PROCTER & GAMBLE HOME PRODUCTS LTD,MUMBAI vs. ADDL CIT RG 8(2), MUMBAI

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 iv. There is no commercial activity carried on by the Appellant other than the collection of service charges which is based on the turnover effected by each party occupying the premises, v. He failed to appreciate and ought to have held that the purpose of entering into an agreement with PGHH was sharing of certain common facilities and not for renting of the premises in favour of PGHH and no tenancy rights were created in favour of PGHH. vi. The Appellant prays that the addition of Rs. 5.01 crores lacs be deleted. Without Prejudice to the Above: Ground III: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in assessing the alleged rental income under the head "Income from House Property". ii. The CIT(A) also erred in confirming the action of the AO in assessing the income earned from M/s. Nortel Network Private Limited and M/s. DSP Merril Lynch under the head "Income from House Property". iii. The Appellant prays that the said rental income be assessed under the head "Income from Business or Profession" as against the "Income from House Property". Without Prejudice to the Above: Ground III: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in assessing the alleged rental income under the head "Income from House Property". ii. He failed to appreciate and ought to have held that the same was temporally let out along with various facilities to the sister concern. iii. The Appellant prays that the said amount (to the extent held as income) be considered as "Income for Other Sources". Ground IV: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing Rs. 10.19 crores consisting of repairs & maintenance of building, service charges and depreciation on building, on the alleged ground that these expenditures have been incurred in relation to the let-out portion of the building

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 ii. He further erred in confirming the action of the AO of adopting the proportion of the "Space Rented Out" as basis for disallowing the expenditures without rejecting the method of apportionment of expenditure in the ratio of "Net Outside Sales" ("NOS") as agreed between the Appellant and PGHH and adopted by the Appellant. iii. He failed to appreciate and ought to have held that: a. Nature of expenditure ought to be examined before treating the same as incurred in relation to the let-out portion of the building; b. The expenditure claimed by the Appellant were in the nature of business expenditure of the Appellant; and c. The expenditure incurred by the Appellant were in relation to its own use of the building. iv. The Appellant prays that the disallowance of Rs. 10.19 crores be deleted. Ground V: i. If the alleged rental income from PGHH, GIL and rental income from Nortel Network Private Limited and DSP Merril Lynch is taxed under the head "Income from House Property", in such case, only the expenditure related to building ought to be considered for disallowance and not the shared expenses which were not related to building at all. ii. The Appellant prays that for the purpose of disallowance; the AO be directed to consider only building related expenses. Ground VI: i. On the facts and circumstances of the case, and in law, the CIT(A), erred in upholding /confirming the action of the AO/Transfer Pricing Officer ('TPO') in holding that the Appellant's international transaction pertaining to rendering of support services to the associated enterprises('AEs') is not at arm's length and thereby confirming the addition of Rs. 41,30,973. ii. In doing so, the CIT(A) erred in agreeing with AO/TPO's actions of: a. Disregarding the transfer pricing analysis carried out by the Appellant and re-determining the arm's length price of the international transaction without appreciating that the none of the conditions set out in the Section 92C(3) of the Act are satisfied; b. Rejecting Vatika Marketing Limited from the set of comparables;

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 c. Retaining Green Care Holdings Limited as a comparable company; d. Not allowing the working capital and risk adjustments. iii. The Appellant prays that the aforesaid adjustment to be deleted. Ground VII: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming action of the AO of charging interest u/s. 234 of the Act. ii. The Appellant prays that the AO be directed to delete / appropriately reduce the interest u/s. 234.

Ground VIII: i. The appellant craves leave to add to, alter or amend all or any of the above grounds of appeal at the time of hearing.

Additional Grounds of appeal; i. On the facts and in the circumstances of the case and in law, the Transfer pricing Officer (TPO) and thereby the OA erred in considering K C Maritime (India) Limited in its comparability analysis which is functionally dissimilar to the Appellant. ii. It is prayed that the above company be excluded from the set of comparables considered by the TPO for comparability analysis.

following grounds of appeal; -

Ground I: i. On the facts and circumstances of the case, and in law, the Learned Commissioner of Income Tax (Appeals)-57. Mumbai ['CIT(A)'] erred in upholding / confirming the action of the Learned Assessing Officer (AO)/ Transfer Pricing Officer (TPO) in holding that the Appellant's international transaction pertaining to rendering of support services to the associated enterprises('AEs) is not at arm's length and thereby confirming the addition of Rs. 98,08,785/-. ii. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding /confirming the action of the AO/TPO in:

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 a. rejecting the Transfer Pricing study which was maintained in good faith and with due diligence; b. rejecting the search process followed by the Appellant; c. rejecting multiple year data; d. including certain comparables, which were not comparable; e. not including certain comparables selected by the Appellant in its TP Study / submitted during the course of assessment proceedings; f. not granting working capital adjustment; g. not granting risk adjustment.

Domestic Tax Grounds: Ground No. II: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in bringing to tax an notional amount of Rs. 4.55 crores as rent u/s. 22 of the Act for the alleged consideration for premises usage charges payable by Procter & Gamble Hygiene and Health Care Ltd ("PGHH") and Gillette India Limited ("GIL"). ii. The Appellant prays that the addition of Rs. 4.55 crores lacs be deleted. Ground No. III: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in assessing the alleged rental income under the head "Income from House Property". ii. The CTT(A) also erred in confirming the action of the AO in assessing the income of Rs. 4.91 crores earned from M/s. Nortel Network Private Limited and M/s. DSP Merril Lynch under the head "Income from House Property". iii. The Appellant prays that the said rental income be assessed under the head "Income from Business or Profession" as against the "Income from House Property". Ground No. IV: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in assessing the alleged rental income under the head "Income from House Property".

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 ii. He failed to appreciate and ought to have held that the same was temporally let out along with various facilities to the sister concern. iii. The Appellant prays that the said amount (to the extent held as income) be considered as "Income for Other Sources". Ground No. V: i. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing Municipal Taxes of Rs. 1.21 Crores, administrative expenses of Rs. 27.09 lacs, Repairs and Maintenance of Rs. 33.39 lacs and depreciation of Rs. 299.73 lacs, on the alleged ground that these expenditures have been incurred in relation to the let-out portion of the building. ii. He further erred in confirming the action of the AO of adopting the proportion of the "Space Rented Out" as basis for disallowing the expenditures without rejecting the method of apportionment of expenditure in the ratio of "Net Outside Sales" ("NOS") as agreed between the Appellant and PGHH. GIL and adopted by the Appellant. iii. The Appellant prays that the disallowance of above expenditure be deleted. Ground No. VI i. If the alleged rental income from PGHH, GIL and rental income from Nortel Network Private Limited and DSP Merril Lynch is taxed under the head "Income from House Property", in such case, only the expenditure related to building ought to be considered for disallowance and not the shared expenses which were not related to building at all. ii. The Appellant prays that for the purpose of disallowance; the AO be directed to consider only building related expenses.

assessee submits that he is not pressing grounds of appeal related with

transfer pricing issues in both the years. Hence, the corresponding grounds of

appeal related with transfer pricing issues in both the years are dismissed.

assessee company is engaged in the business of manufacturing, marketing,

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 selling of several consumer products. The assessee filed its return of income

for AY 2007-08 on 29.10.2007 declaring income of Rs. 57.60 Crore. The case

was selected for scrutiny. During assessment, the Assessing Officer (in short

‘AO’) noted that the assessee has claimed expenses of Rs. 85,58,205/- against

professional fees. On show case, the assessee, furnished required details vide

their submission dated 23.11.2010. On going through, such details, the AO

was of the view that assessee has made a general submission. Some of the

payments pertain to project expenses. Certain payments were in respect of

conducting investigation, on research, transfer pricing study report and other

payments which are capital in nature. The AO was not satisfied with such

explanation and held that assessee has not discharged its onus in justifying

such payment on such professional services. The AO thereby made ad-hock

disallowance Rs. 10 lakhs by taking view to the extent of Rs. 10 lakhs

expenditure was not exclusively for the purpose of business.

expenditure of Rs. 42.69 Crore under the head ‘trade incentive’. In earlier

year, the assessee has shown similar expenses of Rs. 24.83 Crore. On show

case, the assessee explained that their sales turn over has increased in the

year and thereby sales incentive also increased by Rs. 17.86 Crore. The

assessee also explained that trade incentive includes incentive of scheme

reimbursement expenses made to distributor incurred by them under various

scheme offered by assessee company from time to time. Due to price

reduction, such reimbursement was made. Further, such incentive includes

brand promotion expenses. The assessee also explained that such expenses

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 were including of promotion sales policy during the year. The reply of

assessee was not accepted by the AO. The AO was of the view that assessee

spend large sum of money to distributors in the name of ‘brand promotion’ as

reimbursement on account of incentive scheme. The AO made ad-hock

disallowance of 20% of total such expenses thereby worked out disallowance

of Rs. 6.66 Crore.

company viz. Procter & Gamble Hygiene Healthcare Limited allowing them to

use office building owned by assessee and also sharing certain common

expenses with regard to such building. In support of such arrangement, the

assessee furnished agreement dated 29.08.2003 which is effective from

01.04.2001. On going through various clause of agreement, the AO recorded

his observation in para 9.1 of assessment order. The AO noted that for use

and occupation, the part of office building and for availing certain services, the

assessee received compensation/reimbursement as has been listed in

Annexure-I to the agreement. As per Annexure-I of the agreement, the

condition for usage charges is @ Rs. 90 per square feet for the built-up area.

There is reference of non-refundable security deposit equivalent to six months’

compensation by associate company. The assessee is also entitled for various

other expenses like furniture, power and firefighting, water, electricity,

generator charges, administrative expenses and various other items

mentioned in Annexure-I. The AO was of the view that such agreement is in

the form of rent agreement. The AO asked as to why such usage charges

should not be treated as income from house profit, as has been held in earlier

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 years assessment order. The assessee was also asked to furnish exact area

shared with the associate/group companies and to furnish depreciation and

other maintenance expenses incurred as the part of common services

expenditure. The assessee filed its reply dated 01.12.2010, relevant part of

which is extracted in para 9.4 at page 14 of assessment order. In the reply,

the assessee stated that total required expenses shared by assessee with

group company is Rs. 28.87 crore under operation and other expenses and

Rs. 9.73 Crore under payment of employees. Ledger on such services was also

furnished. Such cost sharing was based on agreement dated 01.07.2006,

though it was executed on 03.06.2009. The AO was not satisfied with the

explanation and details furnished by assessee. The AO, as per his working in

para9.27 of assessment order treated such receipt as income from house

property on account of rent received/receivable from group companies at Rs.

7.77 crore under the head income from house property and after allowing

standard deduction, Municipal tax and other expenses worked out net annual

value of Rs. 5.01 Crore and taxed the same under the head income from

house property.

Before CIT (A), the assessee furnished similar explanation in respect of third

addition. The Ld. CIT(A) confirm the action of assessee on all three additions.

Further aggrieved, the assessee has filed present appeal before this Tribunal.

Commissioner of Income Tax-Departmental representative (CIT- DR) for the

revenue. The Ld. AR of the assessee submits that the ground No. 1 related to

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 ad hock disallowance of professional fees. The Ld. AR of the assessee submits

that similar disallowances are bone of contention between the assessee and

the AO from earlier preceding/ assessment years. Similar disallowance was

made in AY 2004-05, which was confirmed by ld CIT(A).However, on further

appeal before Tribunal similar disallowances was deleted in ITA

No.1286/Mum/2009. By following the decision of Tribunal in AY 2004-05,

similar disallowances were deleted by ldCIT (A) in AY 2005-06. Thus, this

issue is now covered in favour of the assessee. Further, copy of decision of

Tribunal in AY 2004-05 in ITA No. 1286/Mum/2009 and order of CIT(A) in AY

2005-06 is filed.

AY 2004-05 by Tribunal is not applicable as the facts of the year under

consideration was different.

the orders or lower authorities carefully. We find that assessee has claimed

total professional expenses of Rs. 85,58,205/- on account of various

professional fees. The AO disallowed Rs. 10 Lakh on ad hocbasis. The Ld.

CIT(A) confirmed. We find that on similar ground of appeal, the coordinate

bench of Tribunal in assesses own case in AY 2004-05 deleted the similar

disallowances. We find that in AY 2005-06, the AO disallowed the similar

expenses. The CIT(A) allowed relief to the assessee in AY 2005-06 by

following order of AY 2004-05. Thus, this issue is covered in favour of the

assessee. Otherwise, we find that the AO while making ad hoc disallowance

has not specified as to which item of professional fees is not wholly and

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 exclusively for the purpose of business. Thus, considering the decision of

Tribunal in AY 2004-05 (supra), we do not find any justification for making

such ad hoc disallowance. In the result, ground No. 1 of the appeal is allowed.

expenses tearing it capital in nature. The Ld. AR of the assessee submits that

sales promotion and advertisement expenses are not capital expenditure and

should be allowed as business expenditure. The higher Courts in series of

decision have allowed sales promotion expenses, incentive in advertisement

taxes as a business expense. To support his submission, the Ld. AR relied

upon the decision of jurisdictional High Court in CIT vs. Procter & Gamble

Home Products Limited reported in (377 ITR 66 Bombay) wherein it was held

that expenditure incurred by assessee on film production by way of

advertisement films was allowed as revenue expenditure. The Ld. AR also

relied upon the following case laws:-

(a) CIT vs. Geoffrey Manners & Co. Ltd. [2009] 315 ITR 134 (Bombay HC)., (b) CIT vs. Intercontinental Hotels Group India (P.) Ltd. [2013taxmann.com 153 (Delhi Tribunal)., (c) CIT (Mumbai) vs. Asian Paints (India) Ltd (75 taxnmann.com 152) (Bom HC), (d) DCIT (Mumbai) vs Polygel Industries (P.) Ltd (68 SOT 130) (Mumbai Tribunal) (e) Fine Jewellery (India) Ltd vs. ACIT (165 TTJ 705) (Mumbai Tribunal), (f) Brightest Circle Jewellery (P.) Ltd vs. ACIT Mumbai 154 TTJ 571 (Mumbai Tribunal), (g) ACIT vs. Janson Industries Ltd. 194 TTJ 19 (Chennai Tribunal), (h) DCIT vs. Warner Lambert (India) (P.) Ltd. [2013] 33 taxmann.com 686 (Mumbai Tribunal) (i) Hemraj Nebhomal Sons vs CIT [2005] 278 ITR 345 (Madhya Pradesh HC)

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 12. The Ld. ARfor the assessee in alternative submission submits that such

expenditure is to be allowed, even if incidental benefit is received by third

party. To support his submission, the Ld. AR mainly relied upon the decision

of Delhi High Court and PCIT vs. Seagram Manufacturing Private Limited 2018

Taxman.com 2013 Delhi High Court. The Ld. AR of assessee also submits that

it is not open for the department to adopt subjective standard on

reasonableness and disallowed part of business as expenditure.

lower authorities. The Ld. Sr. DR submits that the assessee has claimed huge

expenses under the garb of incentive/trade incentive scheme. The expenses

during the year were substantially increased comparative to the earlier year.

The AO, thus, reasonably disallowed 20% of such expenses.

through the orders of lower authorities carefully. We have also deliberated on

various case laws relied by parties. We find that during the year under

consideration, the assessee debited Rs. 42.69 Crore on account of trade

incentive and brand promotion expenses. The AO disallowed 20% of such

expenditure and by taking view that such expenses were exclusively indicated

for promotion of brand of various products which is enduring benefit and take

it a capital expenditure and disallowed to the extent of 20% and worked out

on disallowance of Rs. 6.66 Crore. The Ld. CIT(A) confirm the action of the

AO by taking the view that observation of AO have not been rebutted by

assessee it its submission and thus, he has no reason to deviate from the

finding of AO. We find that assessee has incurred/allowed such trade

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 incentive as a part of their business model. Such expenses in respect of

promoting of products, is to be considered as revenue expenses. Similar view

was taken by jurisdictional High Court in assesses own case reported in CIT

vs. Procter & Gamble Homes Products Limited (supra). We further find that

Delhi Tribunal in ACIT vs. Intercontinental Hotel Groups India Private Limited

(supra) also held that advertisement expenses incurred by the assessee in

promotion of brand belonging to its parent company, was to be allowed as

business expenditure. Further, the Hon’ble Delhi high Court in PCIT vs.

Seagram Manufacturing Private Limited (supra) also held that where assessee

incurred expenses for brant popularity merely because overseas of all the

brand also gained some benefit, claim of expenditure as a business

expenditure should not be denied. Thus, in view of the aforesaid legal

position, we do not find any justification in disallowing 20% of trade incentive

by taking view that it was revenue nature and that it was incurred for the

promotion of brand on various products and were enduring benefit. In the

result, ground No. 2 of appeal is allowed.

notional income in the hands of the assessee in respect of owned property

shared with its sister concernsas also let out to certain third parties and

disallowance of certain expenses treated by the AO as being related to the

said premises. The ld AR of the assessee extensively argued these grounds of

appeal and at the conclusion of hearing he was asked to furnish a written

note on his submissions. The ld AR of the assessee at the time of his

submissions sought permissions to explained the background of from AY

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 2004-05 and with the help of a separate compilation of relevant orders for

that year containing pages 1 to 49. The factual background is explained in the

following way;

(i) The Assessee is engaged in the business of manufacturing (including

through job work) and trading of laundry, hair care, skin care, baby care,

air freshener and fem care products ("Home Products"). Its sister concern,

namely, Procter & Gamble Hygiene and Health Care Lid ("PGHH") is

engaged in the manufacture and sale of personal care and health care

products like Vicks, Whisper, etc. ("Healthcare products").

(ii) As the marketing/distribution channels (such as medical stores, etc.) of the

Assessee and PGHH (Appellant's sister concern) are common, both the

aforesaid parties shared the office building owned by the assessee in such

a manner that can enable their marketing/production planning teams to sit

together for a seamless flow of work. While this arrangement was in place

since 2001, the parties formalized it by way of an agreement dated August

29, 2003 (effective from April 01, 2001) for sharing of certain common

facilities. Clauses 1 to 7 thereof deals with sharing of common premises

and Clauses 8 to 10 deals with sharing of common costs, which are part of

paper book.

(iii) Clause 2 of the aforesaid agreement read with Annexure I thereof refers

to compensation/ usage charges of Rs. 90 per sq. ft. "and/or"

reimbursement of certain expenses as may be agreed between the

parties. Accordingly, it was only the reimbursement of expenses that was

implemented between the parties. In other words, the usage charges of

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 Rs. 90/- per sq. ft. were never implemented between the assessee and its

sister concern. Also, the corresponding security deposit was never

implemented.

(iv) Clauses 8 and 9 of the aforesaid agreement read with Annexure Il thereof

refers to sharing of common expenses in the ratio of net sales of the

companies. These expenses are not necessarily the expenses incurred in

respect of the commonly used premises, hut several other expenses

incurred across various centres all over the country.

(v) The AO in AY 2004-05 assessed the notional income of Rs. 90/- per sq. ft.

as Income from House Property ("HP") in the hands of the assessee and

consequently, disallowed building related expenses such as repairs &

maintenance of budding, service charges and depreciation on building.

The disallowance of said expenses included not only expenses related to

the common office building but also the expenses shared by the two

companies in accordance with Clauses 8 and 9 read with Annexure II of

the agreement mentioned above. The Id. CTT(A) confirmed the addition

made by the AO.

(vi) On further appeal before Tribunal in AY 2004-05 in its order June 06, 2016

in ITA No. 3531/Mum/2014 held that the income so receivable from PGHH

was assessable as Income from Other Sources ("OS") following the

decision in PGHH's cases (initially incorrectly referred to as own case, later

corrected in assesses MA) for earlier years. However, the Tribunal not

adjudicated the grounds relating to non-taxability of notional income and

the allowability of expenses.

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 (vii) The Department filed an appeal before the Hon'ble Bombay High Court

(ITA No 1052/2017) challenging the said order of the Tribunal, which is

pending adjudication till date.

(viii) In the interim, the Appellant Assessee filed a Miscellaneous Application

("MA") before the Tribunal inter alia stating that,  Notional income cannot be taxed under ‘OS’ considering the real income theory:  Grounds relating to the allowability of building related expenses were not adjudicated, and  Reference was incorrectly made to the assessees case instead of PGHH while considering the Tribunal's order for the earlier years. On the other hand, the Department also filed an MA stating that

fixation of head “other sources” by Tribunal is a mistake apparent from

record since PGHH could not have been regarded as precedents and

therefore, the whole order deserved to be recalled.

(ix) The Tribunal vide its order dated July 28, 2017 recalled the entire order

dated June 06, 2016, thereby allowing both the MA’s.

(x) The assessee filed a Writ Petition before Hon'ble Bombay High Court vide

WP No. 2738/2017, challenging the Tribunal's order dated July 28, 2017 to

the extent it had allowed Department's MA. The Hon'ble Bombay High

Court vide its order dated March 10, 2018,set aside the Tribunal's order to

the extent it allowed Department's MA and remanded the matter to the

Hon'ble Tribunal to adjudicate the pending grounds and examine the

applicability of taxing notional income under the head “ other sources”.

(xi) Thus, the issues which survived before the Tribunal pursuant to the

Hon'ble High Court order were: 17

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015  Whether any notional income could be added given the finding that the income receivable from PGHH was "income from other sources"? and  Whether the disallowance of expenses could be justified when income is not taxable as "income from house property"? (xii) However, the Tribunal re-adjudicated the entire matter and held that the

rental income is assessable under the head “house property” vide its order

dated September 02, 2022, and the pending grounds relating to

disallowance of expenses were remanded to the AO.

(xiii) The assessee once again filed a Writ Petition before the Hon'ble Bombay

High Court, vide WP No. 1960 of 2023, where the Hon'ble High Court vide

order dated February 24, 2025 set aside the Tribunal’s order holding at

para 9 that the finding that income in assessable as “other sources” had

attained finality at the Tribunal level and directed the Hon'ble Tribunal to

decide only the pending grounds relating to taxing the notional income

and disallowance of expenditure. The relevant extract of the order is as

follows;

“9. Based on the facts we narrated above, we are satisfied that, at least qua the ITAT, the finding that income receivable from PGHH was "income from other sources" had attained finality……….. 15. Accordingly, we set aside the ITAT's order dated 2 September 2022 and once again remand the matter to the ITAT to decide grounds Nos. 1, 4, and 5 in the petitioner's appeal before the ITAT, appeal No.3531 of 2014. The Rule is made absolute without costs order” The ld AR of the assessee submits that Ground No, III relate to

taxation of notional income under the head ‘OS’, Ground No. 4 relates to

disallowance of repair, maintenance and building related expenses and

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 Ground No. 5 relates to disallowance of proportionate building related

expenses if rent income received from the third party (Nortel Network) is

to be charged under the head house property.

(xiv) Therefore, as per the Hon'ble High Court's order dated February 24, 2025,

the head of income as regards the rental income being ‘OS’ has become

final qua the Tribunal. Further, the small portion of area which is let out to

third parties from whom rent is actually received is also held to be ‘OS’.

The only grounds which now remain to be adjudicated for AY 2004-05 is

the taxability of notional income under “OS” and deductibility of building

related expenses related to PGHH and third parties.

relating the above issue remain same in AY 2007-08 as well as in AY 2008-09,

subject to the following two factual differences: firstly, inclusion of Gillette

India Limited ("GIL"), one more sister concern, under the cost-sharing

arrangement with PGHH. And secondly execution of fresh agreements on

June 3, 2009 (effective from July 01, 2006), which do not contain any clause

for charging compensation/usage charges of Rs. 90/- per sq. The AO and

CIT(A) alleged that since the earlier agreement effective from 2001 was not

expressly terminated, the said agreement was still in force and therefore,

notional rent at Rs. 90/- per square feet was receivable even in AY 2007-08

and AY 2008-09 for the premises let out. Accordingly, the lower authorities

taxed notional rental income at the rate of Rs. 90/- per square feet under the

head income from house property and disallowed building related expenses.

It was explained that under the old agreement, in accordance with Clause -2

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 which provided for compensation/usage charges of Rs. 90/- per squarefeet

and/ or reimbursement of expenses as may be agreed between the parties

the assessee and its sister concern did not implement the usage charges of

Rs. 90/- per square feet for the area shared but implemented the

reimbursement of expenses as envisaged under the agreement. Commercially,

it was deemed fit not to implement the usage charges per square feet

because it was very difficult to identify the square feet area occupied by the

group companies. Therefore, even if it is assumed that the said old

agreement is still in effect, the head of income would be ‘OS’ as per Hon'ble

High Court's order. Once the income is assessable as ‘OS’, notional income

cannot be brought to tax under this head. Consequently, the disallowance of

building related expenditure such as repairs & maintenance of building,

service charges and depreciation on building is not sustainable. Section 57(ii)

and section 57(iii) of the Act expressly permits complete deduction of

expenditure laid out wholly and exclusively for earning income chargeable

under the head ‘OS’. Besides the amount of disallowance of expenses includes

several other common expenses which are not commonly used property. Such

disallowance in any case is unwarranted.

once, the head of income is finalized as “other sources” as per Hon'ble High

Court's order, it is respectfully submitted that: no notional income can be

assessed to tax under ‘other sources” in AY 2007-08 and AY 2008-09, and in

the disallowance of building related expenditure in the said assessment yours

relating to sister concerns and third parties deserves to be deleted; and in the

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 disallowance of common expenses unrelated to building in the said

assessment years should any way may be deleted.

& CIT(A). The ld. CIT-DR for the Revenue submits that the agreement

between the assessee and its associate companies clearly shows that it is a

lease agreement. The assessee has also received advance equivalent to the

six months’ rent. So, any receipt received against usage of area is to be taxed

as income from house property.

through the orders of lower authorities carefully. We have also deliberated on

decision on Hon’ble Jurisdictional High Court in assesses own case in Writ

Petition No. 1960 of 2023. On considering the treatment / action of assessing

officer in earlier years as well as in the current assessment year, we find that

ld. AR of the assessee has correctly explained the fact with regard to issue

under consideration. We find after the decision of Hon'ble High Court's order

dated February 24, 2025; the head of income as regards the rental income

being ‘OS’ has become final. Thus, following the decision of Hon’ble High

Court, receipt of rent payable by PGHH and GIL is held as income from other

sources. So far asother small portion of area, which is let out to third parties,

on same principle as per the decision of jurisdictional High Court is also to the

taxed under the headother sources.

submission of ld. AR of the assessee that once the income is assessable as

‘OS’, notional income cannot be brought to tax under this head. Consequently,

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 the disallowance of building related expenditure such as repairs &

maintenance of building, service charges and depreciation on building is not

sustainable. We also find merits in the submission of ld AR of the assessee

that section 57(ii)&(iii) of the Act expressly permits complete deduction of

expenditure laid out wholly and exclusively for earning income chargeable

under the head ‘OS’. Thus, the assessee is also eligible for all such deduction

which are incurred wholly and exclusively for the purpose of income from

other sources. So far as taxing of notional income is concerned, it cannot be

taxed unless the AO brought any evidence that such income is received or

receivable by the assessee. Thus, in view of aforesaid discussion, we do not

find any justification for taxing notional rent.In the result, ground No. 3 of the

appeal is dismissed. In the result, ground no. 3 and all alternative ground No.

4 & 5 raised by assessee are allowed. Ground related with interest under

section 234B is consequential.

ITA No. 2876/Mum/2015 (A.Y.: 2008-09)

the time of hearing not pressed such ground of appeal. Resultantly, ground

no. 1 of appeal is dismissed.

house property and taxing the notional rent. We find that these ground of

appeal are similar to ground no. 3 to 5 of appeal for A.Y. 2007-08, which we

have partly allowed. Thus, following the principle of consistency, these

grounds of appeal are allowed with similar direction.

Procter & Gamble Home Products Private Limited (AY 2007-08 & 2008-09)) ITA No(s)4191/Mum/2014 & 2876/Mum/2015 24. Ground no. 7 relates to ad-hoc disallowance of professional fee. We find that

this ground of appeal is similar to the ground no. 1 in appeal for A.Y. 2007-08,

which we have allowed. Thus, following the principle of consistency this

ground of appeal is allowed with similar direction.

brand promotion expenses by treating capital in nature. We find that this

ground of appeal is similar to the ground no. 2 in appeal for A.Y. 2007-08,

which we have allowed. Thus, following the principle of consistency this

ground of appeal is allowed with similar direction.

Order was pronounced on 06/04/2026 in open Court.

Sd/- Sd/-

ARUN KHODPIA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 06/04/2026 Zu PS (dragon) Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai