DIAGEO INDIA P.LTD, MUMBAI V. DCIT RG 7(3), MUMBAI

ITA 7932/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3511 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 07-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Keywords: Related party transaction; Business income; Transfer pricing; Business expenditure; International transaction; Retrospective amendment; Revenue expenditure; Capital expenditure
• Section: 92B

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , !' !' !' !' # $% # $% # $% # $% , ,, , & & & & ' ' ' ' BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 7932/MUM./2011 ( &) * '+* / ASSESSMENT YEAR : 200708 ) DIAGEO INDIA PRIVATE LIMITED 4 TH FLOOR, NICHOLAS PIRAMAL TOWER PENINSULA CORPORATE PARK GANPATRAO KADAM MARG M.K. ROAD, MUMBAI 400 020 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF INCOME TAX RANGE7(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AAAC13378L &) *1# 2 3 / ASSESSEE BY : MR. P.J. PARDIWALA ' 2 3 / REVENUE BY : MR. AJIT KUMAR JAIN A/W MRS. SASMITA MISRA )' 2 # / DATE OF HEARING 07.05.2013 $ 45+ 2 # / DATE OF ORDER 19.06.2013 $ $ $ $ / ORDER # $% # $% # $% # $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE CHA LLENGING THE FINAL DRAFT ASSESSMENT ORDER DATED 31 ST OCTOBER 2011, PASSED BY THE LEARNED ASSTT. COMMISSIONER OF INCOME TAX7(3), MUMBAI, IN PURSUANCE OF THE DIRECTIONS GIVEN UNDER SECTION 144C(5) OF THE INCOM E TAX ACT, 1961 (FOR DIAGEO INDIA PRIVATE LIMITED 2 SHORT 'THE ACT' ) BY THE DISPUTE RESOLUTION PANELI (FOR SHORT THE DRP ), MUMBAI, FOR THE ASSESSMENT YEAR 200708. 2. THE ASSESSEE HAS RAISED AS MANY AS 24 GROUNDS OF AP PEAL OUT OF WHICH 21 GROUNDS RELATE TO TRANSFER PRICING ADJUSTMENT MA DE BY THE TRANSFER PRICING OFFICER (FOR SHORT THE TPO ). WE WILL FIRST TAKE UP THE ISSUE OF ADJUSTMENT ON ACCOUNT OF PURCHASE OF RAW MATERIALS MADE BY THE TPO FOR ` 1.56 CRORES. THIS ISSUE IS ARISING OUT OF GROUNDS N O.17 TO 21. 3. FACTS IN BRIEF : THE ASSESSEE IS A SUBSIDIARY COMPANY OF SELVIAC NETHERLANDS, B.V. WHICH IS A PART OF WORLDWIDE DIAG EO GROUP WHICH HOLDS 100% OF THE EQUITY SHARE CAPITAL OF THE ASSESSEE. D IAGEO IS THE WORLD LEADING ALCOHOLIC DRINK MANUFACTURING COMPANY AND IS CARRYI NG ON TRADING IN OVER 180 COUNTRIES. THE DIAGEO INDIAS KEY BUSINESS ACTI VITIES COMPRISED OF MANUFACTURING AND MARKETING OF VARIOUS INTERNATIONA L BRANDS OF ALCOHOLIC BEVERAGES FOR DOMESTIC CONSUMPTION. THE PRODUCTS MA NUFACTURED BY DIAGEO INDIA ARE SMIRNOFF, HAIG, SHARK TOOTH, CHAPLAIN MOR GAN, GILBES GIN, CHRISTIAN BROTHERS RUM / BRANDY, BLACK & WHITE, VA T 69, ETC. THE DIAGEO INDIA HAS OBTAINED LICENCE FOR MANUFACTURING THE AB OVE PRODUCTS DURING THE YEAR UNDER CONSIDERATION BUT IT DOES NOT HAVE LICEN CE TO RETAIL ITS PRODUCT. CONSEQUENTLY, IT DEPENDS UPON THE DISTRIBUTORS CARR YING LICENCE TO SELL JMFL TO RETAILERS. IT SELLS ITS PRODUCT THROUGH A WIDE N ETWORK OF DISTRIBUTORS SITUATED ACROSS THE COUNTRY AND ALSO HAS SALES OFFI CER IN VARIOUS PARTS OF THE COUNTRIES. FOR THE YEAR ENDING 31 ST MARCH 2007, THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS WITH DIAG EO GROUP ENTITIES. PURCHASE OF RAW MATERIAL 6,72,31,741 PURCHASE OF FLAVOR 10,60,365 PURCHASE OF VODKA 14,671 PROVISIONS OF SALES SUPPORT SERVICES 11,30,66,250 PROVISION OF OTHER ADMINISTRATIVE SERVICES 1,01,84,412 RECOVERY OF EXPENSES 78,88,012 REIMBURSEMENT OF EXPENSES 16,65,738 DIAGEO INDIA PRIVATE LIMITED 3 4. THE ASSESSEE, AFTER OBTAINING MANUFACTURING LICENCE FROM 1 ST APRIL 2006, HAS STARTED MANUFACTURING SCOTCH, WHISKY AND OTHER ALCOHOLIC BEVERAGES AND SOME OF THEM IN ITS OWN NAME. IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS SHOWN REVENUE OF ` 127.75 CRORES. HOWEVER, ITS EXPENDITURE EXCEEDED THE REVENUE AND HAD SHOWN OPER ATING LOSS OF ` 26,42,60,496. THE TPO TO WHOM THE MATTER WAS REFERR ED TO BY THE A.O. FOR DETERMINATION OF ALP WITH REFERENCE TO ALL THE TRAN SACTIONS REPORTED IN FORM 3CEB, REQUIRED THE ASSESSEE TO FURNISH THE DETAILS / BIFURCATION OF THE TURNOVER AND TO WORK OUT THE NET OPERATING MARGIN O F THE ASSESSEE FROM THE ACTIVITY OF MANUFACTURING AND DISTRIBUTION OF LIQUO RS IN ORDER TO JUSTIFY ITS ARMS LENGTH. IN RESPONSE, THE ASSESSEE FURNISHED T HE FOLLOWING DETAILS: PARTICULARS INVOLVING A.E. TRANSACTIONS INVOLVING DOMESTIC TRANSACTIONS TOTAL ( ` ) TOTAL SALES 440,841,531 834,891,844 1,275,733,375 TOTAL OPERATING INCOME 440,841,531 834,891,844 1,27 5,733,375 EXPENDITURE MATERIAL CONSUMED FROM A.ES 68,306,777 FROM NONA.ES 152,137,887 220,444,664 217,446,182 437,890,846 OPERATING EXPENSES 24,01,70,069 24,01,70,069 110,21,02,958 TOTAL OPERATING EXPENDITURE 4,60,614,733 4,60,614,733 801,042,614 OPERATING PROFIT (19,773,203) (19,773,203) (264,260,496) OP / TS (NPM) (4.49%) (29.28%) (20.71%) 5. THE ASSESSEE, IN THE TRANSFER PRICING REPORT AND AL SO BEFORE THE TPO, SUBMITTED THAT IT HAS CARRIED OUT COMPARABILITY ANA LYSIS BETWEEN THE TRANSACTION INVOLVING A.E. AND DOMESTIC TRANSACTION S AND TREATING IT TO BE INTERNAL COMPARABLE UNDER THE TRANSACTIONAL NET MAR GIN METHOD (FOR SHORT TNMM ). THE TPO REQUIRED THE ASSESSEE TO EXPLAIN AS TO W HY INTERNAL TRANSACTIONS OF PURCHASE BE NOT BENCHED MARKED ON T HE BASIS OF NET MARGIN OF COMPARABLE COMPANIES. IN RESPONSE, THE ASSESSEE FURNISHED FOLLOWING 15 COMPARABLES WITH THEIR NET PROFIT MARGIN FOLLOWING TNMM: DIAGEO INDIA PRIVATE LIMITED 4 S.NO. COMPANY NAME NPM 1. ASSOCIATED ALCOHOLS & BREWERIES LTD. 1.41 2. BRIHAN MAHARASHTRA SUGAR SYNDICATE LTD. (0.50) 3. G.M. BREWERIES LTD. 3.91 4. IFB AGRO INDS. LTD. (SEG.) 0.83 5. ARTHOS BREWERIES LTD. (9.69) 6. BLOSSOM INDUSTRIES LTD. 10.33 7. JAGATJIT INDUSTRIES LTD. (2.65) 8. KHODAY INDIA LTD. 1.86 9. MOHAN MEAKIN LTD. (1.15) 10. SHAW WALLACE & CO. LTD. (26.46) 11. TILAKNAGAR INDUSTRIES LTD. 11.03 12. MOUNT SHIVALK INDUSTRIES LTD. 1.39 13. RADICO KHAITAN LTD. 1.48 14. UNITED BREWERIES (HOLDINGS) LTD. (6.52) 15. MCDOWELL & CO. LTD. (UNITS SPIRITS LTD. USL) 0.39 (0.96) 6. HOWEVER, THE ASSESSEES OPERATING PROFIT UPON TOTAL SALES HAS BEEN WORKED OUT TO () 20.71%. BASED ON THE AVERAGE PROF IT MARGIN OF 0.96% OF THE COMPARABLES, THE ASSESSEE WORKED OUT THE ARMS LENGTH PRICE (ALP) IN VIEW OF THE PROVISO TO SECTION 92C(2) IN THE FOLLOW ING MANNER: WORKSHEET OF ALP AS PER PROVISO TO SECTION 92C( 2) HEADS ASSESSEES TRANSACTIONS (CRORES) ALP AS DETERMINED (CRORES) SALES / INCOME : (CONSTANT) 44.08 44.08 PURCHASES / EXP. (VARIABLE) : FROM A.E: 6.83 5.27 FROM NON A.E 39.23 39.23 OPERATING PROFIT / LOSS 9.13 (0.42) OP / SALES (4.49)% (0.96)% 7. THE TPO REJECTED THE INTERNAL TNMM ADOPTED BY THE A SSESSEE AND AFTER TAKING 15 COMPARABLES AS FURNISHED BY THE ASSESSEE AND BENCH MARKED THE THE AVERAGE ARITHMETIC MEAN OF 0.96% AS ARRIVED WIT H THAT OF THE ASSESSEES OPERATING MARGINS AND MADE THE ADJUSTMENT OF ` 1.56 CRORES. THE MAIN DIAGEO INDIA PRIVATE LIMITED 5 REASON FOR THE DISCARDING THE ASSESSEES INTERNAL T NMM WAS THAT THE ASSESSEE HAS INCURRED HUGE EXPENDITURE ON ADVERTISE MENT AND PROMOTION OF SALES AT ` 7,49,55,59,128, WHICH IS ALMOST 59% OF THE REVENUE . THIS APPORTIONMENT OF ` 74.95 CRORES ON ADVERTISEMENT AND PROMOTION OF SAL ES BETWEEN THE A.E. AND NONA.E. IS THE MOST SIGNIFICA NT POINT IN TRANSFER PRICING DETERMINATION OF THE ASSESSEE. THIS ADJUSTM ENT OF ` 1.56 CRORES HAVE BEEN CHALLENGED BY THE ASSESSEE VIDE GROUNDS NO.17 TO 21. THE DRP HAS CONFIRMED THE ACTION OF THE TPO IN RESPECT OF THE P URCHASES. 8. BEFORE US, THE LEARNED SR. COUNSEL, MR. P.J. PARDIW ALA, REPRESENTING THE ASSESSEE, AFTER NARRATING THE ENTIRE FACTS SUBM ITTED THAT THE ASSESSEE HAS BEEN MAINTAINING SEGMENTAL ACCOUNTS WITH REGARD TO THE TRANSACTIONS WITH THE A.E. AND TRANSACTIONS WITH THE UNRELATED E NTERPRISE. THE A.ES TRANSACTIONS WERE ENTIRELY RELATED TO WHISKY SEGMEN T WHEREAS THE TRANSACTIONS WITH NONA.E. WERE FOR OTHER THAN WHIS KY LIKE VODKA, RUM, GIN, BRANDY, ETC. IN BOTH THE SEGMENTS, THE ASSESSEE HAS INCURRED LOSSES WHICH ARE EVIDENT FROM THE TRANSFER PRICING STUDY REPORT. THE DETAILS OF THESE TWO SEGMENTS HAVE BEEN GIVEN AT PAGE82 OF THE PAPER BO OK. FROM THE SAID STATEMENT, HE SUBMITTED THAT THERE IS AN INTERNAL C OMPARABLE AS THE NET PROFIT MARGIN AFTER ADVERTISEMENT EXPENSES IN TRANS ACTIONS CARRIED ON WITH THE A.E. IS ()4.49% WHEREAS THE NET PROFIT MARGIN IN THE TRANSACTIONS WITH THE UNRELATED PARTIES WAS ()29.28%. BEFORE THE ADV ERTISEMENT ALSO HE POINTED OUT THAT THE NET PROFIT MARGIN FOR THE TRAN SACTIONS WITH THE A.E. WAS FOR 7.27% WHICH IS FAR BETTER AS COMPARED TO NONA. E. WHICH WAS AT () 4.38%. THUS, EVEN WITHOUT ADVERTISEMENT COST, THE R ESULTS OF THE A.E. ARE MUCH BETTER THAN THE NONA.E. AND, THEREFORE, THE T PO SHOULD HAVE ACCEPTED THE ASSESSEES SEGMENTAL RESULT. HE FURTHE R SUBMITTED THAT THE TPO, WHILE BENCH MARKING THE AVERAGE NET PROFIT MAR GINS OF THE 15 COMPARABLES AT 0.96% HAS ACCEPTED THE LOSS OF ()4. 49% IN THE SEGMENTAL RESULT OF THE A.E. TRANSACTION. THIS, INTERALIA, M EANS THAT ONCE HE HAS ACCEPTED THE SEGMENTAL NET MARGIN, THEN HE MUST FOL LOW INTERNAL TNMM. THE TPOS REASONING FOR REJECTING THE INTERNAL COMPARAB LES IS UNWARRANTED AS EVEN WITHOUT ADVERTISEMENT COST, THE A.ES MARGIN I S BETTER THAN THE NON DIAGEO INDIA PRIVATE LIMITED 6 A.E. MARGIN. THUS, HE SUBMITTED THAT THE INTERNAL T NMM SHOULD BE ACCEPTED RATHER THAN GOING FOR 15 EXTERNAL COMPARABLES. IN S UPPORT OF THE CONTENTION THAT IN SUCH A SITUATION, INTERNAL COMPARABLES SHOU LD BE GIVEN PRIORITY, HE RELIED UPON THE THIRD MEMBER DECISION OF MUMBAI BEN CH OF THE TRIBUNAL IN M/S. TECONIMONT ICB PVT. LTD. V/S ACIT, ITA NO.4608 /MUM./2010, FOR ASSESSMENT YEAR 200506, ETC., VIDE ORDER DATED 17 TH JULY 2012. 9. HE FURTHER BROUGHT TO OUR NOTICE THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200607, HAS REJECTED THE INTERNAL TNMM ON THE GROUND THAT WHISKY SEGMENT AND OTHER THEN WHISK Y SEGMENT ARE NOT FUNCTIONALLY COMPARABLE BECAUSE AS PER THE OBSERVAT IONS MADE BY THE TRIBUNAL, WHISKY IS AN ESTABLISHED PRODUCT WITH A M ASS BASE WHEREAS OTHER ALCOHOLIC BEVERAGES ARE YET TO BE ESTABLISHED IN IN DIAN MARKET. IN SUPPORT OF THIS REASONING, SOME ARTICLE IN TIME MAGAZINE WAS R EFERRED TO BY THE TRIBUNAL. HE SPECIFICALLY DREW OUR ATTENTION TO PAR AS14 AND 15 OF THE TRIBUNAL ORDER IN ITA NO.8602/MUM./2010. HE SUBMITT ED THAT THE SAID TRIBUNAL ORDER CANNOT BE RELIED UPON AT ALL FOR THE REASONING THAT UNDER THE TNMM, PRODUCT SIMILARITY IS NOT REQUIRED AND THAT T OO FOR MAKING A DISTINCTION BETWEEN WHISKY AND NONWHISKY PRODUCTS WHICH ARE IN FACT UNDER SAME BUSINESS LINE AND IS HIGHLY UNDESIRABLE AS BOT H ARE ALCOHOLIC DRINKS AND FUNCTIONAL ATTRIBUTES & COMPARABILITY IN SUCH CASES ARE VERY HIGH. MOREOVER, THE TPO ALSO HAS NOT MADE ANY SUCH DIFFERENCE. THER EFORE, THE TRIBUNAL ORDER CANNOT BE FOLLOWED IN THIS YEAR AS SUCH A DIS TINCTION IS WHOLLY IRRELEVANT UNDER TNMM. 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE, MR. AJIT KUMAR JIAN, RELYING UPON THE REASONS GIVEN BY THE T PO / DRP, SUBMITTED THAT THE ASSESSEE ITSELF HAS CHOSEN 15 COMPARABLES FOLLOWING THE TNMM AND EVEN THE AVERAGE NET PROFIT MARGIN OF THESE COMPARA BLES HAS BEEN ACCEPTED FOR BENCH MARKING THE ASSESSEES TRANSACTIONS WITH THE A.E. THUS, IT CANNOT BE HELD THAT THESE EXTERNAL COMPARABLES, AS CHOSEN BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY REPORT SHOULD BE REJECTED. L ASTLY, HE SUBMITTED THAT IF THE ASSESSEE IS NOT RELYING UPON ITS OWN EXTERNAL C OMPARABLES SELECTED BY IT DIAGEO INDIA PRIVATE LIMITED 7 IN THE TRANSFER PRICING STUDY REPORT, THE MATTER SH OULD BE RESTORED BACK TO THE FILE OF THE TPO FOR FRESH COMPARABLES AND ALSO TO EXAMINE THE ASSESSEES CONTENTIONS ABOUT INTERNAL COMPARABILITY OF BOTH TH E SEGMENTS I.E., THE A.E. AND NONA.E. SEGMENTS. 11. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE ARGU MENTS PUT FORTH BY THE EITHER PARTY AND ALSO TO THE RELEVANT FINDIN GS OF THE TPO AND THE DRP. THE ASSESSEES KEY BUSINESS ACTIVITIES COMPRISED OF MANUFACTURING AND MARKETING OF VARIOUS INTERNATIONAL BRANDS OF ALCOHO LIC BEVERAGES IN INDIA. AS STATED BY THE LEARNED SENIOR COUNSEL, THE ASSESSEE HAS MAINTAINED SEGMENTAL ACCOUNTS WITH REGARD TO INTERNATIONAL TRA NSACTIONS WITH THE A.E. AND TRANSACTIONS WITH THE NONA.E. THE A.E. TRANSAC TIONS WERE MOSTLY RELATED TO WHISKY SEGMENT WHEREAS TRANSACTIONS WITH UNRELATED PARTIES CONSIST OF OTHER THAN WHISKY SEGMENT VIZ. VODKA, RU M, GIN, BRANDY, ETC. IN THE TRANSFER PRICING REPORT, THE ASSESSEE HAD SUBMI TTED THAT IT HAD CARRIED OUT COMPARABILITY ANALYSIS BETWEEN THE TRANSACTIONS INVOLVING THE A.E. AND THE DOMESTIC TRANSACTIONS TREATING IT TO BE THE INT ERNAL COMPARABLE UNDER THE TNMM. AS REQUIRED BY THE TPO, THE ASSESSEE ALSO SUB MITTED 15 EXTERNAL COMPARABLES WHEREIN THE AVERAGE PROFIT MARGIN WORKE D OUT TO 0.96% AS COMPARED TO ASSESSEES OPERATING PROFIT UPON TOTAL SALES AT () 20.71%. THE TPO, AFTER REJECTING THE INTERNAL TNMM ADOPTED BY T HE ASSESSEE IN THE TRANSFER PRICING REPORT BENCHED MARKED THE OPERATIN G PROFIT MARGIN WITH THAT OF THE 15 EXTERNAL COMPARABLES AND MADE AN UPWARD A DJUSTMENT OF ` 1.56 CRORES. THE MAIN REASON FOR REJECTING THE ASSESSEE S INTERNAL TNMM WAS THAT THERE WAS A HUGE EXPENDITURE ON ADVERTISEMENT AND P ROMOTION OF SALES IN BOTH THE SEGMENTS. 12. ON A PERUSAL OF THE SEGMENTAL DETAILS, AS REFERRED TO BY THE LEARNED SR. COUNSEL WITH REGARD TO THE TRANSACTIONS WITH THE A. E. WHEREIN MANUFACTURING AND SELLING OF WHISKY WAS UNDERTAKEN AND TRANSACTIO NS WITH UNRELATED ENTERPRISE WHEREIN OTHER THAN WHISKY PRODUCTS LIKE VODKA, GIN, BRANDY, RUM, ETC., WAS CARRIED OUT, IT IS SEEN THAT THERE I S FUNCTIONAL SIMILARITY NOT ONLY WITH REGARD TO THE BUSINESS LINE BUT ALSO THE ENTIRE OPERATIONS OF DIAGEO INDIA PRIVATE LIMITED 8 BUSINESS FUNCTIONS, ASSETS EMPLOYED AND OTHER VARIA BLES OF COST AND OPERATING EXPENSES. THESE SEGMENTAL DETAILS AS PLAC ED BEFORE US, IS REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFER ENCE: PARTICULARS REFERENCE TRANSACTION WITH A.E. TRANSACTION WITH UNRELATED CLAIM TOTAL SALES 440841531 834891844 TOTAL OPERATING INCOME A 440841531 893943152 EXPENDITURE MATERIALS CONSUMED B 220444664 217446182 ADVERTISEMENT EXPENSES C 51808851 207892693 SALES RELATED EXPENSES 114484976 340736331 OTHER EXPENSES 73876242 313303865 TOTAL OPERATING EXPENDITURE D 403466877 397575737 NET OPERATING PROFIT E=AD (19773203) (244487293) NPM BEFORE ADVERTISEMENT EXPENSES (%) F=(E+C)A*100 7.27 (4.38) NPM AFTER ADVERTISEMENT EXPENSES (%) G=EA*100 (.49) (29.28) 13. ON A PERUSAL OF THE ABOVE, IT IS QUITE EVIDENT THAT NOT ONLY THE OPERATING INCOME BUT ALSO THE OPERATING EXPENSES AN D PROFIT LEVEL INDICATORS ARE QUITE SIMILAR. THUS, IT IS A CLASSIC EXAMPLE OF INTERNAL COMPARABILITY AS ONE IS A CONTROLLED TRANSACTION WITH THE RELATED PA RTY AND OTHER IS AN UNCONTROLLED TRANSACTION WITH THE UNRELATED PARTY. THE ARMS LENGTH RESULT UNDER THE TNMM IS DETERMINED BY REFERENCE TO NET PR OFIT MARGIN OF A COMPARABLE TRANSACTIONS UNDER THE COMPARABLE CIRCUM STANCES. THE PROFITABILITY DERIVED FROM UNCONTROLLED PARTY ENGAG ED IN SIMILAR BUSINESS ACTIVITY UNDER SIMILAR CIRCUMSTANCES IS THE MEASURE OF ARMS LENGTH RESULT. THE FOCUS UNDER THE TNMM IS ON TRANSACTIONS RATHER THAN OPERATING INCOME OF THE ENTERPRISE AS A WHOLE. ONCE IN A GIVEN CASE, THERE ARE SIMILAR NATURE OF TRANSACTION AND FUNCTIONS BETWEEN CONTROLLED TRA NSACTIONS WITH THE RELATED PARTY AND UNCONTROLLED TRANSACTIONS WITH UNRELATED PARTY, THEN INTERNAL DIAGEO INDIA PRIVATE LIMITED 9 COMPARABILITY WILL RESULT INTO MORE APPROPRIATE RES ULT OF ALP, AS IT WILL REQUIRE LEAST AMOUNT OF ADJUSTMENTS. THIS ISSUE HAS BEEN EX ACTLY DEALT BY THE THIRD MEMBER DECISION OF THE TRIBUNAL IN TECONIMONT ICB P VT. LTD. (SUPRA), WHEREIN IT HAS BEEN OBSERVED AND HELD AS UNDER: 10. CLAUSE (I) OF RULE IOB(E) STIPULATES THAT NET PROFIT MARGIN FROM AN INTERNATIONAL TRANSACTION WITH AN AE IS COMPUTED IN RELATION TO COST INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED ETC. CLAUSE (II) IS MATERIAL FOR THE PRESENT PURPOSE. IT PROVIDES THAT THE NET PROFIT MARGIN REA LIZED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROL LED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGA RD TO THE SAME BASE. THE 'BASE' OF THIS PROVISION TAKES ONE BACK TO CLAU SE (I) WHICH REFERS TO COST INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED. ON SPLITTING CLAUSE (II) INTO TWO PARTS IT DIVULGES THAT THE REF ERENCE IS MADE TO INTERNAL AND EXTERNAL COMPARABLES. ONE PART OF CLAUSE (II) REFER S TO 'THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE.... FROM A COMPARABLE UN CONTROLLED TRANSACTION' AND THE OTHER PART TALKS OF 'THE NET MARGIN REALISED... . BY AN UNCONTROLLED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTI ON'. IT TRANSPIRES THAT WHEREAS THE FIRST PART REFERS TO THE PROFIT MARGIN FROM INTERNAL COMPARABLE UNCONTROLLED TRANSACTIONS, THE SECOND PART REFERS T O PROFIT MARGIN FROM AN EXTERNAL COMPARABLE UNCONTROLLED TRANSACTION. THUS IT IS DISCERNIBLE THAT WHAT IS TO BE COMPARED UNDER THIS METHOD IS PROFIT FROM A COMPARABLE UNCONTROLLED TRANSACTION. THE WORD 'COMPARABLE' MAY ENCOMPASS IN TERNAL COMPARABLE OR EXTERNAL COMPARABLE. THERE IS CUE IN THE RULE ITSEL F AS TO PREFERENCE TO BE GIVEN TO INTERNAL COMPARABLE UNCONTROLLED TRANSACTI ONS VIS--VIS EXTERNALLY COMPARABLE UNCONTROLLED TRANSACTIONS. IT IS BECAUSE THE DELEGATED LEGISLATURE HAS FIRSTLY REFERRED TO THE NET PROFIT MARGIN REALI ZED BY THE ENTERPRISE (INTERNAL) FROM A COMPARABLE UNCONTROLLED TRANSACTI ON AND, THEREAFTER, IT POINTS TOWARDS NET PROFIT MARGIN REALIZED BY AN UNR ELATED ENTERPRISE (EXTERNAL) FROM A COMPARABLE UNCONTROLLED TRANSACTI ON. THUS WHERE POTENTIAL COMPARABLE IS AVAILABLE IN THE SHAPE OF AN UNCONTRO LLED TRANSACTION OF THE SAME ASSESSEE, IT IS LIKELY TO HAVE HIGHER DEGREE O F COMPARABILITY VIS-A-VIS COMPARABLES IDENTIFIED AMONGST THE UNCONTROLLED TRA NSACTIONS OF THIRD PARTIES. THE UNDERLYING OBJECT BEHIND COMPUTING ALP OF AN IN TERNATIONAL TRANSACTION IS TO FIND OUT THE PROFITS WHICH SUCH ENTERPRISE WOULD HAVE EARNED IF THE TRANSACTION HAD BEEN WITH SOME THIRD PARTY INSTEAD OF RELATED PARTY. WHEN THE DATA IS AVAILABLE SHOWING PROFIT MARGIN OF THAT ENT ERPRISE ITSELF FROM A THIRD PARTY, IT IS ALWAYS SAFE AND ADVISABLE TO HAVE RECO URSE TO SUCH INTERNAL COMPARABLE CASE. THE REASON IS PATENT THAT THE VARI OUS FACTORS HAVING BEARING ON THE QUALITY OF OUTPUT, ASSETS EMPLOYED, INPUT CO ST ETC. CONTINUE TO REMAIN BY AND LARGE SAME IN CASE OF AN INTERNAL COMPARABLE . THE EFFECT OF DIFFERENCE DUE TO SUCH INHERENT FACTORS ON COMPARISON MADE WIT H THE THIRD PARTIES, GETS NEUTRALIZED WHEN COMPARISON IS MADE WITH INTERNAL C OMPARABLE. EX CONSEQUENTI, IT FOLLOWS THAT AN INTERNAL COMPARABLE UNCONTROLLED TRANSACTION IS E NOTEWORTHY VIS-A-VIS ITS COUNTERPART I.E, EXTERNA L COMPARABLE . 14. THUS, IN OUR CONSIDERED OPINION, THE TPO AND THE LE ARNED COMMISSIONER (APPEALS) HAVE ERRED IN REJECTING THE ASSESSEES CONTENTIONS FOR INTERNAL COMPARABILITY IN THIS CASE. FROM THE S EGMENTAL RESULTS OF THE TWO TRANSACTIONS AS INCORPORATED ABOVE, IT IS SEEN THAT THE ASSESSEES NET PROFIT MARGIN IS FAR BETTER THAN THE NET PROFIT MARGIN OF TRANSACTION WITH UNRELATED DIAGEO INDIA PRIVATE LIMITED 10 PARTIES. EVEN IF NO ADJUSTMENT IS MADE ON ACCOUNT O F ADVERTISEMENT EXPENSES WHICH WAS THE BASIS FOR REJECTING THE INTE RNAL COMPARABILITY BY THE TPO, THEN ALSO THE MARGIN IN THE A.E. SEGMENT IS FA R BETTER THEN THE MARGIN WITH THE NONA.E. SEGMENT WHICH IS EVIDENT FROM THE STATEMENT INCORPORATED ABOVE. THUS, WE UPHOLD THE CONTENTIONS OF THE LEARN ED COUNSEL THAT ITS OPERATING MARGIN IN THE A.E. TRANSACTIONS ARE AT AL P AND NO ADJUSTMENT IS REQUIRED. 15. NOW COMING TO THE DECISION OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WHEREIN THE TRIBUNAL HAS REJECTED THE INTERNAL COMPARABILITY OF THESE TWO SE GMENTS ON THE GROUND THAT IT IS NOT FUNCTIONAL COMPARABLE FOR THE REASON THAT WHISKY IS AN ESTABLISHED PRODUCT WITH A MASS BASE AS COMPARED TO OTHER ALCOHOLIC BEVERAGES. THE RELEVANT OBSERVATIONS AND FINDINGS O F THE TRIBUNAL IN PARAS 14 AND 15 IS REPRODUCED HEREIN BELOW: 14. IN OUR CONSIDERED VIEW, WHISKEY SEGMENT AND OT HER THAN WHISKEY SEGMENT OF ASSESSEES BUSINESS ARE NOT FUNCTIONALLY COMPARABLE INASMUCH AS WHILE WHISKEY IS AN ESTABLISHED PRODUCT WITH A MASS BASE, OTHER ALCOHOLIC BEVERAGES ARE YET TO BE SO FIRMLY ESTABLISHED IN IN DIAN MARKET AND ARE IN COMPARABLY INITIAL STAGES. INDIA IS TRADITIONALLY A WHISKEY MARKET. AN ARTICLE APPEARING IN TIME MAGAZINE (23 RD DECEMBER 2009 ISSUE) TITLED TAPPING INTO INDIAS GROWING ALCOHOL MARKET, INTER ALIA, STATES AS FOLLOWS: DRINKING PATTERNS IN INDIA ARE UNLIKE THOSE OF ANY OTHER MAJOR MARKET. HARD LIQUOR IS FAR MORE POPULAR THAN BEER A ND WINE, WITH SPIRITS ACCOUNTING FOR ABOUT 70% OF THE MARKET . NEARLY ALL OF THAT IS WHISKEY A LEGACY OF THE COLONIAL FONDN ESS FOR SCOTCH. INDIA IS THE LARGEST WHISKEY MARKET IN THE WORLD, SO AMERICAN WHISKEY PRODUCERS FIGURE THEY'VE GOT A HEA D START IN INDIA COMPARED TO OTHER NEW MARKETS. 'INDIANS ARE P REORDAINED WHISKEY DRINKERS,' SAYS FRANK COLEMAN, SENIOR VICE PRESIDENT OF THE DISTILLED SPIRITS COUNCIL OF THE UNITED STATES, A TRADE GROUP FOR AMERICAN SPIRITS MAKERS. 'THEY'VE DEVELOPED A T ASTE FOR WHISKEY.' (HTTP://WWW.TIME.COM/TIME/WORLD/ARTICLE/0,8599,1949 796,00.HTML#IX ZZ1WVW71TS5) 15. THE ABOVE OBSERVATIONS SEEM TO BE QUITE APPROPR IATE, AND REFLECT THE GROUND REALITIES OF ALCOHOL MARKET IN INDIA. WE HAV E ALSO NOTED, FROM THE SEGMENTAL RESULTS FILED BEFORE US, THAT THE ADVERTI SEMENT COSTS AND OTHER OVERHEADS IN OTW SEGMENT ARE QUITE HIGH RS 11.21 CRORES AS ADVERTISEMENT IN SALES PROMOTION IN WHISKEY SEGMENT, AS AGAINST R S 26.00 CRORES IN OTW SEGMENT, AND RS 2.38 CRORES IN OTHER OVERHEADS IN W HISKEY SEGMENT, AS AGAINST RS 14.94 CRORES IN OTW SEGMENT). IF THESE T WO ITEMS WERE TO REMAIN IN THE SAME PROPORTION AS IN THE WHISKEY SEGMENT, T HIS SEGMENT ALSO WOULD HAVE SHOWN LOSSES. IT IS IN THIS BACKGROUND THAT TH E BUSINESS RESULTS WILL HAVE DIAGEO INDIA PRIVATE LIMITED 11 TO BE EXAMINED AND CONSIDERED. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSIDERED VIEW, SEGREGATING ALL SPIRITS OTHER THAN WHISKEY AND COMPARING THE RESULTS IN THAT SEGMENT WITH THE RESULTS OF WHISKEY SEGMENT WOULD NOT BE APPROPRIATE. WE REJECT THIS CLAIM OF THE ASSESSEE. AS WE HAVE REJECTED THE COMPARABILITY ITSELF, WE SEE NO NEED TO DEAL WITH T HIS ISSUE OF COMPARING FINANCIAL RESULTS OF OTW SEGMENT WITH WHISKEY SEGME NT ANY FURTHER. 16. AS STATED ABOVE, THE ARMS LENGTH RESULT UNDER THE TNMM IS DETERMINED TO THE NET PROFIT MARGIN OF A COMPARABLE TRANSACTIONS UNDER A COMPARABLE CIRCUMSTANCES AND THE PROFITABILITY DERI VED FROM UNCONTROLLED PARTY ENGAGED IN SIMILAR BUSINESS ACTIVITY UNDER SI MILAR CIRCUMSTANCES ARE TO BE ANALYSED. THE PRODUCT SIMILARITY HAS TO BE SEEN WHILE APPLYING CUP METHOD AND NOT UNDER THE TNMM BECAUSE UNDER THE CUP , THE FOCUS IS ON THE PRICE OF THE PRODUCT SOLD OR TRANSFERRED. IN ASSESS EES CASE, BOTH THE TRANSACTIONS WITH THE A.E. AND UNRELATED PARTIES RE LATE TO ALCOHOLIC BEVERAGES WHICH IS SIMILAR BUSINESS LINE. MAKING SUCH INTRA D ISTINCTION BETWEEN TYPES OF ALCOHOLIC BEVERAGES LIKE WHISKY AND OTHER THAN WHISKY , IS WHOLLY UNDESIRABLE WHILE CARRYING OUT COMPARABILITY ANALYS IS UNDER THE TNMM. BECAUSE UNDER THE TNMM, FUNCTIONAL COMPARABILITY OF TRANSACTIONS ARE TO BE ANALYSED AT NET PROFIT MARGIN LEVEL. IF SUCH A HIGH DEGREE OF SIMILARITY IS TO BE SEEN IN TNMM, THEN IT WOULD BECOME IMPRACTICAL T O APPLY TNMM IN ANY OF THE CASE. THUS, IN OUR CONSIDERED OPINION, REJECTIN G OF INTERNAL TNMM SIMPLY ON THE BASIS OF DISTINCTION BETWEEN WHISKY AND NON WHISKY AS TWO DIFFERENT PRODUCTS IS WHOLLY UNDESIRABLE AND CANNOT BE A GROU ND FOR REJECTING INTERNAL COMPARABILITY AND, THEREFORE, SUCH A FINDING AND OB SERVATION OF THE TRIBUNAL CANNOT BE SAID TO BE A BINDING PRECEDENCE IN THE PR ESENT CASE. IN VIEW OF THE DISCUSSION MADE ABOVE, THE ADJUSTMENT OF ` 1.56 CRORES MADE BY THE TPO / DRP IS UNCALLED FOR AND THE SAME IS HEREBY DELETED. 17. THE SECOND MAJOR DISPUTE IN THE TRANSFER PRICING AD JUSTMENT IS ADJUSTMENT OF ` 64.81 CRORES ON ACCOUNT OF ADVERTISEMENT AND BUSIN ESS PROMOTION EXPENSES WHICH HAS BEEN MODIFIED BY THE D RP BY GIVING PARTIAL RELIEF ON CERTAIN DIRECTIONS. 18. RELEVANT FACTS, APROPOS THIS ISSUE, ARE THAT THE TP O ON A PERUSAL OF AUDITED FINANCIAL STATEMENT OBSERVED THAT THE ASSES SEE HAS INCURRED AN DIAGEO INDIA PRIVATE LIMITED 12 AMOUNT OF ` 94,95,59,128, ON ADVERTISEMENT AND BUSINESS PROMOT ION EXPENSES WHICH WORKS OUT TO 58.75% OF THE TOTAL TUR NOVER OF ` 127.57 CRORES. HE WAS OF THE OPINION THAT THE BENEFIT DERI VED FROM SUCH ADVERTISEMENT, RESULTS INTO BRAND PROMOTION OF THE BRANDS OWNED BY THE A.E. THE ASSESSEE WHICH IS ENGAGED IN MANUFACTURING AND DISTRIBUTION OF VARIOUS BRANDS ARE, IN FACT, INTERNATIONAL BRANDS AND EXPEN DITURE INCURRED ON ADVERTISEMENTS MOSTLY BENEFITS THE A.E. FOR WHICH T HE ASSESSEE HAS NOT RECEIVED ANY COMPENSATION FROM ITS A.E., EXCEPT FOR MINISCULE AMOUNT OF ADVERTISEMENT EXPENSES OF ` 28,19,348. HE OBSERVED THAT ANY OTHER INDEPENDENT ENTERPRISE WITH A SIMILAR BUSINESS MODE L WOULD EXPECT AN ARMS LENGTH REIMBURSEMENT FOR CARRYING THE BRAND PROMOTI ON ACTIVITIES ALONG WITH THE MARKUP. BEFORE THE TPO, THE ASSESSEES CONTENT ION WAS THAT THESE EXPENSES WERE INCURRED BY THE ASSESSEE AS AN ENTREP RENEUR AND PART OF BUSINESS STRATEGY FOR PENETRATING THE INDIAN MARKET WHICH WAS IN THE BUSINESS INTEREST OF THE ASSESSEE. BY INCURRING SUC H ADVERTISEMENT EXPENSES, THERE HAS BEEN INCREASE IN SALES OF THE A SSESSEE OVER THE PERIOD OF TIME. IT WAS FURTHER POINTED OUT THAT THE ADVERT ISEMENT AND BUSINESS PROMOTION EXPENSES ALSO INCLUDE SUBSTANTIAL AMOUNT OF SALES RELATED EXPENSES WHICH HAS NOTHING TO DO WITH THE BRAND VAL UE PROMOTION AND BREAKUP OF SUCH EXPENSES WAS ALSO GIVEN WHICH HAS BEEN INCORPORATED AT PAGE7 OF THE TPOS ORDER IN THE FOLLOWING MANNER: ( ` IN THOUSANDS ) ADVERTISEMENT COST 285696 SALES RELATED EXPENSES 463863 TOTAL AS PER FINANCIALS 749559 19. THE OTHER CONTENTIONS OF THE ASSESSEE WERE THAT THE CONTRACT FOR ADVERTISING SERVICES BETWEEN THE ASSESSEE AND THE I NDEPENDENT THIRD PARTIES WAS FOR THE BENEFIT OF THE ASSESSEE ONLY AND SUCH A TRANSACTION DOES NOT QUALIFY AS AN INTERNATIONAL TRANSACTIONS WITHIN THE MEANING AND SCOPE OF SECTION 92B OF THE ACT. FURTHER, THE ADVERTISEMENT EXPENSES WERE PURELY FOR THE BENEFIT OF THE ASSESSEE FOR COMMERCIAL AND BUSI NESS EXIGENCIES AND DIAGEO INDIA PRIVATE LIMITED 13 RELIANCE WAS ALSO PLACED ON THE VARIOUS DECISIONS I N SUPPORT OF THE CONTENTIONS THAT ANY ADVERTISEMENT EXPENSES INCURRE D BY THE ASSESSEE TO PROMOTE THE SALES OF PRODUCT DEALT WITH BY IT IN IN DIA, WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS IN INDIA WAS FULLY DEDUCTIBLE AS BUSINESS EXPENDITURE. THE LIST OF SUCH CASES RELIED UPON WER E AS UNDER: I) SONY INDIA P. LTD. V/S DCIT, 2008TIOL439 II) ACIT V/S NESTLE INDIA P. LTD., 94 TTJ 3 III) STAR INDIA P. LTD. V/S ACIT, 2006TOIL248ITATMUM TM ALONG WITH THE SAID CONTENTIONS, DETAILS OF ADVERT ISEMENT EXPENSES WERE ALSO GIVEN. 20. THE TPO REJECTED THE ENTIRE CONTENTIONS OF THE ASSE SSEE AND HELD AS UNDER: 7(A) IT IS OBSERVED THAT THE ASSESSEE HAS INCURRED SUBSTANTIAL ADVERTISING EXPENDITURE. THIS WOULD RESULT IN CREATION OF A MAR KETING INTANGIBLE. THE VALUE OF THE BRAND IN THE CONCERNED MARKETS WOULD INCREAS E. IT IS TO BE NOTED THAT THE ASSESSEE MANUFACTURES AND DISTRIBUTES VARIOUS B RANDS OF LIQUOR LIKE SMIRNOFF RED, VAT 69, BLACK & WHITE, ARCHERS PEACH SNAPPS, GIN, CHRISTAIN BROTHERS BRAND ETC. THESE ARE INTERNATIONAL BRANDS AND ANY AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON ADVERTISEME NT PROMOTES THE BRAND VALUE OF THE AE. THIS WOULD BENEFIT THE OWNER OF TH E BRAND. SUPPOSE THE OWNER SUBSEQUENTLY DECIDES TO SELL THE BRAND THEN I T WOULD BE ABLE TO SELL THE BRAND FOR THESE MARKETS AT A MUCH HIGHER PREMIUM. T HE ASSESSEE WOULD NOT BENEFIT FROM THE SAME. IT ALSO INDICATES THAT THE A SSESSEE MAY NOT BE ABLE TO BENEFIT FROM THE MARKETING AND DISTRIBUTION EXPENDI TURE IT INCURS AT ITS OWN RISK. THE ASSESSEE HAS ACTED TO INCREASE THE VALUE OF THE BRAND NAME OWNED BY AE. AE SHOULD HAVE THEREFORE COMPENSATED THE ASS ESSEE FOR PROMOTING THE BRAND. 21. HE FURTHER HELD THAT INCURRING OF SUCH EXPENDITURE IS NOT ONLY INTERNATIONAL TRANSACTIONS BUT ALSO REQUIRES DETERM INATION OF ALP FOR RECOVERY OF ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES. H E ALSO REJECTED THE ASSESSEES CONTENTION THAT THE ADVERTISEMENT AND SA LES EXPENSES SHOULD BE SEGREGATED BECAUSE EVEN THE SALES PROMOTIONS ARE FO R BRAND PROMOTION ONLY. THE NOMENCLATURE ITSELF IS ERRONEOUS AS THESE ARE N OTHING BUT AWARENESS OF THE BRANDS. IN ORDER TO DETERMINE THE PROPER ALP, H E HAS CHOSEN 15 EXTERNAL COMPARABLES AFTER FOLLOWING TNMM FOR BENCH MARKING THIS TRANSACTION WITH ARITHMETIC MEAN OF 7.95% AND THEREBY MADE AN UPWARD ADJUSTMENT OF ` DIAGEO INDIA PRIVATE LIMITED 14 64.81 CRORES AS PER THE FINDINGS GIVEN IN PAGES11 AND 12 OF HIS ORDER. THE DETAILS OF 15 COMPARABLES HAVE BEEN PROVIDED AT PAG E11 OF HIS ORDER. 22. BEFORE THE DRP, VARIOUS OBJECTIONS WERE RAISED ON T HIS ISSUE WHICH HAS BEEN DISCUSSED FROM PARAS20 TO 44 / PAGES10 TO 28 OF THE DRPS DIRECTIONS). THE SUM AND SUBSTANCE OF THE OBJECTION S DEALT BY THE DRP RAISED BY THE ASSESSEE ARE AS UNDER: (I) THE ASSESSEE HAS INCURRED A HUGE OPERATING LOSS OF ` 32 CRORES ON THE TURNOVER OF ` 127.57 CRORES WHICH IS MAINLY ON ACCOUNT OF INCURRING HUGE AMOUNT OF ` 74.95 CRORES TOWARDS ADVERTISEMENT AND BUSINESS PROMOTION EXPENS ES. SUCH AN INCURRING OF EXPENSES ARE MAINLY FOR THE BR AND PROMOTION OF THE BRANDS OWNED BY THE A.E. AND THE T PO WAS WITHIN THE POWERS TO CONCLUDE THAT EXCESS AMOUN T INCURRED ON BRAND PROMOTION REQUIRES ADJUSTMENT OF ALP AND IN SUPPORT OF THIS CONCLUSION, THEY HAVE RELIED UPON OECD GUIDELINES 2010, WHICH HAS BEEN INCORPORATED I N PARA20.4; (II) REGARDING THE ASSESSEES CONTENTION THAT ENTIRE ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES INCUR RED BY IT WAS FOR PROMOTING ASSESSEES OWN SALES ONLY, THE DRP OBSERVED THAT WHETHER ANY MANUFACTURER AND DISTRIBU TOR WOULD INCUR EXTRA ORDINARY MARKETING ACTIVITIES FOR THE BENEFIT OF THE TRADE MARK / BRAND NAME OWNED BY THE A.E. WITHOUT GETTING ANY COMMERCIAL BENEFIT. FURTHER SUC H AN INCURRING OF AN EXPENDITURE OF THE BRAND PROMOTION HAS TO BE SEEN IN COMPARISON TO THE INDEPENDENT MANUFACTUR ER AND DISTRIBUTOR IN SIMILAR CIRCUMSTANCES AND WHETHE R IT WOULD INCUR SUCH AN EXTRA ORDINARY MARKETING EXPEND ITURE. THUS, ASSESSEES OBJECTION WAS REJECTED AND WAS HEL D THAT NO INTERFERENCE IS CALLED FOR IN THE TPOS ORDER FO R THE APPROACH FOLLOWED BY HIM; DIAGEO INDIA PRIVATE LIMITED 15 (III) REGARDING OTHER MAIN OBJECTIONS OF THE ASSESSEE THA T INSOFAR AS THE BRAND OWNED BY THE ASSESSEE, THE SAM E SHOULD BE EXCLUDED FROM THE TRANSACTION AS ONE OF T HE BRANDS MANUFACTURED AND SOLD BY IT NAMELY SHARK TOOTH FOR WHICH IT HAS INCURRED AN AMOUNT OF ` 15.31 CRORES HAS NOTHING TO DO WITH THE BRAND OWNED BY THE A.E. AND, THEREFORE, TO THIS EXTENT, NO ADDITION SHOULD BE MA DE, THE DRP, IN PRINCIPLE, AGREED WITH THE OBJECTIONS OF TH E ASSESSEE THAT THE EXPENDITURE INCURRED BY IT TO PRO MOTE ITS OWN BRAND SHOULD BE EXCLUDED FROM THE ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES ADJUSTMENT. FURTHER, WHETHER THE AMOUNT OF ` 15.31 CRORES WAS ACTUALLY INCURRED FOR PROMOTION OF NONBRAND COULD NOT BE VE RIFIED IN THE ABSENCE OF PROPER DETAILS. THE DRP DIRECTED THE TPO TO MAKE REVISED ADJUSTMENT AFTER VERIFYING THE AMOU NT INCURRED FOR PROMOTION OF ASSESSEES OWN BRAND WITH REFERENCE TO THE BOOKS OF ACCOUNT, INVOICE AND RATI O OF SALES; (IV) REGARDING ASSESSEES OBJECTION THAT SUCH AN EXPENDI TURE INCURRED FOR ADVERTISEMENT IS NOT AN INTERNATIONAL TRANSACTIONS, THE SAME HAS BEEN REJECTED ON THE GRO UND THAT APPORTIONMENT OF EXTRA ORDINARY ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES TO THE A.E. IS AN INTER NATIONAL TRANSACTIONS WITHIN THE MEANING OF SECTION 92B(1); (V) REGARDING ASSESSEES OBJECTION THAT THE TPO HAS ERR ED IN CONSIDERING SALES RELATED EXPENSES WHICH IS INCLUDE D IN ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES OF A. ES BRAND WAS NOT CORRECT, THE DRP REJECTED THIS CONTEN TION ON THE GROUND THAT THE TPO HAS EXAMINED THE DETAILS OF SALES RELATED EXPENDITURE WHEREIN IT WAS NOTED BY THE TPO THAT OUT OF THE SAME, A SUM OF ` 32.82 CRORES, WAS IN FACT DIAGEO INDIA PRIVATE LIMITED 16 TOWARDS BRAND PROMOTION ONLY WHICH WAS CLASSIFIED U NDER THE HEAD SALES RELATED EXPENDITURE . FURTHER, THE DRP AGREED WITH THE TPOS CONCLUSION THAT SUCH SALES PROMOTION EXPENSES ARE ONLY TO PROMOTE THE BRAND AN D, THEREFORE, THEIR SALES RELATED EXPENDITURE CANNOT B E SEGREGATED; (VI) REGARDING APPLICATION OF TNMM, THE DRP HELD THAT TH E TNMM CANNOT BE APPLIED IN SUCH A CASE AND CUP WOULD BE THE MOST APPROPRIATE METHOD FOR CONSIDERING THE VAL UE OF ADVERTISEMENT AND BUSINESS PROMOTION EXPENSES INCUR RED BY THE INDEPENDENT ENTERPRISE AS PERCENTAGE OF THEI R SALES. THUS, IT DIRECTED TO FOLLOW CUP METHOD; (VII) REGARDING ASSESSEES OBJECTION ABOUT INAPPROPRIATE ADOPTION OF FIGURE AS THE SALES OF THE ASSESSEE WAS AT ` 131.20 CRORES INSTEAD OF ` 127.57 CRORES AND THEREBY REQUIRING THE REDUCTION OF ADJUSTMENT TO SUCH EXPEN DITURE BY ` 0.29 CRORES, THE DRP REJECTED THE SAID OBJECTION A ND HELD THAT THE TPO WAS CORRECT IN ADOPTING ONLY NET SALES WHICH ARE ATTRIBUTABLE TO SALE OF GOODS AND THE INC OME RECEIVED BY THE ASSESSEE FROM THIRD PARTIES FOR BOT TLING ARRANGEMENT MADE BY THEM CANNOT BE INCLUDED IN THE FIGURE OF NET SALES; (VIII) REGARDING VARIOUS COMPARABLES AS CHOSEN BY THE TPO, ALL THE EXTERNAL COMPARABLES WERE HELD TO BE PROPER COMPARABLES EXCEPT FOR BACARDI MARTINI INDIA LTD., WHICH HAD SIMILAR TRANSACTIONS WITH ITS A.E; AND (IX) THE OTHER VARIOUS OBJECTIONS OF THE ASSESSEE HAVE A LSO BEEN REJECTED WHICH HAS BEEN DEALT BY THE DRP AND T HE SAME HAS BEEN DISCUSSED FROM PARAS39 TO 44 OF THE ORDER. DIAGEO INDIA PRIVATE LIMITED 17 23. THE LEARNED SR. COUNSEL, MR. P.J. PARDIWALA, REITER ATED THE SUBMISSIONS AND OBJECTIONS MADE BEFORE THE DRP AND SUBMITTED TH AT FIRST OF ALL THE SALES OF THE ASSESSEE SHOULD BE TAKEN AT ` 131.20 CRORES INSTEAD OF ` 127.57 CRORES AS TAKEN BY THE TPO AND THERE WAS NO JUSTIFI CATION FOR EXCLUDING THE INCOME FROM BOTTLING ARRANGEMENT WITH THIRD PARTIES . HE SUBMITTED THAT THIS ISSUE HAS BEEN DEALT BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 200607 WHEREIN IT HAS BEEN HELD THAT THE REVE NUE FROM CONTRACT BOTTLING UNIT (CBU) ARE PART OF THE SALES OF THE AS SESSEE AND, THEREFORE, ALL THE SALES VALUE SHOULD BE INCLUDED TO ARRIVE AT THE PERCENTAGE OF ADVERTISEMENT AND PROMOTION EXPENSES. IN THE EARLIE R YEAR, THE ASSESSEES INCOME WAS MAINLY FROM BOTTLING ARRANGEMENT WITH TH E THIRD PARTIES WHICH HAS BEEN CONSIDERED AS SALES, THEREFORE, IN THIS YE AR, IT CANNOT BE EXCLUDED FROM THE SALES. REGARDING VARIOUS OTHER DIRECTIONS AND CONCLUSIONS OF THE DRP, HE MADE HIS ELABORATE SUBMISSION. HOWEVER, HE SUBMITTED THAT IN THE WAKE OF SPECIAL BENCH DECISION OF THE TRIBUNAL IN L .G. ELECTRONICS INDIA PVT. LTD V/S ACIT, [2013] 22 ITR (TRIB.) 1 (SB), MOST OF THE CONTENTIONS RAISED BY THE ASSESSEE HAS UNDERGONE A HUGE CHANGE AND AS THE PRIMARY CONTENTION THAT ADVERTISEMENT AND PROMOTION EXPENSES DOES NOT LEAD TO BENEFIT TO THE A.E. AND IS NOT AN INTERNATIONAL TRANSACTION HAS BE EN DECIDED AGAINST THE ASSESSEE. HOWEVER, HE SUBMITTED THAT THE RATIO OF T HE SPECIAL BENCH DECISION CANNOT BE APPLIED IN TOTALITY ON THE FACTS OF THE A SSESSEES CASE AS THERE ARE VARIOUS DISTINGUISHING FEATURES WHICH WAS ELABORATE D BEFORE US IN DETAIL. ON THE ISSUE WHETHER SUCH AN EXPENDITURE ON ADVERTISEM ENT FOR THE PROMOTION OF THE BRAND IS INTERNATIONAL TRANSACTION OR NOT, H E SUBMITTED THAT THIS ISSUE HAS BEEN NOW DECIDED AGAINST THE ASSESSEE BY THE SP ECIAL BENCH. THE MAIN DISTINCTIVE FEATURES CULLED OUT BY HIM WAS THAT IN THE PRESENT CASE, THERE WAS NO SUCH DIRECTIONS BY THE A.E. TO INCUR ADVERTISEME NT AND PROMOTION EXPENSES UNLIKE THE CASE OF L.G. ELECTRONICS INDIA P. LTD. (SUPRA). FURTHER, THE SPECIAL BENCH IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA), HAS CONCLUDED THAT COST SHOULD BE DETERMINED AND A MARKUP SHOULD BE ADDED WHICH CANNOT BE DONE IN THE ASSESSEES CASE BECAUSE THE S AME HAS NOT BEEN DONE EITHER BY THE TPO OR BY THE DRP. OTHER MAIN CONTENT IONS OF THE LEARNED SR. DIAGEO INDIA PRIVATE LIMITED 18 COUNSEL WAS THAT SALES RELATED EXPENDITURE SHOULD B E EXCLUDED BY DETERMINING THE COST / VALUE OF THE INTERNATIONAL T RANSACTIONS WHICH HAS BEEN SPECIFICALLY HELD BY THE SPECIAL BENCH THAT THIS DI D NOT LEAD TO BRAND PROMOTION AND DOES NOT COME WITHIN THE AMBIT OF ADV ERTISEMENT, MARKETING AND PROMOTION EXPENDITURE. WITH REGARD TO THE COMPA RABLES CHOSEN BY THE TPO, HE SUBMITTED THAT MOST OF THE COMPARABLES ARE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AS THEY ARE MOSTLY ENGAGED IN MAN UFACTURING OF COUNTRY LIQUOR, BEER, CONTRACT MANUFACTURER, ETC., AND THER E ARE ALSO RELATED PARTY TRANSACTIONS. LASTLY, WITHOUT PREJUDICE, HE SUBMITT ED THAT IF THE RATIO OF SPECIAL BENCH DECISION IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA) IS TO BE APPLIED, THEN THE COST PLUS MARKUP CANNOT BE HELD TO BE APPLICABLE IN THE ASSESSEES CASE AS NO MARKUP WAS APPLIED BY THE TP O / DRP ON THE ADJUSTMENT. THUS, HE CONCLUDED THAT IN CASE THE SPE CIAL BENCH DECISION IS TO BE FOLLOWED FOR WHICH HE SUBMITTED THAT HE HAS SOME RESERVATIONS, THEN THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE T PO WITH CERTAIN DIRECTIONS AND MODIFICATIONS AS SUBMITTED BY HIM. 24. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE, MR. AJIT JAIN, REPRESENTING THE REVENUE, SUBMITTED THAT WHET HER OR NOT THE ISSUE OF ADVERTISEMENT AND BRAND PROMOTION EXPENSES IS INTER NATIONAL TRANSACTION AND THE ADJUSTMENT SHOULD BE MADE ON ACCOUNT OF BRA ND VALUE PROMOTION OF THE BRANDS OWNED BY THE A.E., NOW STANDS SQUARELY C OVERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA). REGARDING VARIOUS OTHER SUBMISSIONS MADE BY THE LEARNED SR. C OUNSEL, HE SUBMITTED THAT NO FETTERS SHOULD BE GIVEN TO THE TPO WHILE IM PLEMENTING THE RATIO LAID DOWN IN THE SPECIAL BENCH DECISION AND THIS ENTIRE ISSUE SHOULD BE RESTORED TO THE FILE OF THE TPO FOR ADJUDICATION AFRESH FOLL OWING THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL IN L.G. ELECTRONI CS INDIA P. LTD. (SUPRA). 25. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE ORDERS PASSED BY THE TPO A ND THE DRP, WHICH HAS BEEN DISCUSSED ABOVE AND ALSO THE SPECIAL BENCH DEC ISION OF THE TRIBUNAL IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA). THE MAIN IS SUE BEFORE US FOR DIAGEO INDIA PRIVATE LIMITED 19 ADJUDICATION IS WHETHER THE AMOUNT SPENT ON ADVERTI SEMENT AND BRAND PROMOTION EXPENSES OF ` 74,95,59,128, CAN BE HELD TO GIVING RISE TO BENEFI T TO THE A.E. AND, HENCE, IT IS AN INTERNATIONAL TRAN SACTION WITHIN THE AMBIT OF SECTION 92B. WITH REGARD TO THE ISSUE THAT SUCH A N ATURE OF TRANSACTION IS AN INTERNATIONAL TRANSACTION WITHIN THE AMBIT OF SECTI ON 92B R/W SECTION 92F, HAS BEEN SETTLED BY THE SPECIAL BENCH DECIDING THAT IT DOES FALL WITHIN THE REALM OF INTERNATIONAL TRANSACTION AND, HENCE, TRANSFER P RICING MECHANISM IS TRIGGERED. IN THE PRESENT CASE, THE TPO HAS CHOSEN 15 EXTERNAL COMPARABLES BY APPLYING TNMM FOR BENCH MARKING THE PERCENTAGE O F COST OF ADVERTISEMENT AND BRAND PROMOTION EXPENSES WITH THE NET SALES AND BY TAKING THE AVERAGE COST OF 7.95% TO BE BRIGHT LINE AND OVER AND ABOVE THIS LINE, THE EXPENDITURE IS DEEMED TO INCREASE THE VAL UE OF BRAND INTANGIBLE FOR THE A.E. THE DRP HAS ALSO ENDORSED THE OBSERVATION AND CONCLUSION OF THE TPO EXCEPT FOR THE FACT THAT THE DRP HAS DIRECTED T HE TPO TO APPLY CUP METHOD BY CONSIDERING THE VALUE OF ADVERTISEMENT AN D BRAND PROMOTION EXPENSES INCURRED BY THE INDEPENDENT ENTERPRISE AS PERCENTAGE OF THE SALES. THE DRP HAS ALSO GIVEN PART RELIEF ON ACCOUNT OF EX PENDITURE INCURRED ON ASSESSEES OWN BRAND PROMOTION OF SHARK TOOTH TO BE EXCLUDED FROM OVER ALL EXPENDITURE UNDER THIS HEAD. 26. NOW COME THE ISSUE OF DETERMINATION OF COST / VALUE OF THE INTERNATIONAL TRANSACTION OF BRAND PROMOTION THROUG H ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES INCURRED BY THE IN DIAN A.E. FOR THE BRAND OWNED BY THE FOREIGN ENTITY. THIS ASPECT HAS TO BE NOW EXAMINED ON THE BASIS OF PRINCIPLE LAID DOWN BY THE SPECIAL BENCH I N L.G. ELECTRONICS INDIA P. LTD. (SUPRA) WHEREIN DETAILED GUIDELINES AND FACTOR S HAVE BEEN LAID DOWN FOR DETERMINING THE COST / VALUE OF SUCH INTERNATIONAL TRANSACTIONS. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT THIS ISSU E NEEDS TO BE REMANDED BACK TO THE FILE OF THE TPO / ASSESSING OFFICER. CO NSEQUENTLY, WE RESTORE THIS ISSUE TO THE FILE OF THE TPO / ASSESSING OFFICER FO R ADJUDICATION IN THE LIGHT OF THE SPECIAL BENCH DECISION IN L.G. ELECTRONICS INDI A P. LTD. (SUPRA). HOWEVER, WHILE APPLYING THE RATIO OF THE DECISION IN L.G. EL ECTRONICS INDIA P. LTD. DIAGEO INDIA PRIVATE LIMITED 20 (SUPRA), THE TPO WILL KEEP IN MIND FOLLOWING ASPECT S WHICH ARE RELEVANT IN THE PRESENT CASE: I) WHILE DETERMINING THE RATIO OF ADVERTISEMENT EXPENS ES TO SALES, THE TPO WILL CONSIDER THE INCOME FROM CONTRA CT BOTTLING UNITS OF ` 3.63 CRORES AS THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE ASSESSMENT YEAR 200607 AND, ACCORDINGLY, THIS INCOME FROM BOTTLING ARRANGEMENT WILL FORM PART OF THE SALES FOR THE PUR POSE OF COMPUTING RATIO OF ADVERTISEMENT EXPENSES AND NET S ALES; II) SALES RELATED EXPENDITURE SHOULD BE EXCLUDED WHILE DETERMINING THE COST / VALUE OF INTERNATIONAL TRANS ACTIONS AS HELD BY THE SPECIAL BENCH THAT THE EXPENDITURE I N CONNECTION WITH THE SALES WHICH DO NOT LEAD TO BRAN D PROMOTION CANNOT BE BROUGHT WITHIN THE AMBIT OF ADVERTISEMENT MARKETING AND PROMOTION EXPENSES FOR DETERMINING THE COST / VALUE OF SUCH TRANSACTIONS W ITH THE A.E. THE TPO / ASSESSING OFFICER WILL EXAMINE AND V ERIFY SUCH KIND OF EXPENSES AFTER CALLING FOR THE DETAILS FROM THE ASSESSEE AND EXCLUDE THE SAME WHILE DETERMINING SUC H COST / VALUE OF ADVERTISEMENT EXPENSES; III) INSOFAR AS APPLICABILITY OF METHODOLOGY IS CONCERNE D, THE DRP HAS APPLIED CUP METHOD AND, THEREFORE, THE TPO WILL APPLY CUP METHOD AFTER SELECTING THE COMPARABLES WH ICH ARE INVOLVED IN SIMILAR TYPE OF BUSINESS AND IF REQ UIRED FRESH COMPARABLES SHOULD ALSO BE LOOKED INTO FROM T HE SAME GENUS OF COMPARABLES AND OTHER RELEVANT FACTOR S SUCH AS PRODUCTS, MARKET SHARE, ASSETS EMPLOYED, FUNCTIONS PERFORMED AND OTHER SIMILAR ATTRIBUTES. S UITABLE ADJUSTMENT IF REQUIRED SHOULD ALSO BE MADE IN NATUR ALISING THE EFFECT OF DIFFERENCE, IF ANY; AND LASTLY, DIAGEO INDIA PRIVATE LIMITED 21 IV) IN ASSESSEES CASE, CUP METHOD HAS BEEN APPLIED FOR MAKING ADJUSTMENT ON ACCOUNT OF ADVERTISEMENT AND B RAND PROMOTION EXPENSES AND NO MARKUP HAS BEEN APPLIED EITHER BY THE TPO OR BY THE DRP. THUS, THE TPO WILL CONSIDER THIS ASPECT WHILE APPLYING THE RATIO OF SP ECIAL BENCH IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA). 27. IN THE LIGHT OF THE ABOVE OBSERVATION, THIS MATTER IS RESTORED TO THE FILE OF THE TPO / A.O. FOR FRESH ADJUDICATION IN THE LIG HT OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN L.G. ELECTRONICS INDIA P. LTD. (SUPRA) AND ALSO SUBJECT TO THE AFORESAID DIRECTIONS. CONSEQUENTLY, GROUNDS NO.1 TO 15, RAISED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. 28. WITH REGARD TO THE ISSUE OF +/ 5% BENEFIT AS RAISE D IN GROUNDS NO.16 AND 21, THE SAME HAS BEEN ADMITTED BY THE LEARNED S R. COUNSEL THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT IN SECTION 92C, THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THESE GROUNDS AR E TREATED AS DISMISSED. 29. IN GROUND NO.22, THE ASSESSEE HAS CHALLENGED SOFTWA RE EXPENDITURE OF ` 34,630. 30. AS ADMITTED BY BOTH THE PARTIES, THIS ISSUE HAS BEE N DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN C ASE IN A.Y. 200607, WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE AFTER O BSERVING AS UNDER: 26. THE NEXT ISSUE THAT WE ARE REQUIRED TO ADJUDIC ATE IS WHETHER OR NOT THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING REVENUE EXPENDITURE OF RS 2,11,674 (NET DISALLOWANCE OF RS 84,670 AFTER ALLOWING DEPRE CIATION @ 60%) INCURRED BY THE APPELLANT ON ACCOUNT OF SOFTWARE, AS CAPITAL EXPENDITURE. 27. THE EXPENDITURE ON SOFTWARE, WHICH HAS BEEN HEL D TO BE CAPITAL EXPENDITURE BY THE ASSESSING OFFICER, IS IN RESPECT OF ROUTINE BUSINESS APPLICATIONS AND ATTENDANCE RECORDINGS ETC. WE HAVE EXAMINED EACH OF THESE CASES, AND ALL THESE SOFTWARE ARE APPLICATION SOFTW ARE , WHICH BECOME OBSOLETE RATHER QUICKLY, AND THE PAYMENT IS TOWARDS LICENCE FEES FOR USE OF SOFTWARE. KEEPING IN VIEW THE NATURE OF THE SOFTWAR E, AS ALSO THE PRINCIPLE LAID DOWN BY SPECIAL BENCH IN THE CASE OF AMWAY ENTERPRI SES VS DCIT (111 ITD 112), WE UPHOLD THE GRIEVANCE AND DIRECT THE ASSESS ING OFFICER TO TREAT ENTIRE EXPENDITURE ON THESE ROUTINE BUSINESS APPLICATION S OFTWARE AS REVENUE EXPENDITURE AND THUS DELETE THE IMPUGNED DISALLOWAN CE. DIAGEO INDIA PRIVATE LIMITED 22 31. SINCE THE GROUND RAISED BY THE ASSESSEE IS IDENTICA L TO THE ISSUE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A SSESSMENT YEAR 200607, THEREFORE, FOLLOWING THE SAME, THE GROUND NO.22 IS TREATED AS ALLOWED. 32. IN GROUND NO.23, THE ASSESSEE HAS CHALLENGED DISALL OWANCE OF CLUB EXPENSES OF ` 63,325, INCURRED FOR THE PURPOSE OF ITS BUSINESS. 33. BOTH THE PARTIES AGREE BEFORE US THAT THIS ISSUE NO W STANDS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR A SSESSMENT YEAR 200607, WHEREIN IDENTICAL ISSUE RAISED BY THE ASSESSEE HAS BEEN ALLOWED BY THE TRIBUNAL. WE ALSO FIND THAT THE ISSUE BEFORE US IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE JURISDICTIO NAL HIGH COURT IN CIT V/S RAYCHEM RPG LTD., [2012] 346 ITR 138 (BOM.). THUS, IN VIEW OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT CITED SUPRA AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200607, THE GROUND NO.23, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 34. GROUND NO.24, RELATES TO LEVY OF INTEREST UNDER SEC TION 234B. 35. BEFORE US, THE LEARNED SR. COUNSEL SUBMITTED THAT T HIS GROUND IS CONSEQUENTIAL IN NATURE. CONSEQUENTLY, WE DIRECT TH E A.O. TO GIVE CONSEQUENTIAL EFFECT IN ACCORDANCE WITH LAW WHILE R E-COMPUTING THE INCOME. 36. 1 #7 &) *1# 82 9:; ! $ '# < ) # = > 35. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. $ 2 45+ ? @)7 19 TH JULY 2013 5 2 A > ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JULY 2013 SD/- RAJENDRA SINGH ACCOUNTANT MEMBER SD/- # # # # $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, @) @) @) @) DATED: 19 TH JULY 2013 DIAGEO INDIA PRIVATE LIMITED 23 $ 2 .&#B CB+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) ' / THE REVENUE; (3) D () / THE CIT(A); (4) D / THE CIT, MUMBAI CITY CONCERNED; (5) B'GA .&#&) , , / THE DR, ITAT, MUMBAI; (6) AH* I / GUARD FILE. /B# .&# / TRUE COPY $) / BY ORDER . . JK / PRADEEP J. CHOWDHURY '1L &) J' / SR. PRIVATE SECRETARY 9 / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI