THE ACIT 5(2), MUMBAI V. M/S. JOHNSON & JOHNSON LTD, MUMBAI

ITA 4070/MUM/2007

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70999 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 13-08-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 25-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAN VORA NIKHIL TIWARI
• Assessee Lawyers: AJEET KUMAR JAIN
• Keywords: Related party transaction; Business income; Depreciation; Transfer pricing; Business expenditure; Opportunity of being heard; Principle of natural justice; International transaction; Fair market value; Commercial expediency
• Section: 92B; 80HHC; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K B ENCH, MUMBAI . . , , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 4092/MUM/2007 ( / ASSESSMENT YEAR : 2002-03 M/S. JOHNSON & JOHNSON LTD., 30, FORJETT STREET, MUMBAI-400 036 THE ACIT-RANGE 5(2), MUMBAI ( ! /APPELLANT ) .. ( '# ! / RESPONDENT ) ./ I.T.A. NO. 4070/MUM/2007 ( / ASSESSMENT YEAR : 2002-03 THE ACIT-RANGE 5(2), MUMBAI M/S. JOHNSON & JOHNSON LTD., 30, FORJETT STREET, MUMBAI-400 036 ./ $% ./PAN/GIR NO. : AAACJ 0866E ( ! /APPELLANT ) .. ( '# ! / RESPONDENT ) ! & / APPELLANT BY : ` S/SHRI RAJAN VORA NIKHIL TIWARI '# ! ' & /RESPONDENT BY : SHRI AJEET KUMAR JAIN DR ( ' )* / DATE OF HEARING :13.08.2013 +,-. ' )* / DATE OF PRONOUNCEMENT :28.08.2013 / / O R D E R PER N.K. BILLAIYA, AM: JOHNSON & JOHNSON LTD. 2 THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-V, MUMBAI DT.22 .3.2007 PERTAINING TO A.Y. 2002-03. AS BOTH THESE APPEALS WERE HEARD T OGETHER, THEY ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 4092/M/07 ASSESSEES APPEAL 2. THE FIRST THREE GROUNDS RELATE TO MODVAT EXCISE DUTY CREDIT RELATING TO THE CLOSING STOCK OF RAW MATERIAL AND PACKING GO ODS. 3. THE AUDITORS IN THEIR NOTE ON THE EXCISE DUTY ON THE CLOSING STOCK HAVE MENTIONED THAT THE ASSESSEE HAS REDUCED EXCISE DUTY FROM THE SALES. MEANING THEREBY THAT THE EXCISE DUTY CHARGED TO PRO FIT & LOSS ACCOUNT IS RELEVANT TO SALES MADE DURING THE YEAR. EXCISE DUT Y PAID ON CLOSING STOCK IS PART OF INVENTORIES IN THE BALANCE SHEET. IT WAS EXPLAINED THAT THE COMPANY FOLLOWS EXCLUSIVE METHOD OF ACCOUNTING OF E XCISE TO DETERMINE THE VALUE OF COST OF GOODS SOLD. 3.1. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE VALUE O F MODVAT CREDIT BALANCE AVAILABLE AT THE CLOSE OF THE ACCOUNTING YE AR SHOULD NOT BE INCLUDED IN THE CLOSING STOCK. IT WAS EXPLAINED TH AT THE VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE IS IN ACCORDA NCE WITH THE ACCOUNTING STANDARD AS PRESCRIBED BY THE ICAI AND T HE COMPANY IS CONSISTENTLY FOLLOWING THE SAME SINCE THE INTRODUC TION OF MODVAT CREDIT AVAILABLE ON PURCHASE OF MATERIALS. THE AO WAS OF T HE FIRM BELIEF THAT AS PER SEC. 145(A) , WHICH IS RELEVANT FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION, THE VALUE OF CLOSING STOCK INVENTORI ES WOULD BE DETERMINED AFTER TAKING INTO ACCOUNT ALL THE OUTGOINGS ON ACCO UNT OF TAX, DUTY, CESS OR FEES ACTUALLY PAID OR INCURRED TO BRING THE GOODS T O THE PLACE OF ITS JOHNSON & JOHNSON LTD. 3 LOCATION AND CONDITION AS ON THE DATE OF VALUATION. ACCORDINGLY, THE AO WENT ON TO MAKE AN ADDITION OF RS. 1,65,75,560/- BE ING THE MODVAT CREDIT BALANCE AT THE END OF THE ACCOUNTING PERIOD. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA-10 ON PAGE -18 OF HIS ORDER. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT MODVAT CRE DIT DOES NOT AND CANNOT ALTER THE PROFITS OF THE ASSESSEE AND THEREF ORE NO ADJUSTMENTS ARE CALLED FOR ON THIS ISSUE. THE LD. CIT(A) FOLLOWED THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SEVANTHI LAL K ANTILAL IN ITA NO. 6043 OF 2003 WHEREIN IT HAS BEEN HELD THAT TAXING O F RETAINED MODVAT CREDIT IS JUSTIFIED. HOWEVER, THE LD. CIT(A) WAS O F THE OPINION THAT SUCH ADJUSTMENTS ARE ALSO REQUIRED TO BE MADE TO OPENING STOCK, PURCHASE AND SALES AND ACCORDINGLY DIRECTED THE AO TO GRANT CRED IT TO THE ASSESSEE IN RESPECT OF RETAINED MODVAT CREDIT RELATING TO OPENI NG STOCK. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 1999-2000 IN ITA NO. 2680/M/2003 AND A LSO IN A.Y. 2001- 02 IN ITA NO. 3289 & 9437/MUM/04. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCE DED THAT IDENTICAL ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL AS MENTION ED BY THE LD. COUNSEL. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND WE HAVE ALSO THE BENEFIT OF THE ORDER OF THE TRIBUN AL IN ASSESSEES OWN CASE IN ITA NO. 2680/M/03. WE FIND THAT THE TRIBUN AL HAS CONSIDERED THIS ISSUE AT PARA-95 OF ITS ORDER AND AT PARA-96 H AS HELD AS UNDER: RIVAL CONTENTIONS HEARD. AFTER HEARING BOTH THE PA RTIES, WE FIND THAT THOUGH THIS ISSUE IS SIMILAR TO THE ISSUE RAIS ED IN EARLIER YEARS, HOWEVER, PROVISIONS OF SECTION 145A, HAS BEEN BROUG HT ON STATUTE W.E.F. JOHNSON & JOHNSON LTD. 4 1ST APRIL 1999. THEREFORE, THE SAME WILL BE APPLICA BLE IN THE ASSESSMENT YEAR 19992000. CONSEQUENTLY, WE SET ASIDE THE IMPU GNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RE STORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOV O ADJUDICATION IN THE LIGHT OF THE PROVISIONS OF SECTION 145A. THE ASSESS ING OFFICER IS ALSO DIRECTED TO GIVE CORRESPONDING BENEFIT IN THE OPENI NG STOCK IN VIEW OF THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN CIT VS. MA HALAXMI GLASS WORKS P. LTD. (2009) 318 ITR 116 (BOM) AND THE JUDG EMENT OF DELHI HIGH COURT IN MAHAVIR ALLUMINIUM LTD. (2008) 297 IT R 077 (DEL). THUS, GROUND NO.2, IS ALLOWED FOR STATISTICAL PURPO SES. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNA L, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIREC TED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE DIRECTION OF THE TRIBUNA L MENTIONED HEREINABOVE. GROUND NO. 1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWE D FOR STATISTICAL PURPOSE. 8. GROUND NO. 4 AND 5 RELATE TO THE DISALLOWANCE OF PROVISION FOR EXECUTIVE RETIREMENT SCHEME (ERS). 8.1. THE AO HAS DISCUSSED THIS ISSUE AT PAGE-10 PAR A-6 OF HIS ORDER. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 6,64,372 /- TOWARDS PROVISION FOR EXECUTIVE RETIREMENT SCHEME. THE AO WAS OF THE OPINION THAT THE CLAIM OF THE ASSESSEE WAS ONLY A PROVISION AND THER EFORE IN THE NATURE OF CONTINGENT LIABILITY AND THE ASSESSEE HAS NOT ACTU ALLY INCURRED ANY EXPENSE TOWARDS ERS, THE AO DISALLOWED THE ENTIRE P ROVISION OF RS. 6,64,372/-. 9. THE LD. CIT(A) HAS CONSIDERED ASSESSEES GRIEVAN CE AT PARA-11 ON PAGE 18 OF HIS ORDER. THE LD. CIT(A) OBSERVED THAT IN ASSESSEES OWN CASE THE TRIBUNAL IN ITA NO. 6633 AND 6634 OF 1998 FOR A.YRS 1993-94 AND 1995-96 HAD THE OCCASION TO CONSIDER IDENTICAL ISSUES WHEREIN THE TRIBUNAL HAS FOLLOWED ITS OWN DECISION FOR A.Y. 198 5-86 TO 1988-89. JOHNSON & JOHNSON LTD. 5 THE LD. CIT(A) ACCORDINGLY DIRECTED THE AO TO FOLLO W THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. WE FIND THAT IN A SSESSEES OWN CASE FOR A.Y. 1997-98 IN ITA NO. 349/M/01, ITA NO. 2679/M/03 FOR A.Y. 1998- 99 AND ITA NO. 2680/M/03 FOR A.Y. 1999-2000, THE TR IBUNAL HAD DISCUSSED SIMILAR ISSUE AND AT PARA-20 OF ITS ORDER FOR A.Y. 1997-98, THE TRIBUNAL HAD CONSIDERED AN IDENTICAL ISSUE AND ON P ARA-21 OF ITS ORDER, THE TRIBUNAL HAD DIRECTED THE AO TO ALLOW THE EXPENSES ON ACCOUNT OF ERS ON THE BASIS OF ACTUAL PAYMENT MADE DURING THE RELEVAN T ASSESSMENT YEAR AS BUSINESS EXPENSES. RESPECTFULLY FOLLOWING THE FIND ING OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO FOLLOW THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND ALLOW THE DEDUCTION ON ACCOUNT OF ERS ON PAYMENT BASIS AS AGAINST PROVISION BASIS CLAIMED BY THE ASSESSEE. GROUND NOS. 4 & 5 ARE PARTLY ALLOWED. 10. GROUND NO. 6 & 7 RELATE TO THE DISALLOWANCE ON ACCOUNT OF PROVISION FOR CASH DISCOUNT AMOUNTING TO RS. 21,33, 679/-. 10.1. THE AO HAS DISCUSSED THIS ISSUE AT PARA-7 ON PAGE-11 OF HIS ORDER. THE AO NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 75 LAKHS BEING PROVISION FOR CASH DISCOUNT. THE AO WAS OF THE FIR M BELIEF THAT SUCH A PROVISION IS ONLY A CONTINGENT LIABILITY AND ACCORD INGLY SOUGHT EXPLANATION FROM THE ASSESSEE FOR ITS ALLOWABILITY. THE ASSESSEE EXPLAINED THAT THIS IS A NORMAL BUSINESS PRACTICE FOLLOWED BY THE COMPANY AND IS A PURELY BUSINESS EXPENDITURE AND THEREFORE SHOULD BE ALLOWED. ALTERNATIVELY, THE ASSESSEE CLAIMED THAT IT HAS ACT UALLY PAID RS. 50,82,348/- OUT OF THE PROVISION CREATED DURING A.Y . 2001-02, THEREFORE A SUM OF RS. 50,82,348/- SHOULD BE ALLOWED ON PAYMENT BASIS. THE AO DISCARDED BOTH THE PLEA OF THE ASSESSEE AND DISALLO WED RS. 21,33,679/- OUT OF RS. 75 LAKHS CLAIMED BY THE ASSESSEE. JOHNSON & JOHNSON LTD. 6 11. THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE OF THE ASSESSEE AT PARA-12 PAGE-19 OF HIS ORDER WHEREIN THE LD. CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR WHO HAS NOT ALLOWED SUC H EXPENDITURE ON PROVISION BASIS. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CON TENDED THAT IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESS EES OWN CASE FOR A.Y. 1999-2000 IN ITA NO. 2680/M/03. 13. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT B RING ANY DISTINGUISHING FACT IN RESPECT OF THIS. 14. WE HAVE CONSIDERED THE SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND ALSO THE ORDER OF THE TRIBUNA L AS MENTIONED BY THE LD. COUNSEL. WE FIND THAT THE TRIBUNAL HAS CONSIDE RED AN IDENTICAL ISSUE AT PARA 103 OF ITS ORDER AND AT PARA-108, THE TRIBU NAL HAS RESTORED THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION T O EXAMINE THIS MATTER AFRESH AND ALLOW SUCH CASH DISCOUNT WHICH HAS BEEN ACTUALLY PAID BY THE ASSESSEE. FACTS AND CIRCUMSTANCES BEING IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO TO EXAMINE THIS MATTER AFRESH AND ALLOW SUCH CAS H DISCOUNT WHICH HAS BEEN ACTUALLY PAID BY THE ASSESSEE. GROUND NO. 6 & 7 ARE ALLOWED FOR STATISTICAL PURPOSE. 15. GROUND NO. 8 RELATES TO DISALLOWANCE OF EXPENDI TURE INCURRED TOWARDS REPAIRS, MAINTENANCE AMOUNTING TO RS. 44,35 ,997/-. 15.1. THE AO HAS DISCUSSED THIS ISSUE AT PARA-8 ON PAGE-12 OF HIS ORDER WHEREIN HE HAS EXHIBITED THE DETAILS OF EXPENDITURE AND WAS OF THE FIRM BELIEF THAT CERTAIN ITEMS OF EXPENSES ARE OF CAPITA L NATURE. AFTER CALLING JOHNSON & JOHNSON LTD. 7 FOR THE DETAILS FROM THE ASSESSEE, THE AO DISALLOWE D A SUM OF RS. 44,35,997/-. 16. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA-13 ON PAGE -20 OF HIS ORDER. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS MAD E BY THE ASSESSEE, THE LD. CIT(A) WAS OF THE OPINION THAT THE ADHOC DISALL OWANCE AT THE RATE OF 10% MADE BY THE AO IS NOT JUSTIFIED AND IS NOT CAL LED FOR AND ACCORDINGLY DELETED THE ADHOC DISALLOWANCES MADE BY THE AO, HOWEVER CONFIRMED THE SPECIFIC DISALLOWANCE MADE BY THE AO. THE LD. CIT(A) ALSO DIRECTED THE AO TO GRANT DEPRECIATION ON THE A MOUNTS SO CAPITALIZED. 17. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO PAGE-653 AND 654 OF THE PAPER BOOK AND CONTENDED TH AT THESE EXHIBITS CONTAINED THE DETAILS OF EXPENDITURE INCURRED BY TH E ASSESSEE. IT IS THE SAY OF THE LD. COUNSEL THAT THE EXPENSES ARE OF REVENUE IN NATURE AND THEREFORE THERE IS NO REASON/JUSTIFICATION TO TREAT THEM AS CAPITAL IN NATURE. THE LD. COUNSEL FURTHER POINTED OUT THAT IN ASSESSE ES OWN CASE FOR A.Y. 2001-02, THE TRIBUNAL IN ITA NO. 9106/M/04 HAD CONS IDERED A SIMILAR ISSUE AND HAS HELD THE EXPENDITURE TO BE OF REVENUE IN NATURE. 18. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF T HE LOWER AUTHORITIES. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVANT PAGES OF THE PAPER BOOK AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE. W E HAVE ALSO CONSIDERED THE ORDER OF THE TRIBUNAL REFERRED BY THE LD. COUNS EL. WE FIND THAT THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE BECA USE THE ASSESSEE HAS SUCCESSFULLY EXPLAINED THE NATURE OF EXPENSES BY FI LING NECESSARY DETAILS. JOHNSON & JOHNSON LTD. 8 HOWEVER, IN THE PRESENT CASE, WE FIND THAT THE DETA ILS AS EXHIBITED AT PAGE- 653-654 HAVE NOT BEEN PROPERLY EXAMINED BY THE LOWE R AUTHORITIES. THEREFORE, IN THE INTEREST OF NATURAL JUSTICE AND F AIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FILE ALL THESE DETAILS BEFORE THE AO. THE AO IS DIRECTED TO EXAMI NE THIS ISSUE AFRESH IN THE LIGHT OF THE DETAILS FILED BY THE ASSESSEE AFTE R GIVING REASONABLE OPPORTUNITY OF BEING HEARD. GROUND NO. 8 IS ALLOWE D FOR STATISTICAL PURPOSE. 20. GROUND NO. 9 IS NOT PRESSED THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 21. GROUND NO. 10 RELATES TO DISALLOWANCE OF LIABIL ITIES/PROVISIONS WRITTEN BACK AMOUNTING TO RS. 24,11,000/- U/S. 80HH C OF THE ACT. WE FIND THAT AN IDENTICAL ISSUE CAME UP FOR HEARING BE FORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 IN ITA NO. 943 7/M/07. THE TRIBUNAL HAS CONSIDERED THIS ISSUE AT PARA-32 ON PA GE-13 OF ITS ORDER AS EXHIBITED AT PAGE-761 OF THE PAPER BOOK WHEREIN THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILES OF THE AO TO BE DECIDED IN LINE WITH THE VIEW TAKEN IN APPEAL FOR ASSESSMENT YEAR 2000-0 1. FACTS AND CIRCUMSTANCES BEING IDENTICAL, RESPECTFULLY FOLLOWI NG THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE RESTORE THIS IS SUE BACK TO THE FILES OF THE AO TO BE DECIDED AFRESH IN THE LIGHT OF THE DEC ISION TAKEN IN EARLIER YEARS FOLLOWING THE DIRECTION OF THE TRIBUNAL IN AS SESSEES OWN CASE. GROUND NO. 10 IS ALLOWED FOR STATISTICAL PURPOSE. 22. GROUND NO. 11 RELATES TO DISALLOWANCE OF GROSS RENTAL INCOME AMOUNTING TO RS. 3,14,200/- U/S. 80HHC OF THE ACT. AN IDENTICAL ISSUE CAME UP FOR HEARING BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. JOHNSON & JOHNSON LTD. 9 2001-02 IN ITA NO. 9437/M/04. WE FIND THAT THE TRI BUNAL HAS CONSIDERED THIS ISSUE AT PARA-33 ON PAGE-14 OF ITS ORDER AS EXHIBITED AT PAGE 762 OF THE PAPER BOOK WHEREIN THE TRIBUNAL HAS HELD THAT THE ISSUE IS SIMILAR TO THE ONE DECIDED IN ASSESSEES APPEAL FOR A.Y. 2000-01 AND CONSIDERING THE SAME, THE TRIBUNAL DIRECTED THAT NE TTING OFF OF RENT PAID AGAINST RENT RECEIVED SHOULD BE ALLOWED AND ONLY 90 % OF THE NET RENT INCOME SHOULD BE CONSIDERED FOR DISALLOWANCE U/S. 8 0HHC OF THE ACT. GROUND NO. 11 IS PARTLY ALLOWED. 23. GROUND NO. 12 RELATES TO DISALLOWANCE OF SUNDRY RECEIPTS AMOUNTING TO RS. 2,25,51,870/- U/S. 80HHC. 24. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PAGE -20 PARA-B OF HIS ORDER WHEREIN THE AO HAS HELD THAT SUNDRY RECEIPTS OF RS. 2,25,51,870/- CAN NEVER BE BUSINESS INCOME. SUCH RECEIPTS CAN T AKE THE CHARACTER OF INCOME FROM OTHER SOURCES. 25. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PAR A-25 ON PAGE-30 OF HIS ORDER AND CONFIRMED THE FINDINGS OF THE AO. 26. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT ON IDENTICAL FACTS THE TRIBUNAL HAS REMANDED THE MATTE R BACK TO THE FILE OF THE AO IN ASSESSEES OWN CASE FOR A.Y. 2000-01 AND 2001 -02 IN ITA NOS. 3289 & 9437/M/04. 27. THE LD. DR AGREED WITH THIS SUBMISSION OF THE L D. COUNSEL 28. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. JOHNSON & JOHNSON LTD. 10 IDENTICAL ISSUE CAME UP FOR HEARING BEFORE THE TRIB UNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS. RESPECTFULLY FOL LOWING THE DECISION OF THE TRIBUNAL, WE RESTORE THIS ISSUE BACK TO THE FIL ES OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AFTER FOLLOWIN G THE DIRECTIONS OF THE TRIBUNAL GIVEN IN EARLIER ASSESSMENT YEARS IN ASSES SEES OWN CASE. GROUND NO. 12 IS ALLOWED FOR STATISTICAL PURPOSE. 29. GROUND NO. 13, 14, 15 AND 16 RELATE TO TRANSFER PRICING ISSUES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS ENTERED INTO THE FOLLOWING INTERNATIONAL TRANSACTIONS AS DEFINED UND ER SECTION 92B OF THE ACT. 1) PURCHASE OF RAW MATERIALS/SPARES 2) PURCHASE OF FINISHED GOODS 3) SALE OF FINISHED GOODS 4) PURCHASE OF MACHINES/MACHINE SPARES/CAPITAL GOODS 5) PAYMENT OF ROYALTY 6) PAYMENT OF NETWORKING CHARGES 7) PAYMENT OF PROFESSIONAL SERVICE CHARGES 8) PROVISION OF TECHNICAL SERVICES (RECEIPTS) 9) REIMBURSEMENT OF EXPENSES (PAYMENTS) 10 )REIMBURSEMENT OF EXPENSES (RECEIPTS) 30. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE PAID ROYALTY AT THE RATE OF 1% OF NET SALES AMOUNTING TO RS. 4,60,5 5,102/- J&J US FOR THE USE OF BRANDS AND TRADEMARKS AS PER THE TERMS OF TH E BRAND USAGE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND J&J US DT. 14 TH MARCH, 2002 W.E.F. 1 ST JULY, 2001. THE ASSESSEE ALSO PAID ROYALTY AT TH E RATE OOF 2% TO J&J US AMOUNTING TO RS. 11,14,50,413/- FOR TH E JOHNSON & JOHNSON LTD. 11 TECHNICAL/MARKETING KNOW-HOW PROVIDED TO THE ASSESS EE AS PER THE TERMS OF THE KNOW-HOW AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND J&J US. 30.1. THE ASSESSEE ADOPTED THE TRANSACTIONAL NET MA RGIN METHOD (TNMM) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF ITS INTERNATIONAL TRANSACTIONS INCLUDING, INTER-ALIA, THE INTERNATION AL TRANSACTION RELATING TO PAYMENT OF ROYALTY. THE NET OPERATING MARGINS EARN ED BY EACH SEGMENT OF THE ASSESSEE WERE COMPARED WITH THE NET OPERATIN G MARGINS EARNED BY COMPANIES ENGAGED IN SIMILAR ACTIVITIES. THE TPO O BSERVED THAT THERE WAS NO BASIS FOR PAYMENT OF ANY ROYALTY FOR USE OF TRADEMARKS/BRAND NAMES AS THE PRODUCTS SOLD BY J&J INDIA HAVE ALREAD Y ACQUIRED A REPUTATION OF QUALITY BEFORE THE CONCLUSION OF THE ROYALTY AGREEMENTS. THE TPO FURTHER OBSERVED THAT RBI/GOVERNMENT APPROV ALS CANNOT BE CONSIDERED TO BE AN ARMS LENGTH BENCHMARK SINCE TH E SAME IS MERELY AN APPROVAL UNDER THE EXCHANGE CONTROL POLICY OF THE G OVT. OF INDIA. FURTHER THE RATES PRESCRIBED UNDER THE AUTOMATIC RO UTE ARE FOR THE USE OF FRESH TECHNOLOGY AND ALSO FOR THE USE OF TRADEMARKS FOR THE FIRST TIME. J&J INDIA IS NOT GETTING ANY FRESH TECHNOLOGY PER SE FR OM J&J US. THE TPO FINALLY OBSERVED THAT ONLY PAYMENT OF TECHNICAL KNO W-HOW FEES AT 1% FOR ALL PRODUCTS MANUFACTURED BY J&J INDIA AND TRADE MA RK/BRAND NAME ROYALTY AT 1% WOULD BE THE ARMS LENGTH ROYALTY. 30.2. AS PER THE AGREEMENT ENTERED INTO WITH J&J US , J&J INDIA WAS NOT REQUIRED TO BEAR THE TAX LIABILITY OF J&J US ARISIN G OUT OF PAYMENT OF TRADEMARK/BRAND NAME ROYALTY. THUS, THE TAX OF APP ROX. RS. 60 LACS PAID BY J&J INDIA ON THE TRADEMARK/BRAND NAME ROYALTY PA ID TO J&J US IS TO BE DISALLOWED. THE TPO DISALLOWED ON ACCOUNT OF ROYAL TY AS UNDER: JOHNSON & JOHNSON LTD. 12 A) TAX ON TRADEMARK/BRAND NAME ROYALTY -RS. 60 LACS B) RESTRICTION OF ROYALTY TO 1% ON MANUFACTURED GOODS -RS. 363.74 LACS C) ROYALTY ON SALES OF TRADED FINISHED GOODS -RS. 202.54 LACS D) CORRESPONDING TAX AND R&D CESS -RS. 112.64 LACS 31. WHEN THE MATTER WAS CARRIED BEFORE THE LD. CIT( A), THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 60 LAKHS CONSIDER ING THAT TAX AT BRAND ROYALTY IS NOT A LIABILITY OF J&J INDIA IN TERMS OF AGREEMENT WITH J&J US AND THEREFORE CANNOT BE ALLOWED AS DEDUCTION. THE LD. CIT(A) DELETED THE OTHER THREE DISALLOWANCE AT POINT B, C & D MENT IONED HEREINABOVE. 32. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THERE WAS A TACIT UNDERSTANDING BEFORE J&J US AND J&J IND IA THAT J&J INDIA WILL BEAR THE TAX LIABILITY ARISING ON ACCOUNT OF P AYMENT OF BRAND USERS ROYALTY TO J&J US. TO SUBSTANTIATE HIS CLAIM, THE LD. COUNSEL DREW OUR ATTENTION TO PAGE 585 OF THE PAPER BOOK WHICH IS A CERTIFICATE ISSUED BY J&J US. THE LD. COUNSEL FURTHER POINTED OUT THAT T HE ROYALTY PAYMENTS HAVE BEEN APPROVED BY RBI RELYING UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF DRESSER RAND INDIA PVT. LTD. IN ITA NO . 3509/M/08. THE LD. COUNSEL FOR THE ASSESSEE CONTINUED TO ARGUE THAT C OMMERCIAL ARRANGEMENT FOR PAYMENT OF TAXES CANNOT BE QUESTIONED FOR DISAL LOWING THE SAME WHILE CALCULATING ARMS LENGTH PRICE. 33. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. JOHNSON & JOHNSON LTD. 13 34. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND ALSO THE COPY OF AGREEMENT SU BMITTED ALONGWITH APPLICATION TO RBI AS EXHIBITED AT PAGES 1143 TO 11 45 OF THE PAPER BOOK. WE FIND THAT THE APPLICATION MADE BY THE ASSESSEE T O RBI FOR BRAND USAGE AGREEMENT SPECIFICALLY MENTIONS THAT THE ROYALTY TO BE REMITTED IS NET OF TAXES. FURTHER, THE APPROVAL WAS RECEIVED FROM THE RBI TO REMIT THE ROYALTY ON BRAND USAGE BY THE ASSESSEE @ 1% NET OF TAXES. CONSIDERING THE BRAND USAGE AGREEMENT VIS--VIS THE APPROVAL GR ANTED BY RBI, IT CAN BE SAFELY INFERRED THAT TAXES WERE LIABILITY OF J&J INDIA UNDER THE TERMS OF AGREEMENT. THE ASSESSEE HAS ENTERED INTO A COMMERC IAL ARRANGEMENT WITH J&J US AND IT HAS BEEN SO ARRANGED THAT THE PAYMEN T OF TAXES HAVE TO BE BORNE BY THE ASSESSEE BEING A COMMERCIAL ARRANGEMEN T, THE SAME SHOULD NOT BE QUESTIONED WHILE CALCULATING ARMS LENGTH PR ICE. RELIANCE BY THE ASSESSEE ON THE DECISION OF THE TRIBUNAL IN THE CAS E OF DRESSER RAND INDIA PVT. LTD. IN ITA NO. 3509/M/08 IS WELL FOUNDED. CO NSIDERING THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE BRAND USAGE A GREEMENT AND THE APPROVAL OF THE RBI, THE FINDINGS OF THE LD. CIT(A) IS SET ASIDE. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 60,00,000/-. GROUND NO. 13 IS ALLOWED. 35. GROUND NO. 14 RELATES TO THE ENHANCEMENT MADE B Y THE LD. CIT(A) IN RESPECT OF BRAND USAGE ROYALTY. 36. THE TPO HAS HELD THAT THE BRAND USAGE ROYALTY P AID BY J&J INDIA @ 1% OF ENTIRE SALES IS AT ARMS LENGTH PRICE. HOW EVER, THE LD. CIT(A) ISSUED A SHOW CAUSE TO THE ASSESSEE AS TO WHY THE ENTIRE PAYMENT OF ROYALTY FOR THE PERIOD 1.7.2001 TO 14.3.2002 SHOULD NOT BE DISALLOWED. THE LD. CIT(A) WENT ON TO DISALLOW THE BRAND ROYALT Y PAID DURING THE PERIOD 1.7.2001 TO 14.3.2002 ON THE GROUND THAT THE RE WAS NO AGREEMENT JOHNSON & JOHNSON LTD. 14 IN PLACE BETWEEN J&J INDIA AND J&J US DURING THE AB OVE SAID PERIOD INDICATING THE INTENTION TO PAY ROYALTY W.E.F. 1.7. 2001. 37. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT A DRAFT AGREEMENT WAS SUBMITTED ALONGWITH THE APPLICATION T O RBI ON 10.8.2001 THEREFORE, THE ALLEGATION OF THE LD. CIT(A) THAT TH ERE WAS NO AGREEMENT PREVAILING DURING THE PERIOD FROM JULY 2001 TO MAR CH, 2002 IS AGAINST THE FACTS OF THE CASE. THE LD. COUNSEL FURTHER SUBMITT ED THAT THE ASSESSEE HAS PAID THE ROYALTY AS PER THE GUIDELINES ISSUED BY TH E RBI AND THEREFORE THE SAME SHOULD BE ALLOWED AND THERE IS NO QUESTION OF DISALLOWING THE SAME. IT IS THE SAY OF THE LD. COUNSEL THAT THE LD. CIT(A ) GROSSLY ERRED IN STATING THAT THERE WAS NO AGREEMENT BETWEEN J&J IND IA AND J&J US DURING THE PERIOD INDICATING THE INTENTION TO ROYAL TY WITH EFFECT FROM 1.7.2001. 38. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE LD. CIT(A). 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS. WE FIND THAT THE LD. CIT(A) HAS ENHANCED THE ASSESS MENT BY DISALLOWING THE BRAND USAGE ROYALTY PAID RETROSPECTIVELY BY THE ASSESSEE FOR THE PERIOD 1.7.2001 TO 14.3.2002. WE FIND THAT THE LD. CIT(A) HAS BASED HIS FINDING OBSERVING THAT THE AGREEMENT FOR PAYMENT OF BRAND U SAGE ROYALTY WERE ENTERED INTO ONLY ON 14 TH MARCH, 2002. HOWEVER, AT THE SAME TIME, WE FIND THAT THE LD. CIT(A) ERRED IN IGNORING THE COPY OF DRAFT BRAND USAGE ROYALTY AGREEMENT WHICH WAS SUBMITTED BY THE ASSESS EE ALONGWITH APPLICATION TO RBI ON 10.8.2001. THE ASSESSEE RECE IVED APPROVAL FROM THE RBI ON 20.11.2001 AND AFTER RECEIVING THE APPRO VAL FROM THE RBI, THE ASSESSEE ENTERED INTO THE BRAND USAGE ROYALTY AGREE MENT WITH J&J US BY JOHNSON & JOHNSON LTD. 15 WHICH IT WAS AGREED TO PAY THE ROYALTY FROM 1 ST JULY, 2001. THE DATE BEING THE SAME, AS AGREED IN THE DRAFT AGREEMENT FI LED WITH THE APPLICATION MADE TO RBI, THEREFORE, THE OBSERVATIONS MADE BY TH E LD. CIT(A) THAT THERE WAS NO TACIT AGREEMENT DOES NOT HOLD ANY WATE R. ASSUMING YET NOT ACCEPTING THAT THERE WAS NO AGREEMENT, PAYMENTS MA DE HAVING REGARD TO THE COMMERCIAL EXPEDIENCY NEED NOT NECESSARILY HAVE THEIR ORIGIN IN CONTRACTUAL OBLIGATION. IF THE ASSESSEE, WHICH CARRIES ON A BUSINESS FIND THAT IT IS COMMERCIALLY EXPEDIENT TO INCUR CERTAIN EXPENDITURE DIRECTLY OR INDIRECTLY, IT WOULD BE OPEN TO SUCH AN ASSESSEE TO DO SO NOTWITHSTANDING THE FACT THAT A FORMAL DEED DOES NOT PRECEDE THE IN CURRING OF SUCH EXPENDITURE. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS ASSOCIATED ELECTRICAL AGENCIES 266 ITR 63. CONSIDERING THE FA CTS IN TOTALITY IN THE LIGHT OF THE DECISION CITED HEREINABOVE, WE DO NOT FIND ANY MERIT IN THE ENHANCEMENT MADE BY THE LD. CIT(A). WE, ACCORDINGL Y SET ASIDE THE FINDINGS OF THE LD. CIT(A). THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY THE LD. CIT(A). GROUND NO. 14 IS ACCORDIN GLY ALLOWED. 40. GROUND NO. 15 IS GENERAL IN NATURE AND NEED NO ADJUDICATION. 41. GROUND NO. 16 RELATES TO THE DISALLOWANCE OF T AX AND R&D CESS PAID ON TECHNICAL KNOW-HOW ROYALTY. 42. THE TPO HAS DISALLOWED THE WITHHOLDING TAX AND R&D CESS AND TECHNICAL KNOW-HOW ROYALTY. THE LD. CIT(A) HAS CON FIRMED THE DECISION OF THE TPO HOLDING THAT WITHHOLDING TAX AND R&D CES S CAN ONLY BE ALLOWED ONLY TO THE EXTENT THEY ARE PAYABLE ON ALL OWABLE ROYALTY. AS WE HAVE ALREADY HELD ELSEWHERE THAT ROYALTY PAYMENTS H AS BEEN APPROVED BY RBI AND THEREFORE DESERVES TO BE ALLOWED. ACCORDIN GLY AS THE PAYMENTS HAVE BEEN MADE IN THE LIGHT OF THE AGREEMENT WITH J &J US AND AS PER THE JOHNSON & JOHNSON LTD. 16 APPROVAL/GUIDELINES OF THE RBI, WE DO NOT FIND ANY REASON TO DISALLOW THE TAX AND R&D CESS PAID ON TECHNICAL ROYALTY. WE ACC ORDINGLY DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS ACCOUNT. GR OUND NO. 16 IS ACCORDINGLY ALLOWED. ITA NO. 4070/MUM/2007 A.Y. 2002-03- REVENUES APP EAL 43. GROUND NO. 1 RELATES TO THE DELETION OF THE DIS ALLOWANCE OF RS. 2,02,54,000/- ON ACCOUNT OF ROYALTY PAYMENT ON SALE OF TRADED FINISHED GOODS. 44. THIS ISSUE HAS BEEN DISCUSSED BY THE TPO AT PA RA-5.4. ON PAGE-29 OF HIS ORDER. ACCORDING TO THE TPO FOR THE SERVIC ES PROVIDED BY J&J USA, THE COMPENSATION GETS COVERED IN BRAND ROYALT Y. THEREFORE, TECHNICAL KNOW-HOW ROYALTY IS NOT REQUIRED TO BE PA ID FOR THE TRADED PRODUCTS. THE TPO COMPUTED THE ROYALTY AT THE RATE OF 2% AT RS. 202.54 LACS AND DISALLOWED THE SAME. 45. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA-5 ON PAGE- 6 OF HIS ORDER. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT EVEN IF THE P RODUCT UNDER CONSIDERATION ARE OLD THAT DOES NOT DEBAR THE ASSES SEE FROM PAYING THE ROYALTY NOW. IT WAS FURTHER CONTENDED THAT THE ASS ESSEE CONTINUES TO GET NEW PRODUCTS FROM TIME TO TIME AND ALSO GETS UPDATE S ON EXISTING PRODUCTS. THE ASSESSEE POINTED OUT THAT THE ALLEGA TION OF THE TPO THAT THE ROYALTY IS COVERED BY BRAND ROYALTY DOES NOT HO LD ANY WATER AS THERE IS NO CO-RELATION BETWEEN THE TWO. IT WAS CLAIMED THAT BRAND ROYALTY IS PAID FOR USE OF THE BRAND NAMES OWNED BY J&J USA WH EREAS THE ROYALTY FOR TECHNICAL SERVICES AND KNOW-HOW IS PAID APART F ROM MANUFACTURING RIGHTS ON THE KNOW HOW RELATING TO SALE, DISTRIBUTI ON AND MARKETING, JOHNSON & JOHNSON LTD. 17 THEREFORE, IT IS INCORRECT TO SAY THAT THIS ROYALTY IS INCLUDED IN BRAND ROYALTY. 46. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS IN THE LIGHT OF THE AGREEMENT BETWEEN THE ASSESSEE AND J&J USA, THE LD. CIT(A) WAS CONVINCED THAT PAYMENT OF ROYALTY ON TRADED GOODS I S AN INTEGRAL PART OF THE AGREEMENT DT. 14.3.2002 BETWEEN J&J INDIA AND J&J USA AND ACCORDINGLY DELETED THE ADDITIONS MADE BY THE TPO. 47. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTED THE FINDINGS OF THE TPO. 48. THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN REF ERRED TO THE AGREEMENTS ENTERED INTO BETWEEN J&J INDIA AND J&J U SA FOR PAYMENT OF TECHNICAL/MARKETING KNOW-HOW ROYALTY. IT IS THE SA Y OF THE LD. COUNSEL THAT THE TPO CANNOT DICTATE TO THE ASSESSEE AS TO H OW IT SHOULD CONDUCT ITS BUSINESS AND THE EXPENDITURE THE ASSESSEE CAN INCUR . TO SUBSTANTIATE, THE LD. COUNSEL RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF SC ENVIRO AGO INDIA LTD. VS DCIT IN ITA NOS. 20 57 & 2058/M/2009. 49. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BRO UGHT ON RECORD IN THE FORM OF PAPER BOOK. IN ASSESSEES APPEAL, WE HAVE ALREADY HELD THAT THE AGREEMENTS BETWEEN J&J INDIA AND J&J USA FOR PAYMEN T OF ROYALTY HAS TO BE CONSIDERED IN THE LIGHT OF THE APPROVAL OF T HE RBI. WE DO NOT FIND ANY SUBSTANCE IN THE FINDINGS OF THE TPO THAT THERE IS NO NEED FOR PAYING ROYALTY FOR TECHNICAL/MARKETING KNOW-HOW. WE ALSO DO NOT FIND ANY FORCE IN THE FINDINGS OF THE TPO THAT THIS ROYALTY IS DEE MED TO BE INCLUDED IN JOHNSON & JOHNSON LTD. 18 THE BRAND ROYALTY. THE LD. CIT(A) HAS RIGHTLY CONS IDERED THE RELEVANT CLAUSES OF THE AGREEMENT BETWEEN J&J INDIA AND J&J USA. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 50. GROUND NO. 2 RELATES TO RESTRICTING TECHNICAL KNOW-HOW ROYALTY TO 1% INSTEAD OF 2% PAID BY THE ASSESSEE RESULTING IN A DISALLOWANCE OF RS. 363.73 LAKHS. 51. THIS ISSUE HAS BEEN CONSIDERED BY THE TPO AT PA RA-5.2 ON PAGE-4 OF HIS ORDER. THE ASSESSEE HAS PAID ROYALTY TO ITS AE IN CONNECTION WITH PROVISION OF TECHNICAL/MARKETING KNOW-HOW AT THE RA TE OF 2%. THE TPO HAS RESTRICTED THE SAME TO 1%. 52. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PA GE-12 PARA-6 OF HIS ORDER. IT WAS STRONGLY CONTENDED BEFORE THE LD. C IT(A) THAT THE TPO HAS NOT PROVIDED ANY SOUND BASIS FOR RESTRICTING THIS R OYALTY. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESS EE, THE LD. CIT(A) WAS CONVINCED THAT THE RESTRICTION BY THE TPO TO 1% IS WITHOUT ANY BASIS AND ALLOWED THE APPEAL. 53. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE TPO. 54. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THA T THE PAYMENT IS BASED AS PER THE AGREEMENT ENTERED INTO BETWEEN J&J INDIA AND J&JUSA. 55. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS. AS WE HAVE ALREADY HELD HEREINABOVE THAT THE PAYMENT O F ROYALTY HAS TO BE CONSIDERED IN THE LIGHT OF THE AGREEMENT BETWEEN TH E ASSESSEE AND J&J JOHNSON & JOHNSON LTD. 19 USA, FOR THE SAME REASONS, WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS AC CORDINGLY DISMISSED. 56. GROUND NO. 3 RELATES TO THE DELETION OF ADDITIO N OF RS. 4,44,03,643/- ON ACCOUNT OF UNACCOUNTED PRODUCTION AND SALES. 57. THIS ISSUE HAS BEEN CONSIDERED BY THE AO AT PAR A-2 ON AGE-2 OF HIS ORDER. DURING THE COURSE OF THE EXAMINATION OF THE BUSINESS ACTIVITIES OF THE ASSESSEE, THE AO OBSERVED THE ISSUE RELATING TO THE PRODUCTION OF VARIOUS ITEMS DIVISION-WISE. AFTER CONSIDERING EAC H DIVISION, THE AO CONSIDERED THE YIELD PERCENTAGE FOR THE YEAR UNDER CONSIDERATION AS EXHIBITED AT PAGE 7 & 8 OF HIS ORDER AND AFTER CONS IDERING THE PERCENTAGE OF YIELD AND CONSUMPTION, THE AO MADE AN ADDITION O F RS. 4,44,04,643/- ON ACCOUNT OF UNACCOUNTED PRODUCTION AND SALES THER EOF. 58. THE ASSESSEE STRONGLY AGITATED THIS ADDITION BE FORE THE LD. CIT(A) AND CIT(A) HAS CONSIDERED THIS ISSUE AT PARA-8 ON P AGE 15 OF HIS ORDER. IT WAS STRONGLY SUBMITTED BEFORE THE LD. CIT(A) THA T REGULAR BOOKS OF ACCOUNT INCLUDING STOCK REGISTER ARE MAINTAINED BY THE ASSESSEE IN RESPECT OF EACH ITEM OF EACH GROUP OF EACH DIVISION. IT WA S FURTHER SUBMITTED THAT THE AO HAS NOT OBSERVED ANYTHING AGAINST MAINTAINEN CE OF THESE RECORDS. NO MISTAKE IDENTIFIED AND NO MANIPULATIONS HAVE BEE N POINTED OUT. THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE ALSO NOT BEE N REJECTED. 59. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS , THE LD. CIT(A) OBSERVED THAT THE AO HAS NOT POINTED OUT ANY MISTAK ES OR MANIPULATIONS IN THE RECORDS MAINTAINED BY THE ASSESSEE NOR HE HA S INVOKED PROVISIONS OF SEC. 145 FOR MAKING THE ADDITION. THE LD. CIT(A ) FURTHER RELIED UPON JOHNSON & JOHNSON LTD. 20 THE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1991-92 AND DELETED THE ENTIRE ADDITIONS. 60. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO. 61. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN SUBMITTED BEFORE THE LD. CIT(A). 62. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1991-92 IN ITA NO. 1146/M/97 WHEREIN THE TRIBUNAL HAS HELD THAT THE PRODUCTION LOSS DEP ENDS ON NUMBER OF FACTORS AND IN ABSENCE OF ANY COMPARABLE TO SHOW TH AT THE LOSS SHOWN BY THE ASSESSEE IS EXCESS AND DECIDED THE APPEAL IN FA VOUR OF THE ASSESSEE. WE FIND THAT NO EVIDENCE OF PURCHASE/SALES OUTSIDE THE BOOKS OF ACCOUNT HAVE BEEN BROUGHT ON RECORD. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GRO UND NO. 3 IS ACCORDINGLY DISMISSED. 63. GROUND NO. 4 RELATES TO THE DELETION OF ADDITIO N ON ACCOUNT OF PUBLICITY EXPENSES BEING EXPENSES ON ADVERTISEMENT FILMS AMOUNTING TO RS. 3,55,73,542/-. 64. THE AO HAS CONSIDERED THIS ISSUE AT PAGE-9 ON P ARA-4 OF HIS ORDER. WHILE SCRUTINIZING THE RETURN OF INCOME. THE AO OBS ERVED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 58.37 CRORES TOWA RDS PUBLICITY EXPENSES AS AGAINST 53.52 CRORES DEBITED IN THE IMMEDIATELY PRECEDING YEAR. ON FURTHER EXAMINATION, THE AO FOUND THAT THESE EXPENS ES ALSO INCLUDE A SUM OF RS. 3,55,73,542/- TOWARDS PURCHASE, COST OF FILM AND OTHER JOHNSON & JOHNSON LTD. 21 PRODUCTION MATERIAL USED FOR PRODUCTION OF ADVERTIS EMENT FILMS AND COMMERCIAL TO BE USED AS TV SPOTS FOR ADVERTISEMENT S. THE AO FURTHER FOUND THAT SIMILAR EXPENSES HAVE BEEN DISALLOWED IN EARLIER YEAR ALSO. FOLLOWING THE FINDINGS OF EARLIER YEARS, THE AO DIS ALLOWED THE EXPENSES. 65. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PAR A-9 ON PAGE-18 OF HIS ORDER AND HAS OBSERVED THAT A SIMILAR ADDITION HAS BEEN DELETED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 1991-92 IN ITA NO. 1146/M/97. FOLLOWING THE FINDINGS OF THE TRIBUNAL, THE LD. CIT (A), DELETED THE ENTIRE ADDITION. 66. BEFORE US, THE LD. DR COULD NOT BRING ANY OTHER DISTINGUISHING FACTS ON RECORD. 67. WE FIND THAT IN ASSESSEES OWN CASE IN EARLIER YEARS, THE TRIBUNAL IN ITA NOS. 145/M/07, 2054/M/03 AND 2055/M/03 HAVE CON SIDERED SIMILAR EXPENSES ARE OF REVENUE IN NATURE. AS NO DISTINGUI SHING FACTS HAVE BEEN BROUGHT ON RECORD, RESPECTIVELY FOLLOWING THE DECIS ION OF THE TRIBUNAL IN ASSESSEES OWN CASE, FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. GROUND NO. 4 IS ACCORDINGLY DISMISSED. 68. GROUND NO. 5 RELATES TO THE DISALLOWANCE ON ACC OUNT OF MODVAT OF RS. 1,65,75,560/-. 69. THIS ISSUE HAS BEEN CONSIDERED IN THE APPEAL FI LED BY THE ASSESSEE IN GROUND NO. 1 TO 3. FOLLOWING OUR OWN FINDINGS IN ASSESSEES APPEAL, THIS ISSUE IS RESTORED BACK TO THE FILES OF THE AO TO BE DECIDED AFRESH AS PER THE DIRECTIONS GIVEN IN ASSESSEES APPEAL. GRO UND NO. 5 IS ALLOWED FOR STATISTICAL PURPOSE. JOHNSON & JOHNSON LTD. 22 70. GROUND NO. 6 RELATES TO THE DISALLOWANCE OF PRO VISION MADE FOR EXECUTIVE RETIREMENT SCHEME. THIS ISSUE HAS BEEN D ECIDED IN ASSESSEES APPEAL VIDE GROUND NO. 4 & 5 WHEREIN WE HAVE HELD T HAT PAYMENT OF ERS IS TO BE ALLOWED ON PAYMENT BASIS. FOLLOWING OUR O WN FINDINGS IN ASSESSEES APPEAL, WE DIRECT THE AO TO ALLOW THE CL AIM OF ERS ON PAYMENT BASIS. THIS GROUND IS PARTLY ALLOWED. 71. GROUND NO. 7 RELATES TO DISALLOWANCE OF 10% OF PAYMENT MADE TO M/S. CRAWFORD BAILEY & CO. AMOUNTING TO RS. 1,11, 807/-. 72. SIMILAR ISSUE CAME UP FOR HEARING IN ASSESSEE S APPEAL BEFORE THE TRIBUNAL IN A.Y. 2001-02 IN ITA NO. 9437/M/04 WHERE IN THE TRIBUNAL HAS DELETED THE ADDITION MENTIONING THAT IN ORDER T O MAKE ANY DISALLOWANCE U/S. 40A(2)(B), IT IS FOR THE AO TO BR ING ON RECORD SOME MATERIAL TO INDICATE THAT THE PAYMENT WAS IN FACT EXCESSIVE HAVING REGARD TO THE FAIR MARKET VALUE OF GOODS OR SERVICES FOR THE LEGITIMATE NEEDS OF THE BUSINESS. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, THE AO HAS DISALLOWED INVOKING PROVISIONS OF SEC. 40A(2)(B ) ON FEES PAID FOR LEGAL COUNSELING. WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION HOLDING THAT FOR THE PAYMENTS FOR LEGAL COUNSELING, IT IS FUTILE TO THINK OF COMPARABLES BECAUSE COUNSELS MAY NOT CHARGE STANDAR D FEE BUT MAY CHARGE ACCORDING TO THE ISSUE INVOLVED. THE LD. CI T(A) FURTHER OBSERVED THAT IF THE AO WANTED TO DISALLOW ON THE GROUND OF EXCESSIVE PAYMENT, HE OUGHT TO HAVE ESTABLISHED EXCESSIVENESS OF THE PAYMENT. THIS HAS NOT BEEN DONE. CONSIDERING THE DECISION OF THE TRIBUNA L IN ASSESSEES OWN CASE, IN THE LIGHT OF THE OBSERVATIONS MADE BY THE LD. CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF T HE LD. CIT(A). GROUND NO. 7 IS ACCORDINGLY DISMISSED. JOHNSON & JOHNSON LTD. 23 73. GROUND NO. 8 RELATES TO THE DISALLOWANCE OF 10 % OF PAYMENT MADE TO CROMPTON CORPORATION AMOUNTING TO RS. 20,56,484 /-. THOUGH THE ISSUE IS IDENTICAL TO THE ISSUE RAISED IN GROUND NO. 7 HEREINABOVE, A PERUSAL OF THE RECORD SHOWS THAT THIS RELATED PARTY TRANSACTION IS ALSO AN INTERNATIONAL TRANSACTION. THIS ASPECT HAS NOT BE EN LOOKED UPON BY THE LOWER AUTHORITIES. THEREFORE, IN THE INTEREST OF N ATURAL JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF TH E AO. THE AO IS DIRECTED TO EXAMINE THIS TRANSACTION IN THE LIGHT OF THE PRO VISIONS FOR INTERNATIONAL TRANSACTION. THE ASSESSEE IS DIRECTED TO ESTABLISH THAT THE PAYMENTS HAVE BEEN MADE AT ARMS LENGTH PRICE. GROUND NO. 8 IS A LLOWED FOR STATISTICAL PURPOSE. 74. GROUND NO. 9 RELATES TO THE ADHOC DISALLOWANCE OF TRAVELLING EXPENSES AMOUNTING TO RS. 78,49,766/-. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PARA-10 ON PAGE 13 OF HIS ORDER. THE AO WAS OF THE FIRM BELIEF THAT THE ELEMENT OF PERSONAL EXPENDITURE CREEPING INTO SUCH EXPENSES CANNOT BE RULED OUT AND ACCORDINGLY MADE AN ADHOC D ISALLOWANCE OF 10% RESULTING INTO AN ADDITION OF RS. 78,49,766/-. 75. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PAR A-16 ON PAGE-21 OF HIS ORDER. IT WAS STRONGLY CONTENDED BEFORE THE LD . CIT(A) THAT THE DISALLOWANCE MADE BY THE AO IS DONE ON ADHOC MANNER WITHOUT ANY SOUND BASIS. THE LD. CIT()A) OBSERVED THAT WHEN TH E AO TALKS OF PERSONAL EXPENSES, HE IS TALKING OF POSSIBILITIES. THE AO HAS NOT BROUGHT ON RECORD ANY INSTANCES OF PERSONAL EXPENSE S. THE LD. CIT(A) WAS CONVINCED THAT THE AO IS PROCEEDING ON HYPOTHET ICAL IDEAS AND CONJECTURES. THE LD. CIT(A) HELD THAT THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY DELETED THE ENTIRE ADDITION. JOHNSON & JOHNSON LTD. 24 76. THE LD. DR SUPPORTED THE ASSESSMENT ORDER. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEF ORE THE LOWER AUTHORITIES. 77. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE IS A COMPAN Y AND THEREFORE IN SUCH A CASE DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES CANNOT BE SUSTAINED. THE AO HAS MADE AN ADHOC DISALLOWANCE PRESUMING THA T SUCH EXPENSE HAVE PERSONAL ELEMENT. WE DO NOT FIND ANY LOGIC/BA SIS FOR MAKING DISALLOWANCE WHICH ARE BASED ON PRESUMPTIONS AND SU RMISES. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 9 IS ACCORDINGLY DISMISSED. 78. GROUND NO. 10 RELATES TO THE DELETION OF ADDIT ION MADE ON ACCOUNT OF CLUB MEMBERSHIP FEES AMOUNTING TO RS. 40,11,000/ -. 79. AN IDENTICAL ISSUE CAME UP FOR HEARING IN ASSES SEES OWN CASE BEFORE THE TRIBUNAL IN A.Y. 2001-02 IN ITA NO. 9106 /M/04 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE AS SESSEE RELYING ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF OTIS ELEVATOR 195 ITR 682 (BOM). FACTS AND CIRCUMSTANCES BEING IDENT ICAL, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION IN ASSESSEES OWN CASE, GROUND NO. 10 IS DISMISSED. 80. GROUND NO. 11 RELATES TO 10% ADHOC DISALLOWANCE OF EXPENSES INCURRED ON PROFESSIONAL SPONSORSHIP AMOUNTING TO R S. 43,64,470/-. 81. AN IDENTICAL ISSUE CAME UP FOR HEARING BEFORE T HE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2001-02 IN ITA NO. 910 6/M/04 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE AS SESSEE RELYING ON THE JOHNSON & JOHNSON LTD. 25 PAST JURISPRUDENCE ON THE ISSUE OF THAT ONCE THE E XPENDITURE IS HELD TO BE FOR BUSINESS PURPOSES, THERE IS NO QUESTION OF ADHO C DISALLOWANCE OF SUCH EXPENSES BY TREATING SAME AS NON-BUSINESS EXPENDITU RE. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE , GROUND NO. 11 IS DISMISSED. 82. GROUND NO. 12 RELATES TO DEPRECIATION ON TESTIN G EQUIPMENTS AMOUNTING TO RS. 34,50,441/-. THIS ISSUE HAS BEEN CONSIDERED BY THE AO AT PARA-14 ON PAGE-17 OF HIS ORDER AND THE LD. CIT( A) HAS CONSIDERED THE SAME AT PARA-20 ON PAGE-25 OF HIS ORDER. 83. A SIMILAR ISSUE CAME UP FOR HEARING BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2000-01 AND 2001-02 IN ITA NOS. 2774 & 9106/M/04 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISS UE IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF NR JET ENTERPRISES LTD. IN ITA NO. 4474/M/04. FACTS AND C IRCUMSTANCES BEING IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE GROUND NO. 12 IS DISMISSED. 84. GROUND NO. 13 RELATES TO EXCLUSION OF EXCISE DU TY AND TRADE DISCOUNT FROM TOTAL TURNOVER FOR DEDUCTION U/S. 80H HC. THIS ISSUE HAS BEEN CONSIDERED BY THE AO AT PARA-15A ON PAGE-17 OF HIS ORDER WHEREIN THE AO HAS OBSERVED THAT FOR THE WORKING OF DEDUCT ION U/S. 80HHC. THE ASSESSEE HAS NOT INCLUDED THE FIGURE OF EXCISE DUTY AT RS. 57,35,49,000/- AND DISCOUNT AT RS. 11,89,09,000/- AS PART OF TOTAL TURNOVER. THE ASSESSEE WAS ASKED TO EXPLAIN ITS STAND. THE ASSESSEE RELIE D ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SUD ERSHAN CHEMICALS LTD. 245 ITR 769. THE AO REJECTED THE ASSESSEES P LEA. THE AO WAS OF JOHNSON & JOHNSON LTD. 26 THE FIRM BELIEF THAT EXCISE DUTY AND DISCOUNT FORM INTEGRAL PART OF TOTAL TURNOVER. 85. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PARA-22 ON PAGE -26 OF HIS ORDER. BEFORE THE LD. CIT(A), THE ASSESSEE ONCE AGAIN RELI ED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF SUDERSHAN CHEMICALS (SUPRA). THE LD. CIT(A) OBSERVED THAT IN ASSESSEES OWN CASE IN A.Y. 2000-01 HIS PREDECESSOR HAS FOLLOWED THE DE CISION OF THE HONBLE JURISDICTIONAL HIGH COURT. THE LD. CIT(A) ACCORDINGLY FOLLOWED THE DECISION OF HIS PREDECESSOR AND DELETED THE ADD ITIONS MADE BY THE AO. 86. BEFORE US, THE LD. DR SUPPORTED THE FINDINGS OF THE AO. 87. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 88. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2000-01 AND 2001-02 IN ITA NOS. 2774 & 9106/M/04 WHEREIN THE TRIBUNAL HAS CONSIDERED AND FOLLOWED THE FINDINGS OF THE HONBLE SUPREME COURT IN THE CASE OF LAXMI MACHINE WORKS 290 ITR 667. FACTS AND CIRCUMSTANCES BEING I DENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, IN THE LIGHT OF THE FINDINGS OF THE HONBLE S UPREME COURT IN THE CASE OF LAXMI MACHINE WORKS (SUPRA), FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. GROUND NO. 13 IS ACCORDINGLY DISMISSED. JOHNSON & JOHNSON LTD. 27 89. GROUND NO. 14 RELATES TO REDUCTION OF 90% OF RE COVERY OF OTHER EXPENSES AGGREGATING TO RS. 3,10,86,000/- FROM BUSI NESS PROFITS WHILE COMPUTING DEDUCTION U/S. 80HHC. 90. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PARA -15B ON PAGE-17 OF HIS ORDER AND THE SAME HAS BEEN CONSIDERED BY THE L D. CIT(A) AT PARA-26 ON PAGE-31 OF HIS ORDER. THIS ISSUE RELATING TO TH E NETTING OFF OF EXPENSES INCURRED AGAINST THE INCOME EARNED HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATE CAPSULES PVT. LTD. VS CIT 343 ITR 89. FACTS ARE IDENTICAL, THE AO IS DIRECTE D TO FOLLOW THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASS OCIATE CAPSULES (SUPRA) AND ALLOW NETTING OFF OF EXPENSES INCURRED AGAINST THE INCOME EARNED. GROUND NO. 14 IS ALLOWED FOR STATISTICAL P URPOSES. 91. GROUND NO. 15 RELATES TO REDUCTION OF 90% OF RE COVERY OF R&D EXPENSES AGGREGATING TO RS. 2,44,21,000/- FROM BUSI NESS PROFITS WHILE COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. THIS IS SUE IS IDENTICAL TO THE ISSUE RAISED VIDE GROUND NO. 14. THIS IS ALSO REST ORED BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO ALLOW NETTING OFF O F EXPENSES IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT MENTI ONED HEREINABOVE. GROUND NO. 15 IS ALLOWED FOR STATISTICAL PURPOSES. 92. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AND THE CROSS APPEAL FILED BY THE REVENUE ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2013 JOHNSON & JOHNSON LTD. 28 / ' 0,-. 1 2 3 28 TH AUGUST, 2013 , ' 4( 5 (I.P. BANSAL ) (N. K. BILLAIYA ) /ACCOUNTANT MEMBER / ACCOUNTANT MEMBER ( MUMBAI; 2 DATED 28 /08/2013 . . ./ RJ , SR. PS !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. 6) ( ) / THE CIT(A)- 4. 6) / CIT 5. 784 ')90 , * 90. , ( / DR, ITAT, MUMBAI 6. 4: ;( / GUARD FILE. & / BY ORDER, #7 ) ') //TRUE COPY// ' / &( ) (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI