Apollo International Ltd., New Delhi V. ACIT, New Delhi

ITA 3520/DEL/2010

• Counselvise Citation: 352020114 RSA 2010
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 04-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y K VERMA
• Assessee Lawyers: T N CHOPRA
• Keywords: Gift; Business income; Transfer pricing; Business expenditure; Bad and doubtful debts
• Section: 14A

Judgement Text

I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI I BENCH, NEW DELHI [CORAM: PRAMOD KUMAR (ACCOUNTANT MEMBER) AND C. M. GARG (JUDICIAL MEMBER)] I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 APOLLO INTERNATIONAL LTD .APPELLANT OFFICE NO. 202, F 46 BHAGAT SINGH MARKET NEW DELHI 110 001 [AAACA6447N] VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 2, NEW DELHI .RESPONDENT APPEARANCES BY: T N CHOPRA , FOR THE APPELLANT Y K VERMA , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 04 , 2 014 DATE OF PRONOUNCING THE ORDER : OCTOBER 13 TH , 2014 O R D E R PER PRAMOD KUMAR, ACCOUNTANT MEMBER: 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 25 TH SEPTEMBER 2009, PASSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX , RANGE 2, NEW DELHI ( HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) UNDER SECTION 143 (3), READ WITH SECTION 144(C), OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO. 1IS GENERAL AND IT DOES NOT CALL FOR ANY ADJUDICATION. I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 2 OF 8 3. IN THE SECOND GROUND OF APPEAL, THE ASSESSEE HA S RAISED THE FOLLOWING GRIEVANCE: THAT LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN MAKING THE ADDITION OF RS 28,65,157 ON ACCOUNT OF WRITE OF F OF BAD DEBTS RELATING TO PHARMA DIVISION OF THE APPELLANT COMPAN Y, WHICH IS LEGALLY AND FACTUALLY ERRONEOUS. 4. TO ADJUDICATE ON THIS GRIEVANCE, IT IS NECESSARY TO FIRST TAKE NOTE OF THE FACTS AS RECORDED IN THE IMPUGNED ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT EVEN THOUGH THE ASSESSEE HAS TRANSFERRED ITS PHARMACEUTICAL UNIT, I .E. VITA LIFE LABORATORIES, ON GOING CONCERN BASIS AND ON SLUMP SALE TO ONE ARCH P HARMALAB LIMITED, THE ASSESSEE HAS WRITTEN OFF ITS BAD DEBTS OF RS 28,65, 157 IN RESPECT OF THE BUSINESS SO SOLD. THE AO WAS OF THE VIEW THAT SINCE THE RELA TED BUSINESS ITSELF IS SOLD, THE RELATED BAD DEBTS CANNOT BE ALLOWED AS DEDUCTION. T HE AO WAS OF THE VIEW THAT WHEN BOTH THE ASSETS AND LIABILITIES OF A UNIT ARE TRANSFERRED, THERE CANNOT BE ANY JUSTIFICATION FOR CLAIMING BAD DEBTS IN RESPECT OF THE UNIT SO TRANSFERRED. IT WAS NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO ES TABLISH THAT BAD DEBTS PERTAIN TO ITS OWN BUSINESS, AND, THEREFORE, THE CL AIM IS TO BE TREATED AS INADMISSIBLE. THE ASSESSEE DID RAISE GRIEVANCE, BEF ORE THE DRP, AGAINST THE ADDITION OF RS 28,65,157 BUT WITHOUT ANY SUCCESS. T HE DRP, IN A RATHER BRIEF AND SOMEWHAT CRYPTIC ORDER, DECLINED TO INTERFERE ON TH IS ISSUE. WHILE DOING SO, THE DRP OBSERVED AS FOLLOWS: BEFORE DRP, THE MATTER WAS ARGUED AT LENGTH AND DET AILED SUBMISSIONS ON THIS POINT HAVE BEEN FILED. A NUMBER OF JUDICIAL PRECEDENTS HAVE ALSO CITED. HAVING CONSIDERED THE A RGUMENTS AND THE SUBMISSIONS OF THE ASSESSEE, THE DRP IS OF THE VIEW THAT THE ASSESSEE HAS ALL ALONG BEEN PLEADING THE ISSUE ON TOTALLY IN ADMISSIBLE LINES. AS OBSERVED BY THE AO, NOWHERE IT HAS BEEN ESTABLISHED THAT THE BAD DEBTS RELATED TO ASSESSEES OWN BUSINESS. HAD THAT BEEN THE CASE, IT WOULD HAVE BEEN A MEANINGFUL CLAIM. ITS CLAIM OF BA D DEBTS WRITTEN OFF, WHICH ADMITTEDLY DOES NOT PERTAIN TO ITS BUSIN ESS, IS, THEREFORE, RIGHTLY HELD AS INADMISSIBLE I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 3 OF 8 5. THE AO THUS PROCEEDED TO MAKE THIS DISALLOWANCE. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND TAKEN INTO ACCOUNTS FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THE ASSESSEE HAD MADE DETAILED SUBM ISSIONS ON THIS ISSUE WHICH HAVE NOT BEEN DEALT WITH AT ALL. IT WAS CLAI M OF THE ASSESSEE THAT WHILE, VIDE BUSINESS TRANSFER AGREEMENT DATED 16 TH DECEMBER 2004, TOTAL BUSINESS WAS TRANSFERRED AT RS 3,965.45, SUBJECT TO ADJUSTMENT I N THE VALUATION OF INVENTORIES BY AN INDEPENDENT VALUER AS ON THE EFFECTIVE DATE O F TRANSFER, IT WAS AGREED BY THE PARTIES TO THE AGREEMENT THAT BAD DEBTS WILL NO T EXCEED 5% OF TOTAL SALES CONSIDERATION. IT WAS IN THIS BACKGROUND THAT A SU M OF RS 165 LAKHS WAS CONSIDERED TO BE BAD DEBTS AS ON THE DATE OF TRANSF ER AND THE SAME WAS ADJUSTED AGAINST THE SALES CONSIDERATION THE ASSESSEE COMPAN Y HAD MADE A PROVISION OF BADE DEBTS OF RS 28.65 LAKHS RELATING TO ERSTWHILE PHARAM DIVISION, IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. WHEN THE SAID UNIT WAS BEING SOLD, BUT THIS PROVISION WAS ADDED BACK TO THE RETURNED I NCOME. IN THE CURRENT ASSESSMENT YEAR, THE ASSESSEE ACTUALLY WROTE OFF RS 25.80 LAKHS WHICH IS WHAT THE ASSESSEE HAD CLAIMED AS A DEDUCTION AGAINST INC OME OF THE DISCONTINUED BUSINESS WHICH WAS RS 31.51 LAKHS IN THE RELEVANT P REVIOUS YEAR. THIS INCOME AROSE MAINLY ON SALE OF INVENTORIES. THE WAY THE AS SESSING OFFICER HAS PROCEEDED TO FRAME THE ASSESSMENT, WHILE THE AO HAS BROUGHT TO TAX THIS INCOME OF RS 31.51 LAKHS, THE RELATED WRITE OFF HAS BEEN H ELD TO BE INADMISSIBLE AS THE RELATED BUSINESS IS DISCONTINUED AND AS, ACCORDING TO THE AO, ALL THE RELATED DEBTORS WERE ALREADY TRANSFERRED ON SLUMP SALE BASI S. WE FIND THAT PRIMA FACIE EVEN THOUGH SALE OF UNIT HAS BEEN MADE ON GOING CON CERN BASIS, THE DEBTORS ARE TRANSFERRED ONLY ON REALIZATION @ 95% SINCE ADMITTE DLY BAD DEBTS CANNOT EXCEED 5%, AND, TO THAT EXTENT, THE ASSESSEE CONTIN UES TO HAVE FINANCIAL EXPOSURE FOR REALIZATION OF DEBTORS. WE HAVE ALSO N OTED CLAIM OF THE ASSESSEE THAT WHILE THE PHARMA UNIT WAS SOLD, THE BUSINESS O F THE ASSESSEE DID NOT CONTINUE INASMUCH AS PHARMA DIVISION DID NOT CONSTI TUTE A SEPARATE AND INDEPENDENT BUSINESS OF THE ASSESSEE AND INASMUCH A S IT WAS MERELY A PART OF I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 4 OF 8 ASSESSEES BUSINESS IN DIVERSIFIED LINES WITH INTE RCONNECTION, INTERDEPENDENCE AND UNITY AMONGST VARIOUS LINES OF BUSINESS. WE HA VE ALSO NOTED THE PLEA OF THE ASSESSEE THAT IN ORDER TO BE ENTITLED TO CLAIM OF D EDUCTION UNDER SECTION 36(1)(VI) R.W,S. 26(2) IT IS NOT A CONDITION PRECED ENT THAT THE SAME BUSINESS ACTIVITY MUST BE CONTINUING. NONE OF THESE SUBMISSI ONS, INCLUDING SUCH A FUNDAMENTAL FACTUAL SUBMISSION THAT CORRECT AMOUNT OF CLAIM OF DEDUCTION IS RS 25.80 LAKHS, AS AGAINST RS 28,65,157, HAVE BEEN DEA LT WITH ANY OF THE AUTHORITIES BELOW. SUCH AN APPROACH, IN OUR CONSIDERED VIEW, A VERY SUPERFICIAL APPROACH AND CANNOT MEET ANY JUDICIAL APPROVAL. HOWEVER, AS THERE IS NO CLEAR FACTUAL AND LEGAL FINDINGS ABOUT THE VERY BASIC ASPECTS OF THIS DISALLOWANCE, THE RIGHT COURSE OF ACTION, IN OUR CONSIDERED VIEW, IS TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION DE NOVO IN THE L IGHT OF OUR ABOVE OBSERVATIONS, BY WAY OF A SPEAKING ORDER SPECIFICAL LY DEALING WITH ALL THE CONTENTIONS OF THE ASSESSEE, IN ACCORDANCE WITH THE LAW AND AFTER GIVING A FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESS EE. WE ORDER SO. WE MAY MAKE IT CLEAR THAT IT WILL BE OPEN TO THE ASSESSE T O TAKE UP ALL THE LEGAL AND FACTUAL ASPECTS, UNFETTERED BY OUR PRIMA FACIE OBSERVATIONS ABOVE, AND IT WILL BE INCUMBENT ON THE ASSESSING OFFICER TO SPECIFICALLY DEAL WITH THE SAME. 9. GROUND NO. 2 IS THUS ALLOWED FOR STATISTICAL PUR POSES. 10. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THE LEARNED AO ERRED IN LAW AND ON FACTS IN MAKING DISALLOWANCE OF RS 8,17,045 UNDER SECTION 14A OF THE INCOME TAX ACT , 1961, READ WITH RULE 8D OF THE INCOME TAX RULES, ON ACCOUNT OF EXEM PTED DIVIDEND INCOME RECEIVED BY THE APPELLANT COMPANY WITHOUT CO NSIDERING THE APPLICABILITY OF RULE 8D DURING THE ASSESSMENT. 11. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DISCLOSED RECEI PT OF TAX FREE DIVIDENDS AGGREGATING TO RS 91,36,000 BUT HAS NOT OFFERED ANY RELATED BUSINESS EXPENDITURE FOR DISALLOWANCE UNDER SECTION 14A. WH EN HE PROBED THE MATTER FURTHER, IT WAS EXPLAINED BY THE ASSESSEE THAT THE RELATED SHARES WERE ACQUIRED I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 5 OF 8 BY THE ASSESSEE BY OWN FUNDS, THAT NO BORROWINGS AR E MADE FOR THESE INVESTMENTS AND THAT NO EXPENDITURE IS INCURRED IN EARNING THIS INCOME. THE ASSESSING OFFICER WAS, HOWEVER, NOT SATISFIED WITH THIS EXPLANATION. HE WAS OF THE VIEW THAT SOME PART OF THE ADMINISTRATIVE EXPEN DITURE, EVEN THOUGH IT MAY BE INDIRECT EXPENDITURE, IS ALSO TO BE TAKEN INTO A CCOUNT FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A. WHILE HE DID NOT D ISPUTE THAT ENTIRE NO PART OF BORROWED FUNDS ARE USED IN MAKING RELATED INVESTMEN TS, HE DID PROPOSE TO RESORT TO RULE 8D AND DISALLOWED .5% OF THE AVERAGE VALUE OF INVESTMENTS, WHICH CAME TO RS 8,17,045, AS EXPENDITURE INCURRED TO EAR N THE DIVIDEND INCOME. THE ASSESSEE WAS AGGRIEVED OF THIS PROPOSAL AND RAISED THE ISSUE BEFORE THE DRP BUT IN VAIN. THE AO THUS PROCEEDED TO MAKE THE DISALLOW ANCE OF RS 8,17,045. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 13. WE FIND THAT THE LAW IS BY NOW WELL SETTLED THA T THE PROVISIONS OF RULE 8D CAN ONLY BE APPLIED PROSPECTIVELY AND, ACCORDINGLY, FIND NO RELEVANCE SO FAR AS ASSESSMENTS FOR THE ASSESSMENT YEARS PRIOR TO 2008- 09. HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF MAXOPP INVESTMENTS LTD VS CIT (347 ITR 272) HAS HELD SO. LEARNED DEPARTMENTAL REPRESENTATIVE ALSO D OES NOT DISPUTE THIS LEGAL POSITION. IN THIS VIEW OF THE MATTER, THE DISALLOWA NCE MADE BY THE AO BY INVOKING RULE 8D CANNOT BE SUSTAINED. HOWEVER, CONS ISTENT WITH THE VIEW TAKEN BY VARIOUS COORDINATE BENCHES AND HAVING NOTED THAT THERE ARE NO DIRECT EXPENSES INCURRED IN EARNING THIS DIVIDEND INCOME, WE ARE OF THE CONSIDERED VIEW THAT INTERESTS OF JUSTICE WILL BE MET BY RESTR ICTING THE DISALLOWANCE UNDER SECTION 14A TO DIVIDEND INCOME. THE BALANCE DISALLO WANCE, THEREFORE, STANDS DELETED. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 14. GROUND NO. 3 IS THUS PARTLY ALLOWED IN THE TERM S INDICATED ABOVE. 15. IN GROUND NO. 4(A) (B) AND (C), THE ASSESSEE HA S RAISED THE FOLLOWING GRIEVANCES: I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 6 OF 8 (A) THE LEARNED DRP ERRED IN LAW AND ON FACTS IN UP HOLDING THE ORDER OF THE TPO WRONGLY BY TREATING THE ADVERTISEM ENT EXPENSES AS UNCONNECTED AND DISTINCT TRANSACTION IGNORING RULE 10D OF THE ACT, AND HELD THAT THE SAME DID NOT YIELD ANY BENEFIT TO THE BUSINESS ASSESSEE. (B) THE ADDITION OF THE AO/TPO IN MAKING/PROPOSING AN ADDITION OF RS 44,28,721 IS CONTRARY TO THE FACTS AND MATERI AL ON RECORD, INCLUDING THE TRANSFER PRICING STUDY REPORT OF THE PRICEWATERHOUSE COOPERS. (C) THE IMPUGNED ADDITION OF RS 44,28,721 IS ON FA CTS AND CIRCUMSTANCES OF THE CASE, WITHOUT JURISDICTION, IN VALID AND ILLEGAL SINCE NONE OF THE CONDITIONS UNDER SECTION 92C(3) O F THE ACT ARE FULFILLED IN THE INSTANT CASE. 16. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSE IS ENGAGED IN INT ERNATIONAL TRADING OF TYRES, TUBES AND FLAPS THROUGH TYRETECH GLOBAL DIVISION. THE ASSESSE PROCURES THESE PRODUCTS FROM APOLLO TYRES LIMITED AND EXPORTS IT T O ITS ASSOCIATED ENTERPRISES NAMELY, (I) APOLLO INTERNATIONAL FZC SHARJAH UAE, A ND (II)APOLLO INTERNATIONAL TRADING LLC, DUBAI UAE. DURING THE COURSE OF RELEVA NT PREVIOUS YEAR, THE ASSESSEE ENTERED FOLLOWING INTERNATIONAL TRANSACTIO NS WITH ITS THESE AES: SL NO. DESCRIPTION OF TRANSACTION METHOD VALUE 1. EXPORT OF AUTOMOBILE TYRES, TUBES AND FLAPS TNM M 133,07,52,059 2. PAYMENT OF SELLING COMMISSION TNMM 1,81,819 3. REIMBURSEMENT OF ADVERTISEMENT EXPENSES TNMM 44, 28,721 17. WHILE THERE WAS NO DISPUTE WITH REGARD TO THE F IRST TWO ITEMS, THE TPO DID NOT FIND THE THIRD TRANSACTION, I.E. REIMBURSEMENT OF ADVERTISEMENT EXPENSES, TO BE AN ARMS LENGTH TRANSACTION. HIS REASONING WAS T HIS. HE NOTICED THAT THE ASSESSEE HAD REIMBURSED THE AE, I.E. APOLLO INTERNA TIONAL TRADING LLC, FOR SALES PROMOTION EXPENSES INCURRED ON BEHALF OF THE ASSESS EE, WHICH WAS MADE WITHOUT ANY MARK UP AND SUPPORTED BY A BILL REPRESE NTING COST OF GIFTS AND BUSINESS PROMOTION MATERIAL. THE TPO WAS OF THE VI EW THAT THE ASSESSEE WAS NOT UNDER ANY CONTRACTUAL OBLIGATION TO PERFORM MAR KETING FUNCTION AT DUBAI, AND, AS SUCH, NO SUCH REIMBURSEMENT WOULD HAVE BEEN MADE IN ARMS LENGTH I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 7 OF 8 SITUATION. WHILE TPO DID NOT DISPUTE THAT THE ASSES SEE MAY HAVE BENEFITED FROM THIS EXERCISE, HE WAS OF THE VIEW THAT SUCH A BENEF IT WAS ONLY INCIDENTAL AND SUCH INCIDENTAL BENEFITS CANNOT BE REGARDED AS GIVING RI E TO AN ARMS LENGTH TRANSACTION. HE THUS PROCEEDED TO HOLD THAT THIS P AYMENT IS NOT FOR INTRA GROUP SERVICES, IS PURELY FOR AN INCIDENTAL BENEFIT AND I TS ARMS LENGTH PRICE TO THE ASSESSEE IS ZERO. ACCORDINGLY, AN ALP ADJUSTMENT OF RS 44,28,721 WAS PROPOSED BY THE TPO. THE ASSESSEE OBJECTED TO THIS ADJUSTMEN T BEFORE THE DRP BUT WITHOUT ANY SUCCESS. IN A BRIEF ORDER, REITERATING THE STAND OF THE TPO, DRP REJECTED GRIEVANCE OF THE ASSESSEE. ACCORDINGLY, TH E AO PROCEEDED TO MAKE THIS ADJUSTMENT OF RS 44,28,721. THE ASSESSEE IS AGGRIEV ED AND IN APPEAL BEFORE US. 18. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 19. WE FIND THAT THE TPO HAS ACCEPTED PROFITABILITY OF THESE TRANSACTIONS ON THE BASIS OF TNMM AND YET PICKED UP THIS REIMBURSEM ENT, WHICH CONSTITUTES A CHARGE ON SUCH PROFITABILITY, FOR REJECTION. THIS IS ESSENTIALLY A REIMBURSEMENT OF EXPENDITURE, WITHOUT ANY MARK UP TO THE AE. WHEN AN AE IS ACTING ONLY AS AN INTERMEDIARY IN THE PROVISION OF SERVICES AND INCUR COSTS ON BEHALF OF THE ASSESSEE, WHICH THE ASSESSEE WOULD HAVE INCURRED DI RECTLY, IT MAY WELL BE APPROPRIATE FOR THE AE TO PASS ON THESE COSTS WITHO UT A MARK-UP. IT IS NOT IN DISPUTE THAT THE COSTS WERE ACTUALLY INCURRED BY TH E AE UNDER INSTRUCTIONS FROM THE ASSESSEE AND IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS REIMBURSED THESE COSTS, WITHOUT ANY MARK UP, TO THE AE. IT IS NOT E VEN THE CASE OF THE TPO THAT THIS REIMBURSEMENT WAS REIMBURSEMENT OF NORMAL BUSINESS EXPENDITURE OF THE AE, AND, THEREFORE, IT CANNOT AMOUNT TO ANY ADVANTAGE T O THE AE THAT THESE EXPENSES ARE REIMBURSED BY THE ASSESSEE. AS LONG AS EXPENSE S ARE INCURRED UNDER INSTRUCTIONS FROM, AND ON BEHALF OF, THE ASSESSEE, AS IS THE UNCONTROVERTED POSITION BEFORE US, THE ARMS LENGTH PRICE OF THE S AME CANNOT BE TAKEN AT ZERO. WHETHER THE ASSESSEE WAS UNDER AN OBLIGATION TO MAK E THIS REIMBURSEMENT OR NOT COULD BE RELEVANT ONLY WHEN THE EXPENSES WERE N ORMAL BUSINESS EXPENSES OF THE AE AND YET THE ASSESSEE DECIDES TO BEAR THE SAM E. THERE IS NOTHING TO INDICATE THAT THE REIMBURSEMENT IS FOR EXPENSES ALR EADY INCURRED BY THE AE IN I.T.A. NO.: 3520/DEL/10 ASSESSMENT YEARS 2006-07 PAGE 8 OF 8 ITS NORMAL COURSE OF BUSINESS. IT IS SPECIFICALLY STATED THAT THESE EXPENSES WERE INCURRED ON BEHALF OF THE ASSESSEE, AND THIS POSITI ON REMAINS UNCONTROVERTED. WHETHER THE ASSESSEE WAS UNDER AN OBLIGATION TO INC UR THESE EXPENSES OR NOT IS, THEREFORE, NOT REALLY RELEVANT. THE QUESTION OF IN CIDENTAL BENEFIT TO THE ASSESSEE, FOR EXPENSES INCURRED BY THE AE, WOULD ARISE ONLY W HEN THE EXPENSES ARE INCURRED BY THE AE IN ITS OWN RIGHT THOUGH FOR THE COMMON BENEFIT OF GROUP AS A WHOLE. THE IMPUGNED ALP ADJUSTMENT IS, THEREFORE, D EVOID OF LEGALLY SUSTAINABLE BASIS ON THE FACTS OF THIS CASE. WE, ACCORDINGLY, D IRECT THE AO TO DELETE THE SAME. 20. GROUND NO. 4 IS THUS ALLOWED. 21. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON13 TH DAY OF OCTOBER, 2014. SD/- SD/- C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, 13 TH DAY OF OCTOBER 2014 COPIES TO : (1) THE ASSESSEE (2) THE ASSESSING OFF ICER (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI