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3. In computation of the income, the assessees showed 45% of Rs.7.40 crores as relating to manufacturing activity, taxable under Section 55 of the Income Tax Act (hereinafter referred to as "the Act") and balance 55% relating to the marketing activity, not liable to be charged to tax. This segregation of non-compete fees in the ratio of 45% (manufacturing) and 55% (marketing) was based on the report of M/s.Ernst and Young Pvt. Ltd. dated 15th July, 1999 filed by the assessees along with the returns. According to Assessing Officer there were various discrepancies in the aforesaid report as it gave 55% weightage to marketing and 45% toward non-compete fees (manufacturing). In arriving at this conclusion, the Assessing Officer referred to some literature of economics on the subject and specifically noted that the amounts of manufacturing was not properly projected in the report of the M/s.Ernst and Young Pvt. Ltd. He specifically noted few points relating to manufacturing process missing in the said report. Persuaded by the literature on the study of the subject, he made a fresh conclusion in the ratio of 38% and 62% respectively for marketing and manufacturing components. Consequently, he made addition of Rs.1,25,80,000/- by making disallowance on non-compete fee. The Assessing Officer also ordered for initiation of penalty proceedings under Section 271(1)(c).

4. Aggrieved by this, the assessees preferred appeals before the Commissioner, Income Tax (Appellate) [CIT(A)], which came to be allowed by the common order dated 05.09.2003. The Revenue preferred appeals against the order of CIT(A) which were dismissed by the Tribunal by order dated 06.02.2009. It is against this common impugned order that the appeals have been preferred by the Revenue.

5. Learned counsel appearing for the Revenue tried to justify the order of the Assessing Officer by taking us through various items as noted by the Assessing Officer to be missing in the report of the M/s.Ernst and Young Pvt. Ltd. Our attention was also drawn to the table showing comparison of the items mentioned in the order of the Assessing Officer and in the report of M/s.Ernst and Young Pvt. Ltd. Comparison was sought to be demonstrated with regard to various items to bring home the point that all the items which were found to be missing by the Assessing Officer were specifically not mentioned in the report of M/s.Ernst and Young Pvt. Ltd. On the other hand, learned counsel for the assessee stated that the report of M/s.Ernst and Young Pvt. Ltd. covered all the items which were alleged to be missing by the Assessing Officer. It was also submitted that in any case, this was nowhere submitted by the Revenue before the CIT(A) and also the Tribunal and thus this question could not be raised at this stage before this Court.

"It is a settled position of law that valuations report of an expert can not be brushed aside in a lighthearted manner. It has to be done by another report of an expert. Ernst & Young have rated the company, (PPL) vis-à-vis their competitors, which can be done only after studying the industry & the competition. The contention of the appellant that Ernst & Young is an expert professional firm of international repute and is engaged even by Governments also appears to be correct. The Ld. AO though not have the where with all both in reference to data and professional experience in such matters to give a finding on his own.

I have gone through the report of Ernst & Young and find that the contentions of the appellant that all the factors alleged by the AO to have been missed by Ernst & Young were indeed considered by them have sufficient force in them therefore, I am inclined the delete this changes made by the AO in the ratios and direct him to accept the ratios adopted by the appellant on the basis of the report of Ernst & Young Pvt. Ltd., both on law and merit,"