Moet Hennessy India Pvt. Ltd., Mumbai V. DCIT, New Delhi

ITA 1070/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1233 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHA KANT SAHU SENIOR
• Keywords: Gift; Transfer pricing; International transaction; Rule of consistency; Wholly owned subsidiary; Commercial expediency; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 143(3); 234B; 37(1); 144C; 13; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1051/DEL./2016 (ASSESSMENT YEAR : 2011-12) DCIT, CIRCLE 17 (1), VS. M/S. MOET HENNESSY (I) PVT . LTD., NEW DELHI. 1903, TOWER 2, 19 TH FLOOR, INDIA BULLS FINANCIAL CENTRE, SENAPATI BAPAT ROAD, MUMBAI 400 013. (PAN : AACCM4079L) ITA NO.1070/DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. MOET HENNESSY (I) PVT. LTD., VS. DCIT, CIRCLE 17 (1), 1903, TOWER 2, 19 TH FLOOR, NEW DELHI. INDIA BULLS FINANCIAL CENTRE, SENAPATI BAPAT ROAD, MUMBAI 400 013. (PAN : AACCM4079L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIKAS SRIVASTAVA, ADVOCATE SHRI SUMIT MANGAL, ADVOCATE SHRI SAKSHAM SINGHAL, CA REVENUE BY : SHRI SUBHA KANT SAHU, SENIOR DR DATE OF HEARING : 07.11.2019 DATE OF ORDER : 13.12.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 2 PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, M/S. MOET HENNESSY (I) PVT. LTD. (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 30.12.2015 PASSE D BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE ACT Q UA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1. THE ORDER DATED DECEMBER 30, 2015 PASSED BY THE LEARNED ASSESSING OFFICER ('LD. AO') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 ('THE ACT'), PURSUANT TO THE DIRECTIONS OF THE HON'BLE DISPUTE R ESOLUTION PANEL ('HON'BLE DRP') DATED NOVEMBER 16, 2015, IS B AD IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. AO AND THE HON'BLE DRP HAVE ERRED IN DISALLOWING ADVERTISEMENT EXPENSES OF RS.6,64,24,16 1 INCURRED BY THE APPELLANT, UNDER SECTION 37(1) OF THE ACT. 3. THE LD. AO HAS COMMITTED CERTAIN ERRORS WHILE COMPUTING THE TAX DEMAND OF RS.5,08,83,820 AGAINST THE APPELLANT, AND IN THE COMPUTATION OF INTEREST UNDER SECTION 234B AND SECTION 234C OF THE ACT. 2. THE APPELLANT, DCIT, CIRCLE 17 (1), NEW DELHI (H EREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 30.12.2015 PASSE D BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 3 SECTION 143 (3) READ WITH SECTION 144C OF THE ACT Q UA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD DRP WAS RIGHT IN REJECTING COMPARABLES A CCEPTED BY TPO OF 'IFB AGRO INDUSTRY LTD.' IGNORING THE FACT T HAT IT IS A GOOD COMPARABLE BEING A PART OF WINE AND SPIRIT IND USTRY WHICH FUNCTIONALLY MATCHES WITH THE ASSESSEE'S BUSINESS. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO INCLUDE R ADICO KHAITAN LTD. IGNORING THE FACT THAT IT CANNOT BE CONSIDERED AS A GOOD COMPARABLE BEING NOT FUNCTIONALLY IDENTICAL TO THAT OF THE ASSESSEE'S BUSINESS. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO INCLUDE S KOL BREWERIES LTD. IGNORING THE FACT THAT IT CANNOT BE CONSIDERED AS A GOOD COMPARABLE BEING NOT FUNCTIONALLY IDENTICAL TO THAT OF THE ASSESSEES BUSINESS. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO INCLUDE T ILAKNAGAR INDUSTRIES LTD. IGNORING THE FACT THAT IT CAN NOT B E CONSIDERED AS A GOOD COMPARABLE IN ABSENCE OF CORRESPONDING FINANCI AL DATA. 5. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO INCLUDE U NITED BRAVERIES LTD. IGNORING THE FACT THAT IT CAN NOT BE CONSIDERED AS A GOOD COMPARABLE IN ABSENCE OF CORRESPONDING FINANCI AL DATA. 6. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN AMENDING THE COMPARABL ES IN ABSENCE OF ANY CONCRETE OR SPECIFIC REASONS GIVEN, BY ONLY STATING THAT THESE AMENDED COM PARABLES ARE IN THE SAME LIN E OF BUSINESS. 7. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO VERIFY TH E OP/ SALES AND INTENSITY OF AMP FUNCTION IN ABSENCE OF ANY CONCRET E REASON AND BEFORE CONSIDERING THE FINAL SET OF FIVE COMPARABLE S SELECTED BY DRP. 8. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DRP WAS RIGHT IN DIRECTING TO EXCLUDE R OUTING SELLING AND DISTRIBUTION EXPENSES FROM THE AMP EXPENSES. ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 4 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. MOET HENNESSY (I) PV T. LTD., THE TAXPAYER IS A WHOLLY OWNED SUBSIDIARY OF MOET HENNE SSY INTERNATIONAL (MHI), WHICH IS A WHOLLY OWNED SUBSID IARY OF LVMH GROUP. THE TAXPAYER IS INTO THE BUSINESS OF I MPORTING OF WINES AND SPIRITS FROM ITS OVERSEAS ASSOCIATED ENTE RPRISES (AES), AND IS INTO THE DISTRIBUTION OF THE SAME IN THE IND IAN MARKET HAVING EXCLUSIVE DISTRIBUTION RIGHTS. DURING THE YEAR UND ER ASSESSMENT, THE TAXPAYER ENTERED INTO INTERNATIONAL TRANSACTION S WITH ITS AES AS UNDER:- SR. NO. NATURE OF TRANSACTION METHOD USED BY ASSESSEE AMOUNT MHIPLS OPERATING MARGIN/ SALES METHOD PLI 1 IMPORT OF FINISHED GOODS TNMM OP/SALES 30,04,27,894 12.77% 2 SALE OF FINISHED GOODS 1,47,87,279 3 REIMBURSEMENT OF EXPENSES (PAID) CUP 1,04,40,381 - 4 RECOVERY OF EXPENSES (RECEIVED) CUP 26,19,766 5 PURCHASES OF ASSETS 3,50,419 TOTAL 32,86,25,739 4, TPO NOTICED THAT THE TAXPAYER HAS INCURRED HUGE ADVERTISING, MARKETING AND PROMOTION (AMP) EXPENDIT URE WITH OBJECTIVE OF EXPANDING THE REACH OF THE AE BRAND IN INDIA AS AE IS THE LEGAL OWNER OF THE BRAND. TPO ALSO NOTICED THA T THE AE HAS THEREBY CREATED MARKETING INTANGIBLES IN FAVOUR OF THE AE. ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 5 5. TPO IN THE BACKDROP OF AFORESAID FACTS AND CIRCU MSTANCES PROCEEDED TO ISSUE A SHOW-CAUSE NOTICE PROPOSING TO DETERMINE THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION OF PROMOTING THE BRAND NAME BY THE TAXPAYER BY USING THE BRIGHT LINE TEST (BLT). TPO COMPARED THE AMP EXPENDITURE OF THE TAXPAYER VI S--VIS AMP EXPENDITURE OF THE COMPARABLE COMPANIES ENGAGED IN THE DISTRIBUTION BUSINESS USING AMP TO SALES RATIO IN O RDER TO BENCHMARK THE SAID TRANSACTION. 6. TPO IN ORDER TO BENCHMARK THE INTERNATIONAL TRAN SACTIONS QUA AMP EXPENDITURE INCURRED BY THE TAXPAYER SELECTED S IX COMPARABLES WITH AVERAGE OF 3.45% AS AGAINST AVERAG E OF TAXPAYER AT 11.35%. TPO ALSO NOTICED THAT WHEN THE TAXPAYER EVEN DOES NOT OWN THE BRANDS, ITS AMP EXPENDITURE IS MUCH MORE TH AN THE COMPARABLES FOR SIMILAR ACTIVITIES. TPO ALSO ADDED MARK-UP OF 15% OF AMP SPENT AND DETERMINE THE ARMS LENGTH VAL UE OF EMP EXPENDITURE AT RS.7,10,04,420/-. 7. PURSUANT TO THE TP ORDER, THE AO PROPOSED THE TP ADJUSTMENT OF RS.7,10,04,420/- ON ACCOUNT OF AMP EX PENDITURE TO WHICH THE TAXPAYER FILED OBJECTIONS WITH THE DRP. LD. DRP ALLOWED THE OBJECTIONS OF THE TAXPAYER BY CONSIDERI NG THAT THE TAXPAYER HAS BETTER FINANCIAL PERFORMANCE AS COMPAR ED TO ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 6 COMPARABLES. HOWEVER, LD. DRP CALLED UPON THE TAXPA YER TO SHOW CAUSE AS TO WHY THE AMP EXPENDITURE OF RS.6,64,24,1 61/- BE NOT DISALLOWED UNDER SECTION 37 (1) OF THE INCOME-TAX A CT, 1961 (FOR SHORT THE ACT) BEING PROHIBITED BY LAW. BY DISA GREEING WITH THE DETAILS FURNISHED BY THE TAXPAYER BEFORE THE LD. DR P REGARDING ALLOWABILITY OF AMP EXPENDITURE U/S 37 (1) OF THE A CT, LD. DRP DISALLOWED THE SAME U/S 37(1) OF THE ACT, HOWEVER W ITH A RIDER THAT AO SHALL ALLOW THE TAXPAYER AN OPPORTUNITY TO FILE ITS SUBMISSIONS. AO CONFIRMED THE DISALLOWANCE OF RS.6,64,24,161/-. FEELING AGGRIEVED, THE TAXPAYER AS WELL AS THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 8. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 OF TAXPAYERS APPEAL (ITA NO.1070/DEL/2016) 9. UNDISPUTEDLY, THE TPO HAS DETERMINED THE ARMS L ENGTH VALUE OF INTERNATIONAL TRANSACTIONS ON ACCOUNT OF A MP EXPENDITURE BY THE TAXPAYER BY APPLYING BLT WHICH HAS OTHERWISE BEEN DISCARDED AS A METHOD BY THE HONBLE COURTS; THAT L D. DRP HOWEVER DISCARDED THE BLT. IT IS ALSO NOT IN DISPU TE THAT IN ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 7 TAXPAYERS OWN CASE IN AYS 2009-10 & 2010-11, IDENT ICAL ISSUE QUA AMP EXPENDITURE INCURRED BY THE TAXPAYER HAS BE EN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 23.08.2018 IN ITA NO.1906/DEL/2014 IN AY 2009-10 AN D ORDER DATED 09.04.2019 IN ITA NO.85/DEL/2015 IN AY 2010-1 1. IN TAXPAYERS OWN CASE IN AYS 2012-13 & 2013-14, IDENT ICAL ISSUE QUA AMP EXPENDITURE INCURRED BY THE TAXPAYER WAS AL SO DECIDED IN FAVOUR OF THE TAXPAYER VIDE ORDER DATED 24.04.2019 IN ITA NOS.5003/DEL/2017 & 5004/DEL/2017. IT IS ALSO NOT IN DISPUTE THAT THOUGH THE LD. DRP HAS DISCARDED THE BLT IN DETERMI NING THE AMP EXPENSES INCURRED BY THE TAXPAYER QUA AMP EXPENDITU RE BUT PROCEEDED TO CONFIRM THE ADDITION ENTIRELY ON THE N EW GROUND THAT THESE EXPENSES ARE TO BE DISALLOWED U/S 37 (1) OF T HE ACT. 10. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, NOW THE SOLE QUESTION ARISES FOR DETERMIN ATION IN THIS CASE IS :- AS TO WHETHER LD. DRP HAVE ERRED IN DISALLOWING TH E AMP EXPENSES OF RS.6,64,24,161/- INCURRED BY THE TAXPAY ER U/S 37(1) OF THE ACT AS IT HAS NO POWER TO TAKE UP THE NEW ISSUE WHICH HAS NEVER BEEN AGITATED/DECIDED BY THE LD. TPO/AO? 11. THE LD. AR FOR THE TAXPAYER FURTHER CONTENDED T HAT THE LD. DRP WAS NOT EMPOWERED TO TAKE UP NEW ISSUE FOR ADJU DICATION WHICH HAS NOT BEEN TAKEN UP BY THE AO IN DRAFT ASSE SSMENT ORDER ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 8 NOR ANY OBJECTION HAS BEEN FILED BY THE TAXPAYER AN D RELIED UPON SECTION 144C(8) OF THE ACT. FOR FACILITY OF REFERE NCE, SECTION 144C(8) IS EXTRACTED AS UNDER :- 144C. (1) THE ASSESSING OFFICER SHALL, NOTWITHSTAN DING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANCE, FORWARD A DRAFT OF THE PROPOSED ORD ER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFERRED TO A S THE DRAFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE PROPOSE S TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. .. (5) THE DISPUTE RESOLUTION PANEL SHALL, IN A CASE W HERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), IS SUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. .. (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUC E OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORD ER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOS ED VARIATION OR ISSUE ANY DIRECTION UNDER SUB-SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSMENT O RDER. EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT THE POWER OF THE DISPUTE RESOLUTION P ANEL TO ENHANCE THE VARIATION SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED THE POWER TO CONSIDE R ANY MATTER ARISING OUT OF THE ASSESSMENT PROCEEDING S RELATING TO THE DRAFT ORDER, NOTWITHSTANDING THAT S UCH MATTER WAS RAISED OR NOT BY THE ELIGIBLE ASSESSEE. 12. BARE PERUSAL OF THE AFORESAID SECTION MAKES IT CLEAR THAT THE LD. DRP MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER . MEANING THEREBY, DRP IS NOT ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 9 EMPOWERED TO SET ASIDE ANY PROPOSED VARIATION OR IS SUE ANY DIRECTION UNDER SUB-SECTION (5) FOR FURTHER ENQUIRY FOR PASSING OF THE ASSESSMENT ORDER. SO, IN THE INSTANT CASE, THE LD. DRP HAS INDIRECTLY REMANDED THE CASE BACK TO THE AO BY OBSE RVING THAT THESE (AMP) EXPENSES ARE TO BE DISALLOWED U/S 37(1) OF THE ACT AND DIRECTED THE AO TO ALLOW THE TAXPAYER AN OPPORTUNIT Y TO FILE ITS SUBMISSIONS AND THEREAFTER TO PASS FINAL ASSESSMENT ORDER, WHICH CERTAINLY AMOUNTS TO REMAND OF THE CASE AS THERE WA S NO SUCH OBSERVATIONS MADE BY TPO OR AO, AS THE CASE MAY BE. 13. MOREOVER, AT THE SAME TIME, AO IS NOT EMPOWERED TO MAKE FRESH DETERMINATION WHILE PASSING FINAL ASSESSMENT ORDER WHICH WAS NOT PROPOSED BY HIM IN HIS DRAFT ASSESSMENT ORD ER. SO, ON THESE GROUNDS ALSO, DISALLOWANCE MADE BY THE AO U/S 37(1) IS NOT SUSTAINABLE. 14. COORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE IDENTICAL ISSUE IN CASE OF PGS GEOPHYSICAL AS (SUCCESSOR OF PGS EXPLORATION (NORWAY) AS) VS. ADDL. DIRECTOR OF INCO ME-TAX (2014) 50 TAXMANN.COM 392 (DELHI-TRIB.) HELD THAT, DRP HAS NO AUTHORITY EITHER TO DIRECT THE AO/TPO TO MAKE FURTH ER ENQUIRY AND TO DECIDE THE MATTER AND AT THE BEST, THE DRP CAN C ALL FOR THE REMAND REPORT FROM THE INCOME-TAX AUTHORITY. ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 10 15. SIMILARLY, COORDINATE BENCH OF THE TRIBUNAL IN PGS GEOPHYSICAL (SUPRA) OBSERVED THAT, IN TERMS OF SECTION 144C (8), DRP DOES NOT HAVE POWER TO SET ASIDE ANY PROPOSED V ARIATION OR ISSUE FOR FURTHER ENQUIRY TO THE AO . 16. SO, WE ARE OF THE CONSIDERED VIEW THAT DISALLOW ANCE MADE BY THE AO U/S 37(1) OF THE ACT PURSUANT TO THE DIRECTI ONS ISSUED BY THE DRP IS NOT SUSTAINABLE IN THE EYES OF LAW. SO, QUE STION FRAMED IS ANSWERED IN AFFIRMATIVE. 17. EVEN ON MERIT, IT IS THE CASE OF THE TAXPAYER T HAT AMP EXPENSES HAVING BEEN INCURRED BY THE TAXPAYER IN OR DER TO BOOST ITS SALE/BUSINESS IN INDIA WERE DIVIDED INTO TWO CATEGO RIES : (I) SELLING AND DISTRIBUTION OF EXPENSES AMOUNTING TO RS.3,55,02,256 WHICH INCLUDES EXPENSES IN THE NATUR E OF DISTRIBUTION OF POINT OF SALES MATERIAL (POSM), FREE SAMPLES, GIFTS TO DEALERS AND RETAILS, TRADE DISCOU NTS, CUSTOM DUTY CHARGED ON POSM, WAREHOUSING CHARGES, TRAVELLING AND TRAINING OF MARKET STAFF ETC. DULY DETAILED AT PAGE 220 OF THE PAPER BOOK WHICH SUPPLI ED TO THE LD. DRP VIDE ORDER DATED 03.11.2015; AND (II) MARKING AND PROMOTION EXPENSES AMOUNTING TO RS.3,09,21,635/-, WHICH INCLUDES EXPENSES IN THE ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 11 NATURE OF DISPLAYS AT RETAIL OUTLETS, SALARY OF MAR KETING STAFF, MARKET VISIT EXPENSES OF THE MARKETING STAFF , EXPENSES INCURRED ON EVENTS, INCENTIVES PAID, VISIB ILITY CHARGES, ETC. ALSO DULY DETAILED AT PAGE 220 OF THE PAPER BOOK FURNISHED BEFORE THE LD. DRP VIDE LETTER DATED 03.11.2015. 18. CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD . DRP/TPO, LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT AMP EXPENSES ARE REVENUE IN NATURE HAVING BEEN INCURRED FOR COMMERCI AL EXPEDIENCY. IN AY 2012-13 & 2013-14 IN TAXPAYERS OWN CASE, THE COORDINATE BENCH OF THE TRIBUNAL HAS RETURNED CATEGORIC FINDIN GS THAT AMP EXPENDITURE HAS BEEN INCURRED BY THE TAXPAYER JUST TO ENHANCE ITS SALES AND PROFITS, AND CANNOT BE TREATED AS CAPITAL IN NATURE BY RETURNING FOLLOWING FINDINGS :- 13. IN THE BACKDROP OF THE AFORESAID FACTS AND CIR CUMSTANCES OF THE CASE, ARGUMENTS ADDRESSED BY LD. ARS OF THE PARTIES OF THE APPEALS AND ORDERS PASSED BY THE REVENUE AUTHORITIE S, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS : - AS TO WHETHER ADVERTISEMENT AND SALES PROMOTION EXPENSES INCURRED BY THE ASSESSEE BEING AN IMPORTER AND DISTRIBUTOR OF WINE AND SPIRITS IN INDIA IN THE FOR MS OF GIFTS, DISPLAY AT RETAIL OUTLETS, DISCOUNT SCHEMES, CUSTOM DUTY CHARGED ON POSM, ETC. ARE REVENUE IN NATURE AS CONTENDED BY THE ASSESSEE? 14. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE HIGH COURT OF DELHI IN CASE OF MONTO MOTORS LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 12 4. IN VIEW OF THE FACTUAL MATRIX WHICH IS AVAILABL E ON RECORD AND AS THE ASSESSING OFFICER HAS NOT DEALT W ITH THE FACTUAL MATRIX IN DETAIL WE ARE NOT INCLINED TO ADM IT THE PRESENT APPEAL. THE ADVERTISEMENT EXPENSES AS PER T HE FINDINGS OF BOTH THE CIT (APPEALS) AND THE TRIBUNAL WERE NOT OF CAPITAL NATURE. ADVERTISEMENT EXPENSES WHEN INCURRED TO INCREASE SALES OF PRODUCTS ARE USUALLY TREATED AS A REVENUE EXPENDITURE, SINCE THE MEMORY OF PURCH ASERS OR CUSTOMERS IS SHORT. ADVERTISEMENT ARE ISSUED FRO M TIME TO TIME AND THE EXPENDITURE IS INCURRED PERIODICALL Y, SO THAT THE CUSTOMERS REMAIN ATTRACTED AND DO NOT FORG ET THE PRODUCT AND ITS QUALITIES. THE ADVERTISEMENTS PUBLISHED/DISPLAYED MAY NOT BE OF RELEVANCE OR SIGNIFICANCE AFTER LAPSE OF TIME IN A HIGHLY COMPET ITIVE MARKET, WHEREIN THE PRODUCTS OF DIFFERENT COMPANIES COMPETE AND ARE AVAILABLE IN ABUNDANCE. ADVERTISEME NTS AND SALES PROMOTION ARE CONDUCTED TO INCREASE SALE AND THEIR IMPACT IS LIMITED AND FELT FOR A SHORT DURATI ON. NO PERMANENT CHARACTER OR ADVANTAGE IS ACHIEVED AND IS PALPABLE, UNLESS SPECIAL OR SPECIFIC FACTORS ARE BR OUGHT ON RECORD. EXPENSES FOR ADVERTISING CONSUMER PRODUCTS GENERALLY ARE A PART OF THE PROCESS OF PROFIT EARNI NG AND NOT IN THE NATURE OF CAPITAL OUTLAY. THE EXPENSES I N THE PRESENT CASE WERE NOT INCURRED ONCE AND FOR ALL, BU T WERE A PERIODICAL EXPENSES WHICH HAD TO BE INCURRED CONTINUOUSLY IN VIEW OF THE NATURE OF THE BUSINESS. IT WAS AN ON-GOING EXPENSE. GIVEN THE FACTUAL MATRIX, IT I S DIFFICULT TO HOLD THAT THE EXPENSES WERE INCURRED F OR SETTING THE PROFIT EARNING MACHINERY IN MOTION OR N OT FOR EARNING PROFITS. 15. SIMILARLY, AGAIN HONBLE HIGH COURT OF DELHI IN CASE OF JUBLIANT FOODWORKS (P.) LTD. (SUPRA) DECIDED THE ID ENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF MONTO MOTORS LTD. (SUPRA). 16. WHEN WE EXAMINE THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE RATIO OF MONTO MOTORS LTD. (SUP RA), IT IS PROVED ON RECORD THAT THE ASSESSEE HAS INCURRED PERIODICAL EXPENSES ON ACCOUNT OF ADVERTISEMENT AND SALES PROMOTION WHICH IS TO INCREASE THE SALES OF PRODUCTS IN ORDER TO REMIND T HE CUSTOMER FROM TIME TO TIME SO THAT THEY DO NOT FORGET THE PR ODUCTS AND ITS QUALITIES. HONBLE HIGH COURT HAS HELD THAT WHEN T HE ADVERTISEMENT EXPENSES ARE INCURRED TO INCREASE THE SALE OF THE PRODUCTS, THE SAME ARE TREATED AS REVENUE EXPENDITU RE BECAUSE THE MEMORY OF PURCHASERS OR CUSTOMERS IS SHORT-LIVE D. SO, IN THE INSTANT CASE, THE REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT ADVERTISEMENT AND SALES PROMOTION EXP ENSES HAVE CREATED LONG LASTING BENEFITS TO THE ASSESSEE, BECA USE ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 13 ADVERTISEMENT AND SALES PROMOTION ARE GENERALLY MAD E IN ORDER TO INCREASE THE SALES AND THEIR IMPACT IS LIMITED A ND FELT FOR A SHORT DURATION BY THE CUSTOMERS. 17. HONBLE SUPREME COURT IN EMPIRE JUTE CO. LTD. ( 1`980) 3 TAXMAN 69 (SC) HELD THAT, NO TEST IS PARAMOUNT OR CONCLUSIVE TO DISTINGUISH BETWEEN CAPITAL AND REVENUE EXPENDITURE , HOWEVER HELD THAT :- WHEN AN EXPENDITURE IS MADE NOT ONLY ONCE AND FOR ALL, BUT WITH A VIEW TO BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE (OR THE ENDURING BENEFIT OF A TRADE, THER E IS VERY GOOD REASON (IN THE ABSENCE OF SPECIAL CIRCUMS TANCES LEADING TO AN OPPOSITE CONCLUSION) (OR TREATING SUC H AN EXPENDITURE AS PROPERLY ATTRIBUTABLE NOT TO REVENUE BUT TO CAPITAL. THIS TEST, AS THE PARENTHETICAL CLAUSE SHOWS, MUST YIELD WHERE THERE ARE SPECIAL CIRCUMSTANCES LEADING TO A CONTRARY CONCLUSION AND, AS POINTED OUT BY LORD RAD CLIFFE IN CIT V. NCHANGA CONSOLIDATED COPPER MINES LTD. [1965158 ITR 241 (PC), IT WOULD BE MISLEADING TO SUPPOSE THAT, IN ALL CASES, SECURING A BENEFIT FOR THE BUSINESS WOULD BE PRIMA FACIE CAPITAL EXPENDITURE ' SO LONG AS THE BENEFIT IS NOT SO TRANSITORY AS TO HAVE NO ENDURANCE AT ALL'. THERE MAY BE CASES WHERE EXPENDI TURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURIN G BENEFIT, MAY, NONETHELESS, BE ON REVENUE ACCOUNT AN D THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSE E THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A. COMMERCIAL SENSE AND IT IS ONLY WHE RE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDIT URE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TES T. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FI XED CAPITAL UNTOUCHED THE EXPENDITURE WOULD BE ON REVEN UE ACCOUNT EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. 18. HONBLE GUJARAT HIGH COURT IN CASE CITED AS DCI T VS. CORE HEALTHCARE LTD. (2009) 308 ITR 263 (GUJARAT) H AS HELD THAT, EVEN BRAND PROMOTION EXPENSES ARE REVENUE IN NATURE, ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 14 HENCE DEDUCTIBLE U/S 37 (1) OF THE ACT BECAUSE SUCH EXPENDITURE DO NOT CREATE ANY INTANGIBLE INTEREST AND MERELY BE CAUSE OF THE FACT THAT EXPENDITURE MAY BRING SOME BENEFIT OF END URING NATURE TO THE ASSESSEE, THAT FACTOR ALONE IS NOT SUFFICIEN T TO TREAT THE EXPENDITURE AS CAPITAL EXPENDITURE. SO, THE ADVERT ISEMENT EXPENSES EVEN TO CREATE THE BRAND IMAGE IS ALLOWABL E AS A REVENUE EXPENDITURE. 19. SO, IN THIS CASE, ASSESSEE HAS UNDISPUTEDLY INC URRED ADVERTISEMENT AND SALES PROMOTION EXPENSES PERIODIC ALLY, AND NOT AT ONCE JUST TO REFRESH THE PRODUCT AND QUALITY TO BE SOLD IN THE MEMORY OF ITS CUSTOMERS. SO, IT CANNOT BE HELD TO BE IN THE NATURE OF ENDURING BENEFIT FOR A TRADER. 20. SO, WE ARE OF THE CONSIDERED VIEW THAT FOLLOWIN G THE RATIO LAID DOWN BY HONBLE SUPREME COURT AND HONBLE HIGH COURTS, DISCUSSED IN THE PRECEDING PARAS, ADVERTISEMENT AND SALES PROMOTION EXPENSES HAVE BEEN INCURRED BY THE ASSESS EE JUST TO ENHANCE ITS SALES AND PROFIT AND CANNOT BE TREATED AS CAPITAL IN NATURE. CONSEQUENTLY, ADVERTISEMENT AND SALES PROM OTION EXPENSES DEBITED BY THE ASSESSEE TO THE TUNE OF RS. 12,33,64,847/- & RS.14,69,15,576/- FOR AYS 2012-13 & 2013-14 ARE O RDERED TO BE TREATED AS REVENUE IN NATURE AND ADDITION MADE/CONF IRMED BY THE LD. AO/CIT (A) ON THIS SCORE IS ORDERED TO BE DELET ED. HENCE, GROUND NO.2 OF ITA NO.5003/DEL/2014 (AY 2012-13) AN D ITA NO.5004/DEL/2014 (AY 2013-14) IS DETERMINED IN FAVO UR OF THE ASSESSEE. 19. SO, FOLLOWING THE AFORESAID DECISION RENDERED B Y THE COORDINATE BENCH OF THE TRIBUNAL, WE ARE OF THE CON SIDERED VIEW THAT AMP EXPENDITURE CANNOT BE CONSIDERED AS CAPITA L EXPENDITURE BY ANY STRETCH OF IMAGINATION, HENCE THE SAME ARE R EVENUE IN NATURE HAVING BEEN INCURRED FOR COMMERCIAL EXPEDIENCY. 20. THE NEXT CONTENTION RAISED BY THE TAXPAYER IS T HAT THE EXPENDITURE INCURRED BY THE TAXPAYER IS NOT PROHIBI TED BY LAW. WHEN WE EXAMINE THE ORDER PASSED BY THE LD. DRP IT HAS COME ON RECORD THAT LD. DRP/AO HAVE OBSERVED THAT IN VIEW O F THE CABLE ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 15 TELEPHONE NETWORK RULES AND GUIDELINES IN THE FORM OF ASCI CODE LAID DOWN BY THE ADVERTISING STANDARDS COUNCIL OF INDIA (ASCI), THE AMP EXPENSES INCURRED BY A LIQUOR DISTR IBUTOR ON ADVERTISEMENT AND SALES PROMOTION EXPENSES ARE PROH IBITED BY LAW, HENCE NOT ALLOWABLE U/S 37 (1) OF THE ACT. 21. PERUSAL OF THE ORDER PASSED BY THE LD. DRP/AO G OES TO PROVE THAT THE DRP/AO HAS TAKEN GENERAL VIEW AND HAS NOT BROUGHT THE CASE OF THE TAXPAYER UNDER ANY SPECIFIC RULES & REG ULATIONS OF CABLE TV NETWORK RULES/ ASCI NOR THEY HAVE ANALYZED THE NATURE OF EXPENSES. THE LD. AR FOR THE TAXPAYER DREW OUR ATTENTION TO SECTION 22(2)(C) OF THE CABLE TV ACT WHICH LAYS DO WN THAT IF THE PRODUCTS ARE ADVERTISED ON NATIONAL TELEVISION TO W HOM THESE RULES APPLY, ONLY THEN IT CAN BE TREATED IN VIOLATION OF THE SAID RULES. THERE IS NO FINDING OF FACTS BY THE AO/DRP AS TO HO W THE CABLE TV ACT HAS BEEN VIOLATED. FURTHERMORE, WHEN WE EXA MINE ASCI CODE IT IS NOT A PROFIT COMPANY U/S 25 OF THE COMPA NIES ACT WORKING AS A SELF-REGULATORY BODY FOR PROTECTION OF THE INTEREST OF CONSUMERS AND IS NOT EMPOWERED TO EXERCISE ANY LEGI SLATIVE POWERS UNDER CENTRAL OR STATE STATUTES, SO THE VIOLATION O F ASCI CODE, IF ANY, IS NOT PROHIBITED BY LAW. MOREOVER, AO/DRP HA VE NOT ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 16 BROUGHT ON RECORD TO SHOW AS TO HOW THE TAXPAYER HA S VIOLATED ASCI CODE, RATHER PROCEEDED ON THE BASIS OF GENERAL OBSERVATIONS. 22. FURTHERMORE, THERE IS NOT AN IOTA OF EVIDENCE O N FILE TO PROVE THAT THE TAXPAYER HAS INCURRED EXPENDITURE TO ADVER TISE ITS PRODUCTS ON TELEVISION OR USE MINORS TO CONDUCT ITS MARKETIN G ACTIVITIES AND THUS, THE QUESTION OF VIOLATING CABLE RULES OR ASCI CODE DOES NOT ARISE, AS IS EVIDENT FROM THE DETAIL OF EXPENDITURE GIVEN BY THE TAXPAYER AT PAGE 220 OF THE PAPER BOOK. 23. MOREOVER, IT IS UNDISPUTED FACT ON RECORD THAT THE TAXPAYER HAS NEVER AVAILED OF THE SERVICES OF CABLE NETWORKI NG AND ASCI FOR INCURRING AMP EXPENSES AND THIS FACT HAS BEEN BROUG HT TO THE NOTICE OF LD. DRP VIDE LETTER DATED 16.11.2015, AVA ILABLE AT PAGES 243 TO 248 OF THE PAPER BOOK. BUT THE LD. DRP INST EAD OF RETURNING FINDINGS ON THE FACTS DECIDED THE ISSUE ON THE BASI S OF GENERAL OBSERVATIONS BY TAKING SHELTER IN THE CABLE TV NETW ORK AND ASCI CODE WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW. 24. FURTHERMORE, IN THE SUBSEQUENT YEARS I.E. AYS 2 012-13, 2013-14, 2014-15, 2015-16 & 2016-17, AO TOOK DIAMET RICALLY OPPOSITE STAND QUA AMP EXPENSES BY DISALLOWING THE SAME U/S 37 OF THE ACT, WHICH HAS BEEN TREATED AS REVENUE EXPEN SES BY THE ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 17 TRIBUNAL IN TAXPAYERS OWN CASE IN AY 2012-13 & 2013-14 (SUPRA). 25. FURTHERMORE, WHEN UNDISPUTEDLY IDENTICAL AMP EX PENSES HAVE BEEN INCURRED BY THE TAXPAYER SINCE 2009-10 AN D HAS BEEN ALLOWED BY THE TRIBUNAL IN AYS 2009-10 & 2010-11, C ONVERSE STAND TAKEN BY THE TAXPAYER IN AY 2011-12 IS NOT SU STAINABLE BEING HIT BY RULE OF CONSISTENCY AS HAS BEEN HELD BY HONBLE SUPREME COURT IN RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) AND MUNICIPAL CORPORATION OF CITY OF THANE VS. VIDY UT METTALICS LTD. (2007) 8 SCC 688 . 26. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, DISAL LOWANCE MADE BY THE AO/DRP ON ACCOUNT OF AMP EXPENSES TO TH E TUNE OF RS.6,64,24,161/- IS NOT SUSTAINABLE, HENCE ORDERED TO BE DELETED. SO, GROUNDS NO.1 & 2 OF TAXPAYERS APPEAL ARE DETER MINED IN FAVOUR OF THE TAXPAYER. GROUND NO.3 OF TAXPAYERS APPEAL (ITA NO.1070/DEL/2016) 27. THE LD. AR FOR THE TAXPAYER CONTENDED THAT AO H AS COMMITTED ERROR IN CALCULATING THE INTEREST U/S 234 B AND 234C OF THE ACT TO THE TUNE OF RS.1,94,50,024/- AND RS.9,72 ,092/- RESPECTIVELY AND HAS COME UP WITH THE CALCULATION T HAT CORRECT ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 18 INTEREST U/S 234B AND 234C IS RS.1,68,37,706/- AND RS.5,21,961/- RESPECTIVELY. WE ARE OF THE CONSIDERED VIEW THAT T HIS IS A CALCULATION ERROR ON THE PART OF THE AO AND HE IS D IRECTED TO CORRECT THE SAME UNDER LAW BY GIVING CREDIT OF TDS ETC. CO NSEQUENTLY, GROUND NO.3 IS DETERMINED IN FAVOUR OF THE TAXPAYER . REVENUES APPEAL (ITA NO.1051/DEL/2016) 28. REVENUE BY FILING THE CROSS APPEAL CHALLENGED T HE ORDER PASSED BY THE LD. DRP DISCARDING THE BRIGHT LINE TE ST (BLT) APPLIED BY THE TPO AND CONSEQUENTLY, REJECTING THE COMPARABLES ACCEPTED BY THE TPO. 29. UNDISPUTEDLY, THERE IS UMPTEEN NUMBER OF JUDGME NTS PASSED BY HONBLE JURISDICTIONAL HIGH COURT WHEREBY BLT HA S HELD NOT TO BE A METHOD HAVING STATUTORY FORCE TO DETERMINE THE AMP EXPENSES. MOREOVER, IDENTICAL ISSUE HAS BEEN DECID ED BY THE COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE VIDE ORDER DATED 23.08.2018 IN ITA NO.1906/DEL/2014 IN A Y 2009-10 BY RETURNING FOLLOWING FINDINGS :- 10. IN THE PRESENT CASE, NO NEW FACTS HAVE EMERGE D AND ALL THE FACTS BROUGHT TO RECORD, DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS, DO NOT INDICATE LEGALLY SUSTAINABLE BA SIS FOR COMING TO THE CONCLUSION THAT THERE WAS AN INTERNAL TRANSA CTION IN RESPECT OF AMP EXPENSES INCURRED BY THE ASSESSEE. W E ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE PLEA OF THE ASSESSEE, ON THE PECULIAR FACTS OF THIS CASE, DOES INDEED DESERV E TO BE UPHELD THAT THERE IS NO MATERIAL ON RECORD TO HOLD THAT TH ERE WAS AN ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 19 INTERNATIONAL TRANSACTIONS, IN TERMS OF THE PROVISI ONS OF SECTION 92B, NOR ANY MATERIAL HAS BEEN BROUGHT ON RECORD TO EVEN REMOTELY SUGGEST SO AND, THEREFORE, THAT THERE IS N O GOOD REASON TO REMIT THE MATTER TO THE ASSESSMENT STAGE FOR BUI LDING A CASE AFRESH. RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENTS, WE DELETE THE IMPUGNED ALP ADJUSTMENT WHICH WAS MADE S OLELY ON THE BASIS OF BRIGHT LINE TEST. THE PLEA OF THE LEA RNED COUNSEL WAS INDEED WELL TAKEN AND MERITS ACCEPTANCE. THE IMPUGN ED ALP ADJUSTMENT OF RS 6,64,70,841, ACCORDINGLY, STANDS D ELETED. 30. SO, FOLLOWING THE ORDER PASSED BY THE COORDINAT E BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AYS 2009-10 & 2010-11 AND FOLLOWING THE JUDICIAL PRECEDENTS ON THE ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. DRP HAS RIGHTLY DELETE D THE ALP ADJUSTMENT MERELY ON THE BASIS OF BLT. THE LD. DRP HAS NOT BROUGHT ON RECORD ANY LAW AND FACTS CONTRARY TO THE ORDER PASSED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AYS 2009-10 & 2010-11 (SUPRA). CONSEQUENTLY, APPEAL FILED BY THE REVENUE IS NOT SUSTAINABLE, HENCE DISMISSED. 31. RESULTANTLY, THE APPEAL FILED BY THE TAXPAYER I S ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF DECEMBER , 2019 TS ITA NO.1051/DEL./2016 ITA NO.1070/DEL./2016 20 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.