M/s. Monto Motors Ltd., New Delhi V. ACIT, New Delhi

CO 186/DEL/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5499 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-12-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 19-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY KALRA
• Assessee Lawyers: PEEYUSH SANKAR
• Keywords: Revenue expenditure
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI RAMESH P. TOLANI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 497/DEL/2010 ASSESSMENT YEAR: 2004-05 ACIT, VS. MONTO MOTORS LTD., CIRCLE 5(1), D-33, OKHLA INDL. AREA, 409A, C.R. BLDG., I.P. ESTATE, PHASE-1, NEW DELHI . NEW DELHI. AABCM9856E (APPELLANT) (RESPONDENT) & CROSS OBJECTION NO. 186/DEL/2010 ASSESSMENT YEAR: 2004-05 MONTO MOTORS LTD., VS. ACIT, D-33, OKHLA INDL. AREA, CIRCLE 5(1), PHASE-1, NEW DELHI. C.R. BLDG., I.P. ESTATE, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PEEYUSH SANKAR, SR. DR RESPONDENT BY : SH. SANJAY KALRA, CA ORDER PER RAMESH P. TOLANI, J.M. THIS IS REVENUES APPEAL AND ASSESSEES CROSS OBJ ECTION. REVENUES APPEAL AND ASSESSEES CROSS OBJECTION RAISES FOLLOW ING GROUNDS: - GROUNDS OF REVENUES APPEAL : - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CO NTRARY TO FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,36,89,0 00/- MADE BY THE AO DISALLOWING THE EXPENSES INCURRED BY THE ASSESSEE O N ACCOUNT OF ADVERTISEMENT EXPENSES CLAIMED FOR LAUNCHING OF NEW PRODUCTS. 2.1THE LD. CIT(A) HAS IGNORED THE FACTS THAT THE AS SESSEE WAS GOING TO ITA NO. 497/D/2010 & CO NO. 186/D/10 2 DERIVE LONG TERM BENEFIT FROM THE EXPENSES INCURRED FOR LAUNCHING NEW PRODUCTS/ VEHICLES WHICH IS CAPITAL IN NATURE AS HE LD BY HONBLE APEX COURT IN THE CASE OF ASSAM BENGAL CEMENT CO. VS. CI T 27 IT 34 (SC) BALANCES WERE OUTSTANDING AGAINST THE CONCERNED PAR TIES AND GOODS WERE NOT DELIVERED EVEN AFTER EXPIRY OF ONE YEAR WH EREAS THE ASSESSEE WAS PAYING INTEREST TO BANKS AND ON UNSECURED LOANS . 3.THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR A MEND ANY GROUND OF THE APPEAL RAISED ABOUT AT THE TIME OF THE HEARING. GROUNDS OF ASSESSEES CROSS OBJECTION : - THE LD. AO ERRED IN REOPENING AND REASSESSING THE CASE U/S 147 WHEN THERE WAS NO SUFFICIENT CAUSE WITH AO TO DO THE SAM E. IT IS UNJUST AND AGAINST JUSTICE. THE ORDER OF AO NEEDS TO BE QUASH ED AND LOSS SO REASSESSED BY DISALLOWING DEFERRED REVENUE EXPENDIT URE OF RS. 1,36,89,000/- BE REVISED. 2. THE LD. DR RELIED ON THE ORDER OF AO. LD. COUNS EL FOR THE ASSESSEE VEHEMENTLY CONTENDS THAT CIT(A) HAS VERIFIED ALL TH E FACTS THE EXPENDITURE IN QUESTION IS IN THE NATURE OF ADVERTISEMENT ONLY AND ASSESSEE CLAIMED THE EXPENDITURE AS DIFFERED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT AND THE ENTIRE AMOUNT AS REVENUE EXPENDITURE IN THE YEAR IN QUESTION. THE EXPENDITURE WAS INCURRED IN THIS YEAR FOR THE PURPOSES OF BUSIN ESS AND FOR ADVERTISEMENT. THEREFORE, IT WAS RIGHTLY ALLOWED AS REVENUE EXPEND ITURE BY CIT(A) BY FOLLOWING OBSERVATIONS: - 2.4 IN SUPPORT OF ABOVE ARGUMENTS, LD. COUNSEL HA S RELIED UPON THE FOLLOWING JUDGMENTS: ACIT VS.ASHIMA SUNTEX LD. (30) ITR 1 ITAT (AHMEDABAD) DELHI HIGH COURT IN CIT VS. JAI PARABOLIC SPRINGS L TD. (2008) 172 TAXMAN 258 (PARA 18) CIT (CENTRAL), LUDHIANA VS. LIBERTY GROUP MARKETING ITA NO. 497/D/2010 & CO NO. 186/D/10 3 DIVISION, PUNJAB AND HARYANA HIGH COURT (2008) 173 TAXMAN 439 CYNAMID AGRO LTD. VS. ADCIT BY ITAT MUMBAI IN 2009 3. THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND FINDINGS RECORDED BY THE LD. AO HAVE BEEN CAREFULLY PERUSED. THE UNDISPUTED POSITION IS THAT THE APPELLANT COMPA NY HAD LAUNCHED CERTAIN NEW PRODUCTS OF TWO WHEELERS DURIN G THE YEAR UNDER CONSIDERATION AND SINCE THE MARKET RESPONSE W AS NOT AS PER ITS EXPECTATIONS, IT HAD TO ADOPT VARIOUS MARKE T TECHNIQUES AND METHODS OF ADVERTISEMENT AND BUSINESS PROMOTION . THEREFORE, THE EXPENDITURE OF RS. 1,38,89,000/- WAS INCURRED. IT IS ALSO NOT DENIED BY THE APPELLANT COMPANY THAT FO R CERTAIN REASONS, THE EXPENDITURE WAS CLAIMED IN DIFFERENT 5 YEARS, THOUGH THE SAME WAS INCURRED IN THE YEAR UNDER CONS IDERATION ITSELF. NOW THE ONLY POINT OF DISPUTE BETWEEN THE AO AND THE ASSESSEE IS AS TO WHETHER THE EXPENDITURE IN QUESTI ON IS OF CAPITAL NATURE OR THE SAME HAS TO BE ALLOWED ON REV ENUE ACCOUNT AS CLAIMED BY THE ASSESSEE COMPANY. 3.1 THE ISSUE IN QUESTION HAS BEEN LONG DEBATED AN D NOW THE SETTLED POSITION IS THAT EXPENDITURE INCURRED IN OR DER TO PROMOTE ITS OWN PRODUCTS HAS TO BE TREATED ON REVENUE ACCOU NT AND THE SAME HAS TO BE ALLOWED IN THE YEAR OF INCURRING OF SUCH EXPENDITURE, IRRESPECTIVE OF THE FACT WHETHER THE S AME HAS BEEN CLAIMED BY THE ASSESSEE IN THE YEAR ITSELF OR THE S AME HAS BEEN DEFERRED TO FUTURE YEARS. THIS POSITION OF LAW HAS DULY BEEN UPHELD IN THE DECISIONS RELIED UPON BY THE LD. COUN SEL FOR THE ASSESSEE COMPANY AS DISCUSSED HEREIN ABOVE. 4. IN VIEW OF THE ABOVE FACT AND CIRCUMSTANCES, I AM OF THE VIEW THAT THE ENTIRE EXPENDITURE OF RS. 1,38,89,000/- IS ALLOWABLE IN THE UNDER CONSIDERATION ALONE AND THE AO IS BEING D IRECTED TO ALLOW THE NECESSARY RELIEF TO THE APPELLANT ASSESSE E. ITA NO. 497/D/2010 & CO NO. 186/D/10 4 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE SEE NO INFIRMITY IN THE ORDER OF CIT (A), EXPENDITURE INCURRED ON ADVERTISEMENT CANNOT BE CALLED CAPITAL IN NATURE AN D IS TO BE ALLOWED AS REVENUE EXPENDITURE. 4. IN VIEW THEREOF, WE UPHOLD THE ORDER OF CIT(A), REVENUE APPEAL IS DISMISSED. 5. ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING R EOPENING OF ASSESSMENT U/S 147. THE CROSS OBJECTION IS FILED LATE. LD. C OUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAME. HENCE, DISMISSED ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE S CROSS OBJECTION BOTH ARE DISMISSED. 7. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7.12.2 010 (SHAMIM YAHYA) (RAMESH P. TO LANI) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: *KAVITA CHOPRA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ITA NO. 497/D/2010 & CO NO. 186/D/10 5 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR