RECKITT BENCKISER INDIA PRIVATE LIMITED,GURGAON, HARYANA vs. D.C.I.T., CIRCLE 11.1, KOLKATA, KOLKATA

Present for: Appellant by : Shri Deepak Chopra, AR & Shri Rohan Khare, AR Respondent by : Shri Guru Bhashyam, CIT, DR Date of conclusion of Hearing : 23.01.2025 Date of Pronouncement : 18.03.2025 O R D E R Per Sonjoy Sarma, Judicial Member: These appeals have been preferred by the assessee against the separate orders dated 30-10-2017, 29.10.2018, 30.10.2019, 26.07.2024 and 23.10.2024 of the DCIT, Circle-12(1), Kolkata [hereinafter referred to as ‘AO’], passed u/s. 143(3) read with section 144C(13) of the Income-tax Act, 1961 hereinafter referred to as ‘the Act’) passed against the directions of the Dispute Resolution Panel u/s. 144C(5) of the Act 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 for the AYs 2013-14, 2014-15, 2015-16, 2020-21 and 2021-22 respectively.

raised by the assessee in read as under:

1. That, on the facts and in the circumstances of the case, impugned order of assessment under section 143(3) read with section 144C( 13) of the Act, is contrary to law laid down by courts, based on extraneous consideration, unsubstantiated presumptions, ignoring to consider all relevant facts and relevant law, bad in law and violative of principles of natural justice.

2. That, on the facts and in the circumstances of the case, the AO erred on facts and in law in computing the total income of the appellant at Rs 2,070,635,140 against the returned total income of Rs.547,399,361. 3(a). That, on the facts and in the circumstances of the case, Transfer Pricing Officer ('TPO')/ DRP/ AO erred in relying on extraneous consideration, unsubstantiated presumptions in holding that expenditure towards advertisement, marketing and promotion (‘AMP'), unilaterally incurred by the appellant, results in a separate international transaction. 3(b) That, on the facts and in the circumstances of the case and in law, TPO/ DRP/ AO have erred in not appreciating that RBIL has incurred the AMP expenses wholly and exclusively for the purpose of its business and the same does not fulfill any condition of being an 'international transaction' under section 92B of the Act. 3(c) That, on the facts and in the circumstances of the case and in law, the TPO/DRP/ AO have erred in placing reliance on the decision of the Hon'ble Delhi High Court decision in Sony Ericson Mobile Co Pvt Ltd (ITA No. 16.2014) in concluding that the incurrence of expenses related to AMP is an 'International Transaction', without correctly appreciating the subsequent decision of Maruti Suzuki India Ltd. vs. CIT (ITA No. 110/2014). 3(d) That, on the facts and in the circumstances of the case, the TPO/ DRP have erred in holding that AMP expenses incurred by the appellant resulted in 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 ‘promotion' of brand name owned by the Associated Enterprises ('AEs') and not ‘use’ of brand name. 3(e)That, on the facts and in the circumstances of the case, the TPO/ DRP have erred in not appreciating the fact that the appellant is the sole beneficiary of the AMP expenditure incurred by it and the benefit to the AEs, if any, is only incidental. Hence, bearing the cost of such expenditure was consistent with the arm’s length principle and not on behalf off for the benefit of the AEs. 3(f) That, on the facts and in the circumstances of the case, the TPO/ DRP have holding that the assessee is not subjected to related risk of a brand owner producer and failed to appreciate that the appellant being a full-fledged manufacturer undertaking all the functions and bearing all the risks, is justified in incurring and bearing the cost of AMP expenditure. 3(g) That, on the facts and in the circumstances of the case, the TPO/ DRP have erred in not appreciating that application of "bright line test" which is not a prescribed method within the purview of section 92C of the Act read with Rule 10B of the Income Tax Rules, 1962 cannot be applied in the garb of 'Cost Plus Method’ as done by the TPQ. 3(h) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the AQ/ TPO have erred in not following the directions of the DRP which is binding as per the provisions of section 144C(10) of the Act by not reducing expenses in connection with sales promotion. 3(i) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the AO/ TPO/ DRP have erred in not excluding the reversal of the advertisement expenses credited by the appellant under the head ‘Other Income’ for A Y 2013-14 in computing the alleged AMP expenditure. 3(j) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the AO/ TPO/ DRP have erred in ignoring reasons furnished by the appellant with respect to selection of appropriate set of comparable companies in light of detailed analysis of comparability factors and matching FAR profile. Further, the DRP has erred in upholding certain comparable companies selected by the TPO for benchmarking the alleged AMP expenditure. 3(k) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the AO/ DRP have erred in upholding the action of the TPO that the assessee has rendered brand promotion services to its AEs and it should charge a mark-up on cost incurred in rendering such services thereby making an adjustment of Rs. 938,214,885 towards alleged AMP transaction. 3(1) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the Assessing Officer/TPO erred in not following directions of the DRP pursuant to which no adjustment on account of AMP is required in the case of the appellant. 3(m) Without prejudice to above grounds of appeal, on the facts and in the circumstances of the case, the DRP has erred in not giving any specific direction 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 on the intensity adjustment filed before him and on the subsequent remand report of the TPO. 4(a) Whether on the facts and in the circumstances of the case, the DRP erred in not adjudicating the specific objection raised by the appellant with respect to applicability of Comparable Uncontrolled Price ('CUP') method instead of Transactional Net Margin Method ('TNMM') for benchmarking payment of royalty transactions, and further erred in ignoring the fact that the same method was duly accepted by the TPO for A Y 2010-11. 4(b) Whether on the facts and in the circumstances of the case, the DRP has erred in upholding the disallowance of Royalty Expenses made by Assessing Officer/ TPO by applying Comparable Uncontrolled Price method as the most appropriate method for certain brands instead of Transactional Net Margin Method as adopted by RBIL at entity level, and restricting the Arm's Length Price of royalty at 2% on the basis of alleged comparable agreements in FMCG Industry. 4(c) Whether on the facts and in the circumstances of the case, the DRP has erred in upholding the order of TPO in treating the payment of royalty for know- how as NIL on certain brands (Robinson Barley, Brasso Liquid, Cherry Handishine, Cherry Liquid Polish, Cherry Wax, Clearsil Cream, Clearsil facewash, Disprin, Fybogel, Lizol Disinfectants, Mansion Cream, Min Cream, Robin Fabric Stain Remover, Robin Liquid, Robin Powder, Silvo, Sweetex Liquid, Sweetex Tablet, Teepol) on the contention that no benefit has been received with respect to the said brands and therefore, the TPO erred in applying the 'benefit test' 4(d) Whether on the facts and in the circumstances of the case, the DRP/ TPO erred in not considering the submission of the assessee with respect to manner in which support/ benefit has been received with respect to the said brands from the AEs. 4(e) Whether on the facts and in the circumstances of the case, the DRP/ TPO erred in making an adjustment of Rs. 26,851,761 by treating the royalty paid by the assessee with respect to sale of imported goods as NIL. 5(a) That, on the facts and in the circumstances of the case, TPO/ DRP/ AO erred in making an adjustment of Rs. 13,413,665 with respect to Research & Development ('R&D') services. 5(b) That, on the facts and in the circumstances of the case, DRP has erred in stating that TPO has provided reasons in respect of the comparable selected by him. 5(c) Whether on the facts and in the circumstances of the case, TPO/ DRP/ AO erred in not appreciating the specific objections raised by the appellant against the set of comparable companies chosen by the TPO. 5(d) Whether on the facts and in the circumstances of the case, DRP has erred in upholding the order of the TPO in rejecting companies selected by the Assessee 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 for the purpose of benchmarking the transaction of provision of Research & Development services. 5(e) Without prejudice to the grounds mentioned above, the TPO has incorrectly computed the operating margin of certain comparable companies and has erred in not following directions of the DRP in the context of R&D services w.r.t. certain com parables. 5(f) Whether on the facts and in the circumstances of the case, the DRP/ TPO have erred in rejecting the use of multiple year data for analysis and determining the arm's length margin. 6(a) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in making an adjustment of Rs 23,640,014 with respect to IT Support Services by the appellant. 6(b) That, on the facts and in the circumstances of the case, the DRP has erred in upholding certain comparable companies selected by the TPO and in not appreciating the specific objections raised by the appellant against the same. 6(c) Whether on the facts and in the circumstances of the case, DRP has erred in upholding the order of the TPO in rejecting companies selected by the Assessee for the purpose of benchmarking the transaction of IT Support Services and erred in not considering the fact that TPO has not provided any reasons for rejection of the same. 6(d) Without prejudice to above grounds of appeal, AO/ TPO erred in not following directions of the DRP in the context of IT Support Services w.r.t. certain com parables. 6(e) Whether on the facts and in the circumstances of the case, the DRP/ TPO have erred in rejecting the use of multiple year data for analysis and determining the arm's length margin. 7(a) That, on the facts and in the circumstances of the case, the TPO/ AO erred in making an adjustment on account of transaction of import of finished goods of Rs. 121,078,342. 7(b) That, on the facts and in the circumstances of the case, the DRP erred in not giving any direction in its order W.r.t. the transaction of import of raw materials and finished goods. 7(c) That, on the facts and in the circumstances of the case, the TPO/ DRP/ AO erred in not appreciating the specific objection raised by the appellant against the set of comparable chosen by TPO with respect to difference in the products imported by the appellant in FY 2010-11 as compared to the products imported in FY 2012-13. 7(d) That, on the facts and in the circumstances of the case, the TPO/ AO erred in applying Resale Price Method ('RPM') and holding that closer product comparability is not essential.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 7(e) Whether on the facts and in the circumstances of the case, the TPO have erred in selecting companies engaged in import of products with different profile from the products imported by the assessee. 7(f) Whether on the facts and in the circumstances of the case, the DRP/ TPO have erred in rejecting the use of multiple year data for analysis and determining the arm's length margin. 8(a) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in making an adjustment of Rs 9,279,769 on account of chargeback at cost, of expenses incurred by the appellant on behalf of its AEs and treating the same as 'market support services'. 8(b) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in not appreciating that charging of mark-up of 9.23% is not required since the expenses are incurred on behalf of AEs for merely facilitation purpose and the same cannot be treated as rendering of 'market support services'. 8(c) That, on the facts and in the circumstances of the case, without prejudice to other grounds, the TPO/ DRP erred in not appreciating that out of total recovery of Rs.100,539,206 received from Reckitt Benckiser Corporate Services Ltd, UK (,RBCSL'), only some portion pertains to reimbursement received towards Project Bedrock and Legal expenses of TTK and it also includes third party costs over which a mark-up is not warranted. 8(d) That, on the facts and in the circumstances of the case, without prejudice to other grounds, the TPO/ DRP erred in considering entire reimbursement of Rs.100,539,206 received from RBCSL for imposing a mark-up instead of considering only reimbursement received towards Project Bedrock and Legal expenses of TTK. 8(e) That, on the facts and in the circumstances of the case, without prejudice to other grounds, the TPO/ DRP erred in rejecting the objections raised by the appellant in respect to factors of incomparability in the set of comparable chosen by the TPO. 9(a) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in making an adjustment of Rs. 17,334,721 by treating the expenses allocated to the appellant as NIL and applying the 'benefit test'. 9(b) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in not appreciating that the expenses allocated to the appellant cannot be treated akin to rendering of intra-group 'stewardship services'. 9(c) That, on the facts and in the circumstances of the case, the TPO/ DRP erred in treating the expenses of Rs 17,334,721 as NIL by applying Comparable Uncontrolled Price Method, without appreciating that the costs have been scientifically allocated to all group companies. 10(a) That, on the facts and in the circumstances of the case, the DRP/ AO grossly erred in reducing the claim for deduction under sections 80-IB and 80-IC of the Act by Rs 250,200,000.

10(b) That on the facts and circumstances of the case, the DRP/ AO erred in allocating the residual cost among the eligible and non-eligible units in the ratio of sales and rejecting the basis adopted by the appellant. 10(c) That on the facts and in the circumstances of the case, the DRP/ AO erred in not appreciating the fact that the basis of allocation of residual cost as adopted by the assessee in computing the profits eligible for deduction under sections 80-IB and 80-IC of the Act has been accepted by the Learned Commissioner of Income Tax (Appeals) in AYs 2005-06, 2008-09 & 2009-10 and by the Hon'ble DRP itself in AYs 2010-11, 2011-12 and 2012-13. 11(a) That, on the facts and in the circumstances of the case, the DRP/ AO erred in holding that scrap sales of Rs 79,053 earned by the Appellant and allocated to eligible undertaking(s) is not eligible for deduction under sections 80-IB and 80- IC of the Act on the ground that the same is not 'derived from' the eligible undertaking(s). 11 (b) That, on the facts and in the circumstances of the case, the DRP/ AO erred in not appreciating the fact that scrap generated has direct nexus with the manufacture of the final product in the units and sale of such scrap reduces the cost of production and hence, has direct nexus with the business income of the eligible undertaking(s). 11(c) That on the facts and circumstances of the case, the DRP/ AO erred in not appreciating the fact that the deduction claimed by the Appellant under section 80-IB and 80-IC of the Act are supported by the Auditor's Certificate in Form 10CCB. 11(d) That on the facts and circumstances of the case, the DRP/ AO AO has erred in not appreciating the fact that Learned Commissioner of Income Tax (Appeals) in assessee's own case for A Ys 2008-09 & 2009-10, Hon'ble DRP in assessee's own case for AYs 2010-11, 2011-12 & 2012-13 and the Hon'ble Kolkata Income Tax Appellate Tribunal and Kolkata High Court in assessee's own case for AY 2007 -08 has held that income from scrap sales earned by the assessee and allocated to eligible undertaking(s) is eligible for deduction under sections 80-IB and 80-IC of the Act and the same is 'derived from' the eligible undertaking(s).

12. On the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under sections 271(1)(c) of the Act.

13. The above grounds are independent and without prejudice to each other. The appellant craves leave to add, amend, modify, alter, withdraw or vary any grounds of appeal either before or at the time of hearing of appeal proceedings.”

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 4.1. Reckitt Benckiser (India) Limited or ‘RBIL’ or ‘the company’ is a subsidiary of Reckitt Benckiser Plc., UK. RBIL is engaged in the business of manufacturing and trading of FMCG products. RBIL manufactures and distributes various brands of household products, and over the counter pharmaceutical products. Some of the key products are Dettol Soap, Dispirin, Robin Blue, Cherry Blossom shoe polish, Harpic toilet cleaner, Mortein Insecticide, Colin, etc. RBI is registered in India under the Companies Act, 1956. 4.2. RBIL has entered into a License Agreement with Reckitt Benckiser N. V. and Reckitt & Colman Limited for the transfer of Intellectual Property Rights for the production, sale, distribution and marketing of Reckitt Benckiser “products” domestically and internationally. These include all IPR(s) owned by the AEs such as trademarks, design and model rights, know-how, and all current and future copyrights and rights to databases relating to design, distribution, marketing and sale of licensed products in the licensed territory. 4.3. In the course of transfer pricing assessment, Ld. Transfer Pricing Officer (TPO) dealt with various transactions between the assessee and its Associated Enterprises (AEs) and made adjustments, resulting into increase of the total income assessed. Assessee raised its objection before the Ld. DRP who had given its directions which were incorporated in the assessment completed by the Ld. AO for which the assessee is in appeal before the Tribunal. We will deal with the grounds seriatim.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 5. Ground nos.1 and 2 are general in nature as submitted by the Ld. Counsel for the assessee. Accordingly, they are not adjudicated upon and are dismissed.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 The second proviso to Section 92C (2) provides a 'gateway' by stipulating that if the variation between the ALP and the transaction price does not exceed the specified percentage, no TP adjustment can at all be made. Both Section 92CA, which provides for making a reference to the TPO for computation of the ALP and the manner of the determination of the ALP by the TPO, and Section 92CB which provides for the "safe harbour” rules for determination of the ALP, can be applied only if the TP adjustment involves substitution of the transaction price with the ALP. Rules 10B, 10C and the new Rule 10AB only deal with the determination of the ALP. Thus for the purposes of Chapter X of the Act, what is envisaged is not a quantitative adjustment but only a substitution of the transaction price with the ALP.

filed by the Revenue.” 28.We note that the AMP transaction does not represent the international transaction between the assessee and its AE’s as the revenue failed to bring on record any contract or arrangement between assessee and its AE for making AMP expenses for promotion of brand of its AE.In the assessee`s case, the assessee company was not under any obligation to incur AMP expenses and also its parent company had no control over such decisions of RBIL. These are routine advertisement expenses. Therefore, in assessee`s case the AMP cannot be regarded as international transaction as held by the Hon’ble Delhi High Court in the case of Maruti Suzuki India Limited Vs. CIT reported in 381 ITR 117 (supra). Therefore, we allow the appeal of the assessee and dismiss the appeal of the revenue and delete the ALP adjustment made by TPO Rs.104,43,39,401/- for A.Y.2010-11 and Rs.331,09,56,767/- for A.Y. 2011-12.” 6.2. Before us, ld. Counsel submitted that there is no material change in the facts of the present case vis-à-vis the earlier two preceding years as well as in the applicable law and, therefore, this issue is squarely covered in favour of the assessee by the said decision. 6.3 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case for the preceding two years as extracted above, we are in agreement that AMP is not an International Transaction and thus, delete the ALP adjustment made in this respect of Rs.93,82,14,885/-. Accordingly, these grounds taken by the assessee in this respect are allowed.

7. Ground Nos.4(a) to 4(e) are relating to ALP adjustment of Rs.14,99,95,332/- made on account of payment of royalty. 7.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee’s own case for the Assessment Year 2012-13 in dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue holding in favour of the assessee. The relevant 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 extract on the finding given by the Coordinate Bench in this issue is reproduced as under: “9. In respect of grounds 4(a) and 4(b) relating to ALP adjustment of Rs.2,65,52,926/- made on account of payment of royalty, Ld. AO/TPO observed that many of the brands on which royalty for know-how and brand were paid are very old for which no patent exists. Assessee was show caused as to why not royalty paid for know-how on the brands be considered as junk and only the royalty on brand be allowed on the basis of comparable agreement. Assessee submitted the details of royalty payments. In response to the show cause notice, assessee submitted that it has entered into royalty agreement with its AEs viz., Reckitt & Coleman (Overseas) Ltd., UK (RCO) and Reckitt Benckiser, N.V., Neitherlands (RBNV) for production, sales, distribution and marketing of products. As per the licensing agreements entered into by the assessee with these AEs, royalty is paid by the assessee for the right to use the Intellectual Property Rights (IPR) which includes trademark, patent, design and model rights, know-how and all current and future copy rights and rights to database relating to the design, production, distribution, marketing and sale of the products. Assessee further submitted that there have been on going improvements/developments in the products with the support of licensors. Submissions of the assessee were found not tenable and an upward adjustment was computed by taking 3% of the sales chargeable to royalty, amounting to Rs.10,65,24,001/-. 9.1. Further, it was noted that assessee had paid royalty for goods which have been imported by it. Quantum of royalty in this respect is Rs.2,65,52,926/-. In respect of this component, assessee submitted that apart from the use of brand, trade mark, know-how etc. assessee has also been given the right to market, distribute and sell its products in India by its AEs, thus assessee is paying royalty for the import of goods from its AEs in accordance with the commercial arrangement. 9.2. It was submitted that in the initial years, demand for these products which are imported are low and, therefore, company has adopted a model whereby it obtained license for these products from the brand owning entity (i.e. AEs) to manufacture, market, distribute and sell in India against payment of royalty. Assessee provides specification to its AEs for these imported products and part with only nominal profit margin. Gradually, manufacturing of these products by the assessee locally grows, by setting up manufacturing facilities. Assessee submitted that imported products are marketed and sold by the assessee locally on which it pays royalty to the licensors. Further, it was submitted that products manufactured locally by the assessee on the basis of know-how from the AEs and also exported to the other group entities depending upon their demands. On export sale of its products which are manufactured locally in India, assessee does not pay any royalty to the licensors under the licensing 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 agreements. Assessee thus contended that from the import of finished goods, it is able to earn overall gross margin of 17.31% and is thus creating local demands for these products and at the same time is able to earn better margins inspite of paying royalty for the use of its AEs IPRs. 9.3. AO/TPO did not accept the submission of the assessee and took it as Nil by applying Comparable Uncontrolled Price (CUP) method by holding that with the imported goods, the payment of royalty is embedded and thus, an upward adjustment of royalty was made on two components of Rs.10,65,24,001/- and Rs.2,65,52,926/-, totalling Rs.13,30,76,927/-. On the objections raised by the assessee before the Ld. DRP on the above ALP adjustment, it directed to delete the adjustment made of Rs.10,65,24,001/- against which the Department is not in appeal. Thus, the only issue before us is in respect of royalty payment on imported goods by the assessee from its AEs, amounting to Rs. 2,65,52,926/-. 9.4. Observations of Ld. AO/TPO while making this upward adjustment are noted as under: “With the imported goods the payment of royalty is embedded As per agreement for sales of goods outside India the assessee should pay Royalty to A.E at the 8%. Thus when any goods that are manufactured whether sold India or outside India royalty is paid. As per Agreement the royalty payment is on net Sales while the net sales has been left undefined which shall be in accordance with law for the time being in force. As per the majority of agreement net sales mean goods sold in India minus excise duty, packing material, brought out goods, ex-factory value of the sales etc. The undersigned is not privy to pricing policy of the A.E from which the assessee has purchased imported goods.”

9.5. The moot point before us in respect of this ALP adjustment on account of royalty payment is to consider whether royalty is embedded in the import price paid by the assessee to its AEs, on the goods imported by it. In this respect, assessee has already explained the business model carried by it as stated above. Further, Ld. Counsel for the assessee referred to the licensing agreement entered into between it and the AE (RCOL), placed in the paper book at page 2332. The said licence agreement is dated 15.07.2005. He specifically referred to Article 6.1 which lays down the terms for the payment of royalty equivalent to 5% of net sales of products in India and 7% of exports from India. He also referred to Article 7 which lays down the terms for calculation and payment of said royalty. The two articles are reproduced as under:

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 “6.1. In consideration of the rights and Intellectual Property Rights granted by the Licensor under this Agreement, the Licensee shall pay the Licensor: (i) Royalty equivalent to 5% of net sales of Product(s) in India or such other percentage as may be permitted by the laws for the time being in force in India. (ii) Royalty equivalent to 8% on exports from India or such other percentage as may be permitted by the laws for the time being in force in India. Any costs either directly or indirectly paid by the Licensee for any and all costs including legal services in relation to any Intellectual Property Rights owned by an RB group entity including without limitation for advise, registry related work, litigation (both civil and criminal counterfeit actions and raid, administrative action, may be deducted from the royalty provided that the Licensee supplies evidence of such payments to the Licensor. The claims for the royalty shall arise at the time of Products sold leave the premises of the Licensee.

6.2. Net sales shall be in accordance with law for the time being in force in India. Article 7 Payment 7.1. A calculation of the amount of royalties due according to article 6 above shall be made at the end of each calendar half year. The Licensee shall send a complete statement by the 20th of the month following a calendar half year and shall transfer the corresponding amount within the same period. The statement shall set forth the net sales of the products, the amount of any payment due and all other information necessary to show the grounds on which such payment has been computed. 7.2. The Licensor and the Licensee may jointly decide to adjust the royalty at the end of each calendar year in connection with market circumstances which justify an adjustment. 7.3. All amounts due hereunder shall be transferred after deduction of any taxes and cesses including but not limited to Research & Development Cess due and in local currency at a bank account to be notified from time to time by the Licensor. The costs of payment shall be borne by the Licensee.”

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 9.6. On perusal of the said Articles of the licence agreement, it is observed that these are pure commercial terms and there is no legal bar for having such commercial arrangement. Ld. Counsel further submitted that there is no basis for holding that royalty is embedded in the import price of the goods imported by the assessee. Nothing positive is brought on record by the Ld. AO/TPO to demonstrate as to how this conclusion has been arrived at. He further contended that it is the prerogative of the assessee to decide in a particular, if royalty is payable or not and Ld. AO/TPO cannot step into the shoes of the assessee for such commercial arrangements which is adequately documented and verifiable from the records. It is a mere presumption at the end of the Ld. AO/TPO to conclude that royalty is embedded in the import price which is based on nothing but surmises and conjectures, claimed the Ld. Counsel. He also referred to the Schedule forming part of the licence agreement wherein brand and the products are listed which are subjected to payment of royalty when imported by the assessee from the concerned AEs. This schedule is placed at page 2344 of the paper book. From the perusal of this schedule, ld. Counsel pointed out specific products which have been imported during the year under consideration and royalty has been paid by the assessee on import of these specific products in terms of this license agreement. 9.7. Ld. Counsel further submitted that payment of royalty on import of goods is not a one off transaction and assessee has been paying the said royalty in earlier years which has never been challenged and has always been allowed in the preceding years. Ld. Counsel thus claimed for application of principle of consistency for which he placed reliance on the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang Vs. CIT [1992] 193 ITR 321 (SC). In this respect, he submitted that this principle has been appreciated and upheld by the Coordinate Bench in assessee’s own case for the preceding two assessment years (supra). 9.8. Ld. Counsel also contended that it is not within the jurisdiction of the Ld. TPO to test the commercial expediency of an international transaction by applying the benefit test and taking the transaction value at nil. On this contention, he again placed reliance on the decision of Coordinate Bench in assessee’s own case for the preceding two assessment years (supra). 9.9. Ld. Counsel reiterated to accept the business model in respect of payment of royalty on the import of finished goods by submitting that as per terms of the license agreement between the assessee and its AE, assessee enjoys the right to manufacture (in own factory) the licensed goods or get the same manufactured from other contractors. Accordingly, the rights granted by the licensor to assessee in respect of all licensed goods are identical. However, in respect of certain goods for which the demand in its licensed territory is not adequate or attained a sizeable scale, assessee chooses to import these goods from other Reckitt Benckiser entities ("AE") and sell in the local market. It may also be noted that for 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 such goods imported from group entities, assessee pays cost plus a fixed mark-up of 5 percent to such group entities for goods manufactured by such entities for the assessee. Accordingly, it may be appreciated that no amount of "Royalty" is embedded in the import price paid by the assessee to its AE. Furthermore, it may also be noted that likewise when an AE sources goods from the assessee for sale in their respective market, assessee is paid on cost plus a fixed mark-up on such cost, and no royalty is paid to the assessee on such related party exports. In such cases, where the AE sources the goods from assessee, the AE operating in the respective local country pays 'the Royalty for use of IPR. 9.10. On this submission, a specific query was raised by the Bench on the Ld. Counsel as to whether the business model so explained has been accepted by any Government Authority in any further proceedings. To this effect, Ld. Counsel placed on record a copy of order dated 29.06.2015 passed by Deputy Commissioner of Customs, Special Valuation Branch, New Custom House, New Delhi in the assessee’s own case wherein valuation of imports made by the assessee from its AEs was referred to Special Valuation Branch under the Customs Valuation (Determination of Value of imported goods) Rules, 2007. While dealing with the valuation issue in respect of import of goods done by the assessee the Customs Authority held that royalty is not included in the invoice value of the goods imported by the importer from the foreign suppliers. The relevant extracts of the findings given by the Customs Authority in the said order are reproduced for ease of reference: “19. From the provisions of the above agreements it is noticed that the Licensor has granted the Importer the right to use the Intellectual Property Rights in connection with the design, production, distribution, marketing and sale of the products. The Licensor also granted to the Importer the right to sublicense the rights granted herein to the Licensee to third Parties for the purpose of manufacture, packaging, sale and distribution of products. In consideration of the rights and Intellectual Property Rights granted by the Licensor under this Agreement, the Importer is required to pay royalty to the Licensor on the basis of Net sales of products sold in India/exported from India. 20.1 Guidelines to make addition of royalty to the assessable value of imported goods are enshrined in Rule 10(1)(c) of the Valuation Rules, 2007. The said Rule provides that in determining the transaction value, royalties and license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; shall be added to the price actually paid or payable for the imported goods. Explanation:- Where the royalty, license fee or any other payment for a process, whether patented or otherwise, is 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 includible referred to in clauses (c) and (e), such charges shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods. Interpretative Notes-to Rule 10(1) (c) provide that the royalties and license fees referred to in Rule 10(1) (c) may include among other things, payments in respect to patents, trademarks and copyrights. However, the Charges for the right to reproduce the imported goods in the country of importation shall not be added to the price actually paid or payable for the imported goods in determining the customs value. 20.2 From these provisions of the Valuation Rules it is clear that for addition of any amount under Rule 10(1)(c) of the Valuation Rules the following conditions need to be fulfilled:-

(i) such amount is not Included in the price actually paid or payable (ii) the amount should be paid as a condition of the sale of the goods being valued and (iii) the amount is actually paid or payable for the imported goods 20.3 Since in this case royalty is to be paid on Net Sales of products sold in India or exported from India, it is clear that the said amount of royalty is not included in the invoice values of the goods Imported by the Importer from the foreign Suppliers.” [emphasis supplied by us ] 9.11. Per contra, Ld. CIT, DR referred to the written submission placed on record wherein contentions raised are in respect of challenging the commercial expediency of a transaction and the benefits derived by the assessee from the alleged royalty payment.

10.1. Further, we observe that payment of royalty on the import of goods by the assessee from its AEs is governed by the licence agreement which is effective since the year 2005. We note that there is no legal bar on the commercial terms arrange by the 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 assessee in respect of payment of royalty of the net sales as referred in Article 6 extracted above. Also, Customs Authorities have duly examined the issue in respect of royalty if embedded within the import price in respect of goods imported by the assessee from its related parties i.e. AEs. The Special Valuation Branch of the Customs Authorities has given a categorical finding that royalty is not included in the invoice value of the goods imported by the assessee. We also observe that while arriving at a conclusion, ld. TPO has no where recorded and referred to any material which could demonstrate that royalty payment by the assessee is embedded in the process of the imported goods. To our understanding, it is merely a presumption which cannot be upheld after looking into the facts of the case and corroborative material placed on record. Accordingly, considering the submissions made by the Ld. Counsel and in reference to the discussion made above, we delete the upward adjustment in respect of payment of royalty of Rs.2,65,52,956/-. Thus, grounds 4(a) and 4(b) are allowed.”

7.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in for the Assessment Year 2012-13 as extracted above, we are in agreement that we delete the upward adjustment in respect of payment of royalty of Rs.14,99,95,332/-. Accordingly, grounds 4(a) to 4(e) are allowed.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 “11. Ground no. 5(a) to 5(c) is in respect of upward adjustment of Rs.1,12,45,571/- for R&D services. In the Transfer pricing assessment, ld. TPO rejected certain comparables selected by the assessee owing to difference in functions, assets, risk (FAR analysis). Assessee raised the objections and submitted that comparables taken by the Ld. TPO are functionally not comparable. Ld. TPO rejected the objections raised by the assessee. Ld. Counsel referred to the comparability analysis made for the comparables selected by the assessee by taking into account the correct functionality of the comparables for which detailed charts are placed on record. By referring to these charts, Ld. Counsel submitted that for making a correct comparability analysis, it is important to capture the correct functionality of the comparables and, therefore, he submitted that the matter can go back to the Ld. TPO to undertake fresh comparability test based on the charts submitted on record. According to him, it is important that proper functional profile including the FAR analysis as well as economic analysis must be undertaken to arrive at the correct bench- marking. 11.1. In this respect, he submitted that assessee provides following service to its AEs which must be kept in the perspective while undertaking fresh search of the comparables, the same is reproduced as under: “• Provide services in relation to preparation of samples for consumer research. • Provide assistance in undertaking market research, including examining consumer tastes and preferences, product packaging and other specific attributes as may be prescribed by the Recipient and/or are acceptable considering the broad guidelines laid out by the Group. • Assistance in providing research reports on the various activities such as sensory evaluation, shelf-life studies, storage stability studies and other product testing and trials to verify whether the same adhere to the internationally acceptable standards of quality and internal guidelines and policies of the Group. 11.2. He also referred to FAR analysis and economic analysis placed on record in the paper book which ought to be considered for the purpose of undertaking comparability test based on correct functionality of the comparables. Considering the facts on record and the submissions made as stated above, we find it proper to remit the matter back to the file of Ld. TPO to undertake comparability test based on correct functionality of the comparables by considering the material on record and arrive at the benchmarking in accordance with the provisions of law. Assessee is at liberty to furnish any further details in this respect to justify its benchmarking of ALP of the transaction. Accordingly, ground nos. 5(a) to 5(c) are allowed for statistical purposes.”

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 8.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in ITA No.619/Kol/2017 for the Assessment Year 2012-13 as extracted above, we find it proper to remit the matter back to the file of Ld. TPO. Accordingly, ground nos. 5(a) to 5(f) are allowed for statistical purposes.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 • Provide incident resolution to resolve any issues users encounter in the system with respect to data accuracy. • Implement minor application configurations to resolve issues on data accuracy or to cater to changing business requirement. • Deploy changes to production environment for any new enhancement or bug fixes to the application. • Generate and circulate management information reports in relation to organizational processes, framework etc. as may be required by the Recipients from time-to-time.”

12.1. In this respect also, Ld. Counsel referred to charts prepared for taking the correct comparables based on the functional profile arrived at after undertaking FAR analysis and economic analysis, details of which are placed in the paper book. On this issue , Ld. Counsel candidly submitted that after capturing the correct functional profile of the comparables based on material furnished by the assessee, the matter may be remitted back to the file of Ld. TPO to undertake a fresh comparability test to arrive at correct bench-marking. Considering the submissions made, facts of the case and material placed on record, we find it proper to remit this issue also to the file of Ld. TPO to undertake afresh comparability test by capturing the correct functionality as the assessee has described the IT support services which it has provided to its AEs. Assessee is at liberty to furnish any further details in this respect to justify its benchmarking of ALP of the transaction. Accordingly, grounds 6(a) to 6(d) are allowed for statistical purposes.”

9.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in for the Assessment Year 2012-13 as extracted above, we find it proper to remit the issue back to the file of Ld. TPO. Accordingly, ground nos. 6(a) to 6(e) are allowed for statistical purposes.

10. Ground nos. 7(a) to 7(f) are in respect of import purchases of finished goods from the AEs for which an upward adjustment of Rs.12,10,78,342/- has been made.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 10.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee’s own case for the Assessment Year 2012-13 in ITA No.619/Kol/2017 dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue has remanded back to the file of Ld. TPO. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: “14. Ground nos. 8(a) to 8(e) are in respect of import purchases of finished goods from the AEs for which an upward adjustment of Rs.7,99,56,607/- has been made. 14.1. In this respect, assessee has bench-marked the purchase of finished goods imported from AEs amounting to Rs.40,11,48,074/- by using resale price method. Ld. TPO found functional difference in the comparables and recomputed the gross profit margin of 37.06% to arrive at the ALP of imported goods. In this respect, Ld. DRP had observed that product comparability must be similar, it is not essential to have closer comparability of the products. The broad basket of the products of comparables should be similar to the tested party products. Thus, Ld. TPO was directed to follow this criteria to examine the comparables by verifying their product comparability. In this respect, ld. Counsel for the assessee submitted that no finding has been given by the Ld. TPO on this direction of the Ld. DRP. He further submitted that each comparable considered for the purpose of bench-marking has to be seen on its own set of facts by taking into account the functionality. It was contended that the comparables considered by the Ld. TPO have functional differences and, therefore, the entire bench-marking exercise has to be revisited by keeping in mind similarity for the functionality of the comparables. He again referred to the functional profile of the assessee including the FAR analysis and the economic analysis and the charts which have been furnished and placed on record describing the functionality of each of the comparables to be considered for the purpose of bench- marking. 14.2. Considering the facts on record and the submissions made as well as the perusal of the charts furnished on record, we find it proper to remit the matter back to the file of Ld. TPO to revisit the bench-marking exercise by taking into account the functional profile of the comparables and that of the assessee to arrive at justifiable ALP. Assessee is at liberty to furnish any further details to substantiate its claim. Accordingly, ground nos. 8(a) to 8(e) are allowed for statistical purposes.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 10.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in ITA No.619/Kol/2017 for the Assessment Year 2012-13 as extracted above, we find it proper to remit the issue back to the file of Ld. TPO. Accordingly, ground nos. 7(a) to 7(f) are allowed for statistical purposes.

11.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in for the Assessment Year 2012-13 as extracted above, we find it proper to remit the issue back to the file of Ld. TPO. Accordingly, Ground nos. 8(a) to 8(e) are allowed for statistical purposes.

12.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 bench in assessee’s own case in ITA No.619/Kol/2017 for the Assessment Year 2012-13 as extracted above, we find it proper to remit the issue back to the file of Ld. TPO. Accordingly, Ground nos.9(a) to 9(c) are allowed for statistical purposes.

The deduction claimed by the assessee was in respect of Unit 1,2,3 & 4. The Unit 1 commercial operation commenced only on 02.02.2004 which is evidenced by the audit report in Form 10CCB which is placed at Page 90 of the assessee’s Paper Book. The Unit No.2 commenced commercial operation only w.e.f. 03.04.2004 which is evidenced by Form No.10CCB, placed at Page 79 of the assessee’s Paper Book. The Unit No.3 commenced commercial operation only on 08.12.2004 as it is evidenced by the Form No.10CCB, copy of the Page 101 of the assessee’s Paper Book. The Unit No.4 commenced commercial operation w.e.f, 02.02.2005 which is evidence by Form No.10CCB from placed at Paper Book page 68. It can thus perusal of the bad debts written off would show that all the debts pertained to assessment year 2002-03 and earlier Financial Years. The units for which deduction u/s 80-IB and 80-IC were claimed by the assessee, came into existence only in F.Y. 2004-05. Thus, it is clear that the bad debts written off which was claimed as deduction did not pertain to any of the units for which the assessee claimed deduction u/s 80-IB and 80-IC of the Act. Therefore, apportionment of bad debt written off to the eligible units and registering profit of those eligible units for the purpose of allowing deduction u/s 80-IB and 80-IC, as done by the revenue authorities is unsustainable. The apportionment is directed to be deleted. Ground No.3 raised by the assessee is allowed. 5.As far as Ground No.2 raised by the revenue is concerned, this issue again pertains to apportionment of residual cost of Rs.40.43 crores. The total cost as per the Profit & Loss A/c of the assessee is a sum of Rs.717.26 crores. The details of the other expenses isgiven in Schedule 16 to the Profit & Loss A/c. As far as residual cost is concerned, the assessee allocated residual cost amount tothe eligible and non-eligible units in the ratio of number of employees at the corporate office who are directly involved in the management of these eligible units like production, procurement, quality, logistics etc. to the total number of employees at the corporate office. According to the assessee these expenses primarily relates to the corporate office of the company. The benefit of which is derived by the whole organization including the eligible units, the allocation of cost incurred on account of residual cost among eligible and non-eligible units should have to be done in the ratio of eligible workers of eligible undertakings to the total 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 number of workers across all the manufacturing units. The Assessing Officer, however, was of the following views: “Regarding the issue of bifurcation of residual cost as has been discussed in detail in the earlier part of the order, the assessee has not applied the provisions of section 80IB of the Act properly especially sub-section (5) thereof which dearly states that the profit of the eligible unit has to be determined as if this is the only source of income of the assessee. The profit of the eligible unit has to be calculated in such a way as if this is the only source of income of the assessee. The relevant portion of the Section is reproduced as under- "(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (emphasis supplied)". As per Section 80IA(5) r/w Section 80IB(13) and 80IC(7), for the purposes of computing the quantum of allowable deduction u/s 80IB, the profits and gains of the eligible unit of the assessee has to be computed as if such eligible business were the only source of income of the assessee during the year. The above expenses, even though booked centrally in the head office books, have been incurred for all the units of the assessee company. Hence; in order to arrive at the true and correct value of the profits & gains derived from the eligible units, these expenses are required to be allocated to all the units in the proper manner. The best way to divide these expenses would be to allocate among eligible and non-eligible units in the ratio of workers of eligible undertakings to the total number of workers across all the manufacturing locations from where the assessee has sourced its requirements, instead of in the ratio of number of executives at the corporate office who are directly involved in the management of these eligible units to the total number of executives at the corporate office as has been done by the assessee company. This is because the expenditure incurred by the assessee company on the residual functions have also been used and benefited the whole company including the eligible units hence it has to be bifurcated in the ratio of total workforce of the eligible units with total number of workers of the company to arrive at the correct and true profit. This is also supported by the fact that on an average all the expenditures which has either been bifurcated in the ratio of sales or on the basis of actuals are in the percentage of almost average of 22% whereas the percentage of these particular expenditures are around 5.69%. This itself proves beyond doubt that this expenditure has not been bifurcated properly by the assessee company. Moreover, the assessee's arguments that the accounts of the company are audited does not have a bearing on the deduction being claimed u/s 80IB/IC of the Act. The income- tax Act specifically provides that the profits of these undertakings is required to be computed in the manner as if these are independent and only source of income of the assessee company. This effect has probably not been given by the auditor who has filed the accountants report along with claim of deduction. This is also proved by the fact that this has not been mentioned by the auditor who has submitted the accountants report as per the provisions of section 80IB/IC as to the procedure for bifurcating the 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 expenditure for the eligible units. In view of this, there is no force in the assessee’s arguments and the same are rejected. The assessee was asked to furnish the revised working after allocating the residual cost in the manner as detailed above which was submitted by the a vide letter dated April 11, 2008 and made part of this order as Annexure A of this order.”

6. On appeal by the assessee, the CIT(A) accepted the basis of apportionment of the residual cost as made by the assessee with the following observations: “7.3.3. With regard to change in the basis of allocation of residual cost by the AO. I find merit in the appellant’s argument that the residual costs pertain to those cost which could not be allocated or identified with single function or unit due to the general utility to all the functions and units of the company. The basis of allocation of this cost is the number of executive. These costs include the residuary costs of all the support functions which have not been allocated to the Cost of Goods Sold. As per the appellant, at corporate office level there were 101 persons during the FY 2004-05 out of which, persons were working in supply function which is directly linked to factory operation. This worked out to 21.78%. The ratio of sale of fiscal units to overall sales was 26.10%. The effective percentage of residual cost thus worked out to 5.68% (21.78% * 26.10%), which the appellant applied for allocating the residual cost to the eligible units. For allocation expenses, the appellant has taken into consideration number of person as well as sales of the eligible units. The AO has allocated the residual costs of the corporate office on the basis of the number of workers. Hence, I find more logic on the basis of allocation of expenses adopted by the appellant as the appellant has also taken turnover of the eligible units into consideration.” 7.We have heard the rival submissions, the ld. DR reiterated the stand of the Assessing Officer as reflected in the order of the assessment. The ld. Counsel for the assessee relied on the order of the ld. CIT(A). We have given a careful consideration to the rival submissions, we note that the basis of allocation of residual cost to the eligible units has been done by the Assessing Officer is as follows:

It can be seen from the above Chart that the allocation done by the assessee on the basis of number of employees who are directly linked with the factory operation is more logical. The residual cost is incurred at the head office and is not capable of being identified with any of the units which are running by the assessee. It is only because of this difficulty that the Assessing Officer and the assessee resorted to allocation of residual cost. When it comes to allocation of residual cost, it cannot be done arbitrarily. The allocation should have due regard to the efforts put at the head office level to be eligible. That can be done only by allocation on the basis of number of employees linked to factory operation divided by total number of employees into corporate office into sales of the eligible units divided by total sales. This allocation of residual cost done by the assessee was logical and we find no infirmity in the action of the CIT(A) in accepting this basis of allocation. We, therefore, do not find any merit in Ground No.2 raised by the revenue and the same is dismissed. In the result, the Ground No.3 raised by the assessee is allowed and the Ground No.2 raised by the revenue is dismissed.”

of the assessee. Accordingly, Ground nos.10(a) to 10(c) are allowed.

14. Ground nos.11(a) to 11(d) are relating to disallowance of scrap sale u/s 80IB and 80IC of the Income Tax Act, 1961 amounting to Rs.79,053/-. 14.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee’s own case in & ITA No.625/Kol/2016 for Assessment Years 2010-11 to 2011-12 order dated 17/06/2020, the Coordinate Kolkata Bench of ITAT 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 has dealt with this identical issue. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: “43. Summarized ground No. 2 of corporate tax issue reads as follows: “2.Eligibility of income from sale of scraps whilst calculating deduction u/s 80IC of the Act of Rs. 20,723,924/-. This ground covers ground no. 9 raised by the revenue in ITA No. 529/Kol/2015 for A.Y. 2010- 11 and Ground no. 3 raised by the revenue in ITA No. 518/Kol/2016 for A.Y. 2011-12.” 44.When this issue was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 23.12.2014, passed by the Hon’ble Calcutta High Court in assessee’s own case in GA No. 1420 of 2014, ITAT No. 41 of 2014, whereby the issue of eligibility of income from sale of scraps have been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the, Hon’ble Calcutta High Court, a copy of which is also placed before the Bench.

2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 14.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in ITA No.404/Kol/2015 & ITA No.625/Kol/2016 for the Assessment Years 2010-11 to 2011- 12, we allow these grounds of appeal of the assessee. Accordingly, Ground nos.11(a) to 11(d) are allowed.

15. Ground nos.13.1 to 13.4 refer to additional ground of the assessee relating to non-granting of benefit of Double Tax Avoidance Agreement (DTAA) between India-UK and India- Spain respectively, qua the right of tax towards payment of dividend. 15.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee’s own case for the Assessment Year 2012-13 in dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue has remanded back to the file of Ld. TPO. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: “18. On the first additional ground relating to non-granting of benefit of Double Tax Avoidance Agreement (DTAA) between India- UK and India-Spain respectively, qua the right of tax towards payment of dividend to the shareholders, assessee has raised this additional ground to claim that while distributing dividend to the non-resident shareholders, the beneficial right of tax as per the applicable India-UK and India-Spain DTAA should have been applicable. Assessee draws force on it contention by placing reliance on the decision of Coordinate Bench of ITAT Delhi in the case of Gieseckc & Devrient (India) Pvt. Ltd. Vs. ACIT [2020] 120 taxmann.com 338 (Del. Trib.). Ld. Counsel for the assessee submitted that in the immediately preceding year this issue has been remanded back to the Ld. AO for fresh examination in ITA No. 404 & 529/Kol/2015 (supra). Ld. Counsel apprised the bench of subsequent developments and submitted that owing to dissenting view on the same issue by another Coordinate Bench of ITAT, Mumbai in the case of DCIT Vs. Total Oil India Pvt. Ltd. [2021] 190 ITR 312 (Mum. Trib.) a Special Bench was constituted. The Hon’ble 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 Special Bench so constituted in the case of DCIT Vs. Total Oil India Pvt. Ltd. (supra) has decided the issue against the assessee vide its order reported in [2023] 149 taxmann. Com 332 (Mum. Trib.)(SB). In this respect, ld counsel submitted that assessee is not a party to the decision of Hon’ble Special Bench and there are certain distinguishing factors in the case of the assessee which have not been considered in the decision of the Hon’ble Special bench and, therefore, prayed that this matter may be set aside to the file of ld. AO for fresh consideration and assessee be given an opportunity to distinguish the law laid down by the Hon’ble Special Bench. He submitted that this will enable the assessee to bring on record all factual and legal submission in support of its claim. 18.1.We have gone through the submissions made by the Ld. Counsel in this respect and find it appropriate to remit the matter back to the file of Ld. AO for fresh consideration by giving the assessee an opportunity to make its submission on the factual and legal aspect in support of the claim made before us. Accordingly, this additional ground is allowed for statistical purposes.” 15.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee’s own case in ITA No.619/Kol/2017 for the Assessment Year 2012-13 as extracted above, we find it proper to remit the issue back to the file of Ld. AO for fresh adjudication after giving an opportunity to the assessee to make its submission on the factual and legal aspects in support of the claim made before us. Accordingly, these additional grounds i.e Ground nos.13.1 to 13.4 are allowed for statistical purposes.

16. Since all the above grounds raised by the assessee are common and the facts are identical, therefore, the decisions rendered in for Assessment Year 2013-14 will apply mutatis mutandis to all the remaining appeals except Ground No.8 in ITA No. 2631/Kol/2019 for the Assessment Year 2015-16. Hence, we proceed to adjudicate the Ground No.8 in ITA No. 2631/Kol/2019.

17. - Ground No.8 – The issue raised by the assessee is relating to disallowance of Rs.5,43,74,993/- made u/s 14A 2681/Kol/2018 & ITA Nos.2631/Kol/2019& ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 r.w.r 8D whilst computing the book profits u/s 115JB of the Act, was not proper.

17.1 On this context, the Learned. AR stated that This issue is no longer res-integra and has been decided in the favour of the Assessee by High Court of Delhi [PCIT v. Moon Star Securities Trading & Finance Co. Pvt. Ltd., [2024] 469 ITR 15 (Delhi HC)] as well as Karnataka [Sobha Developers Ltd. v. DCIT, [2021] 434 ITR 266 (Karnataka HC) and by jurisdictional Tribunal in the case of DCIT v. Century Plyboards (L) Ltd., [2021] 123 taxmann.com 256 (Kolkata-Trib). The Coordinate Kolkata Bench of the Tribunal in the case of DCIT vs. Century Plyboards (L) Ltd. has held as under:

8. With regard to disallowance u/s 14A of the Act read with rule 8D while computing the book profits u/s115JB of the Act, we note that there is no enabling provision in clause (f) of Explanation 1 to section 115JBfor making any adjustment in respect of expenditure disallowed as per rule 8D. It is noted that clause (f) of the said Explanation 1 requires adjustment of 'the amount of expenditure relatable to any income to which section10 (other than the provisions contained in clause (38) thereof) section 11 or section 12 apply'. The aforesaid expression is similar to the expression used in section 14A(1) of the Act. Section 115JB however being deeming provision, the clauses contained therein has to be strictly construed. Accordingly, it is only the provisions of section 14A(1) that can be imported into clause (f) of section 115JB of the Act. The scope of clause (f) cannot be enlarged in order to bring within its ambit the provisions of sub-section (2) & (3) of section 14A of the Act and therefore the disallowance made by applying rule 8D cannot also be imported. The special Bench of this Tribunal in the case of Asstt. CIT v. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com415/165 ITD 27 (Delhi - Trib.) has held that the computation mechanism provided under rule 8D of the Rules cannot be applied for computing addition in terms of clause (f) of Explanation 1,for arriving at the book profit/s 115JB of the Act. Identical view has also been expressed by the coordinate Benches of this Tribunal in the following cases: - Britannia Industries Ltd. v. Dy. CIT [2019] 107 taxmann.com 138 (Kol. - Trib.) - Bata India Ltd. v. Dy. CIT [2019] 111 taxmann.com 453/180 ITD 464 (Kal. - Trib.) 9. Respectfully following the same, we are of the view that the ld. CIT(A) has rightly deleted the addition of Rs. 34,29,000/- by the AO u/s 14A read with rule 8D, while computing book profit u/s 115JB of the Act, therefore, for the reasons as aforesaid, we therefore do not find any reason to interfere with the order of 2681/Kol/2018 & ITA No. 1801&2319/Kol/2024 Reckitt Benckiser (I) P. Ltd., AYs 2013-14 to 2015-16, 2020-21 & 2021-22 the ld.CIT(A) and, we confirm the same and dismiss Ground Nos. 1 to 4 raised by the Revenue.

17.2 Respectfully following the decision of the Coordinate Kolkata Bench of the Tribunal in the case of DCIT vs. Century Plyboards (L) Ltd. (supra), we hold that the disallowance of Rs.5,43,74,993/- made by the AO under section 14A read with Rule 8D of the Rules could not be added back whilst computing book profits under section 115JB, since the same does not fall within the purview of explanation section 115JB of the Act. Hence, the addition Rs.5,43,74,993/- made by the AO is hereby deleted. Therefore, Ground No.8 of the assessee’s appeal in ITA No.2631/Kol/2019 is allowed.