ADDL CIT RG 6(1), MUMBAI V. BIDDLE SAWYER LTD, MUMBAI

ITA 4180/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93070 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MILIN THAKURE
• Keywords: Depreciation; Opportunity of being heard; Fair market value
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3679/MUM/2012 ASSESSMENT YEAR: 2008-09 M/S BIDDLE SAWYER LIMITED, 252, GSK HOUSE, DR. A.B. ROAD, WORLI, MUMBAI-400030 / VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-6(1), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AAACB2028C ITA NO.4180/MUM/2012 ASSESSMENT YEAR: 2008-09 THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-6(1), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S BIDDLE SAWYER LIMITED, 252, GSK HOUSE, DR. A.B. ROAD, WORLI, MUMBAI-400030 ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO.AAACB2028C ! ' / ASSESSEE BY SHRI MILIN THAKURE # / REVENUE BY SHRI YOGESH KAMAT-DR $ #% & ' ' / DATE OF HEARING : 29/06/2015 & ' ' / DATE OF ORDER: 31/07/2015 M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR 2008-0 9 CHALLENGING THE IMPUGNED ORDER DATED 30/03/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI,. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVENU E (ITA NO.4180/MUM/2012), WHEREIN, FIRST GROUND RAISED PERTAINS TO DELETING THE ADDITION MADE U/S 40A(2)(A ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON ACCOU NT OF EXCESS PAYMENT OF RS.46,63,000/-, PAID BY THE ASSES SEE TO THE PARENT COMPANY GLAXO SMITKLINE, WITHOUT ANY BAS IS FOR ALLOCATION OF EXPENSES. THE CRUX OF ARGUMENT ADVAN CED BY DR. YOGESH KAMAT, LD. DR, IS IDENTICAL TO THE GROUN D RAISED BY SUBMITTING THAT THE LD. FIRST APPELLATE AUTHORIT Y DELETED THE ADDITION WITHOUT ASSIGNING ANY REASON IGNORING THE FACT THAT AN EXCESS PAYMENT WAS MADE BY THE ASSESSEE TO THE PARENT COMPANY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI MILIN THAKURE, DEFENDED THE CONC LUSION ARRIVED AT IN THE IMPUGNED ORDER. IT WAS ALSO CON TENDED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN OWN CASE OF THE ASSESSEE FOR AY 2007-08 AND ALSO THE DECISION OF THE LD. FIRST APPELLATE AUTHOR ITY FOR AY 2009-10. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 3 ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL DATED 11/07/2012 (IT A NO.3891/MUM/2011) FOR READY REFERENCE AND CONSIDERATION:- 3. BRIEF FACTS OF THE CASE : I). ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICAL PRODUCTS, FILED ITS RET URN OF INCOME ON 29.10.2007 DECLARING TOTAL INCOME OF RS . 16.17 CRORES. II). APPELLANT COMPANY DOES NOT HAVE EMPLOYEES. THE PERSONNEL OF GLAXO SMITHKLINE PHARMACEUTICALS LTD. (G SK) MANAGE THE COMMON ACTIVITIES FOR BOTH GSK AND THE APPELLANT COMPANY. COMMON ACTIVITIES INCLUDE FUNCTI ONS SUCH AS LEGAL, INFORMATION TECHNOLOGY, ACCOUNTS, TAX ATION AUDIT AND ADMINISTRATION ETC. III). COSTS OF VARIOUS DEPARTMENTS ARE ACCOUNTED IN GS K UNDER VARIOUS COST CENTRE CODES-FOR EXAMPLE COST CENTRE CODE 210307023 REPRESENTS CORPORATE ACCOUNTS DEPARTMENT OF GSK WHICH PREPARES THE BALANCE SHEET, PRO FIT AND LOSS ACCOUNT, TRIAL BALANCE ETC. FOR BOTH THE COM PANIES AND ENSURES THAT THESE ARE AUDITED. SIMILARLY, THE COS T CENTRE CODE 210307034 REPRESENTS TAXATION DEPARTMENT WHICH IS RESPONSIBLE FOR PREPARING AND FILING THE TAX RETURNS OF B OTH COMPANIES, REPRESENTING FOR ASSESSMENTS, FLING APPEALS ETC. IV). COPIES OF COST ALLOCATION AND COMMON COSTS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. V). AS PER THE AGREEMENT DATED 29.12.2000, ENTERED INT O BETWEEN GSK AND THE APPELLANTS, GSK HAD AGREED TO CA RRY OUT SOME FUNCTIONS NECESSARY FOR COORDINATING THE ACTI VITIES RELATING TO MANUFACTURE, PLANNING ETC OF THE APPELLAN TS. VIDE THE SAID AGREEMENT, IT WAS AGREED THAT GSK WILL CROSS CHARGE M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 4 THE APPELLANT COMPANY, THE ACTUAL COST OF CARRY OUT T HE FUNCTIONS ON AN AGREED PERCENTAGE. VI). ACCOUNTS DEPARTMENT OF GSK EXTRACTS THE TOTAL CO ST OF EACH DEPARTMENT BASED ON THE ABOVE COST CENTRES AND U SES THE ESTIMATE TIME PROVIDED BY THE DEPARTMENTAL HEAD TO CALCULATE THE APPORTIONED COST FOR THE APPELLANT COMP ANY. THE AMOUNT CROSS CHARGED FOR THE TAXATION DEPARTMENT IS 10% AND FOR THE REST OF THE DEPARTMENT IS 5% FOR THE WO RK RELATING THE APPELLANTS. 4. DURING THE ASSESSMENT PROCEEDINGS AO HELD THAT THE APPELLANT COULD NOT PROVIDE THE ACTUAL BASIS OF TAK ING 5% OR 10% OF THE TOTAL EXPENSES TO BE ALLOCATED TO THEM, THAT THE ESTIMATED RATE OF PERCENTAGE WAS ONLY ARBITRARY AND WITHOUT ANY BASIS.AO APPORTIONED THE COMMON COSTS ON THE BASIS OF TURNOVER OF THE TWO COMPANIES I.E. GSK AND T HE ASSESSEE COMPANY. HE DETERMINED THE PERCENTAGE OF EXPENDITURE @ 2. 01%.ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). 4.1. AFTER CONSIDERING THE SUBMISSION OF THE APPELLAN T COMPANY AND OBSERVATIONS OF THE AO HE HELD THAT THE ACTION OF THE AO IN DETERMINING THE PERCENTAGE OF EXPENDITURE @ 2.01% ON THE BASIS OF TURNOVER OF THE COMPANIES- GSK AND THE ASSESSEE COMPANY - WAS NOT CORRECT, THAT THE PERCENTAGE OF APPELLANTS TURN OVER TO THAT OF GSK WAS NOT A BENCHMARK FOR APPORTIONING THE EXPENDITURE IN PROPORTI ON TO THE TURNOVER OF THE COMPANIES, THAT THE TURNOVER OF GSK AND THAT OF THE APPELLANT AROSE FROM SALE OF DIFFERENT PRODUCTS, WHICH WERE DISTINCT IN TERMS OF NATURE, PRICE ETC. AND HENCE, NOT COMPARABLE IN ANY WAY, THAT BOTH THE APPELLANT AS WELL AS GSK WERE ASSESSABLE TO TAX AT T HE SAME RATE OF TAX, THAT THE A.O.S VIEW THAT THE APPELLANT COMPANY HAD MADE EXCESS PAYMENT ON COMMON CHARGES, WOULD NOT PROVE THAT THERE WAS ANY LOSS TO THE REVENUE. FOLLOWI NG THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GLAXO SMITHKLINE ASIA (P) LTD.[SLP (CIVIL NO(S).181 21/2007] M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 5 HE HELD THAT IN THE INSTANT CASE THERE WAS NO TAX EV ASION I.E., LOSS OF REVENUE AND ENTIRE EXERCISE WAS REVENUE NEUTRAL . ACCORDINGLY, HE HELD THAT THE STAND TAKEN BY THE AO IN TREATING THE PAYMENT MADE BY THE ASSESSEE AS UNREASON ABLE WAS INCORRECT AND THAT THE SAME WAS NOT SUSTAINABLE. DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.47.28 LA CS MADE U/S. 40A(2)(A) BY THE AO WAS DELETED. 4.2. BEFORE US, DR SUBMITTED THAT THERE WAS NO BASIS FOR FAA TO ACCEPT THE CONTENTION OF THE ASSESSEE, THAT NO CORRESPONDENCE WAS PRODUCED BEFORE THE AO FOR ALLOWABIL ITY OF EXPENDITURE @ 5 TO 10%, THAT NO EXERCISE WAS CARRIED OUT BY THE FAA AS WHETHER THE EXERCISE WAS TAX NEUTRAL.AR REFERRED TO VARIOUS CLAUSES OF AGREEMENT ENTERED INTO BETWEEN GSK AND THE ASSESSEE. PAGE NOS. 5,6,7,13 & 14 OF THE PAPER BOOK WERE ALSO REFERRED TO. IN THIS REGARD AR AL SO RELIED UPON THE CASES OF V.S.DEMPO & CO. DELIVERED BY THE GOA BENCH OF HONBLE HIGH COURT OF BOMBAY AND INDO S AUDI SERVICES(310ITR306).AR REFERRED TO THE CIRCULAR NO. 6P OF 6TH JULY,1968 OF THE CBDT. IN THE CASE OF CIT VS. GLAXO SMITHKLINE ASIA (P) LTD. HONBLE 4.3. BEFORE DECIDING THE ISSUE BEFORE US, WE WOULD LI KE TO CONSIDER THE FOLLOWING BASIC PRINCIPLES ENUMERATED BY THE JUDICIARY WITH REGARD TO SECTION 40A(2) OF THE ACT I). FOR INVOKING THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT, THE INGREDIENTS TO BE SATISFIED ARE : (I) THE AS SESSEE SHOULD INCUR AN EXPENDITURE IN RESPECT OF WHICH PAYMEN T HAS BEEN OR IS TO BE PAID TO ANY PERSON ; (II) IN THE AO S OPINION, SUCH EXPENDITURE SHOULD BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, S ERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LE GITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE O R THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM ; AND (I II) THE EXPENDITURE, WHICH IS CONSIDERED BY THE AO TO BE EXCESSIVE OR UNREASONABLE, SHALL NOT BE ALLOWED AS A DEDUCTION. M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 6 II). THE WORDS THE AO IS OF THE OPINION INDICATE T HAT THE OPINION MUST BE FORMED BY THE AO AND IT IS OF COURSE , IMPLICIT THAT THE OPINION MUST BE AN HONEST OPINION , HAVING BEEN FORMED BASED ON THE CIRCUMSTANCES AVAILABLE BEFO RE HIM. THERE SHOULD BE SOME MATERIAL AVAILABLE WITH HIM FOR INVOKING THE SAID SECTION, SO AS TO DISALLOW OR REFU SE TO DEDUCT THE EXCESSIVE OR UNREASONABLE EXPENDITURE MENTIONED THEREUNDER. III). BEFORE INVOKING THE POWERS CONFERRED BY THE SECT ION, AO SHOULD AFFORD AN OPPORTUNITY TO THE ASSESSEE TO DISCH ARGE HIS BURDEN AND SATISFY THE REVENUE THAT THE EXPENDIT URE INCURRED BY HIM IN CONNECTION WITH PURCHASES OR SERVICES WAS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES. IV). CONCLUSION ABOUT INCURRING HIGHER OR EXCESSIVE PRI CE SHOULD BE ARRIVED AT AFTER COMPARING THE MARKET VALUE OF THE RELEVANT GOODS/SERVICES AS AT THE DATE OF THEIR RES PECTIVE PURCHASES/AVAILING AND NOT AT THE BASIS OF RANDOM PE RIODS OF THE AY CONCERNED. V). IF THE AO FAILS TO RECORD A CLEAR FINDING THAT THE EXPENDITURE INCURRED WAS EITHER EXCESSIVE OR UNREASONABLE , HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS OR SERVICES RENDERED WHICH WERE OF A SPECIFIC NATURE, HIS O RDER IS LIABLE TO BE QUASHED. 4.4. TAKING IN TO CONSIDERATION OF THE ABOVE BROAD P RINCIPLES WITH REGARD TO SEC.40A(2) OF THE ACT WE ARE OF THE OPI NION THAT THE FAA HAS DECIDED THE ISSUE IN RIGHT PERSPECTI VE. AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT PAYMENTS MADE TO GSK WERE NOT GENUINE OR THAT GSK HAD NOT RENDERED SERVICES TO THE ASSESSEE. COMPARABLE FACTS AND FIGURES, BASED ON PREVALENT MARKET RATES, HAVE NOT BEEN BROUGHT ON RECORD TO ESTABLISH THE BASIC REQUIREMENT OF INVOKING THE PROVISIONS OF THE SECTION THAT PAYMENTS MADE BY THE ASSESSEE FOR THE SERVICES AVAILED WERE EXCESSI VE OR UNREASONABLE. M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 7 AS A RESULT, WE UPHOLD THE ORDER OF THE FAA. FIRST GROUND OF APPEAL FILED BY THE AO STANDS DISMISS ED. 2.2. WE FIND THAT WHILE DELIBERATING UPON THE ISSU E WITH RESPECT TO SECTION 40A(2), THE TRIBUNAL FOR AS SESSMENT YEAR 2007-08 FOUND THAT THE ASSESSING OFFICER DID N OT BRING ANY MATERIAL ON RECORD TO PROVE THAT THE PAYMENTS S O MADE WERE NOT GENUINE OR THE PARENT COMPANY DID NOT REND ER ANY SERVICE TO THE ASSESSEE. THUS, FOLLOWING THE FINDI NG OF THE TRIBUNAL THAT TOO IN THE CASE OF ASSESSEE ITSELF, W E FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS), CONSEQUENTLY, THERE IS NO MER IT, ON THIS ISSUE, IN THE APPEAL OF THE REVENUE, THEREFORE , THIS GROUND IS DISMISSED. 3. NEXT GROUND RAISED BY THE REVENUE PERTAINS TO DELETING THE DISALLOWANCE OF MARKETING COMMISSION, AMOUNTING TO RS.3,97,06,510/- PAID TO GSK WHICH AS PER THE REVENUE IS EXCESSIVE AND UNJUSTIFIED. THE LD. C OUNSEL FOR THE ASSESSEE CONTENDED THAT THIS ISSUE IS ALSO COVE RED BY THE AFORESAID ORDER DATED 11/07/2012 OF THE TRIBUNAL. THE LD. DR, CONSENTED THE SAME TO BE CORRECT. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL ON THE ISSUE IN HAND FOR READY REFERENCE AND CONSIDERATION:- 7. LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF R S. 3.67 CRORES BEING EXPENDITURE UNDER THE HEAD MARKETING COMMI SSION INCURRED FOR THE PURPOSE OF BUSINESS AND PAID TO THE P ARENT M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 8 COMPANY OF THE ASSESSEE. DURING THE ASSESSMENT PROCEE DINGS, AO FOUND THAT ASSESSEE HAD PAID MARKETING COMMISSION TO GSK. AFTER OBTAINING EXPLANATION OF THE ASSESSEE IN THIS REGARD, AO HELD THAT ASSESSEE THE ASSESSEE WAS PAYING CONSIGNM ENT SALES AGENTS COMMISSION FOR THE REASON THAT GSK WAS HAVING WIDE NETWORK OF CONSIGNMENT AGENT WHICH BENEFITED TO THE ASSESSEE ALSO, THAT THE ASSESSEE WAS ALSO BEARING COMMON COST TO GSK FOR DIFFERENT MANPOWER EXPENSES, THAT THE ALLOWABILITY OF MARKETING COMMISSION HAD TO BE SEEN IN VIEW OF SECTION 40(A)( 2), THAT ALL PRODUCTS OF THE ASSESSEE WERE SOLD THROUGH GSK TO VARI OUS CONSIGNMENT AGENCIES. INVOKING THE PROVISIONS OF THE SECTION 40A(2) OF THE ACT HE HELD THAT ASSESSEE CLAIM MADE BY THE ASSESSEE WAS NOT JUSTIFIED BECAUSE THE ASSESSEE WAS BEARING ITS SHARE ON COMMON COST ALSO WHICH INCLUDED EXPENSES ON ACCOUNT OF ADMINISTRATION & GMS (GOODS MARKETING SERVICES). DECIDING THE APPEAL FILED BY THE ASSESSE FAA HELD THAT THE ASSESSING OFFICER HAD WRONGLY INTERPRETED THE GMS AS GOODS, MARKETING AND SERVICES AS A PART OF COMMON COST AND TH EREBY HELD THAT COMMON COST CHARGES WERE INCLUSIVE OF MARKET ING COMMISSION, THAT THE AO HAD COMPLETELY IGNORED THE F ACT THAT HE HAD CONSIDERED THE ITEMS OF EXPENDITURE INCLUDED IN THE COMMON COST WHILE MAKING DISALLOWANCE, THAT AO DID NOT CONSIDER THE FACT THAT THE APPELLANT COMPANY HAD ENT ERED INTO A SEPARATE AGREEMENT WITH GSK FOR THE PURPOSE OF MARKETI NG COMMISSION, THAT THE ENTIRE EXERCISE WAS REVENUE NEUTRA L, THAT THE MARKETING COMMISSION EXPENSES WERE INCURRED BY THE APPELLANT AS PER AGREEMENT. 7.1 BEFORE US DR RELIED UPON ORDER OF THE AO AND SUBMI TTED THAT COMMISSION PAYMENT WAS HIT BY THE PROVISIONS OF SECT ION 40A(2) OF THE ACT. AR SUBMITTED THAT THE APPELLANT COMPANY DID NOT HAVE ANY EXPERTISE OF ITS OWN TO MARKET ITS PRODUCTS, THAT IT HAD ENTERED INTO AGREEMENT WITH GSK, THAT GSK ALSO PROVID ED THE COMPANY WITH ALL MARKETING AND PROMOTIONAL SUPPORT TH ROUGH VISITS BY THEIR FIELD STAFF, THAT DETAILS OF THE MARK ETING COMMISSION PAID HAVE BEEN FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT ADDITION WAS MADE IN TH E CASE OF M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 9 GSK FOR SHORT CHARGE FORM THE ASSESSEE. AR REFERRED TO PG. NO. 171 TO 174 OF THE PAPER BOOK. 7.2 AFTER HEARING THE RIVAL SUBMISSION, WE ARE OF THE O PINION THAT NO INTERFERENCE IS CALLED FOR TO DISTURB THE ORDER OF TH E FAA. FAA HAS GIVEN A CATEGORICAL FINDING THAT A SEPARATE AGREEM ENT WAS ENTERED INTO BY THE ASSESSEE WITH GSK FOR THE PURPOSE OF MARKETING COMMISSION. ASSESSEE HAD INCURRED THE EXPEN DITURE AS PER THE SAID AGREEMENT. AO HAD NOT DOUBT THE GENUI NENESS OF THE AGREEMENT. THOUGH AO HAS HELD THAT MARKETING COMM ISSION WAS EXCESSIVE AND JUSTIFIED AS PER THE PROVISIONS OF SEC. 40 A(2) OF THE ACT, YET HE HAS NOT FURNISHED ANY DATA FOR SU PPORTING HIS STAND. MERE OBSERVING THAT PAYMENT IS EXCESSIVE IS NO T SUFFICIENT TO DISALLOW THE EXPENDITURE. PRINCIPLES FOR INVOKING P ROVISIONS OF SECTION 40A(2) OF THE ACT, MENTIONED AT PARAGRAPH 4.3 ARE APPLICABLE HERE ALSO. WE FIND THAT IT IS NOT A FIT C ASE FOR APPLYING SECTION 40A(2). IT IS ALSO NOTEWORTHY THAT THAT AO O F GSK HAS HELD THAT THERE WAS SHORT CHARGE AMOUNTING TO RS.3.44 CRORES BY GSK FROM THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. AS STATED EARLIER, PAYMENT WAS MADE IN PURSUANCE OF THE AGREEMENT, SO TO REJECT IT SOME POSI TIVE EVIDENCE WAS REQUIRED. WE DO NOT FIND ANY SUCH EVIDEN CE IN THE ORDER OF THE AO. GROUND NO.4 STANDS DISMISSED. 3.1. THE STAND OF THE ASSESSING OFFICER WAS THAT T HE PRODUCTS OF THE ASSESSEE WERE SOLD THROUGH GSK TO V ARIOUS CONSIGNMENTS AGENCIES AND GSK ISSUED SALES INVOICES FOR THE PRODUCTS OF THE ASSESSEE WITH THE NARRATION AS SALE ON CONSIGNMENT BASIS. THUS, THE ASSESSING OFFICER HE LD THAT THE ASSESSEE COMPANY IS BEARING ITS SHARES IN COMMO N COSTS WHICH INCLUDES EXPENSES ON ACCOUNT OF ADMINISTRATIO N AND GOODS MARKETING SERVICES THEREBY HOLDING THAT THE M ARKET COMMISSION IS EXCESSIVE, THUS, HE DISALLOWED THE SA ME. THE M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 10 AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BY CLAIMIN G THAT THE ASSESSEE IS NOT HAVING EXPERTISE IN MARKETING O F ITS PRODUCTS AND THUS ENTERED INTO AN AGREEMENT WITH GS K TO MARKET ITS PRODUCTS SO AS TO IMPROVE THE SALES AND MARKET SHARE. THE COPY OF THE AGREEMENT WERE EXAMINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS IS EVIDENT FROM PAGE 12 & 13 OF THE IMPUGNED ORDER, WHICH ARE NOT B EING REPEATED FOR THE SAKE OF BREVITY. THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) HAS ALREADY EXAMINED THE ISSUE AND FOUND THAT IDENTICAL ISSUE FOR A.Y. 2007-08 WAS DEC IDED IN FAVOUR OF THE ASSESSEE, WHICH HAS BEEN REPRODUCED A S PAGE- 15 OF THE IMPUGNED ORDER. RELIANCE HAS BEEN PLACED UPO THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS INDO SAUDI SERVICES (TRAVEL) P. LTD. 310 ITR 306 AS WELL AS THE DECISION FROM THE HONBLE APEX COURT IN CIT VS GLAXO SMITKLINE (SLP) (CIVIL NO.18121/2007). IN VIEW OF T HIS FACTUAL MATRIX AND THE UNCONTROVERTED FINDING CONTA INED IN THE IMPUGNED ORDER, WE FIND NO INFIRMITY IN THE IMP UGNED ORDER. IT IS AFFIRMED. 4. THE NEXT GROUND PERTAINS TO DELETING THE DISALLOWANCE OF PAYMENT OF SECURITY CHARGES OF RS.1,38,000/- PAID FOR FACTORY PREMISES AT GOREGAON . THE CRUX OF ARGUMENT ADVANCED BY LD. DR IS THAT RELIEF WAS GRANTED TO THE ASSESSEE WITHOUT APPRECIATING THAT N O BUSINESS ACTIVITIES WERE CARRIED OUT FROM THE SAID PREMISES. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE , DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 11 RELIANCE WAS PLACED UPON THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN CHEMICAL WORKS LTD. VS CIT 1 TAXMAN 420 (BOM.), GOODLAS NERO LAC PAINTS LTD. VS ADDL. CIT (ITA NO.6491-6724/M/2004) (ITAT MUMBAI) AND GOODLAS NEROLAC PAINTS LTD. VS ADDL.CIT (ITA NO.3858/M/2006)(ITAT MUMBAI). 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. ASSESSING OFFICER DISALLOWED THE EXPENDITURE BY HOLDING THAT IT WAS NOT INCURRED FOR BUSINESS PURPOSES AS T HE FACTORY WAS NOT USED BY THE ASSESSEE AND EVEN DID NOT CLAIM ED ANY DEPRECIATION. THE STAND OF THE ASSESSEE IS THAT FAC TORY STILL CONTINUES TO BE BUSINESS ASSET OF THE ASSESSEE AND REMAINED PART OF BOOKS OF ACCOUNTS OF THE ASSESSEE. EVEN OT HERWISE, IN THE CASE OF THE ASSESSEE FOR A.Y. 2007-08 (PAGES 18 & 19). THE CASE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND NO APPEAL WAS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER BEFORE THE TRIBUNAL. THUS, ON THE ISS UE OF PARITY ALSO THE ASSESSEE IS HAVING A CASE IN ITS FA VOUR, CONSEQUENTLY, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER. THUS, APPEAL OF THE REVENUE IS DISMISSED. 5. NOW, WE SHALL TAKE UP APPEAL OF THE ASSESSEE (I TA NO.3679/MUM/2012). THE ONLY GROUND RAISED BY THE ASSESSEE PERTAINS TO UPHOLDING THE ACTION OF THE AS SESSING OFFICER DISALLOWING A SUM OF RS.16,73,195/- BEING T HE AMOUNT COMPUTED AS PER THE PROVISIONS OF SECTION 14 A OF THE ACT READ WITH RULE 8D OF THE RULES TREATING THE SAM E HAVING M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 12 BEEN INCURRED IN EARNING THE EXEMPT DIVIDEND INCOME , IGNORING THE CONTENTION OF THE ASSESSEE THAT NO EXP ENSES WERE INCURRED FOR EARNING EXEMPT DIVIDEND INCOME. THE LD. COUNSEL FOR THE ASSESSEE ADVANCED HIS ARGUMENTS WHI CH ARE IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT SECTION 14A READ WITH RULE-8D IS APPLICABLE ONLY WH EN THE ASSESSING OFFICER IS NOT SATISFIED WITH THE EXPLANATION/DETAILS, SUBMITTED BY THE ASSESSEE. WI THOUT PREJUDICE TO THE ABOVE, IT WAS CONTENDED THAT THE DISALLOWANCE MAY BE RESTRICTED TO RS.28,000/-, AS C OMPUTED BY THE ASSESSEE. THE LD. COUNSEL EXPLAINED THAT TAX FREE INCOME IS RS.1.99 CRORES FROM TAX FREE MUTUAL FUNDS AND NO BORROWED FUNDS WERE USED BY THE ASSESSEE. IN VIEW O F THIS ASSERTION OF THE ASSESSEE AND ON PERUSAL OF MATERIA L AVAILABLE ON RECORD, WE SENT THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AFRESH AND DECIDE IN ACCORDANCE WITH LAW. THE ASSE SSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBER TY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. THUS, THIS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PUR POSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 29/06/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; ( DATED : 31/07/2015 M/S BIDDLE SAWYER LIMITED ITA NO.3679 & 4180/MUM/2012 13 F{X~{T? P.S/. . . !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1' ( *+ ) / THE CIT, MUMBAI. P4. 0 0 $ 1' / CIT(A)- , MUMBAI 5. 3#4.' , 0 *+'* 5 , $ / DR, ITAT, MUMBAI 6. 6 7 / GUARD FILE. ! / BY ORDER, /3+'.' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI