ACIT CIR 6(1), MUMBAI V. BHARAT DISTILLERIES P.LTD, MUMBAI

ITA 1815/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78974 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-05-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BEN CH, MUMBAI JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JH JH JH CH CHCH CH- -- - VKJ VKJVKJ VKJ- -- - CKLDJ.K CKLDJ.K CKLDJ.K CKLDJ.K] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.1815/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2001-02 ACIT CIR 6(1), ROOM NO. 506, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. BHARAT DISTILLERIES PVT. LTD. BASEMENT NO. 4, TV INDUSTRIAL ESTATE, BEHDING GLAXO LABORATORIES, DR. AB ROAD, MUMBAI 400 025. PAN:-AAACB1492I APPELLANT RESPONDENT REVENUE BY/ JKTLO DH JKTLO DH JKTLO DH JKTLO DH VKSJ LS VKSJ LS VKSJ LS VKSJ LS SHRI R.K. SAHU ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI. M.P. MAKHIJA ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.12. 2010 OF CIT FOR THE A.Y. 2001-02. THE SOLITARY GROUND RAISE D BY THE REVENUE IN THIS APPEAL IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE O F RS. 8,55,800/- REPRESENTING BRAND LAB AND REGISTRATION CHARGES BEI NG CAPITAL IN NATURE DATE OF HEARING 21.05.2014 DATE OF PRONOUNCEMENT 23.05.2014 BHARAT DISTILLERIES PVT. LTD. 2 | P A G E WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FA ILED DURING THE COURSE OF SCRUTINY PROCEEDINGS TO PRODUCE ANY DOCUMENTARY EVI DENCE TO SUBSTANTIATE ITS CLAIM THAT THESE WERE RENEWAL EXPENSES 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING INDIAN MADE FOREIGN LIQUOR (IMFL). THE ASSESSEE SELLS ITS PRODU CTS UNDER VARIOUS BRANDS THROUGHOUT INDIA AND EXPORTS OUT OF INDIA. THE ASSE SSEE IS A MAHARASHTRA BASED COMPANY AND REGISTERED ITS BRAND IN THE STATE OF MA HARASHTRA BUT IN ORDER TO HAVE BETTER RESULTS, THE ASSESEE IS HAVING ITS BRANCH AN D SALES DEPOTS IN OTHER PARTS OF THE COUNTRY PARTICULARLY IN DELHI FOR SALE OF PRODU CTS IN THE NATIONAL CAPITAL TERRITORY. THE BRAND REGISTERED IN MAHARASHTRA WERE ALSO TO BE PUT ON RECORD IN THE OTHER STATES. THE ASSESSEE PAID ANNUAL FEE FOR RENEWAL OF REGISTRATION OF THE BRANDS AMOUNTING TO RS. 8,55,800/-. THE AO DISALLOWED THE SAID EXPENDITURE ON THE GROUND THAT THE SAME IS IN THE NATURE OF CAPITAL EXPENDITU RE. 3. ON APPEAL CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE BY HOLDING THAT THE EXPENDITURE CLAIMED IS REVENUE IN NATURE. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR OF TH E ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE EXPENDITURE IN QUESTION HAS BEEN INCURRED BY THE ASSESSEE FOR BRINGING ON RECORD THE BRAND ALREA DY REGISTERED IN THE STATE OF MAHARASHTRA IN OTHER STATES OF THE COUNTRY. THIS F ACT HAS NOT BEEN DISPUTED BY THE REVENUE THAT THE EXPENDITURE IN QUESTION HAS BEEN I NCURRED IN RELATION TO THE FEE PAID FOR RENEWAL OF REGISTRATION AND TO GET THE REG ISTERED BRANDS OF THE ASSESSEES PRODUCTS PUT ON RECORD IN THE OTHER STATES OF THE C OUNTRY. THUS THE EXPENSES ARE NOT FOR REGISTERING OF ANY NEW BRAND OR PRODUCT BUT IT WAS THE ANNUAL RENEWAL FEE/CHARGES OF THE ALREADY REGISTERED BRANDS AND FU RTHER FOR PUTTING THE BRANDS ON BHARAT DISTILLERIES PVT. LTD. 3 | P A G E RECORD IN OTHER STATES FOR THE PURPOSE OF MORE CONV ENIENT AND BETTER BUSINESS ACTIVITIES. THE CIT(A) AFTER CONSIDERING THE RELEVA NT FACTS HAS RECORDED ITS FINDING IN PARA 8 AS UNDER:- 8. I HAVE GONE THROUGH THE ABOVE SUBMISSIONS VERY CAREFULLY AND PERUSED THE ORDER OF THE ASSESSING OFFICER. FROM THE ABOVE SUBM ISSION: IT IS VERY CLEAR THAT THE EXPENSES INCURRED WERE NOT FOR REGISTERING NEW BRAN D I LEVEL BUT WERE EITHER RENEWAL OF FEES PAID OR TO GET THE SAID BRANDS BEIN G PUT ON RECORD IN OTHER STATES IN, THE COUNTRY SO THAT ASSESSEE'S RIGHT IN RESPECT OF SAID BRAND /LEVELS EVEN IN THOSE STATES GET PROTECTED FROM BEING COPIED. THE COMPANY IN ORDER TO HAVE BETTER RESULTS HAD ITS BRANCH AND SALES DEPOTS IN DELHI WHERE IT SALES ITS PRODUCT IN NATIONAL CA PITAL TERRITORY AND, THEREFORE. BRANDS RE GISTERED IN MAHARASHTRA HAD TO BE PUT ON RECORD FOR WHICH ANNUAL FEES HAD TO BE PA ID IN OTHER STATES ALSO. THE RENEWAL FEES HAD TO BE PAID EVEN FOR ALREADY REGISTERED BRANDS AND THE EXPENSES DEBITED ARE FOR THE ABOVE ACTIVITY AND NOT FOR REGISTERING ANY NEW BRAND. THESE ARE NORMAL REVENUE EXPENSES WHICH ARE INCURRED YEAR AFTER YEAR AND ALSO BEING ALLOWED FOR LAST SEV EN YEARS. THE EXPENSES ARE ALSO ALLOWED IN A Y. 2008-09. THIS CONCLUSIVELY PROVES THAT THE EXPEN DITURE INCURRED WAS IN NATURE OF REVENUE EXPENDITURE. I FIND CONSIDERABLE MERITS IN THE SUBMISSION OF THE APPELLANT. LOOKING TO THE NATURE OF EXPENSES, I AM OF THE VIEW THAT THE EXPENSES CLAIMED ARE REVENU E IN NATURE WHICH ARE BEING INCURRED BY THE APPELLANT YE AR AFTER YEAR AND ALSO ALLOWED BY THE ASSESSING OFFICER IN EARLIER YEARS AS WELL A S IN SUBSEQUENT YEAR THE EXPENSES INCURRED ARE EITHER RENEWAL FEES PAID OR T O GET THE SAID BRANDS BEING' PUT ON RECORD IN OTHER STATES IN THE COUNTRY SO THAT AS SESSEE'S RIGHT IN RESPECT OF SAID BRAND / LEVEL EVEN IN THOSE STATES GET PROTECTED FR OM BEING COPIED. THE EXPENSES ARE 'NOT FOR -REGISTERING ANY NEW BRAND AS HELD BY, THE ASSESSING, OFFICER. KEEPING IN VIEW, THE NATURE OF THE EXPENSES, IT IS HELD THAT T HE SAME ARE REVENUE IN NATURE AND ARE ALLOWABLE 'AS EXPENSES. THE ASSESSING OFFICER IS DIRECTED TO ALLO W THE SAME. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. BHARAT DISTILLERIES PVT. LTD. 4 | P A G E 5 IT WAS FURTHER BROUGHT TO OUR NOTICE THAT THE SIM ILAR EXPENDITURE HAS BEEN ALLOWED BY THE AO IN THE EALIER YEAR AS WELL AS IN THE SUBSEQUENT YEAR I.E. 2008-09. THE LD. AR HAS FILED THE COPY OF ASSESSMENT ORDER F OR A.Y. 2008-09 AND INVITED OUT ATTENTION AT PARA 4C OF THE ASSESSMENT ORDER AND S UBMITTED THAT THE EXPENDITURE FOR LABEL REGISTRATION CHARGES DISALLOWED FOR THE A .Y. 2007-08 FOR THE REASON THAT THE SAME WERE PREPAID EXPENSES OF THE A.Y. 2008-09 WERE ALLOWED FOR THE A.Y. 2008- 09. FIRSTLY, WE DO CONCUR WITH THE VIEW OF THE CIT( A) THAT THE EXPENDITURE IN QUESTION IS REVENUE IN NATURE AS IT DOES NOT BRING INTO EXIS TENCE ANY NEW ASSET OR BENEFIT OF ENDURING NATURE BUT THESE ARE RECURRING ANNUAL CHAR GES/RENEWAL FEE AND FURTHER IN VIEW OF THE FACT THAT THE AO HAS ACCEPTED AN IDENTI CAL EXPENDITURE IN THE EARLIER YEARS AS WELL AS IN THE SUSBEQUENT YEAR, THEREFORE, IN THE ABSENCE OF ANY CHANGE IN THE FACTS AND CIRCUMSTANCES FOR THE YEAR UNDER CONS IDERATION, THE AO IS NOT PERMITTED TO TAKE A DIFFERENT VIEW DE HORS THE RULE OF CONSISTENCY. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTEREFERE WITH THE IMPUG NED ORDER OF CIT(A) QUA THIS ISSUE. THE APPEAL OF THE REVENUE IS DEVOID OF MERTI S AND DESERVES DISMISSAL. 6. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 2 3 -05-2014 SD/- SD/- ( B.R. BASKARAN ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 23 -05-2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI