ADDL CIT RG 8(2), MUMBAI vs. PROCTOR & GAMBLE HYGINENE & HEALTH CARE LTD, MUMBAI

आदेश / O R D E R Per Amarjit Singh (AM): All these cross appeals are filed by the assessee and revenue for assessment year 2006-07 to 2008-09 directed against the different order of CIT(A). Since, common issue on identical facts are involved in these appeals filed by the assessee and revenue, therefore, for the sake of convenience all these appeals are adjudicated together by taking & ITA No.2167/Mum/2012 as lead case and its finding will be applied mutatis mutandis to the other appeals wherever it is applicable. ITA No. 2167/Mum/2012 (Revenue’s Appeal) 2. Fact in brief is that return of income declaring total income of Rs.145,90,09,605/- was filed on 21.11.2006. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 21.11.2007. The assessment u/s 143(3) of the Act was finalized on 05.02.2010 and total income was assessed at Rs.234,49,28,840/- after making various disallowance and additions. Further facts of the case are discussed while adjudicating the various grounds of appeal

3. During the course of assessment the assessing officer noticed that assessee company has claimed Rs.56,55,86,101/- as expenditure on advertisement during the previous year 2005-06. On analysis of the expenditure the assessing officer observed that assessee has also included the expenditure pertaining to production of television film and P a g e | 3 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) commercials in the advertisement expenditure. The detail of such expenses incurred towards cost of production on T.V films are as under: Sr. No. Particulars of Expenditure Amount (Rs.) 1. Madison Communications Pvt. Ltd. 319005288 2. Ambience Publicis Advertising Pvt. Ltd. 20809726 3. TLG India Pvt. Ltd. 13230186 4. AC Nielsen research Services Ltd., 1392377 On query, the assessee explained that these expenditure were essential for the growth of business of the assessee company, therefore the same should be treated as revenue expenditure laid out for the business operation of the assessee during the year under consideration. The assessee also explained that production of advertisement film did not result in any enduring benefit in the highly competitive market. The assessee explained that advertisement film was prerequisite for its telecasting. Since, telecasting or releasing in media was considered as revenue expenditure, therefore, the production of advertisement films should be treated as revenue expenditure. However, AO had not agreed with the submission of the assessee on the ground that TV films and commercials had a life span of a number of years and the production cost of TV film and commercial could not be treated as revenue expenditure and the same pertained to the category of capital expenditure. Therefore, the AO has treated the expenditure of production of TV films of Rs.35,44,37,577/- claimed under the head advertisement expenditure as capital in nature and added back to the assessee’s income.

P a g e | 4 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 5. During the course of appellate proceedings before us the ld. Counsel submitted that the impugned issue has been adjudicated in favor of the assessee by the ITAT, Mumbai in the case of the assessee itself for various assessment year. “AY 2004-05 (ITA No. 6591/Mum/2010) (para 4.1 – 4.9) (Internal Page 4-8) A.Y. 1996-97 to 1998-99 (ITA No. 3076. 5423. 5424.4541. 5009/M/2004) AY 1999-00 to 2000-01 (ITA No. 6795,8999, 6486, 6796/M/2004)”

The ld. Counsel further submitted that revenue has preferred appeal before the Hon’ble High Court, however, the question of law submitted on the claim of such expenditure was not admitted by the Hon’ble jurisdictional High Court for the assessment year 1996-97 to 2001 -02.

11. It was the assessee contention that the expenditure was incurred for advertisement of products being manufactured/marketed by it in the ongoing business and no there is enduring benefit. The AO relied on the decision of CIT vs. Patel International Film Ltd 102 ITR 219 which was confirmed by the CIT(A). This issue is covered in favour of the assessed by the decision of the Hon'ble Bombay High Court in the case of CIT vs. M/s. Geoffrey Manner & Co. Ltd. 180 Taxman 87 where in the above decision was distinguished and held that expenditure was revenue in nature if the same was incurred in the ongoing business. Respectfully following the said decision, the ground raised

by the assessee is allowed” (Emphasis Supplied) 4.7. On perusal of above, it can be seen that while allowing the appeal of the Assessee, the Tribunal has placed reliance on the judgment of the Hon’ble Bombay High Court in the case of CIT vs. M/s Geoffrev Manner & Co. Ltd. (180 Taxman 87) (Bombay High Court), wherein it has been held as under: ―

3. The only ground based on, which the revenue has approached this Court is as pointed out earlier that the Tribunal ignored the ratio of the judgment in Patel International Film Ltd.'s case (supra). We may point out, that on facts there the assessee-company was in the business of processing and printing movie films in a processing and printing laboratory purchased by them. It subsequently purchased a film processor in the laboratory to serve as a model for exhibition to induce confidence in its customers by way of advertisement and claimed the amount spent on the purchase as business expenditure. After considering the facts a learned Bench of this Court noted as under :— "…………. In other words, the asset that was acquired by the assessee-company was a capital asset to be used for the purpose of advertisement of the business that the assessee-company was going to carry on in future and, therefore, the expenditure will have to be regarded as a capital expenditure and not revenue expenditure." (p. 224) It would, thus be clear that the machinery purchased was not in respect of an ongoing business of the assessee, but in respect of the business which was going to be carried out in the future. In the instant case as the facts bear out, the advertisement was in respect of an ongoing business of the assessee herein.

4. A similar issue had come up for consideration before the Division Bench of the High Court of Punjab and Haryana in CIT v. Liberty Group Marketing Division [2008] 173 Taxman 439. In that case the assessee had claimed expenditure incurred on glow sign boards as also T.V. Films. The expenditure was held to be revenue in nature.

5. In our opinion the correct test to be applied in such a case would be, that if the expenditure is in respect of an ongoing business of the assessee and there is no enduring benefit it can be treated as revenue P a g e | 6 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) expenditure. If, however, and if it is in respect of business which is yet to commence then the same cannot be treated as revenue expenditure as expenditure is on a product yet to be marketed. Considering the above, in our opinion the judgment in Patel International Film Ltd.'s case (supra) is clearly distinguishable. The CIT(A) and the Tribunal on the facts of this case were clearly within their jurisdiction in holding that the expenditure was by way of revenue expenditure as it was in respect of promoting ongoing products of the assessee herein.” (Emphasis Supplied) 4.8. We note that the Hon’ble Bombay High Court has, vide order dated 12/03/2013, passed in Income Tax Appeal No. 1536 of 2011 preferred by the Revenue against the decision of the Tribunal for the Assessment Year 1996-97 declined to admit the question of law on this issue. While doing so the Hon’ble Bombay High Court relied upon another decision passed on the same day (i.e. 12/03/2013) by the Hon’ble Bombay High Court in appeal preferred by the Revenue for the Assessment Year 2001-2002 (Income Tax Appeal (L) No 946 of 2012, dated 12/03/2013). In that case it was held that the issue raised was covered in favour of the Assessee and against the Revenue by the above decision of the Hon’ble Bombay High Court in the case of CIT vs. M/s Geoffrev Manner & Co. Ltd. (180 Taxman 87) (Bombay High Court). 4.9. Since both the sides had agreed that there was no change in the facts and circumstances of the case, we find no reason to take a different view. Accordingly, in view of the above judgments/decisions, we hold that the Assessee is entitled to claim deduction under Section 37(1) of the Act for the television film production expenses of INR 25,47,53,254/- incurred in relation to promotion of ongoing products since no enduring benefit accrues to the Assessee. Ground No. I raised by the Assessee is allowed.”

Following the decision of ITAT as referred we don’t find any merit in the appeal of the revenue, therefore, this ground of appeal of the revenue stand dismissed. Ground No. 2: Disallowance in respect of depreciation on left behind assets at Vicks vaporub unit location at Honda Location amounting to Rs. 5.33 lakhs:

P a g e | 8 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 7.4. We have considered the rival submissions and perused the material on record. We note that the assets though abandoned have not been discarded by the Assessee who continues to be the owner. The fact that such assets were not used during the relevant previous year cannot lead to disallowance of depreciation which continue to form part of the block of depreciable assets. In the case of Swati Synthetics Vs. ITO 4(3)(4), Mumbai: 38 SOT 208, it was held by the Tribunal as under: “7.13 From above discussions we noticed that the concept of allowing depreciation on block of assets has been introduced in the statutes with certain objects. The calculation of depreciation in respect of each capital asset separately requires elaborate book keeping and process of checking by the Assessing Officer is time consuming. The practice of granting terminal allowance for taxing the balancing charge under the Income-tax necessitate the keeping of records and depreciation already availed by each asset eligible for depreciation necessitated simply the system of allowing depreciation of block of assets have been introduced by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from 1-4-1988 to give effect to this new system regarding depreciation balancing charge and capital gain relevant provisions were also amended accordingly. No doubt…………………….. ……………………………. Recently after introducing the block concept of depreciation, Hon‘ble jurisdictional High Court dismissed the appeal of revenue vide their judgment dated 28-7-2009 for want of substantial question of law appeal filed by the revenue against the order of the ITAT Mumbai, in the case of GR Shipping Ltd. (supra). The ITAT held that depreciation on (Ship) Barge which included in block of asset, therefore, depreciation is allowable even though said Barge was not used for the purpose of business during the financial year. The Hon‘ble jurisdictional High Court in the said case of GR Shippling Ltd. against the revenue appeal, in Income-tax Appeal No. 598 of 2009, vide order, dated 28-7- 2009, held as under: ― 1. Heard learned counsel for the parties.

Following the decision of ITAT as referred above we don’t find any reason to interfere in the decision of ld. CIT(A) therefore this ground of appeal of the revenue is dismissed.

Ground No. 3: Increasing in claim of deduction u/s 80IB by allocating certain Head Office expenses like salary, depreciation. R & D expenses. Interest on turnover basis to profits derived from Honda unit and Kundaim Unit:

Unit/Expense Total Vicks Tin Vicks Ors. Whisper Whisper E-line HO-Expenses Expenditure (Allocated) (Allocated) (Normal (Allocated not allocated (Allocated Personal 233098677 6186255 3808592 6500535 7779604 208823691 P a g e | 11 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2)

Depreciation 55153856 1797072 6845770 19434582 16395541 10680891 Interest 1131680 100621 61969 149033 178358 641699 Total 289384213 8083948 10716331 26084150 24353503 220146281 Turnover 6236333539 515439269 317332183 880969683 1054312484 % of turnover 8.26 5.08 14.13 16.90 Un-allocated *220146281 18184083 11183431 31106670 37204721 Expenses now allocated proportionate to turnover Taking into consideration the aforesaid reallocation the assessing officer observed that assessee has not allocated the amount of Rs.22,01,46,281/- pertaining to expenditure of personnel, depreciation, and interest incurred at the corporate level amongst the 80IB units for the purpose of computation of deduction. Therefore, the assessee has allocated the aforesaid amount of Rs.22,01,46,281/- for the purpose of computation of deduction u/s 80IB and total deduction u/s 80IB for the year was computed at Rs.26,00,6,151/- as against Rs.61.91 crores claimed by the assessee.

“8.4. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided identical issue in the favour of the Assessee in Assessee’s own case for the following Assessment Years: -1995-96 Dated 26/03/2010 -1997-98 ITA No. 5423/Mum/2004 Dated 18/06/2010 -1997-98 ITA No. 5424/Mum/2004 Dated 18/06/2010 -1999-00 ITA No.6795/Mum/2004 Dated 22/10/2010 -2000-01 ITA No. 8999/Mum/2004 Dated 22/10/2010 -2001-02 ITA No. 1500/Mum/2005 Dated 25/01/2012 -2002-03 ITA No. 4488/Mum/2009 Dated 17/01/2023 8.5. The relevant extract of the common order, dated 22/10/2010, passed by the Tribunal in appeal preferred by the Assessee for Assessment Year 1999- 2000 (ITA No. 6795/Mum/2009) reads as under: ― 10. Ground No. V(1) pertains to reducing the deduction under section 80IA by allocating Head Office expenses like employment cost, depreciation, capital expenditure, etc.

11. This issue is also considered by the Tribunal in assessee's own case in ITA No. 5423/Mum/2004 for A.Y. 1997-98 and decided in favour of the assessee by holding that there is no rationale in allocating the salary expenses of the marketing personnel which may be common expenses of the entire company which were already considered for allocation on the basis of turnover. Likewise the R&D expenditure and depreciation were already considered for allocation on the basis of the turnover ratio. The same principles apply even for the interest expenses allocation also. Since the facts are similar and allocations also similar to the working of the other unit in earlier years, for the reasons discussed in ground No. 9 in ITA No. 3076/Mum/2004 in para 20 above the issue is to be decided in favour of the assessee. Respectfully following the above decision, the A.O. is directed to delete the said allocation of expenditure. Ground is allowed.‖ (Emphasis Supplied) 8.6. Similarly, in appeal for the Assessment Year 2002-03 (ITA No. 4488/Mum/Mum/2009, dated 17/01/2023) the Tribunal has held as under: ― 18. Ground number 3 of the appeal of the learned assessing officer is with respect to deletion of the adjustment to the profit made by the learned assessing officer by locating the head office salaries to the Hyundai unit and Kundaim unit on which assessee has claimed deduction under section 80 IB of the act.

19. Both the parties agreed that identical issue arose in the case of the assessee for earlier assessment years wherein the coordinate bench has allowed the issue in favour of the assessee. Further, the revenue has preferred an appeal before the honourable High Court in earlier years where the appeals of the Department have been dismissed. Accordingly, P a g e | 13 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) these issues are squarely covered in favour of the assessee. Accordingly respectfully following the decision of the coordinate benches in the honourable High Court in assessee's own case for earlier years involving similar facts and circumstances, we dismiss ground number 3 of the appeal of the AO.” 8.7. Respectfully following the above decisions of the co-ordinate Bench of the Tribunal in the case of the Assessee, we hold that the Assessing Officer and CIT(A) erred in holding that that the Assessee has not properly allocated the expenses aggregating to INR 51,30,05,284/- consisting of Head Office Employees Cost (INR 37,78,87,656/-), Depreciation of Head Office (INR 12,65,20,024/-) and Interest Expenses (INR 85,97,604/-). Accordingly, we set aside the reallocation of expenses made by the Assessing Officer and direct the Assessing Officer recomputed deduction under Section 80IB of the Act accordingly.”

Respectfully, following the decision of coordinate bench as referred above this ground of appeal of the revenue stand dismissed. (Revenue Ground) Ground No.4: Considering the total sales consideration in respect of Mandideep of Rs.76.246 cr. Instead of total consideration computed by the AO at Rs.101.365 cr. and Ground No. IV and V of the Appeal of the assessee: (Assessee Ground) (ITA No. 2277/Mum/2012) Ground No.4: Assessing Long Term Capital Gain instead of Long term capital loss by holding that sale of Mandideep detergent unit was in nature of slump sale. Without, prejudice to above, Erred in considering the total sales consideration at Rs.76.246 cr instead of actual consideration of Rs.68.05 cr:

15. During the year under consideration the assessee company has sold its sister concern M/s Proctor & Gamble Home Products Pvt. Ltd. for a sale consideration of Rs.30.07 crores. However, in the computation of income the assessee has offered only Rs.1 crores representing the P a g e | 14 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) same as sale consideration for the portion of the land of the said undertaking and after indexing the cost of land has declared a long term capital loss of Rs.11,09,894/-. The assessee claimed that sale consideration received excluding land has been adjusted against block of assets and accordingly, lower depreciation has been claimed on the assets. The assessing officer referred the sale agreement dated 26.09.2005 and observed that the value of business transferred by the assessee to its sister concern was fixed at Rs.30.70 crores. The assessing officer further stated that it is also mentioned in schedule III of the agreement that upon transfer of the business amount locked up in working capital amounting to Rs.62.469 crores deployed as working capital would also be transferred and made available to the vendor for alternative use. In view of the aforesaid information the assessing officer observed that assessee company was entitled to receive an amount of Rs.30.70 crores as value of the business and another amount of Rs.62.469 crores deployed as working capital for the alternative use by the assessee company. The assessing officer further stated that assessee has transferred the entire detergent undertaking as a going concern to its sister concern and the sale consideration has also been provided in schedule III at a lumpsum value without assigning any value to the individual assets, therefore, the sale consideration falls into ambit of slump sale as provided in Sec. 2(42C) of the Act. On query, the assessee pointed out that while transferring the detergent business as a going concern all the assets were individually valued by the approved valuer based on which the value related to fixed assets transferred was determined. Similarly working capital assets were determined on the basis of value as appearing in the accounts. The assessee submitted that the only current liability were taken over by the purchaser and not all liabilities related to business. The assessee also submitted that the working capital which was valued at Rs.62.46 crores as on 31.03.2005 P a g e | 15 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) was reduced to Rs.22,28,61,109/- as on the date of transfer. However, the AO has not agreed with the submission of the assessee and stated that entire business of Mandideep was sold as a going concern and for a lump-sum amount as mentioned in the agreement without assigning any sale value to any individual asset therein. Consequently, the assessing officer has computed the total consideration of the detergent business for the computation of long term capital gain arising out of the slump sale was taken at Rs. 101.365 crores as per the valuation report of M/s Bansi S. Mehta and the long term capital gain was worked out as under: “Total Sales Consideration Rs.101.365 Less: Net Worth of the undertaking Rs.49.507 Long Term Capital Gain Rs.51,858

 Net current assets as at 30 09.2005-22 29 crores xvii. It is seen from the Schedule III of the agreement where at point 4, it has been mentioned that upon transfer of business, Rs.307 million which represents the value of the business to be transferred will be paid by the purchaser to the vendor as of March 31, 2005. Point 9 of the schedule further mention that the purchaser will pay the vendor for any assets added between April 1, 2005 and the Transfer Date. And transfer date has been defined in clause 'b' of para I of the agreement as October 1, 2005. xviii. In the facts of the case, the consideration for transfer of business at Rs. 30.7 crores and further addition of fixed assets between April 1,2005 to the date of transfer at Rs. 15.06 crores has not been disputed. These figures have been considered by the AO and has not been disputed by the appellant during the instant proceedings xix. It is seen from the point 5 of Schedule III of the agreement that amount locked up in working capital amounting to Rs. 624.69 million which was deployed for the business to be transferred would also be available to the vendor for alternate use. The AO has considered this figure and has contended that this amount ought to have been received by the appellant as the agreement is dated 26.09 2005 and the transfer date is 01.10.2005 and in four days time, there should not have been any change towards the valuation of the working capital. xx. At point 8 of the schedule III, it has been mentioned that the transfer value of the working capital shall be determined as on the date of the transfer date This aspect has not been controverted by the AO in his order. xxi. In the facts of the case, the question arises as to what is the transfer value of the working capital as on the date of the transfer date. The contention of the appellant is that the value of working capital of Rs 62.47 crores mentioned in the Accountant Report at para 3.4 is an estimated level of working capital as on 31.03.2006 based on the level of working capital as the ratio of turnover expected to be maintained over a period to time The Accountant Report in the same para also requires the consideration of material divergence in such value of working capital on the date of transfer xxii. It is seen from the para 3.4 of the Accountant's Report where it has been mentioned that the management has ascertained that the level of working capital so required (excluding cash and bank balance) would be 22.8% of the turnover and such ratio is expected to be maintained over a period of time. Based on this information the Accountants have worked out the level of working capital excluding cash for the year ending 31.03.2006 at around 624 69 million. This figure has found its mention in Schedule III of the agreement. It is therefore seen that such estimated amount locked up in working capital has been considered to be for the year under consideration and that too as on 31.03.2006 and not on the transfer date of the business which is 01.10.2005 The point 8 of the Schedule III of the agreement clearly mentions that the transfer value of P a g e | 17 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) working capital shall be determined as on the date of the transfer date and further para 3 4 of the Accountant's Report states that if on the date of the transfer there is any material divergence from the value of the working capital, the same will need to be considered for valuation. xxiii. The AO in his order has not factually disputed that the working capital that is the net current assets as at 30.09.2005 was of Rs.22.29 crores and not any other figure as has been submitted by the appellant, except that figure mentioned in the agreement is at Rs. 62.49 crores and that should be considered xxiv. It is further seen from the facts of the case that while computing the Long Tem Capital Gain, the AO has considered the net worth of the undertaking at Rs. 49.507 crores which include the net current assets of Rs. 22.29 crore only This without prejudice submission was given to the AO vide appellant's submission at Annexure 111 to the submission dt. 09.12.2009 to the AO. It may be mentioned here that while computing the net worth of the Laundry Business, when the net current assets has been considered at Rs.22.29 crores, then it cannot be differently considered in the sales consideration received by the appellant. As the corollary if the AO has considered the value of net current assets to be al Rs. 62.46 crores, then the same should also have been considered while arriving at the net worth of the undertaking, for the purpose of computation of the Long Term Capital Gain. This is for the reason that as per the general principle and also as per the terms of the agreement, the appellant has to receive sale consideration of Rs. 30.7 crores which is on account of transfer of business, the money towards the working capital and further the present value of the super profit which is towards the transfer of intangibles. xxv. It is nowhere mentioned in the agreement or anywhere else that the working capital which should be available to the purchaser shall have to be compensated to the vendor other than the actual value or higher than the actual value of net current assets Therefore the value of net current assets which is to be considered for arriving at the net worth of the undertaking for the computation of the capital gain shall .ave to be similarly considered as part of the total sales consideration as well. Accordingly on this count also the figure taken for net current assets on account of transfer of business which is to be on actuals shall not have an effect on the quantum of Long Term Capital Gain arising out of the sale of Laundry Business of the appellant Accordingly the contention of the appellant in this regard is found to be acceptable and AO is directed to recomputed the capital gain accordingly xxvi. It is further seen from the facts of the case that as per para 2 and 6 of Schedule III of the agreement, the appellant has to receive consideration towards the transfer of intangible assets attached to its manufacturing contracts with the purchaser and the computation has to be based on the present value of the super profits. The value of the intangibles has been estimated at Rs.8.196 crores. However, the same has not been reflected by the appellant to have been received. In the submission, the appellant has stated that there is no scope to adopt any other value of consideration for the transfer of Laundry Business other than what it has received which totals to Rs.68.05 crores. In this regard it is stated that P a g e | 18 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) the transfer of Laundry Business has been done by entering into an agreement dt. 26.09.2005 which has been executed as per procedure and law and is binding on either side. The terms of the agreement are therefore justiciable and enforceable. As per the agreement, the appellant has to receive Rs.8.196 crores towards the value of intangible transferred which pertains to the appellant's intangible assets and the same have been specifically provided at para 2 and 6 of Schedule III of the agreement and further also at point 7 of the Schedule Ill of the agreement. Accordingly, the contention of the appellant in this regard is not acceptable and the action of the AO of including the value of intangibles at Rs.8.196 crores for arriving at the Long Term Capital Gain is considered to be justifiable and the action in this regard is accordingly upheld.”

P a g e | 20 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 20. After referring the contents of the agreement and sale consideration provided in Schedule III the ld. CIT(A) stated that at para no. 3 of the agreement it is clearly stated that purchaser shall pay to the vendor a slump price arrived in accordance with the method and value mentioned in schedule III. However, the assessee has solely referred the report of the valuer related to value of the fixed assets transferred and also contended that only current liabilities were taken over by the purchases.

P a g e | 21 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 23. We have also perused the judicial pronouncements referred by the ld. Counsel. The decision of Hon’ble Supreme Court in the case of Artex Mfg. Co. as rightly discussed by the ld. CIT(A) is related to the applicability of provision of Sec. 41(2) of the Act whereas the case of the assessee is pertained to the issue of provision of Sec. 50B of the Act. We have also perused the decision of the ITAT Mumbai in the case of ACC Ltd. Vs. Addl. CIT vide dated 25.08.2023 as referred by the assessee. In that case it is categorically mentioned in note of the Board of Director of the Company that transactions of sale of business would be item wise sale. In Board note the price of the sale was based on value assigned to various assets as mentioned in valuation report therefore in that case the genuineness of valuation report was never doubted. In that, case the purcahses has also mentioned in the bid document that transaction may be structured with an item wise category wise break-up. In that case when the entire transaction was approved in shareholder meeting it was never stated that the assessee was selling the undertaking on slump sale basis. In the case of ACC Ltd. item wise valuation was not disputed because of relevant supporting evidences like Board Note as well as Bid documents clearly showing that transactions would be item wise sale and both buyer and seller was well aware that transfer was not slump sale but item wise sale. However, the facts in the case of the assessee are distinguishable compared to the case of ACC Ltd. as briefly as discussed above in the case of the assessee no other relevant evidences except different reports of two valuers. were brought as relevant evidences to substantiate that transactions were not slump sale therefore, in the light of the above facts and findings we consider that assessing officer has computed the total consideration at Rs.101.35 crores after including the amount of Rs.62.46 crores pertaining to working capital as mentioned in the P a g e | 22 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) valuation report of the valuer Bansi S. Mehta & Company, however, it is noticed that the aforesaid value was based on 31.03.2005 whereas the actual value of the working capital on the date of transfer was only Rs.22.29 crore, therefore, we consider that the ld. CIT(A) has correctly held that while computing the net worth of the laundry business the net current assets has to be considered as per actual value of such assets of Rs.22.29 crores on the date of transfer of the business. Regarding estimating value of intangible assets of Rs.8.196 crores we find no material on record substantiating the detail and existence of such intangible assets was brought on record by the lower authority therefore, we direct the AO to restrict the total sale consideration to Rs.68.08 by excluding the estimated value of intangible assets. In view of the above facts and detail finding of the ld. CIT(A) as referred, the ground of appeal of the Revenue is dismissed and ground of appeal of the assessee is partly allowed. (Assessee’s Appeal) Ground No.1: Restricting deduction claimed u/s 80-IB in respect of Vicks Vaporub (Tins) line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking:

24. During the course of assessment the assessing officer noticed that assessee company had closed down its unit at Honda (Goa) during the F.Y. 2002-03 and shifted its Vicks Vaporub plant to Kundiam (Goa) where it had already a factory producing whisper sanitary napkins. The AO further noticed that from the assessment order for assessment year 2002-03 that the Vicks Vaporub Unit in which 100% deduction u/s 80IB was claimed since assessment year 1997-98 has been commenced by splitting up the existing block number 3 plant & machinery at Honda. After referring the assessment order for assessment year 2005- P a g e | 23 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 06 the AO stated that the profit of the vaporub unit were not considered unit wise as claimed by the assessee in the return of income instead both the units were considered as one of the same unit which had been enjoying the deduction u/s 80IB since assessment year 1997-98 and therefore, the current assessment year 2006-07 was considered as the last assessment year for allowing deduction u/s 80IB to the assessee.

of the assessee holding that the same was recurring issue for assessment year 2003-04 to 2005-06 wherein such ground of appeal of the assessee was dismissed.

26. During the course of appellate proceedings before us it was brought to our notice that similar issue on identical facts has been decided against the assessee by the order of the ITAT, Mumbai vide for assessment year 2004-05 dated 25.08.2023.

27. Heard both the sides and perused the material on record. We have perused the decision of ITAT as referred above. The relevant operating part of the decision on the issue is reproduced as under: “6.1. Ground No. III pertains to restricting the deduction claimed by the Assessee under Section 80-IB of the Act in respect of Vicks Vaporub Tins Unit – manufacturing 10 gm tins line to 30% as against 100%. 6.2. The relevant facts in brief are that for the Assessment Year 2004-05 the Assessee has claimed deductions under Section 80IB of the Act at INR 28,90,66,437/- in respect of the profits derived from the following industrial undertakings set up at various locations in Goa. (a) Vaporub Tin Unit located at Kundiam, Goa (shifted from Honda, Goa), and manufacturing vicks vaporub tins of 10 gms [for short ‘Vaporub- 10 gm Unit’] (b) Vaporub Non-Tin Unit located at Kundiam, Goa (shifted from Honda, Goa), and manufacturing vicks vaporub jars [for Short ‘Vaporub Jar Unit’] (c) Whisper-Unit, located at Kundiam, Goa, and manufacturing Whisper sanitary napkins [for short ‘Wishper Unit’] (d) Whisper-Eline Unit located at Kundiam, Goa, and manufacturing Whisper Eline sanitary napkins [for short ‘Whisper ELine Unit’] 6.3. During the assessment proceedings, the Assessing Officer noticed that the Assessee had, during the financial year relevant to Assessment Year P a g e | 24 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 1997-98, set up an undertaking to manufacture Vicks Vaporub - 25 gms. [for Short ‘Vaporub-25 gm Unit’] and claimed deduction in respect of profits of such undertaking at the rate of 100% for the first five years i.e. upto Assessment Year 2001- 02 and at the rate of 30% thereafter. During the Financial Year relevant to Assessment Year 2001-02, the Assessee also claimed to have set up a separate undertaking for manufacture of vicks vaporub 10 gms tins, i.e., Vaporub-10 gm Unit. The Assessing Officer, taking note of the Assessment Order for the Assessment Year 2003-04, asked the Assessee to explain why Vaporub-10 gm Unit and Vaporub-25 gm Unit should not be treated as one unit. 6.4. The Assessee claimed that Vaporub-10 gm Unit was a new undertaking and the Assessee was eligible to claim deduction under Section 80IB of the Act in respect of the same at the rate of 100%. It was claimed that the Vaporub-10 gm Unit eligible undertaking though it was set up in a part of existing building. The claim of the Assessee is that the Vaporub- 10 gm Unit fulfilled all the other eligibility conditions from claiming Section 80IB deduction. Though Old plant and machinery was used, the percentage of the old plant & machinery used was less than the threshold limit of 20%. The new line employed more than 10 workers (since its manufacturing process was carried on with the aid of power) and manufactured a product, which was not specified in the 11th Schedule. Further, even after the new line was set up. Further, the existing line was not affected at all. Thus, the Vaporub-10 gm Unit complied with all the conditions specified in Section 801B(2) of the Act and was accordingly eligible for deduction at the rate of 100% of its profits. 6.5. The Assessing Officer did not accept the above claim of the Assessee and restricted the deduction claimed by the Assessee to only 30% holding that the Vaporub-10 gm Unit and Vaporub-25 gm Unit as one undertaking giving the following reasoning: (a) The Assessee was manufacturing the same product, i.e., Vicks Vaporub. It was earlier packed in jars and 25 gm tins, from now the Assessee started packing the same in 10 gm tins and stated claiming 100% deduction. (b) Contrary to claim of the Assessee, no separate undertaking came into existence in respect of 10 gm tins. (c) The Assessee had submitted, vide letter dated 20/12/2006, that the Vaporub-10 gm line, though a complete line itself, may be considered to take support of the certain machinery being used by already existing line. Thus, instead of starting a new undertaking, an existing manufacturing facility has been utilized by the Assessee. (d) The Assessee has bifurcated written down value of the plant and machinery used for manufacturing vicks vaporub on a prorata basis (as opposed to providing details of plant & machinery actually used) (e) In Annexure 1 to Letter dated 20/12/2006, the Assessee had also ignored the value of the ‘Building’ while computing the percentage of commonly used equipment as against the total plant and machinery employed in Vaporub-10 gm Unit at 8.33% 6.6. Being aggrieved, the Assessee carried the issue in appeal before the CIT(A). By following the decision of his predecessor in appeal preferred by the Assessee for the Assessment Year 2003-04, the CIT(A) upheld the P a g e | 25 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) action of the Assessing Officer and confirmed the order restricting the deduction under Section 80IB in respect of Vaporub-10 gm Unit to 30%. 6.7. The Assessee is now in appeal before us. 6.8. We have given thoughtful consideration to the rival submission and perused the material on record. We find that that the Assessee has claimed that Vaporub-10 gm Unit was set up as a new unit during the Financial Year relevant to the Assessment Year 2001-02. However, this position has been disputed by the Revenue. 6.9. On perusal of Audit Report in Form 10CCB filed by the Assessee in support of its claim for deduction at the rate of 100% in respect of Vaporub-10 gm Unit, we find that it has been stated as under: (a) Paragraph 8. - Date of Commencement of Operation by the Undertaking : 01/04/2000 (b) Paragraph 18 - (a) Has the industrial undertaking received any machinery or plant on transfer which was previously used for any purpose : No, (b) If yes, please specify value of machinery received on transfer : Not Applicable; (c) Total Value of machinery or plant used in the business : INR 2,77,70,116/- and (f) number of workers employed in the manufacturing process: 16 (c) Paragraph 19 – Total Sales of the Undertaking : INR 31,23,96,364/- (d) Paragraph 21 – Profits and Gains derived by the undertaking/enterprise from the eligible business: INR 10,81,22,810/- (e) Deduction under section 80IB – INR 10,81,22,810/- We note that while the case set up by the Assessee is that old plant and machinery was used it was less than 20%, Form 10CCB states that the undertaking had not received by way of transfer any plant and machinery previously used. 6.10. On perusal of Depreciation Schedule annexed to the separate Profit and Loss Account and Balance Sheet drawn up for Vaporub-10 gm Unit, we find that the Plant & Machinery as at 01/04/2002 is stated to be INR 2,77,70,115/-. However, the breakup of such machinery or the details thereof have not been furnished by the Assessee during the assessment or the appellate proceedings to controvert the findings by the Assessing Officer that no new unit was set up. 6.11. Thus, there is nothing on record to support contention of the Assessee that old plant and machinery used for setting up of the Vaporub-10 gm Unit was less than 20% of the entire plant and machinery. 6.12. Ld. Authorised Representative for the Assessee had vehemently contended that the Assessing Officer had relied upon the judicial precedents to support the contention that the deduction under Section 80IB of the Act would be available (a) even if same product is produced by the new undertaking, (b) the new undertaking is setup under the same building, and (c) even if the new undertaking in expansion of undertaking, and (d) dehors the new undertaking having common electricity connection, store room and ancillary activities. We note that none of the judicial precedents cited deal with a situation where all the P a g e | 26 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) above factors are present at the same time. In the present case the product manufactured is same, the new undertaking has been set-up in the existing building with common amenities and involving some common equipment. Be that as it may, even if all the other conditions are assumed to be satisfied, the Assessee would not be able to claim deduction under Section 80IB of the Act at the rate of 100% since the Assessee has failed to establish that the unit has been set up by transfer of old plant and machinery of less than threshold limit of 20%. While we agree with the Learned Authorised Representative of the Assessee that the threshold limit is to be tested in the year of set-up and the building cost cannot be included in computing the aforesaid threshold limit, there is nothing on record to show that the aforesaid eligibility condition was met in the initial assessment year or the year of set-up. There is nothing on record from which it could be established or inferred that plant & machinery of specified value was deployed/used to set-up Vaporub10 gm Unit as claimed by the Assessee. The Assessing Officer had returned a finding that the Assessee had merely bifurcated the written down value of plant and machinery amongst the units on a pro-rata basis and the same has gone uncontroverted during the appellate proceedings. Though, the Vaporub-10 gm Unit is claimed to set-up during the Assessment Year 2001-02, it cannot be said that the claim made by the Assessee has been accepted by the Revenue in any of the preceding years. In absence of the supporting documents/details which support the claim of the Assessee as aforesaid, we are not inclined to accept the contention of the Assessee that deduction under Section 80IB of the Act is available for 100% of the profits from Vaporub-10 gm Unit. Accordingly. Ground No. III raised by the Assessee is dismissed.”

28. Following the decision of the ITAT as referred above, we don’t find any merit in the appeal of the assesse, therefore, the same stand dismissed. Ground No.2: Disallowance of 80-IB in respect of Whisper E-line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking: 29. During the course of assessment the AO noticed that assesse has claimed deduction u/s 80IB @ 100% in respect of its industrial undertaking manufacturing whisper E-line and the same was restricted to 30% only for the reason mentioned in assessment proceedings for assessment year 2005-06. On query, the assessee submitted that the unit was not formed by splitting up or reconstruction of already existing business.

P a g e | 27 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 30. However, the AO has not agreed with the submission of the assessee stated that for assessment year 2005-06 it has already considered and found acceptable on the basis of detailed factual analysis and concrete evidence and spot survey in industrial undertaking located at Goa by the investigation wing Belgaum which had established beyond doubt that the assessee’s claim of deduction u/s 80IB for its manufacturing of ultra whisper E-line was factually incorrect untenable, therefore, the claim of the assessee was rejected. The AO further stated that the investigation has clearly found out as under: “a. The machinery installed for production of whisper E-line is part of the whole unit at Kundaim. b. All existing facilities like common electric connection, common factory shed, common Air compressor machine and common labour and staff are being used for both regular whisper and E-line products. c. The whisper E-line brand differ from the regular whisper only in thickness of obsorbent material d. There is no difference in the manufacturing processes between the two products. e. The undertaking does not maintain any separate pay roll for the Labour and staff for the two products as they are commonly used for all the machines and all the products.”

In view of the aforesaid findings the assessing officer concluded that there was no separate unit for whisper E-line product and therefore, sales were carried out from the same undertaking at Kundiam. Therefore, both the units were treated as one of the same units for the purpose of claim of deduction u/s 80IB and the deduction u/s 80IB in respect of whisper E-line was restricted to 30% of Rs.44,89,04,071/- which works out to Rs.13,46,71,221/- as against 100% claimed by the assessee.

of the assesse was dismissed.

32. During the course of appellate proceedings before us the ld. Counsel brought to our notice that the same issue on identical facts in the case of the assessee for assessment year 2005-06 has been adjudicated by the ITAT, Mumbai vide on 25.08.2023 in favour of the assessee

33. Heard both the sides and perused the material on record. The relevant operating part of the above referred decision is reproduced as under: “20.1. Ground No. III pertains to deduction claimed by the Assessee under Section 80IB of the Act in respect of Whisper E-line Unit. 20.2. The relevant facts in brief are that during the financial year relevant to the Assessment Year 1998-99 had set up an undertaking to manufacture ‘Whisper’ which was eligible for deduction under Section 80IA/80IB of the Act in respect of profits of such undertaking at 100% for the first five years i.e. upto Assessment Year 2002-03 and thereafter, at the rate of 30%. During the previous year relevant to the Assessment Year 2004-05, the Assessee had established Whisper e-Line Unit. 20.3. For the Assessment Year 2005-06, while the Assessee claimed deduction at the rate of 100% of profits derived from Whisper e-Line Unit, the Assessing Officer restricted the same to 30% holding that the aforesaid unit was nothing but in extension of the Whisper Unit established in 1998-99. 20.4. In appeal preferred by the Assessee, the CIT(A) decline to grant any relief on this issue and confirmed the order passed by CIT(A) restricting the amount of deductions under Section 80IB of the Act to 30% of the profits of Whisper e-Line Unit. 20.5. Being aggrieved, the Assessee has carried the issue in appeal before us. 20.6. We have heard the rival contentions and perused the material on record. 20.7. We note that the Tribunal has already examined this issue in appeal preferred by the Assessee for the Assessment Year 2004-05 against the order, dated 28/02/2011, passed by the CIT(A) dismissing the appeal preferred by the Assessee which inturn arose from the Assessment Order, dated 31/12/2009, passed under Section 143(3) read with Section 263 of the Act for the Assessment Year 2004-05. We have perused the aforesaid order passed by the Tribunal in ITA No. 4903/Mum/2011 [Assessment Year 2004-05, dated 09/05/2022] and find that after examining all the issues/contentions raised by both the sides, the Tribunal had concluded that Whisper e-Line Unit was a new unit engaged in manufacturing a new product and that the same was not formed by splitting up or reconstruction of existing business. Thus, P a g e | 29 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) Whisper e-Line Unit was held to be a separate industrial undertaking eligible for deduction under Section 80IB(4) of the Act at the rate of 100%. Respectfully following the aforesaid decision of the Tribunal in the case of the Assessee for the Assessment Year 2004-05, we hold that the Assessee is entitled to claim deduction under Section 80IB of the Act at the rate of 100% of profits derived from Whisper e-Line Unit. Accordingly, Ground No. III Raised by the Assessee is allowed.”

of the assessee is allowed. Ground No. 3: Reduction in claim of deduction u/s 80-IB by reducing the profits of the undertakings by disregarding certain incomes:

35. During the course of assessment the AO noticed that assessee company has credited several other income to the four units as follows: Vaporub-Tin Unit 10701083 Vaporub- Others Unit 6590475 Whisper Unit 15849778 Whisper e-Line Unit 18968437 Total 52109773 On query, the assessee did not furnish the detail of other income credited to the above four units in order to give any explanation as to why the same should not be excluded from the profit and gains derived from the respective industrial undertaking while computing deduction u/s 80IB. Therefore, the AO stated that whole of the above other income was not derived from the industrial undertaking and same was excluded from the profit derived from the industrial undertaking for the purpose of computing deduction u/s 80IB of the Act. Therefore, total deduction allowable u/s 80IB of the Act in respect of the above four units at Goa was arrived at by excluding the above mentioned other income which come to Rs.26,00,61,151/-. Therefore, deduction u/s 80IB was disallowed by Rs.35,90,27,245/-.

P a g e | 30 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 36. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee by referring the similar decision on identical facts in the case of the assessee for the assessment year 2005-06.

P a g e | 32 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) 41. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 1 vide as adjudicated supra in this order, therefore, applying the finding of ITA No. 2167/Mum/2012 as mutatis mutandis this ground of appeal of the revenue is also dismissed. Ground No. 2: Disallowance in respect of depreciation on left behind assets at Vicks vaporub unit location at Honda Location amounting to Rs. 2.48 lakhs:

42. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 2 vide ITA No. 2167/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2167/Mum/2012 as mutatis mutandis this ground of appeal of the revenue is also dismissed. Ground No. 3: Increasing in claim of deduction u/s 80IB by allocating certain Head Office expenses like salary, depreciation. R & D expenses. Interest on turnover basis to profits derived from Honda unit and Kundiam Unit:

43. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 3 vide ITA No. 2167/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2167/Mum/2012 as mutatis mutandis this ground of appeal of the revenue is also dismissed. ITA No.2446/Mum/2013 (Revenue’s Appeal) Ground No. 2: Disallowance of advertisement expenses on production of television films and commercial holding by treating the same as capital expenditure amounting to Rs.2.11 lacks:

44. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 1 vide P a g e | 33 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) as adjudicated supra in this order, therefore, applying the finding of ITA No. 2167/Mum/2012 as mutatis mutandis this ground of appeal of the revenue is also dismissed. Ground No. 3: Increasing in claim of deduction u/s 80IB by allocating certain Head Office expenses like salary, depreciation. R & D expenses. Interest on turnover basis to profits derived from Honda unit and Kundiam Unit:

45. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 3 vide ITA No. 2167/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2167/Mum/2012 as mutatis mutandis this ground of appeal of the revenue is also dismissed. ITA No. 3518/Mum/2012 (Assessee’s Appeal) Ground No.1: Restricting deduction claimed u/s 80-IB in respect of Vicks Vaporub (Tins) line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking:

46. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 1 vide ITA No. 2277/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2277/Mum/2012 as mutatis mutandis this ground of appeal of the assessee is also dismissed. Ground No.2: Disallowance of 80-IB in respect of Whisper E-line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking:

47. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 2 vide ITA No. 2277/Mum/2012 as adjudicated supra in this order, therefore, P a g e | 34 6 Appeals Procter & Gamble Hygiene & Healthcare Pvt. Ltd. Vs. ACIT, Circle 8(2) applying the finding of as mutatis mutandis this ground of appeal of the assessee is also allowed. Ground No. 3: Reduction in claim of deduction u/s 80-IB by reducing the profits of the undertakings by disregarding certain incomes:

48. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 3 vide ITA No. 2277/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2277/Mum/2012 as mutatis mutandis this ground of appeal of the assessee is also dismissed. ITA No.1735/Mum/2013 (Assessee’s Appeal) Ground No.1: Restricting deduction claimed u/s 80-IB in respect of Vicks Vaporub (Tins) line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking:

49. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 1 vide ITA No. 2277/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2277/Mum/2012 as mutatis mutandis this ground of appeal of the assessee is also dismissed. Ground No.2: Disallowance of 80-IB in respect of Whisper E-line to 30% as against 100%, alleging that the new line was only an extension of the existing industrial undertaking:

50. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the appeal ground No. 2 vide ITA No. 2277/Mum/2012 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2277/Mum/2012 as mutatis mutandis this ground of appeal of the assessee is also allowed.