ACIT, Circle-3(2), New Delhi V. Avery Dennison(I)P.Ltd, New Delhi

ITA 4720/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3764 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: S S TOMAR
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 92C; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 4720/DEL/2017 : ASSTT. YEAR : 2009-10 ACIT, CIRCLE-3(2), NEW DELHI VS AVERY DENNISON (I) P. LTD., B-92, 9 TH FLOOR, HIMALAYA HOUSE, 23, KG MARG, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. A A ACA6163D ASSESSEE BY : SH. S. S. TOMAR, ADV. REVENUE BY : SH. SURENDERPAL, CIT DR DATE OF HEAR ING: 07 . 10 .20 2 1 DATE OF PRONOUNCEMENT: 11 .10 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-42, NEW DELHI DATED 28. 04.2017. 2. THE REVENUE HAS TAKEN UP TWO GROUNDS PERTAINING TO 1. INTRA-GROUP SERVICES 2. INTEREST ON RECEIVABLES 3. AVERY DENNISON INDIA PRIVATE LIMITED ('THE ASSES SEE') IS A SUBSIDIARY OF AVERY CORPORATION, USA. AVERY DENNISO N CORPORATION, ADC ACTS AS THE AVERY GROUPS GLOBAL HEADQUARTERS, AND IS PRIMARILY RESPONSIBLE FOR DEFI NING, DESIGNING, AND MONITORING THE IMPLEMENTATION OF GLO BAL ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 2 CORPORATE STRATEGIES AND STANDARDS, AS WELL AS MANA GING ITS FOREIGN SUBSIDIARIES. 4. AVERY DENNISON GROUP ('AVERY') IS A WORLDWIDE MANUFACTURER OF PRESSURE-SENSITIVE ADHESIVES AND MA TERIALS, CONSUMER AND CONVERTED PRODUCTS. AVERY'S BUSINESS S EGMENT IS INVOLVED IN THE PRODUCTION OF PRESSURE-SENSITIVE MA TERIALS, FASSON-BRAND SELF-ADHESIVE MATERIALS, OFFICE PRODUC TS AND A VARIETY OF TICKETS, TAGS, LABELS AND OTHER CONVERTE D PRODUCTS. SOME PRESSURE-SENSITIVE MATERIALS ARE CONVERTED I NTO LABELS AND OTHER PRODUCTS THROUGH EMBOSSING, PRINTING, STA MPING AND DIE-CUTTING, WHILST OTHERS ARE SOLD IN UNCONVERTED FORM AS BASE MATERIALS, TAPES AND REFLECTIVE SHEETING. THESE ACT IVITIES FALL UNDER AVERY'S PSM OR MATERIALS BUSINESS. ROLL MATER IALS IS A MAJOR BUSINESS UNIT UNDER THE PSM SEGMENT. 5. AVERY ALSO DEVELOPS, MANUFACTURES AND MARKETS A WIDE RANGE OF PRODUCTS FOR CONSUMER AND INDUSTRIAL MARKE TS, INCLUDING PEEL-AND-STICK POSTAGE STAMPS, REFLECTIVE HIGHWAY SAFETY PRODUCTS, AUTOMATED RETAIL TAG AND LABELING SYSTEMS, AND SPECIALTY TAPES AND CHEMICALS, GRAPHICS IMAGING MED IA, SPECIALTY TAPES, TICKETS, TAGS, AND IMPRINTING EQUI PMENT FOR RETAIL AND APPAREL MANUFACTURERS. THESE ACTIVITIES FALL UNDER THE RIS SEGMENT OF AVERY'S BUSINESS. 6. THE RIS SEGMENT'S LARGEST PRODUCT LINE CONSISTS OF THE INFORMATION BRAND MANAGEMENT DIVISION ('IBMD') PROD UCTS SUCH AS WOVEN AND PRINTED LABELS FOR THE APPAREL INDUSTR Y, PRINT TO ORDER TAGS AND LABELS MARKETED AS TICKET EXPRESS, IDENTITY GRAPHICS IN THE FORM OF PRINTED TAGS, PACKAGING INS ERTS, J- BOARDS, AND PRESSURE ADHESIVE LABELS. THESE LABEL A ND TAG ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 3 PRODUCTS ARE MANUFACTURED BY THE RIS SEGMENT OF THE ASSESSEE AND OTHER AVERY GROUP MANUFACTURING AFFILIATES IN T HE RIS SEGMENT (COLLECTIVELY REFERRED TO AS 'AVERY MANUFAC TURING AFFILIATES'). THE LABEL AND TAG PRODUCTS ARE USED B Y RETAILERS IN THEIR BRAND PRODUCTS, REFERRED TO AS 'RETAIL BRAND OWNERS' OR 'RBOS'. MOST OF THE RBOS ARE RETAIL APPAREL COMPANI ES THAT OPERATE IN THE U.S. AND EUROPE. 7. AVERY'S OTHER TWO MAIN BUSINESS SEGMENTS INCLUDE OFFICE PRODUCTS ('OP') AND OTHER SPECIALTY CONVERTING SEGM ENTS. THESE SEGMENTS PRODUCE A WIDE ARRAY OF HOME AND OFF ICE STATIONERY PRODUCTS, SPECIALTY TAPES AND ENGINEERED LABELS, INCLUDING RADIO FREQUENCY IDENTIFICATION ('RFID') I NLAYS AND LABELS, AND OTHER CONVERTED PRODUCTS. 8. AVERY'S MAJOR MARKERS ARE IN THE OFFICE PRODUCTS , DATA PROCESSING, HEALTH CARE, RETAIL, TRANSPORTATION, IN DUSTRIAL AND DURABLE GOODS, AND FOOD AND APPAREL SECTORS. 9. ADHK BV IS A HONG KONG BRANCH OFFICE OF THE NETH ERLANDS ENTITY AVERY DENNISON HONG KONG B.V. (NETHERLANDS), WHICH IS ULTIMATELY 100% OWNED BY ADC. ADHK BV IS THE ASIA P ACIFIC REGIONAL HEADQUARTERS OF ADC. ADHK BV IS RESPONSIBL E FOR OVERSEEING THE OPERATIONS IN ASIA PACIFIC REGIONAL COUNTRIES, AND PERFORMS A NUMBER OF SERVICES WHICH ARE OF BENEFIT TO THE MATERIALS SEGMENT OF ITS ASIA PACIFIC AFFILIATES. 10. DMC IS A WHOLLY OWNED SUBSIDIARY OF ADC. IT PER FORMS A NUMBER OF SERVICES O THE BENEFIT OF THE AVERY GROUP AFFILIATES OPERATING IN THE RIS SEGMENT. ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 4 INTRA GROUP SERVICES: 11. FOR THE CONDUCT OF ITS BUSINESS OF MANUFACTURIN G AND SELLING OF GROUP PRODUCTS A MARKET, THE ASSESSEE RE CEIVED VARIOUS INTRA-GROUP SERVICES FROM DMC AND ADHK BV, WHICH IN TURN PROVIDED A NUMBER OF CRITICAL AND OPERATIONAL BENEFITS TO THE ASSESSEE. A SUMMARY OF THE SERVICES RECEIVED IS PROVIDED AS FOLLOWS FOR YOUR REFERENCE: NATURE OF THE INTERNATIONAL TRANSACTIONS AMOUNT (IN INR) SALES AND MARKETING 27,508,164 HUMAN RESOURCE 4,616,627 FINANCE 11,571,204 TECHNICAL ASSISTANCE SERVICES 2,645,884 DISTRIBUTION AND LOGISTICS 13,032,332 PAYMENT FOR SELLING, MARKETING, GPD AND STRATEGIC SERVICES 67,445,886 GVP 32,411,450 VIPFS 19,400,122 TICKETING HUB 47,838,053 TOTAL 226,469,722 12. WHILE COMPUTING THE TOTAL INCOME, THE AO MADE T HE FOLLOWING ADDITIONS TO E AS DECLARED BY THE ASSESSE E IN ITS RETURN OF INCOME: NATURE OF ADDITION AMOUNT (IN) 1 ADDITION IN PURSUANCE OF IMPUGNED ORDER UNDER SECTION92CA (3) OF THE ACT (ON ACCOUNT OF INTRA-GROUP SERVICES) 212,101,593 2 ADDITION IN PURSUANCE OF IMPUGNED ORDER UNDER SECTION 92CA(3) OF THE ACT (ON ACCOUNT OF ACCOUNTS RECEIVABLE) 5,666,322 TOTAL 217,767,915 13. WE FIND THAT THE AO HAS HELD THE ARM'S LENGTH P RICE OF THE INTRA-GROUP SERVICES AT NIL BY APPLYING CUP METHO D ON THE ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 5 GROUND THAT NO UNCONTROLLED ENTERPRISE WOULD HAVE P AID ANY AMOUNT FOR SERVICES WHICH DO NOT TANTAMOUNT TO INTR A GROUP SERVICES WITH DEMONSTRABLE BENEFITS. 14. IN THIS CASE, THE ASSESSEE HAS RECEIVED FOLLOWI NG INTRA- GROUP SERVICES: MARKETING SUPPORT SERVICES, MANAGEMENT SERVICES (GV P SERVICES), OPERATIONS AND LOGISTICS, TICKETING HUB AND VIPFS SERVICES IN RIS SEGMENT; MARKETING SERVICES, FINANC E, DISTRIBUTION AND LOGISTICS, HR, TECHNOLOGY DEPLOYME NT IN MATERIAL DIVISION SEGMENT. 15. THE AO WHILE MAKING THE ADDITION, MADE THE FOLL OWING OBSERVATIONS; THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT SERVIC ES HAVE ACTUALLY BEEN RENDERED TO IT AND BENEFIT HAS ACTUAL LY BEEN DERIVED BY IT ON THE BASIS OF DOCUMENTARY EVIDENCE. THE ASSESSEE HAS MERELY FURNISHED COPIES OF CERTAIN MAI LS EXCHANGED BETWEEN THE PERSONNEL OF THE GROUP. NONE OF THE ABOVE REPRODUCED E-MAIL EXCHANGES BETWEEN THE EMPLOYEES ESTABLISH THE REQUIREMENT/SPECIFIC NEED O F THE ASSESSEE FOR THEIR SERVICES, THE BENEFIT WHICH HAS ACCRUED TO THE ASSESSEE, OR THAT AN INDEPENDENT PARTY WOULD HAVE BEEN WILLING TO PAY ANOTHER INDEPENDENT PARTY FOR T HE SERVICES PURPORTED TO BE RECEIVED BY THE ASSESSEE. IT IS EVIDENT FROM FACTS STATED ABOVE THAT, THE ASS ESSEE DID NOT FILE ANY EVIDENCE TO SUPPORT A CLAIM THAT THESE SERVICES ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 6 WERE ACTUALLY PROVIDED TO THE ASSESSEE AT ITS REQUE ST TO MEET THE SPECIFIC NEED OF THE ASSESSEE AND THAT CER TAIN TANGIBLE AND CONCRETE BENEFITS HAVE ACTUALLY ACCRUE D TO THE ASSESSEE. UNDER UNCONTROLLED CIRCUMSTANCES ANY INDEPENDENT ENTERPRISE HAVING SKILLED AND SUFFICIENTLY TRAINED MANPOWER WOULD NOT HAVE BEEN WILLING TO PAY ANY THIRD PARTY TO DO SO. IN MY OPINION, SERVICES WHICH ARE INCIDENTAL OR MERE DUPLICITY DO NOT FALL IN THE CATEGORY OF INTRA GROU P SERVICES. INCIDENTAL BENEFITS, IF ANY, DO NOT GIVE RISE TO IN TRA GROUP SERVICES AND CANNOT BE REGARDED AS GIVING RISE TO ARRANGEMENT: SUBJECT TO ARM'S LENGTH PRICING AS STI PULATED IN OECD TP GUIDELINES PARAGRAPH 7.13 UNDER CHAPTER VII. THESE FINDINGS-LEAD TO AN IRRESISTIBLE CONCLUSION T HAT PAYMENTS FOR LIAISON SERVICES ALLEGEDLY PROVIDED BY THE AES ARE NOT AT ARM'S LENGTH PRICE. MOREOVER, IT IS SEEN FROM THE DETAILS CONTAINED IN THE TRANSFER PRICING REPORT OF THE ASSESSEE SUBMITTED U NDER RULE 10D THAT THE ASSESSEE HAD NOT CONDUCTED FAR AN ALYSIS IN REGARDS TO THESE ALLEGED SERVICES AND HAD FAILED TO JUSTIFY THE FUNCTIONS PERFORMED BY THE AE FOR THESE PAYMENTS. THIS IS PROBABLY A REASON THAT THE RECEIP T OF ALLEGED SERVICES HAVE NOT BEEN BENCHMARKED UNDER A NY OF THE FIVE METHOD PRESCRIBED UNDER THE ACT N THE TRAN SFER PRICING REPORT. FURTHERMORE, THE ASSESSEE HAS AT THE TIME OF REQUIS ITIONING THE SO-CALLED SERVICES, NOT CARRIED OUT ANY COST BE NEFIT ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 7 ANALYSIS AT ITS END. NO INDEPENDENT PARTY WOULD AGR EE TO INCUR EXPENDITURE WITHOUT INDEPENDENTLY ASCERTAININ G THE VALUE OF THE GOODS/SERVICES INTENDED TO BE AVAILED, IN THE MARKET AND THAT TOO AT THE BESTS NEGOTIATED PRICES. NO SUCH EFFORT HAS BEEN DEMONSTRATED TO BE MADE AT THE END OF THE ASSESSEE, WHICH WEIGHS HEAVILY AGAINST THE N ORMAL PRACTISES OF BUSINESS PRUDENCE. 16. THE LD. CIT(A) DELETED THE ADDITION RELYING ON THE ORDERS OF THE CO-ORDINATE BENCH OF ITAT AND THE HONBLE JURIS DICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE EARLIER Y EARS. 17. AGGRIEVED THE REVENUE FILED APPEAL BEFORE US. 18. DURING THE ARGUMENTS, THE LD. DR UNSUCCESSFULLY TRIED TO DIFFERENTIATE THE FACTS AND LAW APPLIED IN THE CASE OF THE ASSESSEE IN THE INSTANT YEAR IN RELATION TO THE EAR LIER YEARS. 19. BEFORE US, THE LD. AR SUBMITTED THAT THE ITAT, IN THE ASSESSEE'S OWN CASE FOR AY 2007-08 AND AY 2008-09, AFTER UNDERSTANDING THE NATURE OF THE ASSESSEE'S BUSINESS OPERATIONS AND THE NATURE OF VARIOUS INTRA-GROUP SERVICES RECE IVED BY THE ASSESSEE HELD THAT THERE EXISTED A DIRECT, NEXUS BE TWEEN THE INTRA-GROUP SERVICES RECEIVED BY THE ASSESSEE VIS-A -VIS THE REVENUE EARNED/COST INCURRED BY THE ASSESSEE. 20. HENCE, THE CO-ORDINATE BENCH OF ITAT HELD THAT THESE SERVICES ARE INTRINSICALLY LINKED TO THE CORE BUSIN ESS OPERATIONS OF THE ASSESSEE AND CANNOT BE ANALYSED IN ISOLATION . THE RELEVANT EXTRACT FROM THE RULING OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ASSESSEE'S OWN CASE FOR AY 2007-08 IS AS UNDER: ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 8 ' 20. ON PERUSAL OF THE TP STUDY, WE OBSERVE THAT EAC H TRANSACTION ARE INTERLINKED WITH EACH OTHER. WE NOTICE THAT THE ASSESEE HAS TREATED THE AGREEMENT AS A WHOLE, AND HAS APPLIED T NMM, IN RESPECT OF THE SERVICES RECEIVED TO ARRIVE AT THE ALP. IT I S OBSERVED THAT THE ID. CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT; INTRA GROUP SERVICES WERE RECEIVED BY THE ASSESSEE AS PER THE A GREEMENT, AND THAT THESE ARE CRITICAL, AND LINKED TO THE CORE BUS INESS OPERATIONS OF THE ASSESSEE. HOWEVER, THE LD. CIT(A) HELD THAT CER TAIN SERVICES SPECIFIED IN THE AGREEMENT DID NOT RESULT IN ANY BE NEFIT TO THE ASSESSEE. 21. ALL THE SERVICES RECEIVED ARE PART OF COMPOSITE CONTRACTS/AGREEMENTS WHICH IN OUR VIEW CANNOT BE UN BUNDLED... 23. FROM THE ABOVE DISCUSSION WE ARE OF THE CONSID ERED OPINION THAT THE AGREEMENT IS AN INTRINSIC ONE AND THAT IT IS WRONG TO SPLIT THE SAME AND HOLD THAT SOME SERVICES ARE AT ARM'S L ENGTH AND SOME SERVICES ARE NOT. 24. THE LD. CIT(A) ACCEPTED TNMM TO ARRIVE AT THE ALP, IN RESPECT OF CERTAIN SERVICES RECEIVED BY THE ASSESSEE AND IN THE SAME BREATH, HAS REJECTED THE ANALYSIS UNDERTAKEN BY THE ASSESSE E UNDER THE TNMM IN RESPECT OF OTHER SERVICES. WE ARE INFORMED BY THE ASSESSEE THAT, THE AUTHORITIES HAVE ACCEPTED TNMM AS MAM IN THE SUBSEQUENT YEARS. THE REVENUE HAS TO BE CONSISTENT IN ITS APPR OACH. IN OUR VIEW, THE TPO ANALYSIS OF THE ASSESSEE USING TNMM AS THE MAM HAS TO BE ACCEPTED. WHEN THERE IS AN AGREEMENT FOR SERVICES A ND CERTAIN SERVICES OUT OF A BUNDLE OF SERVICES ARE UNDISPUTED LY RENDERED, THE ENTIRE AGREEMENT HAS TO BE VIEWED AS A WHOLE. WHETH ER THE SERVICES HAVE ACTUALLY RESULTED IN A BENEFIT TO THE ASSESSEE OR NOT IS NOT MATERIAL. THE CONCLUSION OF THE LD. TPO THAT THE SE RVICES HAVE NOT RESULTED IN ANY BENEFIT AND NO INDEPENDENT ENTITY W OULD HAVE MADE SUCH A PAYMENT IS IN THE REALM OF SURMISED AND CONJ UNCTURES AND NOT ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 9 BACKED BY ANY MATERIAL. THUS, THE ALP DETERMINED BY THE ASSESSEE COMPANY IS ACCEPTED AND THE TPO ADJUSTMENT IS DELET ED.' 21. THE RELEVANT EXTRACTS OF CO-ORDINATE BENCH OF I TAT DELHI IN ITS OWN CASE FOR THE A.Y. 2008-09 IN ITA NO. 4934/DEL/2014 AND 4869/DEL/2014 IS AS UNDER: 33. FURTHER, THE ID. DR HAD RAISED A CONTENTION THA T THE ASSESSEE HAS NOT DEMONSTRATED HOW THE SERVICES RECEIVED ARE BENEFICIAL TO THE ASSESSEE. WE ARE OF THE OPINION THAT, ASCERTAINING WHETHER A SERVICE HAS ACTUALLY BENEFITTED THE TAXPAYER OR NOT IS NOT WITHIN THE PREROGATIVE OF THE TAX AUTHORITIES. TO AVAIL A SERV ICE OR NOT IS A COMMERCIAL DECISION WHICH CANNOT BE CHALLENGED BY T HE TAX AUTHORITIES.' 22. THE CO-ORDINATE BENCH OF ITAT IN THE ASSESSEE'S CASE FOR AY 2008-09 HELD THAT OECD GUIDELINES END AN AGGREGA TED BENCHMARKING APPROACH IN A SITUATION, WHERE THE UND ERLINE TRANSACTIONS ARE CLOSELY LINKED TO THE CORE BUSINES S OPERATIONS. THE RELEVANT EXTRACTS IN THIS REGARD ARE REPRODUCED BELOW: '28. WE ARE OF THE CONSIDERED OPINION THAT, WITH RE GARD TO PSM AND RIS SEGMENTS, THE MARK-UP CHARGED BY THE AES IS WIT HIN THE +/-5% RANGE, ALLOWED UNDER SECOND PROVISO TO SECTION 92C OF THE INDIAN INCOME TAX ACT, 1961. ACCORDINGLY, THESE SERVICES C AN BE CONSIDERED TO BE AT ARM'S LENGTH; AND WITH REGARD TO OF GVP SE RVICES, VIPFS SERVICES AND TICKETING HUB SERVICES, THE SERVICE CH ARGES PAID BY THE ASSESSEE, REPRESENTS THE ACTUAL COST INCURRED BY TH E AES, WITHOUT APPLICABLE OF ANY MARK-UP. ACCORDINGLY, THESE CAN B E CONSIDERED TO BE AT ARM'S LENGTH. 30. WE HAVE PERUSED THE OECD GUIDELINES WHICH HAS RECOMMEND AN AGGREGATE BENCHMARKING APPROACH IN SITUATION, WH ERE THE ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 10 UNDERLINE TRANSACTIONS ARE CLOSELY LINKED TO THE CO RE BUSINESS OPERATIONS. PRINCIPLE OF AGGREGATION, IS A WELL-EST ABLISHED RULE IN TRANSFER PRICING ANALYSIS. THIS PRINCIPLE SEEKS TO COMBINE ALL CLOSELY LINKED TRANSACTIONS WHEREIN ARM'S LENGTH PRICE CAN BE DETERMINED FOR A NUMBER OF TRANSACTIONS TAKEN TOGETHER... 31. THE ASSESSEE IS PREDOMINANTLY A MANUFACTURER AN D THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES ARE INTRINSIC ALLY LINKED TO THE CORE BUSINESS OPERATIONS OF THE ASSESSEE, IN THE FO LLOWING FORM: A. BASED ON THE SUPPORT PROVIDED BY THE AES IN TERM S OF MARKETING SERVICES AND STRATEGIC SERVICES, THE ASSE SSEE IS ABLE TO ACHIEVE HIGHER SALES, BOTH IN TERMS OF HIGHER SALES QUANTITY AND SALES PRICES. B. BASED ON THE SUPPORT PROVIDED BY THE ASSESSEE IN TERMS OF OPERATIONS AND LOGISTICS THE ASSESSEE HAS BEEN ABLE TO PROCURE RAW MATERIALS AT LOWER COSTS. ACCORDINGLY, THE IMPACT O F SUCH SUPPORT SERVICES IS RECEIVED BY THE ASSESSEE IN THE FORM OF LOWER DIRECT COSTS. 32. WE OBSERVE THAT THERE EXISTS A DIRECT NEXUS BET WEEN THE REVENUE EARNED/ COST INCURRED BY THE ASSESSEE AND T HE MAJORITY INTRA-GROUP SERVICES RECEIVED, IT WOULD BE INCORREC T TO ANALYSE THE INTRA-GROUP SERVICES RECEIVED AS A SINGLE ELEMENT O F COST IN ISOLATION...' 23. FURTHER, THE DEPARTMENT HAS ALSO FILED APPEAL A GAINST THE ORDER OF ITAT BEFORE HON'BLE DELHI HIGH COURT. HON' BLE DELHI HIGH COURT HAS HELD THAT THE VIEW TAKEN BY THE ITAT IS PLAUSIBLE ONE AND DOES NOT WARRANT ANY INTERFERENCE. THE RELE VANT EXTRACTS OF THE ORDER OF HON'BLE DELHI HIGH COURT A RE AS UNDER: ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 11 'THE CONTENTION OF THE ASSESSEE WAS THAT AGREEMENT BETWEEN THE ASSESSEE AND ITS AE WAS A COMPOSITE ONE AND COULD N OT BE SPLIT UP FOR THE PURPOSES OF HOLDING THAT SOME SERVICES ARE AT ARM'S LENGTH AND SOME ARE NOT. THE ITAT APPEARS TO HAVE AGREED WITH THE ABOVE CONTENTION OF THE ASSESSEE ON VIEWING THE AGREEMENT AS WHOLE. IT WAS NOT WITHIN THE PURVIEW OF THE TPO TO DETERMINE IF SOME OF THE SERVICES RESULTED IN ANY ACTUAL BENEFIT TO THE ASSE SSEE OR NOT.' 24. SINCE, THE ORDER OF THE LD. CIT(A) IS BASED ON THE ORDER OF THE ITAT DELHI AND THE HONBLE HIGH COURT OF DELHI, IN THE ABSENCE OF ANY CHANGE IN THE MATERIAL FACTS AND THE PROPOSITION OF LAW, WE DECLINE TO INTERFERE WITH THE CONSIDERED DECISION OF THE LD. CIT(A). INTEREST ON THE RECEIVABLES: 25. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. PERUSED THE ORDER OF THE LD. CIT(A) IN DETAILS WHICH MAKES MENTION BELOW. 26. WE FIND THAT THE ASSESSING OFFICER MADE AN ADJU STMENT OF RS.56,66,322/- ON ACCOUNT OF INTEREST ON THE OVER-D UE INTRA- GROUP RECEIVABLES, WHICH WERE PENDING FOR MORE THAN 30 DAYS. THE ASSESSEE POINTED OUT THAT THE RATIO BETWEEN THE INTERNATIONAL TRANSACTIONS ON THE COST SIDE (LEADIN G TO CREATION OF CREDITORS) AND ON THE REVENUE SIDE (LEADING TO C REATION OF DEBTORS) IS 66:34. THE ASSESSEE SUBMITTED THE DETAI LS OF NET MONTHLY BALANCE PAYABLE TO THE AES WHICH ARE TABULA TED BELOW: ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 12 MONTH AMOUNT PAYABLE (IN INR) APRIL 2008 100,468,512.31 MAY 2008 122,926,408.85 JUNE 2008 131,329,666.56 JULY 2008 122,044,694.25 AUGUST 2008 169,014,895.12 SEPTEMBER 2008 209,041,292.33 OCTOBER 2008 207,378,648.26 NOVEMBER 2008 207,604,201.90 DECEMBER 2008 169,327,332.17 JANUARY 2009 126,361,396.40 FEBRUARY 2009 137,857,020.30 MARCH 2009 265,257,673.50 27. THE ASSESSEE HAS NET MONTHLY BALANCE PAYABLE TO THE AES AS OPPOSED TO MONTHLY BALANCE RECEIVABLE FROM THE A ES AS ALLEGED BY AO. ON THE PERUSAL OF THE ABOVE DETAILS, IT CAN BE SEEN THAT EACH MONTH, THERE WAS A BALANCE RECEIVABL E FROM THE AE. 28. AS THE INTEREST ON INTRA-GROUP RECEIVABLE IS LE SS THAN THE INTEREST ON INTRA-GROUP PAYABLES, THEREFORE, THE AD JUSTMENT ON ACCOUNT OF INTEREST ON OVERDUE INTRA-GROUP RECEIVAB LE DOES NOT HOLD GOOD. 29. THE ASSESSEE HAD TRANSACTIONS WITH BOTH AES AND NON-AES AND ACCORDINGLY, A COMPARISON OF OUTSTANDING POSITI ON IN TERMS OF DEBTOR DAYS IN BOTH THE AE AS WELL AS NON-AE TRA NSACTIONS CAN BE DONE FOR DETERMINING WHETHER THE CREDIT PERI OD EXTENDED TO THE AES IS AT ARM'S LENGTH OR NOT. 30. A SUMMARY OF SUCH COMPARISON AES SEGMENT AND NO N-AES SEGMENT WITH REGARD TO THE ALLOWANCE OF DAYS FOR CR EDIT IS AS UNDER: ITA NO. 4720/DEL/2017 AVERY DENNISON (I) P. LTD. 13 PARTICULARS TOTAL INCOME (A) DEBTORS (B) DEBTOR DAYS (C) = (B)/(A) 360 AE SEGMENTS 371,212,528 78,701,922 76 NON-AE SEGMENT 2,407,113,572 579,479,765 87 31. BASED ON THE ABOVE, THE DEBTOR DAYS GIVEN TO TH E AES ARE LESS THAN THE DEBTOR DAYS GIVEN TO THE NON-AES. FUR THER, THE ASSESSEE CONTENDED THAT IT DID NOT LEVY ANY INTERES T ON DELAYED PAYMENTS MADE BY THE NON-AES, DESPITE THE FACT THAT THE DEBTOR DAYS GIVEN TO THE NON-AES WERE MORE THAN THE DEBTOR DAYS GIVEN TO THE AES AND THEREFORE, JUSTIFIED NOT TO CH ARGE INTEREST ON THE DELAYED PAYMENTS BY THE AES AS WELL. AT TIME S 120 DAYS ARE GIVEN TO THE NON-AE ENTITY FOR PAYMENT FROM BIL LING DATE. 32. IN VIEW OF THE ABOVE DISCUSSION, THE LD. CIT(A) HELD THAT THE AO/TPO IS NOT JUSTIFIED TO CHARGE INTEREST ON R ECEIVABLES WITHOUT FACTORING IN THE PAYABLES TO THE AE/AES. HA VING CONSIDERED THE ENTIRE FACTS AND FOUND THEM TO BE IR REFUTABLE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT( A). 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/10/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 11/10/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR