M/s Boston Scientific India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6806/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6599 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 27-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Gift; Transfer pricing; Business expenditure; International transaction; Retrospective amendment; Initiation of penalty proceedings; Fair market value
• Section: 143(3); 92B; 234B; 37(1); 37; 154; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I, NEW DELHI) BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 6806/DEL/2015 (ASSESSMENT YEAR 2011-12) BOSTON SCIENTIFIC INDIA PVT. LTD. VS. ACIT C-40/41, OKHLA INDL. AREA NEW DELHI PHASE 2, NEW DELHI PAN : AABCG9446Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT TIWARI, CA SHRI RAVI SHARMA, CA SHRI AMITAV SEN, CA MS. SHRUTI KHIMTA, ADVOCATE RESPONDENT BY : SHRI AMRENDRA KUMAR, CIT DR SHRI NEERAJ KUMAR, SR. DR. DATE OF HEARING : 27.10.2016 DATE OF PRONOUNCEMENT : 3011.2016 ORDER PER BEENA A. PILLAI, JM: 1. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSE E AGAINST THE FINAL ASSESSMENT ORDER DATED 30/11/2015 PASSED BY ACIT CIRCLE 5 (1) NEW DELHI FOR ASSESSMEN T YEAR 2011-12 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED DISPUTE RESOLUTION PANEL ('LD. DRP') AND THE LD. ASSISTANT COMMISSIONER OF INCOME-TAX ('LD. AO 1 ) (FOLLOWING THE DIRECTIONS OF THE LD. DRP) HAVE ERRED ON FACTS AND IN LAW IN 2 I.T.A. NO. 6806/DEL/2015 ENHANCING THE INCOME OF THE APPELLANT TO INR 2,90,36,334 UNDER SECTION 143(3) F THE INCOME-TAX ACT 1961 ('ACT') AS AGAINST THE RETURNED INCOME OF INR 69,48,386. GROUNDS RELATING TO TRANSFER PRICING ADJUSTMENT 2. THE LD. DRP AND LD. AO HAVE ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 1,80,67,400 BY HOLDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTIONS DOES NOT SATISFY THE ARM 'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT AND IN DOING SO HAVE GROSSLY ERRED IN COMMUTING TRANSFER PRICING (TP) ADJUSTMENTS: A. IN RELATION TO PROVISION OF MARKETING SUPPORT SERVICES BY: 2.1 DISREGARDING THE ARM'S LENGTH PRICE ('ALP') AS DETERMINED BY THE APPELLANT IN THE TRANSFER PRICING ('TP') DOCUMENTATION MAINTAINED BY IT IN TERMS OF SECTION 920 OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 ('RULES'); 2.2 DISREGARDING MULTIPLE YEAR AND PRIOR YEARS' DATA AS USED BY THE APPELLANT IN ITS TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR (I.E. F Y 2010-11) DATA FOR COMPARABLE COMPANIES SHOULD BE USED DESPITE THE FACT THAT THE SAME WAS NOT NECESSARILY AVAILABLE TO THE APPELLANT AT THE TIME OF PREPARING ITS TP DOCUMENTATION; 3 I.T.A. NO. 6806/DEL/2015 2.3 DISREGARDING THE QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE APPELLANT IN THE TP DOCUMENTATION, ARBITRARILY APPLYING ADDITIONAL QUANTITATIVE FILTERS, AND CONDUCTING A COMPARABIL ITY ANALYSIS; 2.4 ERRONEOUSLY INCLUDING CERTAIN FUNCTIONALLY DISSIMILAR COMPANIES THAT ARE NOT Y COMPARABLE TO THE APPELLANT AND DOES NOT PERFORM SIMILAR MARKETING SUPPORT SERVICES ACTIVITY; 2.5 NOT CONSIDERING THE CORRECT COMPUTATION OF OPERATING PROFIT MARGIN OF A CERTAIN COMPANY USED AS COMPARABLE INCLUDED PURSUANT TO THE DRP DIRECTIONS; 2.6 DISREGARDING JUDICIAL PRONOUNCEMENTS IN INDIA IN UNDERTAKING THE TP ADJUSTMENT. B. IN RELATION TO OUTSTANDING RECEIVABLES BY: 2.7 IMPUTING INTEREST ON RECEIVABLES FROM THE AES BEYOND THE CREDIT PERIOD OF THE ASSESSEE ON AN AD HOC BASIS, WHILE COMPLETELY DISREGARDING THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE TO EXPLAIN THAT SUCH ADJUSTMENTS ARE NOT MANDATED UNDER THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE; 2.8 DISREGARDING THE ACTUAL DATE OF THE INVOICE AND TAKING AN ARBITRARY DATE OF OCTOBER 1, 2010 AS THE DATE OF INVOICE RAISED FOR PROVISION OF MARKETI NG SUPPORT SERVICES, FOR COMPUTATION OF INTEREST ON 4 I.T.A. NO. 6806/DEL/2015 RECEIVABLES OUTSTANDING ON THE LAST DATE OF THE YEA R ; 2.9 NOT APPRECIATING THE FACT THAT THE SAID ADVANCES WERE NOTHING BUT MERE BALANCES RECOVERABLE FROM THE ASSOCIATED ENTERPRISES ('AE') ON ACCOUNT OF GENUINE BUSINESS TRANSACTIONS IN THE REGULAR COURSE OF BUSINESS AND CONCLUDING THAT THE ASSESSEE HAS MADE INTEREST FREE ADVANCES TO ITS AES; AND 2.10 NOT APPRECIATING THE FACT THAT WORKING CAPITAL ADJUSTMENT ADJUSTS THE MARK-UP OF COMPARABLE COMPANIES ON ACCOUNT OF VARIATION IN THE WORKING CAPITAL OF THE APPELLANT. GROUNDS RELATING TO CORPORATE TAX DISALLOWANCES 3. THE LD. DRP HAS ERRED IN LAW IN DIRECTING THE AO TO ENHANCE THE INCOME OF THE APPLICANT BY INVOKING THE PROVISIONS OF SECTION 1440(8) OF THE A CT WITHOUT APPRECIATING THAT THERE IS NO DISALLOWANCE/VARIATION PROPOSED BY THE AO UNDER SECTION 37(1) OF THE ACT IN THE DRAFT ASSESSMENT ORDER. 3.1 THE LD. DRP FAILED TO APPRECIATE THAT THE INSERTION OF EXPLANATION BELOW SUB SECTION 8 OF SECTION 1440 OF THE ACT WAS TO MAKE AN ENHANCEMENT ON THE VARIATION MADE IN THE DRAFT 5 I.T.A. NO. 6806/DEL/2015 ASSESSMENT ORDER AND NOT TO RAISE A FRESH ISSUE WHICH IS NOT THE SUBJECT MATTER OF DRAFT ASSESSMENT ORDER WITHOUT PREJUDICE TO THE ABOVE, THE LD. AO ERRED ON FACTS AND IN LAW IN: 4.1 CONTENDING THAT EXPENSES AMOUNTING TO INR 1,314,548 INCURRED BY THE APPELLANT UNDER VARIOUS HEADS WERE IN VIOLATION OF THE REGULATIONS FRAMED B Y THE MEDICAL COUNCIL OF INDIA AND HENCE DISALLOWABLE UNDER SECTION 37(1) OF THE ACT READ WITH CENTRAL BOARD OF DIRECT TAXES C'CBDT') CIRCULAR NO. 5/2012. WHILE DOING SO, THE LD. AO FAILED TO APPRECIATE THA T THESE EXPENSES WERE NOT IN THE NATURE OF 'FREEBIES' WHICH WERE PROVIDED TO DOCTORS/ MEDICAL PRACTITIONERS. 4.2 DISALLOWING MEETING, SEMINAR AND CONFERENCE EXPENSE A AMOUNTING TO INR 1,906,000 UNDER SECTION 37(1) OF THE ACT ON THE GROUNDS THAT NO DOCUMENTARY EVIDENCE WAS FURNISHED BY THE APPELLANT. WHILE DOING SO, THE LD. AO FAILED TO APPRECIATE THAT THESE WERE GENUINE BUSINESS EXPENDITURE AND THE APPELLANT WAS UNABLE TO PROVIDE DOCUMENTARY EVIDENCE ONLY DUE TO PAUCITY OF TIME. 4.3 DISALLOWING PAYMENT MADE TOWARDS SPONSORSHIP OF EVENT, AMOUNTING TO INR 800,000, ON THE GROUND THAT THE PAYMENT WAS MADE BY THE 6 I.T.A. NO. 6806/DEL/2015 APPELLANT AFTER THE EVENT HAD TAKEN PLACE. WHILE DOING SO, THE LD. AO FAILED TO APPRECIATE THAT THE DELAY IN PAYMENT WAS ON ACCOUNT OF CERTAIN BUSINESS EXIGENCIES WHICH THE APPELLANT WAS UNABLE TO JUSTIFY DUE TO PAUCITY OF TIME. 5. LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1X0) OF THE ACT. 6. THE LD. AO ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234A, 234B AND 234C OF THE ACT. 2. THE LD. AR AT THE OUTSET SUBMITS THAT GROUND NO. 1 IS GENERAL GROUND NO. 2.1, 2.2, 2.3, 2.6, 2.9 AND 2.10 IN RESPECT OF TRANSFER PRICING ISSUES ARE NOT PRESSED. ACCORDINGLY WE DISMISS THESE GROUNDS. 3. TO DECIDE THE ISSUE IN RESPECT OF THE BALANCE GROU NDS RELATING TO TRANSFER PRICING ADJUSTMENT THE BRIEF F ACTS THAT WOULD BE NECESSARY ARE AS UNDER THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 9/05/2012 DECLARING A TOTAL INCOME OF RS.69,48,386/ -. THE ASSESSEE HAD ALSO DECLARED A BOOK PROFIT OF RS.36,27,614/- UNDER THE PROVISIONS OF SECTION 115 JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND NOT ICES UNDER SECTION 143 (2) WAS ISSUED TO ASSESSEE ALONG WITH QUESTIONNAIRE AND NOTICE UNDER SECTION 142(1), REQU IRING ASSESSEE TO SUBMIT VARIOUS INFORMATION AS CALLED FO R. THE 7 I.T.A. NO. 6806/DEL/2015 ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UND ER CONSIDERATION, ASSESSEE HAS ENTERED INTO INTERNATIO NAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES AND THU S THE CASE WAS REFERRED TO TRANSFER PRICING OFFICER FOR DETERMINATION OF ARMS LENGTH PRICE UNDER SECTION 92 C(1) OF THE ACT. 4. THE LD. TPO ISSUED NOTICE TO THE ASSESSEE CALLIN G FOR VARIOUS DOCUMENTS TO BE FILED ALONG WITH DOCUMENTAT ION UNDER RULE 10 D OF THE INCOME TAX RULES 1962. 5. THE LD.TPO OBSERVED THAT ASSESSEE IS ENGAGED IN MARKETING, PRESALE AND RELATED ACTIVITIES FOR CUSTO MERS (HOSPITAL AND DOCTORS) FOR MEDICAL PRODUCTS IN INDI A. IT WAS OBSERVED THAT W.E.F. 25/11/2008 THE ASSOCIATED ENTE RPRISE, IRELAND ENTERED INTO AN EXCLUSIVE DISTRIBUTORSHIP A GREEMENT WITH INDEPENDENT DISTRIBUTOR, BEING TRIVITRON HEALT HCARE PRIVATE LTD. (TRIVITRON), FOR SALE, MARKETING, DIST RIBUTION AND DELIVERY OF PRODUCTS AND SERVICES. THE LD.TPO OBSER VED THAT IN THE TRANSFER PRICING DOCUMENTATION FURNISHED BY ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTION WITH ITS A SSOCIATED ENTERPRISES (AES) WHICH IS AS UNDER: S.NO. NATURE OF TRANSACTION VALUE (INR) 1 SERVICE INCOME 9,95,60,466 2 REIMBURSEMENT OF EXPENSES PAID 1,23,90,288 8 I.T.A. NO. 6806/DEL/2015 3 REIMBURSEMENT OF EXPENSES RECEIVED 2,99,464 6. IT WAS OBSERVED BY THE LD. TPO THAT ASSESSEE HAD USED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM) FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS AND OPERATING PROFIT/TOT AL COST (OP/TC) TO DETERMINE THE PROFIT LEVEL INDICATOR (PL I) FOR THE PURPOSES OF CALCULATING THE MARGIN OF SUCH TRANSACT IONS WHICH HAS NOT BEEN DISPUTED BY THE LD. TPO. 7. THE LD.TPO OBSERVED THAT ASSESSEE HAD SELECTED 5 COMPARABLES WHICH ARE AS UNDER: S.NO. NAME OF THE COMPANY OP/TC 1. I DC (INDIA) LTD. 12.57% 2. QUADRANT COM MUNICATIONS LTD. 9.14% 3. EMPIRE INDUSTRIES LTD. [TRADING & INDENTING] 18.39% 4. ENTERTAINING NETWORK (INDIA) LTD. [EVENTS (CONSOLIDATED)] 2.11% 5. PRIYA INTERNATIONAL LTD. [INDENTING] 19.89% MEAN 12.4% MEDIAN 12.5% UPPER QUARTILE 18.39% LOWER Q UARTILE 9.14% 8. THE LD.TPO USING VARIOUS FILTERS PREPARED A FINA L LIST OF COMPARABLES WHICH ARE AS UNDER: 9 I.T.A. NO. 6806/DEL/2015 S. NO. NAME OF THE COMPANY OP/TC 1. APITCO LTD 25.17% 2. GLOBAL PROCUREMENT CONSULTANTS LTD. 30.86% 3. INFO EDGE INDIA LTD. 45.53% 4. QUADRANT COMMUNICATION LTD. 14.58% AVERAGE 29% 9. FURTHER THE LD.TPO BENCHMARK THE DELAY IN RECEI PT OF THE PAYMENT FOR RECEIVABLES. THE LD.TPO THUS MADE T HE FOLLOWING ADJUSTMENTS: 10. AGGRIEVED BY THE ORDER OF THE LD.TPO THE ASSESS EE FILED PROCEEDINGS BEFORE THE DRP. THE DRP DIRECTED FOR EX CLUSION OF APITCO LTD FROM THE FINAL SET OF COMPARABLES AS BEING FUNCTIONALLY DISSIMILAR BUT DIRECTED INCLUSION OF ENTERTAINMENT NETWORK INDIA LTD IF IT PASSES THROUG H THE RELATED PARTY TRANSACTION FILTER AS WELL AS THE OTH ER FILTERS APPLIED BY THE TPO AS IT WAS FUNCTIONALLY COMPARABL E TO THE ASSESSEE. THE DRP ALSO DIRECTED FOR INCLUSION OF ID C INDIA S.NO NATURE OF INTERNATIONAL TRANSACTION AMOUNT OF ADJUSTMENT (IN INR) 1. PROVISION OF MARKETING SUPPORT SERVICES 1,26,29,135 2. INTEREST IMPOUND ON 24,47,587 TOTAL 1,50,76,722 10 I.T.A. NO. 6806/DEL/2015 LTD, PR INTERNATIONAL LTD, UMPIRE INDUSTRIES LTD IF THE ANNUAL REPORTS OF THESE COMPARABLES WERE AVAILABLE FOR THE RELEVANT FINANCIAL YEAR UNDER CONSIDERATION AND THE Y PASS THROUGH THE OTHER FILTERS APPLIED BY THE TPO AS THE SE ARE ALSO COMPARABLE TO THE ASSESSEE. AFTER THE DRPS DI RECTIONS THE FINAL SET OF COMPARABLES FOR CONSIDERATION ARE AS UNDER: S. NO. COMPANY NAME OP/TC MARGIN (TP STUDY MARGINS) 1 I D C (INDIA) LTD. 10.71% 2 QUADRANT COMMUNICATIONS LTD. 14.58% 3 EMPIRE INDUSTRIES LTD. (TRADING & INDENTING) 22.63% 4 ENTERTAINMENT NETWORK (INDIA) LTD. (EVENTS (CONSOLIDATED)) 1.96% 5. PRIYA INTERNATIONAL LTD. (INDENTING) 4.20% 11. IN RESPECT OF INTEREST ON OUTSTANDING RECEIVABL ES, DRP HELD THAT IN CASE INVOICES IS RAISED IN FOREIGN CUR RENCY, INTEREST WILL BE COMPUTED USING LIBOR +400 BASIS PO INTS AND IN CASE INVOICES ARE BEING RAISED IN INDIAN CUR RENCY THE INTEREST WOULD BE AS PER SBI BASE RATE +150 BASIS P OINT, IF THE VALUE OF THE RECEIVABLES IS LESS THAN RS. 50 CR ORE AND IN CASE THE VALUE OF THE RECEIVABLES ARE MORE THAN RS. 50 CRORES, THE INTEREST RATE WOULD BE SBI RATE +300 BA SIS POINT. THE DRP ALSO TOOK OCTOBER 2010 TO BE THE MIDPOINT O F THE YEAR AS THE DUE DATE OF INVOICE RAISED FOR PROVISIO N OF MARKETING SUPPORT SERVICES TO COMPUTE THE INTEREST ON 11 I.T.A. NO. 6806/DEL/2015 OUTSTANDING RECEIVABLES INSTEAD OF TAKING THE ACTUA L DATE OF INVOICE. THE DRP FURTHER DIRECTED TO COMPUTE INTERE ST ON THE INVOICES WHICH HAVE BEEN RAISED IN THE PREVIOUS YEA R FOR THE PERIOD OUTSTANDING BEYOND 60 DAYS TILL 31/03/2011. 12. LD. AO WHILE PASSING THE FINAL ORDER AS PER THE DIRECTION OF DRP, INCREASED THE MARGIN OF PRIYA INT ERNATIONAL 92.62% ALONG WITH THE OTHER COMPARABLES INCLUDED BY THE DRP. IN RESPECT OF THE INTEREST ON OUTSTANDING RECE IVABLES THAT THE LD.AO CALCULATED THE ADJUSTMENT AT RS.34,6 4,076/. 13. THERE WERE CERTAIN CORPORATE ADDITIONS THAT WER E MADE BY THE LD. AO IN RESPECT OF THE DISALLOWANCE OF THE EXPENSES INCURRED BY THE ASSESSEE ALLEGED TO HAVE BEEN MADE FOR THE PURPOSES OF BUSINESS. 14. AGGRIEVED BY THE FINAL ORDER PASSED BY THE LD. AO THE ASSESSEE IS IN APPEAL BEFORE US NOW. WE SHALL 1 ST DEAL WITH THE TRANSFER PRICING ADJUSTMENTS MADE BY THE LD. TP O. THE LD.AR IS DISPUTING INCLUSION OF TWO COMPANIES BEING ; GLOBAL PROCUREMENT CONSULTANT LTD., AND INFO EDGE INDIA LTD., AND HE SUBMITTED IN FURTHERANCE THAT THE MARGIN THAT NE EDS TO BE CORRECTED IN CASE OF PRIYA INTERNATIONAL LTD. 15. BEFORE DEALING WITH THE COMPATIBILITY IT IS SINE QUA NON TO ANALYZE THE FUNCTIONAL PROFILE OF THE ASSESSEE B EFORE US. 16. FROM THE TP STUDY ASSESSEE HAS BEEN CHARACTERIZ ED AS A SUBSIDIARY OF BOSTON SCIENTIFIC INTERNATIONAL B.V 12 I.T.A. NO. 6806/DEL/2015 (NETHERLANDS) AND WAS SET UP IN 2006 TO CARRY OUT MARKETING, PROMOTION, SALES AND DISTRIBUTION IN IND IA OF BOSTON SCIENTIFICS PRODUCTS AND ASSUMES NORMAL RIS K ASSOCIATED WITH CARRYING OUT SUCH BUSINESS. W.E.F. 25/11/2008 GUIDANT, IRELAND AND OTHER AES (GROUP COMPANIES), ENTERED INTO AN EXCLUSIVE DISTRIBUTORSH IP AGREEMENT WITH AN INDEPENDENT DISTRIBUTOR, TRIVITRO N HEALTHCARE PVT. LTD., FOR SALES, MARKETING, DISTRIB UTION AND DELIVERY PRODUCTS AND SERVICES. ACCORDINGLY, CARDIA C RHYTHM MANAGEMENT (CRM) PRODUCTS HAVE BEEN DIRECTLY SHIPPED TO THE DISTRIBUTORS FROM OUTSIDE INDIA. ON 01/01/2011, AN AGREEMENT WAS ENTERED INTO BETWEEN BOSTON SCIENTIFIC INTERNATIONAL B.V(NETHERLANDS) A ND TRIVITRON HEALTHCARE PVT. LTD AND ASSESSEE ROLE WAS LIMITED TO PARTICIPATING IN KEY EDUCATION PROGRAMS WITH KEY MEDICAL PRACTITIONER, MARKET RESEARCH, CUSTOMER FEEDBACK AN D REPORTING TO GROUP ENTITIES TO EFFECTIVELY SELL PRO DUCTS IN THE MARKET. DOES W.E.F. 01/04/2010 ASSESSEE PROVIDED MARKETING SUPPORT SERVICES FOR ITS HOLDING COMPANY BEING BOSTON SCIENTIFIC INTERNATIONAL B.V(NETHERLANDS). A S PER THIS AGREEMENT THE ASSESSEE SHALL PROVIDE FOLLOWING SERV ICES: IMPORT OF MARKETING AND PROMOTION MATERIALS FOR THE HOLDING COMPANY THAT IS BROCHURES LITERATURE ETC F OR CARRYING OUT MARKETING OF BOSTON SCIENTIFIC PRODUCT S IN INDIAN PROVIDING INFORMATION AND CREATING AWARENESS ABOUT BOSTON SCIENTIFIC PRODUCTS 13 I.T.A. NO. 6806/DEL/2015 ORGANIZING AND CONDUCTING SEMINARS AND WORKSHOPS TO PROVIDE INFORMATION ABOUT BOSTON SCIENTIFIC PRODUCT S DISTRIBUTION OF THE SAID BROCHURES, LITERATURES ET C MEETING WITH DOCTORS AND PROVIDING TECHNICAL CLARIFICATIONS; AND PROVIDING ADMINISTRATIVE SUPPORT TO ASSESSEES INDEPENDENT DISTRIBUTOR IN INDIA. 17. BESIDES THESE FUNCTION ASSESSEE ALSO PERFORMS GENERAL MANAGEMENT FUNCTIONS WHICH INCLUDE: FINANCE AND ACCOUNTING FUNCTION: BOTH ASSESSEE AS WELL AS ITS HOLDING COMPANY ARE RESPONSIBLE FOR MANAGING THE DAY-TO-DAY FINANCES AND ACCOUNTING FUNCTIONS. THEYRE ALSO RESPONSIBLE FOR ALL LOCAL STATUTORY COMPLIANCES. FURTHER IN CERTAIN CASES WHE N NECESSARY ASSESSEE IS GUIDED/SUPPORTED BY ITS HOLDI NG COMPANY. HUMAN RESOURCE MANAGEMENT FUNCTION: ASSESSEE RESPONSIBLE FOR RECRUITMENT AND RETENTION OF PERSONNEL. FURTHER WHERE APPROPRIATE ASSESSEE IS GUIDED/SUPPORTED BY ITS HOLDING COMPANY. 17. IN TERMS OF THE ASSETS EMPLOYED AND THE INTANGI BLES OWNED, IT IS THE HOLDING COMPANY THAT HAS CREATED A ND UTILISED ITS LAND AND BUILDING, OFFICE PREMISES COMMUNICATION FACILITIES ETC FOR THE PURPOSES OF IT S BUSINESS. ASSESSEE UTILISES ITS OFFICE PREMISES FOR PURPOSES 14 I.T.A. NO. 6806/DEL/2015 OF ITS OPERATION. THE GROUP COMPANIES HAS OVER THE YEARS CREATED AND DEVELOPED SEVERAL INTANGIBLES LIKE CORP ORATE LOGO, BRAND NAME, TECHNICAL KNOW-HOW, QUALITY STAND ARDS, CUSTOMER AND SUPPLIER IS LESS, WORKFORCE ETC WHEREA S THE ASSESSEE AS A MARKETING SUPPORT SERVICE PROVIDER IN THE COURSE OF ITS ROUTINE OPERATIONS BUILDS AND HAS CUS TOMER RELATIONSHIPS AND MARKET INTANGIBLES BUT IT DOES NO T OWN, CREATE OR DEVELOP ANY SCIENTIFIC COMMERCIALS/MARKET ING INTANGIBLES. 18. IN TERMS OF THE RISK ASSUMED, ASSESSEE DOES NOT HAVE ANY SIGNIFICANT EXPOSURE TO RISK AS ITS SERVICE FEE IS GUARANTEED BY ITS HOLDING COMPANY, REGARDLESS OF SA LE OF PRODUCT IN THE MARKET. 19. THUS IN THE LIGHT OF THE ABOVE THE ASSESSEE HAS BEEN CHARACTERISED AS A PURE MARKET SUPPORT SERVICE PROV IDER EXPOSED TO LESS ART NORMAL RISK ASSOCIATED WITH CAR RYING OUT SUCH BUSINESSES IN THE TP STUDY. 20. WE SHALL NOW DEAL WITH THE OBJECTIONS RAISED BY THE ASSESSEE IN RESPECT OF THE COMPARABLES. GLOBAL PROCUREMENT CONSULTANT LTD 21. THE LD. AR IS AGGRIEVED BY INCLUSION OF THIS CO MPANY INTO THE FINAL LIST OF COMPARABLES AS IT IS SUBMITT ED THAT THIS COMPANY IS NOT INTO MARKETING SEGMENT. THE TP STUDY IN RESPECT OF THIS COMPARABLE HAS BEEN PLACED AT PAGE 211 OF THE PAPER BOOK, ANNUAL REPORTS COMPENDIUM WHEREIN , THIS COMPANY HAS BEEN CHARACTERISED AS PROVIDING TE CHNICAL 15 I.T.A. NO. 6806/DEL/2015 ASSISTANCE AND ENHANCING QUALITY, TRANSPARENCY, EFF ICIENCY AND EFFECTIVENESS OF PROCUREMENT AND PROJECT IMPLEMENTATION SERVICES TO HELP ATTAIN DESIRED INST ITUTIONAL AND CORPORATE OBJECTIVES. IT IS ENGAGED IN ASSISTIN G FINDING AND IMPLEMENTING AGENCIES BY OFFERING THEM A COMPREHENSIVE RANGE OF ADVISORY SERVICES WITH PARTI CULAR FOCUS ON PROCUREMENT. 21.1. ON THE CONTRARY THE LD. DR SUBMITS THAT THIS COMPANY IS FUNCTIONALLY COMPARABLE AND THAT THE AUTHORITIES BELOW WERE RIGHT IN INCLUDING IT IN THE FINAL LIST OF COM PARABLES. THE LD.DR SUBMITTED THAT THIS COMPANY IS RENDERING HIGH- END CONSULTANCY AND THUS IS FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE AS THE ASSESSEE IS ALSO PROVID ING TECHNICAL CLARIFICATIONS TO THE DOCTORS. 21.2. WE HAVE PERUSED THE RECORDS PLACED BEFORE AS AND THE ARGUMENTS ADVANCED BY BOTH THE PARTIES. AS PER THE ANNUAL REPORT OF THIS COMPARABLE THIS COMPANY IS PROMOTED BY EXPORT IMPORT BANK OF INDIA IN ASSOCIATION WITH LEA DING INDIAN PUBLIC SECTOR AND PRIVATE SECTOR CONSULTANCY ORGANISATION ON THE BASIS OF PUBLIC-PRIVATE PARTNER SHIP MODEL THAT OFFERS PARTICULAR FOCUS ON PROCUREMENT. ITS SERVICES HAS BEEN OUTLINED IN THE ANNUAL REPORT AS CONDUCTING INDEPENDENT PROCUREMENT REVIEW OF MULTILATERALLY FUNDED PROJECTS SPREAD ACROSS THE GL OBE. THE COMPANY HAS ALSO UNDERTOOK VALUATION ASSIGNMENTS AS LISTED AT PAGE 237 OF THE PAPER BOOK. IT IS BASICAL LY INTO PROVIDING ADVISE ON PROCUREMENT AND CARRYING OUT 16 I.T.A. NO. 6806/DEL/2015 PROCUREMENT AUDIT. THESE SERVICES PROVIDED BY THIS COMPANY ARE VERY MUCH DIFFERENT FROM THOSE RENDERED BY ASSESSEE. WE THEREFORE DIRECT THE LD.TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. INFO EDGE INDIA LTD. 22. THE ASSESSEE HAS OBJECTED TO THE INCLUSION OF T HIS COMPANY AS IT IS FUNCTIONALLY DIFFERENT FROM THAT O F THE ASSESSEE. IT HAS BEEN CONTENDED THAT THIS COMPANY I S ENGAGED IN RECRUITMENT SOLUTIONS BUSINESS, INTERNET -BASED MATRIMONIAL RELATED SERVICES, REAL ESTATE RELATED S ERVICES AND EDUCATION RELATED SERVICES IT HAS BEEN SUBMITTED TH AT THIS COMPANY IS AN INTERNET-BASED SERVICE PROVIDER OPERA TING IN BACK PORTALS NAMELY NAUKRY.COM FOR RECRUITMENT RELA TED SERVICES, JEEVAN SATIE.COM FOR MATRIMONY RELATED SE RVICES, 99 ACRES.COM FOR REAL ESTATE RELATED SERVICES AND SHIKSHA.COM FOR EDUCATION AND RELATED SERVICES. HE IS SUBMITTED THAT THIS COMPARABLE IS SPREAD ACROSS WID E SPECTRUM OF DOMAINS IN THE INDIAN INTERNET SPACE IS AND SIGNIFICANT REVENUE FROM THESE PORTALS. IT IS OBSER VED FROM THE TP STUDY OF THIS COMPARABLE THAT ALL THE RISKS ASSOCIATED TO THE BUSINESS IS BORNE BY THE COMPARABLE WHICH IS NOT THE CASE WITH THE ASSESSEE BEFORE US. 22.1. ON THE CONTRARY LD. DR SUBMITS THAT THIS COMP ANY IS FUNCTIONALLY COMPARABLE AND THAT THE AUTHORITIES BE LOW WERE RIGHT IN INCLUDING IT IN THE FINAL LIST OF COMPARAB LES 22.2. IT IS OBSERVED THAT THIS COMPANY IS INTO INTE RNER BASED SERVICES, WHICH CANNOT BE COMPARED TO THE KIND OF 17 I.T.A. NO. 6806/DEL/2015 MARKETING CARRIED ON BY ASSESSEE. WE THEREFORE DIRE CT THE LD.TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. PRIYA INTERNATIONAL LTD. 23. IT HAS BEEN SUBMITTED BY THE LD. AR THAT THIS C OMPANY EARNS ITS REVENUES FROM 2 BASIC SEGMENTS THAT IS TR ADING AND INDENTING. LD.AR HAS SUBMITTED THAT THE INDENTI NG SEGMENT OF THIS COMPANY WAS INCLUDED IN THE FINAL L IST OF COMPARABLES, POST DRP DIRECTIONS. HE SUBMITTED THAT AS PER THE STANDARD METHODOLOGY FOR ALLOCATION OF ALLOCABL E EXPENSES, THEY ARE TO BE INITIALLY ALLOCATED BETWEE N THE 2 SEGMENTS ON THE BASIS OF TURNOVER. THE LD.AR FURTHE R SUBMITTED THAT IN THE IMMEDIATELY SUBSEQUENT YEAR, THE MARGINS OF THIS COMPARABLES HAVE BEEN COMPUTED BY APPORTIONING THE UN-ALLOCABLE EXPENSES ON GROSS PRO FIT BASIS AS AGAINST TURNOVER BASIS USED IN THE INSTANT YEAR. HE ALSO SUBMITTED THAT THE LD. TPO HAS ACCEPTED THE COMPUTA TION METHODOLOGY WHICH IS EVIDENT FROM THE TPO ORDER. 23.1. ON THE CONTRARY THE LD. DR SUBMITTED THAT THE ASSESSEE HAD MADE AN APPLICATION UNDER SECTION 154 FOR RECTIFICATION OF THE MARGIN IN RESPECT OF THIS COMP ANY BEFORE THE LEARNER TPO WHICH HAS BEEN REJECTED WIDE ORDER DATED 29/02/2016. HE SUBMITTED THAT THE MARGIN ADOPTED BY THE AUTHORITIES BELOW MUST BE UPHELD. 23.2. WE HAVE PERUSED THE CONTENTIONS RAISED BY BOT H THE PARTIES IN THE LIGHT OF THE RECORDS PLACED BEFORE U S. IN OUR VIEW ALLOCATION OF UN-ALLOCABLE EXPENSES MUST BE MA DE ON 18 I.T.A. NO. 6806/DEL/2015 THE BASIS OF GROSS MARGIN OF DISTRIBUTION FUNCTION AND COMMISSION INCOME RECEIPTS AND NOT ON THE BASIS OF SALES AS ADOPTED BY THE TPO. THUS WE DIRECT THE LD.TPO TO RECOMPUTED MARGIN OF THIS COMPANY BY ALLOCATING UNALLOCABLE EXPENSES TO THE GROSS PROFIT AS THE BAS IS. INTEREST ON RECEIVABLES 24. AT THE OUTSET THE LD.AR IN THE SYNOPSIS HAS SUB MITTED THAT THE INTEREST ON RECEIVABLES CANNOT BE TREATED AS AN INTERNATIONAL TRANSACTION AS THE INTEREST PROPOSED TO BE CHARGED IF ANY, IS ALREADY BUILT IN THE PRICE CHARG ED. IT HAS BEEN FURTHER SUBMITTED IN THE SYNOPSIS THAT ONCE TH E ALP IN RESPECT OF ANY SERVICE IS DETERMINED, IT IS DEEMED TO COVER ALL THE ASPECTS OF THE TRANSACTIONS. RELIANCE HAS BEEN PLACED ON THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF M/S.A VNET INDIA PVT. LTD. VS. DCIT IN ITA NO. 757/BANG/2011 FOR ASSESSMENT YEAR 2007-08 AND MICRO INKS LTD VERSUS A CIT REPORTED IN (2013) 36 TAXMANN.COM 50. 25. THE LD.AR HAS PUT FORTH ALTERNATIVE ARGUMENT IN THE SYNOPSIS THAT AS THE INVOICE FOR THE PAYMENT HAS BE EN RAISED ONLY AT THE YEAR-END THAT IS ON 31/03/2011, THE REC EIVABLES WERE OUTSTANDING ONLY FOR ONE DAY. HE HAS FURTHER SUBMITTED THAT AS 60 DAYS CREDIT PERIOD EXPIRES ONL Y IN THE NEXT FINANCIAL YEAR THE INTEREST PERTAINS TO FINANC IAL YEAR 2011-12 AND HENCE CANNOT ACCRUE IN THE CURRENT ASSESSMENT YEAR. HENCE THE QUESTION OF NON-REALISAT ION OF SERVICE FEE BEYOND NORMAL CREDIT PERIOD DURING THE FINANCIAL YEAR UNDER CONSIDERATION DOES NOT ARISE. IN THE SYN OPSIS 19 I.T.A. NO. 6806/DEL/2015 LD.AR HAS FURTHER OBJECTED THE DRP IS OBSERVATION I N RESTRICTING THE COMPUTATION OF INTEREST TILL 31/03/ 2011, AND TAKING THE ACTUAL DATE OF INVOICE AS 01/10/2010, BE ING THE MIDPOINT OF THE YEAR AS THE DATE OF INVOICE FOR THE PROVISION OF MARKETING SUPPORT SERVICE FOR COMPUTATION OF INT EREST ON RECEIVABLES. 26. ON THE CONTRARY THE LD. DR SUBMITTED THAT FINAN CE ACT 2012, HAS INSERTED EXPLANATION TO SECTION 92B WITH RETROSPECTIVE EFFECT FROM 1/04/2002 TO INCLUDE NOTI ONAL INTEREST CHARGED ON THE RECEIVABLES AS AN INTERNATI ONAL TRANSACTION. HE PLACED IS RELIANCE UPON THE ORDER D ATED 12/08/2015 PASSED BY COORDINATE BENCH THIS TRIBUNAL IN THE CASE OF AMERIPRISE INDIA VS. DCIT IN ITA NO. 2010/DEL/2014 AND ITA NO. 2575/DEL/2014 FOR ASSESSM ENT YEAR 2009-10, WHEREIN IT HAS BEEN HELD THAT INTERES T PAYABLE ON DELAYED CREDITS/RECEIVABLES IS AN INTERNATIONAL TRANSACTION. THE LD.DR HAS PLACED RELIANCE UPON PARAGRAPHS 22 TO 25 OF THIS DECISION WHICH HAS BEEN REPRODUCED HEREUNDER: 22. ON GOING THROUGH THE RELEVANT PART OF THE EXPLANATION INSERTED WITH RETROSPECTIVE EFFECT FROM 2 , THEREBY ALSO COVERING THE ASSESSMENT YEAR UNDER CONSIDERATI ON, THERE REMAINS NO DOUBT THAT APART FROM ANY LONG-TERM OR S HORT-TERM LENDING OR BORROWING, ETC., OR ANY TYPE OF ADVANCE PAYMENTS OR DEFERRED PAYMENTS, 'ANY OTHER DEBT ARISING DURIN G THE COURSE OF BUSINESS' HAS ALSO BEEN EXPRESSLY RECOGNI ZED AS AN INTERNATIONAL TRANSACTION. THAT BEING SO, THE PAYME NT/NON- PAYMENT OF INTEREST OR RECEIPT/NON-RECEIPT OF INTER EST ON THE LOANS ACCEPTED OR ALLOWED IN THE CIRCUMSTANCES AS M ENTIONED IN THIS CLAUSE OF THE EXPLANATION, ALSO BECOME INTE RNATIONAL TRANSACTIONS, REQUIRING THE DETERMINATION OF THEIR ALP. IF THE 20 I.T.A. NO. 6806/DEL/2015 PAYMENT OF INTEREST IS EXCESSIVE OR THERE IS NO OR LOW RECEIPT OF INTEREST, THEN SUCH INTEREST EXPENSE/INCOME NEED TO BE BROUGHT TO ITS ALP. THE EXPRESSION 'DEBT ARISING DU RING THE COURSE OF BUSINESS' IN COMMON PARLANCE ENCOMPASSES, INTER ALIA, ANY TRADING DEBT ARISING FROM THE SALE OF GOO DS OR SERVICES RENDERED IN THE COURSE OF CARRYING ON THE BUSINESS. ONCE ANY DEBT ARISING DURING THE ITA NOS. 2010 & 2575/DEL/2014 COURSE OF BUSINESS HAS BEEN ORDAINED BY THE LEGISLATURE AS AN INTERNATIONAL TRANSACTION, IT IS, BUT, NATURAL THAT IF THERE IS ANY DELAY IN THE REALIZATION OF SU CH DEBT ARISING DURING THE COURSE OF BUSINESS, IT IS LIABLE TO BE VISITED WITH THE TP ADJUSTMENT ON ACCOUNT OF INTEREST INCOM E SHORT CHARGED OR UNCHARGED. UNDER SUCH CIRCUMSTANCES, THE CONTENTION TAKEN BY THE ASSESSEE BEFORE THE TPO THA T IT IS NOT AN INTERNATIONAL TRANSACTION, TURNS OUT TO BE BEREF T OF ANY FORCE. 23. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. PATNI COMPUTER SYSTEMS LTD., (2013) 215 TAXMANN 108 (BOM.) DEALT, INTER ALIA, WITH THE FOLLOWING QUESTI ON OF LAW:- '(C) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL DID NOT ERR IN HOLDING THAT TH E LOSS SUFFERED BY THE ASSESSEE BY ALLOWING EXCESS PERIOD OF CREDIT TO THE ASSOCIATED ENTERPRISES WITHOUT CHARGING AN I NTEREST DURING SUCH CREDIT PERIOD WOULD NOT AMOUNT TO INTER NATIONAL TRANSACTION WHEREAS SECTION 926(1) OF THE INCOME-TA X ACT, 1961 REFERS TO ANY OTHER TRANSACTION HAVING A BEARI NG ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRIS ES?' ITA NOS.20LO & 2575/DEL/20I4 24. WHILE ANSWERING THE ABOVE QUESTION, THE HON'BLE HIGH COURT NOTICED THAT AN AMENDMENT TO SECTION 926 HAS BEEN CARRIED OUT BY THE FINANCE ACT, 2012 WITH RETROSPEC TIVE EFFECT FROM 1.4.2002. SETTING ASIDE THE VIEW TAKEN BY THE TRIBUNAL, THE HON'BLE HIGH COURT RESTORED THIS ISSUE TO THE F ILE OF THE TRIBUNAL FOR FRESH DECISION IN THE LIGHT OF THE LEG ISLATIVE AMENDMENT. _ 1 25. THE FOREGOING DISCUSSION DISCLOSES THAT NON-CHA RGING OR UNDER- CHARGING OF INTEREST ON THE EXCESS /PERIOD O F CREDIT ALLOWED TO THE AE FOR THE REALIZATION OF INVOICES A MOUNTS TO AN 21 I.T.A. NO. 6806/DEL/2015 INTERNATIONAL TRANSACTION AND THE ALP OF SUCH A N INTERNATIONAL TRANSACTION IS REQUIRED TO BE DETERMI NED. 27. WE HAVE PERUSED THE CONTENTIONS RAISED BY BOTH THE PARTIES IN THE LIGHT OF THE RECORDS PLACED BEFORE U S. THE DETAILS OF THE INVOICES RAISED AND THE PAYMENTS RECEIVED BY ASSESSEE FROM ITS AE ARE AS UNDER: . NO INVOICE NO DATE OF INVOICE AMOUNT (INR) DATE OF RECEIPT CREDIT PERIOD (IN DAYS) PERIOD EXCEEDING 60DAYS INTEREST @10.84% 1 IN/1C 10- 002 31 - MAR- 11 86855188 26 - JULY 11 117 57 1470303.659 2 IN/IC 10- 003 31 - MAR- 11 12705278 13 - FEB-12 319 259 977283.022 TOTAL 2447587 28. COPIES OF THE INVOICES RAISED ARE PLACED AT PAG E 264 AND THE PAYMENT THEREOF ARE PLACED AT PAGE 265 AND 266 OF THE PAPER BOOK LD. AR HAS RAISED PRIMARY CONTENTION THAT AS THE INVOICES HAS BEEN RAISED ON THE LAST DAY OF THE FINANCIAL YEAR, THERE IS DELAY OF PAYMENT OF THE RE CEIVABLES ONLY BY ONE DAY, AND THEREFORE THE QUESTION OF NON- REALISATION OF THE RECEIVABLES BEYOND NORMAL CREDIT PERIOD DURING THE RELEVANT FINANCIAL YEAR UNDER CONSIDERAT ION DOES NOT ARISE. HE HAS ALSO ARGUED THAT THE INTEREST IS AN INBUILT ITEM IN THE PRIZE CHARGED IS NOT AN INTERNATIONAL T RANSACTION BY PLACING RELIANCE UPON THE DECISION OF THIS TRIBU NAL AS 22 I.T.A. NO. 6806/DEL/2015 REFERRED TO HEREIN ABOVE. ON THE CONTRARY THE LD.DR HAS ARGUED THAT DUE TO THE AMENDMENTS THAT HAS BEEN BRO UGHT IN BY FINANCE ACT 2012, BY WAY OF AN EXPLANATION TO SECTION 92B WITH RETROSPECTIVE EFFECT FROM 1/4/2002, ANY TY PE OF ADVANCE PAYMENT OR DEFERRED PAYMENTS, ANY OTHER DEA D ARISING DURING THE COURSE OF BUSINESS HAS ALSO BEEN EXPRESSLY RECOGNISED AS AN INTERNATIONAL TRANSACTIO N. HE HAS PLACED RELIANCE UPON THE DECISION OF COORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF AMERIPRISE INDIA PRIVA TE LIMITED (SUPRA). ON PERUSAL OF THIS DECISION IT IS VERY CLE AR THAT EXPLANATION HAS SOUGHT TO INCLUDE, 'ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS' AS INTERNATIONAL TRANSACTION WITH A RETROSPECTIVE EFFECT THEREBY COVERING THE ASSESSMENT YEAR UNDER CONSIDERATION THAT BEING SO, THE PAYMENT/NON- PAYMENT OF INTEREST OR RECEIPT/NON-RECEIPT OF INTER EST ON THE LOANS ACCEPTED OR ALLOWED IN THE CIRCUMSTANCES AS MENTIONED IN THIS CLAUSE OF THE EXPLANATION, ALSO B ECOME INTERNATIONAL TRANSACTIONS, REQUIRING THE DETERMINA TION OF THEIR ALP. 29. THE DECISIONS RELIED UPON BY THE ASSESSEE ARE P RIOR TO THE INSERTION OF THE EXPLANATION TO SECTION 92B AND THEREFORE THE RATIO LAID DOWN CANNOT BE APPLIED TO THE ASSESS EE BEFORE US. RESPECTFULLY FOLLOWING THE DECISION IN AMERIPRI SE INDIA PRIVATE LIMITED (SUPRA), WE REJECT THE ARGUMENT OF THE LD. AR THAT INTEREST CHARGED BY THE ASSESSEE IS IN INCLUDE D IN THE PRIZE CHARGED AND WOULD NOT AMOUNT TO INTERNATIONAL TRANSACTION. 23 I.T.A. NO. 6806/DEL/2015 30. ADHERING FURTHER, TO UNDERSTAND WHETHER THE INT EREST PROPOSED TO BE CHARGED BY THE ASSESSEE IS BUILT IN THE PRIZE CHARGED, IT WOULD BE NECESSARY TO DEAL WITH THE REL EVANT CLAUSES OF THE MARKETING SUPPORT SERVICES AGREEMENT DATED 01/04/2010, ENTERED INTO BETWEEN THE ASSESSEE AND I TS AE. PLACED AT PAGE 116 TO 118 OF THE PAPER BOOK. THE RE LEVANT CLAUSES 3 DEALS WITH THE PAYMENT FOR SERVICES WHICH READS AS UNDER: 3. PAYMENT FOR SERVICES: (A) IN CONSIDERATION FOR GIPL'S SERVICES UNDER TH IS AGREEMENT, BSI SHALL PAY TO GIPL A FEE EQUAL TO ALL OF GIPL'S COSTS AND EXPENSES INCURRED IN PROVIDING THE MSS RE NDERED DURING THE FISCAL YEAR TO BSI, PLUS A MARK-UP OF SU CH COSTS AND EXPENSES AT A RATE TO BE AGREED ON FROM TIME TO TIME ACCORDING TO ARM'S-LENGTH PRINCIPLES (THE 'SERVICE FEE'). (B) FOR THIS PURPOSE, THE COST OF GIPL IN PROVIDI NG THE MSS SHALL MEAN THE ALLOCABLC SHARE OF GIPL'S DIRECT AND INDIRECT COSTS THAT ARE INCURRED IN RELATION TO PROVIDING TH E MSS. FURTHER, REVISION OF COST CALCULATIONS, IF ANY, PUR SUANT TO THE AUDIT OF BOOKS OF ACCOUNTS OF GIPL SHALL BE CONSIDE RED AS A REVISION OF THE COST OF GIPL IN PROVIDING THE ABOVE SERVICES. (C) SERVICE TAX OR OTHER INDIAN INDIRECT TAXES IF ANY THAT MAY BECOME APPLICABLE ON THE SERVICES SHALL BE REIMBURS ED BY BSI TO GIPL IN ADDITION TO THE SERVICE FEES. (D) ON A MONTHLY OR OTHER PERIODIC BASIS AS AGREE D BY THE PARTIES, GIPL SHALL SUBMIT WRITTEN INVOICES TO BSI OF THE 24 I.T.A. NO. 6806/DEL/2015 SERVICE FEE THEN DUE AND THE BASIS OF SUCH FEE. BSI SHALL PAY GIPL THE AMOUNTS INVOICED WITHIN 60 DAYS OR RECEIVI NG SUCH INVOICES (OR SUCH OTHER PERIOD AS AGREED BY THE PAR TIES). SUCH INVOICES AND PAYMENTS SHALL BE MADE IN GIPL'S FUNCT IONAL CURRENCY UNLESS OTHERWISE AGREED BETWEEN PARTIES. 31. SUB-CLAUSE (D) DEALS WITH MANDATE IN WHICH THE INVOICES WOULD BE RAISED, IN LIEU OF WHICH PAYMENTS SHALL BE MADE BY AE. IT HAS BEEN AGREED HEREIN THAT ASSESSEE WOULD B E RAISING WRITTEN INVOICES TO ITS AE ON A MONTHLY OR A PERIODIC BASIS OF THE SERVICE FEE AND THE AMOUNT INVOICED SH ALL BE PAID BY THE AE WITHIN 60 DAYS OF RECEIVING SUCH INV OICES. SUB-CLAUSE (D) REQUIRES THE ASSESSEE TO RAISE INVOI CES AS AND WHEN THE SERVICES ARE RENDERED. THERE IS NO MENTION REGARDING A SITUATION IF PAYMENTS MADE BY THE AE AR E BEYOND 60 DAYS. IT IS ALSO OBSERVED THAT THE ASSESS EE HAS RAISED THE BILL AT THE END OF THE YEAR ON THE LAST DATE IN CONTRADICTION TO THE CLAUSE IN AGREEMENT. 32. ASSESSEE HAS TAKEN THE ARGUMENT BEFORE US THAT AS THE INVOICES RAISED ON THE LAST DAY OF THE FINANCIAL YE AR, PERIOD OF 60 DAYS ARE TO BE CALCULATED FROM THE DATE ON WH ICH THE PAYMENTS ARE RECEIVED BY THE ASSESSEE WHICH HAPPENS TO BE FALLING IN THE NEXT FINANCIAL YEAR. UNDER SUCH METH OD OF CREDITING THE RECEIVABLES, EVEN DURING THIS FINANCI AL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , ASSESSEE WOULD HAVE RECEIVED RECEIVABLES PERTAINING TO THE PREVIOUS FINANCIAL YEAR BEING 2008-09. AT THIS JUNC TURE WE HAVE OBSERVED THE MANNER IN WHICH ASSESSEE HAVE BEE N 25 I.T.A. NO. 6806/DEL/2015 SHIFTING THE PAYMENT OF RECEIVABLES TO THE SUCCEEDI NG FINANCIAL YEAR. THIS CANNOT BE ALLOWED AS THE ALP O F AN INTERNATIONAL TRANSACTION HAS TO BE CALCULATED IN T HE YEAR IN WHICH SERVICES HAVE BEEN RENDERED. 38. THERE IS A CATEGORICAL FINDING RECORDED BY DRP THAT ASSESSEE HAS NOT SUBMITTED COMPLETE DETAILS REGARDI NG THE CURRENCY IN WHICH RECEIVABLES ARE TO BE PAID TO THE ASSESSEE AND THE DETAILS OF COMPUTATION OF INTEREST ON THE R ECEIVABLES BEFORE LD.TPO. AS THE FACTS HAVE NOT BROUGHT ON REC ORD BY THE ASSESSEE, IN OUR OPINION THE DRP WAS RIGHT IN D IRECTING THE LD.TPO TO EXAMINE THE FACTS AND ASCERTAIN THE I NTEREST ON RECEIVABLES IN ACCORDANCE TO THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. COTTON NATURALS I NDIA PRIVATE LIMITED REPORTED IN 2015-TII-09-HTC-DEL-TP. 39. WE THEREFORE SET ASIDE THIS ISSUE TO THE FILES OF THE LD.TPO TO EXAMINE THE FACTS AND TO ASCERTAIN ON THE BASIS OF THE DOCUMENTATION IS PROVIDED BY THE ASSESSEE REGAR DING THE EXACT PERIOD DURING WHICH THE SERVICES HAVE BEEN RE NDERED FOR THE PURPOSES OF CALCULATING INTEREST. THE ASSES SEE IS DIRECTED TO SUBMIT ALL NECESSARY DETAILS BEFORE THE LD.TPO AND THE TPO SHALL GRANT PROPER OPPORTUNITY TO THE A SSESSEE BEFORE CALCULATING THE INTEREST ON RECEIVABLES IN A CCORDANCE WITH LAW FOR THE YEAR UNDER CONSIDERATION. CORPORATE ISSUE: 40. ASSESSEE IN GROUND NO. 3 AND 4 HAS RAISED ISSUE RELATING TO DISALLOWANCE OF EXPENSES UNDER SECTION 37 (1) OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION 26 I.T.A. NO. 6806/DEL/2015 HAD INCURRED CERTAIN EXPENSES ALLEGED TO HAVE BEEN FOR THE PURPOSES OF BUSINESS AND HAD CLAIMED AS AN EXPENDIT URE UNDER SECTION 37 (1) OF THE ACT. THE EXPENSES INCUR RED BY THE ASSESSEE ARE AS UNDER PARTICULARS AMOUNT (INRS.) MAJOR HEAD UNDER WHICH EXPENSE BOOKED HONORARIUM FEES PAID TO DR ANIL SAXENA 1,72,800 LEGAL AND PROFESSIONAL EXPENSES AIRFARE FOR DR. ANIL SAXENA'S JAPAN VISIT 1,92,451 TRAVELLING AND CONVEYANCE EXPENSES REGISTRATION FEE FOR DR. SHAKIR HUSSAIN 42,590 ADVERTISEMENT MARKETING AND SALES PROMOTION EXPENSES REGISTRATION CHARGES FOR DR. JOSEPH 57,399 ADVERTISEMENT MARKETING AND SALES PROMOTION EXPENSES 41. THE DRP WAS OF THE OPINION THAT ASSESSEE COULD NOT DISCHARGE BURDEN OF PROVING THAT THE ADVERTISEMENT, BUSINESS PROMOTION EXPENSES, AND TRAVEL EXPENSES DE BITED TO THE P&L ACCOUNT WERE EXCLUSIVELY FOR THE PURPOSE S OF BUSINESS IN TERMS OF SECTION 37(1). THE DRP THEREFO RE IN TERMS OF EXPLANATION TO SECTION 37(1) AND CBDT CIRC ULAR NO. 5/2012 DISALLOWED THE EXPENSES CLAIMED BY THE ASSES SEE THE DRP SET ASIDE THE ISSUE WITH CERTAIN DIRECTIONS TO THE LD. AO WHICH IS AS UNDER: THE AO IS DIRECTED TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO FURNISH COMPLETE DETAILS OF ADVERTISING AND BUSINES S PROMOTION EXPENSES AND TRAVEL EXPENSES DEBITED TO T HE P&L ACCOUNT. THESE DETAILS MUST INCLUDE THE NAMES AND A DDRESS 27 I.T.A. NO. 6806/DEL/2015 OF THE PAYEES AND THE PURPOSE OF PAYMENT. THE AO SH ALL EXAMINE THESE DETAILS AND OUT OF THE AMOUNT ALLOWAB LE U/S 37(1), THE AO WILL SEGREGATE THE GIFTS AND FREEBIES , TO DOCTORS AND OTHER MEDICAL PERSONNEL WHICH ARE TO BE DISALLO WED IN TERMS OF THE EXPLANATION BELOW SECTION 37(1) AND DI SALLOW THIS AMOUNT. THE ASSESSEE IS DIRECTED TO FURNISH CO MPLETE DETAILS TO THE AO WITHIN A WEEK. 42. SUBSEQUENTLY THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVIDE ALL THE DETAILS AS PER THE DIRE CTIONS OF DRP. AFTER PERUSAL OF THE DETAILS AND THE SUBMISSIO NS THE LD.AO DISALLOWED THE PAYMENTS MADE TO DIRECTLY AND INDIRECTLY TO THE DOCTORS AMOUNTING TO RS.13,14,548 /-, EXPENSES INCURRED BY THE ASSESSEE UNDER THE HEAD MEETINGS/SEMINARS/CONVENTION EXPENSES AMOUNTING TO RS.19,06,000/-AND THE SPONSORSHIP PAID AMOUNTING TO RS. 8 LACS. AGGRIEVED BY THE DISALLOWANCE MADE THE ASSE SSEE IS IN APPEAL BEFORE US NOW. 43. THE LD. AR SUBMITTED THAT ASSESSEE BEING A LEAD ER IN MEDICAL EQUIPMENT INDUSTRY, IS QUITE OFTEN APPROACH ED BY EVENT ORGANISING COMMITTEES FOR CO-SPONSORING PREST IGIOUS EVENTS CONFERENCES ALONG WITH OTHER CORPORATE IN TH E PHARMACEUTICAL INDUSTRY. THE LD.AR SUBMITTED THAT T HE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO HONORARIUM FEE, REGISTRATION CHARGES FOR CONFERENCES/SEMINARS AND TRAVELLING EXPENSES IN REL ATION TO DOCTORS OR MEDICAL PRACTITIONERS DOES NOT AMOUNT TO PROVISION OF FREEBIES AND ACCORDINGLY WILL NOT BE C OVERED BY THE CBDT CIRCULAR READ WITH MCI REGULATIONS. IT HAS BEEN SUBMITTED THAT THESE PAYMENTS ARE INCURRED BY THE A SSESSEE IN THE NORMAL COURSE OF BUSINESS FOR MARKETING OF I TS 28 I.T.A. NO. 6806/DEL/2015 PRODUCTS AND SPONSORSHIP OF CONFERENCES ETC WHICH A RE NOT COVERED IN THE SPECIFIED PAYMENTS MENTIONED IN THE MCI REGULATION, CONSEQUENTLY THERE IS NO QUESTION OF DI SALLOWING THE SAME UNDER SECTION 37 (1). 44. ON CONTRARY THE LD. DR SUBMITTED THAT AS PER TH E MCI REGULATION DOCTORS ARE NOT ALLOWED TO ACCEPT ANY TR AVEL FACILITY INSIDE OR OUTSIDE THE COUNTRY INCLUDING RA IL, AIR, SHIP, CRUISE TICKETS PAID VACATION ETC FROM ANY PHARMACEU TICAL OR ALLIED HEALTHCARE INDUSTRY OR THEIR REPRESENTATIVES FOR SELF AND FAMILY MEMBERS CERTIFICATION OR FOR ATTENDING CONFERENCES SEMINARS WORKSHOPS, CME PROGRAM ETC., A S A DELEGATE AND IT IS ALSO PROHIBITED UNDER THE MCI RE GULATION FOR A MEDICAL PRACTITIONER FROM ACCEPTING ANY HOSPI TALITY LIKE LUKE HOTEL ACCOMMODATION FOR SELF OR FAMILY MEMBER UNDER ANY PRETEXT. LD. DR SUBMITTED THAT THE PAYMENTS MAD E BY THE ASSESSEE ARE PROHIBITED UNDER THE MCI REGULATIO NS, WHICH HAS BEEN AMENDED VIDE NOTIFICATION DATED 10/12/2009. HE SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THESE EXPENSES UNDER SECTION 37 (1) READ WITH EXPLANATION 1. 45. WE HAVE PERUSED THE CONTENTIONS RAISED BY BOTH THE PARTIES IN THE LIGHT OF THE RECORDS PLACED BEFORE U S AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. 46. RELIANCE HAS BEEN PLACED BY BOTH THE SIDES ON T HE NOTIFICATIONS ISSUED BY THE MEDICAL COUNCIL OF INDI A AND THE CBDT CIRCULAR NO. 5/2012 WHICH IS PLACED AT PAGE 32 1 AND 322 OF THE PAPER BOOK. THE ISSUE OF ADMISSIBILITY O F 29 I.T.A. NO. 6806/DEL/2015 DEDUCTION OF SUCH PAYMENTS MADE BY ASSESSEE TO DOCTORS/MEDICAL PRACTITIONERS, HAS TO BE CONSIDERED IN REGARD TO SECTION 37 (1) OF THE ACT. IT IS A RESIDU ARY PROVISION, AND ASSESSEE WOULD BE ENTITLED TO DEDUCT ION OF ALL EXPENDITURE WHICH IS WHOLLY AND CONCLUSIVELY LAID O UT FOR ALL EXPENDED FOR THE PURPOSES OF THE BUSINESS WHICH HAS NOT BEEN EXPRESSLY COVERED BY ANY OTHER SPECIFIC PROVIS ION OF THE ACT. EXPLANATION TO SUB-SECTION (1) WAS INSERTED BY FINANCE (NO. 2) ACT 1998 WITH RETROSPECTIVE EFFECT FROM 01/ 04/1962 WHICH READS THUS: EXPLANATION-FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT ANY TEACHER INCURRED BY AN ASSESSEE F OR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. 47. THE EXPLANATION HAS BEEN INCLUDED IN ORDER TO C URB THOSE BENEFITS THAT WOULD BE EXPENDED WHICH ARE UNWARRANTED FOR, UNDER ANY APPLICABLE LAW. THE PURP OSE OF INCORPORATION OF THIS EXPLANATION HAS BEEN EXPLAINE D BY THE CBDT VIDE CIRCULAR NO. 772 DATED 23/12/1998. THUS I T EMERGES THAT AN ASSESSEE WOULD NOT BE ENTITLED TO D EDUCTION OF ANY PAYMENTS THAT HAS BEEN MADE IN CONTRAVENTION OF LAW. 48. MCI REGULATIONS FALL WITHIN THE DEFINITION OF LAW, AND HENCE, COVERED UNDER EXPLANATION TO SECTION 37 OF T HE ACT. 30 I.T.A. NO. 6806/DEL/2015 NOW WE SHALL PROCEED TO EXAMINE THE NATURE OF EXPEN SES INCURRED BY THE ASSESSEE IN RESPECT OF DOCTORS/MEDI CAL PETITIONERS IN THE LIGHT OF EXERCISE OF POWERS CONF ERRED UNDER THE INDIAN MEDICAL COUNCILS ACT 1956,THAT HAS BEEN AMENDED AS THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) 2002, WHICH HAS BEEN AMENDED VIDE NOTIFICATION DATED 10/12/2009. REGULAT ION 6.8 HAS BEEN ADDED WHICH PROHIBITS A MEDICAL PRACTI TIONER FROM TAKING ANY GIFTS, TRAVEL FACILITIES, CASH OR M ONETARY GRANTS HOSPITALITY FROM ANY PHARMACEUTICAL OR ALLIE D HEALTHCARE SECTOR WHICH READS AS UNDER: '6.8 CODE OF CONDUCT FOR DOCTORS AND PROFESSIONAL A SSOCIATION OF DOCTORS IN THEIR RELATIONSHIP WITH PHARMACEUTICA L AND ALLIED HEALTH SECTOR INDUSTRY. 6.8.1 IN DEALING WITH PHARMACEUTICAL AND ALLIED HEA LTH SECTOR INDUSTRY, A MEDICAL PRACTITIONER SHALL FOLLOW AND A DHERE TO THE STIPULATIONS GIVEN BELOW:- A) GIFTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY GIFT FROM ANY PHARMACEUTICAL OR ALLIED HEALTH CARE INDUSTRY A ND THEIR SALES PEOPLE OR REPRESENTATIVES. B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCL UDING RAIL, AIR, SHIP , CRUISE 9 ITA 904 AND 945/MUM/2013 TICKETS, P AID VACATIONS ETC. FROM ANY PHARMACEUTICAL OR ALLIED HE ALTHCARE INDUSTRY OR THEIR REPRESENTATIVES FOR SELF AND FAMI LY MEMBERS FOR VACATION OR FOR ATTENDING CONFERENCES, SEMINARS , WORKSHOPS, CME PROGRAMME ETC AS A DELEGATE. 31 I.T.A. NO. 6806/DEL/2015 C) HOSPITALITY: A MEDICAL PRACTITIONER SHALL NOT AC CEPT INDIVIDUALLY ANY HOSPITALITY LIKE HOTEL ACCOMMODATI ON FOR SELF AND FAMILY MEMBERS UNDER ANY PRETEXT. D) CASH OR MONETARY GRANTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY CASH OR MONETARY GRANTS FROM ANY PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRY FOR I NDIVIDUAL PURPOSE IN INDIVIDUAL CAPACITY UNDER ANY PRETEXT. F UNDING FOR MEDICAL RESEARCH, STUDY ETC. CAN ONLY BE RECEIVED T HROUGH APPROVED INSTITUTIONS BY MODALITIES LAID DOWN BY LA W / RULES / GUIDELINES ADOPTED BY SUCH APPROVED INSTITUTIONS, IN A TRANSPARENT MANNER. IT SHALL ALWAYS BE FULLY DISCLO SED. E) MEDICAL RESEARCH: A MEDICAL PRACTITIONER MAY CAR RY OUT, PARTICIPATE IN, WORK IN RESEARCH PROJECTS FUNDED BY PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRIES. A MEDICAL PRACTITIONER IS OBLIGED TO KNOW THAT THE FULFILLMEN T OF THE FOLLOWING ITEMS (I) TO (VII) WILL BE AN IMPERATIVE FOR UNDERTAKING ANY RESEARCH ASSIGNMENT / PROJECT FUNDED BY INDUSTR Y - FOR BEING PROPER AND ETHICAL. THUS, IN ACCEPTING SUCH A POSITION A MEDICAL PRACTITIONER SHALL:- (I) ENSURE THAT THE PARTICULAR RESEARCH PROPOSAL(S) HAS THE DUE PERMISSION FROM THE COMPETENT CONCERNED AUTHORITIES . (II) ENSURE THAT SUCH A RESEARCH PROJECT(S) HAS THE CLEARANCE OF NATIONAL/ STATE / INSTITUTIONAL ETHICS COMMITTEES / BODIES. (III) ENSURE THAT IT FULFILS ALL THE LEGAL REQUIREM ENTS PRESCRIBED FOR MEDICAL RESEARCH. 32 I.T.A. NO. 6806/DEL/2015 (IV) ENSURE THAT THE SOURCE AND AMOUNT OF FUNDING I S PUBLICLY DISCLOSED AT THE BEGINNING ITSELF. (V) ENSURE THAT PROPER CARE AND FACILITIES ARE PRO VIDED TO HUMAN VOLUNTEERS, IF THEY ARE NECESSARY FOR THE RES EARCH PROJECT(S). (VI) ENSURE THAT UNDUE ANIMAL EXPERIMENTATIONS ARE NOT DONE AND WHEN THESE ARE NECESSARY THEY ARE DONE IN A SCI ENTIFIC AND A HUMANE WAY. (VII) ENSURE THAT WHILE ACCEPTING SUCH AN ASSIGNMEN T A MEDICAL PRACTITIONER SHALL HAVE THE FREEDOM TO PUBL ISH THE RESULTS OF THE RESEARCH IN THE GREATER INTEREST OF THE SOCIETY BY INSERTING SUCH A CLAUSE IN THE MOU OR ANY OTHER DOC UMENT / AGREEMENT FOR ANY SUCH ASSIGNMENT. F) MAINTAINING PROFESSIONAL AUTONOMY: IN DEALING WI TH PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRY A MED ICAL PRACTITIONER SHALL ALWAYS ENSURE THAT THERE SHALL N EVER BE ANY COMPROMISE EITHER WITH HIS / HER OWN PROFESSIONAL A UTONOMY AND / OR WITH THE AUTONOMY AND FREEDOM OF THE MEDIC AL INSTITUTION. G) AFFILIATION: A MEDICAL PRACTITIONER MAY WORK FOR PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRIES IN ADVISORY CAPACITIES, AS CONSULTANTS, AS RESEARCHERS, AS TREA TING DOCTORS OR IN ANY OTHER PROFESSIONAL CAPACITY. IN DOING SO, A MEDICAL PRACTITIONER SHALL ALWAYS: (I) ENSURE THAT HIS PROFESSIONAL INTEGRITY AND FREE DOM ARE MAINTAINED. 33 I.T.A. NO. 6806/DEL/2015 (II) ENSURE THAT PATIENTS INTEREST ARE NOT COMPROMI SED IN ANY WAY. (III) ENSURE THAT SUCH AFFILIATIONS ARE WITHIN THE LAW. (IV) ENSURE THAT SUCH AFFILIATIONS / EMPLOYMENTS AR E FULLY TRANSPARENT AND DISCLOSED. H) ENDORSEMENT: A MEDICAL PRACTITIONER SHALL NOT EN DORSE ANY DRUG OR PRODUCT OF THE INDUSTRY PUBLICALLY. ANY STU DY CONDUCTED ON THE EFFICACY OR OTHERWISE OF SUCH PROD UCTS SHALL BE PRESENTED TO AND / OR THROUGH 11 ITA 904 AND 945/MUM/2013 APPROPRIATE SCIENTIFIC BODIES OR PUBLI SHED IN APPROPRIATE SCIENTIFIC JOURNALS IN A PROPER WAY'. 50. IT HAS BEEN CONTENDED BY LD.AR THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS INCURRED EXPENDIT URE FOR SPONSORING DOCTORS OVERSEAS AND WITHIN INDIA TOUR FOR ATTENDING SEMINARS WHICH HELPED IN CREATING A RELAT IONSHIP WITH THE DOCTORS, WHO MAY, IN TURN, UNDERSTAND THE UTILITY AND CREAT AWARENESS OF SUCH MACHINES WHICH WAS MARK ETED BY THE ASSESSEE. HENCE, SUCH EXPENSES WERE ALLOWAB LE UNDER SECTION 37(1) OF THE ACT, BEING REVENUE IN NA TURE AND INCURRED FOR THE PURPOSE OF BUSINESS AS EXPLAINED A BOVE. 51. THE ASSESSEE IN THE PAPER BOOK HAS FILED BROCHU RE, BILLS AND TRAVEL DETAILS OF THE DOCTORS AND THE DES TINATION WHERE THE SEMINARS HAVE BEEN CONDUCTED BUT DID NOT BRING ANYTHING ON RECORD TO SHOW THAT SUCH SEMINARS WERE ACTUALLY CONDUCTED AT THE RESPECTIVE VENUES (INSIDE AND OUTSIDE THE COUNTRY) DURING THE RESPECTIVE DOCTORS TRIPS. FURTHER THE LD.AR REFERRED TO CONSULTING AGREEMENT THAT HAS BEEN ENTERED INTO BETWEEN THE ASSESSEE AND ONE DR. ANIL 34 I.T.A. NO. 6806/DEL/2015 SAXENA WHICH HAS BEEN PLACED AT PAGE 405 TO 407 OF THE PAPER BOOK. AS PER THIS AGREEMENT DR. ANIL SAXENA W OULD BE PAID A MINIMUM AMOUNT OF USD 1800 PER DAY OR PRO-RA TA PER HOUR, OF THE SERVICES RENDERED WHICH REPRESENTS THE FAIR MARKET VALUE. IT ALSO SAYS THAT THE INVOICE SHALL I NCLUDE AN ITEMISED LIST OF THE SERVICES RENDERED AND ALL APPR OPRIATE SUPPORTING DOCUMENTS FOR THE SERVICES PROVIDED BY D R ANIL SAXENA. HOWEVER FROM THE RECORDS PLACED BEFORE US W E DO NOT FIND ANY SEARCH DETAILS THAT HAS BEEN PROVIDED IN ORDER TO ESTABLISH THAT DR ANIL KUMAR SAXENA HAS ACTUALLY DELIVERED ANY LECTURES, ATTENDED ANY MEETINGS, PROV IDE TRAINING COURSES AND SEMINARS FOR ASSESSEE ETC. IT IS FURTHER PERTINENT TO NOTE THAT DR ANIL KUMAR SAXENA IS ASSO CIATED WITH ESCOTRS HEART INSTITUTE AND RESEARCH CENTRE. S IMILAR IS AN AGREEMENT ENTERED INTO BY ASSESSEE WITH ONE DR S HAKIR HUSSAIN WHO IS ASSOCIATED WITH MAX SUPER SPECIALITY HOSPITAL. FROM THESE AGREEMENTS IT IS DIFFICULT TO MAKE OUT WHETHER THESE DOCTORS HAVE ENTERED INTO AGREEMENTS WITH ASSESSEE IN THEIR INDIVIDUAL CAPACITY OR ON BEHALF OF RESPECTIVE HOSPITALS WITH WHOM THEY ARE ASSOCIATED, AS ITS REPRESENTATIVE. 52. AS THE ASSESSEE HAS INCURRED EXPENSES IN THE GA RB OF MARKETING THE CARDIAC MACHINE, ONUS IS UPON THE ASS ESSEE TO PROVE THAT THE EXPENSES INCURRED DO NOT VIOLATE ANY LAW THAT MAY BE APPLICABLE. THE BURDEN LIES UPON THE AS SESSEE WHICH HAS NOT BEEN DISCHARGED WITH COGENT EVIDENCES/MATERIALS. MERELY BY PLACING THE BILLS OF PAYMENTS, THE TRAVEL DETAILS, THE HOTEL DETAILS WHE RE THE 35 I.T.A. NO. 6806/DEL/2015 DOCTORS WERE STATIONED AND THE SEMINARS/CONFERENCES WERE CONDUCTED DOES NOT PROVE THAT IN REALITY THE CONFER ENCES WERE ACTUALLY ATTENDED BY SUCH DOCTORS. ASSESSEE HA S ALSO NOT DEMONSTRATED THAT THE DOCTORS BY PARTICIPATING IN SUCH CONFERENCES/ACCEPTING THE HOSPITALITY EXTENDED BY T HE ASSESSEE HAS NOT CONTRAVENED ANY MCI REGULATIONS. 53. IN THE LIGHT OF THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT ENTERTAINING DOCTORS INSIDE /ABROAD AND LURING DOCTORS TO SOLICIT BUSINESS BY, WHICH IS PROHIBITED UNDER REGULATION 6.8.1 OF THE MCI REGULATIONS, AND HENCE IS CLEARLY NOT ALLOWABLE IN VIEW OF EXPLANATION 1 TO S ECTION 37 OF THE ACT. ACCORDINGLY GROUND NO. 3 AND 4 OF ASSESSEES APPEAL STANDS DISMISSED. GROUND NO. 5 IS IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS WHICH IS CONSEQUENTIAL IN NATURE AND GROUND NO. 6 IS IN RESPECT OF CHARGING INTEREST UNDER SECTION 2 34 WHICH IS PREMATURE AT THIS STAGE ACCORDINGLY THESE GROUNDS ARE LEFT UNANSWERED. 54. ACCORDINGLY THE APPEAL FILED BY THE ASSESSEE ST ANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016. (N.K.SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 30.11.2016 @M!T.