The ACIT, Central Circle, Vijayawada V. M/s Prakash Publicis, Vijayawada., Vijayawada

ITA 163/VIZ/2005

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7298 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-12-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 17-03-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: Y SURYACHANDRA RAO
• Keywords: Depreciation; Search and seizure; Revenue expenditure; Capital expenditure

Judgement Text

ITA NO.163 OF 2005 PRAKASH PUBLICIS VIJAYAWADA PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 163/VIZAG/2005 ASSESSMENT YEAR:2001-02 ACIT CENTRAL CIRCLE, VIJAYAWADA VS. M/S PRAKASH PUBLICIS, VIJAYAWADA (APPELLANT) (RESPONDENT) GIR NO: P 351 APPELLANT BY: SHRI D.S.SUNDER SINGH, SR DR RESPONDENT BY: SHRI Y. SURYA CHANDRA RAO, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 9.11.2004 PASSED BY LEARNED CIT(A), VIJAYAWADA AND IT RELATES TO THE ASSESSMENT YEAR 2001-02. 2. THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO A SINGLE ISSUE VIZ., WHETHER THE LEARNED CIT (A) IS JUSTIFIED IN H OLDING THAT THE COST OF INSTALLATION OF TRIAD SIGN SYSTEM IS A REVENUE EXPE NDITURE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF ADVERTISEMENT. T HE ASSESSEE CLAIMED A SUM OF RS.7,40,590/- WHICH WAS INCURRED O N INSTALLATION OF TRIAD SIGN SYSTEM AS REVENUE EXPENDITURE. THE SAID SYSTEM WAS INSTALLED IN VISAKHAPATNAM AND SAME DISPLAYS DIGITA LLY 3 ADVERTISEMENTS IN ROTATION. THE ASSESSEE HAS GENER ATED INCOME BY DISPLAYING ADVERTISEMENTS THROUGH THE SAID SYSTEM. THE ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE AS ACCORDING TO HIM IT WAS A PERMANENT ERECTION AND THE BENEFIT DERIVED TH ERE FROM IS OF ITA NO.163 OF 2005 PRAKASH PUBLICIS VIJAYAWADA PAGE 2 OF 5 ENDURING NATURE. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM AND ALLOWED DEPRECIATION ELIGIBLE THEREON. TH E LEARNED CIT (A) DELETED THE SAID ADDITION AND HENCE THE REVENUE IS IN APPEAL BEFORE US. 4. WHILE DELETING THE SAID ADDITION, THE LEARNED CI T (A) TOOK SUPPORT FROM THE DECISION OF ITAT HYDERABAD IN WTA NO.148/HYD/1994 IN THE CASE OF SHRI C.D.S. PRAKASA RAO WHEREIN IT WAS HELD THAT THE ADVERTISEMENT HOARDINGS CANNOT BE TREATED AS AN ASSET FOR THE PURPOSES OF WEALTH TAX ACT. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE BROUGHT TO OUR NOTICE T HAT THE SAME BENCH OF THE TRIBUNAL IN THE SAME ASSESSEES CASE I N WTA NO.203/HYD/1994 HAS HELD THAT THE ADVERTISEMENT HOA RDINGS SHALL CONSTITUTE AN ASSET UNDER THE WEALTH TAX ACT. THE A SSESSEE ALSO IN ITS WRITTEN SUBMISSION HAS STATED THAT THE DECISIONS O F HON'BLE TRIBUNAL RENDERED IN THE CONTEXT OF WEALTH TAX ENACTMENT ARE NOT APPLICABLE TO THE INSTANT CASE. THUS THERE IS AGREEMENT BETWE EN THE PARTIES THAT THE PRESENT ISSUE HAS TO BE DECIDED INDEPENDENTLY O N THE BASIS