JOHNSON & JOHNSON, MUMBAI V. ADIT (IT) 3(1), MUMBAI

ITA 7865/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1891 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 26-12-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Double taxation relief; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 234B; 145; 148; 144

Judgement Text

ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER AND ITA NO.7865/MUM/2010 (ASSESSMENT YEAR: 2004-05) JOHNSON & JOHNSON, 30 FORJETT STREET, MUMBAI 400036 PAN: AAACJ 1067 F VS. ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-3) (1) SCINDIA HOUSE, N.M. ROAD, BALLARD PIER, MUMBAI 400038 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M.P. LOHIA DEPARTMENT BY: SHRI MAHESH KUMAR, DR DATE OF HEARING: 24/01/2013 DATE OF PRONOUNCEMENT: 01/02/2013 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEE APPEAL AGAINST THE ORDER OF TH E DDIT (IT)- 3(1) MUMBAI UNDER SECTION 143(3) R.W.S. 147 R.W.S. 144C(13) OF THE I.T. ACT. SINCE THE DRAFT ORDER WAS APPROVED BY THE DRP-I, MUMBAI, ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US. 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED AO HAS ERRED IN LAW AND IN FACT, IN REO PENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE INITIATION OF RE- ASSESSMENT PROCEEDINGS IS CONTRARY TO LAW AND ERRONEOUS AND OUGHT TO BE SET ASIDE. 2. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED AO HAS ERRED IN LAW AND IN FACT IN MAKING ARBITRARY ADDITION OF ROYALTY INCOME OF ` .4,49,084,243 TO THE TOTAL INCOME OF THE APPELLANT BY SUMMING UP THE TOTAL AMOUNT OF ROYALTY AS REFLECTED BY THE CERTIFICATES OF TAX DEDUCTED AT SOURCE (TDS) AND NOT ACCEPTING THE CASH BASIS OF ACCOUNTING METHOD ADOPTED REGULARLY BY ASSESSEE SINCE LAST 13 YEARS. ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 2 OF 16 3. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED AO HAS ERRED IN NOT ASSESSING THE INCOME OF THE APPELLANT ON MERCANTILE BASIS AT ` .38,48,76,032 FOR A.Y 2004-05 AS AGAINST ` .5,20,753,780 AS PER TDS CERTIFICATES FOR VARIOUS YEARS. 4. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED AO HAS ERRED IN NOT GRANTING CORRESPONDING CREDIT OF TDS OF ` .78,113,068 IN RESPECT OF ABOVE DETERMINED INCOME OF ` .5,20,753,780. 5. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED AO HAS ERRED IN LAW AND IN FACT, IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT, DISREGARDIN G THE FACT THAT THE APPELLANT IS A NON-RESIDENT ASSESSEE AND ITS ENTIRE REVENUES/ RECEIPTS ARE SUBJECT TO TAX WITHHO LDING IN INDIA UNDER SECTION 195 OF THE ACT AND THE APPEL LANT IS NOT LIABLE TO PAY ADVANCE TAX IN RESPECT OF SUCH REVENUES. THE APPELLANT RESPECTFULLY SUBMITS THAT, AS PER THE PROVISIONS OF THE ACT, THE INTEREST UNDER SECTI ON 234B OF THE ACT IS NOT LEVIABLE IN CASE OF THE APPELLANT AND THE AO BE DIRECTED TO DELETE THE INTEREST LEVIED UNDER SECTION 234B OF THE ACT AT ` .52,542,856 . 3. THE FACTS LEADING TO THE PRESENT APPEAL ARE AS UNDE R. ASSESSEE IS A TAX RESIDENT OF USA DERIVING INCOME MAINLY ON ROYALTY CLAIMING BENEFITS UNDER INDIA-USA DTAA. ASSESSEE FILED ITS R ETURN OF INCOME FOR A.Y 2004-05 ON 1.11.2004 DECLARING INCOME OF ` .7,16,69,537. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE I.T. ACT DATED 30 .11.2006 WAS PASSED ACCEPTING THE TOTAL INCOME AT ` .7,16,69,540 AND RATE OF TAX @15%. AFTERWARDS THE NOTICE UNDER SECTION 148 OF TH E ACT, DATED 25.03.2009 WAS ISSUED. THE ASSESSMENT IN THE CASE O F ASSESSEE WAS REOPENED AFTER RECORDING THE REASONS AS UNDER: THE TOTAL INCOME OF A PERSON FOR ANY PREVIOUS YEAR INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH IS RECEIV ED OR WHICH ACCRUES OR ARISES IN SUCH PREVIOUS YEAR UNLES S SPECIFICALLY EXEMPTED FROM TAX. THE RELATED RECEIPT IN RESPECT OF ANY TAX DEDUCTED AT SOURCE HAS TO BE TAKEN INTO ACC OUNT IN COMPUTING THE TOTAL INCOME OF ASSESSEE. ASSESSEE IS A TAX RESIDENT OF USA. ASSESSEE PROVIDE S VARIOUS SERVICES LIKE TECHNOLOGICAL ASSISTANCE, EXPERT SERV ICES RELATED TO ADVERTISING, PROMOTIONS, MARKETING PLANS AND STRATE GY, DISTRIBUTION NETWORK, TECHNOLOGICAL SOLUTIONS FOR I NFORMATION MANAGEMENT ETC, TO ITS ASSOCIATED ENTERPRISES. JOHN SON & ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 3 OF 16 JOHNSON LTD AND M.R. ENTERPRISES LTD AND EARNED ROY ALTY J&J USA HOLDS 75% OF THE TOTAL SHARES OF J&J INDIA. THE ASSESSMENT OF A.Y 2004-05 WAS COMPUTED UNDER SCRUTI NY IN NOVEMBER, 2006 FOR INCOME OF ` .716.69 LAKHS. ON VERIFICATION, IT WAS REVEALED THAT THE TOTAL AMOUNT PAID/CREDITED TO ASSESSEE ACCOUNT ON ACCOUNT OF ROYALTY FOR THE PERIOD UPTO M ARCH 04 (PREVIOUS YEAR RELEVANT TO A.Y 2004-05) AMOUNTED TO ` .52,07,53,780, WHEREAS ASSESSEE HAS OFFERED ONLY ` .7,16,69,537 FOR TAXATION. THUS ROYALTY INCOME OF ` .44,90,84,243 WAS NOT OFFERED FOR TAXATION IN AY 20 04-05. FURTHER THE TAX RATE APPLICABLE AS PER AGREEMENT IS 20 PER CENT WHEREAS TAX WAS LEVIED @ 15 PER CENT. THE SHORT LEV Y OF TAX ON ASSESSED INCOME ESCAPED ASSESSMENT WORKS OUT TO ` .2,60,37,689 (AFTER ADJUSTMENT OF TDS @ 15%). IN VIEW OF THE ABOVE, THERE IS REASON TO BELIEVE TH AT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147, EXPLANATION 2(C) OF THE IT ACT AND IT IS FIT CASE TO RE-OPEN THE ASSESSMENT. IN THE RE-ASSESSMENT PROCEEDINGS REJECTING ASSESSE E OBJECTIONS, DRAFT ORDER UNDER SECTION 144C (1) R.W.S. 147 R.W.S . 143(3) OF THE I.T. ACT 1961 WAS PASSED ON 24.11.2009. ASSESSEE FILED O BJECTIONS AGAINST THE DRAFT ORDER BEFORE THE DISPUTE RESOLUTI ON PANEL- 1,MUMBAI (DRP) AS PER THE PROVISIONS OF SECTION 144 C (2) OF THE ACT. THE DISPUTE RESOLUTION PANEL-1, MUMBAI VIDE ITS ORD ER DATED 12.08.2010 HAS ISSUED DIRECTIONS UNDER SECTION 144C (5) OF THE I.T. ACT CONFIRMING THE ACTION OF AO. ACCORDINGLY ORDER UNDER SECTION 143(3) R.W.S. 147 R.W.S. 144C (13) OF THE I.T. ACT, 1961 DT. 03.09.10 WAS PASSED, WHICH IS SUBJECT MATTER OF PRESENT APPE AL. 4. ASSESSEES OBJECTIONS REGARDING REOPENING OF ASSESS MENT AND BRINGING TO TAX HIGHER AMOUNT BEFORE AO AND DRP ARE AS UNDER: A) NO FRESH MATERIAL HAS COME ON RECORD TO ESTABLISH T HAT INCOME OF J&J USA HAS ESCAPED ASSESSMENT. THE ISSUE OF ROYALTY HAS BEEN VERIFIED IN DETAIL DURING THE SCRU TINY ASSESSMENT PROCEEDINGS FOR AY 2004-05 AND ALL THE RELEVANT DOCUMENTS WERE SUBMITTED TO AO DURING SUCH PROCEEDINGS. ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 4 OF 16 B) ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS IN RETURN OF INCOME WHICH HAS ATTAINED FINALITY BY VIR TUE OF ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THUS, THE ENTIRE RE-ASSESSMENT PROCEEDINGS HAVE BEEN INITIATE D MERELY BECAUSE OF A CHANGE IN OPINION IN RESPECT OF THE TAX POSITION WHICH WAS INITIALLY ACCEPTED BY AO AND NOT BECAUSE OF INCOME ESCAPING ASSESSMENT DUE TO FAILUR E OR OMISSION ON PART OF J&J TO TRULY DISCLOSE THE MATER IAL FACTS NECESSARY FOR ASSESSMENT. ASSESSEE PLACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF ITS CONTENTIONS. C) J&J USA HAS BEEN CONSISTENTLY FOLLOWING THE CASH BA SIS OF ACCOUNTING FOR MORE THAN 13 YEARS AND THE SAME HAS BEEN ACCEPTED CONSEQUENT TO THE ORDER BY THE CIT (A) FOR ASSESSMENT YEAR 2003-04. D) J&J INDIA AND NR JET BEING COMPANIES INCORPORATED U NDER COMPANIES ACT, 1956 FOLLOW MERCANTILE SYSTEM OF ACCOUNTING. AMOUNT ACCRUED TO J&J INDIA IN ITS BO OKS FOR THE PREVIOUS YEAR ENDED 31 ST MARCH 2004 HAS BEEN ACTUALLY PAID TO J&J USA DURING THE PREVIOUS YEAR E NDED ON 31 ST MARCH, 2006 AND 31 ST MARCH, 2007. E) IN ANY CASE, AMOUNT OF ROYALTY MENTIONED IN THE NOT ICE DOES NOT MATCH WITH AMOUNT OF ROYALTY ACCRUED TO J& J INDIA AND NR JET. F) SINCE THE PROVISION OF INDIA-USA DTAA ARE MORE BENE FICIAL TO J&J USA I.E. ROYALTY TAXABLE @15% VIS--VIS @ 20 % UNDER THE INCOME TAX ACT, THE ROYALTY RECEIVED HAS BEEN OFFERED TO TAX @ 15%. G) WITHOUT PREJUDICE TO ABOVE, THE AMOUNT OF ROYALTY C REDITED AS PER FORM 3CEB, J&J INDIA AND NR JET IS ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 5 OF 16 ` .38,48,76,032 ONLY AND NOT THE AMOUNT CONSIDERED BY AO. 5. AO DISCUSSED THE PROVISIONS OF SECTION 147, VARIOUS LEGAL PRINCIPLES IN REOPENING WITHIN 4 YEARS AND REJECTED THE OBJECTIONS. ON FACTS, SURPRISINGLY AO DID NOT ACCEPT ASSESSEES OBJECTIONS BY STATING AS UNDER: (G) ASSESSEES REPRESENTATIVE HAS FAILED TO FILE T HE DOCUMENTARY EVIDENCES TO PROVE THAT J&J INDIA AND N R JET BEING COMPANIES INCORPORATED UNDER COMPANIES AC T, 1956 FOLLOW MERCANTILE SYSTEM OF ACCOUNTING AND AMOUNT ACCRUED IN BY J&J INDIA IN ITS BOOKS FOR THE PREVIOUS YEAR ENDED 31 ST MARCH, 2004 HAS BEEN ACTUALLY PAID TO J&J DURING THE PREVIOUS YEAR ENDED ON 31 ST MARCH, 2006 AND 31 ST MARCH, 2007. ASSESSEES REPRESENTATIVE HAS ALSO NOT FILED ANY DOCUMENTARY EVIDENCES TO PROVE VARIOUS OTHER CONTENTIONS MADE I N THE SUBMISSIONS. IN THE ABSENCE OF THE DOCUMENTARY EVIDENCES, ASSESSEES REPRESENTATIVES VARIOUS CONTENTIONS ARE NOT ACCEPTABLE. (H) ASSESSEES REPRESENTATIVE HAS SUBMITTED THAT TH E AMOUNT OF ROYALTY CREDITED AS PER FORM 3CEB, J&J IN DIA AND NR JET IS ` .38,48,76,032. THE SAME ARGUMENT IS ALSO NOT ACCEPTABLE BECAUSE ON PERUSAL OF THE TDS CERTIFICATES FILED BY ASSESSEE ALONG WITH THE RETUR N OF INCOME FOR A.Y 2004-05, IT IS NOTICED THAT THE TOTA L AMOUNT OF ROYALTY RECEIVED BY ASSESSEE IS ` .52,07,53,780. AO BROUGHT TO TAX THE ENTIRE AMOUNT OF ` .52,07,53,780. DRP-I IN THEIR BRIEF ORDER, SIMPLY REJECTED THE OBJECTIONS W ITHOUT CONSIDERING THE MERITS OF THE ISSUES. 6. THE LEARNED COUNSEL IN HIS ARGUMENTS, REFERRING TO THE DOCUMENTS PLACED ON RECORD, RAISED THE ISSUE OF JUR ISDICTION, LEGALITY OF BRINGING TO TAX THE ENTIRE ROYALTY INCOME, PROVI SIONS OF DTAA, MISTAKE IN AOS ORDER IN CONSIDERING THE ENTIRE AMO UNT AS ACCRUED IGNORING ASSESSEES CONTENTION OF AMOUNT ACCRUED DU RING THE YEAR, NOT GIVING CREDIT OF TAX DEDUCTED AND LEVY OF INTER EST ETC,. ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 6 OF 16 7. THE LEARNED CIT (DR) HOWEVER, COUNTERED THE ARGUMEN TS AND RELIED ON THE ORDER OF AO, PRINCIPLES RELIED UPON B Y AO ON LEGALITY OF REOPENING AND REASON FOR TAXING THE INCOME ON ACCRU ED BASIS. HE ALSO SUBMITTED THAT AN ANOMALOUS SITUATION MAY ARIS E WHEN ASSESSEE MAY NOT OFFER INCOME AND THE DEDUCTORS MAY NOT DEDUCT TAX AS AMOUNT IS NOT TAXABLE AND PROVISION OF ACT M AY BECOME IN- OPERABLE. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMIN ED THE PAPER BOOK PLACED ON RECORD. BEFORE EXAMINING THE L EGAL ISSUE OF REOPENING, WE EXAMINED THE FACTS WHICH DETERMINE WH ETHER ACTION OF AO IS SUSTAINABLE. ASSESSEE FILED RETURN OF INCO ME OFFERING ` .7,16,69,534 AND CLAIMING TDS OF ` .1,07,50,431 (@15%) LEAVING A NOTE IN THE COMPUTATION OF INCOME AS UNDER: THE TDS HAS BEEN CLAIMED FOR ` .1,07,50,431 THOUGH THE CERTIFICATES FILED ARE FOR ` .7,81,13,068 WHICH PERTAIN TO INCOME THAT ARE YET TO BE RECEIVED AND THE SAME SHA LL BE CLAIMED ON THE RECEIPT OF THE ROYALTY. 8.1 ASSESSEE ENCLOSED THE STATEMENT OF TDS AND DETAILS OF INCOME OFFERED YEAR WISE AS UNDER: (BIG TABL E WAS SPLIT FOR PRESENTATION) S. NO NAME OF THE PERSON DEDUCTING THE TAX PERIOD DURING WHICH IT WAS ISSUED AMOUNT ( ` .) TDS ( ` .) 1 JOHNSON & JOHNSON LTD (J&J INDIA) 2002 - 03 90,33,657 13,55,049 2 J&J INDIA 2002 - 03 5,19,04,792 77,85,719 3 J&J INDIA 2002 - 03 1,36,23,484 20,43,522 4 J&J INDIA 2002 - 03 5,99,76,651 89,96,497 5 NR JET ENTERPRISES LTD 2002 - 03 8,48,972 1,27,346 6 J&J INDIA 2003-04 30,99,83,389 4,64,97,509 7 J&J INDIA 2003-04 7,53,82,835 1,13,07,426 52,07,53,780 7,81,13,068 ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 7 OF 16 THE ABOVE INCOMES WERE OFFERED YEAR WISE AS: AY 2004-05 AY 2006-07 AY 2007-08 AMOUNT ( ` .) TDS ( ` .) AMOUNT ( ` .) TDS ( ` .) AMOUNT ( ` .) TDS ( ` .) 90,33,657 13,55,049 - - - - 5,19,04,792 77,85,719 - - - - 42,69,013 6,40,352 93,54,471 14,03,170 - - 56,13,100 8,41,965 5,43,63,551 81,54,532 - - 8, 48,972 1,27,346 - - - - - - 21,01,89,480 3,15,28,422 9,97,93,909 1,49,69,087 - - 4,96,91,373 74,53,706 2,56,91,462 38,53,720 7,16,69,534 1,07,50,431 32,35,98,875 4,85,39,830 12,54,85,371 1,88,22,807 8.2 THE RATE OF TAX @ 15% WAS CLAIMED AS UNDER: - TAX ON ROYALTY AS PER ARTICLE 12(2)(A)(II) OF DTAA BETWEEN INDIA & USA 8.3 ASSESSEE ENCLOSED ALL THE TDS CERTIFICATES A LONG WITH THE RETURN. AO IN THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) DATED 30.11.2006 HAS STATED THAT THE ISSUE OF ROYALTY WAS REFERRED TO TPO AND TPO UNDER SECTION 92CA(3) DATED 29.09.06 HAD NO T MADE ANY ADJUSTMENT TO THE ARMS LENGTH PRICE. AO ALSO LEFT A NOTE REGARDING THE TAX LEVIED AS PER DTAA. 8.4 INTERESTINGLY, BY THE TIME ASSESSMENT UNDER SEC TION 143(3) WAS PASSED BY AO FOR AY 2004-05, THE CIT (A) HAS AL READY DECIDED SIMILAR ISSUE IN AY 2003-04. IN THAT YEAR ASSESSEE HAS SHOWN ROYALTY OF ` .24,66,34,994, WHEREAS THE TPO HAS FIXED AS ROYALTY INCOME AT ` .26,53,07,141. THE DIFFERENCE IS ONLY BECAUSE IN TH E AUDIT REPORT IN FORM NO.3CEB, THE AMOUNT REPORTED W AS ` .26,53,07,141. ASSESSEE WAS ASKED BY AO TO EXPLAIN WHY THE DIFFERENCE SHOULD NOT BE TREATED AS ITS INCOME FOR THAT ASSESSMENT YEAR. IN THIS REGARD, ASSESSEE CONTENDED BEFORE AO AS FOLLOWS: ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 8 OF 16 (A) J&J USA HAS RECEIVED ROYALTY INCOME OF ` .24,66,34,994 FROM JOHNSON & JOHNSON LIMITED DURING THE YEAR RELEVANT FOR THE ASSESSMENT YEAR 2003-04. (B) THE AMOUNT OF ` .26,53,07,141 AS REPORTED IN THE ACCOUNTANTS AUDIT REPORT IS AMOUNT PROVIDED BY JOHNSON & JOHNSON LIMITED IN ITS BOOKS OF ACCOUNT. (C) J&J USA HAS BEEN FILING THE RETURN ON CASH BASI S AND NOT ON ACCRUAL BASIS SINCE MORE THAN LAST 10 YEARS. ASSESSEE ALSO CONTENDED BEFORE AO THAT ` .26,53,07,141 CANNOT BE CONSIDERED AS INCOME OF ASSESSEE, SINCE ASSESSEE HA S RECEIVED ONLY ROYALTY INCOME OF ` .24,66,34,994 AND ALSO ASSESSEE WAS FOLLOWING CASH ACCOUNTING SYSTEM. AO HAS NOT ACCEPTED ASSESSE ES CONTENTION STATING THAT THE TPO HAS FIXED THE ROYALTY INCOME O F ` .26,53,07,141. ON APPEAL, THE LEARNED CIT (A) RECORDED THE CONTENT IONS AND DECIDED AS UNDER: 3.4 THE APPELLANT ALSO CONTENDED THAT IN ANY CASE, THE AUDITORS WHO HAD ISSUED THE FORM NO.3CEB OF THE APPELLANT, HAVE ISSUED A REVISED CERTIFICATE TO THE APPELLANT EXPLICITLY STATING THAT THE AMOUNT OF ROY ALTY RECEIVED BY THE APPELLANT FROM J&J INDIA DURING THE PREVIOUS YEAR ENDED 31/03/2003 HAS BEEN INADVERTENT LY SHOWN AS OF ` .2,65,307,141 INSTEAD OF ` .2,46,634,994 IN THE FORM NO.3CEB OF THE APPELLANT. THE APPELLANT AL SO FURNISHED A COPY OF REVISED FORM NO.3CEB WHICH WAS SUBMITTED ALONG WITH THE RECTIFICATION APPLICATION TO AO. 3.5 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT S TATED THAT THE TAXES ON THE ROYALTY PAYABLE TO THE APPELL ANT, CREDITED IN THE BOOKS OF ACCOUNT OF THE PAYING ENTI TIES, NAMELY J&J INDIA AND NR JET, IS ACTUALLY PAID INTO THE GOVERNMENT TREASURY BY THE PAYING ENTITIES UPFRONT. HENCE, WHILE THE ROYALTY INCOME MAY BE OFFERED TO T AX BY THE APPELLANT FOLLOWING THE CASH BASIS OF ACCOUNTIN G, THE TAXES PAYABLE THEREON HAVE BEEN ALREADY BEEN PAID I N ADVANCE. IT IS ALSO CONTENDED THAT ACCORDINGLY, EVE N IN TERMS OF THIS ADDITION MADE BY AO TO THE TOTAL INCO ME OF THE APPELLANT, THERE SHOULD BE NO TAX LIABILITY PAY ABLE BY THE APPELLANT. IN ADDITION TO THE ABOVE, THE APPELL ANT FURNISHED THE FOLLOWING DETAILS: ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 9 OF 16 I) DOCUMENTS EVIDENCING RECEIPT OF ROYALTY BY THE APPELLANT. II) COPY OF RETURN OF INCOME OF THE APPELLANT FOR T HE ASSESSMENT YEAR 2001-02, 2002-03 & 2003-04. 3.6 THE APPELLANT ALSO FURNISHED THE RECONCILIATION OF ROYALTY RECEIVED BY THE APPELLANT VIS--VIS ROYALTY ACCRUED IN THE BOOKS OF J&J INDIA AND IT IS REPRODUCED BELO W: IN THE BOOKS OF APPELLANT DETAILS OF ROYALTY RECEIPTS IN THE BOOKS OF J&J INDIA DETAILS OF ROYALTY PROVISION A.Y ROYALTY PERIOD AMOUNT IN ` `` ` . ROYALTY PERIOD AMOUNT IN ` `` ` . 2001 - 02 OCT. 99 TO SEPT.00 4,66,59,254 APR.00 TO MAR.01 4,83,07,352 2002 - 03 OCT.00 TO JUN 01 3,16,42,481 APR.01 TO MAR.02 13,29,18,968 2003 - 04 JULY 01 TO SEP.02 24,66,34,994 APR.02 TO MAR.03 2,65,307,140 DETAILS OF PAYMENT OF ROYALTY PROVIDED IN THE BOOKS OF J&J INDIA (AMOUNT ` `` ` .) ROYALTY AMOUNT PROVIDED IN THE BOOKS OF J&J INDIA DURING P.Y.E. 31/03/2003 26,53,07,140 LESS: ROYALTY PAID TO APPELLANT ON 29 JAN.2003 12,2 3,40,114 1,42,967,026 LESS: ROYALTY PAID TO APPELLANT ON 16 MAR.2004 7,08,20,564 7,21,46,462 LESS: BALANCE ROYALTY PAID TO APPELLANT ON 16 SEP.05 7,21,46,462 N I L 4. I HAVE CONSIDERED THE FACTS OF THE CASE VERY CAR EFULLY. IT IS A FACT THAT THE APPELLANT IS FOLLOWING CASH SYS TEM OF ACCOUNTING CONSISTENTLY, CASH SYSTEM OF ACCOUNTIN G IS ALSO RECOGNIZED METHOD OF ACCOUNTING UNDER SECTION 145 OF THE I.T. ACT, 1961. THIS FACT IS SEEN FROM RETUR NS OF INCOME FILED FOR THE AY 2001-02, 2002-03 & 2003-04. IT IS ALSO SEEN FROM THE RECONCILIATION FILED BY THE APPE LLANT, THE BALANCE AMOUNT OF ROYALTY WAS PAID ON 16/09/200 5. IT IS ALSO SUBMITTED THAT THE TAX WAS ALSO DEDUCTED AS AND WHEN ROYALTY INCOME WAS CREDITED IN THE BOOKS O F ACCOUNT OF J&J LIMITED. FROM THESE FACTS, IT VERY C LEAR THAT THE INCOME OF ROYALTY HAS NOT ESCAPED ASSESSME NT. M/S J&J CREDITED THE ROYALTY IN ONE ACCOUNTING YEAR WHEREAS THE APPELLANT OFFERED THIS INCOME IN THE LA TER YEAR AS AND WHEN IT IS RECEIVED, SINCE THE APPELLAN T IS FOLLOWING CASH SYSTEMS OF ACCOUNTING. ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 10 OF 16 4.1 IN VIEW OF THIS, I FIND MERITS IN THE APPELLANT S CONTENTION AND THE APPEAL IS ALLOWED. AO IS DIRECTE D TO DELETE THE ENTIRE ADDITION. THE ORDERS OF THE CIT (A) DATED 30.10.2006 HAS BECO ME FINAL AS THE REVENUE HAS ACCEPTED THE SAME AND HAS NOT PREFERRED ANY APPEAL. 8.5 THEREFORE, WHAT CRYSTALLIZES FROM THE ABOVE IS THAT: A) ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING B) THE TDS WAS DEDUCTED AT THE SAME RATE UPON CREDITIN G TO THE ACCOUNT OF ASSESSEE BY THE DEDUCTORS. C) THE ROYALTY INCOME WAS BEING OFFERED AND TDS TO THA T EXTENT ONLY WAS CLAIMED. D) THERE IS NO ESCAPEMENT OF INCOME OF INCOME, AS AND WHEN RECEIVED WAS BEING OFFERED BY ASSESSEE IN THAT YEAR . E) ASSESSEES CONSISTENT PRACTICE IS ACCORDING TO THE PROVISIONS OF LAW AND ACCEPTED UPTO ASSESSMENT YEAR 2003-04, EVEN BEFORE REOPENING OF THE ASSESSMENT IN THIS YEAR. 8.6 IT IS ALSO NOTICED THAT AO VIDE HIS LETTER DATED 15.11.06 HAS ASKED ASSESSEE THE FOLLOWING CLARIFICATION: QUESTION NO.7 . PLEASE SUBSTANTIATE THE FOLLOWING NOTE GIVEN UNDER THE COMPUTATION OF INCOME?. THE TDS HAS BEEN CLAIMED FOR ` .1,07,50,431 THOUGH THE CERTIFICATES FILED ARE FOR ` .7,81,13,068 WHICH PERTAIN TO INCOME THAT ARE YET TO BE RECEIVED AND THE SAME SHA LL BE CLAIMED ON THE RECEIPT OF THE ROYALTY. IN THE ABOVE CONTEXT STATE THE NAME OF THE PARTIES FROM WHOM THE BALANCE ROYALTY IS RECEIVABLE AND FURTHER STATE WHETHER THE SAID ROYALTY IS RECEIVED AS ON DA TE, IF SO IN WHICH A.Y THE ABOVE CREDIT FOR TDS WAS CLAIME D?. ASSESSEE ANSWERED THE ABOVE VIDE LETTER DATED 28.11 .2006 AS UNDER: C) AS REGARDS TDS CERTIFICATES AND THE INCOME CLAI MED, PLEASE FIND ENCLOSED THE COPY OF THE STATEMENT GIVI NG THE DETAILS OF THE SAME MARKED AS ANNEXURE 5 . ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 11 OF 16 D) PLEASE NOTE THAT THE COMPANY OFFERS THE INCOME I N INDIA ON RECEIPT BASIS FOR THE ROYALTY INCOME. ( THE ANNEXURE 5 IS SAME AS PER THE TABLE EXTRACTED A BOVE BUT IN DIFFERENT FORMAT. ) IT WAS EXPLAINED THAT PART OF THE AMOUNT CREDITED A ND TDS PAID PERTAIN TO FINANCIAL YEAR 2002-03 IE. ASSESSMENT YE AR 2003-04 AND THE AMOUNTS PERTAINING TO THE YEAR 2003-04( AY 200 4-05) WAS ONLY ` .38,48,76,032. ASSESSEE WAS OFFERING THE AMOUNTS O N RECEIPT BASIS. THIS WAS ALSO RECONCILED BEFORE THE CIT (A) IN ASSESSMENT YEAR 2003-04 WHEN THE APPEAL WAS PREFERRED AS CAN B E SEEN FROM THE SUBMISSIONS EXTRACTED ABOVE. 8.7 ALL THESE FACTS INDICATE THAT ASSESSEE HAS F URNISHED ALL THE DETAILS, AO ENQUIRED AND ACCEPTED. THERE IS NO ESCA PEMENT OF INCOME ALSO AS ASSESSEE OFFERED IN LATER YEARS AND CLAIMED TDS ONLY TO THE EXTENT OF INCOME OFFERED. AS RIGHTLY POINTED OUT BY THE CIT (A) IN ASSESSMENT YEAR 2003-04, THE REMITTANCE OF TDS I S COMING TO THE GOVERNMENT FIRST AT THE TIME OF CREDIT ITSELF BY TH E DEDUCTORS, WHEREAS ASSESSEE IS TAKING CREDIT AT A LATER POINT OF TIME WHEN CORRESPONDING INCOME WAS OFFERED. 8.8 ASSESSEE CONTENDS THAT IT IS OFFERING INCOM E ON RECEIPT BASIS CONSISTENTLY OVER THE LAST SO MANY YEARS, BASED ON THE DTAA BETWEEN INDIA & USA. ARTICLE 12 COVERING ROYALTIES AND FEES FOR INCLUDED SERVICES IS AS UNDER: ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVI CES - . 1. ROYALTIES AND FEES FOR INCLUDED SERVICES ARISI NG IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE 2. HOWEVER, SUCH ROYALTIES AND FEES FOR INCLUDED SE RVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAWS OF THAT STATE, BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR INCLU DED SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STA TE, THE TAX SO CHARGED SHALL NOT EXCEED: A) IN THE CASE OF ROYALTIES REFERRED TO IN SUB-PARA GRAPH (A) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES A S DEFINED IN THIS ARTICLE (OTHER THAN SERVICES DESCRI BED IN SUB-PARAGRAPH) (B) OF THIS PARAGRAPH) ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 12 OF 16 I) DURING THE FIRST FIVE TAXABLE YEARS FOR WHICH TH IS CONVENTION HAS EFFECT, A) 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES AS DEFINED IN THIS ARTICLE, W HERE THE PAYER OF THE ROYALTIES OR FEES IS THE GOVT. OF THAT CONTRACTING STATE, A POLITICAL SUB-DIVISIONS OR PUB LIC SECTOR COMPANY; AND B) 20 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES IN ALL OTHER CASES AND II) DURING THE SUBSEQUENT YEARS, 15 PER CENT OF THE GROSS AMOUNT OF ROYALTIES OR FEES FOR INCLUDED SERVICES A ND B) IN THE CASE OF ROYALTIES REFERRED TO IN SUB-PARA GRAPH (B) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES A S DEFINED IN THIS ARTICLE THAT ARE ANCILLARY AND SUBS IDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH PAYMENT IS RECEIVED UNDER PARAGRAPH 3(B) OF THIS ARTICLE, 10 P ER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR IN CLUDED SERVICES . THE DEFINITION OF ROYALTIES, VIDE ARTICLE 12(3) MEA NS AS UNDER: 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE ME ANS: A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE, ANY COPYRIGHT O F A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RA TIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL O R SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE OR DISPOSITION THEREOF; AND B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8(SHIPPING AND AIR TRANSPORT ) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. 8.9 AS CAN BE SEEN FROM THE ABOVE, THE WORDS USED IN ARTICLE 12(1) WAS PAID TO A RESIDENT OF OTHER CONTRACTING STATE . THE TERM ROYALTIES ALSO MEANS PAYMENT OF ANY KIND RECEIVED . SINCE THE WORD USED IN THE DTAA IS PAID OR RECEIVED, ASSESSEE S CONTENTION THAT ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 13 OF 16 AMOUNTS CANNOT BE TAXED ON ACCRUAL BASIS IS CORRECT . THIS INTERPRETATION IS ALSO SUPPORTED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (IT) VS. M/S S IEMENS AKTIENGESELLSCHAFT ITA NO 124 OF 2010 DT.22.10.12 W HEREIN THE HON'BLE BOMBAY HIGH COURT ON A QUESTION AS FOLLOWS: QUESTION: Q. I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING T HAT THE ROYALTY AND FEES FOR TECHNICAL SERVICES SHOULD BE T AXED ON RECEIPT BASIS WITHOUT APPRECIATING THE FACT THAT THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF STAND ARD DRUM MOTORS PRIVATE LIMITED VS. CIT 201 ITR 391 THA T THE CREDIT ENTRY TO THE ACCOUNT OF ASSESSEE NON-RES IDENT IN THE BOOKS OF THE INDIAN COMPANY AMOUNTED TO RECE IPT BY THE NON-RESIDENT?. HELD: 2. AS REGARDS FIRST QUESTION IS CONCERNED, THE INC OME TAX APPELLATE TRIBUNAL REFERRING TO PARA 1 TO 3 UND ER ARTICLE IIX-A OF THE DOUBLE TAXATION AVOIDANCE TREA TY WITH THE FEDERAL GERMANY REPUBLIC AS PER NOTIFICATI ON DATED 26 TH AUGUST, 1985 HELD THAT THE ASSESSMENT OF ROYALTY OR ANY FEES FOR TECHNICAL SERVICES SHOULD B E MADE IN THE YEAR IN WHICH THE AMOUNTS ARE RECEIVED AND N OT OTHERWISE. COUNSEL FOR THE REVENUE RELIED UPON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE, WHICH IN OUR OPINION, HAS NO RELEVANCE TO THE FACTS OF THE PRESENT CASE, AS IT RELATES TO THE PERIOD PR IOR TO THE ISSUANCE OF NOTIFICATION DATED 26 TH AUGUST, 1985. IN THIS VIEW OF THE MATTER THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN HOLDING THAT THE ROYALTY AND FEES FOR TECHNICAL SERVICES SHOULD BE TAXED ON RECEIPT B ASIS CANNOT BE FAULTED. THUS, THERE IS NO DISPUTE WITH REFERENCE TO TAXATIO N OF THE ROYALTIES ON RECEIPT BASIS AS FAR AS RECIPIENT IS CONCERNED W HO IS A RESIDENT OF THE OTHER CONTRACTING STATE, LIKE ASSESSEE AS PER T HE DTAA. 8.10. IN VIEW OF THE LEGAL PRINCIPLES AND FACTS AS STATED ABOVE, WE DO NOT SEE ANY REASON TO RE-OPEN THE ASSESSMENT UNDER SECTION 147 AS PER THE SATISFACTION RECORDED BY AO. FIRST OF ALL, THE ENTIRE INFORMATION WAS FURNISHED AND WAS AVAILABLE WITH AO AT THE TIME OF ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 14 OF 16 ASSESSMENT, AO MADE INQUIRIES PARTICULARLY WITH REF ERENCE TO THE CLAIM OF TDS OF PART AMOUNT WHEN CERTIFICATES WERE FILED TO AN EXTENT OF ` .7.81 CRORES AND ALSO THE FACT THAT ASSESSEES TAXA TION ON RECEIPT BASIS WAS ACCEPTED AND THE ORDER OF THE CIT (A) IN ASSESSMENT YEAR 2003-04 WAS ALREADY ON RECORD BY TH E TIME THE RE- ASSESSMENT PROCEEDINGS WERE INITIATED. IN VIEW OF T HIS AOS OPINION IN REOPENING THE ASSESSMENT CAN ONLY BE CONSIDERED AS CHANGE OF OPINION FROM THAT OF HIS PREDECESSOR WHO INQUIRED A ND ACCEPTED ASSESSEES RETURN UNDER SECTION 143(3), WHICH IS AL SO CORRECT ACCORDING TO THE LAW AND ON FACTS. THEREFORE, THE P RINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. KELVINATOR INDIA LTD, 320 ITR 561(SC) THAT MERE CHA NGE OF OPINION CANNOT BE A REASON TO REOPEN THE ASSESSMENT, AS AO HAS NO POWER TO REVIEW THE EARLIER ORDER, APPLY TO THE FACTS OF THE CASE. IN VIEW OF THIS, WE UPHOLD ASSESSEES CONTENTION WITH REFERENC E TO JURISDICTION OF SECTION 147 AND HOLD THAT THE ISSUANCE OF NOTICE UNDER SECTION 147 IS BAD IN LAW. THE RE-ASSESSMENT PROCEEDINGS AR E CONTRARY TO THE LAW AND FACTS OF THE CASE. 8.11 THE DRP-1 SHOULD HAVE EXAMINED THESE ASPECTS WHEN THEY WERE ENTRUSTED WITH THE STATUTORY FUNCTION TO RESOL VE THE OBJECTIONS RAISED BY ASSESSEE. THE ORDER OF THE DRP IS NOT ONL Y BRIEF BUT ALSO DEVOID OF ANY FACTS. ONE CANNOT DECIDE THE ISSUE ON LEGAL PRINCIPLES ALONE WITHOUT EXAMINING THE FACTS ON RECORD. LEAVE ALONE THE ISSUE OF JURISDICTION, EVEN THE CONTENTION THAT AN AMOUNT OF ` .38,48,76,032 ONLY HAS ACCRUED DURING THE YEAR WAS ALSO NOT ACCEPTED WHEN THE FACTS STARE ON ITS FACE. WE WERE SURPRISED TO NOTE THAT WHILE ACCEPTING THAT ROYALTY INCOME SHOULD BE TAXED ON ACCRUAL BASIS, THE DRP FAILED TO EXAMINE THE CORRECT AMOUNT WHICH WAS ACCRUED DURING THE YEAR, AS PART OF THE AMOUNT OFFE RED DURING THE YEAR ON RECEIPT BASIS PERTAIN TO ASSESSMENT YEAR 20 03-04. 8.12. IT IS ALSO SURPRISING THAT WHILE BRINGING TO TAX THE ENTIRE AMOUNT, NEITHER AO NOR THE DRP FOUND IT CONVENIENT TO GRANT THE ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 15 OF 16 TDS OF THE ENTIRE AMOUNT DEDUCTED. AS ALREADY STATE D EARLIER ASSESSEE HAS ENCLOSED ALL THE CERTIFICATES WHEREIN THE TDS OF ` .7,81,13,068 WAS DEDUCTED AND PAID TO THE GOVERNMEN T ON THE TOTAL ROYALTY CLAIMED BY THE SAID PERSONS OF ` .52,07,53,780. HAD AO GAVE CREDIT TO THE ENTIRE AMOUNT OF TDS DEDUCTED @ 15%, THERE WOULD NOT BE ANY OCCASION TO RAISE THE DEMAND OR LE VY OF INTEREST UNDER SECTION 234B, THE ISSUE OF WHICH WAS ALSO NOT ACCORDING TO THE PROVISIONS OF THE LAW. THEREFORE, WE ARE OF THE OPINION THAT THE DRP FAILED IN ITS STATUTORY DUTY IN RESOLVING THE D ISPUTE/OBJECTIONS RAISED BY ASSESSEE AND AFFIRMED THE ORDER OF AO WIT HOUT ANY APPLICATION OF MIND. 8.13. THE LEARNED DR RAISED AN INTERESTING ISSU E IN THE COURSE OF ARGUMENTS THAT IF THE SYSTEM OF CASH ACCOUNTING WAS ALLOWED, IT WOULD RESULT IN ANOMALOUS SITUATION WHEREIN THE PAY ERS WILL CLAIM ON ACCRUAL BASIS AND THE PAYEES WOULD OFFER ON CASH BASIS AND A SITUATION MAY ARISE WHERE SINCE THE AMOUNT WAS NOT TAXABLE IN THAT YEAR, THERE IS NO NEED TO DEDUCT THE TAX AND ACCORD INGLY THE PAYEE MAY NOT BE COVERED UNDER THE PROVISIONS OF TDS. THI S ARGUMENT IS NOT ONLY FAR FETCHING BUT ALSO NOT ACCORDING TO THE PROVISIONS OF LAW. AS FAR AS PAYER IS CONCERNED, BEING AN INDIAN COMPA NY AND MAINTAINING ACCOUNTS ON MERCANTILE SYSTEM OF ACCOUN TING CAN CLAIM THE ROYALTY ON ACCRUAL BASIS, THE PROVISIONS OF INC OME TAX ALLOWS SUCH PAYMENT TO NON -RESIDENT ONLY IN THE EVENT OF DEDUCTION OF TAX. THEREFORE, ANOMALOUS SITUATION SO VISUALIZED BY THE LEARNED DR MAY NOT ARISE AT ALL. ON THE FACTS OF THE CASE, THE PAY EES CREDITED THE AMOUNT TO ASSESSEE, DEDUCTED THE TAX AS PER THE PRO VISIONS OF THE ACT, REMITTED TO THE GOVT. OF INDIA AND ISSUED CERT IFICATES. WHAT ASSESSEE HAS CLAIMED WAS ONLY OFFERING THE INCOME W HICH IT RECEIVED AND ALSO TAKING CREDIT ONLY TO THE EXTENT OF INCOME OFFERED AS PER THE PROVISIONS OF SECTION 199 OF THE I.T. ACT. FAILURE ON THE PART OF AO IN NOT GIVING CREDIT TO THE ENTIRE TDS MADE WHEN HE BR OUGHT THE ENTIRE AMOUNT TO TAX ON ACCRUAL BASIS GAVE RISE TO THE DEM AND AFRESH WITH ITA NO.7865 OF 2010 JOHNSON & JOHNSON LTD MUMBAI PAGE 16 OF 16 UNNECESSARY IMPLICATIONS. LOOKING AT IN ANY WAY, WE CANNOT UPHOLD THE ORDERS OF AO AND THE DRP. 8.14 THEREFORE, WE HOLD THAT THE INITIATION OF P ROCEEDINGS UNDER SECTION 147 IS BAD IN LAW AND CONSEQUENTLY THE ORDE RS PASSED ARE TO BE ANNULLED. WE DIRECT ACCORDINGLY. ASSESSEES GROU NDS ARE ALLOWED. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST FEBRUARY, 2013 SD/- SD/- ( AMIT SHUKLA ) (B. RAM AKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 1 ST FEBRUARY, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI