Spectrum Consultants India Pvt Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-12(3), Bangalore

ITA 1080/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6578 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 1080 /BANG/201 7 ASSESSMENT YEARS : 20 08 - 09 M/S. SPECTRUM CONSULTANTS INDIA PVT. LTD., NO.5/1, MSREC ROAD, BANGALORE 560 054. PAN : AABCS 7552 F VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1(1)(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI. SREEHARI KUTSA, CA REVENUE BY : SHRI. VIKAS SURYAVAMSHI , ADD. CIT DATE OF HEARING : 16 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 02 . 0 8 .201 9 O R D E R PER JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-6, BANGALORE, DATED 19.08.2016 FOR ASSESSMENT YEAR 2008-09. ORDER ON PETITION FOR CONDONATION OF DELAY IN FILING THE APPEAL FOR ASSESSMENT YEAR 2008-09 BEFORE ITAT 2.1 ALONGWITH THE APPEAL, ASSESSEE HAS FILED A PETITION SEEKING CONDONATION OF DELAY OF 16 DAYS IN FILING THE APPEAL FOR ASSESSMENT YEAR 2008-09 BEFORE THE TRIBUNAL. IN SUPPORT OF ITS PRAYER, THE ASSESSEE HAS PLACED RELIANCE, INTER ALIA, ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MST KATIJI AND OTHERS ITA NO.1080/BANG/2017 PAGE 2 OF 8 (1987) 167 ITR 471 (SC); THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ISRO SATELLITE CENTRE (2013) 263 ITR 549 (KAR) AND THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHAKUNTALA HEGDE L/R OF R. K. HEGDE VS. ACIT IN ITA NO.2785/BANG/2004. 2.2 AFTER HAVING HEARD BOTH PARTIES IN THE MATTER; THE REASONS ADDUCED BY THE ASSESSEE IN ITS PETITION FOR CONDONATION OF DELAY AND TAKING INTO ACCOUNT THE PRINCIPLES LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF MST KATIJI AND OTHERS (SUPRA), FOR DEALING WITH MATTERS RELATING TO CONDONATION OF DELAY, WE ARE OF THE VIEW THE DELAY OF 16 DAYS IN FILING THE APPEAL BEFORE TRIBUNAL IS TO BE CONDONED AND WE DO SO. CONSEQUENTLY, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 IS ADMITTED FOR CONSIDERATION AND ADJUDICATION. O R D E R 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER:- 3.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF PLACEMENT SERVICES AND OUTSOURCING CONTRACTORS, FILED ITS RETURN FOR ASSESSMENT YEAR ON 27.09.2008 DECLARING INCOME OF RS.1,74,67,420/-. A REVISED RETURN WAS SUBSEQUENTLY FILED ON 28.08.2009 WHEREIN THE TAXABLE INCOME DECLARED WAS REVISED TO RS.98,56,750/-. THE CASE WAS TAKEN UP FOR SCRUTINY FOR THIS ASSESSMENT YEAR AND THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 27.10.2010, WHEREIN THE ASSESSEES TOTAL INCOME WAS DETERMINED AT RS.1,03,45,520/-. THIS WAS IN VIEW OF DISALLOWANCE OF THE ASSESSEES CLAIM OF EXPENDITURE ON COST OF LOGO DESIGNING AMOUNTING TO RS.6,51,688/- BY THE ASSESSING OFFICER (AO) WHO HELD THIS EXPENDITURE TO BE CAPITAL IN NATURE AND CONSEQUENTLY ALLOWED THE ASSESSEE DEPRECIATION THEREON @ ITA NO.1080/BANG/2017 PAGE 3 OF 8 25%. THE ASSESSEES APPEAL WAS DISMISSED BY THE CIT(A)-6, BANGALORE, VIDE THE IMPUGNED ORDER DATED 19.08.2016. 4.0 AGGRIEVED BY THE ORDER OF CIT(A)-6, BANGALORE, DATED 19.08.2016, FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.1080/BANG/2017 PAGE 4 OF 8 5. GROUND NOS. 3 TO 5 EXPENDITURE INCURRED ON DESIGNING OF LOGO 5.1 THE ONLY ISSUE OF DISPUTE FOR OUR CONSIDERATION AND ADJUDICATION IN THIS APPEAL IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE ON DESIGNING OF LOGO IS A REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE OR IS CAPITAL IN NATURE AS HELD BY THE AUTHORITIES BELOW. IN THE ORDER OF ASSESSMENT, THE AO WAS OF THE VIEW THAT THE AFORESAID EXPENDITURE INCURRED FOR DESIGNING OF LOGO WAS CAPITAL IN NATURE AS IT RESULTS IN ENDURING BENEFIT TO THE ASSESSEE. ON APPEAL, THE CIT(A) UPHELD THE AOS VIEW IN THE MATTER. 5.2.1 THE LEARNED AR WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. ACCORDING TO THE LEARNED AR, THE EXPENDITURE INCURRED ON DESIGNING THE LOGO WAS IN ORDER TO FACILITATE THE DAY TO DAY BUSINESS ACTIVITIES OF THE ASSESSEE AND HAS NOT RESULTED IN THE ASSESSEE ACQUIRING AN ASSET OF ENDURING NATURE AND IS THEREFORE ITA NO.1080/BANG/2017 PAGE 5 OF 8 ALLOWABLE AS REVENUE EXPENDITURE. IT IS ARGUED THAT MERE LOGO ALONE WOULD NOT GENERATE BUSINESS, BUT IT WOULD BENEFIT THE BUSINESS IN TANDEM WITH PROPER MARKETING AND SELLING EXPENSES. IN THIS REGARD, IT IS POINTED OUT THAT THE ASSESSEES CLAIM OF SELLING EXPENSES, COMPRISING MARKETING, SELLING AND ADVERTISEMENT, AMOUNTING TO RS.2,34,31,330/- HAS BEEN ALLOWED BY THE AO. IN THESE CIRCUMSTANCES, THE LEARNED AR PRAYS THAT THE EXPENDITURE OF A SMALL AMOUNT OF RS.5,80,000/- ON DESIGNING OF LOGO; BREAK UP OF WHICH IS GIVEN IN THE BILL NO.6298 DATED 08.06.2007 ISSUED BY SCION ADVERTISING PVT. LTD., CLEARLY INDICATES THAT THIS EXPENDITURE (COPY PLACED ON RECORD) CREATES NO NEW ASSET OR ANY BENEFIT OF ENDURING NATURE, AND THEREFORE BE ALLOWED AS REVENUE EXPENDITURE. IN SUPPORT OF THE ABOVE, THE LEARNED AR HAS PLACED RELIANCE ON THE FOLLOWING TRIBUNAL DECISIONS:- (I) KAYA LTD., VS. ITO IN ITA NOS.3175 AND 3286/MUM/2013 DATED 04.03.2015 AND (II) FINE JEWELLERY (INDIA) LTD., VS. ACIT IN ITA NO.3124/MUM/2011 DATED 31.07.2012. 5.3 PER CONTRA, THE LEARNED DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5.4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTS NOT DISPUTE ARE THAT THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD INCURRED AN EXPENDITURE OF RS.5,80,000/- ON DESIGNING OF LOGO FOR THE COMPANY AND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE AO, ON EXAMINATION THEREOF, WAS OF THE VIEW THAT THE AFORESAID EXPENDITURE BRINGS INTO EXISTENCE AN ASSET OR GIVES ENDURING BENEFIT TO THE ASSESSEE AND THEREFORE TREATED ITA NO.1080/BANG/2017 PAGE 6 OF 8 IT AS CAPITAL EXPENDITURE AND ALLOWED THE ASSESSEE DEPRECIATION THEREON. ON APPEAL, THE CIT(A) UPHELD THE AOS VIEW. 5.4.2 WE HAVE PERUSED THE RELEVANT BILL FOR THE EXPENDITURE OF RS.5,80,000/- INCURRED BY THE ASSESSEE FOR DESIGNING OF LOGO WHICH GIVES THE BREAK UP OF VARIOUS ITEMS THAT CONSTITUTE SUCH EXPENDITURE. A COPY OF THE BILL ISSUED TO THE ASSESSEE BY SCION ADVERTISING PVT. LTD., BEARING BILL NO.6298 DATED 08.06.07 FOR RS.5,80,000/- PLUS ADVERTISING SERVICING TAX OF RS.71,688/- (TOTALING RS.6,51,688/-) HAS BEEN PLACED ON RECORD. THE SAME IS EXTRACTED HEREUNDER:- ITA NO.1080/BANG/2017 PAGE 7 OF 8 5.4.3 FROM A PERUSAL OF THE AFORESAID BILL, IT IS EVIDENT THAT THE BREAK UP INCLUDES NORMAL / ROUTINE BUSINESS EXPENDITURE IN THE FORM OF OFFICE STATIONERIES, NAME BOARDS, T-SHIRT DESIGN, POWER POINT PRESENTATION, ETC. THUS, FROM THE FACTS OF THE CASE AND THE DETAILS OF EXPENSES OF RS.5,80,000/- THAT FORM PART OF THE BILL FOR DESIGNING A LOGO, WE DO NOT FIND THAT THESE EXPENSES INCURRED BY THE ASSESSEE HAVE RESULTED IN THE CREATION OF AN ASSET OR AUGMENTATION OF ANY PROFIT MAKING ASSET OF ENDURING NATURE / BENEFIT. THE AFORESAID EXPENDITURE HAS ALSO TO BE SEEN FROM THE CONTEXT OF BUSINESS NECESSITY OR BUSINESS EXPEDIENCY ALSO. IN OUR VIEW, IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE ON HAND, AS DISCUSSED ABOVE, SINCE THE AFORESAID EXPENDITURE MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT EARNING PROCESS AND NOT FOR AN ACQUISITION OF NEW ASSET OR RIGHT OF PERMANENT CHARACTER, THE POSSESSION OF WHICH IS A CONDITION FOR CARRYING ON BUSINESS, THE SAID EXPENDITURE IS TO BE REGARDED AS REVENUE EXPENDITURE. CONSEQUENTLY, GROUNDS 3 TO 5 OF ASSESSEES APPEAL ARE ALLOWED. 6. GROUND NOS.1, 2, 7 AND 8 (SUPRA), BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 7. GROUND NO.6 CHARGING OF INTEREST UNDER SECTION 234D OF THE ACT 5.1 IN THIS GROUND (SUPRA), THE ASSESSEE DENIES HIMSELF LIABLE TO BE CHARGED INTEREST U/S 234D OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE AO HAS NO DISCRETION IN THE MATTER. THIS PROPOSITION HAS BEEN UPHELD BY THE HONBLE APEX COURT IN THE CASE OF ANJUM H. GHASWALA (252 ITR 1) (SC) AND WE, THEREFORE, UPHOLD THE ACTION OF THE AO IN CHARGING THE ASSESSEE THE AFORESAID INTEREST U/S 234D OF THE ACT. THE AO IS, HOWEVER, DIRECTED TO RE- COMPUTE THE INTEREST CHARGEABLE U/S 234D OF THE ACT, IF ANY, WHILE GIVING EFFECT OF THIS ORDER. ITA NO.1080/BANG/2017 PAGE 8 OF 8 8. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF AUGUST, 2019. SD/ - SD/ - (N. V. VASUDEVAN) VICE PRESIDENT (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 02 ND AUGUST, 2019. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.