S. Muralidhar, J.

1. This appeal by the Revenue is directed against the impugned order dated 28th February 2006 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 1771/Del/2005 for the Assessment Year (‘AY’) 2001-02.

Background facts

2. The background facts are that the Assessee, which is the Indian subsidiary of Herbalife International Inc. (‘HII’), USA, carries on business of trading and marketing of herbal products for use in weight management, to improve nutrition and enhance personal care. The Assessee was incorporated as a company in India with 100% foreign equity participation, pursuant to an approval granted by the Department of Industrial Policy and Promotion, Secretariat for Industrial Assistant, Ministry of Industry, Government of India. The approval was obtained by HII. In terms of the approval, the Assessee was to manufacture herbal products on contract basis in India and should not import these items.

3. It is stated that HII developed significant expertise over the years. It provided data processing services, record keeping, distributor/supervisor information and order and shipment processing etc. HII also provided financial and marketing services.