DCIT CIRCLE 8 (1) vs. SEAGRAM MANUFACTURING (P) LTD,

4. It is further noticed by ld. TPO that assessee did not have authority to conclude contract on behalf of Seagram Martell. He noted that for the above mentioned services rendered by assessee to Seagram Martell, Seagram Martell reimbursed the actual marketing cost incurred by assessee for performing the above services and paid the fixed commission of US$ 2500 p.m. to assessee. This arrangement was governed by Representation Agreement dated 01.07.2000 between Seagram Martell Duty Free Ltd. and Seagram India Mfg. P. Ltd. (assessee). 5. Ld. TPO noted from the Representation Agreement that in addition to the functions noted earlier, the assessee was also performing following functions: (a) Negotiations of terms and conditions and credit limit with customers (b) obtaining orders from customers and forwarding them to Seagram Martell with draft proforma invoices containing proposed terms and conditions including prices, based on confirmations from the customers; (c) Advising Seagram Martell on delivery of goods.

Market Support Services fee Rs. 13,85,339/- Reimbursement for market support services Rs. 4,80,71,661/- Exchange gain Rs. 61,093/- Total amount for market support services Rs. 4,95,18,093/-

“7.0 Two serious defects were noted in the economic analysis done in the T.P. Report to justify the arm's length price of market support service activity: . (a) The expenditure in respect of marketing support services segment has not been properly allocated by SMPL Management. As a result, the operating profit computed on page 28 of the T.P. Report and reproduced above in this Order is not the actual profit from this activity. This issue will become further clear in this Order. There are various other expenses (besides those debited now), which needed to be taken into account for this segment.

(b) The reimbursed expenses of about Rs. 4.8 crores are routed through assessee's accounts and are mentioned as part of "international transaction of market support services" in Form 3CEB. However, while preparing the segmented accounts, the Company Management (page 28 of the T.P. Report), excluded these reimbursements both from the receipts and the expenditure. For NCP Ratio calculation also, reimbursed expenses are not included in the "cost".

8.0 During the proceedings u/s 92CA. vide Order Sheet entry dt. 17.01.2004 assessee was informed that for market support services activity the agreement with Seagram Martell Hong Kong, lists comprehensive responsibility of SMPL for sale of liquor manufactured by Seagram Martell in duty free outlets in the SAARC Region. However, the commission received is fixed at US$ 2500 per month and is not linked to either cost incurred or sales made. Assessee's (ARs) were asked to clarify as to why in the economic analysis. reimbursed expenses of about Rs. 4.8 crores were excluded to calculate NCP of SMPL. Assessee was also asked to furnish total sales of liquor achieved by SMPL during F.Y. 2001-02 separately for India and SAARC countries. It was also asked as to why the commission was agreed to be received as a fixed small sum and not as a percentage of sales. as is the usual practice for independent commission agents. Details of expenses incurred on market support services of Rs. 13.25.889/- and reimbursed expenses of Rs. 4.80.71.661/- were also called for.

“these expenses are specifically incurred to undertake certain specific activities for Seagram Martell and are reimbursed at actuals. These expenses do not port service role undertaken by SMPL. The role of SMPL in this case is provide administrative assistance to Seagram Martell for g/promotions/events etc. The aforesaid expenses are mere out-of- pocket expenses incurred by SMPL in providing the aforesaid administrative assistance. SMPL is not in the business of providing advertisement or sales promotion services to unrelated parties. The benefit (of SMPL incurring these expenses and obtaining reimbursement of the same), if any, to Seagram Martell is no more than indirect or remote in nature. Any benefit arising to Seagram Martell is purely incidental and not intentional so as to warrant any mark- up on the costs so incurred by SMPL. Further, the cost of providing such assistance and incidental benefit arising to Seagram Martell. if any. is not a significant portion as compared to the operating costs of SMPL. Thus. cost of rendering any indirect benefit. if any to Seagram Martell should not warrant a mark-up. In this regard. we also submit that the above is in accordance with paragraph 7.36 of OECD- Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations: "when an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying the cost-plus method that the return or mark-up is appropriate for the performance of services themselves. In such a case, it may not be appropriate to determine arm's length pricing as a mark-up on the cost of services but rather on the costs of the agency function itself, or alternatively, depending on the type of comparable data being used, the mark-up on the cost of services should be lower than would be appropriate for the performance of the services themselves. For example, an associated enterprise may incur the costs of rendering advertising space on behalf of group members, cost that the group members would have incurred directly had they been independent. In such a case, it may well be appropriate to pass on these costs to the group recipients without a mark-up, and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function.”

For the period up to March, 2000 (approximately 3 months), Seagram Martell directly coordinated the sales with the said customer. The assessee furnished following details of expenses incurred for market support services:

Surjit Verma Salary etc. 100% 842,180 Aditya Gooptu Salary etc. 15% 238,843 1,081,023 Surjit Verma Travel Expenses Actual Expenses 117,590 Aditya Gooptu Travel Expenses 15% of Actual Exp.127,276 244,866 16. Ld. TPO pointed out with reference to above details that though in the letter dated 6.2.2004, the assessee stated that the objective of fixed fee received by assesse was to cover personnel costs, communication expenses and a profit make up, no communication expenses were included in the expenditure on communication. He further pointed out that assessee had not included any expenditure on rent, wear and tear of fixed assets, postage, local conveyance and petrol, power and fuel, bank charges etc. incurred towards marketing support activities.

involved in these events. Mr. Verma was involved in coordination with ITDC and the agency hired by Seagram Martell to develop ITDC shops at Bangalore and Hyderabad. For each and every activity financed through reimbursed expenses. involvement of either Surjit Verma or Aditya Gooptu. i.e. of SMPL was there. It cannot be denied that SMPL played a vital role in all the activities done to promote sales of Seagram Martell Duty-free Ltd. (SMDF) for which expenses of Rs. 4,80.71,661/- were incurred.”

Accordingly, he concluded that reimbursed expenses should be taken as a part of ‘cost’ to be used for calculating NCP ratio. He, accordingly, calculated the NCP ratio for the marketing support services as under:

Market Support Services Fee Rs. 13,85,339/- Reimbursement for Market Support Services Rs. 4,80,71,661/- Exchange gain Rs. 61,093/- Operating income (A) Rs. 4,95,18,093/- Less: Expenses allocated above Rs. 7751884/- Reimbursed expenses Rs. 4,80,71,661/- Total expenses (B) Rs. 5,58,23,545/- Operating profit (C)=(A)-(B) (-) Rs. 63,05,452/- Net cost plus margin (&) (C)/(B)x100

Costs incurred by SMPL but not reimbursed Rs. 64,25,995/- (Difference of Rs. 7751884 and Rs. 1325889) Shortfall in profit Rs. 43,39,758/- (Difference between Rs. 4460301 &(Rs. 59450+Rs.610931) Rs. 1,07,65,753/-” Total

26. The AO, accordingly gave effect to the directions of ld. TPO and further made addition on following counts: - Loss on foreign exchange fluctuation - Provision for professional expense - Provision for transit breakages - Difference in Arm’s length price u/s 92CA - Expenditure disallowed on Brand Promotion. - Expenditure on advertisement & sales promotion, treated as capital expenditure.

27. The AO also computed the interest income of Rs. 98,85,207/- , returned by assessee as business income under the head “income from other sources”. 28. Ld. CIT(A) has partly allowed the assessee’s appeal. Being aggrieved, both the assessee, as well as the department are in appeal before us. 29. First we take up the assessee’s appeal. Grounds raised by assessee are as under:

“1. That the Ld. Commissioner of Income (Appeals) [Ld. C!T(A)] erred on facts and in law in sustaining the adjustment of Rs. 5,809,675 made by the Transfer Pricing Officer (TPO) under section 92CA of the Income Tax Act, 1961 (Act). 1.1 That the Ld. CIT(A) failed to appreciate that the apportionment of expenses done by the TPO were without basis and could not be sustained.

1.2 That the Ld. CIT(A) erred in concluding that the NCP margin of the appellant worked out to -3.35% as against the NCP margin of7.99% as taken by the TPO. 1.3 That the Ld. C!T(A) erred in law in not granting the variation of 5% as permitted under the proviso to section 92C(2) of the Act.

3. That the Ld. CIT(A) grossly erred in law in sustaining the disallowance of Rs. 5,159,990 on account of provision for transit breakages. 3.1 That the Ld. CIT(A) grossly erred in law in concluding that there was no certainty in respect of breakages and as such there was no accrual on any legal liability. 3.2 That the Ld. CIT(A) gravely erred in law in concluding that the provision for transit breakages was purely contingent in nature.

4. That the Ld. CIT(A) erred in sustaining the disallowance of Rs. 114,449 on account of depreciation.

6. That the Ld. CIT(A) erred on facts and in law in sustaining the treatment of Rs. 9,885,207 as 'income from other sources' as against 'business income' of the appellant.

7. That the Ld. CIT(A) erred in sustaining the levy of interest under section 234B and D of the Act”.

S. Nature of Value taken Head of Apportionment on Finding in No. expenses by TPO expenses as the basis of head this order appearing in count computed the P&L by the appellant 1. Reimbursement 48071661 0 0 4,80,71,661 expenses 2. Communication 42,52,144 1,05,06,755 52,534 5,26,388 expenses 3. Finance charges 4,44,088 33,94,492 16,972 0 4. Rent 3,00,000 1,84,65,610 92,328 92,328 5. Conveyance and 2,50,000 3,18,18,476 1,59,092 1,59,092 local travel 6 Depreciation 1,00,000 1,96,10,713 98,054 98,054 7 Power and fuel 1,25,616 12,93,984 6,470 6,470 8 Miscellaneous 1,00,000 1,88,04,901 94,025 1,00,000 9 Salary expense of 8,42,180 - - 8,42,180 Mr. Verma 10 Travel expenses 1,17,590 - - 1,17,590 of Mr. Verma 11 50% salary of 7,96,143 7,96,143 7,96,143 7,96,143 Mr. Aditya Gooptu 12 50% travel 4,24,253 - - 4,24,253 expenses of Mr. Aditya Gooptu Total 5,58,23,675 4,05,05,741 13,15,618 5,12,34,159 (*) The total expenses worked out at Rs. 26,41,507/- after including expenses of Rs. 13,25,889/- already taken into account by the TPO. This is against the total expenses worked out in this order of Rs. 28,72,072/- excluding the reimbursement expenses.”

“(b)SML possesses the necessary expertise, know-how and the resources for promoting the Products and their sale, in the Markets in the territory and is capable and willing to act as the interface between the Company and its customers in the Territory;

“1.2. SML shall provide the following services (the "Services") to the Company for promoting the sale arid supply of Products in the Markets in the Territory; 1.2.1 Promoting sales of Products in the Markets in the Territory; 1.2.2 Canvassing orders for the Products; 1.2.3 Providing administrative assistance to the Company in Product advertising, addressing customer grievances regarding features and standards of the Products providing clarifications to customers and prospective customers in the Territory, organization and conduct of various promotion/ marketing events and liaison with third parties such as advertising agencies, event managers and other sponsors if any, on behalf of the Company without in any way having the authority to finally bind the Company to the terms and conditions negotiated by it with such third parties;

1.2.4 Negotiating terms and conditions and credit limits with customers, subject to the terms and conditions of Article 2.3; 1.2.5 Obtaining orders from customers 3..11d forwarding such orders to Company with draft proforma invoices containing proposed terms and conditions, including prices; 1.2.6 Upon receipt of formal proforma invoices from the Company, obtaining confirmation from customers;

1.2.7 Based on the confirmation received from the customers, advising Company on delivery of goods while retaining the original invoice with itself; 1.2.8 Providing assistance and support to the Company in the collection and follow up of payments due and outstanding from customers in the Territory; and 1.2.9 Providing any other assistance as may be mutually agreed between the parties hereto. ……..

“6.3. The Company shall directly bear all expenditure to be incurred in respect of the promotion and marketing events organized by SML for and on behalf of the Company. In the event that SML agrees to disburse such expenditure or any part thereof on behalf of the Company due to expediency or convenience, the Company shall provide to SML an advance of the estimated amount of expenditure to be so disbursed by it. SML shall furnish to the Company a detailed statement of account on the conclusion of the event and adjust any balance amounts against the commission payable to SML under this Agreement.”

The only question that fell for consideration was with regard to the method of computing profit/TC margin whether on gross basis as done by the TPO or net basis as worked out by the assessee. In the instant case the assessee had applied TNM method to determine ALP, which had also been accepted by the revenue authorities. The com parables cited by the assessee had also been accepted by the TPO as appropriate. It was also found that in the regular financial accounts maintained by the comparable companies, the com parables recognized revenue on a net basis. The assessee had also recognized revenues on a net basis in its financial account, which had been duly audited by the auditor. The assessee had computed the margin of operative profit on the total cost on the basis of net revenue by way of mark-up received from the associate concern. The payment made by the assessee to third party vendor/media agencies for and on behalf of the principal had not been included in the total cost for determining the profit margin, though , on the other hand, the Tp75hacrmcruded the Payment reimbursed by the assessee's associate enterprise to the assessee on account of payment made to Third party vendor/media agencies. It was not in dispute that the assessee was engaged in undertaking advertising services for its customers/AEs in the capacity of an agent. As part of its business operation, the assessee facilitated placement of advertisement for its AE in the print/electronic etc. media and for that purpose, the assessee was required to make payment to third parties for rendering of advertisement space on behalf of its customers or AEs. It was, thus, clear that the assessee's business was not sale of advertising slots to its customers or associate concern. For performing the functions for and on behalf of AEs, the assessee was remunerated by its AEs on the basis of a fixed commission/charges based on expenses or cost incurred by the assessee for release of a particular advertisement. It was also to be noted that advertising space ( be it media, print or outdoor), had been let out by third party vendors in the name of ultimate customers and beneficiary of advertisement. The assessee simply acted as an intermediary between the ultimate customer and the third party vendor in order to facilitate placement of the advertisement. The payment made by the assessee to vendor was recovered from the respective customers or AEs. In the event customer failed to pay any such amount to the advertisement agency, the bad debt risk was borne by the third party vendor and not by the advertising agency i.e. the assessee. It was, thus, clear that the assessee had not assumed any risk on account of non-payment by its customers or AEs. At this stage a useful reference may be made to ITS 2009 Transfer Pricing Guidelines accepted by the GECD where it is laid down that when an AE is acting only as an agent or intermediary in the provision of service, it is important in applying the cost plus method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves, and, in such a case, it may not be appropriate to determine ALP as a mark-up on the cost of services but rather on the cost of agency function itself, or alternatively, depending on the type of comparable data being used, the mark-up on the cost of services should be lower than would be appropriate for the performance of the services themselves. In this type-of case, it will be appropriate to pass on the cost of rendering advertising space, to the credit recipient without a mark-up and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function.

“In view of the foregoing analysis, I am inclined to agree with the findings of the TPO that the reimbursed expenses should be part of the cost base of the appellant for computing return on the total cost, for the following additional reasons, in addition to what has been cited by the TPO:

(i) The resources of the entire enterprise of the appellant had been put to use for discharging the comprehensive functions assigned to the appellant as per the agreement.

(ii) Sales promotion activities of similar nature were also organized for the domestic segment of the appellant and claim of such expenses have been allowed as business expenses. There is no reason as to why a separate treatment is to be given to the reimbursed amounts in the segmented accounts as both these expenses aim at achieving similar results. In any case, the reimbursed expenses did impact the sales of the AE positively.

(iii) The appellant has been using the same agencies for the sales promotion purposes both for the domestic segment as well as for the AE segment. Credits are extended to SMPL on its own credibility or standing and not on the basis of the credibility of the AE. This makes these expenses an integral part of the market support function.

(iv) Perusal of some of the advertising bills reveals that the appellant while making payments collected TDS. All obligations relating to collection of TDS, obtaining TAN, filing TDS returns and all other consequential legal Obligations are met by the appellant in its own right as an independent entity. Resources of the entire enterprise are used to meet such legal Obligations and support the market service function. Under these circumstances, the appellant is entitled to get a mark-up on the actual cost incurred inclusive of reimbursed expenses.

(v) Under TNMM, the appropriate cost base is to be taken into account while determining the arm's length nature, of compensation received for discharging a particular function. Exclusion of a relevant cost item would distort the bench marking analysis vis-a-vis the results of the comparables. No such exceptions have been brought out by the appellant for the comparables.

“25. The question is not whether on account of the reversal of the provision made by the Assessees on the first day of the following year, there would be no loss as such to the Revenue. The question is whether making a provision for transit breakages would be allowable as a business expenditure. In light of the law explained in the above decisions, the Court is satisfied that the view taken by the ITAT in the present case is not erroneous in law.

He confirmed the AO’s action.

“5. The remaining issue in appeal for assessment year 1998- 99 is I regard to treating the interest income of Rs. 3,40,680/- earned on loans given to employees, as income from other sources against income shown by assessee as business income. The Assessing Officer and the CIT(Appeals) held that the income earned on loans given to employees by the assessee is income from other sources. The contention of the assessee was not accepted that the loan was given to its employees for keeping harmonious relationship and the interest charged by assessee was on a reduced rate.”

The AO shall recalculate the interest under the aforesaid sections, if any, while giving effect to appellate orders.

Departmental appeal (ITA no. 4779/Del/2007):-

1. "On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in allowing relief of Rs.49,56,078/- out of total disallowance of Rs. 1,07,65,753/- made by the AO on account of difference in Arm's Length Price determined by the TPO and that taken by the assessee." 2." On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the addition of Rs.63,60,000/- made by the AO on account of foreign exchange fluctuation loss." 3." On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the disallowance of Rs.3,11,81,808/- representing 10% of the brand expenses by holding that the parent company was also benefited from such brand building exercise." 4. "On the facts and in the circumstances of the case the Ld. CIT (A) erred- in law and on facts in deleting the disallowance of Rs.3,11,81,808/- being 10% of the brand expenses made by the AO by holding the same as of capital nature."

53. As far as ground no. 1 is concerned, we have confirmed the action of ld. CIT(A) on both the counts viz. allocation of expenses to Marketing support Service segment and also for including the reimbursement of expenses as cost base and also for the income of this segment for computing the NCP of this segment. Therefore, this ground stands dismissed.

58. Ground nos 3 & 4: The AO noticed that in the P&L A/c the assessee had claimed sales and marketing expenses amounting to Rs. 51,61,92,453/- as against Rs. 39,02,30,608/- in the immediately preceding year. He noted that the expenditure of Rs. 51,61,92,453/- included expenses of Rs. 31,18,18,080/- as brand expenses. The assessee explained that these expenses comprised of expenditure on event management, business promotion, merchandising, princting of brouchers/ mailers, market research etc. to determine the consumer reaction to company’s products, bar collaterals (like stirrers, glasses, ice buckets, coasters etc.), advertisement (both electronic and print media) and designing of packaging material for company’s products. The assessee submitted that the expenditure on brands did not provide enduring benefit to the company and was allowable as revenue expenditure. It was explained that the company brand was a primary source of its competitive advantage and also a valuable strategic asset.

Further, brands create an identification for company’s products in a brand conscious market and as such these were an integral part of asessee’s business and ensure customer loyalty/ satisfaction which naturally results sin increased in its turnover and higher taxable profits.

Ltd. 254 ITR 503 and held that brand expenses did facilitate the profitable operations of the assessee’s business.

“10. Ground no. 4 relates to restricting the allowance of brand expenses to the tune of Rs. 10,16,10,577/- to only 1/5th of such expenses for AY 2006-07, Rs. 11,48,67,170/- for A Y 2007- 08 and Rs. 7,34,56,093 for AY 2008-09. In the profit and account, the appellant debited an amount of Rs. 30,18,52,870/- under the head advertising, sales promotions and rebates. Out of the same the appellant had shown expenses of Rs. 10,16,10,577/- as brand expenses. The appellant explained that these expenses were incurred for advertising, sales promotion, cost and distribution etc. The Assessing Officer held that the brand expenses were incurred for enhancing the image of the brand and as such it was resulting in an enduring benefit. Therefore, he disallowed the same holding to be capital expenditure. On appeal before the CIT(A), the CIT(A) held that although the expenditure was in the nature of event management, business promotion expenses etc. the same would result in an enduring benefit to the appellant. He accordingly spread the expenses over a period of 5 years and allowed only 1/5 of the total expenditure for the year under consideration. 10.1 Before us, the learned counsel argued that the expenditure was in the nature of advertising and sales promotion of the products being sold by the appellant and the expenditure has not resulted in creation of new asset. The test of enduring benefit cannot be alone applied to determine whether the expenditure is revenue or capital. He placed reliance on the following decisions: 1. Empire Jute Company, 124 ITR 1 (SC), 2. CIT Vs. Berger Paints (India) Ltd., 254 ITR 503, (Cal.), 3. CIT Vs. Vs. Adidas India Marketing Pvt. Ltd., 195 Taxman 256 (Del.),

10.2 On the other hand, learned DR placed reliance on the order of the Assessing Officer. 10.3 We have heard the rival submissions and perused the details of the expenditure incurred placed at pages no. 76 to 79 of the paper book. From the details, it is clear that the expenditure is incurred only towards sales promotion and on advertisement issued. The issue whether the advertisement expenditure is revenue or capital is adjudicated by the Hon'ble Jurisdictional High Court in the case of CIT Vs. Monto Motors, 206 TAXMAN 43 (Del.) vide para 4, which is reproduced below: "Advertisement expenses when incurred to increase sales of products are usually treated as a revenue expenditure, since the memory of purchasers or customers is short. Advertisements are issued from time to time and the expenditure is incurred periodically, so that the customers remain attracted and do not forget the product and its qualities. The advertisements published/displayed may not be of relevance or significance after lapse of time in a highly competitive market, wherein the products of different companies compete and are available in abundance. Advertisements and sales promotion are conducted to increase sale and their impact is limited and felt for a short duration. No permanent character or advantage is achieved and is palpable, unless special or specific factors are brought on record. Expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. The expenses in the present case were not incurred once and for all, but were a periodical expenses which had to be incurred continuously in view of the nature of the business. It was an ongoing expense. Given the factual matrix, it is difficult to hold that the expenses were incurred for setting the profit earning machinery in motion or not for earning profits. " 10.4. Following the above ratio laid down by the Hon'ble Jurisdictional High Court, we allow this ground of appeal filed by the assessee. 10.5 Hence the appeal filed by the assessee company is allowed.

63. As no distinguishing feature has been brought on record by the department, respectfully following the order of the ITAT in the case of M/s Seagram Distilleries Pvt. Ltd. (supra), holding that the brand expenses were in revenue field and contributed towards profit earning process of the assessee, dismiss both these grounds raised by revenue.

Assessee’s appeal for AY 2003-04 (4784/Del/2007):

1. That the Ld. Commissioner of Income (Appeals) [Ld. CIT(A)] erred on facts and in law in sustaining the adjustment of Rs. 4,748,353 made by the Transfer Pricing Officer (TPO) under section 92CA of the Income Tax Act, 1961 (Act). 1.1 That the Ld. CIT(A) failed to appreciate that the apportionment of expenses done by the TPO were without basis and could not be sustained. 1.2 That the Ld. CIT(A) erred in concluding that the NCP margin of the appellant worked out to -1.41 % as against the NCP margin of 8.05% as taken by the TPO. 1.3. That the Ld. CIT(A) erred in law in not granting the variation of 5% as permitted under the proviso to section 92C(2) of the Act.

2. That the Ld. CIT(A) erred on facts and in law in sustaining the disallowance of Rs. 153,428 being provision for professional charges. 3. That the Ld. CIT(A) grossly erred in law in sustaining the disallowance of Rs. 782,854 on account of provision for transit breakages. 3.1. That the Ld. CIT(A) grossly erred in law in concluding that there was no certainty in respect of breakages and as such there was no accrual on any legal liability. 3.2. That the Ld. CIT(A) gravely erred in law in concluding that the provision for transit breakages was purely contingent in nature. 4. That the Ld. CIT(A) erred in law in sustaining the addition of Rs. 782,854 being provision of transit breakages in order to compute book profit under section 115JA of the Act. 5. That the Ld. C1T(A) erred in sustaining the levy of interest under section 234B and D of the Act.

66. Ld. counsel for the assessee did not press ground no. 2. Hence, ground no. 2 stands dismissed being not pressed.

67. Ground no. 1: Identical ground has been taken by the assessee as ground no. 1 in AY 2002-03. On identical set of facts in AY 2002-03 we have upheld the action of ld. CIT(A) in sustaining the adjustment by ld. TPO u/s 92CA. For the same reasons herein also we uphold the order of ld. CIT(A) on the issue in question. Ground is dismissed.

68. Ground no. 3: Identical ground has been taken by the assessee as ground no. 3 in AY 2002-03. On identical set of facts in AY 2002-0 following the decision of Hon’ble Delhi High Court in assessee’s own case in & others dated 6.10.2015, 3 we have restored the matter to the file of AO to pass order in terms of the observations made by Hon’ble Delhi High Court (supra). Ground no. 3 is allowed for statistical purposes.

69. Ground no. 4: Identical ground has been taken by the assessee as ground no. 5 in AY 2002-03. In AY 2002-03 we have rejected this ground being of academic interest only. Facts being identical herein also adopt the same course. Ground is dismissed.

70. Ground no. 5: Charging of interest u/s 234B & D is consequential.

The AO shall recalculate the interest under the aforesaid sections, if any, while giving effect to appellate orders.

Revenue’s appeal for AY 2003-04 (ITA no. 4780/Del/2007):

1. "On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in allowing relief of Rs.26,35,948/- out of total disallowance of Rs. 73,84,301/- made by the AO on account of difference in Arm's Length Price determined by the TPO and that taken by the assessee." 2. " On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the addition of Rs.7,00,292/- made by the AO on account of foreign exchange fluctuation loss." 3. " On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the disallowance of Rs.3,77,54,860/- representing 10% of the brand expenses by holding that the parent company was also benefited from such brand building exercise. 4. "On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the disallowance of Rs.76,90,395/- being 10% of the brand expenses made by the AO by holding the same as of capital nature." 5. "On the facts and in the circumstances of the case the Ld. CIT (A) erred in law and on facts in deleting the disallowance of commission of Rs. 76,90,395/-, made by the AO on account of commission paid to M/s Sunrise Bottles.”

73. Ground nos. 1 to 4 taken by the revenue in AY 2003-04 are identical(excepting quantum) to ground nos. 1 to 4 as taken in AY 2002-03.

For the very same reasons herein also we dismiss ground nos. 1 to 4.

The AO, accordingly, made a disallowance of Rs. 76,90,395/-.

After taking into account all these evidences, ld. CIT(A) allowed the assessee’s claim by observing that the authenticity of payment of commission cannot be in doubt only on the basis of absence of the conformation letter.