The DCIT, Circle-1, Ahmedabad V. AIM Expositions Pvt.Ltd., Ahmedabad

ITA 1623/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9803 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Capital expenditure

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.1623/AHD/2012 /BLOCK ASSTT. YEAR: 2009-2010 DCIT, CIR.1 AHMEDABAD. VS AIM EXPOSITIONS PVT. LTD. AKAR 50B, NARAYANNAGAR SOCIETY PALDI, AHMEDABAD. PAN : AAGCA 8876 M %& / (APPELLANT) '( %& / (RESPONDENT) REVENUE BY : SHRI KAMLESH MAKWANA, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 09/12/2015 / DATE OF PRONOUNCEMENT: 08/01/2016 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD.COMMISSIONER INCOME-TAX (APPEALS)-6, AHMEDABAD D ATED 25.5.2012 PASSED FOR THE ASSTT.YEAR 2009-10. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OUT OF THE EXP ENSES ALLEGED TO HAVE BEEN INCURRED BY THE ASSESSEE FOR THE ACQUISITION O F BRAND. THIS DISALLOWANCE HAS BEEN MADE WITH THE AID OF SECTION 40A(2)(B) ON THE GROUND THAT EXCESS PAYMENT WAS MADE TO RELATED PARTIES. ITA NO.1623/AHD/2012 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 29.9.2009 DECLARING A LOSS OF RS.53,70,026/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UND ER SECTION 143(2) WAS ISSUED ON 28.09.2010. THEREAFTER, JURISDICTION OVE R THE ASSESSEE WAS TRANSFERRED AND THE NEW INCUMBENT IN THE SEAT OF TH E AO HAS ALSO ISSUED NOTICE UNDER SECTION 143(2) ON 31.5.2011. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS PURCHASED BRAND FROM M /S.AKAR INFOMEDIA PVT.LTD. WHICH IS AN ASSOCIATED CONCERN AND HAS COM MON DIRECTORS. THE ASSESSEE HAS PURCHASED PLUMBEX INDIA BRAND FROM M/S .AKAR INFOMEDIA PVT LTD. AT RS.2.33 CRORES AND THE SAME HAS BEEN CAPITA LIZED. THE AO HAS OBSERVED THAT M/S.AKAR INFOMEDIA PVT. LTD. PURCHASE D THE BRAND IN THE YEAR UNDER CONSIDERATION AT ONLY RS.40 LAKHS FROM PLUMBE X INDIA. THEREFORE, THE AO HAS DISALLOWED A SUM OF RS.2,33,50,000/- AND ALL OWED EXPENDITURE TO THE ASSESSEE OF RS.40 LAKHS. THE AO HAS MADE ADDITION OF RS.1,93,50,000/- 4. ON APPEAL, THE LD.CIT(A) HAS DELETED THE DISALLO WANCE BY OBSERVING AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER D ISALLOWED BRAND PURCHASED BY THE APPELLANT UNDER SECTION 40A(2B). I T IS NOT IN DISPUTE THAT APPELLANT DID NOT CLAIM THE BRAND PURCHASE COS T AS REVENUE EXPENSE. IN FACT APPELLANT TREATED BRAND PURCHASE C OST AS CAPITAL ASSET. SECTION 40A (2B) APPLIES TO THE EXPENSE CLAIMED BUT IT DOES NOT APPLY TO CAPITAL ASSET. SINCE APPELLANT DID NOT CLAIM BRAND PURCHASE AS ALLOWABLE BUSINESS EXPENSE, THE SAME CANNOT BE DISA LLOWED UNDER ANY PROVISIONS INCLUDING SECTION 40A (2B). ASSESSING OF FICER WAS ASKED TO JUSTIFY THE DISALLOWANCE BUT AO COULD NOT EXPLAIN T HE SAME AND ONLY MENTIONED THAT EXCESS PAYMENT FOR PURCHASE OF BRAND WAS MADE TO RELATED PARTY. HOWEVER WHEN THE EXPENSE IS NOT CLAI MED, THERE IS NO QUESTION OF ANY DISALLOWANCE ON ACCOUNT OF THE SAME . THEREFORE I DO NOT FIND ANY SUBSTANCE IN ASSESSING OFFICER'S ACTIO N OF DISALLOWING BRAND PURCHASE COST UNDER SECTION 40A (2B). ACCORDI NGLY THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. ITA NO.1623/AHD/2012 3 5. IN RESPONSE TO THE NOTICE OF HEARING, NONE HAS C OME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 40A(2)(A)(B) OF THE INCO ME TAX ACT CONTEMPLATES THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB- SECTION AND THE AO IS OF OPINION THAT SUCH EXPENDIT URE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEG ITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEF IT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. ACCORDING TO THE ASSESSEE, A PERUSAL OF THE SECTION WOULD INDICA TE THAT IT APPLIES TO EXPENDITURE ON ACCOUNT OF GOODS, SERVICES, FACILITI ES AND NOT CAPITAL EXPENDITURE. IF NO EXPENDITURE IS CLAIMED BY THE A SSESSEE, THEN, HOW IT CAN BE DISALLOWED ? WE FIND THAT THE LD.FIRST APPELLATE A UTHORITY HAS APPRECIATED THE CONTROVERSY EXTRACTED (SUPRA) IN RIGHT PERSPECTIVE AND NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISM ISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 8 TH JANUARY, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/01/2016