OF THE FACTS OF THE CASE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE TRAID SIGN SYSTEM IS USED AS A TOOL FOR EARNING INC OME AND FURTHER IT IS A PERMANENT STRUCTURE EXCLUSIVELY CONTROLLED AND OWNED BY THE ASSESSEE. THE SAID TRAID SYSTEM CAN BE MOVED FROM O NE PLACE TO ANOTHER AND IT WILL CONTINUE TO EARN INCOME EVEN AF TER ITS RE-ERECTION AT A NEW PLACE. ACCORDINGLY HE CONTENDED THAT THE C OST OF INSTALLATION OF TRAID SIGN SYSTEM SHOULD BE TREATED AS CAPITAL E XPENDITURE ONLY IN THE HANDS OF THE ASSESSEE. 6. ON THE CONTRARY THE LEARNED AUTHORISED REPRESENT ATIVE SUBMITTED THAT, IN THE ADVERTISEMENT BUSINESS OF TH E TYPE CARRIED ON ITA NO.163 OF 2005 PRAKASH PUBLICIS VIJAYAWADA PAGE 3 OF 5 BY THE ASSESSEE, THE STRATEGIC POINT OF LOCATION OF TRAID SIGN SYSTEM IS THE PRIME FACTOR FOR GENERATION OF REVENUE AND D EHORS SUCH PRIME LOCATION THE ADVERTISEMENT HOARDINGS BECOME USELESS . THE HOARDINGS ARE NORMALLY ERECTED ON A LEASE HOLD PREMISES AND T HEY ARE SUBJECT TO VARIOUS TERMS & CONDITIONS PUT BY THE MUNICIPAL AUT HORITIES. THE LICENSES ARE GIVEN BY THE MUNICIPAL AUTHORITIES ONL Y FOR A SHORT DURATION. AFTER THE COMPLETION OF THE LEASE/LICENSE PERIOD THESE SYSTEMS HAVE TO BE REMOVED FROM THAT PLACE. OUT OF THE TOTAL COST OF THE SYSTEM, THE LABOUR CHARGES INVOLVED IN THE EREC TION OF THE SAID SYSTEM IS ABOUT 50% AND HENCE VALUE OF THESE SYSTEM S BECOMES VERY MEAGER AFTER THE EXPIRY OF THE LICENSE PERIOD. ACC ORDINGLY, HE CONTENDED THAT THESE SYSTEMS CANNOT BE SAID TO HAVE BENEFITS OF ENDURING NATURE AND HENCE THE SAME HAS TO BE ALLOWE D AS REVENUE EXPENDITURE. HE FURTHER SUBMITTED THAT THE ASSESSI NG OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE AS REVENUE EXPEN DITURE IN THE EARLIER AND SUBSEQUENT YEARS. THE AUTHORISED REPRES ENTATIVE RELIED UPON THE FOLLOWING CASE LAW IN SUPPORT OF HIS CONTE NTIONS: A) CIT S. ANDAVAR CALENDERING MILLS (1994) 210 ITR 815 (MAD.) B) B AND A PLANTATION AND INDUSTRIES LTD., VS. CIT 242 ITR 22 (GAU). C) PATHANGE POULTRY FARM VS. CIT (1994) 210 ITR 06 68 W. D) CIT VS. HIND CONSTRUCTION & ENGINEERING COMPANY LTD., (1984) 147 ITR 513 (CAL.) E) CIT VS. NIZAM SUGAR FACTORY LTD (2) (1979) 116 I TR 706 (A.P) F) NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., VS. C IT (1993) 263 ITR 410 (BOM.) 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE ASSESSEE IS IN ADVERTISEMENT BUSINESS AND THE REVENUE IS GENERATED ON ACCOUNT OF DISPLAY OF ADVERTISEMENTS T HROUGH THE TRAID ITA NO.163 OF 2005 PRAKASH PUBLICIS VIJAYAWADA PAGE 4 OF 5 SIGN SYSTEM. IT IS A FACT THAT IF THE ABOVE SAID SI GN SYSTEM IS NOT INSTALLED, THE ASSESSEE CANNOT GENERATE ADVERTISEME NT REVENUES OF THAT TYPE. THUS THE TRAID SIGN SYSTEM IS THE BASIC NEED FOR GENERATING THE REVENUE. HOWEVER, THE LEARNED AUTHOR ISED REPRESENTATIVE SUBMITTED THAT THE SAID SYSTEM IS IN STALLED IN A LEASE HOLD PREMISES AND FURTHER THE LICENSE GRANTED FOR A SHORT DURATION BY THE MUNICIPAL AUTHORITIES AND FURTHER THEY ARE SUBJ ECT TO MANY TERMS AND CONDITIONS. IN OUR VIEW THE ABOVE SAID DISADVAN TAGES POINTED OUT BY THE LEARNED AUTHORISED REPRESENTATIVE ARE THE OB STACLES AND THREATS WHICH ARE USUALLY ATTACHED TO THE BUSINESS CARRIED OUT BY THE ASSESSEE. FOR THAT MATTER, SUCH KIND OF OBSTACLES AND THREATS ARE ATTACHED TO ANY TYPE OF BUSINESS. HENCE THE SAME C ANNOT BE TAKEN AS A TEST FOR DETERMINING THE NATURE OF EXPENDITURE IN CURRED BY THE ASSESSEE. THE SETTLED PRINCIPLE IS THAT, WHEN EXPE NDITURE IS INCURRED WITH A VIEW TO BRING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FOR THE ENDURING BENEFIT OF A TRADE, SUCH EXPENDITURE IS OR DINARILY TAKEN AS CAPITAL EXPENDITURE. IN THE INSTANT CASE AS STATED EARLIER CASE, THE VERY BASIS OF REVENUE GENERATION IS THE TRAID SIGN SYSTE M. IT WAS ALSO ACCEPTED THAT THE SAID TRAID SIGN SYSTEM CAN BE MOV ED FROM PLACE TO PLACE. THUS IT CAN BE SEEN THAT THE SAID TRIAD S IGN SYSTEM HAS GOT BENEFIT OF ENDURING NATURE. THE ONLY OTHER DISADVA NTAGE POINTED OUT WAS WITH THE REGARD TO THE HIGH LABOUR CHARGES FOR ERECTING THE SAID SIGN SYSTEM. THE ASSESSEE HAS NOT CITED ANY AUTH ORITY, WHERE IT IS STATED THAT THE HIGH LABOUR CHARGES THAT MAY BE INC URRED ON ERECTION OF AN ASSET CAN BE TAKEN AS TEST FOR DETERMINING TH E NATURE OF THE EXPENDITURE. IN OUR VIEW, THE SAID DISADVANTAGE CA NNOT BE TAKEN AS A TEST FOR DETERMINING THE NATURE OF EXPENDITURE. SI NCE THE ASSESSEE IS THE EXCLUSIVE OWNER OF TRAID SYSTEM AND FURTHER THE ADVERTISEMENT REVENUE IS GENERATED BY THE ASSESSEE BY USING THE S AID TRAID SYSTEM, IN OUR VIEW, THE COST OF INSTALLATION OF TR IAD SIGN SYSTEM SHALL CONSTITUTE CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE. WE HAVE ITA NO.163 OF 2005 PRAKASH PUBLICIS VIJAYAWADA PAGE 5 OF 5 GONE THROUGH THE VARIOUS CASE LAWS RELIED UPON BY T HE ASSESSEE AND WE NOTICE THAT THEY HAVE BEEN RENDERED UNDER DIFFER ENT CONTEXT AND HENCE THEY ARE NOT APPLICABLE TO THE FACTS OF THE I NSTANT CASE. THOUGH THE ASSESSEE CLAIM THAT THE SAID EXPENDITURE WAS AL LOWED AS REVENUE EXPENDITURE IN THE EARLIER AND SUBSEQUENT YEARS, TH E COPIES OF THE RELEVANT ASSESSMENT ORDERS WERE NOT PRODUCED BEFORE US AND IT IS ALSO NOT KNOWN WHETHER SUCH ASSESSMENT ORDERS WERE PASSE D UNDER REGULAR ASSESSMENT PROCEEDING. IN VIEW OF THE FOREG OING, WE ARE UNABLE TO AGREE WITH THE REASONING GIVEN BY THE LEA RNED CIT(A) AND ACCORDINGLY, WE SET ASIDE HIS ORDER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE: 07-01-2011 COPY TO 1 THE ACIT, CENTRAL CIRCLE, VIJAYAWADA 2 M/S PRAKASH PUBLICIS, 27-20-30 MUSEUM ROAD, GOVER NORPET, VIJAYAWADA 3 4. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM