M/s Spice Distribution Ltd., New Delhi V. DCIT, New Delhi

CO 12/DEL/2014

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4100 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 27-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ANIMA BERNWAL
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 191; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 4281/DEL/2013 ASSESSMENT YEAR: 2010-11 DCIT, VS. M/S SPICE DISTRIBUTION LTD. CIRCLE 9(1), ROOM NO. 163, 60-D, STREET NO. C-5, CR BUILDING, NEW DELHI SAINIK FARMS, NEW DELHI - 6 2 (PAN: AABCH8481N) (APPELLANT) (RESPONDENT) AND CROSS OBJECTION NO. 12/DEL/2014 (IN ITA NO. 4281/DEL/2013) ASSESSMENT YEAR: 2010-11 M/S SPICE DISTRIBUTION LTD., VS. DCIT, CIRCLE 9( 1), S GLOBAL KNOWLEDGE PARK ROOM NO. 163, CR BLDG.,NE W DELHI 191 & 19B, SECTOR-125, NOIDA (UP) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. ANIMA BERNWAL, SR. DR RESPONDENT BY : SH. AJAY VOHRA, SR. ADVOCA TE & SH. ROHIT GARG, ADVOCATE DATE OF HEARING : 27-06-2016 DATE OF ORDER : 01-07-2016 ORDER PER H.S. SIDHU, J.M. THE DEPARTMENT HAS FILED THE APPEAL AND ASSESSEE H AS FILED THE CROSS OBJECTION WHICH IS EMANATE FROM THE ORDER DATED 15.4.2013 OF THE LD. CIT(A)-XII, NEW DELHI PE RTAINING TO ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 2 ASSESSMENT YEAR 2010-11. THE GROUNDS RAISED IN THE REVENUES APPEAL READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF ADVERTISEMENT EXPENSES BEING CAPITAL IN NATURE RS. 1,54,79,239/-. 2. THE APPELLANTS CRAVES TO AMEND MODIFY, ALTER, AD D OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READS AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT DECIDING THE ALTERNATE GROUND OF APPEAL I.E. GROUND OF APPEAL NO. 2(C), WHICH READ AS UNDER, WHILE DECIDING THE APPEAL OF THE COMPANY FILED AGAINST THE ORDER OF ASSESSMENT:- WITHOUT PREJUDICE AND IN THE ALTERNATE, IF ACCORDING TO THE AO 25% OF THE EXPENDITURE INCURRED ON ADVERTISEMENT AND MARKETING WAS ON BRAND BUILDING AND HAS LED TO CREATION OF AN INTANGIBLE ASSET GIVING BENEFIT OF ENDURING NATURE, HE SHOULD HAVE ALLOWED DEPRECIATION THEREON @25%. 2. THAT THE LD. AO HAS ERRED ON FACTS AND IN LAW IN FILING APPEAL AGAINST SPICE DISTRIBUTION LTD. WHICH HAS CEASED TO EXIST CONSEQUENT UPON ITS AMALGAMATION WITH SPICE RETAIL LTD. W.E.F. 1 ST APRIL, 2011 AS PER THE ORDERS OF HONBLE HIMACHAL PRADESH, HIGH COURT. ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 3 THAT THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AME ND OR VARY FROM AFORESAID GROUNDS OF CROSS OBJECTIONS AT OR BEFORE THE TIME OF HEARING. 3. THE FACTS NARRATED BY THE REVENUE AUTHORITIES AR E NOT DISPUTED BY BOTH THE PARTIES, HENCE, THE SAME ARE NOT REPEATED HERE FOR THE SAKE OF CONVENIENCE. 4. LD. SR. DR RELIED UPON THE ORDER OF THE AO AND R EITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE, SH . AJAY VOHRA, SR. ADVOCATE ALONGWITH SH. ROHIT GARG, ADVOC ATE APPEARED FOR THE ASSESSEE AND STATED THAT LD. CIT(A ) HAS DELETED THE ADDITION IN DISPUTE BY RESPECTFULLY FOL LOWING THE ORDER PASSED IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2008-09 BY THE G BENCH IN ITA NO. 4898/DEL/2011 DATED 23.3.2012. HE HAS DRAW OUR ATTENTION TOWARDS THE P AGE NO. 15 TO 17 OF THE APPELLATE ORDER DATED 15.4.2013. HE FURTHER STATED THAT THE TRIBUNAL HAS ALSO FOLLOWED THE VAR IOUS JUDGMENTS RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS HONBLE JURISDICTIONAL HIGH COURT AND DE CIDED THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE. HE REQUESTED THAT THE APPEAL FILED BY THE REVENUE MAY BE DISMISSED. HOW EVER, HE HAS NOT PRESSED THE CROSS OBJECTION FILED BY THE AS SESSEE. ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 4 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION AT PA GE NO. 15 TO 17 OF THE IMPUGNED ORDER IS REPRODUCED AS UNDER:- I HAVE PERUSED THE FACTS STATED IN THE ASSESSMENT ORDER AS WELL AS THE FACTS STATED BY THE ASSESSEE IN HIS SUBMISSIONS. DURING THE COURSE OF ASSESSMENT PROCEEDING, ASSESSING OFFICER HAS MADE DISALLOWANCE AMOUNTING TO RS 1,54,79,239/- BEING 25% OF TOTAL EXPENDITURE OF RS 7,73,96,193/- ON ACCOUNT OF ADVERTISEMENT AND MARKETING, EXPENSES ON VARIOUS SALES PROMOTION SCHEMES, ADVERTISEMENT OF ITS PRODUCTS IN NEWSPAPER, ELECTRONIC MEDIA, NEON SIGNS, BANNERS ETC. THE ASSESSING OFFICER IN THE ASSESSMENT- ORDER-BAS HELD THAT 25% OF THE ABOVE EXPENSES, ON AN ESTIMATE, PERTAIN TO BRAND BUILDING EXERCISE, WHICH HAVE LED TO GIVING BENEFIT OF ENDURING NATURE AND HENCE IS ON CAPITAL ACCOUNT DISREGARDING THE SUBMISSION OF ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 5 THE APPELLANT THAT NO EXPENSES ON BRAND BUILDING WAS INCURRED BY IT. THIS ISSUE WAS EARLIER DEALT BY ME IN THE ASSESSEES CASE FOR THE AY 2008-09 AND THE SAME HAS BEEN UPHELD BY ITAT G BENCH. THE TRIBUNAL DELHI G BENCH IN ITA NO. 4898/DEL/2011 IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2008-09 VIDE ITS ORDER DATED 23.3.2012 WHILE DECIDING THE ISSUE IN FAVOUR OF THE APPELLANT AND OBSERVED THAT:- ' ... WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL DECISION ON THE ISSUE INVOLVED, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A). A PERUSAL OF THE' ASSESSMENT ORDER SHOWS THAT NO BASIS FOR CONCLUDING THAT 25% OF THE EXPENDITURE ON ACCOUNT OF ADVERTISEMENT AND MARKETING EXPENSES ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 6 SHOULD 'BE DISALLOWED HAS BEEN SET OUT WHICH IS A FACT WHICH PREVAILED WITH THE CIT(A) TO UPSET THE FINDING IN THE ASSESSMENT ORDER AS HAVING BASED ON NO FACTS THE ADMITTED POSITION IS THAT THIS WAS THE FIRST YEAR OF OPERATION OF THE ASSESSEE WHEREIN W.E.F. 9.4.2009 THE ASSESSEE SUBSTITUTED THE WORD 'HOT SPOT FOR THE WORD 'SPICE '. AS SUCH THE ASSESSEE UNDERTOOK SCHEMES OF SALES PROMOTION AND ADVERTISEMENT IN PRINTING ELECTRONIC MEDIA THE ASSESSEE WAS IN THE BUSINESS OF SELLING MOBILE HANDSETS AND OTHER ELECTRONIC ITEMS AND ACCESSORIES ADMITTEDLY OPERATES IN A HIGHLY COMPETITIVE MARKET WHEREIN THE SPECIFIC BRAND WAS NECESSARILY TO BE ADVERTISED AND MADE KNOWN TO THE PUBLIC AT LARGE THE FACTUM OF INCURRING THE EXPENDITURE OF SALES PROMOTION SCHEMES ADVERTISEMENT OF ITS PRODUCTS IN NEWSPAPERS, ELECTRONICS MEDIA, NEON SIGNS AND BANNERS ETC. HAVE ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 7 NOT BEEN DATED. IN THESE FACTS IT IS AN ADMITTED POSITION THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE AND IS NOT A CAPITAL EXPENDITURE NOR A PERSONAL EXPENSES. NO REASONING OR BASIS HAS BEEN GIVEN BY THE AO TO DISALLOW 25% OF THE EXPENSE CLAIMED AS IF THE EXPENDITURE IS CAPITAL IN NATURE THEN DEPRECIATION SHOULD HAVE BEEN ALLOWED AND IF THE EXPENSES IN BEING TREATED AS DEFERRED REVENUE EXPENDITURE THEN IT IS CONTRARY TO THE SETTLED LEGAL POSITION. IN THE FACTS AS THEY STAND THE EXPENSES INCURRED FOR BRAND BUILDING, EXERCISE OF SPICE BRAND HAS RIGHTLY BEEN ALLOWED AS REVENUE EXPENDITURE BY THE CIT(A) RELYING UPON THE ORDER OF THE TRIBUNAL IN A GROUP COMPANIES CASE NAMELY ITO VS SPICE COMMUNICATIONS LTD. 210 ITR 35, SOT 75, WE ARE FULLY IN CONCURRENCE WITH THE FINDING OF THE COORDINATE BENCH AS ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 8 ADVERTISEMENT ETC. CANNOT BE SAID TO BE A CAPITAL ASSET. SIMILARLY PUTTING HOARDINGS, NEON SIGNS ETC. CANNOT BE SAID TO HAVE LED TO THE CREATION OF ANY CAPITAL ASSET. WE FIND SUPPORT FROM THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SALORA INTERNATIONAL LTD. 308 ITR 199 DELHI WHEREIN CONSIDERING THE ADVERTISEMENT EXPENDITURE OF APPROXIMATELY RS 3.08 CRORES THE CONCLUSION OF THE TRIBUNAL NAMELY THAT THERE WAS DIRECT NEXUS BETWEEN ADVERTISEMENT EXPENDITURE AND THE BUSINESS OF THE ASSESSEE AND THAT THE ASSESSEE HAD TO INCUR SUCH EXPENDITURE TO MEET THE COMPETITION IN THE INDIAN MARKET FOR SELLING ITS PRODUCTS IN INDIA WAS UPHELD. IN THE FACT OF THE PRESENT CASE ALSO IT IS IMPERATIVE THAT UNLESS THE ASSESSEE MADE ITS PRODUCTS KNOWN TO THE MARKET ITS BUSINESS WOULD SUFFER. THE JUDGEMENT OF APEX COURT IN EMPIRE JUTE ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 9 MILLS 124ITR 1 (SC) WHICH HAS CONSIDERED THAT THERE COULD BE CASES WHERE THE EXPENDITURE EVEN IF IT WAS INCURRED FOR OBTAINING A BENEFIT A BENEFIT OF AN ENDURING NATURE MAY NEVERTHELESS BE ON THE REVENUE ACCOUNT IN WHICH CASE THE TEST OF ENDURING BENEFIT WOULD BREAK DOWN FULLY SUPPORTS THE VIEW TAKEN. SIMILARLY THE JURISDICTIONAL HIGH COURT IN CIT VS COSIO INDIA LTD 335 ITR 196 REFERRED 10 A BUNCH OF APPEALS WITH THE LEAD CASE BEING ITA 1820/2010 ENTITLED CIT VS CITY FINANCE CONSUMERS FINANCE LTD. 335 ITR 29 DELHI HAD HELD THAT EXPENDITURE ON ADVERTISING AND SALES PROMOTION IS TO BE TREATED AS BUSINESS EXPENDITURE U/S 37 OF THE A CT. THE JURISDICTIONAL HIGH COURT THEREIN CONSIDERING THE APPEAL OF THE REVENUE IN REGARD TO THE CLAIM OF THE ASSESSEE BEFORE THE AO PERTAINING TO AN EXPENDITURE OF RS 4.18 LAKHS FOR ADVERTISEMENT AND SALES PROMOTION ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 10 WHEREIN THE AO HAD RELIED UPON THE JUDGEMENT OF APEX COURT IN MADRAS INDUSTRIAL INVESTMENT CORPORATION VS CIT 225 ITR 802 (SC) UPHELD THE ORDER OF THE TRIBUNAL WHICH HAD CONFIRMED THE ORDER OF THE CIT(A) WHO HAD HELD THAT THERE IS NO CONCEPT FOR DEFERRED REVENUE EXPENDITURE IN THE INCOME TAX ACT, 1961. SIMILAR VIEW WAS TAKEN BY THE JURISDICTIONAL HIGH COURT IN CIT VS PEPSI CO INDIA COOL DRINKS LTD. IN ITA 319/2010 RENDERED ON 30.3.2011 A COPY OF WHICH IS PLACED AT PAGES 155 TO 173. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE BEING SATISFIED WITH THE REASONING AND FINDING ARRIVED AT IN THE IMPUGNED ORDER THE DEPARTMENTAL GROUND IS DISMISSED. IN VIEW OF THE FACTS THAT THE FINDING IN THE IMPUGNED ORDER IS CONFIRMED THE C.O. FILED BY THE ASSESSEE IS INFRUCTUOUS AND IS DISMISSED AS SUCH... ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 11 IN VIEW OF THE ABOVE FINDINGS BY THE ITA T 'G' BENCH THIS ISSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE. 7. AFTER GOING THROUGH THE AFORESAID FINDINGS, WE ARE OF THE VIEW THAT LD. CIT(A) HAS PASSED A WELL REASONED, AF TER RESPECTFULLY FOLLOWING THE ITAT, G BENCH ORDER PA SSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 4898/DEL/2011 DATED 23.3.2012. WE ALSO FIND CON SIDERABLE COGENCY IN ASSESSEES COUNSEL CONTENTION THAT THE T RIBUNAL IN THE AFORESAID CASE, HAS ALSO FOLLOWED THE VARIOUS JUDGMENTS RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS HONBLE JURISDICTIONAL HIGH COURT AND DECIDED THE I SSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE. THEREFORE, IN OUR CONSIDERED OPINION, THERE IS NO ILLEGALITY OR INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, WE UPHOLD THE SAME BY DISMISSING THE REVENUES APPEAL. AS REGARDS THE CROSS OBJECTION FI LED BY THE ASSESSEE IS CONCERNED, THE SAME HAS NOT BEEN PRESSE D BY THE LD. COUNSEL OF THE ASSESSEE, AS STATED ABOVE, AND THE SAME IS DISMISSED AS SUCH. 8. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE S CROSS OBJECTION BOTH ARE DISMISSED IN THE AFORESAID MANNE R. ITA NO.4281/DEL./2013 CO NO.12/DEL/2014 12 ORDER PRONOUNCED IN OPEN COURT ON THIS 01-07-2016. SD/- SD/- (O.P. KANT) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01-07-2016 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI