SARA LEE TTK LTD ( NOW AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD), MUMBAI V. ASST CIT RG 10(2), MUMBAI

ITA 7760/MUM/2012

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5100 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 16-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BEERLA LD
• Assessee Lawyers: FARRUKH IRANI LD
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Bad and doubtful debts; Royalty expenses; Set aside
• Section: 143(3)

Judgement Text

ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7760/MUM/2012 ( / ASSESSMENT YEAR:2008-09) SARA LEE TTK LTD. (NOW AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) KALYANIWALLA & MISTRY 3 RD FLOOR, ARMY & NAVY BUILDING 148, M.G. ROAD, FORT MUMBAI-400 001. / VS. ADDL. C IT - RANGE 10(2) AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020. :; ./ ./PAN/GIR NO. AAACK-2416-M ( ;= /APPELLANT ) : ( >?;= / RESPONDENT ) APPELLANT BY : SHRI FARRUKH IRANI- LD. AR RESPONDENT BY : SHRI PAWAN KUMAR BEERLA - LD.DR / DATE OF HEARING : 12/09/2019 / DATE OF PRONOUNCEMENT : 25/11/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [IN SHORT REFERRED TO AS AY] 2008-09 CONTEST CERTAIN ADDITI ONS / ADJUSTMENT MADE BY REVENUE AUTHORITIES IN FINAL ASSESSMENT ORDER DA TED 30/10/2012 PASSED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX- 10(2), MUMBAI [AO] U/S. 143(3) R.W.S. 144C(13), PURSUANT TO THE D IRECTIONS OF DISPUTE ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 2 RESOLUTION PANEL-II, MUMBAI, [IN SHORT REFERRED TO AS DRP], U/S 144C(5) DATED 25/09/2012. 1.2 THE INCOME OF THE ASSESSEE IN THE FINAL ASSESSM ENT ORDER HAS BEEN DETERMINED AT RS.724.42 LACS AFTER CERTAIN TRA NSFER PRICING (TP) ADJUSTMENT OF RS.340.60 LACS AS AGAINST REVISED RET URNED INCOME OF RS.386.33 LACS FILED BY THE ASSESSEE ON 20/01/2010. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: - 1) THE LEARNED DISPUTE RESOLUTION PANEL/ ASSESSI NG OFFICER ERRED IN HOLDING THAT 50% OF THE EXPENDITURE INCURRED ON ADVERTISEMENT AN D PUBLICITY WAS INCURRED FOR PROMOTION OF PRODUCTS IN EXPORT MARKETS AND CONSEQU ENT THERETO, RESTRICTING THE ADJUSTMENT TO THE DOMESTIC SELLING PRICE TO 50% OF THE ADVERTISEMENT AND PUBLICITY EXPENSES INCURRED, FOR THE PURPOSE OF COMPUTING THE COMPARABLE UNCONTROLLED ARMS LENGTH PRICE IN RESPECT OF SALES MADE BY THE APPELL ANT TO ASSOCIATED ENTERPRISES. 2) WITHOUT PREJUDICE TO GROUND 1, THE LEARNED D ISPUTE RESOLUTION PANEL ERRED IN IGNORING THE ALTERNATE SUBMISSIONS AND THE BENCHMAR KING ANALYSIS CARRIED OUT BY THE APPELLANT COMPANY BY APPLYING THE INTERNAL AND EXTE RNAL TRANSACTIONAL NET MARGIN METHOD. 3) THE LEARNED DISPUTE RESOLUTION PANEL/ ASSESSI NG OFFICER ERRED IN DISREGARDING THE SPECIFIC PERMISSION GRANTED BY THE GOVERNMENT O F INDIA, MINISTRY OF COMMERCE AND INDUSTRY, NEW DELHI, FOR THE USE OF TRADEMARK A ND RESTRICTING THE ROYALTY PAID BY THE APPELLANT COMPANY TO ITS ASSOCIATED ENTERPRISE @ 1% OF THE QUALIFYING NET SALES AS AGAINST THE ROYALTY PAYABLE @ 5% OF SUCH S ALES. 4) THE LEARNED DISPUTE RESOLUTION PANEL/ ASSESS ING OFFICER ERRED IN DISREGARDING THE AGREEMENTS AND VARIOUS REPORTS/CORRESPONDENCE F URNISHED DURING THE COURSE OF THE PROCEEDINGS SUBSTANTIATING THE PAYMENT OF TECHN ICAL KNOW-HOW FEES BY THE APPELLANT AND IN HOLDING THAT THERE WAS NO NEED FOR PAYMENT OF SUCH TECHNICAL KNOW- HOW FEES AND DISALLOWING SUCH PAYMENT COMPUTED @ 1.4% OF QUALIFYING NET SALES FOR THE YEAR. 5) THE LEARNED DISPUTE RESOLUTION PANEL / A SSESSING OFFICER ERRED IN CONFIRMING THE DISALLOWANCE OF BRAND DEVELOPMENT EX PENSES PAID BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE. 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT COR PORATE ASSESSEE IS STATED TO BE ENGAGED IN THE MANUFACTURING AND SALE OF SHOE-CARE, HOUSEHOLD-CARE AND PERSONAL-CARE PRODUCTS. CERTAIN INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WITH ITS ASSOCIATED ENTERPRISES (AE) AND AS REPORTED IN ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 3 FORM 3CEB WERE REFERRED U/S. 92CA(1) TO LD. TRANSFE R PRICING OFFICER- II(10) [TPO] FOR DETERMINATION OF ARMS LENGTH PRIC E [ALP]. THE LD. TPO NOTED THE ASSESSEE WAS INCORPORATED UNDER THE INDIA N COMPANIES ACT IN THE YEAR 1977 AND BECAME A MEMBER OF SARA LEE GR OUP IN 1999. THE ASSESSEE, AT PRESENT, WAS A WHOLLY OWNED SUBSIDIARY OF GODREJ SARA LEE LTD. THE MAIN ACTIVITY OF THE ASSESSEE COMPRISED-OF F OF MANUFACTURING AND SALE OF SHOW-CARE, BODY-CARE AND HOUSEHOLD PROD UCTS UNDER THE BRAND NAME KIWI, KIWI-KLEEN AND BRYLCREAM . 2.2 THE DISPUTE UNDER APPEAL IS WITH RESPECT TO DET ERMINATION OF ALP OF FOLLOWING INTERNATIONAL TRANSACTIONS: - NO. CLASS OF TRANSACTION AMOUNT ARMS LENGTH PRICE METHOD ADOPTED 1. SALE OF FINISHED GOODS 311,821,364 311,821,364 CUP 2. EXPENSES REIMBURSED BY THE COMPANY TOWARDS COMMON COST ALLOCATION 9,117,270 9,117,270 AT COST 3. ROYALTY PAYMENT 20,219,217 20,219,217 CUP THE BRIEF DESCRIPTION OF TP ADJUSTMENT MADE BY REVE NUE AUTHORITIES IS AS FOLLOWS. SALE OF FINISHED GOODS OUT OF SALE OF RS.82.81 CRORES ACHIEVED BY THE ASSE SSEE DURING THE YEAR, EXPORT SALES WERE RS.31.81 CRORES OUT OF WHIC H EXPORT SALES OF RS.31.18 CRORES WERE TO ITS AE. THE ASSESSEE COMPAR ED THE SALE PRICE OF GOODS SOLD TO AES WITH THAT OF NON-AES AND IN DOMESTIC MARKET AND CONTENDED THAT AFTER MAKING ADJUSTMENTS SUCH AS ADV ERTISEMENT, PUBLICITY, EXPORT INCENTIVES, EXCISE DUTY, COST OF CREDIT, ROYALTY EXPENSES, TRADE PROMOTIONS, DISTRIBUTION COSTS ETC., THE PRIC E AT WHICH THE GOODS WERE SOLD TO ITS AES ARE HIGHER THAN THE PRICE AT W HICH GOODS WERE SOLD ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 4 TO NON-AES. HOWEVER, LD. TPO OPINED THAT THE ADJUS TMENT OF ADVERTISEMENT & PUBLICITY EXPENSES WOULD NOT BE ALL OWED SINCE THE ADVERTISEMENT WOULD HAVE MASS PRODUCT APPEAL INHERE NT IN IT AND THEREFORE, THE SAID ADJUSTMENT COULD NOT BE ALLOWED . OUT OF EXPORT INCENTIVE, IT WAS HELD THAT EXCHANGE GAIN WOULD BE PURELY HEDGING INCOME AND THEREFORE, THE DEDUCTION OF EXCHANGE GAI N WOULD NOT BE ALLOWED. REGARDING COST OF CREDIT, THE ASSESSEE CLA IMED THAT IN DOMESTIC MARKET, IT EXTENDED THE CREDIT IN DISTRIBUTION CHAI N WHEREAS IN EXPORT MARKET, ANY CREDIT IN DISTRIBUTION CHAIN IS TAKEN C ARE OF BY ITS AE. HOWEVER, IN THE ABSENCE OF EVIDENCE, THE SAID ADJUS TMENT WAS NOT ALLOWED, SIMILARLY, THE ADJUSTMENT OF TRADE PROMOTI ONS EXPENDITURE WAS NOT ALLOWED. FINALLY, AS AGAINST DISTRIBUTION COST OF 2.45% AS CLAIMED BY THE ASSESSEE DURING PROCEEDINGS, THE SAME WAS ALLOW ED ONLY TO THE EXTENT OF 1.96% OF SALE PRICE, BEING RATE WORKED OU T BY THE ASSESSEE IN THE BEGINNING OF THE YEAR. ACCORDINGLY, MODIFYING T HE ADJUSTMENT ON PRODUCT BASIS, LD. TPO PROPOSED TP ADJUSTMENT OF RS .603.42 LACS. PAYMENT FOR ROYALTY & TECHNICAL KNOW-HOW IT TRANSPIRED THAT THE ASSESSEE PAID TRADEMARK ROYA LTY OF RS.163.55 LACS TO ITS AE @5% OF NET SALES OF BRYLCREAM AND KIWI PRODUCTS IN INDIA AND R & D (TECHNICAL) ROYALTY OF 1.4%. IN OTHER WORDS, THE TOTAL ROYALTY PAID BY THE ASSESSEE WAS 6.4%. IN THE ABSENCE OF COGENT EVI DENCES, ALP OF TECHNICAL ROYALTY WAS DETERMINED AS NIL . RELYING UPON PRESS NOTE 9 (2000 SERIES), THE TRADEMARK ROYALTY WAS REDUCED TO 1%. BOTH THE ADJUSTMENT RESULTED INTO PROPOSED TP ADJUSTMENT OF RS.169.48 LACS. ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 5 BRAND DEVELOPMENT EXPENSES IT TRANSPIRED THAT THE ASSESSEE PAID AN AMOUNT OF R S.91.17 LACS TO ITS AE AS APPORTIONMENT OF COST ALLOCATION OF BRAND DEV ELOPMENT EXPENSES. THE ASSESSEE PRODUCED AGREEMENT TO SUPPORT THE SAME . HOWEVER, FINDING THAT THE ASSESSEE COULD NOT PRODUCE ANY EVI DENCE IN SUPPORT OF NATURE OF EXPENSES, THE ALP OF THE SAME WAS DETERMI NED AS NIL 2.3 THE TP ADJUSTMENTS, THUS PROPOSED BY LD. TPO, A GGREGATING TO RS.864.07 LACS WERE INCORPORATED IN THE DRAFT ASSES SMENT ORDER DATED 26/12/2011 WHICH WERE SUBJECTED TO OBJECTIONS BEFOR E LD. DRP. 3.1 BEFORE LD. DRP, THE ASSESSEE REITERATED THE STA ND THAT ADVERTISEMENT EXPENDITURE WAS INCURRED IN INDIA FOR A PARTICULAR PRODUCT AND SUCH EXPENDITURE PERTAINED ONLY TO THE INDIAN M ARKET HAVING TARGET AUDIENCE IN INDIA. NONE OF THE EXPENDITURE WAS STAT ED TO BE RELATED TO SALES IN THE EXPORTS MARKETS. THE ATTENTION WAS DRA WN TO THE FACT THAT SUCH EXPENDITURE WAS INCURRED BY CONCERNED AES IN T HEIR RESPECTIVE COUNTRIES FOR MARKETING THE PRODUCT AND THEREFORE, AN ADJUSTMENT WAS TO BE MADE TO EXCLUDE SUCH COSTS FROM THE DOMESTIC SEL LING PRICES FOR PROPER COMPARABILITY. IT WAS SUBMITTED THAT UNDER C OMPARABLE UNCONTROLLED PRICE (CUP) METHOD, WHILE COMPARING TH E PRICE OF A PARTICULAR PRODUCT IN THE DOMESTIC MARKET AND IN TH E EXPORT MARKET, AN ADJUSTMENT WAS REQUIRED TO BE MADE FOR COSTS INCURR ED IN THE DOMESTIC MARKET FOR SALE OF THE PRODUCT WHICH WAS NOT INCURR ED FOR SALE IN THE EXPORT MARKET. 3.2 THE LD. DRP, AFTER DUE CONSIDERATION OF FACTUAL MATRIX, HELD THAT THE EXPENDITURE UNDER THE HEAD ADVERTISEMENT AND PUBLIC ITY HAD 3 ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 6 COMPONENTS VIZ. MEDIA ADVERTISEMENT, MARKET RESEARC H AND PROVISION FOR DOUBTFUL DEBTS. THE EXPENDITURE ON MARKET RESEARCH COULD NOT BE SAID TO HAVE ANY RELATION WITH EXPORT OF THE PRODUCTS AND T HEREFORE, THE ADJUSTMENT OF THE SAME WAS ALLOWABLE TO THE ASSESSE E. HOWEVER, AT LEAST 50% OF EXPENDITURE ON ADVERTISEMENT AND PUBLI CITY WERE DIRECTED TO BE TREATED AS EXCLUSIVELY FOR THE PROMOTION OF PROD UCTS IN DOMESTIC MARKET AND THEREFORE, THE ADJUSTMENT THEREOF WAS TO BE PROVIDED TO THE ASSESSEE. THE ASSESSEES PLEA REGARDING ADJUSTMENT OF SALE PROMOTION EXPENDITURE WAS ACCEPTED BUT THE ADJUSTMENT OF FORE IGN GAINS WAS NOT ALLOWED. IT IS EVIDENT FROM FINAL ASSESSMENT ORDER THAT THE DIRECTIONS OF LD. DRP HAS REDUCED THE PROPOSED TP ADJUSTMENT, UND ER THIS HEAD, TO RS.79.95 LACS. 3.3 THE LD. DRP ALSO NOTED THAT, AS PER THE DIRECTI ON OF LD. TPO, THE ASSESSEE HAD CARRIED OUT COMPARABILITY ANALYSIS USI NG TRANSACTIONAL NET MARGIN METHOD (TNMM), USING INTERNAL AS WELL AS EXT ERNAL DATA AND TAKING OPERATING PROFIT AS PROFIT LEVEL INDICATOR ( PLI). THE ASSESSEES MARGIN, USING INTERNAL AS WELL AS EXTERNAL TNMM, WE RE SHOWN TO BE HIGHER IN EXPORT SALES AND THEREFORE, IT WAS PLEADE D THAT NO ADJUSTMENT WOULD BE WARRANTED. HOWEVER, KEEPING IN VIEW THE DI RECTIONS GIVEN BY LD. DRP, UNDER CUP METHOD, THE SAID PLEA WAS DISMIS SED AS BEING REDUNDANT. 3.4 THE ADJUSTMENT ON ACCOUNT OF ROYALTY PAYMENT WA S CONFIRMED FOLLOWING THE ORDER OF FIRST APPELLATE AUTHORITY IN AY 2007-08. THE GROUND RELATING TO BRAND DEVELOPMENT EXPENSES WAS ALSO DIS MISSED SINCE THE ASSESSEE COULD NOT DEMONSTRATE THE NATURE OF EXPENS ES INCURRED BY IT. ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 7 3.5 THE AFORESAID DIRECTIONS OF LD. DRP WERE INCORP ORATED IN THE FINAL ASSESSMENT ORDER WHEREIN THE ASSESSEE WAS SADDLED W ITH IMPUGNED TP ADJUSTMENT OF RS.340.60 LACS. AGGRIEVED, THE ASSESS EE IS UNDER FURTHER APPEAL BEFORE US. 4. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS, P ERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON THE ORDERS OF LOWER AUTHORITIES. OUR ADJUDICATION ON VARIOUS GROUNDS OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 5. SO FAR AS THE ADJUSTMENT ON ACCOUNT OF EXPORT SA LES MADE TO AE IS CONCERNED, WE FIND THAT ALTHOUGH LD. DRP AGREED WIT H ASSESSEES SUBMISSIONS THAT SIGNIFICANT AMOUNT OF ADVERTISEMEN T EXPENDITURE WAS DIRECTLY FOR THE BENEFIT OF INDIAN MARKET, STILL TH E ADJUSTMENT ONLY TO THE EXTENT OF 50% ONLY WAS PROVIDED TO THE ASSESSEE. TH E ASSESSEES SUBMISSIONS THAT THE EXPENDITURE WAS INCURRED IN IN DIA FOR ADVERTISEMENT OF A PARTICULAR PRODUCT AND THE SAME PERTAINED ONLY TO INDIAN MARKET AND HAD A TARGET AUDIENCE IN INDIA, REMAINED UNCONTROVE RTED. THE DOCUMENTS PLACED IN THE PAPER BOOK, IN THE SHAPE OF MEDIA SER VICE AGREEMENTS, INVOICES ETC. SUPPORT THE SAID SUBMISSIONS. ANOTHER RELEVANT FACT IS THAT ASSESSEES AE WERE INCURRING SIMILAR EXPENDITURE IN THE RESPECTIVE MARKETS AND THE ASSESSEE WAS NOT INCURRING ANY EXPE NDITURE IN RESPECT OF PRODUCTS BEING EXPORTED. LASTLY, THE ASSESSEE HA D BENCHMARKED THESE TRANSACTIONS USING TNMM METHOD, EXTERNAL AS W ELL AS INTERNAL AND HAD DEMONSTRATED THAT THE STATED TRANSACTIONS WERE AT ARMS LENGTH. THE SAME HAS ALSO REMAIN UNCONTROVERTED AND NO FALL ACY HAS BEEN FOUND IN THE SAME. THE LD. DRP DISMISSED THIS GROUN D TREATING THE SAME ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 8 AS REDUNDANT, WHICH COULD NOT BE HELD TO BE CORRECT APPROACH. THEREFORE, KEEPING IN MIND ALL THESE FACTORS, THE IMPUGNED ADJ USTMENT MADE IN FINAL ASSESSMENT ORDER, IN THIS REGARD, COULD NOT BE SUST AINED. BY DELETING THE SAME, WE ALLOW GROUND NOS. 1 & 2. 6.1 SO FAR AS THE PAYMENT OF TRADEMARK ROYALTY @5% & R & D ROYALTY @1.4% IS CONCERNED, WE FIND THAT THE SAID RATES / P AYMENTS ARE PURSUANT TO MANUFACTURING & DISTRIBUTION LICENSE AGREEMENT AS AMENDED ON 02/07/2007 ENTERED INTO BY THE ASSESSEE WITH BUTTRESS B.V. FOR BRYLCREEM BRAND. SIMILAR AGREEMENT FOR PAYMENT OF ROYALTY HAS BEEN ENTERED BY THE ASSESSEE WITH KIWI EUROPEAN HOLDINGS B.V. FOR KIWI PRODUCTS BRAND. THE DOCUMENTS ON RECORD ESTABLISH T HAT THE SAID RATES HAVE DULY BEEN APPROVED BY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION, SECRETARIAT FOR INDUSTRIAL ASSISTANCE (S IA), GOVERNMENT OF INDIA VIDE APPROVAL LETTERS DATED 07/07/2010 & 08/0 7/2010, THE COPIES OF WHICH HAVE BEEN PLACED ON RECORD. THE LD. SR. COUNS EL HAS RELIED UPON THE DECISION OF PUNE TRIBUNAL RENDERED IN SPICER INDIA PRIVATE LIMITED V/S ACIT (ITA NOS. 376,826/PUN/2016 ORDER DATED 09/ 02/2018 FOR THE SUBMISSIONS THAT APPROVAL OF ROYALTY RATES BY SIA / RBI WOULD CONSTITUTE CUP DATA AND THE TRANSACTIONS WERE TO BE CONSIDERED AT ARMS LENGTH PRICE. ON THE OTHER HAND, THE REVENUE HAS DRAWN ATT ENTION TO THE FACT THAT SIMILAR ISSUE OF TRADEMARK ROYALTY AROSE IN AY 2007-08 WHICH WAS RESTORED BY THE TRIBUNAL VIDE ITA NO.376/MUM/2012 O RDER DATED 24/08/2016. THE ATTENTION HAS FURTHER BEEN DRAWN TO THE FACT THAT IN THE SET ASIDE PROCEEDINGS, VIDE ORDER DATED 31/10/2018, THE ALP OF THE ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 9 ROYALTY WAS DETERMINED AS 3.88% BEING MEAN RATE REF LECTED BY 17 ENTITIES. 6.2 UPON DUE CONSIDERATION, IN LINE WITH VIEW TAKEN BY TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007-08, WE DEEM IT FIT TO RESTORE THE MATTER OF TRADEMARK ROYALTY AS WELL AS R & D ROYALTY BACK TO THE FILE OF LD. AO / TPO WITH SIMILAR DIRECTIONS AS GIVEN IN PARA-12 OF THE ORDER FOR AY 2007- 08. GROUND NOS. 3 & 4 STANDS ALLOWED FOR STATISTICA L PURPOSES. 7.1 THE LAST ISSUE OF THE APPEAL IS ALLOWABILITY OF BRAND DEVELOPMENT EXPENSES. IT HAS BEEN SUBMITTED THAT SARA LEE WAS THE WORLD LEADER IN HOUSEHOLD AND BODY CARE-BUSINESS AND MARKET PRODUCT S UNDER VARIOUS GLOBAL BRANDS. THE GROUP INCURRED COSTS ON GLOBAL B ASIS TO DEVELOP AND MARKET THE SAID BRANDS BY WAY OF APPOINTING ADVERTI SING AGENCIES, INCURRING VARIOUS MARKETING COSTS, DEVELOPING MARKE TING STRATEGIES, RUNNING ADVERTISEMENT PROGRAMS ETC. WHICH WOULD BEN EFIT THE GROUP WORLDWIDE. SIMILARLY, THERE WERE VARIOUS OTHER GROU P COSTS THAT WERE INCURRED TO GENERATE AND OBTAIN NEW RIGHTS, INFORMA TION AND EXPERIENCE FOR THE BENEFIT OF THE GROUP AS A WHOLE. THE GROUP ALSO PROVIDED MARKETING CONCEPTS, MARKETING ASSISTANCE AND SUPPOR T AND OTHER EXPERIENCES AND INFORMATIVE DATA CONCERNING THE MAR KETING OF THE PRODUCTS UNDER SARA LEE BRAND. ALL SUCH RIGHTS AND INFORMATION BENEFITS WERE GENERATED AT CONSIDERABLE COSTS WHICH WERE EXP ENSED TO SARA LEE DIVISION. TO REIMBURSE SUCH COSTS, THE ASSESSEE ENT ERED INTO AN AGREEMENT WITH ITS AE WHEREBY THE PARTIES HAVE AGRE ED FOR REIMBURSEMENT OF COSTS BASED ON ASSESSEES PROPORTI ONATE SHARE IN NET SALE VALUE OF THE GLOBAL BUSINESS, IN RELATION TO T HE COSTS OF SUCH ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 10 SERVICES APPLIED UNDER EACH OF THE BRAND. THE APPOR TIONMENT IS STATED TO HAVE BEEN DONE ON COST BASIS WITHOUT ANY MARK UP. I T HAS ALSO BEEN SUBMITTED THAT EXPENSES INCURRED BY ASSESSEE IN IND IA TOWARDS THE DEVELOPMENT OF THE GLOBAL BRANDS WERE SIMILARLY REC OVERED FROM ITS AE ON COST BASIS. PER CONTRA, LD. DR RELIED UPON THE S TAND OF LOWER AUTHORITIES. 7.2 UPON PERUSAL OF DOCUMENTS, WE FIND THAT THE SAI D COST ALLOCATIONS ARE PURSUANT TO GLOBAL BRANDS COSTS ALLOCATION AGREEMENT DATED 15/06/2004 ENTERED INTO BY THE ASSESSEE WITH ITS AE NAMELY SARA LEE / DE N.V., A COMPANY INCORPORATED IN NETHERLANDS. AS PER THE TERMS OF THE AGREEMENT, THE AE WAS, INTER-ALIA, TO MAKE AVAILABLE AND GIVE ASSESSEE ACCESS TO ACHIEVEMENT IN ITS PRODUCT CONCEPTION / D EVELOPMENT AND MARKETING ACTIVITIES RELATING TO GLOBAL BRANDS. THE ASSESSEE WAS ALSO GRANTED A NON-EXCLUSIVE, NON-TRANSFERABLE AND INDIV ISIBLE LICENSE UNDER ALL EXISTING AND FUTURE INTANGIBLE PROPERTY RIGHTS FOR THE PRODUCTS MARKETED AND SOLD BY THE ASSESSEE UNDER THE GLOBAL BRANDS. IN TURN, THE ASSESSEE WAS TO PAY TO ITS AE A COMPENSATION IN PRO PORTION TO ASSESSEES SHARE IN COSTS OF SUCH SERVICES COMPUTED ON THE BASIS OF NET SALES VALUE IN CERTAIN SEGMENT. THE PERUSAL OF THES E DOCUMENTS WOULD DEMONSTRATE THAT THE IMPUGNED PAYMENTS WERE MADE BY THE ASSESSEE PURSUANT TO WELL DEFINED CONTRACTUAL TERMS UNDER AN AGREEMENT. THE NATURE OF SERVICES BEING AVAILED BY THE ASSESSEE WE RE CLEARLY SPELT OUT IN THE AGREEMENT AND THE FACT THAT THE ALLOCATIONS WER E ON COST BASIS, REMAIN UNCONTROVERTED. IT IS ALSO NOTEWORTHY THAT L D. TPO, WITHOUT DETERMINING THE ALP OF THESE TRANSACTIONS BY ADOPTI NG ANY OF THE ITA NO.7760/MUM/2012 SARA LEE TTK LTD. (AMALGAMATED INTO GODREJ CONSUMER PRODUCTS LTD.) ASSESSMENT YEAR :2008-09 11 PRESCRIBED METHOD, DISALLOWED THE ENTIRE PAYMENT. T HE SAME, IN OUR OPINION, COULD NOT BE SAID TO BE CORRECT APPROACH. ANOTHER FACT IS THAT SIMILAR PAYMENTS HAVE BEEN MADE BY THE ASSESSEE IN PRECEDING YEARS WHICH EMANATES FROM THE SAME AGREEMENT BUT NO SUCH ADJUSTMENT HAS BENE MADE IN EARLIER YEARS. THEREFORE, THE GIVEN FA CTUAL MATRIX DOES NOT INSPIRE US TO CONFIRM THE IMPUGNED ADDITIONS. HENCE , BY DELETING THE SAME, WE ALLOW GROUND NO.5. 8. FINALLY, THE APPEAL STANDS PARTLY ALLOWED IN TER MS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 25/11/2019 SR.PS, JAISY VARGHESE !'# ' / COPY OF THE ORDER FORWARDED TO : 1. ;= / THE APPELLANT 2. >?;= / THE RESPONDENT 3. F ( ) / THE CIT(A) 4. F / CIT CONCERNED 5. GH >AI , I , / DR, ITAT, MUMBAI 6. HJKL / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.