTION EXPENSES', WHICH IS ANALOGOUS TO, IF NOT LESSER IN SCOPE THAN THE TERM `ADVERTISEMENT, PUBLICITY AND SALES PROMOTION' AS EMPLOYED IN THE ERSTWHILE SUB-SEC. (3B) OF SEC. 37, ALL THE JUDGMENTS RENDERED IN THE CONTEXT OF SUB-SEC. (3A) & (3B) OF SEC. 37 WILL SQUARELY APPLY TO THE INTERPRETAT ION OF THE SCOPE OF AMP EXPENSES. WE, THEREFORE, HOLD THAT THE EXPENSES IN CONNECTION WITH THE SALES WHICH DO NO T LEAD TO BRAND PROMOTION CANNOT BE BROUGHT WITHIN THE AMBIT OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES FOR DETERMINING THE COST/VALUE OF THE INTERNATIONAL TRANSACTION. 27. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT EXPENSES AGGREGATING RS.5500.86 LACS ARE EXPENSES INCURRED IN CONNECTION WITH SALE AND DO NOT LEAD TO BRAND PROMOTION AS HELD BY THE SPECIAL BENCH. AFTER EXCLUDING THE AFORESAID SELLING EXPENSES AGGREGATING TO RS.5500.86 LACS, THE REMAINING EXPENSES OF RS.8679.75 LACS (CONSTITUTING 6.87% OF THE TOTAL SALES) ONLY IS REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF BENCHMARKING ANALYSIS AS UNDERTAKEN BY THE TPO. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 11 28. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE CLAIM OF THE ASSESSEE IS THAT THE TOTAL AMP EXPENDITURE CONSIDERED BY THE TPO WHILE DETERMINING THE ALP INCLUDED CERTAIN EXPENSES WHICH ARE IN RELATION TO THE SALES MADE BY THE ASSESSEE AND ARE NOT RELATED TO THE BRAND PROMOTION. THE CLAIM OF THE ASSESSEE IS WITH REGARD TO THE EXPENSES TOTALING RS.5500.86 LACS AS TABULATED BELOW: S.NO. NAME OF EXPENSES AMOUNT (RS.LACS) 1. DISCOUNT SALES 60.52 2. MARKET RESEARCH 664.24 3. SALES PROMOTION 3939.90 4. SELLING AND DISTRIBUTION 826.17 5. SERVICE CHARGES PAID TO SELLING AGENT 10.03 TOTAL 5500.86 29. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL (MAJORITY VIEW) IN M/S L.G. ELECTRONICS INDIA (P) LTD. VS. ACIT (SUPRA) HELD THAT THE EXPENSES IN CONNECTION WITH THE SALES DO NOT LEAD TO BRAND PROMOTION AND THUS CANNOT BE BROUGHT WITHIN THE AMBIT OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES FOR DETERMINING THE COST/VALUE OF THE INTERNATIONAL TRANSACTION. IN VIEW THEREOF, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE EXPENSES INCURRED BY THE ASSESSEE IN CONNECTION WITH THE SALES TOTALING RS.5500.86 LACS AS THE SAME DO NOT FALL WITHIN THE AMBIT OF AMP EXPENSES AND HENCE NOT TO BE CONSIDERED FOR COMPUTING THE COST/VALUE OF INTERNATIONAL TRANSACTION. THE ASSESSEE VIDE GROUND NO.4 HAD RAISED THE ISSUE AGAINST DISALLOWANCE OF CONSUMER MARKET RESEARCH EXPENSES OF RS.567.49 LACS. IN VIEW OF OUR DECISION IN ALLOWING THE CLAIM OF THE ASSESSEE BEING RELATABLE TO SALES PROMOTION EXPENSES, THIS GROUND OF APPEAL IS THUS ALLOWED. THE GROUND NOS.2.14 TO 2.16 AND GROUND NO.4 ARE THUS ALLOWED. 15. THE SAID DECISION WAS FOLLOWED IN SUBSEQUENT YE ARS ALSO I.E. ASSESSMENT YEARS 2008-09, 2009-10 AND 201 0-11. NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NO TICE NOR ANY SUBSEQUENT DECISION OF THE HON,BLE HIGH COURT REVERSING THE ORDER OF THE ITAT BROUGHT TO OUR NOT ICE BY THE LD.DR. THE ISSUE, WE FIND, THEREFORE, STANDS DECIDE D IN 12 FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE I.T.A.T. THE DISALLOWANCE THEREFORE MADE OF MARKET RESEARCH EXPENSES AMOUNTING TO RS.17,50,77,000/- IS DELETED. GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE, THEREFORE, STANDS ALLOWED. 16. GROUND NO.4 TO 4.1 RAISED BY THE ASSESSEE READS AS UNDER: 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN MAKING DISALLOWANCE OF RS.4,51,84,000, CLAIMED IN RESPECT OF LIABILITY FOR POST RETIREMENT MEDICAL BEN EFITS TO THE EMPLOYEES, HOLDING THE SAME TO BE AN UNASCERTAINED LIABILITY. 4.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN OBSERVING THAT THE PROVISION HAS BEEN MADE BY DEBITING THE GENERAL RESERVES, WITHOUT APPRECIATING THAT THE SAID PROVISION WAS MADE BY DEBITING THE PROFI T AND LOSS ACCOUNT. 17. THE FACTS RELATING TO THE ISSUE ARE THAT THE AS SESSING OFFICER HAD PROPOSED DISALLOWANCE OF CLAIM OF MEDIC AL REIMBURSEMENT LIABILITY OF EX-EMPLOYEES OF THE ASSE SSEE COMPANY AMOUNTING TO RS.451.84 LACS, WHICH HAD BEEN MADE BY THE ASSESSEE ON THE BASIS OF ACTUARIAL VALU ATION, IN CONSONANCE WITH ACCOUNTING STANDARD-15 ISSUED BY TH E INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, HOLDIN G IT TO BE AN UNASCERTAINED LIABILITY. THE ASSESSEE OBJECTED TO THE SAME BEFORE THE DRP, WHO IN RETURN, REJECTED THE AS SESSEES CLAIM FOLLOWING ITS DIRECTION IN PRECEDING YEAR I.E . ASSESSMENT YEAR 2010-11. THE ASSESSING OFFICER, TH EREFORE, PROCEEDED TO MAKE THE DISALLOWANCE IN COMPLIANCE WI TH THE DIRECTIONS OF THE DRP. 13 18. BEFORE US, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR O F THE ASSESSEE IN EARLIER YEARS I.E. ASSESSMENT YEARS 200 7-08 TO ASSESSMENT YEAR 2010-11. FURTHER A BRIEF GIST OF THE SUBMISSIONS ON THE ISSUE WAS ALSO FILED IN WRITING BEFORE US. 19. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER/DRP. 20. WE HAVE HEARD CONTENTIONS OF BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE DECISION OF THE TRIBUNAL IN PRECEDING YEARS IN THE CASE OF THE ASSESSEE AND FIN D THAT THE ISSUE WAS DEALT WITH AT LENGTH BY THE TRIBUNAL IN ASSESSMENT YEAR 2007-08, WHEREIN AFTER DEALING WITH THE REVISED ACCOUNTING STANDARD ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS FOR ACCOUNTING THE EMPLOYEES MEDICAL BENEFIT POST RETIREMENT, AS-15, THE TRIBUNA L FOUND THAT THE ASSESSEE HAD OBTAINED AN ACTUARIAL VALUATI ON CERTIFICATE IN PURSUANCE TO AS-15, CERTIFYING THE V ALUATION OF POST RETIREMENT MEDICAL ASSISTANCE AS AT THE END OF THE YEAR AND BASED ON IT HAD MADE PROVISION OF THE INCREMENT AL AMOUNT DURING THE YEAR. THEREAFTER, RELYING UPON TH E DECISION OF THE HON'BLE APEX COURT IN BHARAT EARTH MOVERS VS. CIT AND BOKARO POWER SUPPLY CO. P. LTD. VS. DCI T, WHICH HELD THAT PROVISION MADE FOR MEETING LIABILITY OF L EAVE ENCASHMENT AND POST RETIREMENT MEDICAL BENEFITS ON SCHEME IS ALLOWABLE, ALLOWED THE ASSESSEES APPEAL. THIS DECISION WAS FOLLOWED IN ASSESSMENT YEARS 2008-09, 2009-10 A ND 14 2010-11 ALSO. NO DISTINGUISHING FACTS HAVE BEEN BR OUGHT TO OUR NOTICE. NO SUBSEQUENT DECISION OF THE HONBLE H IGH COURT REVERSING THE DECISION OF THE ITAT WAS ALSO B ROUGHT TO OUR NOTICE BY THE LD.DR. WE, THEREFORE, HAVE NO HE SITATION IN ALLOWING THIS GROUND OF APPEAL RAISED BY THE ASS ESSEE, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN EARLIER YEARS. GROUND OF APPEAL NO.4 THEREFORE STANDS ALLOWED 21. GROUND OF APPEAL NOS.5, 5.1 & 5.2 RAISED BY THE ASSESSEE READ AS UNDER: 5. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN DISALLOWING INTEREST OF RS.8,62,81,000 AS CAPITAL EXPENDITURE IN TERMS OF PROVISO TO SECTION 36(1)(III) OF THE ACT ALLEGING THE SAME TO HAVE BEEN INCURRED FOR INVESTMENT MADE IN CAPITAL WORK IN PROGRESS ('CWIP'). 5.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN PROCEEDING ON A FACTUALLY INCORRECT PREMISE THAT THE APPELLANT HAD BORROWED FUNDS WHICH HAD BEEN UTILIZED FOR MAKING INVESTMENT IN CWIP, WITHOUT APPRECIATING TH AT THE APPELLANT HAD NO BORROWED FUNDS AT ALL. 5.2 WITHOUT PREJUDICE, THAT THE ASSESSING OFFICER E RRED ON FACTS AND IN LAW IN NOT ALLOWING DEPRECIATION (I N THE YEAR OF CAPITALIZATION OF THE CWIP) ON INTEREST EXPENSES OF RS. 8,62,81,000 HELD TO BE CAPITAL IN NATURE. 22. BRIEFLY STATED THE ASSESSING OFFICER PROPOSED DISALLOWANCE OF INTEREST EXPENSES, HOLDING THE SAME TO BE IN RELATION TO THE CAPITAL WORK IN PROGRESS SHOWN BY T HE ASSESSEE, WHICH HAD INCREASED FROM RS.3563.39 LACS AS AT THE BEGINNING OF THE YEAR TO RS.10,816.86 LACS AT T HE END OF THE YEAR. THE ASSESSING OFFICER PROPOSED DISALLOWA NCE OF INTEREST @ 12 % OF THE AVERAGE CWIP, WHICH WORKED O UT TO RS.863.81 LACS. THE ASSESSEE OBJECTED TO THE SAME BEFORE 15 THE DRP, WHO IN TURN, REJECTED THE ASSESSEES CLAIM FOLLOWING ITS DIRECTION IN PRECEDING YEAR I.E. ASSE SSMENT YEAR 2010-11. THE ASSESSING OFFICER, THEREFORE, PR OCEEDED TO MAKE THE DISALLOWANCE IN COMPLIANCE WITH THE DIR ECTIONS OF THE DRP. 23. BEFORE US, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE HAD ALREADY BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS I.E. ASSESS MENT YEAR 2008-09 TO ASSESSMENT YEAR 2010-11. FURTHER A BRI EF GIST OF ITS SUBMISSIONS ON THE ISSUE WAS ALSO FILED BEFO RE US IN WRITING. 24. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER/DRP. 25. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. WE HAVE ALSO GONE THROUGH THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09, W HEREIN IDENTICAL ISSUE OF DISALLOWANCE OF INTEREST EXPENSE S PERTAINING TO CWIP WAS RAISED AND THE TRIBUNAL ON P ERUSING THE DETAILS BEFORE IT, FOUND THAT NO BORROWINGS HAD BEEN MADE BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT IN CWIP, WHICH IS A PREREQUISITE FOR DISALLOWING IT A S PER PROVISO TO SECTION 36(1)(III) OF THE ACT. THE TRIB UNAL FOUND THAT THE ASSESSEE HAD PAID INTEREST ON DEPOSITS FRO M DEALERS/WHOLESALERS, WHICH WAS OUT OF BUSINESS COMP ULSION AND HAD NOTHING TO DO WITH INVESTMENT IN CWIP. FUR THER THE TRIBUNAL FOUND THAT THE ASSESSEE HAD PAID INTER EST ON CHEQUE DISCOUNTING WHICH FUNDS IT HELD COULD NOT BE SAID TO 16 PARKED IN CWIP. IT WAS ALSO FOUND THAT THE ASSESSE E HAD EARNED INTEREST INCOME EXCEEDING EXPENDITURE AND ON TOTALITY OF THE AFORESAID FACTS DELETED THE DISALLO WANCE MADE. 26. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THAT IN ASSESSMENT YEAR 2008-09, THE ASSESSEE HAVING PAID INTEREST ON BILL DISCOUNTING, DEPOSITS OF WHOLESALERS/DEALER S AND OTHERS. NO DISTINGUISHING FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LD.DR. THEREFORE THE DECISION OF THE I.T.A.T. IN EARLIER YEAR WILL APPLY IN THE PRESENT CASE ALSO, F OLLOWING WHICH WE DELETE THE DISALLOWANCE MADE. GROUND OF APPEAL NO.5, 5.1 & 5.2 RAISED BY THE ASSESSEE, THEREFORE, STAND ALLOWED. 27. GROUND NOS.6 & 6.1 RAISED BY THE ASSESSEE READ AS UNDER: 6. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING DISALLOWANCE OF RS.1,99,68,000, CLAIMED IN RESPECT OF PROVISION TOWARDS LONG TERM INCENTIVE PLAN HOLDING THE SAME TO BE AN UNASCERTAINED LIABILITY. 6.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN OBSERVING THAT THE AFORESAID LIABILITY HAS NOT BEEN COMPUTED ON A SCIENTIFIC BASIS. 28. THE ABOVE GROUNDS CHALLENGE THE ACTION OF THE ASSESSING OFFICER/DRP IN DISALLOWING AN AMOUNT OF RS.199.68 LACS, BEING PROVISION FOR LONG TERM INCEN TIVE PLAN FOR EMPLOYEES. AS PER THE SCHEME OF THE ASSESSEE, PROVISION HAD BEEN CREATED FOR PROPORTIONATE LIABILITY OF THE RELEVANT YEAR IN RESPECT OF AMOUNT PAYABLE TO THE EMPLOYEES RELATABLE 17 TO SERVICES RENDERED BY THEM UNTIL THE END OF THE Y EAR, THOUGH THE AMOUNT WAS ACTUALLY PAYABLE ON THE DATE OF EXERCISE OF THE OPTION GRANTED TO THE EMPLOYEE. TH E ASSESSING OFFICER FOUND THE PROVISION SO CREATED AS A TOTALLY UNASCERTAINED LIABILITY AND, THEREFORE, PROPOSED DI SALLOWANCE OF THE SAME. THE ASSESSEE CHALLENGED THE SAME BEF ORE THE DRP, WHO CONFIRMED THE ASSESSING OFFICERS ORDER FO LLOWING THEIR DECISION IN THE ASSESSEES CASE FOR ASSESSMEN T YEAR 2010-11. 29. BEFORE US, THE LD. COUNSEL FOR ASSESSEE DREW OU R ATTENTION TO THE FACT THAT THIS ISSUE HAS ALREADY B EEN DECIDED BY THE I.T.A.T. IN FAVOUR OF THE ASSESSEE IN PRECED ING YEARS I.E. ASSESSMENT YEAR 2009-10 AND 2010-11. FURTHER A GIST OF ITS SUBMISSIONS ON THE ISSUE WAS ALSO FILED IN WRIT ING BEFORE US. THE LD. DR ON THE OTHER HAND RELIED ON THE ORD ER OF THE ASSESSING OFFICER/DRP. 30. WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO P ERUSED THE ORDER OF THE I.T.A.T. IN THE CASE OF THE ASSESS EE FOR ASSESSMENT YEARS 2009-10 AND 2010-11, AND FIND THAT IDENTICAL ISSUE WAS RAISED BEFORE IT IN GROUND NO.9 OF THE ASSESSEES APPEAL IN ITA NO.290/CHD/2014, WHICH THE I.T.A.T. ADJUDICATED IN FAVOUR OF THE ASSESSEE FIND ING THE SCHEME TO BE AN ESOP SCHEME AND FOLLOWING THE DEC ISION OF THE SPECIAL BENCH OF THE I.T.A.T. IN THE CASE OF BIOCON LIMITED VS. DCIT, 155 TTJ 649(SB). THE RELEVANT FI NDING AT PARAS 59 AND 60 OF THE ORDER IS AS UNDER: 18 59. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THIS IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS CREATED LIABILITY IN RESPECT OF LONG TERM INCENTIVES PLAN OF RS.158.96 LACS DURING THE YEAR. IT IS ALSO A FACT THAT THE ASSESSEE HAS ADOPTED A STANDARD METHOD TO VALUE THE SAID PROVISION YEAR AFTER YEAR. THE ONLY CONTENTION OF THE ASSESSING OFFICER TO MAKE THE DISALLOWANCE SEEMS THE FACT THAT THERE IS NO CERTAINTY OF THE PAYMENT ON ACCOUNT OF THIS INCENTIVE PLAN, WHICH WAS DEPENDENT ON A NUMBER OF UNFORESEEABLE CONDITIONS. THE EXISTENCE OF VARIABLES DEFINITELY MADE THE QUANTIFICATION OF THE INCENTIVE CLAIM UNCERTAIN. IN VIEW OF THE SAME, THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER THE PROVISION FOR INVESTMENT PLAN MADE BY THE ASSESSEE DURING THE YEAR IS ALLOWABLE IN THIS YEAR OR NOT. WE HAVE TO SEE WHETHER THE SAID PROVISION COME UNDER THE AMBIT OF DEDUCTIBLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT OR NOT. THE CONTENTION OF THE ASSESSING OFFICER SEEMS THAT HE IS CONSIDERING THE SAID LIABILITY TO BE CONTINGENT AS AT VARIOUS PLACES IN HIS ORDER, HE HAS MENTIONED THAT THERE IS UNCERTAINTY AS TO THE QUANTUM OF EXPENSES TO BE INCURRED IN ANY PARTICULAR YEAR. IT IS A KNOWN FACT THAT IN THIS TYPE OF INCENTIVE SCHEME, OPTIONS ARE REVERSED DUE TO NON-EXERCISE OR UNDER VESTED OPTION THAT GET CANCELLED DUE TO LEAVING OF OFFICE BY ANY OF THE EMPLOYEES. THIS FACT WEIGHED VERY HEAVILY IN THE MIND OF THE ASSESSING OFFICER WHILE MAKING THIS DISALLOWANCE. NOW THE ISSUE ARISES WHETHER THE LIABILITY IN QUESTION IS CONTINGENT LIABILITY OR AN UNASCERTAINED LIABILITY. IT IS A TRITE LAW THAT THE LIABILITY WHICH IS ASCERTAINED DURING THE YEAR IS AN ALLOWABLE EXPENDITURE, WHILE CONTINGENT LIABILITY IS NOT. IT IS ALSO A SETTLED LAW THAT AN UNASCERTAINED LIABILITY HAS TO BE ALLOWED EVEN IF THE SAME IS QUANTIFIED ON A FUTURE DATE. THE INCENTIVE PLAN SO FORMULATED BY THE ASSESSEE IS A VERY COMMON FORM OF SCHEME FORMED BY MANY OF THE COMPANIES POPULARLY KNOWN AS ESOP SCHEME. THE TERMS AND CONDITIONS OF THE INVESTMENT PLAN OF THE ASSESSEE ARE SAME AS IN ANY GENERAL SCHEME OF ESOP. THE QUESTION OF LIABILITY OF THIS TYPE OF PROVISION CAME BEFORE THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF BIOCON LIMITED (SUPRA). THE BASIC QUESTION IN THAT CASE ALSO WAS WHETHER THE PROVISION MADE FOR ESOP DURING THE YEAR IS AN ASCERTAINED LIABILITY UNDER SECTION 37(1) OF THE ACT. THE SPECIAL BENCH DEALING WITH THE ISSUE HELD THAT THE DISCOUNT IN RELATION TO OPTIONS 19 LAPSING DURING THE YEAR CANNOT BE HELD AS CONTINGENT LIABILITY AND SUCH EXPENDITURE IS ON ACCOUNT OF AN ASCERTAINED LIABILITY IN FOLLOWING TERMS : AS REGARDS THE CONTENTION OF THE REVENUE ABOUT THE CONTINGENT LIABILITY ARISING ON ACCOUNT OF THE OPTION S LAPSING DURING THE VESTING PERIOD OR THE EMPLOYEES N OT CHOOSING TO EXERCISE THE OPTION, IT WAS FOUND THAT NORMALLY IT WAS PROVIDED IN THE SCHEMES OF ESOP THAT THE VESTED OPTIONS THAT LAPSE DUE TO NON-EXERCISE AND/OR UNVESTED OPTIONS THAT GET CANCELLED DUE TO RESIGNATI ON OF THE EMPLOYEES OR OTHERWISE, WOULD BE AVAILABLE FOR GRAN T AT A FUTURE DATE OR WOULD BE AVAILABLE FOR BEING RE- GRANTED AT A FUTURE DATE. IF IT IS CONSIDERED AT MICRO LEVEL QUA EACH INDIVIDUAL EMPLOYEE, IT MAY SOUND CONTINGENT, BUT IF IT IS VIEWED AT MACRO LEVEL QUA THE GROUP OF EMPLOYEES AS A WHOLE, IT LOSES THE TAG OF 'CONTINGENT' BECAUSE SUCH LAPSING OPTIONS ARE UP FO R GRABS TO THE OTHER ELIGIBLE EMPLOYEES. IN ANY CASE, IF SOME OF THE OPTIONS REMAIN UNVESTED OR ARE NOT EXERCISED, THE DISCOUNT HITHERTO CLAIMED AS DEDUCTION IS REQUIRED T O BE REVERSED AND OFFERED FOR TAXATION IN SUCH LATER YEAR. THEREFORE, THE DISCOUNT IN RELATION TO OPTIONS VESTING DURING THE YEAR CANNOT BE HELD AS A CONTINGENT LIABIL ITY. PROVISIONS TO SECTION 115WB CONTEMPLATES THAT THE DISCOUNT ON PREMIUM UNDER ESOP AS A BENEFIT PROVIDED BY THE EMPLOYER TO ITS EMPLOYEES DURING THE COURSE OF SERVICE. IT WAS HELD THAT IF THE LEGISLATURE CONSIDERS SUCH DISCOUNTED PREMIUM TO THE EMPLOYEES AS A FRINGE BENEFIT OR 'ANY CONSIDERATION FOR EMPLOYMENT', IT WAS NOT OPEN TO ARGUE CONTRARY. ONCE IT WAS HELD AS A CONSIDERATION FOR EMPLOYMENT, THE NATURAL COROLLARY WHIC H FOLLOWS IS THAT SUCH DISCOUNT IS AN EXPENDITURE; SUC H EXPENDITURE IS ON ACCOUNT OF AN ASCERTAINED (NOT CONTINGENT) LIABILITY AND IT CANNOT BE TREATED AS A SHORT CAPITAL RECEIPT. IN VIEW OF THE FORGOING DISCUSSION, IT WAS HELD THAT DISCOUNT ON SHARES UNDER THE ESOP IS AN ALLOWABLE DEDUCTION. 60. SINCE RELIANCE WAS PLACED ON THIS JUDGMENT AND OTHER JUDGMENTS OF VARIOUS BENCHES OF THE TRIBUNAL, WHO HAD IN TURN RELIED UPON THE SPECIAL BENCH, DURING THE COURSE OF HEARING AND NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE BY THE LEARNED D.R., RESPECTFULLY FOLLOWING THE ORDER OF THE SPECIAL BENCH, WE ALSO HOLD THAT THE PROVISION ON ACCOUNT OF INCENTIVE PLAN MADE BY THE ASSESSEE DURING THE YEAR IS AN ASCERTAINED LIABILITY. FURTHER, WE SEE THAT THE ASSESSING OFFICER HAS NOWHERE OBJECTED TO THE METHOD OF QUANTIFYING THE SAID PROVISION BY THE ASSESSEE. THE GROUND OF APPEAL NO.9 RAISED BY THE ASSESSEE IS ALLOWED. 20 31. THE ISSUE, WE FIND IN THE PRESENT CASE IS IDENT ICAL, RELATING TO PROVISION FOR LIABILITY ON ACCOUNT OF L ONG TERM INCENTIVE PLAN. THE REASON FOR THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS ALSO IDENTICAL, SINCE HE FOUND IT TO BE IN THE NATURE OF AN UNASCERTAINED CONTINGENT LIABILITY . NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE, NO R ANY DECISION OF HIGHER AUTHORITY BROUGHT TO OUR NOTICE PASSED AGAINST THE ASSESSEE. WE, THEREFORE, HOLD THAT TH E ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR A.Y 2009-10 & 2010-11 FOLLOWING WHIC H WE DELETE THE DISALLOWANCE MADE ON ACCOUNT OF PROVISIO N TOWARDS LONG TERM INCENTIVE PLAN AMOUNTING TO RS.1,99,68,000/-. GROUND NOS.6 AND 6.1, THEREFORE, STAND ALLOWED. 32. GROUND NOS.7 AND 7.1 RAISED BY THE ASSESSEE REA D AS UNDER: 7. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN LEVYING INTEREST UNDER SECTIONS 234A, 234B AND 234D OF THE ACT. 7.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPUTING INTEREST UNDER SECTION 234A OF THE ACT EVEN THOUGH THE RETURN OF INCOME WAS FILED WITHIN THE DUE DATE AS PER THE PROVISIONS OF SECTION 139(1 ) OF THE ACT. 33. THE ABOVE GROUNDS RAISED ARE CONSEQUENTIAL IN N ATURE AND NEED NO ADJUDICATION. THE APPEAL OF THE ASSESSEE IS, THEREFORE, STANDS A LLOWED FOR STATISTICAL PURPOSES. 21 ITA NO.257/CHD/2016 REVENUES APPEAL)(A.Y. 2011-12) : 34. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ORDER OF THE DISPUTE RESOLUTION PANEL I S PERVERSE IN DELETING ADDITION OF RS.1,46,798/- MADE BY THE A.O. IN RESPECT OF ADVANCE PAYMENT, OF EXCISE DU TY WITH THE EXCISE AUTHORITIES BY RIGHTLY INVOKING THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961. 35. BRIEFLY STATED, THE ASSESSING OFFICER DISALLOWE D THE ASSESSEES CLAIM OF DEDUCTION OF RS.1,46,798/- BEIN G THE INCREMENTAL DIFFERENCE BETWEEN THE EXCISE DEPOSIT W ITH EXCISE DEPARTMENT AS AT THE CLOSE OF THE YEAR AND THE BEGI NNING OF THE YEAR. THE DRP IN TURN DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AND THE DECISION OF THE TRIBUNAL IN LATER YEARS FRO M ASSESSMENT YEARS 1998-99 TO 2000-01 AND ASSESSMENT YEARS 2002-03 TO 2008-09. 36. BEFORE US, THE LD. DR THOUGH FAIRLY ADMITTED TH AT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN PRECEDING YEAR, YET RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER WHILE PROPOSING T HE DISALLOWANCE. 37. THE LD. COUNSEL FOR ASSESSEE, ON THE OTHER HAND , RELIED UPON THE ORDER OF THE ASSESSING OFFICER/DRP. 38. WE FIND NO MERIT IN THE PRESENT GROUND RAISED. ADMITTEDLY, THE ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY REPEATED DECISIONS OF THE TRIBUNAL AND EVEN THE SPE CIAL 22 BENCH OF THE TRIBUNAL IN PRECEDING YEARS IN THE CAS E OF THE ASSESSEE. NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE BY THE LD. DR. IN VIEW OF THE SAME, WE UPHOLD THE DIRECTIONS OF THE DRP DELETING THE DISALLOWANCE OF RS.1,46,798 /- ON ACCOUNT OF INCREMENTAL BALANCE IN PLA . GROUND OF APPEAL NO.1 RAISED BY THE REVENUE, THEREFORE, STANDS DISMI SSED. 39. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDE R: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE DISPUTE RESOLUTION PANEL HAS ERRED IN ALLOWING THE PAYMENT MADE AS ROYALTY AT CERTAIN PERCENTAGE OF SALES AS REVENUE EXPENDITURE WITHOUT APPRECIATING THE ORDER OF THE HON'BLE APEX COURT IN THE CASE OF SWARAJ ENGINE LTD. 40. BRIEFLY STATED, THE ASSESSEE HAD PAID ROYALTY T O THE TUNE OF RS.8319.48 LACS TO M/S GLAXOSMITHKLINE ASIA PVT. LTD. FOR USE OF TRADEMARK HORLICKS AND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE ASSESSING OFFICER PROPOSE D HOLDING THE SAME AS CAPITAL IN NATURE AGAINST WHICH THE ASSESSEE FILED OBJECTIONS TO THE DRP. THE DRP AFTE R RELYING ON THE DECISION OF THE APEX COURT IN ALEMBIC CHEMI CAL WORKS CO. LTD. VS. CIT 177 ITR 377 & THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. J.K . SYNTHETICS LTD. 309 ITR 371 HELD THAT THE ROYALTY PAID IS REVENUE IN NATURE AND DIRECTED THE ASSESSING OFFICE R TO ALLOW THE SAME. 41. BEFORE US, THE LD. COUNSEL FOR ASSESSEE AT THE OUTSET POINTED OUT THAT THE TRIBUNAL HAD IN ASSESSEES OWN CASE DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE I N ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11. FUR THER A 23 GIST OF SUBMISSION ON THE ISSUE WAS ALSO FILED BEFO RE US AND RELIED UPON BY THE LD. COUNSEL FOR ASSESSEE. 42. THE LD. DR THOUGH FAIRLY ADMITTED THAT THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS, YET RELIED UPON THE DRAFT ORDER OF THE ASSESSING OFFICER PROPO SING THE DISALLOWANCE. 43. HAVING HEARD BOTH THE PARTIES WE FIND NO MERIT IN THE PRESENT GROUND RAISED. ADMITTEDLY, IDENTICAL ISSUE HAS ALREADY BEEN ADJUDICATED UPON BY THE TRIBUNAL IN EA RLIER ASSESSMENT YEARS I.E. ASSESSMENT YEARS 2008-09, 200 9-10 AND 2010-11, DECIDING THE ISSUE IN FAVOUR OF THE AS SESSEE. NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NO TICE BY THE LD. DR. WE, THEREFORE, SEE NO REASON TO INTERF ERE IN THE ORDER OF THE DRP DELETING HE DISALLOWANCE OF ROYALT Y EXPENSES. GROUND OF APPEAL NO.2 RAISED BY THE REVE NUE, THEREFORE, STANDS DISMISSED. 44. GROUND NO.3 RAISED BY THE REVENUE READS AS UNDE R: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DISPUTE RESOLUTION PANEL HAS ERRED IN DIRECTING THE TPO TO EXCLUDE THE SELLING EXPENSES INCURRED BY THE ASSESSEE FROM THE AMBIT OF AMP EXPENSES AND TO TAKE THE BALANCE EXPENDITURE TOWARDS THE TAXPAYERS PROVISION OF SERVICE OF CREATI ON OF MARKETING INTANGIBLE FOR THE AE. 45. THE PRESENT GROUND RELATES TO TRANSFER PRICING ADJUSTMENT MADE BY THE TPO ON AMP EXPENSES AND IS AGAINST THE DIRECTION OF THE DRP OF EXCLUDING SELLI NG EXPENSES FROM THE AMP EXPENSES. SINCE THE TP ISSUE HAS ALREADY BEEN DEALT WITH BY US IN GROUND NO.2 RAISED IN ASSESSEES APPEAL IN ITA NO.105/CHD/2016 ABOVE, WHE REIN 24 THE MATTER HAS BEEN RESTORED TO THE FILE OF THE ASS ESSING OFFICER/TPO FOR DECIDING AFRESH, THE PRESENT GROUND RAISED STANDS COVERED BY OUR AFORESAID DECISION. GROUND N O.3 RAISED BY THE ASSESSEE THEREFORE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.346/CHD/2017 (ASSESSEE APPEAL)(A.Y. 2012-13 ): 46. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UND ER: 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPLETING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT (THE ACT) AT AN INCOME OF RS.11,54,47,32,420 AS AGAINST THE RETURNED INCOME OF RS.6,16,07,58,340. 47. THE ABOVE GROUND RAISED BY THE ASSESSEE BEING G ENERAL IN NATURE NEEDS NO ADJUDICATION AND HENCE IS TREATE D AS DISMISSED. 48. GROUND NOS.2 TO 5 RAISED BY THE ASSESSEE READ A S UNDER: 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING ADDITION OF RS.4,21,87,05,375 ON ACCOUNT OF ARM'S LENGTH PRICE OF ALLEGED INTERNATIONAL TRANSACTIONS RESULTING FROM ADVERTISEMENT, MARKET ING AND BRAND PROMOTION EXPENSES INCURRED BY THE APPELLANT ON THE BASIS OF THE ORDER PASSED BY THE TP O UNDER SECTION 92CA(3) OF THE ACT. 2.1 THAT THE DISPUTE RESOLUTION PANEL ('DRP')/ TRANSFE R PRICING OFFICER (TPO') ERRED ON FACTS AND IN LAW IN MAKING THE ADDITION OF RS.322,20,15,000 ON SUBSTANTIVE BASIS APPLYING COST PLUS METHOD AND RS.99,66,90,375 ON PROTECTIVE BASIS APPLYING BRIGHT LINE TEST ON ACCOUNT OF THE ALLEGED TRANSFER PRICING ADJUSTMENT IN RESPECT OF ADVERTISEMENT, MARKETING AND BRAND PROMOTION EXPENSES ('AMP EXPENSES'), INCURRED BY THE APPELLANT. 2.2 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ONLY TRANSFER PRICING ADJUSTMENT PERMITTED BY CHAPTER X OF THE ACT WAS IN RESPECT OF THE DIFFERENCE BETWEEN THE ARM'S LENG TH 25 PRICE (ALP) AND THE CONTRACT OR DECLARED PRICE, BUT THE SAID PROVISION COULD NOT BE INVOKED TO DETERMINE THE 'QUANTUM' / EXTENT OF BUSINESS EXPENDITURE 2.3 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT IN THE ABSENCE OF ANY PROVED UNDERSTANDING/ARRANGEMENT BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE THE AMP EXPENSES, ETC ., UNILATERALLY INCURRED BY THE APPELLANT IN INDIA COULD N OT BE CHARACTERIZED AS AN INTERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B, SO AS TO INVOKE THE PROVISIO NS OF SECTION 92 OF THE ACT. 3. THAT THE DRP ERRED ON FACTS AND IN LAW IN CONS IDERING AMP EXPENSE OF THE APPELLANT AS AN INTERNATIONAL TRANSACTION ALLEGEDLY OBSERVING THAT: (I) THE APPELLANT HAS FAILED TO FURNISH COMPLETE DET AILS AND FAILED TO DISCHARGE ITS BURDEN OF PROOF AND HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT THE AMP EXPENSE INCURRED BY IT IN INDIA IS AT THE BEHEST OF THE AE. (II) THE APPELLANT HAS NOT BEEN ABLE TO DEMONSTRAT E THAT IT HAS BEEN ADEQUATELY COMPENSATED FOR AMP FUNCTIONS, APART FROM THE COMPENSATION IT HAS RECEIVE D FOR ITS ROUTINE FUNCTIONS. (III) THE APPELLANT FAILED TO CONTROVERT THE FINDING O F THE TPO THAT IT HAS RENDERED INTRA-GROUP SERVICES WHICH WERE REQUIRED TO BE SEPARATELY BENCHMARKED. 3.1 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE VOLUMINOUS EVIDENCES / DOCUMENTS (AS WERE REQUIRED IN THE COURSE OF THE HEARING) WERE SUBMITTED IN SUPPORT OF THE CLAIM OF TH E APPELLANT THAT THE ADVERTISEMENT EXPENDITURE WAS INDEPENDENTLY INCURRED BY THE APPELLANT WITHOUT ANY UNDERSTANDING/ ARRANGEMENT OR ANY OTHER INFLUENCE FROM THE ASSOCIATED ENTERPRISE. 3.2 THAT THE DRP / TPO ERRED ON FACTS AND IN LAW IN N OT DISCHARGING THE ONUS BRINGING ON RECORD ANY TANGIBLE MATERIAL TO DEMONSTRATE, EXISTENCE OF THE INTERNATIO NAL TRANSACTION IN RELATION TO THE ADVERTISEMENT, MARKET ING AND BRAND PROMOTION EXPENSES UNILATERALLY INCURRED B Y THE APPELLANT, SO AS TO ESTABLISH THAT THE SAME CONSTITUTED AN INTERNATIONAL TRANSACTION. 3.3 THAT THE DRP ERRED ON FACTS AND IN LAW IN ALLEGE DLY HOLDING THAT THE APPELLANT HAS FAILED TO FURNISH AN Y MATERIAL TO DEMONSTRATE THAT IT ENJOYED ECONOMIC OWNERSHIP OVER THE BRAND AND THAT THE APPELLANT HAS FAILED TO DISCHARGE ITS ONUS OF PROOF AND HAS FAILED T O SUBSTANTIATE THE CLAIM. 4. WITHOUT PREJUDICE, THAT THE DRP/TPO ERRED ON F ACTS AND IN LAW IN NOT APPRECIATING THAT EVEN OTHERWISE ALL THE INTERNATIONAL TRANSACTIONS INCLUDING THE ALLEGED INTERNATIONAL TRANSACTION ON ACCOUNT OF AMP EXPENSES 26 APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM 1 ) AS THE MOST APPROPRIATE METHOD. 4.1. WITHOUT PREJUDICE, THAT THE DRP ERRED ON FACTS AND IN LAW IN REJECTING BENCHMARKING OF AMP EXPENSE BY APPLYING TNMM, ALLEGEDLY HOLDING THAT THE ASSESSEE HAS FAILED TO SHOW THAT THE TRANSACTIONS ARE 'CLOSELY LINKED' IN TERMS OF RULE 10A(D) AND THAT IT HAS NOT BE EN ABLE TO DISCHARGE ITS BURDEN OF PROOF AND SUBSTANTIA TE ITS CLAIM THAT ONLY ENTITY LEVEL MARGIN CAN BE SEEN IN SUCH CIRCUMSTANCES. 5. WITHOUT PREJUDICE, THE DRP ERRED ON FACTS AND IN LAW IN SUSTAINING INCLUSION OF SELLING EXPENSES WITHIN THE AMBIT OF AMP EXPENSES, ALLEGEDLY ON THE BASIS THAT THE REVENUE IS IN APPEAL BEFORE THE SUPREME COURT, AGAINST THE DECISION OF DELHI HIGH COURT IN CASE OF SONY ERICKSON, WHEREIN, THE TPO WAS DIRECTED TO EXCLUDE SELLING EXPENSES FROM THE AMBIT OF AMP EXPENSE. 5.1. WITHOUT PREJUDICE, THE TPO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT MARKUP, IF AT ALL, HAD TO BE RESTRICTED TO THE VALUE ADDED EXPENSES INCURRED BY THE APPELLANT FOR PROVIDING THE ALLEGED SERVICE IN THE NATURE OF BRAND PROMOTION. 49. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THESE GROUNDS IS IDENTICAL TO THAT RAISED IN GROUND NOS.2 TO 2.4 OF THE ASSESSEES APPEAL IN IT A NO. 105/CHD/2016 DEALT WITH US ABOVE. THE FINDINGS GIVE N THEREIN AT PARA 9 OF OUR ORDER ABOVE SHALL APPLY TO THIS CASE ALSO MUTATIS MUTANDIS AND APPLYING WHICH GROUN D NOS.2 TO 5 RAISED BY THE ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES, THE ISSUE BEING RESTORED TO T HE ASSESSING OFFICER/TPO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. 56. GROUND NO.6 RAISED BY THE ASSESSEE READS AS UN DER: 6. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AN D IN LAW IN NOT ALLOWING DEDUCTION TOWARDS THE CLOSIN G BALANCE OF EXCISE DUTY LYING IN PLA AMOUNTIN G TO RS.52,25,915 CLAIMED UNDER SECTION 43B OF THE ACT. 6.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN LAW MAKING NET ADDITION OF RS.26,69,526, WITHOUT APPRECIATING THAT THE APPELLANT HAD CLAIMED DEDUCTION OF THE CLOSING BALANCE LYING IN PLA AMOUNTING TO RS.52,25,915 AND ADDED BACK THE OPENING BALANCE LYING IN PLA AMOUNTING TO RS.25,56 , 389 (CLAIMED AS DEDUCTION U/S 43B BY THE 27 APPELLANT IN THE RETURN OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR). 50. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THIS GROUND IS IDENTICAL TO THE ISS UE RAISED IN GROUND NO.1 OF THE REVENUES APPEAL IN ITA NO. 257/CHD/2016 DEALT WITH US ABOVE. THE FINDINGS GIVE N THEREIN AT PARA 38 OF OUR ORDER ABOVE SHALL THEREFO RE APPLY TO THIS GROUND ALSO WITH EQUAL FORCE. GROUND NO.6 R AISED BY THE ASSESSEE IS THEREFORE ALLOWED. 51. GROUND NO.7 RAISED BY THE ASSESSEE READS AS UND ER: 7. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AN D IN LAW IN DISALLOWING CONSUMER MARKET RESEARCH EXPENSES OF RS.29,92,87,000 UNDER SECTION 37(1) OF THE ACT, ALLEGING THE SAME TO BE CAPITAL IN NATURE. 52. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS IDENTICAL TO THE ISSUE RAIS ED BY THE ASSESSEE IN GROUND NO.3 OF ITS APPEAL IN ITA NO. 105/CHD/2016 AND THE FINDINGS GIVEN THEREIN AT PARA S 14 & 15 OF OUR ORDER ABOVE SHALL APPLY TO THIS GROUND MUTATIS MUTANDIS. GROUND NO.7 RAISED BY THE ASSESSE E THEREFORE STANDS ALLOWED. 53. GROUND NO.8 RAISED BY THE ASSESSEE READS AS UND ER: 8. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN MAKING DISALLOWANCE OF RS.1,04,65,000, CLAIMED IN RESPECT OF LIABILITY FOR POST-RETIREMENT MEDICAL BENEFITS TO THE EMPLOYEES, HOLDING THE SAME T O BE AN UNASCERTAINED LIABILITY. 8.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN OBSERVING THAT THE PROVISION HAS BEEN MADE BY DEBITING THE GENERAL RESERVES, WITHOUT APPRECIATING THAT THE SAID PROVISION WAS MADE BY DEBITING THE PROFIT AND LOSS ACCOUNT. 28 54. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.4 BY THE ASSESSEE IN ITS APPEAL IN ITA N O. 105/CHD/2016 ABOVE AND THE FINDINGS GIVEN THEREIN A T PARA 20 OF OUR ORDER ABOVE SHALL APPLY TO THIS GROU ND ALSO WITH EQUAL FORCE. GROUND NO.8 RAISED BY THE ASSESSE E THEREFORE STANDS ALLOWED. 55. GROUND NO.9 RAISED BY THE ASSESSEE READS AS UND ER: 9. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AN D IN LAW IN DISALLOWING EXPENDITURE AGGREGATING TO RS.96,24,14,000, INCURRED BY THE APPELLANT DURING T HE RELEVANT PREVIOUS YEAR ON ACCOUNT OF ROYALTY, HOLDIN G THE SAME TO BE CAPITAL IN NATURE. 56. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.2 BY THE REVENUE IN ITS APPEAL IN ITA NO.257/CHD/2016 DEALT WITH US ABOVE. THE FINDINGS G IVEN IN ITA NO.257/CHD/2016 AT PARA 43 OF OUR ORDER ABOV E SHALL THEREFORE APPLY TO THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.9 RAISED BY THE ASSESSEE THEREF ORE STANDS ALLOWED. 57. GROUND NO.10 RAISED BY THE ASSESSEE READS AS UN DER: 10. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN DISALLOWING INTEREST AMOUNTING TO RS.13,76,52,000 HOLDING IT AS CAPITAL EXPENDITURE IN TERMS OF PROVISO TO SECTION 36(1)(III) ALLEGING THE SAME TO HAVE BEEN INCURRED FOR INVESTMENT MADE IN CAPITAL WORK IN PROGRESS ('CWIP'). 10.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN PROCEEDING ON A FACTUALLY INCORRECT PREMISE THAT THE APPELLANT HAD BORROWED FUNDS WHICH HAD BEEN UTILIZED FOR MAKING INVESTMENT IN CWIP, WITHOUT 29 APPRECIATING THAT THE ASSESSEE HAD NO BORROWED FUNDS AT ALL. 10.2 WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED O N FACTS AND IN LAW IN NOT ALLOWING DEPRECIATION (IN THE YEAR O F CAPITALIZATION OF THE CWIP) ON INTEREST EXPENSE OF RS.13,76,52,000 HELD TO BE CAPITAL IN NATURE. 58. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.5 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 105/CHD/2016.THE FINDINGS GIVEN THEREIN AT PARAS 2 5 & 26 OF OUR ORDER ABOVE SHALL APPLY TO THIS GROUND ALSO WITH EQUAL FORCE. GROUND NO.10 RAISED BY THE ASSESS EE THEREFORE STANDS ALLOWED. 59. GROUND NO.11 RAISED BY THE ASSESSEE READS AS UN DER: 11. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN MAKING DISALLOWANCE OF RS.6,97,41,000, CLAIMED IN RESPECT OF PROVISION TOWARDS LONG TERM INCENTIVE PLAN HOLDING THE SAME TO BE AN UNASCERTAIN ED LIABILITY. 11.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN OBSERVING THAT THE AFORESAID LIABILITY HAS NOT BEEN COMPUTED ON A SCIENTIFIC BASIS. 11.2 WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON F ACTS AND IN LAW IN NOT ALLOWING DEDUCTION OF RS.388.57 L ACS (NET OF REVERSALS OF RS.68.60 LACS),BEING THE AMOUN T ACTUALLY PAID DURING THE RELEVANT ASSESSMENT YEAR TOWARDS LONG TERM INCENTIVE PLAN. 60. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.6 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 105/CHD/2016 DEALT WITH US ABOVE. THE FINDINGS GIVE N THEREIN AT PARAS 30 & 31 OF OUR ORDER ABOVE SHALL APPLY TO THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.11 RAISED BY THE ASSESSEE THEREFORE STANDS ALLOWED. 61. GROUND NO.12 RAISED BY THE ASSESSEE READS AS UN DER: 30 12. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTIONS 234B AND 234C OF TH E ACT. 62. SINCE THE ABOVE GROUND IS CONSEQUENTIAL IN NAT URE, HENCE IT NEEDS NO ADJUDICATION. THE APPEAL OF THE ASSESSEE, THEREFORE, STANDS ALLO WED FOR STATISTICAL PURPOSES. 63. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES WHILE THE APPEAL O F REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH NOVEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH