TATA SONS PRIVATE LTD.,MUMBAI vs. PR.CIT-2, MUMBAI

Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the assessee against the order dated 28.12.2018 of the Pr. Commissioner of Income Tax [hereinafter referred to as the PCIT] relevant to assessment year 2014-15.

2 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. Validity of initiation of revision proceedings under Section 263 of the Act The learned PCIT erred in initiating revision proceedings under Section 263 of the Act and setting aside the order passed by the learned Assessing Officer ('learned AO') under Section 143(3) read with Section 144C(3) of the Act; The learned PCIT erred in initiating revision proceedings under Section 263 of the Act without appreciating that Section 263 of the Act cannot be invoked unless the conjunctive conditions that assessment order passed is erroneous in law as well as prejudicial to the interest of the revenue, are satisfied; The learned PCIT erred in initiating revision proceedings under Section 263 of the Act, without appreciating that the learned AO had passed the assessment order after making proper inquiries and analysis as regards the nature of income as well as head of income under which the income from investment activity and brand promotion and brand protection should be taxed; The learned PCIT erred in initiating revision proceedings under Section 263 of the Act, based on mere difference of opinion between the learned AO and learned PCIT, without appreciating that this cannot be a ground for initiation of revision proceedings; 2. Directing the learned AO to disallow premium on redemption of debentures of Rs.28,41,57,152 The learned PCIT erred in directing the learned AO to disallow the premium on redemption of debentures under Section 36(1)(iii) of the Act; 3) Directing the learned AO to disallow interest on debentures of Rs 82.97,50,944 i) The learned PCIT erred in directing the learned AO to disallow the interest on debentures of Rs 82,97,50,944 under Section 36(1)(iii) of the Act; ii) The learned PCIT erred in directing the learned AO to disallow the interest on debentures of Rs 82,97,50,944, under Section 36(1 )(iii), without appreciating that of the said amount, an amount of Rs 81,87,17,461 has been disallowed by the learned AO under Section 43B and Section 14A/ Section 37(1) in AY 2013-14 and hence disallowance of the said amount once again under Section 36(1)(iii) in the subject AY, would lead to double disallowance; iii) Without prejudice to ground nos. (i) and (ii) above, disallowance if any, should be restricted to interest on debentures amounting to Rs 81,87,17,461 as against Rs 82,97,50,944 (which includes leave salary of Rs 1,10,33,483) 4) Directing the learned AO to tax income from investment activity under the head 'income from other sources' i) The learned PCIT erred in holding that the income from Appellant's investment business is taxable under the head 'income from other sources' instead of 'profits and gains from business and profession;

3 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. ii) The learned PCIT erred in holding that the expenses claimed by the Appellant in relation to investment activity should be restricted to the extent the same are allowable under Section 57(iii) of the Act; iii) The learned PCIT failed to appreciate that merely because the Act specifically provides for taxability of dividends and capital gains under specific heads of income, that, by itself, does not warrant a conclusion that the investment activity carried on by the Appellant is not in the nature of a business activity; iv) The learned PCIT erred in holding that no income from the Appellant's investment business is taxable under the head 'profits and gains from business and profession' without appreciating that the Income Tax Appellate Authorities, in the Appellant's own case for decades, have held that the activity of controlling, managing, administrating and financing various companies is an elaborate business activity; 5) Directing the learned AO to tax income from brand subscription under the head 'income from other sources' i) The learned PCIT erred in holding that the income from brand subscription is chargeable to tax under the head 'income from other sources1 instead of 'profits and gain from business and profession1; ii) The learned PCIT erred in holding that expenses claimed by the Appellant in relation to brand promotion and brand protection activity should be restricted to the extent the same are allowable under Section 57(iii) of the Act; iii) The learned PCIT erred in summarily rejecting the case laws relied upon by the Appellant laying down principles and parameters on what would constitute a business activity, without appreciating that the Appellant has been carrying on the systematic and continuous business activity of brand promotion and brand protection over the past several years, which has been consistently accepted by the tax department in the assessment proceedings after appropriate enquiry; and iv) The learned PCIT erred in holding that income in the nature of royalty for copyrights, patent, trademark, etc. is taxable as 'income from other sources', without appreciating the judicial precedents relied upon by the Appellant in this regard. Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal.” 3. The issue raised in first ground of appeal is against the validity of initiation of revisionary proceedings under section 263 of the Act by Pr. CIT whereby the order passed by Ld. AO under section 143(3) of the Act was held to erroneous and prejudicial to the interest of the revenue.

4 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. 4. The facts in brief are that the assessee is engaged in the business of making investments as promoter investment holding company and exercises controlling interest in the promoted companies. The assessee is also owner of Tata brand and carries on various activities for promoting and protecting the Tata brand. The assessee earns income by way of dividend from its investments, interest from financing activities as well as brand subscription fee pursuant to brand activity and business promotion hereinafter called (BEBP) agreements entered into with these associated companies granting them the license to use Tata brand as well as rendering certain services to them. The assessee filed return of income on 29.11.2014 declaring a loss of Rs.49,10,05,231/- under the normal provisions of the Act and the book loss of Rs.32,12,03,297/- under section 115JB of the Act. The assessment was framed under section 143(3) read with section 144(3) of the Act vide order dated 16.02.2018 determining the total income under the normal provisions at Rs.759,51,13,110/- and 1541,59,96,700/- under section 115JB of the Act. The Pr. CIT upon examination of the assessment records observed that assessment framed dated 16.02.2018 by the AO is erroneous in so far as its prejudicial to the interest of the Revenue and accordingly held that it is required to be revised. Accordingly, a show cause notice was issued under section 263 on 13.11.2018 texts whereof are reproduced as under: “(i) The assessing officer disallowed entire interest expense u/s.36(1)(vii) / 37 in Para 6 of the assessment order on the basis of interest expense claimed in P&L account. However, the assessee made some adjustment in computation of income and claimed Rs.82,97,50,944/- as debenture interest claimed on payment basis and premium on issue of debentures (Proportionate for the year) Rs.28,41,57,1207-, Since these claims were made in computation of income, the disallowance made by the assessing officer in para 6 should have included these claims also. Failure on the

5 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. part of the assessing officer to do so has resulted in the assessment order dated 16.02.2018 being erroneous in so far as it is prejudicial to the interest of revenue. (ii) The assessee is a core investment company registered with RBI. Its main activity is investment in subsidiary and other companies, income of which is not taxable in business head. Apart from income from dividends assessee earned income from subsidiary companies for use of Tata Brand'. Even this income is taxable under the head 'Income from Other Sources. Therefore, none of the expenses claimed by assessee in business head is allowable. Expenses wholly and exclusively incurred for earning income from other sources head are allowable. Since allowance of expenses u/s 57 is very restrictive compared to section 37, this would have resulted in disallowance of major expenses claimed. This aspect should have been examined in detail by the assessing officer. Failure on the part of the assessing officer to do so has resulted in the assessment order dated 16.02.2018 being erroneous in so far as it is prejudicial to the interest of the revenue.” 5. The assessee strongly objected to the revisionary proceedings by the Pr. CIT vide written submission dated by replying the said show cause notice which is reproduced as under: “The Pr. Commissioner of Income Tax – 2, Room No.344, 3rd Floor, Aayakar Bhavan, M.K .Road, Mumbai – 400 020 Dear sir, Ref: Tata Sons Private Limited - PAN AAACT4060A - Show Cause Notice dated 13.11.2018 issued u/s. 263 of the Income Tax Act, 1961 (Act) Assessment Year 2014-15. We refer to the captioned notice and our reply dated 5th December, 2018 filed with your Honour during the course of the hearing the undersigned attended on even date. During our discussion, you had sought further information as to why brand subscription income should not be treated as income from other sources. In this regard, we have provided our submission hereunder: 1. As per the provisions of Section 263 of the Act, revision proceedings can be invoked only in case where the order passed by the Assessing officer (Ap1) is erroneous as well as prejudicial to the interest of the Revenue. The relevant extract of Section 263 of the Act is reproduced herein below: "(1) The [Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to. the interests of the revenue, he may, aftergiv'tng the assesses an opportunity of being

6 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment"'.... 2. It is submitted that various Courts and Tribunals have held that for invoking the provision of Section 263 of the Act. the order of the AO should be erroneous and prejudicial to the interest of the Revenue. Both these conditions should be satisfied for initiating revision proceedings. This view is affirmed by the Supreme Court in the case of Malabar Industrial Co Ltd (243 ITR 83) (SC). Relevant extract of the decision is reproduced herein below: "A bare reading of section 263(1) makes it dear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (it) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order' passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." In this regard, reliance is further placed on the following decisions: Jagadhri Electric Supply (166 ITR 143) (P&H HC); Venkata-Knshna Rice Co. (163 ITR 129) (Mad HC); Gabrial India Limited (203 ITR 108) (Bom HC); and Nirma Chemicals Work P Limited (309 ITR 67) (Guj HC) 3. It is submitted before your Honour that during the course of assessment proceedings for the captioned year, vide questionnaire dated 14 December 201 A, the AO had specifically sought justification / submissions as to how receipt of royalty is business receipt and why the same should not be treated as income from other sources. Further, justification was also sought as to why corresponding

7 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. expenses should not be allowed as per provisions of Section 57 of the Act. Further, the AO has also requested for justification of allowbility of expenditure incurred for making investment under Section 37 of the Act for earning of interest, dividend and royalty income. Copy of the questionnaire is enclosed as Annexure 1. 4. In response to the above, the Assessee made detailed submissions dated 18 December 2017, 22 December 2017 and 26 December 2017. Vide these submissions, the Assessee explained that as a promoter investment holding company and as an owner of TATA' trademark, it has entered into the Brand Equity and Brand Promotions ('BEBP') Agreements with various Tata companies granting them license to use the TATA' trademark and earning brand subscription income. Since the brand subscription income and related expenditure are part of a systematic and continuous business activity of the Assessee company, it has been considered under the head income from Business and Profession consistently for past several years. Copy of the submissions is enclosed as Annexure 2, 3 and 4 respectively. 5. After considering the submission of the Assessee and proper examination of facts of the case, the AO considered the receipt from brand subscription as income from Business and Profession and allowed the related expenditure as business expenses against such income. Thus, it is submitted that there is no error on the part of the AO in holding that income of the Assessee is taxable as income from Business and Profession and therefore, the order passed by the AO cannot be said to be erroneous. 6. As mentioned above, for validity of revision proceedings, one of the prerequisite is that the order passed by the AO should be erroneous. However, if the AO has passed his order adopting a view by due consideration of facts and application of mind, the order cannot be said to be 'erroneous'. This proposition is supported by the decision of the Bombay High Court in the case of Gabriel India Limited (203 ITR 108). Relevant extract of the decision is reproduced herein below: "............ Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles". From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should

8 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo-motu revision because the first requirement, viz., that the order is erroneous, is absent. ……………….. The ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. Hence, the provisions of section 263 were not applicable to the instant case and, therefore, the Commissioner was not justified in setting aside the assessment order." 7. Further, various Courts and Tribunals have held that if there was any inquiry by the AO (even inadequate), that would not by itself, give occasion for initiation of revisionary proceedings under Section 263 of the Act, merely because the Commissioner would have a different opinion in the matter. This view is affirmed by Delhi High Court in the case of Sunbeam Auto Ltd (332 ITR 167) (Del HC). Relevant extract of the decision is reproduced herein below: "12. The submission of the revenue was that while passing the assessment order, the Assessing Officer did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. That argument predicated on the assessment order, which apparently did not give any reason while allowing the entire expenditure as revenue expenditure. However, that, by itself, would not be indicative of the fact that the Assessing Officer had not applied his mind to the issue. There are judgments galore laying down the principle that the

9 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. Assessing Officer in the assessment order is not required to give detailed reasons in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. One has to keep in mind the distinction between 'lack of inquiry and inadequate inquiry'. If there was any inquiry, even inadequate, that would not, by itself, give occasion to the Commissioner to pass orders under section 263 merely because he has different opinion in the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open. 13. In the instant case, the Assessing Officer had called for explanation on items in question from the assessee and the assessee had furnished his explanation. Said fact was even taken note of by the Commissioner himself in his order. 14. That clearly showed that the Assessing Officer had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools was to be treated as revenue expenditure or not. It appeared that since the Assessing Officer was satisfied with the assessee's explanation, he accepted the same." In this regard, reliance is further placed on the following decisions: Anil Kumar Sharma (335 ITR 83) (Del HC); RatlarnCoa[AshCo(171 ITR 141) (MP HC); Baljees (127 Taxman 150) (Chd. ITAT); and Amrik Singh (127 Taxman 87) (Chd. ITAT). 8. As mentioned above, in the present case, the AO has made specific enquiry as regards the issue under consideration (taxability of brand subscription income under the head income from Business and Profession or Income from other sources) and after due consideration of the detailed submissions of the Assessee passed his order under Section 143(3) of the Act. In light of the above referred judicial precedents, it is submitted that there is no error on part of the AO in passing his order in as much as, the order so passed is not prejudicial to the interest of the Revenue. Thus, the proceedings initiated under Section 263 of the needs to be dropped. 9. Without prejudice to the above, it is submitted that it is a well-settled position of law that mere change of opinion cannot be a ground for revision of the assessment order under Section 263 of the Act. It is submitted that if there are two possible views which are permissible to be adopted in a particular matter and the AO has adopted one such view, then revisionary proceedings under Section 263 of the Act cannot be invoked merely because the Commissioner wishes to adopt another view. In this regard, reliance is placed on the following decisions: Max India Ltd (295 ITR 282) (SC); Greenworld Corporation (314 ITR 81) (SC);

10 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. Kwality Steel Suppliers Complex (395 ITR 1) (SC); and LIC Housing Finance Ltd (367 ITR 458) (Bom HC). 10. It is submitted that recently, in Assessee's own case for AY 2012-13 (ITA No 1213/Mum/2018), the Mumbai Tribunal has quashed the order passed by the Commissioner under Section 263 of the Act by observing that since the AO has considered the same issue during the original assessment proceedings and formed a view permissible under law, the order of the AO cannot be said to be formed a view permissible under law, the order of the AO cannot be said to be erroneous or prejudicial to the interest of the Revenue. Copy of the Tribunal order is enclosed as Annexure 5. 11. In light of the above, the proposed revision proceedings is not in accordance with the provisions of the Act and the same needs to be dropped. 12. Without further prejudice to the above, it is submitted that the BEBP agreement in its current form, was signed for the first time in FY 1998-99 (copy of the agreement enclosed as Annexure 6). Since then, upto AY 2014-15, the income and expenditure pertaining to TATA Brand Promotion and Protection activity has been assessed to tax under the head income from Business and Profession. In the initial years, the Assessing Officer had called for various details pertaining to income and expenditure relating to TATA Brand which was provided, along with relevant agreements. !t is important to note that in AY 2001-02, the AO has recorded the following findings in his Assessment Order; "The Assessee was asked to furnish break-up of consultancy services which included income accrued towards Brand Equity and Business Promotion from various Tata Group companies, amounting to Rs.34.93 crores. The assesses has also furnished break-up of expenses incurred in respect of various expenses which the Company is obligated to incur for centrally promoting as well as protecting the TATA Brand and rendering services to various fields, aggregating toRs.21.18 crores. The issue has been considered by my predecessor, who has noted that these expenses are exclusively for the purpose of the business". Thereafter, in various subsequent years, the Tata Brand Promotion and Protection expenses have been examined by the AO and allowed as a deduction under the head "Business and Profession". Thus the taxability arid aliowability of Brand subscription income and expenses under the head "Income from "Business and Profession became a settled issue." 13. In light of the above, it is submitted that the view adopted by the AO in AY 2014-15 that brand subscription income is taxable under the head income from Business and Profession is in accordance with the view of his predecessor. 14. It is a settled position that a legal view adopted in one year under a particular set of facts cannot be changed in subsequent years in absence of change in facts. This proposition gets support from the decision of the Supreme Court in the case of Radhasoami Satsang (193 ITR 321). Relevant extract of the decision is reproduced herein below:

11 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd.

"We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter—and if there was no change It was in support of the assessee—we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12." In this regard, reliance is placed on the following decisions: Neo Poly Pack P Ltd (245 ITR 492) (Del HC); and D. S. Promoters and Developers P Ltd (330 /TK 291) (Del HC). 15. Accordingly, as mentioned above, taxability of brand subscription income as income from Business and Profession became a settled issue over past several years and following the principle of consistency, the view adopted by the AO cannot be altered, facts remaining unchanged. On this ground as well, the action of revision of the assessment order passed by the AO, is not justified and the proceedings needs to be dropped. 16. Without further prejudice to the above, as submitted earlier vide our submission dated 5 December 2018 the issue as to whether activities of the Assessee is in the nature of business or not has been dealt with by Commissioner of Income-tax (Appeals) ['CIT(A)'] in AY 2009-10. After considering the nature of business of the Assessee, (i.e. a promoter investment holding company holding investments in various Tata companies), the CIT(A) held that the activity of controlling, managing, administrating and financing various companies is an elaborate business activity which is not only for the purpose of earning dividend income, but a variety of other purposes including development of brand value, setting up new enterprises, receiving brand subscription, etc. Similar stand has been taken by the CIT(A) in the orders for AY 2010-11 the decision for AY 2009-10 is enclosed as Annexure 7 17. Further, in AY 1984-85, the Company had incurred expenditure which had been disallowed by the A.O., towards meeting certain liabilities of Tata Mills Ltd which was part of the Tata Group, Upon nationalisation of the Textile Mills, the assets of this company were taken over by the Government and the liabilities were left with the company. The Assessee had incurred expenditure towards repayment

12 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. of certain public fixed deposits and Employees Provident Fund dues. The Tribunal in its order (ITA No 3624/Mum/1991) dated 21 January 2000 acknowledged the fact that these expenses were incurred towards protecting the TATA1 brand by the Assessee (in its capacity as the owner of TATA brand), during the course of its business and accordingly, allowed the deduction of these expenses as business expenditure and the High Court dismissed the Departmental Appeal. Thus, this issue has already attained finality. Similar position was taken by the Tribunal in various subsequent years. Copy of the decision for A.Y. 1984-85, is enclosed as Annexure 8. 18. Thus, it is submitted that the view adopted by the AO is also in accordance with the findings and decision of the appellate authorities (as mentioned above). As has been held by the Calcutta High Court in the case of Russell Properties P. Ltd. (109 ITR 229), when there is a decision of a higher appellate authorities and the subordinate authorities act in accordance with such decisions, it would not be possible for the Commissioner to invoke its revisionary powers under Section 263 of the Act. Accordingly, the proposed action of revision of the assessment order passed by the AO is not in accordance with the provisions of the Act and above legal position. 19. In summary, it is submitted that – (i) Since the Assessee has duly responded to the queries of the AO as regards taxability of brand subscription income during the assessment proceedings and after due consideration of "the submission of the Assessee, the AO has passed his order holding brand subscription income taxable under the head income from Business and Profession, the order of the AO cannot be said to be erroneous and prejudicial to the interest of the Revenue leading to invoking of revision powers by the Commissioner; (ii) Without prejudice to the above, mere change of opinion between the AO and the Commissioner cannot be a ground for invoking revision proceedings under Section 263 of the Act; (iii) Without further prejudice to the above, revision proceedings under Section 263 of the Act cannot be invoked where the action of the AO in considering brand subscription income as income from Business and Profession is in line with the settled position over past several years; and (iv) Without further prejudice to the above, it is submitted that where the action of the AO is in accordance with the decision of higher^ appellate authority(s), it would not be possible for the Commissioner to invoke its revisionary powers under Section 263 of the Act. Thus, we request your Honour to kindly consider the above submission and drop the proceedings initiated under Section 263 of the Act. Without prejudice to ail of the above, on merits, it is submitted that –

13 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. 20. The Assessee is the owner of the TATA brand, and other Tata trademarks, registered in India as well as around the world. The Tata brand and trademarks are used by various Tata Group companies as part of their corporate name or in relation to their products and services, under a license obtained from the Assessee. The Assessee, in turn, receives brand subscription income from Tats Group companies as consideration for grant of such licenses. The Tata brand and trademarks are thus very valuable assets in the Assessee's hands. The Tata Name and Brand is an Intellectual Property ("IP") in the hands of the Assessee. There are a host of activities carried out for promoting and protecting the TATA Brand, involving services of more than 165 employees. These activities and services are provided / carried out throughout the year and on a continuous basis inter-atia with an objective to earn subscription revenue. 21. It is submitted that the systematic and continuous activities carried out by the Assessee of promoting and protecting the TATA Brand (which is not in dispute) with an objective to earn income amounts to business. Accordingly, the income earned in the form of the brand subscription could only be taxed as business income under the head income from Business and Profession and not as income from other sources since the head 'income from other sources', is a residual head of income and is applicable only if income is not covered under any other heads of income. 22. Thus, the Assessee contends that since brand subscription income is arising from the regular business activity of the Assessee, the said income and corresponding expenses have rightly been assessed under the head income from Business and Profession by the AO, in compliance with judicial precedents in our own case and the assessment order does not require any revision under Section 263 of the Act. In fight of the above legal and factual submissions, we request your Honour to kindly drop the proceedings under Section 263 of the Act. We request your Honour to kindly take the above on record. In case you need any further information / clarification, we shall be happy to provide the same and would request you to kindly give us an opportunity for a personal hearing. Thanking you, Yours faithfully, TATA SONS PRIVATE LIMITED” 6. After considering the reply of the assessee and distinguishing various case laws relied on, the Ld. Pr. CIT revised the assessment farmed under section 143(3) read with section 144C(3) by observing and holding as under:

14 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. 7.4 In view of discussions above, it is held that assessee does not have any income from its business taxable in business head and therefore by allowing expenses in business head, assessment order passed by A.O is erroneous and prejudicial to the interest of revenue. In view of the amended provisions of Section 263, A.O. did not examine the income and expenses and did not assign them correct head as required u/s.14 of the I.T. Act. Since, none of the income of assessee, after demerger of TCS, is taxable in business head, A.O is directed to tax the income earned by assessee in other sources heads and not in business head. After re-classifying the incomes in relevant head, A.O is directed to allow various expenses allowable in that particular head. For this purpose, assessment is set aside with a direction to AO to examine and allow claims of expenses in respective head. 8. In view of the aforesaid facts and the provisions of taw mentioned in the preceding paras, the assessment order dated 16.2.2018 passed by the assessing Officer under section 143(3) r.w.s 144C(3) is held to be erroneous in so far as it is prejudicial to the interest of revenue. The assessment order is, therefore, revised being erroneous and prejudicial to the interest of the revenue. The Assessing Officer is directed to add interest and debenture premium as mentioned in Para 6 of this order and to tax income earned by assessee in 'Income from other sources' head after allowing appropriate deductions u/s 57 as per provisions of the Act. Necessary opportunity of hearing should be allowed to the assessee. 9. Order under section 263 of the Income-tax Act, 1961, is passed accordingly.” 7. The Ld. A.R. submitted before the Bench that the conditions precedent to invoking the revisionary jurisdiction under section 263 were not satisfied and therefore the jurisdiction was assumed without the authority of law. The Ld. A.R. submitted that assessment was framed after making full and proper inquiries and examination of facts and records alongwith the submissions of the assessee during the original assessment proceedings. In so far as the taxability of brand subscription fee is concerned it was pointed out that consistently in the earlier years, this income has been assessed under the head “profits and gains of business or profession” by referring to the earlier years documents in the paper book. It was also submitted that even prior to entering into the BEBP agreements, the Tribunal had allowed the appellant a deduction for expenditure incurred on discharging the obligation of one of

15 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. the group companies on the footing that same were incurred to protect Tata brand and hence wholly and exclusively incurred for the purpose of assessee’s business. The Ld. A.R. submitted that the revisionary jurisdiction under section 263 can be exercised by the Commissioner if he is of the view that assessment order framed by the AO is erroneous and prejudicial to the interest of the Revenue. The Ld. A.R. contended that fulfillment of both these conditions simultaneously is mandatorily required as has been held by the Hon’ble Apex Court in the case of Malabar Industrial Company Ltd. vs. CIT 243 ITR 83 (SC). However, in the present case, the assessee was originally assessed to tax at Rs.759.51 crores and even after the direction in the order of the Commissioner is given by the AO in the consequent order passed under section 143(3) read with section 263 dated 31.12.2019, the assessee was assessed at an income of Rs.740,97,15,755/- and accordingly there is no prejudice of any kind whatsoever in the assessment as framed. In other words as even complying with the directions of the Ld. Pr. CIT, the assessee is assessed to income which is lesser than what it was originally assessed in the order framed under section 143(3) read with section 144C(3) dated 16.02.2018 which was revised by the Ld. Pr. CIT by exercising the revisionary jurisdiction u/s 263 of the Act. Without prejudice to the above submissions, the Ld. Counsel submitted that in the assessment order dated 16.02.2018, there was no error on both the issues that Ld. Pr. CIT has sought to revise under section 263 of the Act.

16 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. 8. The Ld. A.R. submitted that in the previous assessment year 2013-14 the assessee has made a provision for interest of Rs.81,87,17,461/- which was suo moto disallowed by the assessee. In view of the mandate of section 43B of the Act which provides that expenditure inter alia by way of interest which is otherwise allowable as deduction in accordance with the system of accounting adopted by the assessee would be allowed as a deduction only in the year of payment. It was submitted that assessee has not paid the interest during the previous year relevant to assessment year 2013-14 or even before filing of due date of return for the said year and consequently the said interest was disallowed but since this was paid during the financial year relevant to A.Y. 2014-15 the same was claimed as deduction in the computation of income. The Ld. A.R. argued that the said direction was allowed in A.Y. 2014-15 by the AO after considering the fact that the same was allowable in terms of provisions of section 43B of the Act. The Ld. A.R. contended that Ld. Pr. CIT has sought to revise the order on the ground that while computing the business income for the year by, the AO has held that interest for the year was neither allowable under section 36(1)(iii) nor under section 37(1) of the Act and accordingly on the same analogy of reasoning he should have disallowed the claim made by the assessee in respect of interest pertaining to the previous year relevant to A.Y. 2013-14 in the current year. The Ld. A.R. also submitted that there is no error in the order of AO in allowing the deduction under section 43B of the Act as the claim made in this year was consequential to the disallowance made under section 43B in the earlier year and therefore the AO was fully justified in allowing the claim of the

17 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. assessee. The Ld. A.R. contended that had he disallowed the expenditure during the year by applying the reasoning as given in para 6 of the assessment order, in that event the order would have become erroneous. Accordingly the action of Ld. Pr. CIT to revise the order for A.Y. 2014-15 is without jurisdiction and can not be sustained.

18 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. been recognised even by the Hon’ble Supreme Court itself in CIT vs. Distributor (Broda Pvt. Ltd.) 83 ITR 377 and thus claim of deduction of prorata premium was rightly allowed by the AO. The Ld. A.R. also referred to the decision of co-ordinate bench of the Tribunal in the case of Tata Industries Ltd. vs. ITO Ward - 2(3)(3) wherein a similar view has been taken by the co-ordinate bench of the Tribunal by referring to and following the judgment of Hon’ble Bombay High Court in the case of CIT vs. Phil Corporation Ltd. 14 taxman.com 58 The Ld. A.R. argued that in view of the above precedents it is amply clear that there is no error in the AO’s action in allowing the claim even though dividend earned on investments and gain arising on transfer of investments would be assessed under the head “Income from other sources” and “Capital gain” respectively. Therefore, the Ld. PCIT was not justified in exercising jurisdiction under section 263 to deny the same.

19 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. perform certain tasks as set out therein. Over and above the performance of such obligation by virtue of clause (iii), the assessee has also granted TISCO a right to use Tata Brand name, marketing indicia as well as a right to enter into a separate registered use license agreement for use of certain trade marks. The assessee has received consideration in terms of this agreement ever since the previous year relevant to A.Y. 1999-2000 and the income so earned has consistently been treated, offered and assessed as income under the head “Profits and gains of business or profession”. The Ld. A.R. submitted that the assessee was required to grant license to use certain intellectual property not only but was also obliged to render certain services as detailed in clause (ii) of the agreement and therefore the income was rightly treated as income from profit and gains from business and profession as has been held by the Hon’ble Bombay High Court in the case of CIT vs. Cilag Ltd. 70 ITR 760 and CIT vs. Gilbert and Barker Manufacturing Co. III ITR 529 wherein the Hon’ble Bombay High Court has held that income earned from licensing of certain intellectual property right is rightly assessed under the head “Profits and gains of business or profession” and not under the head “Income from other sources”. The Ld. A.R. argued that in view of the aforesaid decisions of the Jurisdictional High Court it is quite clear that AO was fully satisfied in accepting the assessee’s contention that income was rightly assessable under the head “Profits and gains of business or profession”. The Ld. A.R. argued that it was a possible view taken by the AO and accordingly the Ld. PCIT was not justified in exercising the revisionary jurisdiction under section 263 in view of the settled position of law that where two

20 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. views are possible and the AO has taken one of the possible views with which Ld. PCIT does not agree, the assessment order can not be treated as erroneous order prejudicial to the interest of the Revenue. Unless the view taken by the AO is unsustainable in law as has been held by the Hon’ble Apex Court in Malabar Industrial Company Ltd. vs. CIT 243 ITR 83. The Ld. A.R. submitted that even if assuming one takes the view that as earning of income by exploitation of brand name, trade mark and marketing indicia is any manner of speaking passive income and therefore should be assessed under residuary head, nevertheless, in the present case this principle would not apply as not only does the assessee grant a license in terms of clause (iii) of the agreement but also bound to inform the obligation and assume the responsibility as said out in clause (ii) of the agreement. The obligation performed by no stretch of imagination be recorded as giving raise to passive income and therefore as it is composite agreement the entire consideration receivable by the assessee has to be assessed as business income. The Ld. Counsel submitted that there is no basis for finding as given by Ld. PCIT that income has to be assessed under residuary head. The Ld. A.R. stated that reasoning of the Ld. PCIT that as the income is not assessable under business head (since it is for use of unsetting assets and the same was recovered for specific purposes of maintaining the brand” is without any legal basis. The Ld. A.R. also stated that the attempt of the Ld. PCIT to distinguish the decision of CIT vs. Cilag Ltd. (supra) is not well founded as the Ld. PCIT has not justified in his conclusion that allowing the use of Tata name to the business of the brand subscription paying companies as

21 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. such companies are running their own business independently and conduct of their business is not dependent on the use of the brand name. The Ld. A.R. while negating the reasoning given by the Ld. PCIT submitted that the assertion of Ld. PCIT is far from truth as the trucks manufactured by Tata Motors, salt produced and sold by Tata Chemicals and the tea marketed by Tata Global Beverages are also synonymous with the Tata name and under these circumstances, the business of brand subscription paying companies is not dependent on use of brand completely ignores the prevalent factual situation. The Ld. A.R. therefore submitted that the AO was wholly justified in accepting the contention of the assessee and following a consistent view taken by his predecessor in assessing such income under the head “Profits and gains of business or profession”. The Ld. A.R. stated that stand of the Ld. PCIT that as a mistake occurred in the past and it was imperative having regard to the dictum of Hon’ble Supreme Court in Distributors (Baroda Pvt. Ltd.) vs. UOI 155 ITR 120 to rectify such mistakes is not correct because in fact no such mistake had occurred and if such view of the Ld. PCIT is to be upheld, same would reflect an error.

22 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. rightly exercised. The Ld. D.R. also submitted that the AO has not examined whether the income by way of royalty was on capital account or revenue account as this issue was not examined at all. The Ld. D.R. also relied on the decision of CIT vs. Corner Stone Exports Pvt. Ltd. 48 taxman.com 65. The Ld. D.R. also referred to page No.6 of the order passed by Ld. PCIT to contend that AO did not examine the brand, equity and business promotion agreement and had not examined in detail the business activity of the assessee and under which heads of income these incomes were taxable. The Ld. D.R. also argued that the principle of resjudicata is not applicable to the income tax proceedings and mere fact that in the past the brand subscription fee earned by the appellant was assessed under the head “Profits and gains of business or profession” was not determinative of the issue. The Ld. D.R. argued that the same fact in the past that the income has been assessed under the head “Profits and gains of business or profession” is not a bar on the department to assess the same thing in the subsequent year meaning thereby that once a mistake is committed in the earlier years same should not be rectified in the subsequent year. The Ld. D.R. finally relied heavily on the order of Ld. PCIT and prayed before the Bench that the order of AO which was sought to be revised by Ld. PCIT by exercising jurisdiction under section 263 of the Act is erroneous and prejudicial to the interest of the Revenue and therefore the appeal of the assessee filed against the order under section 263 may kindly be dismissed.

23 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. the revisionary jurisdiction has already been specifically examined by the AO in the original assessment proceedings as these were raised through various queries which were replied to in detail by the assessee and only those submissions of the assessee which were not accepted by the AO only finds discussion/reference in the assessment order but where the AO has accepted the submission made by the assessee, the same are not dealt with in the order and such a course of action is permissible as supported by the ratio laid down in the following three decisions by the Hon’ble Bombay High Court. 1. CIT vs. Capital India Ltd. 203 ITR 108 2. Idea Celluar Ltd. vs. Dy. CIT 301 ITR 407 3. CIT vs. Fine Jewellery India Ltd. 372 ITR 303 (Bom.- HC) 13. The Ld. A.R. submitted that under these circumstances it could not be said that there was no enquiry made or one of the possible view was not taken by the AO. On the issue of royalty being a capital account or revenue account, the Ld. A.R. submitted that the Ld. PCIT has not raised this issue in the revisionary proceedings. The Ld. A.R. also distinguished the decision relied upon by the Ld. D.R. in the case of CIT vs. Corner Stone Exports Pvt. Ltd. (supra) by submitting that in that case the question was whether the Tribunal was right in deleting the addition towards interest paid on loans which in turn were advanced to several companies at low rate of interest as the assessee had borrowed funds at higher rate of interest and advanced money to other company at very low rate of interest and nothing was brought on record to suggest that such advances were made for business purposes of the assessee and no business expediency was demonstrated for making such

24 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. advances at concessional rate of interest. As regards the arguments of the Ld. D.R. that AO has not examined the brand equity and business promotion agreement and the heads under which these are taxable, the Ld. A.R. submitted that the findings of Ld. PCIT are contrary to evidence on record as the AO has made full enquiry in respect of various heads under which the assessee’s income was chargeable. The Ld. A.R. also submitted that the brand, equity and business promotion agreement was filed with the AO in the original assessment proceedings vide letter dated 22.12.2017 in response to query from the AO and one can reasonably presume that if AO calls for documents, the same has been examined by him before coming to any conclusion as this was the whole purpose of calling for documents unless, of course, there is evidence on record to conclusively establish that such documents were not taken into consideration. In the present case, the Ld. A.R. submitted that there is no evidence on record and it is only on the basis of conjuncture and surmises that Ld. PCIT has concluded that AO did not examine the brand, equity and business promotion agreement. The Ld. A.R. submitted that in fact the AO made a disallowance of interest on the ground that investment activity of the assessee can not be considered as a business itself amply demonstrates that the AO had examined the issue as to under which head the income of the assessee is to be assessed. On the issue of resjudicata , the Ld. A.R. submitted that it is not the assessee’s case that principle of resjudicata applies to tax proceedings but when an issue has consistently been decided by the Revenue in one way unless there is a change in facts and circumstances or change of law it would not be open to Revenue

25 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. to take a view to the contrary and the principle of res-adjudicata shall not apply and principle of consistency must be applied. The Ld. A.R. relied heavily on the order of Apex Court in the case of Radhasoami Satsang vs. CIT 193 ITR 321 SC especially to the relevant observation at page No.329. The Ld. A.R., while rebutting the contentions of the Ld. D.R., submitted that the principle laid down in the said decision is not applicable to other cases as the penultimate paragraph of the judgment of the court had confined the decision to the facts of the case. The Ld. A.R. submitted that judgment of the Hon’ble Supreme Court affirming the finding of the Tribunal that property of assessee therein was subjected to legal liability of being used for religious or charitable purpose of the satsang was the aspect which was sought to be confined to the facts of the case. The general principle laid down by the Hon’ble Supreme Court on the applicability of the principle of consistency is not something which was in any manner caveated. The Ld. Counsel argued that this is apparent from the statement of the counsel for the Revenue that the facts of case being from special nothing should be said in a manner which would have general application. Therefore, Caveat put up by the Hon’ble Supreme Court in the penultimate paragraph must be read in the context of statement of Revenue. The Ld. A.R. submitted that so reading it would be apparent that principle laid down by the Hon’ble Supreme Court in Radhasoami Satsang case as to applicability of rule of consistency would be fully applicable to the case of the assessee. The Ld. A.R. submitted that having regard to the subsequent decision of the Hon’ble Supreme Court in the case of BSNL vs. UOI 282 ITR 273 and of the jurisdictional High Court

26 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. in the case of PCIT vs. Quest Investments advisors Pvt. Ltd. ITA No.280 of 2016, this principle would still be applicable and accordingly there is no basis nor change in facts and in law for the Ld. PCIT to exercise revisionary power. The Ld. A.R. finally prayed that the order of Ld. PCIT may kindly be quashed.

27 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd.

ii) that assessee is a core investment company registered with SEBI and its main activity is the investments in subsidiaries and other companies , income of which is not taxable under the head business. Also that income received by the assessee by way of dividend from subsidiary company for use of Tata brand which was taxable under the head “Income from other sources”. Accordingly, none of the expenses claimed by the assessee under the business head is allowable as these expenses were not allowable under section 57 of the Act as the scope of the said section is very restrictive vis-à-vis section 37 of the Act. The AO has not examined the disallowance of major expenses and therefore this has also resulted in order being erroneous in so far as prejudicial to the interest of the Revenue.

28 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. with section 263 dated 31.03.2019 which was passed in the consequential proceedings under section 263 by the AO, we observe that the total income assessed was Rs.740.97 crore as against the income assessed in the original assessment framed under section 143(3) Rs.759.51 crores which is sought to be revised by the Ld. PCIT by exercising revisionary jurisdiction under section 263 of the Act . Thus we note that the mandatory twin conditions which are required to be fulfilled before exercise of jurisdiction under section 263 of the Act i.e. the assessment order being erroneous and also prejudicial to the interest of the Revenue were not fulfilled and thus there is no justification for exercising the jurisdiction by Ld. PCIT. The said position is required from the fact that the assessed income in the consequent assessment framed is lesser than the income assessed under section 143(3) of the Act and thus certainly the order is not prejudicial to the interest of the Revenue. The case of the assessee is supported by the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd. vs. CIT (supra) wherein the Hon’ble Supreme Court has held that the satisfaction of twin conditions is a prerequisite for exercising the revisionary jurisdiction of the Ld. PCIT.

29 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. interest was not paid either before the end of the year or before the due date of filing the return and though the same was allowable as deduction in accordance with the accounting system adopted by the assessee but in view of the provisions of section 43B that was disallowed. The said expenditure was paid during the previous year relevant to A.Y. 2014-15 and it was claimed as deduction in the computation of income. Thus, we find that the AO did not disallow the said expenditure in A.Y. 2013-14 on the ground that same was not incurred for the purpose of assessee’s business but the disallowance was made under section 43B of the Act. Accordingly, while completing the assessment for A.Y. 2014-15 the AO disallowed the interest paid on the footing that though the same was not allowable during the year as per the system of accounting followed by the assessee but as per the provisions of section 43B which provides that such interest would be allowable as deduction in the year of payment. The Ld. PCIT sought to revise the order of AO on the ground that while computing the income by the AO, the AO has held that interest for the year was neither allowable under section 36(1)(iii) nor under section 37(1) and therefore on the same analogy it should be disallowed. We note that the claim of the assessee in this year was consequential to disallowance made under section 43B in the earlier year and the AO was fully justified in allowing the claim and thus the assessment order passed by the AO is not erroneous and it is for this reason also the exercise of jurisdiction under section 263 is wrong and can not be sustained. On the second issue, we observe that the assessee has issued debenture in the previous year relevant to A.Y. 2010-11 and the said debenture carries interest at 4.5%

30 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. annually and it was also provided that a premium of 4% was payable on the redemption of such debenture upon expiry of 4 years from the date of issue. Accordingly, the assessee proportionately amortized the premium on debenture and claimed the deduction. On this issue also we do not find any error as to how the assessment order is erroneous as the deduction was claimed on proportionate basis. In this case also we find that the case of the assessee is squarely covered by the decision of Apex Court in the case of Madras Industrial Investments Corporation Ltd. vs. CIT (supra) wherein the Hon’ble Apex Court has held that where the assessee has taken one of the possible views with which the PCIT does not agree then the assessment order can not be treated as erroneous. Thus we note that the deduction has rightly been allowed by the AO. Similarly, in the case of Tata Industries Ltd. vs. ITO (supra) the co-ordinate bench of the Tribunal has taken a similar view wherein the decision of Hon’ble Bombay High Court in the case of CIT vs. Phil Corporation Ltd. 14 taxman.com 58 has been followed. Accordingly, we hold that there is no error in the AO’s action in allowing the claim even though dividend earned on investments and gain arising out of transfer of investment would be assessed under the head “Income from other sources” and capital gain respectively and therefore the revisionary jurisdiction exercised under section 263 of the Act can not be sustained. The Ld. PCIT observed that AO has not examined the issue of taxability of income earned in terms of brand, equity and business promotion agreement whether assessable under the head “Income from other sources” or “Profit and gains of business or profession”. We find merit in the contention of the

31 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. assessee that besides licensing the brand, the assessee is also obliged to certain tasks in terms of clause (ii) of the Tata brand, equity and business promotion agreement dated 18.12.1998 wherein the assessee was required to provide e-services as is mentioned in page No.6 to 9 of the said agreement. For the sake of convenience the said clause is reproduced as under: “2,1 The Proprietor shall have the following obligations and responsibilities : (a) to protect and promote the interests generally of the Subscriber both in India and abroad. To this end, the Subscriber hereby authorises the Proprietor to act on its behalf in protecting and enforcing the collective image and goodwill of the Group and preventing any newly developed mark or symbol from being usurped and/or diluted in any way. (b) to organise periodically, as may be deemed necessary, corporate identity and brand promotional activities and campaigns through various media including electronic/telecommunication/satellite communication media (e.g.TATA Website) etc., printing and publishing of promotional material and such other activities as, in the opinion of the Board of Directors or the Proprietor company,- will enhance the TATA Brand Equity and correspondingly x benefit the business of the Subscriber ; (c) to co-ordinate major campaigns involving the promotion and development of the Business Name, Marks and Marketing Indicia; (d) to engage the services of specialist agencies both National and International as the need may be to energize and enhance the overall TATA Brand Equity which eventually could result in a greater market share for the products and services of the Subscriber and help in the preservation and vindication of the trust and confidence reposed by customers, business associates, stakeholders and the society in general; (e) to engage professional consultants for conducting industry organisational studies/research for the formulation of Group business strategies and policies that would assist the subscribing companies to emerge as business leaders in the evolving markets; (f) for the attainment of the overall objectives of the TATA Brand Equity & Business Promotion Scheme and interacting closely with the participating Tata companies in a centrally co-ordinated manner, engage and set up a team of senior personnel and/or advisors/consultants and/or specialist firzis as well as provide them with the necessary supporting staff and facilities to perform their functions; (g) g) to take steps to make available a pool of sharable resources of the Tata Group including managerial talent trained in TATA values to the Subscriber; (h) to provide necessary guidance to the Subscriber in order to ensure uniformity in the application of the Group policies relating to good business policies

32 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. (i) to adopt the JRD Quality Value and/or other such process as a means to appraise the performance of the Subscriber in various areas of its activity and to guide and assist the Subscriber in the attainment of higher standards of quality of its products, services and management; (j) to provide such support and assistance to the Subscriber as the Board of Directors of the Proprietor company may consider necessary in certain circumstances including securing the support of Group companies to the extent and in a manner permissible under the prevalent laws ; (k) to encourage support to the Subscriber's business from Group companies subject to the availability of products and services of a desirable quality at competitive rates ; (l) to undertake activities which in the opinion of the Board of Directors of the Proprietor company are essential for the purposes of promoting, developing, maintaining, managing and legally protecting the Business Name, the Marks and the Marketing Indicia in India and abroad and thereby endeavour to promote the business of the Subscriber to achieve greater profitability and enhancement of stakeholder value. (m) to undertake measures to preserve the stability of the management of the Subscriber in order to protect the larger interests of its stakeholders. (n) to provide resources for availing services in the areas of – 1. Financial and Strategic Management; 2. Legal and Economic matters; 3. Management Development and Human Resources; 4. Corporate Communications; 5. Community Services; (o) for the purposes of promoting the business of the Subscriber, to provide assistance in accessing the network of domestic and international business contacts and availing the services of the domestic and overseas offices of the Proprietor and the Group companies (p) to institutionalize mechanisms to share and propagate best management practices amongst the Subscribing companies. (q) to manage and supervise the implementation of the Scheme and ensure compliance with the terms of this Agreement and the Code;” 17. Apart from performing certain tasks as set out above, by virtue of clause (iii) the assessee has also granted to TISCO a right to use Tata brand, name, marketing indicia as well as right to enter into separate registered license agreement for use of certain trade marks and we also note that right from assessment year 1999-2000 the assessee has been receiving consideration in terms of this agreement and income has consistently been offered to tax and assessed as income from business. The case of the assessee also finds supports from the jurisdictional High

33 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. Court decision in the case of CIT vs. Cilag Ltd. (supra) and CIT vs. Gilbert and Barker Manufacturing Co. (supra) wherein the Hon’ble Bombay High Court has held that income earned from licensing certain intellectual property is rightly assessable under the head profits and gains of business or profession and not under the head “Income from other sources”. In view of this, we are of the view that AO has taken a possible view while passing the order. The revisionary jurisdiction under section 263 on this issue also can not be sustained. In view of the settled position that where two views are possible and AO has taken one of the possible views with which Ld. PCIT does not agree. The assessment can not be treated as erroneous and prejudicial to the interest of the Revenue unless the view taken by the assessee is unsustainable in law. The case of the assessee is supported by the decision of Apex Court in the case of Malabar Industrial Company Ltd. vs. CIT (supra). Therefore the order of Ld. PCIT is wrong and can not be sustained. We are not in agreement with the arguments of the Ld. D.R. that when there is no discussion or reference to these issues in the assessment order it can be construed that AO has not examined the issue at all. We note that in this case the AO has made specifically queries which were replied in detail by the assessee and in that scenario the only presumption is that AO has passed the order after considering the reply of the assessee. Where the AO is not accepting the submissions of the assessee only in that case the issues are dealt with in the assessment order. Thus the AO is in full agreement with the submissions of the assessee, the same are not dealt with in the assessment order. This position is well supported by the decision of Hon’ble Jurisdictional High Court

34 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. in the case of CIT vs. Gabrial India Ltd. (supra), Idea Cellular India Ltd. vs. DCIT (supra) and CIT vs. Fine Jewellery India Ltd. (supra) and thus it can not be said that there has been no enquiry made or that one of the possible views was not formed by the AO. On the argument of Ld. D.R. whether the royalty was on capital or revenue account, we find that that was not the issue in the revisionary proceedings. We have also examined the decision relied upon by the Ld. D.R. and found the same to be distinguishable on facts and not applicable to the present case. We also note that during the year there is no change in law or the facts of the assessee’s case vis-à-vis earlier years and therefore there is no locus standie on the part of the Ld. PCIT to exercise the revisionary jurisdiction on the issues which are already settled and there is no change in the facts or change in law during the year. The case of the assessee is supported by the Hon’ble Apex Court decision in the case of Radhasoami Satsang vs. CIT (supra) and thus we do not find any merit in the arguments of the Ld. D.R. that principle of resjudicata is not applicable to the income tax proceedings. The Revenue tried to distinguish this decision by relying on the penultimate paragraph of the decision that the Hon’ble Apex Court decision is applicable to the facts of that case only but we find that this is not the case as the principle of consistency as laid down by Hon’ble Supreme Court in Radhasoami Satsang vs. CIT case (supra) would be applicable to assessee’s case. Even the Hon’ble Supreme Court in the subsequent decision in Bharat Sanchar Nigam Ltd. vs. UOI (supra) and the Hon’ble Bombay High Court in PCIT vs. Quest Investment Advisor Pvt. Ltd. (supra) have held that the principle of consistency would be applicable unless

35 ITA No.1091/M/2019 M/s. Tata Sons Pvt. Ltd. there is a change of facts and change in law and accordingly the exercise of revisionary jurisdiction by the Ld. PCIT is wrong and can not be sustained. In view of the above said facts and judicial decisions we are of the considered view that the revisionary jurisdiction under section 263 of the Act has been wrongly exercised by the Ld. PCIT and therefore we are inclined to quash the same.

Order pronounced in the open court on 20.04.2020.

Sd/- Sd/- (Ram Lal Negi) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 20.04.2020. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order

Dy/Asstt. Registrar, ITAT, Mumbai.