DCIT 2(3), MUMBAI V. TATA MOTORS LTD, MUMBAI

ITA 1817/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75915 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 27-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK; PITAMBER DAS
• Assessee Lawyers: DINESH VYAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONOURABLE VICE PRESIDENT SHRI. D. MANMOHAN, & SHRI RAJENDRA (AM) ITA NO. 1817/MUM/2011 (ASSESSMENT YEAR 2007-08) ITANO.1818/MUM/2011 (ASSESSMENT YEAR 2007-08) DATE OF HEARING: 27/03/2014 DATE OF PRONOUNCEMENT: 27/03/2014 O R D E R PER BENCH: THESE TWO APPEALS, FILED AT THE INSTANCE OF THE RE VENUE, ARE DIRECTED AGAINST THE ORDER OF LD.CIT, MUMBAI. SINCE COMMON ISSUE IS INVOLVED IN B OTH THESE DCIT- 2(3) R.NO.555 AAYAKAR BHAVAN, MUMBAI TATA MOTORS LTD. BOMBAY HOUSE,24, HOMI MODY STREET, FORT, MUMBAI-40001 PAN:- AAACT2727Q APPELLANT RESPONDENT DCIT 2(3) R.NO.555 AAYAKAR BHAVAN, MUMBAI TATA POWER CO. LTD. BOMBAY HOUSE,24, HOMI MODY STREET, FORT, MUMBAI-40001 PAN:- AAACT0054A APPELLANT RESPONDENT DEPARTMENT BY.: SHRI K.C.P. PATNAIK & PITAMBER DAS ASSESSEE BY: SHRI DINESH VYAS ITANOS.1817&1818 /M/2011 2 APPEALS, WE PROCEED TO DISPOSE OF THESE APPEALS BY A COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE CASE OF THE REVENUE IS THAT LD. CIT(A) ERRED IN HOLDING THAT THE IMPUGNED EXPENSES WHICH ARE ON ACCOUNT OF SALES PROMOTION CANNOT BE CHARGED UNDER FBT, WITHOUT APPRECIATING THAT SALES PROMOTION EXPENSES IS TO BE INCLUDED IN THE VALUE OF TAXABLE FRINGE BENEFITS AS PROVIDED U/S115WB(2) OF THE IT ACT 1961. 3. IN THE CASE OF M/S. TATA MOTORS LTD IT HAD MAD E A PAYMENT OF RS.40,88,00,500/- TO M/S. TATA SONS LTD., TOWARDS BRAND EQUITY AND BUSIN ESS PROMOTION IN ACCORDANCE WITH BEBP AGREEMENT. ASSESSEE HAS NOT CONSIDERED THE SAME F OR THE PURPOSE OF COMPUTING VALUE OF FRINGE BENEFITS. SIMILARLY, IN THE CASE OF TATA POWER CO. LTD. THE ASSESSEE HAD INCURRED THE EXPENDITURE OF RS.13,20,94,819/- UNDER THE HEAD BRAND EQUITY. A CCORDING TO THE ASSESSING OFFICER SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SALES PROMOTION AND PUBLICITY AND THUS, THE PROVISIONS OF SECTION 115WB(2)(D) IS ATTRACTED AND CONSEQUENTLY THE EXPENDITURE DESERVES TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUT ING VALUE OF FRINGE BENEFITS. 4. ON THE OTHER HAND, THE CASES OF THE ASSESSEES WA S THAT NOT ONLY THEY BUT OTHERS PAID SUBSCRIPTION FEES TO OWNER OF THE TATA BRAND. THIS FEE WAS USED BY THE OWNER OF THE BRAND FOR ENHANCING AND PROTECTING THE BRAND BY UNDERTAKING V ARIOUS ACTIVITIES SUCH AS LEGAL EXPENSES FOR ACTING ON INFRINGEMENT OF BRAND, IMPROVEMENT IN QUA LITY SYSTEMS ETC. AS PER THE AGREEMENT OF M/S. TATA SONS LTD. IT HAD TO PROTECT THE IMAGE AN D GOODWILL OF THE GROUP AND HENCE IT CANNOT BE CONSIDERED US EXPENDITURE FOR PURPOSE OF SALES PROM OTION AND PUBLICITY. THE AO WAS OF THE VIEW THAT 20% OF THE BRAND EQUITY EXPENDITURE TO BE ADDE D TO THE VALUE FRINGE BENEFITS AND ASSESSMENT WAS COMPLETED ACCORDINGLY. 5. BEFORE THE CIT(A), IT WAS CONTENDED THAT SECTIO N 115WB COVERED EXPENSES ON SALES PROMOTION INCLUDING PUBLICITY BUT INCLUDING EXCLUDE D CERTAIN EXPENSES LIKE ADVERTISEMENT OF ANY FORM IN ANY PRINT (INCLUDING JOURNALS, CATALOGUES O R PRICE LISTS) OR ELECTRONIC MEDIA OR TRANSPORT SYSTEM, BY WAY OF SIGNS BOARDS, BANNERS, ELECTRIC S PECTACULARS, KIOSKS, HOARDINGS, BILL BOARDS BOARD PAPER HOLD PAYMENT AT AGENCIES. . LD. CIT(A) EXHAUSTIVELY CONSIDERED THIS ISSUE FROM PARA 5 ONWARDS TO HOLD THAT FBT CANNOT BE APPLIED IN THE INSTANT CASE. 6. FURTHER AGGRIEVED, REVENUE IN APPEAL BEFORE US. LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE PLACED BEFORE US COPIES OF FOLLOWING ORDERS OF ITAT MUMBAI BENCHES, IN SUPPORT ITANOS.1817&1818 /M/2011 3 OF HIS CONTENTION THAT EXPENDITURE ON ACCOUNT OF SA LES PROMOTION CANNOT BE BROUGHT WITHIN THE AMBIT OF FRINGE BENEFITS TAX, SINCE THE EXPENDITURE WAS NOT INCURRED FOR THE EMPLOYEES OF THE COMPANY I.E., NOT FOR THE BENEFIT OF EMPLOYEES DIRE CTLY OR INDIRECTLY. 1. ITA NO.8297/M/2011 ACIT VS. M/S. TATA MOTORS LTD ., ORDER DATED 23.11.2012 2. ITA NO.7927/M/2010 HV TRANSMISSIONS LIMITED, VS. ACIT ORDER DATED 09.11.2012 3. ITA NO.2337/M/2012 ACIT VS. TATA POWER CO. LTD. ORDER DATED 23.11.2011 4.ITA NOS.251&252/M/2012 TML DRIVELINES LTD. VS. DC IT ORDER DATED 11.1.2013 5. ITA NO.3457/M/2011 ACIT VS. TATA CONSULTANCY SER VICES LTD. DATED 29.8.2005 6. ITA NOS.2735&2736/M/2011 ACIT VS. M/S. TATA ASSE T MANAGEMENT LTD. ORDER DATED 25/04/2012 7. LEARNED DEPARTMENTAL REPRESENTATIVES, ON THE OTH ER HAND STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER, THOUGH HE ADMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY THE AFORCITED DECISIONS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED ON RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT MUMBAI BENCHES IN THE CASE OF TAT A POWER CO. LTD. AND OTHER GROUP CASES. WE HOLD THAT SUBSCRIPTION AMOUNT PAID BY THE ASSESS EES AS PER BEBP AGREEMENT WITH M/S. TATA SONS LTD. FALLS OUTSIDE THE AMBIT OF FRINGE BENEFIT S SINCE THERE IS NO BENEFIT TO THE EMPLOYEES OF THE ASSESSEES HEREIN. WE THEREFORE, UPHOLD THE ORDE RS PASSED BY THE LEARNED CIT(A). 9. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMIS SED, AS PRONOUNCED IN THE OPEN COURT. SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/ SD/ SD/ SD/- -- - (D. MANMOHAN) VICE PRESIDENT MUMBAI; DATED : 27/3/2014 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI ITANOS.1817&1818 /M/2011 4 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ( ( ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI A.K.PATEL