Gandhimathi Appliances Limited, CHENNAI V. ACIT, CHENNAI

CO 88/CHNY/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6362 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 26-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K ME GHANATH CHOWHAN
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Depreciation; Revenue expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1326/MDS/2010 ASSESSMENT YEAR : 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-II(2), CHENNAI. V. M/S. GANDHIMATHI APPLIANCES LTD., NO. 377, (OLD NO. 272), ANNA SALAI, TEYNAMPET, CHENNAI-600 018. (PAN : AAACG2038F) (APPELLANT) (RESPONDENT) A N D C.O. NO. 88/MDS/2010 (IN ITA NO. 1326/MDS/2010) ASSESSMENT YEAR : 2002-03 M/S. GANDHIMATHI APPLIANCES LTD., V. THE AS SISTANT COMMISSIONER OF NO. 377, (OLD NO. 272), INCOME-TAX, ANNA SALAI, TEYNAMPET, COMPANY CIRCLE-II(2) , CHENNAI-600 018. CHENNAI. (CROSS OBJECTOR) (RESPONDE NT) DEPARTMENT BY : SHRI K. MEGHANATH CHOWHAN, SR.DR ASSESSEE BY : SHRI R. MEENAKSHISUNDARAM, ADVOCATE DATE OF HEARING : 10-08-2011 DATE OF PRONOUNCEMENT : 12/ 08/2011 I.T.A. NO. 1326/MDS/2010 & CO 88/MDS/2010 2 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO. 1326/MDS/2010 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-III, CHENNAI IN ITA NO. 413/09-10/A.III DATED 28-05- 2010 FOR THE ASSESSMENT YEAR 2002-03. CO NO. 88/MD S/2010 IS CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL IN IT A NO. 1326/MDS/2010. 2. SHRI K. MAGHANATH CHOWHAN, JCIT REPRESENTED ON B EHALF OF THE REVENUE AND SHRI R. MEENAKSHISUNDARAM, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE C ASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN DELETING THE MARKET DEVELOPMENT EXPENSES O F ` 4,28,94,857/- DISALLOWED BY THE ASSESSING OFFICER. 2.1 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT DEV ELOPMENT EXPENDITURE INCURRED BY THE ASSESSEE WAS FOR THE PU RPOSE OF NEW MARKET AND WAS HAVING ENDURING VALUE AND THE ASSESS EE HAS ALSO TREATED THIS EXPENDITURE IN THE SAME MANNER AND HAD WRITTEN OFF THIS OVER SUBSEQUENT YEARS AND HENCE IT CANNOT BE T REATED AS REVENUE EXPENDITURE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED I.T.A. NO. 1326/MDS/2010 & CO 88/MDS/2010 3 COMMISSIONER OF INCOME TAX (APPEALS_ BE SET ASIDE A ND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSE SSEE IS A COMPANY DOING THE BUSINESS OF MANUFACTURE AND SALE OF KITCHEN AND HOME APPLIANCES. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF ` 4,28,94,857/- BEING THE MARKET DEVELOPMENT EXPENSES AS A REVENUE EXPENDITUR E. IT WAS THE SUBMISSION THAT THE SAID EXPENDITURE WAS IN THE NATURE OF ADVE RTISEMENT AND SALES PROMOTION EXPENSES. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD TREATED THE SAID EXPENDITURE AS CAPITAL IN NATURE AS THE ASSESSEE DE RIVED AN ENDURING BENEFIT IN INCURRING THE EXPENDITURE. IT WAS THE SUBMISSION T HAT THE LEARNED CIT(A) HAD DELETED THE DISALLOWANCE AND HAD DIRECTED THAT THE SAID EXPENDITURE SHOULD BE TREATED AS REVENUE EXPENDITURE. IT WAS THE SUBMISS ION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE EXPENDITURE THOUGH TERMED AS MARKET DEVELOPMENT EX PENDITURE, WAS IN FACT THE ADVERTISEMENT AND SALES PROMOTION EXPENSES AND THE SAID EXPENSES WERE INCURRED RIGHT FROM THE ASSESSMENT YEAR 1992-93 AND THE ASSE SSEE DID NOT DERIVE ANY ENDURING BENEFIT. IT WAS THE SUBMISSION THAT FOR T HE PURPOSE OF THE COMPANIES ACT THE ASSESSEE HAD CLAIMED THE SAME AS DEFERRED R EVENUE EXPENDITURE. HOWEVER, FOR THE PURPOSE OF INCOME-TAX, THE SAME HA D BEEN TREATED AS REVENUE EXPENDITURE. IT WAS THE FURTHER SUBMISSION THAT EV EN FOR THE IMMEDIATELY I.T.A. NO. 1326/MDS/2010 & CO 88/MDS/2010 4 PRECEDING ASSESSMENT YEAR AN EXPENDITURE ON THE SAM E COUNT TO THE EXTENT OF ` 4,77,76,406/- HAD BEEN INCURRED AND THE SAME HAD AL SO BEEN ALLOWED AS REVENUE EXPENDITURE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6. IN THE CROSS OBJECTION THE ASSESSEE HAS CHALLENG ED THE RE-OPENING OF THE ASSESSMENT. IT WAS THE SUBMISSION THAT THOUGH THE RETURN FILED BY THE ASSESSEE WAS ORIGINALLY PROCESSED U/S 143(1), THE PROVISIONS OF SECTION 154 HAD BEEN INVOKED TO DISALLOW THE DEPRECIATION ON THE USAGE O F THE RIGHT OF TRADE MARK. IT WAS THE SUBMISSION THAT THE SUBSEQUENT ISSUE OF NOT ICE UNDER SECTION148 FOR THE PURPOSE OF RE-OPENING WAS ONLY ON A CHANGE OF OPINI ON AND THERE WAS NO MATERIAL AVAILABLE BEFORE THE ASSESSING OFFICER TO COME TO A NY CONCLUSION OR INFERENCE THAT THERE WAS ESCAPEMENT OF INCOME. 7. IN REPLY, THE LEARNED DR SUBMITTED THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN 291 ITR 5 00, AS THE RETURN HAD BEEN PROCESSED UNDER SECTION 143(1), THE RE-OPENING WAS VALID AS THE ASSESSING OFFICER WAS OF THE OPINION THAT INCOME HAD ESCAPED ASSESSME NT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN RE GARD TO THE ISSUE OF JURISDICTION WHICH HAS BEEN RAISED BY THE LEARNED A UTHORISED REPRESENTATIVE IN THE CROSS OBJECTION IT IS NOTICED THAT THE RETURN HAS B EEN ORIGINALLY PROCESSED U/S. 143(1) AND THE SEC. 154 RECTIFICATION HAS BEEN DONE ONLY FOR THE PURPOSE OF DISALLOWING THE DEPRECIATION ON THE USAGE RIGHT OF TRADE MARK. U/S. 154 THE I.T.A. NO. 1326/MDS/2010 & CO 88/MDS/2010 5 ASSESSING OFFICER HAS NOT GONE INTO THE ISSUE OF TH E CAPITAL OR REVENUE EXPENDITURE IN RESPECT OF THE MARKET DEVELOPMENT EX PENDITURE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IN VIEW OF T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS P. LTD., REFERRED TO SUPRA, THE RE-OPENING OF THE ASSESSMENT IS LIABLE T O BE UPHELD AND WE DO SO. IN THE CIRCUMSTANCES, THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED. 9. IN REGARD TO THE MERITS OF THE ADDITION IT IS NO TICED THAT THE EXPENDITURE WHICH HAS BEEN CLAIMED IS IN THE NATURE OF ADVERTIS EMENT EXPENDITURE AND SALES PROMOTION EXPENDITURE. BOTH THE EXPENSES DID NOT I N ANY MANNER GIVE THE ASSESSEE ANY ENDURING BENEFIT. ADVERTISEMENT IS BA SICALLY TO BRING TO THE ATTENTION OF THE GENERAL PUBLIC OR THE CONSUMERS AB OUT THE PRODUCTS THAT ARE DEALT IN BY THE ASSESSEE. OUT OF SIGHT IS OUT OF MIND. THE ADVERTISEMENT IS BASICALLY TO KEEP THE ASSESSEES PRODUCTS IN THE SIGHT OF THE CO NSUMERS. THE VALUE OF ADVERTISEMENT IS SHORT-LIVED. IT DOES NOT GIVE ANY ENDURING BENEFIT. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR A NY INTERFERENCE. 10. IT IS ALSO NOTICED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. BRILLIANT TUTORIALS LTD. REPORTED IN 292 ITR 399 WHICH IS ON THE SIMILAR ISS UE. IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE IS DISMISSED. I.T.A. NO. 1326/MDS/2010 & CO 88/MDS/2010 6 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. 12. THE ORDER WAS PRONOUNCED IN THE COURT ON 12/08/ 2011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 12 TH AUGUST, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE