JOHNSON & JOHNSON LTD, MUMBAI V. ADDL CIT LTU, MUMBAI

ITA 7133/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75563 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 11-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJEET KUMAR JAIN
• Assessee Lawyers: R R VORA
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; International transaction
• Section: 143(3); 92B; 92F; 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K B ENCH, MUMBAI . . , , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO. 7133/MUM2012 ( & & & & / ASSESSMENT YEAR :2008-09 M/S. JOHNSON & JOHNSON LTD., 30, FORJETT STREET, MUMBAI-400 036 / VS. THE ACIT, LTU 29 TH FLOOR, CENTRE NO. 1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI-400 005 ' $ ./ () ./ PAN/GIR NO. : AAACJ 0866E ( '* / APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI R.R. VORA +,'* . - / RESPONDENT BY: SHRI AJEET KUMAR JAIN . /0$ / DATE OF HEARING :11.02.2014 12& . /0$ / DATE OF PRONOUNCEMENT :19.02.2014 3 / O R D E R PER N.K. BILLAIYA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX U/S. 143(3) R.W. S ECTION 144C(13) OF THE ACT FOR THE A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED 38 GROUNDS AND 2 ADDITIO NAL GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR TH E ASSESSEE STATED THAT THE ITA NO. 7133/M/12 2 ASSESSEE IS NOT PRESSING GROUND NOS. 27, 30, 33, 34 , 35 AND 40. THESE GROUNDS ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A CHA RT. IT IS THE SAY OF THE LD. COUNSEL THAT MOST OF THE GRIEVANCES OF THE ASSESSEE HAVE BEEN DECIDED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN EARLIER ASSESSMENT YEAR FOR A.Y. 2006-07. THE DRP HAS UPHO LD THE ADDITIONS MADE BY THE TPO ON SAME GROUND. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT SO FAR AS THE ISSUES WHICH ARE COVERED BY THE EARLIER DECISIONS O F THE TRIBUNAL, THE REVENUE HAS NOTHING TO SAY. 5. LET US NOW CONSIDER EACH GROUND OF APPEAL. GROU ND NO. 1 IS OF GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATIO N. 6. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF TAX ON BRAND USAGE ROYALTY OF RS. 182.34 LAKHS. 6.1. THIS ISSUE FINDS PLACE AT PAGE-7 ON PARA-1 OF DRPS ORDER. THE DRP HAS UPHOLD THE ADJUSTMENT MADE BY THE AO HOLDIN G THAT THIS ISSUE IS COMING FROM EARLIER YEAR. WE FIND THAT THE TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 4092/M/07 AT PARA- 34 ON PAGE-13 OF ITS ORDER HAS DELETED THE ADJUSTMENT MADE BY THE AO AND THE SAME VIEW WAS TAKEN BY THE TRIBUNAL IN A.Y. 2006-07 IN ITA NO. 83 /M/2011. AS NO DISTINGUISHING FACTS HAVE BEEN BROUGHT BEFORE US, R ESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE , ADDITION OF RS. 182.34 LAKHS IS DELETED. GROUND NO. 2 IS ACCORDING LY ALLOWED. ITA NO. 7133/M/12 3 7. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF SERV ICE TAX AMOUNTING TO RS. 150.25 LAKHS. 8. THIS ISSUE HAS BEEN DISCUSSED BY THE DRP AT PAGE -7 ON PARA-2 OF ITS ORDER WHEREIN THE DRP HAS CONFIRMED THE ACTION OF THE AO NOTING THAT THIS ISSUE IS COMING FROM EARLIER YEAR. WE FIND TH AT THE IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN A.Y. 2006-07 IN I TA NO. 83/M/2011 AT PARA-34 ON PAGE-27 OF ITS ORDER. FACTS AND ISSU E BEING IDENTICAL, RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL (SUPRA), ADDITION OF RS. 150.25 LAKHS IS DELETED. GROUND NO. 3 IS ACCORDING LY ALLOWED. 9. GROUND NO. 4 RELATES TO ALTERNATIVE PLEA TO GROU ND NO. 3. AS THE ADDITION HAS BEEN DELETED QUA IN GROUND NO. 3, GROU ND NO. 4 BECOME OTIOSE. 10. GROUND NO. 5 RELATES TO THE DISALLOWANCE OF TEC HNICAL KNOW-HOW ROYALTY PAYMENT ON TRADED GOODS AMOUNTING TO RS. 11 72.64 LAKHS. THIS ISSUE HAS BEEN CONSIDERED BY THE DRP AT PARA-3 ON P AGE-7 OF HIS ORDER WHEREIN IT CONFIRMED THE ADJUSTMENTS MADE BY THE AO STATING THAT THIS ISSUE IS COMING FROM EARLIER YEAR. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN A.Y. 2006-07 IN ITA N O. 83/MUM/2011 AND AT PARA-33 OF ITS ORDER, THE TRIBUNAL DELETED T HE ADJUSTMENTS MADE ON THIS ACCOUNT. FACTS AND ISSUE BEING IDENTICAL, RES PECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL IN A.Y 2006-07, THE ADDITI ON OF RS, 1172,64 LAKHS IS DELETED. GROUND NO. 5 IS ACCORDINGLY ALLO WED. 11. GROUND NO. 6 RELATES TO THE RESTRICTION OF TECH NICAL KNOW-HOW ROYALTY TO 1% IN RESPECT OF MANUFACTURED GOODS WHIC H RESULTED INTO A DISALLOWANCE OF RS. 2221.26 LAKHS. ITA NO. 7133/M/12 4 12. THIS ISSUE HAS BEEN CONSIDERED BY THE DRP AT PA RA-1 ON PAGE-8 OF ITS ORDER WHEREIN IT CONFIRMED THE ADJUSTMENTS MADE BY THE TPO STATING THAT THIS ISSUE IS COMING FROM EARLIER YEAR. A PER USAL OF THE RECORD SHOWS THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBU NAL IN A.Y. 2006-07 IN ITA NO. 83/MUM/2011 AT PARA -31 TO 33 OF ITS ORDER WHEREIN THE TRIBUNAL HAS MENTIONED THAT A SIMILAR ISSUE WAS CONSIDERED B Y THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 409 2/M/2007 AND DELETED THE TP ADJUSTMENT ON THIS ACCOUNT. AS NO N EW FACTS HAVE BEEN BROUGHT BEFORE US, RESPECTFULLY FOLLOWING THE FINDI NGS OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), THE ADDITION OF RS. 22 21.16 LAKHS IS DELETED. GROUND NO. 6 IS ACCORDINGLY ALLOWED. 13. GROUND NO. 7 RELATES TO THE DISALLOWANCE OF TAX AND R&D CESS PAID ON TECHNICAL KNOW-HOW ROYALTY AMOUNTING TO RS. 678.78 LAKHS. THE DRP HAS CONSIDERED THIS GRIEVANCE OF THE ASSESSEE V IDE OBJECTION NO. 5 ON PAGE-8 OF HIS ORDER AND CONFIRMED THE TP ADJUSTM ENTS MADE BY THE AO FOLLOWING THE EARLIER YEARS DECISION. 14. WE FIND THAT THE TRIBUNAL IN A.Y. 2002-03 IN IT A NO. 4092/M/07 HAS CONSIDERED A SIMILAR GRIEVANCE AT PARA-42 OF IT S ORDER AND DELETED THE ADDITION ON THIS ACCOUNT. A SIMILAR VIEW WAS FOLLO WED BY THE TRIBUNAL IN A.Y. 2006-07 IN ITA NO. 83/M/2011 AT PARA-35 OF ITS ORDER. RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL IN ASSESSEE S OWN CASE (SUPRA), THE ADDITION OF RS. 678.78 LAKHS IS DELETED. GROUND NO . 7 IS ACCORDINGLY ALLOWED. 15. GROUND NOS. 8 TO 10 RELATE TO THE DISALLOWANCE OF SERVICE TAX PAID ON KNOW-HOW ROYALTY. ITA NO. 7133/M/12 5 16. THESE GRIEVANCES OF THE ASSESSEE WAS CONSIDERED BY THE DRP AT PAGE-8 VIDE OBJECTION NO. 6 WHEREIN THE DRP HAS ME NTIONED THAT THIS ISSUE IS COMING FROM EARLIER YEAR FOR A.Y. 2006-07. THE DRP HAS UPHOLD THE ADJUSTMENT MADE BY THE TPO ON SAME GROUND. WE HAVE THE BENEFIT OF THE ORDER OF THE TRIBUNAL FOR A.Y. 2006-06 IN ITA N O. 83/M/2011. A PERUSAL OF PARA-34 ON PAGE 27 OF THE SAID ORDER SH OWS THAT THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2002-03. RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL, WE HOLD THAT THE DISALLOWANCE MADE BY TPO ON ACCOUN T OF CESS SERVICE TAX IS NOT JUSTIFIED. WE, ACCORDINGLY DELETE THE S AME. GROUND NO. 8 TO 10 ARE ALLOWED. 17. GROUND NOS. 11 TO 23 AND ADDITIONAL GROUND NO. 39, THE ASSESSEE IS AGGRIEVED BY AN ADJUSTMENT IN RESPECT OF ADVERTISIN G, MARKETING AND PROMOTION (AMP) EXPENDITURE TO THE TUNE OF RS. 1082 1.38 LAKHS. 18. DURING THE COURSE OF THE TRANSFER PRICING PROCE EDINGS, THE TPO NOTICED THAT THE ASSESSEE HAS SPENT A HUGE AMOUNT O F RS. 170 CRORES ON AMP ON NET SALES OF RS. 800 CRORES. THE TPO WAS OF THE FIRM BELIEF THAT SUCH HIGH PROPORTION OF AMP EXPENSES CLEARLY INDICA TE THAT THE ASSESSEE WAS DEVELOPING AND PROMOTING THE BRANDS MANUFACTURE D AND DISTRIBUTED BY IT EVEN THOUGH THEY ARE NOT OWNED BY IT. THE TP O WAS OF THE FIRM BELIEF THAT PROVISIONS OF SEC. 92B R.W. SECTION 92F SQUARELY APPLY ON THE FACTS AND INCURRING OF AMP EXPENSES BY THE ASSES SEE FOR PROMOTING THE BRANDS OWNED BY ITS AES WAS A DEEMED INTERNATIONAL TRANSACTION FOR WHICH ARMS LENGTH COMPENSATION SHOULD BE RECEIVED BY THE ASSESSEE. THE TPO PROCEEDED BY APPLYING RESIDUAL PROFIT SPLIT METHOD (PSM) TO DETERMINE THE ARMS LENGTH PROFITS THAT THE ASSESSE E SHOULD BE EARNING. THE TPO TOOK THE CONSOLIDATED PROFIT OF THE JOHNSON & JOHNSON GROUP ITA NO. 7133/M/12 6 AND COMPUTED 35% OF THE GLOBAL PROFIT OF THE JOHNS ON & JOHNSON GROUP AT RS. 21697.80 CRORES ATTRIBUTING THE MAJOR ACTIV ITIES OF JOHNSON & JOHNSON GROUP UNDER THE FOLLOWING HEADS: A) MANUFACTURING 50% B) RESEARCH AND DEVELOPMENT 15% C) ADVERTISING, MARKETING AND SALES PROMOTION 35%. 19. THE AMP EXPENDITURES SPENT BY THE ASSESSEE WER E AT 1.54% OF THE TOTAL AMP EXPENDITURE SPENT BY THE GROUP. THE TPO TOOK 1.54% AND APPLIED IT TO THE GLOBAL PROFIT OF RS. 21697.80 CRO RES AND COMPUTED PROFIT AT RS. 334.14 CRORES ATTRIBUTABLE TO THE ASSESSEE O N ACCOUNT OF THE AMP EXPENDITURE. SINCE THE ASSESSEE HAD ALREADY SHOWN CORPORATE PROFITS AT RS. 115.81 CRORES, THE TPO DEDUCTED 35% OF THESE PR OFITS FROM THE SUM COMPUTED BY HIM AND FINALLY ARRIVED AT RS. 293.61 C RORES AS THE COMPENSATION RECEIVABLE BY THE ASSESSEE FOR PROMOTI NG AND ENHANCING THE BRANDS OWNED BY THE AES. THE SAME WAS DETERMINED A S ADJUSTMENT REQUIRED TO BE MADE TO THE ASSESSEES INCOME. 19.1. THE TPO FURTHER MADE AN ALTERNATIVE COMPUTATI ON OF THE COMPENSATION RECEIVABLE ON ACCOUNT OF THE AMP EXPEN DITURE USING THE BRIGHT LINE STANDARD CONSIDERING THE MANUFACTURING AND DISTRIBUTION SEGMENTS FOR THIS PURPOSE. APPLYING BRIGHT LINE OF 8% ON THE NET SALES IN THE MANUFACTURING SEGMENT AND AFTER CONSIDERING AMP EXPENDITURE OF RS. 130.18 CRORES IN THIS SEGMENT COMPUTED THE EXCESS A MP EXPENDITURE AT RS. 81.23 CRORES AND APPLYING A MARK-UP OF 10% DETE RMINED AN ADJUSTMENT OF RS. 89.36 CRORES FOR THE MANUFACTURIN G SEGMENT. FOR THE DISTRIBUTION SEGMENT, THE TPO TOOK 0.4% FOR THE BRI GHT LINE ADJUSTMENT AND APPLIED THE NET SALES OF RS. 188.59 CRORES FOR THE DISTRIBUTION SEGMENT ITA NO. 7133/M/12 7 AND FURTHER CONSIDERING THE AMP EXPENDITURE OF RS. 40.12 CRORES, THE TPO DETERMINED THE EXCESS AMP EXPENDITURE AT RS. 32 .43 CRORES AND APPLYING THE MARK UP OF 10% DETERMINED AN ADJUSTMEN T OF RS. 35.67 CRORES FOR THE DISTRIBUTION SEGMENT. 20. THE ASSESSEE STRONGLY OBJECTED THIS BEFORE THE DRP STATING THAT AMP EXPENSES INCURRED REPRESENTS ONLY DOMESTIC TRAN SACTIONS UNDERTAKEN WITH THIRD PARTIES AND ARE OUTSIDE THE PURVIEW OF S ECTION 92B OF THE ACT. THE ASSESSEE ALSO STRONGLY OBJECTED TO THE APPLICAT ION OF PROFIT SPLIT METHOD. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE PROFIT SPLIT METHOD (PSM) BASED ON THE CONSOLIDATED NET PROFIT OF THE E NTIRE JOHNSON & JOHNSON GROUP WORLD-WIDE IS ERRONEOUS AND INSTEAD T HE AGGREGATE PROFITS GENERATED BY J&J INDIA AND ITS AES ON MANUFACTURING AND TRADING OF SAMPLE PRODUCTS SOLD IN INDIA ON WHICH THE AMP EXPE NDITURE INCURRED SHOULD HAVE BEEN CONSIDERED. 21. ANOTHER OBJECTION OF THE ASSESSEE BEFORE THE DR P WAS THAT THE TPO HAS CONSIDERED THE NET PROFIT OF ALL THE THREE DIVI SIONS OF THE J&J GROUP WORLD-WIDE NAMELY CONSUMER, PHARMACEUTICALS AND MED ICAL DIVISION. INSTEAD OF CONSIDERING ONLY PROFITS OF CONSUMER SEG MENT BECAUSE AT INDIA LEVEL THE COMPUTATION WAS MADE ONLY IN CONSUMER LEV EL. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE DRP THAT THE TPO ERRED IN COMPUTING TWO ALTERNATIVE ARMS LENGTH PRICE BY A DOPTING TWO DIFFERENT METHODS FOR THE SERVICES RENDERED BY THE ASSESSEE T OWARDS PROMOTION OF THE BRAND OF ITS AE WHICH IS INCONSISTENT WITH THE INDIAN TRANSFER PRICING REGULATIONS. THE GRIEVANCE OF THE ASSESSEE WAS CONS IDERED BY THE DRP AT LENGTH. THE DRP DID NOT ACCEPT THE CONTENTION OF T HE ASSESSEE THAT AMP EXPENDITURE DOES NOT CONSTITUTE ANY INTERNATIONAL T RANSACTION. THE DRP WAS CONVINCED THAT A PORTION OF AMP EXPENDITURE ACT UALLY CONFERS A ITA NO. 7133/M/12 8 BENEFIT ON THE ASSESSEES AE WHICH CONSTITUTE AN IN TERNATIONAL TRANSACTION FOR WHICH THE ASSESSEE IS ENTITLED TO COMPENSATION. HOWEVER, THE DRP WAS NOT CONVINCED WITH THE COMPUTATION MADE BY THE TPO ON THE BASIS OF THE RESIDUAL PROFITS SPLIT METHOD (PSM) BUT THE DRP AGREED WITH THE APPLICATION OF THE BRIGHT LINE TEST FOR DETERMINING THE NON ROUTINE AMP EXPENDITURE TO BE RECOVERED FROM THE AE. THE DRP W AS OF THE VIEW THAT THE CHOICE OF COMPARABLES BECOMES CRITICAL FOR THE ESTIMATION OF THE BRIGHT LINE. THE DRP ALSO DID NOT AGREE WITH THE S ELECTION OF THE COMPARABLES BY THE TPO WHICH WERE COLGATE PAMOLIVE (INDIA) LTD., HINDUSTAN UNILEVER LTD. AND PROCTER & GAMBLE BECAUS E IN THEIR CASES, THE AMP HAS BEEN RELATED TO DEVELOPMENT OF BRANDS THAT WERE OWNED BY THEIR AES AND ANY PROMOTION OR SUCH BRAND WOULD CONSTITUT E RELATED PARTY TRANSACTION. THE DRP ALSO REJECTED THE BASIS FOR REDUCING THE AVERAGE AMP SPENT FROM 10.5% TO 8% IN THE MANUFACTURING SEG MENT BECAUSE THE RECORDS DO NOT SHOW ANY BASIS AT ALL. 22. WITH REGARD TO THE MARK UP OF 10% ON THE AMP CO ST, THE DRP WAS SATISFIED WITH THE REASONS GIVEN BY THE TPO. FINAL LY, THE DRP DIRECTED THE AO TO COMPUTE THE ARMS LENGTH COMPENSATION FOR THE BENEFITS CONFERRED ON THE AE IN THE FORM OF BRAND DEVELOPMEN T AND BRAND VALUE AUGMENTATION, USING THE BRIGHT LINE STANDARD AND RE COMPUTE THE ADJUSTMENT IN ACCORDANCE WITH THE DIRECTIONS OF THE DRP. 23. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THAT AMP EXPENDITURE IS NOT AN INTERNATIONAL TRANSACTION. IT IS THE SAY OF THE LD. COUNSEL THAT JOHNSON & JOHNSON BRAND HAS BEEN IN EXISTENCE EVEN BEFORE THE ASSESSE E STARTED ITS OPERATIONS IN INDIA, THEREFORE, THE ASSESSEE DID NOT NEED TO C REATE JOHNSON & JOHNSON BRAND IN INDIA. THE ASSESSEE ONLY INFORMED THE CUS TOMERS ABOUT ITS ITA NO. 7133/M/12 9 PRODUCT LAUNCH AND ITS FEATURE OF ITS PRODUCT. THE LD. COUNSEL EXPLAINED THE PURPOSE/OBJECTIONS OF INCURRING AMP EXPENDITURE . IT IS THE SAY OF THE LD. COUNSEL THAT A COMPANY CONSIDERS THE FOLLOWING SPECIFIC FACTORS: A) STAGE IN THE PRODUCT LIFE CYCLE B) MARKET SHARE AND CONSUMER BASE C) FACING COMPETITION D) INFORMING THE CHANGES TO THE CUSTOMERS E) BARRING NEW ENTRANTS. 24. THE LD. COUNSEL CONTINUED TO ARGUE THAT JOHNSON & JOHNSON INDIA IS THE SOLE BENEFICIARY OF THE ENTIRE AMP EXPENDITU RE INCURRED BY THE JOHNSON & JOHNSON INDIA. IT IS THE SAY OF THE LD. COUNSEL THAT J&J US THE ULTIMATE PARENT COMPANY OF J&J GROUP ITSELF SP END HUGE AMOUNT OF BRAND BUILDING ACTIVITIES. IN ALTERNATIVE, THE LD. COUNSEL SUBMITTED THAT EVEN IF THE AMP SPENT BY J&J INDIA NEEDS TO BE COMP ARED THE SAME SHOULD BE COMPARED FOR EACH PRODUCT CATEGORY SEPARA TELY AND NOT FOR THE COMPANY AS A WHOLE AS THE MARKETING CONDITIONS AND THE DEGREE OF REQUIREMENT OF ADVERTISING OF EACH PRODUCT CATEGORY WOULD BE DIFFERENT. IN SUPPORT OF ITS CLAIM, NO ADJUSTMENT COULD BE MAD E ON ACCOUNT OF AMP EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE FILED CERTAIN ADDITIONAL SUPPORTING DOCUMENTS STATING THAT J&J INDIA HAS UND ERTAKEN ADDITIONAL BENCH MARKING OF BASIC RETURN EARNED BY AE FROM VAR IOUS TRANSACTIONS WITH J&J INDIA. 25. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTED THE FINDINGS OF THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. DR THAT THE ADDITIONAL SUPPORTING DOCUMENTS ARE BEING FILED FOR THE FIRST TIME THEREFORE REQUIRES VERIFICATION AT THE ASSESSMENT S TAGE. ITA NO. 7133/M/12 10 26. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE LOWER AUTHORITIES AND THE ADDITIONAL DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. WE AGREE WITH THE SUBMISSIONS OF THE LD. DR THAT TH ESE ADDITIONAL SUPPORTING DOCUMENTS NEED TO BE VERIFIED BY THE TPO . WE, THEREFORE, RESTORE THIS ISSUE BACK TO THE FILES OF THE TPO. THE TPO IS DIRECTED TO DECIDE THIS ISSUE DENOVO AFTER CONSIDERING THE DOC UMENTS FILED BY THE ASSESSEE AND AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE TRIBUN AL IN THE CASE OF L.G. ELECTRONICS INDIA PVT. LTD. VS ACIT 152 TTJ (DEL)(S B) 273 /ITA NO.5140/DEL/2011 . THE ASSESSEE IS DIRECTED TO FIL E NECESSARY DETAILS AFRESH FOR THE CONSIDERATION OF THE TPO IN SUPPORT OF ITS CLAIM. BOTH THE PARTIES ARE FREE TO CONSIDER ANY OTHER EVIDENCE WHI CH COME TO THEIR NOTICE DURING THE COURSE OF THE DENOVO ASSESSMENT PROCEEDI NGS. GROUND NO. 11 TO 23 ARE ALLOWED FOR STATISTICAL PURPOSE. 27. GROUND NO. 24 AND 25 RELATE TO THE DISALLOWANCE OF EXPENDITURE INCURRED ON PRODUCTION OF ADVERTISEMENT FILMS. 28. THIS GRIEVANCE OF THE ASSESSEE WAS CONSIDERED B Y THE DRP VIDE OBJECTION 8 ON PAGE-17 OF HIS ORDER WHEREIN THE DRP HAS CONFIRMED THE ACTION OF THE AO FOLLOWING HIS OWN ORDER FOR A.Y. 2 006-07. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL F OR A.Y. 1997-98 TO 1999-2000 IN ITA NOS. 145/M/01, 2054 & 2055/M/03 AN D IN A.Y 2000- 01 AND 2001-02 IN ITA NOS. 2774/M/04 AND 9106/M/04 AND ALSO IN A.Y. 2002-03 AND 2006-07 IN ITA NOS. 4707/M/07 AND 83/M/ 2011. 29. WE FIND THAT THE TRIBUNAL IN A.Y. 2006-07 HAS F OLLOWED EARLIER YEARS ORDERS IN ASSESSEES OWN CASE AT PARA 4.2 ON PAGE 3 OF ITS ORDER AND AT PARA 4.3 HELD THAT THE EXPENDITURE ON PRODUCTION OF ADVERTISEMENT FILMS ITA NO. 7133/M/12 11 IS REVENUE IN NATURE. RESPECTFULLY FOLLOWING THE O RDERS OF THE TRIBUNAL (SUPRA), WE HOLD THAT THE EXPENDITURE ON PRODUCTION OF ADVERTISEMENT FILMS IS REVENUE IN NATURE AND ACCORDINGLY DIRECT T HE AO TO DELETE THE SAME. GROUND NO. 24 & 25 ARE ACCORDINGLY ALLOWED. 30. GROUND NO. 26 RELATES TO THE ADJUSTMENTS MADE U /S. 145A OF THE ACT TO THE TUNE OF RS. 229.18 LAKHS. 31. THIS GRIEVANCE OF THE ASSESSEE WAS CONSIDERED B Y THE DRP VIDE OBJECTION NO. 9 ON PAGE 17 OF HIS ORDER WHEREIN THE DRP HAS FOLLOWED HIS OWN FINDINGS FOR A.Y. 2006-07. AN IDENTICAL IS SUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 1999-20 00 AND 2000-01, 2001-02, 2001-02, 2002-03 AND 2006-07 IN ITA NOS. 2 680/M/03, 3289/M/04, 9347/M/10, 4092/M/07 AND 83/M/2011. WE FIND THAT THE TRIBUNAL IN A.Y. 2006-07 HAS CONSIDERED THIS ISSUE AT PARA-5 ON PAGE-4 OF ITS ORDER AND AT PARA-5.2 FOLLOWED THE FINDINGS OF THE CO-ORDINATE BENCH FOR EARLIER ASSESSMENT YEARS AND AT PARA 5.3 RESTOR ED THIS ISSUE TO THE FILES OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRES H. RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL (SUPRA), WE RESTORE THIS ISSUE TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE FINDINGS GIVEN IN EARLIER ASSESSMENT YEARS A FTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 26 IS ALLOWED FOR STATISTICAL PURPOSE. 32. GROUND NO. 28 RELATES TO THE GRIEVANCE THAT THE AO HAS NOT GRANTED RELIEF IN RESPECT OF THE RESERVE FOR CASH DISCOUNT OF THE PREVIOUS ASSESSMENT YEAR 2007-08 WRITTEN BACK DURING THE CUR RENT YEAR. ITA NO. 7133/M/12 12 33. THIS GRIEVANCE OF THE ASSESSEE WAS CONSIDERED B Y THE DRP VIDE OBJECTION NO. 10 AT PAGE-18 OF HIS ORDER WHEREIN TH E DRP OBSERVED THAT THIS ISSUE IS COMING FROM EARLIER ASSESSMENT YEARS WHEREIN THE DRP UPHELD THE ADDITIONS MADE BY THE AO. THE DRP FURTH ER OBSERVED THAT A.Y. 2006-07, IT WAS DIRECTED TO THE AO TO ALLOW TH E ACTUAL CASH DISCOUNT GIVEN BY THE ASSESSEE DURING THE YEAR. THE DRP CON FIRMED THE DISALLOWANCE, AT THE SAME TIME DIRECTED THE AO TO A LLOW ACTUAL CASH DISCOUNT GIVEN BY THE ASSESSEE DURING THE YEAR. 34. WE FIND THAT A SIMILAR VIEW WAS TAKEN BY THE TR IBUNAL IN A.Y. 1999-2000 AND 2000-01 AND 2001-02 IN ITA NOS. 2680/ M/03, 3289/M/04 AND 9437/M/04. THE ASSESSEE HAS ALTERNATIVELY CLAI MED THAT RESERVES WHICH WERE NOT ALLOWED IN THE EARLIER ASSESSMENT YE AR AMOUNTING TO RS. 18,29,724/- WAS WRITTEN BACK DURING THE CURRENT YEA R. WE ACCORDINGLY, RESTORE THIS ISSUE BACK TO THE FILES OF THE AO TO D ECIDE THIS ALTERNATIVE GRIEVANCE OF THE ASSESSEE, IF THE CASH DISCOUNT RES ERVE WAS NOT ALLOWED IN THE EARLIER ASSESSMENT YEAR, THE RIGHT BACK OF THE SAME WOULD AMOUNT TO DOUBLE TAXATION, THEREFORE THE SAME SHOULD BE DELET ED AFTER DUE VERIFICATION. GROUND NO. 28 IS ALLOWED FOR STATISTI CAL PURPOSE. 35. GROUND NO. 29 RELATES TO THE DISALLOWANCE OF 1% OF TRAVELLING EXPENDITURE. THIS GRIEVANCE OF THE ASSESSEE WAS CO NSIDERED BY THE DRP VIDE OBJECTION NO.11 AT PAGE-18 OF HIS ORDER. A SI MILAR GRIEVANCE WAS CONSIDERED BY THE TRIBUNAL FOR A.Y. 2001-02, 2002-0 3 AND 2006-07 IN ITA NOS. 9106/M/04, 4070/M/07 AND 83/M/2011. WE FI ND THAT IN A.Y. 2006-07, THE TRIBUNAL CONSIDERED THIS ISSUE AT PARA -8 ON PAGE-7 OF ITS ORDER AND AT PARA 8.2 THE TRIBUNAL HAS FOLLOWED THE DECISIONS OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER A SSESSMENT YEAR. THE TRIBUNAL HAS ALSO FOLLOWED THE DECISION OF THE HON BLE GUJARAT HIGH ITA NO. 7133/M/12 13 COURT IN THE CASE OF SAYAJI IRON & ENGG CO. 253 IT R 749 AND AT PARA 8.4 DELETED THE ADHOC DISALLOWANCE OUT OF TRAVELLING EX PENSES. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) WE DELE TE THE ADHOC DISALLOWANCE OF RS. 60.60 LAKHS. . GROUND NO. 29 I S ACCORDINGLY ALLOWED. 36. GROUND NO. 31 & 32 RELATE TO THE DISALLOWANCE O F DEPRECIATION CLAIMED ON TESTING EQUIPMENTS. THIS GRIEVANCE OF T HE ASSESSEE WAS CONSIDERED BY THE DRP VIDE OBJECTION NO. 13 AT PAGE -18 OF ITS ORDER WHEREIN THE DRP HAS FOLLOWED HIS OWN FINDING FOR A. Y. 2006-07. SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL FOR A. Y. 2000-01, 2001-02, 2002-03 AND 2006-07 IN ITA NOS. 2774/M/04, 9106/M/0 4, 4070/M/07 AND 83/M/2011. WE FIND THAT THE TRIBUNAL IN A.Y. 2 006-07 HAS CONSIDERED THIS ISSUE AT PARA-16 OF ITS ORDER AND A T PARA-18, THE TRIBUNAL HAS CONSIDERED ITS FINDING OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS AND ALLOWED THE C LAIM OF DEPRECIATION ON THE TESTING EQUIPMENTS. RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL (SUPRA), WE DIRECT THE AO TO ALLOW THE CLA IM OF DEPRECIATION ON TESTING EQUIPMENTS AMOUNTING TO RS. 199.06 LAKHS . GROUND NO. 31 & 32 ARE ACCORDINGLY ALLOWED. 37. GROUND NO. 36 RELATES TO THE SHORT GRANT OF CRE DIT FOR TDS AMOUNTING TO RS. 22.38 LAKHS. 38. AFTER CONSIDERING THE FACTS WE ARE OF THE OPINI ON THAT THIS ISSUE NEEDS VERIFICATION AT THE ASSESSMENT STAGE. WE ACC ORDINGLY DIRECT THE AO TO VERIFY THE TDS CERTIFICATES AND THEN ALLOW THE C ORRECT CLAIM AS PER THE PROVISIONS OF THE LAW AFTER AFFORDING REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE TDS CERTIFICATES TO SUBSTANTIATE ITS CLAIM. GROUND NO. 36 IS ALLOWE D FOR STATISTICAL PURPOSE. ITA NO. 7133/M/12 14 39. GROUND NO. 37 RELATES TO THE CHARGING OF INTERE ST U/S. 234B AND 234D OF THE ACT. THE LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUENTIAL, THEREFORE THE AO IS DIRECTED TO CHARGE INTEREST AS PER PROVISIONS OF LAW AFTER GIVING NECESSARY APPEAL EFFECT. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 40. GROUND NO. 38 RELATES TO THE INITIATION OF PENA LTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THIS GRIEVANCE IS PRE-MATURE AND ACCORDINGLY DISMISSED. 41. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014 . 3 . 2& $ 4 56 19.2.2014 2 . 7 SD/- SD/ (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 19.2.2014 . . ./ RJ , SR. PS ITA NO. 7133/M/12 15 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI