MONDELEZ INDIA FOODS P.LTD (FORMERLY KNOWN AS CADBURY INDIA LIMITED),MUMBAI vs. ASST CIT RG 5(1)(2), MUMBAI

O R D E R Per Padmavathy S (AM): These two appeals filed by the assessee are against the separate orders of assessment passed by the Assistant Commissioner of Income-tax, Range- 5(1)(2), Mumbai under section 143(3) read with section 144C(13) of the Income- tax Ac, 1961 (in short, ‘the Act’) dated 24/11/2017 for A.Y. 2013-14 and dated

2 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd 18/10/2018 or A.Y. 2014-15. The common issues contended by the assessee in both the assessment years through various grounds are as tabulated below:- Issue AY 2013-14 AY 2014-15 Adjustment on account of Advertisement, Ground Nos. 2 to 22 Ground Nos. 2 to 22 Marketing and Promotion (‘AMP’) expenses Disallowance of payment of royalty on technology Ground Nos. 23 to 27 Ground Nos. 23 to paid to Cadbury Enterprises Pte Ltd 27 Disallowance of service fees paid to Cadbury Ground Nos. 28 to 30 Ground Nos. 28 to Enterprises Pte Ltd. Singapore 30 Disallowance of service fees paid to Mondelez Ground Nos. 31 to 33 Ground Nos. 31 to International Holdings LLC 33 Adjustment on account of information technology Ground Nos. 34 to charges 37 Disallowance under section 14A of the Act read Ground No. 34 Ground No.38 with Rule 8D Allocation of expenditure at Baddi Unit-I & II Ground Nos.35 to 36 Ground Nos.39 to 40 Short-granting of credit of taxes deducted at source Ground No.37 Ground No.41 Non grant of MAT credit Ground No.38 Non grant of credit of distributed taxes paid Ground No.39

3 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd 1948 as Cadbury Fry (India) Private Limited. The Assessee was initially set up for processing imported chocolates and Bournvita, over the years, it expanded to cover a range of products in the chocolate, sugar confectionery and malted food drinks segment. The chocolate business contributes about 75% of assessee's turnover, whereas, malted food drinks contribute remaining 25%. Assessee operates in food segment of the fast moving consumer goods industry. The assessee is in the business of manufacturing and marketing of malted food drinks , cake, powder chocolates, toffees, drinking chocolate and sugar confectionery. The assessee has its factories at Thane, Induri in Maharashtra and Malanpur, Buddi and Bangalore and marketing branches at Delhi, Kolkata, Chennai and Mumbai. Assessee exports its products to Bangladesh, Sri Lanka, Middle East, Nigeria, South Africa, USA, Malaysia, West Indies etc. The Assessee is a group company of Cadbury Schweppes Plc., a company incorporated in United Kingdom, having its principal place of business at 25 Berkeley Square, London. The group deals in beverages and confectionery business with presence in more than 200 countries. Cadbury and Schweppes, two different groups, were merged in 1969 to form Cadbury Schweppes Plc.

(A.Y. 2013014) 4. The assessee filed the return of income for A.Y. 2013-14 on 30/11/2013 declaring a total income o Rs.214,70,75,740/-. The return was later revised where the income has been revised to Rs.219,65,47,720/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. A reference to the Transfer Pricing Officer (TPO) was made in order to determine the arm’s length price of the international transaction, the assessee is having with its 4 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd Associated Enterprises (AE). The TPO, vide order dated 31/10/2016 proposed a total adjustment of Rs.253,73,00,819/- as per the break up given below:-

Name of Adjustment Amount in (Rs.) Adjustment of Advertisling and Marketing expenses 2,41,39,32,782 Adjustment of receipt of services from CEPT 5,63,20,192 Adjustment of receipt of services from MIHL 5,50,75,089 Payment of technical know-how royalty to CEPT 1,19,72,756 Total 253,73,00,819

5. The Assessing Officer passed the draft assessment order incorporating the TP adjustments. The Assessing Officer, besides the TP adjustment also made additions on the corporate tax front as listed below – (1) Disallowance under section 14A Rs. 6,79,072/- (2) Denial of deduction under section 80IC Unit I Rs. 12,10,78,108/- Unit II Rs. 40,41,80,939/- Rs. 6,65,60,220/- (3) Disallowance under section 40(a)(ia) 6. Aggrieved, the assessee filed its objections before the DRP. The DRP confirmed the adjustments/disallowances made by the TPO/Assessing Officer except for the disallowance made under section 40(a)(ia) where the DRP reduced the disallowance to Rs.1,14,85,140. The assessee is in appeal before the Tribunal against the final assessment order passed by the Assessing Officer pursuant to the DRP directions.

6 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd bench of the Tribunal in assessee’s own case for A.Y. 2011-12 in while considering an identical issue, has followed the order of another order of the co-ordinate bench [A.Y.2009-10 (ITA No.2214/Mum/2014] to decide the issue in assessee’s favour by holding as under:- 10. We heard the parties and perused the materials on record. We notice that the co-ordinate bench in assessee’s own case for A.Y.2009-10 (ITA No.2214/Mum/2014) has considered the similar issue and held that – ―23. Considered the rival submission and material placed on record. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in ITA No. 1512/Mum/2013 for AY 2006-07 in assessee’s own case on merits. For the sake of clarity, which is reproduced below:- 14. We have considered rival submissions and perused materials on record. Undisputedly, as could be seen from the material on record, in response to the show cause notice issued by the Transfer Pricing Officer the assessee had specifically submitted that there is no arrangement or agreement with the overseas A.E. for incurring AMP expenditure. It is also apparent the expenditure was wholly and exclusively incurred for marketing assessee‟s own products and the payment was made to third parties in India. Therefore, it is outside the purview of international transaction as defined under section 92B of the ACT. As could be seen, the Transfer Pricing Officer ignoring the submissions made by the assessee had assumed that a benefit has accrued to the overseas A.E. on account of AMP expenditure incurred by the assessee. The learned Commissioner (Appeals) has upheld the adjustment / addition proposed by the Transfer Pricing Officer simply relying upon his order passed in assessee‟s own case for assessment year 2005–06. Notably, while deciding assessee‟s appeal for assessment year 2005–06 the Tribunal vide order passed in ITA no. 5470/Mum./2012, dated 18th May 2016, has decided the issue in favour of the assessee holding as under:– ―3.4.We have heard the rival submissions and perused the material before us. Before proceeding further, it would be useful to understand the philosophy and to consider the historical background of the TP provisions. It is said that the purpose and object of introduction of the provisions contained in Chapter X is to prevent an assessee from avoiding payment of tax by transferring income yielding assets to non-residents even while retaining the power to enjoy the fruits of such transactions i.e. the income so generated. As a concept, it is not totally a new idea. A reference to the provisions of section 42(2)to the Indian Income Tax Act,1922,could be made in this regard-as it was a somewhat similar section and dealt with the trans-border transactions. The provisions of the said section broadly provided that where a nonresident carried out business with 7 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd the person resident in the taxable territory and it appeared to the AO that on account of a close connection between such persons the business was so arranged that the business conducted by the resident with the nonresident either yielded no profit or, less than ordinary profit, which may be expected to arise in that business then, the AO was empowered to tax profits which were derived or which may reasonably be deemed to be derived from the business in the hands of a person resident in the taxable territory. Thus, it can safely be concluded that TP provisions were part of tax administration even during the 1922 Act days though at infancy stage. The present provisions were been incorporated vide Finance Act,2001.Same were further amended vide Finance Act,2002 and are being amended from time to time to meet the new challenges thrown up by the dynamism of the current commercial and business realities. Having regard to the object for which provisions have been enacted, applicability of the said provisions has to be limited to situations where there is diversion of profits out of India or where there may be erosion of tax revenue in intra group transaction. So, intra-group transaction is the first pre-condition for invoking the TP provisions. Calculation of ALP is the next and logical step. But, if the first step itself is missing, the AO cannot go to the second stage. In other words, the AOs cannot climb the second storey of a building without reaching to the first storey if the existence of an IT and calculation of ALP can be compared with a double storeyed building. 3.4.1.We find that the assessee is the market leader of the chocolate market in India, that it was commanding 70% of the market share in the year under appeal, that it had debited AMP expenses, amounting to Rs.85.15crores to its P& L a/c,that the net turnover of the assessee was of Rs.766.21crores,that it was 11.11% of the sales recorded by the assessee during the year, that it had also paid royalty amounting to Rs.13.56 crores for the same period, that the TPO computed Rs.1.52 crores(1.78%) as the cost apportioned/allocable out of the A&M cost incurred by the assessee for the benefit accruing to the AE, that he restricted the cost to Rs.71 lakhs(being0.87% of Rs.85.15crores)in view of the disallowance/ adjustment in income made on account of royalty for trade mark, that the average AMP expenditure by the leading FMCG companies for the period 2001-05 was 10.28%,that the AMP expenditure incurred by the assessee during the same period was 10.45%,that the assessee had contended that its profitability(PBT to sales ratio) @10.85%was much higher compared to the average profitability of the comparables at the rate of 3.57%,that the FAA had held that higher rate profitability could not be a justification of this proportionate expenditure, that in the appellate proceedings the FAA had proposed further addition, that finally he upheld the order of the TPO and confirmed the addition of Rs.71 lakhs, that there was no contractual obligation to recover money from the AE, that it was separately paying royalty for use of brand and trademark. There is no reason for not holding that the increased AMP expenditure led to 8 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd enhanced sales and profitability, that for the purpose of analysing the AMP expenditure incurred by and the comparables it is necessary to consider various factors. If factors like growth rate, nature of business ,number of products launched, territories serviced and turnover/profits achieved have necessarily to be considered for determining the AMP expenses. The entire expenditure was focused on the Indian consumer and it is evident from the local flavour/ language/concepts. It is also an undeniable fact that new players were entering India after liberalisationera started. If the expenditure incurred by the assessee is considered in the back ground of the growth achieved by it one has to agree with the argument of the assessee that it made rapid progress in the Indian market post liberalisation period and AMP played an important role in it. Here, we would also like to mention that there exists a fundamental and basic distinction between the provisions of section 37 and section 92 of the Act-as the first is expense oriented and the second is pricing oriented. The FAA tried to incorporate the ingredients of Section 37 while dealing with the TP adjustments, when he talked of the„higher expenditure ‟and„ justification‟ of such expenditure. In our opinion, the approach of the FAA was not in accordance with the basic philosophy of TP provisions. In our opinion, it is the assessee who has to decide how much to spend for earning his income. The tax authorities are prevented from entering into the proverbial shoes of the assessee to decide the justification of the expenditure. The Act stipulates that in certain conditions only the so called higher expenditure can be questioned. The FAA had not proved that the expenditure incurred by the assessee for advertisement etc. was covered by those sections. If it was the case then the transaction would not fall under section 92 of the Act. Therefore, in our opinion he had adopted a totally incorrect approach, while dealing the allowability of AMP expenditure. 3.4.2.We further hold that the claim of the assessee is factually correct that it had incurred the AMP expenditure for creating product awareness and to recall the value of existing products and that it had a local marketing strategy of making advertisement/slogans in the local language. In our opinion, KUCH MEETHA HO JAY campaign proves the claim made by the assessee. The TPO had ignored the fact that films/TV advertisements of the assessee had the local messaging concept. Such local advertisement campaigns can never be held to be driven towards serving the interests of the AE. It is also a fact that new multinational players in the industry had entered the Indian market. The commercial wisdom of any assessee, in such a situation, would compel it to be innovative and to spent reasonable expenditure for maintaining its position in the market. The TPO/FAA had not controverted the fact that the AE was the owner of intellectual property of the „Cadbury‟ brand and that it was responsible for promoting the brand all over the globe and that the brand related exercise at the cost of the AE for the overall brand positioning and management benefited the assessee also in an indirect manner. Nothing has been 9 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd brought on record to prove that the assessee was directly or indirectly promoting the global brand rather than promoting its own products. In our opinion, there exists a fine but very important distinction between products promoted and nurtured by an assessee and the brand owned and supported by its AE. In the modern world both exist and play different and specified roles. Therefore, until and unless some - thing positive is brought on record about sharing/incurring AMP expenditure under the head by an assessee on behalf of its AE, it cannot be held that it should have recovered some amount from the AE as the expenditure by it indirectly helped in augmenting the brand value owned by its overseas AE. In the case under consideration, the assessee was incurring expenditure for its products whereas the AE was looking after the ground at global level. If the AMP expenditure incurred by them benefited indirectly in the local/ international market it would not mean that it was an IT. The basic purpose of introducing the various provisions of chapter X, as stated earlier, was to prevent tax evasion in the transactions undertaken between an Indian entity and its overseas AE. In our opinion, a perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. It is a fact that the payment under the head AMP expenditure was made to third parties and that those parties were located in India. 3.4.3.We find that in the cases of Maruti Suzuki(supra),Whirlpool India(supra), Bausch & Lomb Eyecare(India)Pvt.Ltd(ITA 643 of 2014 of Hon‟ble Delhi HC), the issue of AMP expenses had been deliberated upon extensively and each and every argument raised by the TPO/DRP have been analysed thread bare. We would like to reproduce relevant portion of the judgment of Bausch & Lomb Eyecare(India) Pvt.Ltd.(supra) and same reads as under: ―53.A reading of the heading of Chapter X['Computation of income from international transactions having regard to arm's length price"]and Section 92 (1) which states that any income arising from an international transaction shall be computed having regard to the ALP and Section 92C (1) which sets out the different methods of determining the ALP, makes it clear that the transfer pricing adjustment is made by substituting the ALP for the price of the transaction. To begin with there has to be an international transaction with a certain disclosed price. The transfer pricing adjustment envisages the substitution of the price of such international transaction with the ALP.

68. The above submissions proceed purely on surmises and conjectures and if accepted as such will lead to sending the tax authorities themselves on a 13 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd wildgoose chase of what can at best be described as a 'mirage'. First of all, there has to be a clear statutory mandate for such an· exercise. The Court is unable to find one. To the question whether there is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions", Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly - inlight of the fact that -the-BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT. 70. What is clear is that it. is the 'price' of an international transaction which is required to be adjusted: The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an adjustment had to be made. The - burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the answer to that is in the negative the TP adjustment should follow. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. " 71. Since a quantitative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed herein before, what the Revenue has sought to do in the present. case is to resort to a quantitative adjustment by first determining whether the AMP spend of the Assessee on application of the BLT, is excessive, thereby evidencing the existence of an international transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case.

74.The problem with the Revenue's approach is that it wants every instance of an AMP spend by an Indian entity which happens to use the brand of a foreign AE to be presumed to involve an international transaction. And this, 14 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd notwithstanding that this is not one of the deemed international transactions listed under the Explanation to Section 928 of the Act. The problem does not stop here. Even if a transaction involving an AMP spend for a foreign AE is able to be located in some agreement, written (for e.g., the sample agreements produced before the Court by the Revenue) or otherwise, how should a TPO proceed to benchmark the portion of such AMP spend that the Indian entity should be compensated for? 63. Further, in Maruti Suzuki India Ltd. '(supra) the Court further explained the absence of a 'machinery provision qua AMP expenses by the following analogy: ―75. As an analogy; and for-no other purpose; in the context of a domestic transaction involving two or more related parties, reference may' be made to Section 40 A (2) (a) under which certain types of expenditure incurred by way of payment to related parties is not deductible where the AO is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods." In such event, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." The AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery' provision in Chapter X which enables' an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is found' that there is an International transaction in that regard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be "impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic trends both international and domestic, the consumption patterns, market behaviour and so on. A simplistic approach using one of the modes similar to the ones contemplated by Section 92C may not only be legally impermissible but will lend itself to arbitrariness. What is then needed is a clear statutory scheme encapsulating the legislative policy and mandate which provides the necessary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance.‖ 64. In the absence of any machinery provision, bringing an imagined transaction to tax is not possible. The decisions in CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. v, CIT (2008) 307 ITR 75 (SC) make this position explicit. Therefore, where the existence of an international transaction involving AMP expense with an ascertainable price 15 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd is- unable to be shown to exist, even if such price is nil, Chapter X provisions cannot be invoked to undertake a TP adjustment exercise.

15. Facts being identical, respectfully following the aforesaid decision of the Co– ordinate Bench in assessee’s own case, we delete the addition made by the Assessing Officer towards transfer pricing adjustment on account of AMP expenditure. Ground raised

is allowed.

24. Therefore, respectfully following the above decision of Coordinate Bench in assessee’s own case in turn relying on the decision of Assessment Year 2006-07. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed.‖

24. Therefore, respectfully following the above decision of Coordinate Bench in assessee’s own case in turn relying on the decision of Assessment Year 2006-07. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed.‖

10. Respectfully following the above decision of the co-ordinate bench, we hold that the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed.‖

11. The facts being identical, respectfully following the above order of the co- ordinate bench of the Tribunal, we hold that the TP adjustment made towards AMP expenses is hereby deleted. The grounds raised by the assessee in this regard are allowed.

No.1 in favour of the assessee.‖

8. There being no difference in factual position in the impugned assessment year, respectfully following the consistent view of the Tribunal on identical issue in assessee‟s own case as referred to above, we hold that the royalty payment on trade mark to SCOL @ 1% of net sales is at arm's length, hence, no further adjustment is required. Accordingly, we delete the disallowance made by the Assessing Officer. Ground raised is allowed. Respectfully following the aforesaid view of Tribunal in assessee‟s own case, we delete the impugned adjustment of Rs.1300.22 Lacs as made by Ld. AO in the final assessment order. Nothing has been shown to us that the aforesaid ruling is not applicable to the year under consideration. Ground No.3 stand allowed. With regard to disallowance of payment of royalty on on technology paid to Cadbury Adams USA LLC 3.4.2 We find that this issue is covered by the decision of this Tribunal for AY 2006- 07 wherein it has been held as under: -

22. We have considered rival submissions and perused materials on record. Undisputedly, the assessee has paid royalty to CAUSA @ 2.7% of net sales as per the agreement executed on 1st June 2006. It is the claim of the assessee that the payment of royalty is for use of trademark as well as technical knowhow. However, the Transfer Pricing Officer after examining the agreement between the assessee and CAUSA has opined that the agreement only provided for use of trademark and it does not provide for use of technical knowhow. It is the say of the Transfer Pricing Officer that since as per the Government guidelines, payment of royalty on trade mark under the automatic route is fixed at the maximum rate of 1%. Royalty paid for trademark at 2.7% is not at arm's length. Accordingly, he has allowed 21 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd payment of royalty for trademark at 1%. While doing so, the Transfer Pricing Officer has also observed that the agreement executed in December 2007, amending the terms of the original agreement having come in to existence after expiry of relevant financial year would not be applicable for a transaction undertaken in the relevant financial year. The learned Commissioner (Appeals) has also endorsed the aforesaid view of the Transfer Pricing Officer. No doubt, on a perusal of the agreement dated 1st June 2006 between the assessee and CAUSA it appears that the said agreement has been termed as trademark license agreement. However, reading the agreement as a whole and more particularly, Clause–7(b) of the said agreement, it becomes clear the licensee (the assessee) shall manufacture licensed product using any technology of the licensor provided to the licensee in accordance with all specifications and instructions provided by the licensor from time to time. It is not the case of the Revenue that in the relevant previous year assessee has neither manufactured nor sold „Halls‟ brand products in India. Thus, it is necessary to ponder whether in absence of necessary technical knowhow/knowledge it would have been possible for the assessee to manufacture the aforesaid products? In our view, the answer would be– No. Further, the assessee and CAUSA have entered into one more agreement on 24th December 2007, amending the terms of the original agreement. As per the aforesaid agreement, certain terms of the original agreement was amended to include licensing / sub–licensing of technology. It is the contention of the learned Sr. Counsel for the assessee that the amendment agreement executed on 24th December 2007, shall operate retrospectively from 1st January 2006, to emphasize this fact, the learned Sr. Counsel for the assessee has sought to produce letter dated 26th April 2016, issued by Mondelez International as additional evidence. From a perusal of the aforesaid letter, it appears that it has been issued to clarify that as per the original agreement executed on 1st June 2006, effective from 1st January 2006, the parties to the agreement intended to transfer and avail technical knowhow / knowledge relating to the licensed product along with trademark. Considering the submissions of the learned Sr. Counsel for the assessee that in subsequent assessment years royalty paid by the assessee @ 2.7% of sales was accepted by the Transfer Pricing Officer, the letter dated 26th April 2016, sought to be produced by the assessee as additional evidence, in our view, is of much significance since it will have a crucial bearing in determining whether CAUSA has authorised the assessee to use technical knowhow along with trademark, hence, is admitted as additional evidence. Even, without taking cognizance of the aforesaid additional evidence, the original as well as amended agreement make it abundantly clear that assessee has also availed technical knowhow from CAUSA. Further, the Departmental Authorities don dispute the genuineness or authenticity of the amended agreement. What they are disputing is the date from which the amended agreement is effective. If the departmental authorities in the subsequent assessment years have allowed 22 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd payment of royalty both for trademark and technical knowhow, there is no reason why it should not be allowed in the impugned assessment year, since, it cannot be said that the assessee was manufacturing „Halls‟ brand products without obtaining the required technical knowhow. Accordingly, we hold that payment of royalty to CAUSA is at arm‟s length. The ground is allowed. Respectfully following the same, we delete the impugned addition of Rs.87.61 Lacs. Ground No.4 stand allowed. With regard to disallowance of payment of royalty on on technology paid to Cadbury Enterprises Pvt. Ltd. 3.5.1 It was noted that the assessee entered into Technical collaboration Agreement dated 28/06/2007 with CEPT to avail the benefits of Technical Know-how, trade secrets etc. for mixed fruit flavored and strawberry flavored sugar noncoated center filled bubble gums / chewing gums. Another agreement was entered into with the same entity for Trademarks and copyright licenses in respect of products Bubbaloo, Bubba the Cat & Adams. As per agreement, the assessee paid Technical royalty @4% and Trademark Royalty @1%. Applying the same reasoning, it was held that CEPT was authorized to sub- license the rights of the Trademark only and there was no reference to presume that the same included the right to sublicense the Technology and know-how related to the products, an adjustment of Rs.142.51 Lacs was proposed by Ld. TPO. The Ld. DRP, finding the adjustment quite similar to as made for royalty payment to CAUSA, endorsed Ld. TPO‟s action. 3.5.2 Since facts as well as reasoning of lower authorities are quite similar as in the case of royalty payment made by assessee to CAUSA, applying the same analogy, we delete the impugned addition. One more reason to delete the adjustment is that the assessee has entered into two separate agreement for payment of Trademark Royalty & Technical royalty and therefore, the matter would stand on a better footing. Hence, Ground No. 5 stand allowed. ― 11. Therefore, respectfully following the above decision of Coordinate Bench in assessee’s own case in turn relying on the decision of Assessment Year 2008-09. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed.

14. It is noticed that the payment of royalty towards trademark for the year under consideration is based on the same agreement, which is considered by the co- ordinate bench for the assessment year 2009-10. Therefore we are of the view that the issue is covered by the above decision for the year under consideration also. Accordingly, we delete the TP adjustment made by the TPO towards payment of royalty on technology paid to Cadbury Adams USA LLC, and Cadbury Enterprises Pte Ltd. These grounds are allowed in favour of the assessee.‖ 23 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd 13. Respectfully following the above order of the co-ordinate bench, we allow the grounds raised by the assessee.

14. Ground Nos. 28 to 30 pertain to disallowance of service fees paid to Cadbury Enterprises Pte Ltd. We notice that the facts and circumstances pertaining to this issue are identical for A.Y. 2011-12 & 2012-13, which, the co- ordinate bench has already decided in favour of the assessee by holding as under:- 16.The Ld.AR submitted that the issue is covered by the decision of the co-ordinate bench in assessee’s own case for A.Y. 2009-10 where it haws been held that – ―14. Considered the rival submission and material placed on record. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in for AY 2008-09 in assessee’s own case on merits in which ITAT has restored the matter back to the file of AO with direction to enable the revenue to take a consistent stand in the matter and also to follow the ITAT order for Assessment Year 2006-07. We draw strength from the following decisions in which matter cannot be remanded back when the TPO has failed to follow the prescribed method u/s 92C:- i) Kodak India Pvt. Ltd. (2013) 37 taxmann.com 233 (Mum) ii) Barclays Bank PLC vrs. ADIT (90 taxmann.com 378) (Mum) iii) Vedanta Ltd. Vrs. PCIT (ITA 303/2018, C.M.Appl. 10257/2018).

15. For the sake of clarity, the decision of ITAT in the case of Kodak India Pvt. Ltd. is reproduced below:- I. Section 92B, read with section 92C, of the Income-tax Act, 1961 - Transfer pricing -Meaning of international transaction - Assessment year 2008-09 - Assessee, an Indian company sold its medical imaging business to 'C' Ltd. another Indian company for USD 13.543 million - Being domestic transaction, assessee returned its income, disclosing sale transaction as a normal domestic transaction - Assessing Officer found that sale transaction of imaging business by assessee to 'C' Ltd. was pursuant to a larger sale transaction, on global basis, wherein holding company of assessee sold its imaging business to 'C' Inc. i.e., holding company of 'C' Ltd. on global basis - Thus, on suo moto assumption of jurisdiction over impugned transaction, TPO, proceeded to determine ALP -TPO determined ALP, based on worldwide revenue break up 24 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd amongst countries and concluded that India accounted for 1.4 per cent thereof, which came to USD 32.9 million as against USD 13.54 million shown by assessee - Accordingly, an adjustment of Rs. 79.96 crore was made - Whether since transactions entered into by holding foreign companies and subsidiary Indian companies were independent of each other and there was no international element involved in sale of imaging segment by assessee of its business to 'C' Ltd., authorities below were not justified in invoking transfer pricing provisions in respect of assessee's transaction - Held, yes - Whether, therefore, impugned adjustment made by revenue authorities was to be set aside - Held, yes [paras 49 and 63] [In favour of assessee] Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price [Others] - Assessment year 2008-09 - Whether while determining ALP of international transactions entered into by assessee, TPO cannot adopt any other method except methods prescribed in section 92C(1) - Held, yes [Para 66] II. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price [Safe harbour rules] - Assessment year 2008-09 - Assessee had incurred certain expenses on behalf of its AE - As said expenses were to be reimbursed to assesee receipts on account of reimbursement was recovered on cost plus 10 per cent mark up TPO proposed mark up at the rate 12.5 per cent and made an adjustment accordingly- Whether since adjustment sought by TPO and sustained by DRP was falling within margin of +/- 5 per cent as provided by proviso to section 92C(2), same was not sustainable - Held, yes [Para .84] [In favour of assessee] 16. Therefore, respectfully following the above decision of Coordinate Bench which are similar to the facts of present case, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed.‖

17. One of the grounds on which the TP adjustment is contested by the assessee is that the TPO has computed the ALP based on an adhoc estimation of salary and the number of man hours. The Ld AR submitted that the TPO has not followed the CUP method but has arrived at the ALP on some estimation. It was further submitted that the determination of ALP cannot be done except under one of the methods as prescribed in section 92C(1) and therefore the TPO's computation of ALP based on adhoc assumptions is not correct. We notice that the TPO while arriving at the ALP has used the estimated salary and also used earlier years man hours to determine the current year man hours spent. In the above decision, the coordinate bench has 25 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd considered the issue of determination of ALP by the TPO and has held that the TP adjustment is not tenable by relying on the decision in the case of Kodak India Pvt. Ltd (supra) where it is held that – 64. On the other legal issue that whether the TPO was correct to employ an alien method for arriving at the ALP. Once again, relevant section is very clear, which reads, "The arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe."

65. It is important to take note of the word "shall" used in the section. No doubt that under the General Clauses Act, shall can be used as may or vice versa, but the Hon'ble Supreme Court of India in the case of CIT v. Anjum M.H. Ghaswala, [2001] 252 ITR 1/119 Taxman 352, sitting in Constitution Bench explained the exact premise of the word "shall". The case was pertaining to the levy of interest under section 234B on Chapter XIXA of the Income-tax Act, i.e. Settlement Commission. In the decision, the Hon'ble Supreme Court held, 'Nextly, the Commission has elaborately discussed the object of introduction of Chapter XIX-A in the Act, the history behind the introduction and schematic rationalisation of the provisions of Chapter XIX-A brought about through Finance Act, 1987 to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment would arise, in our opinion, if the language of the Statute is either ambiguous or conflicting or gives a meaning leading to absurdity. We do not find any such problem in the provisions of the Act to which we have already referred to Sections 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression "shall" used in the said Section cannot by any stretch of imagination be construed as "may". There are sufficient indications in the scheme of the Act to show that the expression "shall" used in Sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as "may".' 66. By the use of the word "shall", for computing the ALP in one of the following methods, the Legislature has cast an embargo that no seventh method could be adopted by the TPO for computing the ALP. Even the Special Bench of the ITAT in the case of LG Electronics India (P.) Ltd., (supra), in paras 22.10 and 22.11, pages 128 and 129, observes, 26 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd "As regards the contention that methods are tools for determining the ALP, we find that there is dispute that there is no dispute the main purpose of Chapter X is to determine the ALP of an international transaction, but such determination can be done only by way of the methods specified by the statute. When the Legislature has specifically enshrined a provision under section 92C requiring the computation of ALP by any of the prescribed methods, it does not fall in the realm of the TPO or for that matter any other authority to breach such mandate and apply or direct to apply any other method. Going by the dictate of the provision as subsists under sub- section (1) of section 92C, there can be absolutely no doubt on adoption of any single method of those set out in section. Rule 10B has specified a set procedure to be followed for determining the ALP distinctly under the five methods. It is equally not permissible to invent a new procedure and try to fit such procedure within any of the existing procedures prescribed as per these methods. No one is authorized to add one ore more new steps in the prescribed procedure or to substitute any other mechanism with the prescribed under the rule. It is neither possible to invent a method nor to substitute a new methodology in place of the one prescribed in the rule."

22. We heard the parties and perused the material on record. It is now a settled position that when the own funds are available, no disallowance is warranted under section 14A read with rule 8D. For the year under consideration, the reserves and surplus of the company as on 31/03/2011 is at Rs.89,988.09 lakhs and the investments made stands at Rs.12,881.07 lakhs, therefore, we see merit in the contention of the Ld.AR that no disallowance is warranted under section 14A. Further, the co-ordinate bench in assesse’s own case for A.Y. 2009-10 had also held that – 30 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd ―31. Considered the rival submission and material placed on record. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in for AY 2008- 09 in assessee’s own case on merits. For the sake of clarity, which is reproduced below:- 5.1 During assessment proceedings, it transpired that the assessee earned exempt income of Rs.16.18 Crores which mainly comprised- off of dividend on mutual funds. The assessee, inter-alia, submitted that Rule 8D was not applicable to year under consideration. It was also submitted that assessee‟s surplus funds were invested in Liquid Mutual Fund and the same were withdrawn as per business requirements. The attention was also drawn to the fact there were two persons in the Treasury department to manage mutual funds investment on regular basis and the total salary paid to them was Rs.9.20 Lacs therefore, a part of the same could be disallowed. The arguments were also raised to submit that investments were made out of reserves and surplus. However, not satisfied, Ld. AO, applying Rule 8D, worked out aggregate disallowance of Rs.233.04 Lacs which comprised-off of direct disallowance u/r 8D(2)(i) for Rs.9.20 Lacs, interest disallowance u/r 8D(2)(ii) for Rs.80.56 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.143.28 Lacs. The direct expense disallowance u/r 8D(2)(i) for Rs.9.20 Lacs is the same disallowance which has been offered by the assessee against Treasury department expenses. The disallowance, upon confirmation by learned DRP, is under appeal before us. 5.2 The arguments of Ld. Sr. Counsel are two-fold viz. (i) Ld. AO has not recorded requisite satisfaction before proceeding to compute disallowance as per Rule 8D; (ii) The assessee had surplus funds to make the investments and therefore, the presumption that the investments were out of surplus funds stood in assessee‟s favor by the judgments of Hon‟ble Bombay High Court rendered in in HDFC Bank Ltd. V/s CIT (2016 95 CCH 61) & CIT V/s HDFC Bank Ltd. (2014 366 ITR 505). 5.3 We have considered the same. Upon perusal of financial statements, we find that own funds in the shape of share capital & free reserves at yearend stood at Rs.46266.97 Lacs as against investment of Rs.31228.98 Lacs. Nothing has been brought on record by Ld. AO to establish the 31 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd nexus of investments with borrowed funds. In fact, opening investments stood at Rs.26663.91 Lacs and the assessee earned profit after tax for Rs.15094.68 Lacs during the year under consideration which is more than incremental investments. Therefore, applying the ratio of cited decisions, we hold that no interest disallowance would be justified on the facts and circumstances. We order so. So far as the disallowance of direct / indirect expenses is concerned, we are of the view that since Rule 8D was applicable to this AY, the findings given in earlier orders of Tribunal would not apply to this year and the disallowance has to be worked out in terms of the Rule 8D. The Ld. AO, in draft assessment order, at para 6.4, has noted that the submissions made by assessee in defense of suo-moto disallowance could not be accepted as against the submissions of the Ld. Sr. Counsel that the requisite satisfaction was not recorded by Ld. AO before proceeding to apply Rule 8D. We are of the considered opinion that there was no particular method of recording satisfaction in the quantum assessment order and therefore, unable to accept this specific plea of Ld. Sr. Counsel. However, keeping in view the factual matrix as well as submissions made before us, we deem it fit to restore the matter of direct / indirect expense disallowance to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee. As held earlier, no interest disallowance would be justified, keeping in view the assessee‟s financial parameters. Ground No. 14 stand partly allowed.

23. Respectfully following the above decision, we hold that no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is being accepted by the revenue. We therefore remit the issue of verification of direct / indirect expense disallowance 32 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee i.e. of Rs.3,44,215/- keeping in mind the fact that for AY 2009-10 the suo motu disallowance based on salary of employees in treasury department has been accepted by the Assessing Officer. Needless to say that the assessee be given an opportunity of being heard. It is ordered accordingly.

―31. We heard the rival submissions and perused the materials on record. From the perusal of statement showing the basis of allocation of expenses to Baddi Unit I and II (page 430 and 431 of paper book) we notice that the Assessing Officer has accepted the allocation of Material cost, employee cost and depreciation. The disallowance is arising out of the allocation of finance cost and the Operating & Establishment expenses (O&E) which the assessee allocated based on the revenue ratio as compared to the total revenue of the assessee. We notice that the coordinate bench in assessee's own case for AY 2009-10 accepted the claim towards finance cost and remitted the issue back to the Assessing Officer only with respect to the verification of allocation of O&E expenses. We further notice that in the OGE the Assessing Officer has allowed the O&E expenses as claimed in the return of income for the purpose of deduction under section 80IC thereby accepting the method of allocation followed by the assessee for allocating 33 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd O&E expenses. It is also noticed that there is no change in the method of allocation followed by the assessee for AY 2011-12 also. Considering the decision of the coordinate bench and the OGE passed by the Assessing Officer, we delete the disallowance made by the Assessing Officer and hold that the assessee be allowed the deduction under section 80IC as claimed in the return of income.‖ 21. For the year under consideration, the ld AR during the course hearing presented a worksheet with details of how the disallowance is computed by the assessing officer. From the perusal of the same we notice that the assessing officer has used the same basis as in AY 2011-12 in order to make the disallowances. Therefore in our considered view our decision in assessee's own case for AY 2011- 12, as extracted above will be applicable for the year under consideration also. Therefore, respectfully following the earlier decision of the co-ordinate bench, we delete the disallowance made by the Assessing Officer. These grounds of the assessee are allowed.

34 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd ―36. The Ld.AR submitted that the MAT credit is carried forward from A.Y. 2010-11 and the credit was modified due to additions made in the assessment order for A.Y. 2010-11. The Ld.AR further submitted that the Tribunal vide order dated 14th November, 2022 has quashed the assessment for A.Y. 2010-11 as being barred by limitation. It is therefore, prayed that the assessee allowed the MAT credit as per the original return of income filed as has been carried forward from A.Y. 2010-11. After hearing the parties, we are of the view that this issue needs to be factually examined for the purpose of allowing the credit towards carried for MAT credit from AY 2010-11. Therefore, we remit the issue back to the Assessing Officer to examine the status of the assessment order passed for A.Y. 2010- 11 and accordingly give credit for the carried forward MAT for the year under consideration‖ 24. Facts and circumstances, being identical, consistent with the earlier decision of the Tribunal, we remit the issue back to the Assessing Officer to examine the status of the assessment order for A.Y.2010-11 and accordingly give credit for the carried forward MAT for the year under consideration. This ground is allowed for statistical purpose. (A.Y. 2014-15) 25. The assessee for the assessment year 2014-15, filed the return of income on 30.11.2011 declaring an income of Rs.2,18,26,13,990/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The TPO made the following TP adjustment – Name of Adjustment Amount in (Rs.) Adjustment of Advertisling and Marketing expenses 1,72,31,15,089 Adjustment of receipt of services from CEPT 9,60,90,565 Adjustment of receipt of services from MIHL 16,30,06,729 Payment of technical know-how royalty to CEPT 162,6,07,558 Total 214,80,47,240 35 ITA 7104/Mum/2017 ITA 7404/Mum/2018 Mondelez India Foods P Ltd 26. The Assessing Officer besides the TP adjustment also made similar disallowance as in AY 2013-14 viz., Disallowance under section 14A, and disallowing expenses of Baddi Unit I&II towards deduction claimed under section 80IC. The DRP confirmed the TP adjustments.

raised by the assessee in both the assessment years are tabulated in the earlier part of this order, from which it is clear that all the issues arising in AY 2014-15 are similar to AY 2013-14 except adjustment on account of information technology charges (Ground No.34 to 37). Considering the fact that the facts being identical our decision with respect to all the issued contended through Ground Nos.2 to 33 and Ground Nos.38 to 41 are mutatis mutandis are applicable to AY 2014-15 also. It is ordered accordingly.

28. Ground Nos.34 to 37 pertain to TP adjustment on account of information technology charges. We notice that the basis on which the TPO has made the TP adjustment is similar adjustment made for service fee. The TPO in order to arrive at the adjustment has used the estimated salary and also used earlier years man hours to determine the current year man hours spent. Therefore our decision with regard to adjustment made with respect to service fees is mutatis mutandis applicable for the on account of information technology charges also. Accordingly respectfully following the decisions of the co-ordinate bench, we delete the TP adjustment. These grounds are allowed in favour of the assessee.

29. In the result, appeal filed by the assessee for AY 2013-14 is allowed for statistical purpose.