WELLA INDIA HAIRCOSMETICS P.LTD, MUMBAI V. ACIT (OSD) 8(1), MUMBAI

ITA 2238/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88537 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: HARESH G BUCH
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI , ,, , !' !' !' !' '''# '''# '''# '''#$ $$ $ % % % % BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 2238/MUM/2013 (ASSESSMENT YEAR: 2009-10) WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED, 425-426, CHINTAMANI PLAZA, MOHAN STUDIO COMPOUND, ANDHERI-KURLA ROAD, ANDHERI (EAST), MUMBAI -400 099 .: PAN: AAACE 5212 H VS ACIT-(OSD)-RANGE -8(1), MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARESH G BUCH RESPONDENT BY : SHRI PAVAN KUMAR BEERLA /DATE OF HEARING : 11-02-2015 ! / DATE OF PRONOUNCEMENT : 04-03-2015 & & & & ORDER '''# '''# '''# '''# , , , , : :: : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 12, MUMBAI, DATED 14.01.2013, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN: GROUND I 1 THE HON'BLE COMMISSIONER OF INCOME TAX APPEALS -18 [CIT(A)'] ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER ('AO') IN TREATING THE SUBJECT PAYMENTS OF RS. 69,34,558/- AS CAPITAL EXPENDITURE. 2. THE CIT(A) FAILED TO APPRECIATE AND OUGHT TO HAV E HELD THAT THE SAID PAYMENTS REPRESENTED PROMOTION EX PENSES IN THE COURSE OF THE BUSINESS ALTHOUGH GIVEN IN THE FORM OF ASSETS. 3.THE APPELLANT THEREFORE PRAYS THAT THE SUM OF RS. 69,34,558/- BE ALLOWED AS REVENUE EXPENDITURE. WITHOUT PREJUDICE TO GROUND I GROUND II WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 2 1. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEPRECIATION OF RS. 13,20,213/- ON THE GROUND THAT THE ASSETS WORTH RS. 69,34,558/- WERE N OT PURCHASED DURING THE YEAR AND THEREBY WRONGLY CLAIM ING DEPRECIATION THEREON. 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE A SSETS WERE PUT TO USE; DURING THE YEAR UNDER CONSIDERATIO N EVEN THOUGH THE PAYMENTS FOR THE SAME WERE MADE IN THE SUBSEQUENT YEAR. 3. THE APPELLANT PRAYS THAT THE DEPRECIATION OF THE RS . 13,20,213/- BE ALLOWED. GROUND III 1. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN TREATING THE WRITTEN OFF AMOUNT OF UNRECONCILED BAL ANCES OF RS. RS. 1,44.298/- AS CAPITAL IN NATURE. 2. THE APPELLANT THEREFORE PRAYS THAT THE SAID WRITE O FF OF RS. 1,44,298/- REPRESENTING UNRECONCILED BALANCES B E ALLOWED AS DEDUCTION AS CLAIMED BY THE APPELLANT. GROUND IV 1. THE CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE A MOUNT OF RS. 1,71,56,104/- INCURRED ON NEON SIGN BOARDS A ND HOARDINGS AS CAPITAL EXPENDITURE AND ADDING IT BACK TO THE TAXABLE INCOME OF THE APPELLANT ON THE GROUND T HAT THEY HAD THE CAPACITY TO GIVE ADVERTISEMENT FOR MOR E THAN A PERIOD OF 2-3 YEARS. 2. HE FAILED TO APPRECIATE THAT THE AO HAD APPLIED HIS MIND AND EXHAUSTED HIS POWERS BY EXAMINING IN DETAIL THE NATURE OF THE EXPENSE. 3. HE FURTHER FAILED TO APPRECIATE THAT HIS POWERS ARE CO- TERMINUS TO THAT OF THE AO AND THEREFORE, HAD NO JURISDICTION TO REVIEW THE ORDER OF THE AO. 4. THE APPELLANT THEREFORE PRAYS THAT THE ORDER OF THE CIT(A), IN SO FAR AS THIS GROUND IS CONCERNED. IS B AD IN LAW AND OUGHT TO BE QUASHED. WITHOUT PREJUDICE TO GROUND IV GROUND V 1. THE CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE A MOUNT OF RS. 1,71,56,104/- INCURRED ON NEON SIGN BOARDS A ND HOARDINGS AS CAPITAL EXPENDITURE AND ADDING IT BACK TO THE TAXABLE INCOME OF THE APPELLANT ON THE GROUND T HAT THEY HAD THE CAPACITY TO GIVE ADVERTISEMENT FOR MOR E THAN A PERIOD OF 2-3 YEARS. 2. HE FAILED TO APPRECIATE THE FACT THAT THE SAID PAYM ENTS WERE NOT FOR ACQUISITION OF ANY CAPITAL ASSET AND T HAT IT WOULD NOT AMOUNT TO AN ACQUISITION OF AN ADVANTAGE OF AN ENDURING NATURE. 3. THE APPELLANT THEREFORE PRAYS THAT THE SAID AMOUNT OF RS.1,71,56,104/- BE ALLOWED AS BUSINESS EXPENDITURE . WITHOUT PREJUDICE TO GROUND IV & V GROUND VI 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT(A) ERRED IN NOT ALLOWING DEPRECIATION U/S. 32(1) OF THE ACT ON THE ALLEGED CAPITAL EXPENDITURE OF RS. 1,71,56,104/-. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT DEPRECIATION ON THE CAPITALIZED PORTION OF THE ADVERTISEMENT EXPENDITURE WAS ALLOWABLE U/S 32(1) O F WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 3 THE ACT. 3. THE APPELLANT PRAYS THAT THE A.O. BE DIRECTED TO AL LOW DEPRECIATION ON RS. 1,71,56,104/-. GROUND VII 1. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AG IN CONSIDERING THE ENTIRE STOCK OF GOODS WORTH RS. 11,76,000/- AS SOLD BY THE APPELLANT OUT OF BOOKS A ND FURTHER APPLYING THE GROSS PROFIT RATIO OF 56% OF T HE ASSESSEE AND THEREBY, BRINGING AN AMOUNT OF RS. 18,34,560/- TO TAX AS OUT OF BOOK SALES. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE AG, BEFORE MAKING SUCH ADDITION TO THE TOTAL INCOME OF THE APPELLANT, OUGHT TO HAVE FIRST REJECTED THE BOO KS OF ACCOUNTS IN TERMS OF SECTION 145(3) OF THE ACT. 3. THE APPELLANT THEREFORE PRAYS THAT THE ADDITION MAD E BY THE AG BE HELD AS BAD IN LAW AND TO BE QUASHED. WITHOUT PREJUDICE TO GROUND VII GROUND VIII 1. THE CIT(A) FAILED TO APPRECIATE AND OUGHT TO HAVE H ELD THAT DUE TO DISCONTINUANCE OF THE PROJECT, THE APPE LLANT DESTROYED THE ENTIRE STOCK AND THE SAME WAS SHOWN A S CONSUMPTION IN THE BOOKS OF ACCOUNTS. 2. THE SUBJECT STOCK WAS NOT SOLD BY THE APPELLANT IN THE MARKET. HOWEVER, THE AG ERRED IN MAKING ARBITRARY ADDITION BASED ON THE ASSUMPTION THAT SUCH STOCK WA S SOLD OUT OF BOOKS. 3. THE APPELLANT THEREFORE PRAYS THAT THE AG BE DIRECT ED TO DELETE THE ADDITION OF RS. 18,34,560/- AND ALLOW TH E WRITE OFF OF THE STOCK OF RS. 11,76,000/-. GROUND IX THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND AND/OR ALTER ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 2. AT THE TIME OF HEARING, THE AR SUBMITTED THAT GROUND NO. I ALONG WITH ITS SUB-GROUNDS ARE NOT PRESSED. THE DR DID N OT OBJECT. 3. SINCE GROUND IS NOT PRESSED, IT IS REJECTED. 4. GROUND NO. I ALONG WITH SUB-GROUNDS ARE THEREFORE REJECTED. 5. GROUND NO. II IS ALTERNATIVE TO GROUND NO. I, WHEREIN T HE REVENUE AUTHORITIES ON THE ONE HAND HELD THE EXPENDITU RE TO BE CAPITAL IN NATURE AND ON THE OTHER HAND DISALLOWED THE CLA IM OF DEPRECIATION ON THE FURNITURE AND FIXTURES PURCHASED BY THE WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 4 ASSESSEE. INITIALLY, THE ASSESSEE HAD CLAIMED THE EXPENDIT URE AS REVENUE. 6. AT THE TIME OF HEARING, THE AR SUBMITTED THAT THE ASS ESSEE IS NOT IN A POSITION TO PRODUCE ANY EVIDENCE WITH REGARD TO ACQUISITION OF THE MATERIALS TO PROVE THAT THE EXPENSE WA S REVENUE IN NATURE. 7. THE DR SUBMITTED THAT THERE WAS NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE PURSUED THE ORDERS OF THE REVENUE AUTHORITIES AND FIND THAT THE CLAIM OF EXPENSE AS REVENUE HAS BEEN REJEC TED, BUT THE AO AND CIT(A) HAVE HELD THE ACQUISITION OF FURNITURE AND FIXTURE AS CAPITAL IN NATURE. BUT AT THE SAME TIME, EVEN IF TO BE TREATED AS CAPITAL ASSET, THE PROOF OF ACQUIRING THE SAME HAD TO BE BROUGHT ON RECORD, WHICH THE AR SUBMITTED THAT THE ASSESSEE IS UNABLE TO SO. 9. IN SUCH A CASE, WHEN WE DO NOT FIND ANYTHING ON RECO RD, AS A PROOF OF ACQUISITION OF THE FURNITURE AND FIXTURES, WE CANNOT EVEN DIRECT THE AO TO ALLOW DEPRECIATION THEREON, AS WE C ANNOT MAKE ANY OBSERVATION WITH REGARD TO THE OWNERSHIP OF TH E ASSET, HAVING BEEN BROUGHT INTO EXISTENCE AND USED FOR THE PU RPOSES OF BUSINESS. 10. WE, THEREFORE, SUSTAIN THE ORDERS OF THE REVENUE AUTHORITIES TO DISALLOW THE EXPENSE CLAIMED BY THE ASSESSEE. 11. GROUND NO. II IS THEREFORE, ALLOWED. 12. GROUND NO. III PERTAINS TO AMOUNTS WRITTEN OFF, WHICH HAVE BEEN HELD TO BE CAPITAL IN NATURE AND THEREFORE DISALLOWED AND SUSTAINED BY THE CIT(A). WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 5 13. THE AR SUBMITTED BEFORE US THAT NO DETAILS CAN BE PROVIDED EVEN TODAY WITH REGARD TO AMOUNTS WRITTEN OFF. 14. THE DR SUBMITTED THAT THERE WAS NO INFIRMITY IN THE ORDER OF THE REVENUE AUTHORITIES. 15. ON GOING THROUGH THE SUBMISSIONS, WE APPRECIATE THAT THE AR ACCEPTED THAT NO DETAILS COULD BE PLACED BEFORE REVEN UE AUTHORITIES AND NO DETAILS CAN BE PLACED NOW BEFORE US TO JUSTIFY ITS CLAIM. IN THESE CIRCUMSTANCES, WE ARE LEFT WITH NO ALTER NATIVE, BUT TO SUSTAIN THE ORDERS OF THE REVENUE AUTHORITIES & CONSEQUENTIALLY REJECT THE GROUND AS RAISED BY THE ASSESSEE. 16. GROUND NO. III IS THEREFORE REJECTED. 17. GROUND NO. IV PERTAINS TO HOLDING EXPENSE OF RS. 1,71,56,104/- AS CAPITAL EXPENDITURE BY THE CIT(A). 18. THE FACTS ARE THAT THE ASSESSEE INCURRED RS. 10,46,67,191/- UNDER THE HEAD ADVERTISEMENT AND SALES PROMOTION. IN THE ASSESSMENT PROCEEDINGS, THE AO ASKED FOR DETAILS OF THE EXPENSE. THE ASSESSEE PROVIDED THE DETAILS . FROM THE DETAILS AS PROVIDED BY THE ASSESSEE, IT WAS NOTICED T HAT RS. 1,71,56,104/- WERE EXPENSE CLAIMED AS REIMBURSEMENT MADE TO ITS C & F AGENTS AT DELHI, GUJARAT & KOLKATA. 19. ON FURTHER DETAILS, IT WAS NOTICED THAT THE ASSESSEE HAD PAID COMMISSION TO TAKE C & F AGENTS, BUT ON THE EXPENS E OF RS. 1,71,56,104/-, THE ASSESSEE DID NOT DEDUCT TAS. THE AO, THEREFORE, IMPORTING THE PROVISIONS OF SECTION 40(A)(IA) DISALLOWED THE EXPENSE OF RS. 1,71,56,104/.-. 20. THE CIT(A) ON THE CONTRARY HELD THE EXPENSE OF RS. 1,71,56,104/- AS CAPITAL IN NATURE AND DISALLOWED THE SAME. WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 6 21. AGAINST THIS DISALLOWANCE AND TREATMENT GIVEN BY THE CIT(A) ASSESSEE IS BEFORE THE ITAT. 22. BEFORE US, THE AR REITERATED ITS SUBMISSIONS MADE BEFO RE THE REVENUE AUTHORITIES AND ALSO SUBMITTED THAT THE CIT (A) TREADED ON A NON ISSUE. 23. THE DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A). 24. WE HAVE HEARD THE ARGUMENTS AND HAVE PURSUED TH E ORDERS OF THE REVENUE AUTHORITIES. IT IS SEEN THAT THE A O HAS DISALLOWED THE IMPUGNED AMOUNT ON ACCOUNT OF NON DEDUCTION OF TAS, WHICH IMPLIES THAT THE AO ACCEPTS THE EXPENSE TO B E A REVENUE EXPENSE. ON THE OTHER HAND, THE CIT(A) HOLDS THA T RS. 1,71,56,104/- INCURRED FOR PUTTING UP BANNERS, NEON LIGHTS A ND SIGN BOARDS, AS CAPITAL EXPENSE. 25. IN THESE CIRCUMSTANCES, FIRST WE HAVE TO ASCERTAIN A S TO WHAT SHOULD BE THE TREATMENT OF EXPENSE, I.E. REVENUE OR CAPITAL. THE AR HAS POINTED OUT THAT PUTTING UP OF NEON SIGN BOA RDS, BANNERS, HOARDINGS ETC. ENTIRELY DEPEND ON THE SCHEME A PPROVED BY THE PARENT COMPANY, I.E. IF THE ASSESSEE NOW PROCTOR & GAMBLE INDIA LTD. WANTS TO CHANGE ITS DECOR OF ITS OUTLETS WITHIN A FEW MONTHS OF ITS SETTING UP, THE SALON OWNERS HAVE TO CHANGE THE ENTIRE DCOR, WHICH IT BUYS FROM DESIGNATED PERSONS , OR THESE HOARDINGS ETC. MAY REMAIN THERE FOR YEARS. 26. THE AR THEREFORE, PLACED RELIANCE ON THE DECISION OF ITO VS. SPICE COMMUNICATIONS LTD. REPORTED IN 35 SOT 78, WHEREIN, T HE COORDINATE BENCH OF THE ITAT, DELHI HELD, DISPUTE THAT THE ASSESSEE WAS IN THE BUSINESS OF PROVIDING CELLULAR MOBILE SERVICES UNDER ITS OWN SE LF- GENERATED BRAND 'SPICE SINCE 1997. THE ASSESSEES BUSINESS WAS UNDOUBTEDLY HIGHLY COMPETITIVE AND IT HAD TO PROVIDE SERVICES IN A COMPETITIVE ENVIRONMENT. T HIS WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 7 WAS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD INCUR RED EXPENDITURES TOWARDS ADVERTISEMENT AND SALES PROMOTION IN THE COURSE OF CARRYING ON ITS BUSINESS ACTIVITIES. THE ASSESSING OFFICER HAD ALLOWED 90 PE R CENT OF THE EXPENSES AS REVENUE EXPENDITURE AND ALLOCATE D 10 PER CENT TOWARDS CAPITAL BY OBSERVING THAT 10 PER C ENT OF EXPENSES HAD BEEN INCURRED TOWARDS BRAND BUILDING. THE ASSESSING OFFICER HAD NOT BEEN ABLE TO JUSTIFY AS TO HOW THE 10 PER CENT OF THE TOTAL ADVERTISEMENT AND SALES PROMOTION EXPENSES COULD BE ALLOCATED TOWARDS CAPIT AL EXPENDITURE WHEN THE ASSESSEE HAD NOT ACQUIRED ANY BRAND FROM ANY OUTSIDE PARTY. THE EXPENDITURES ON ADVERTISEMENT AND SALES PROMOTION CONSTITUTED EXPENDITURES INCURRED ON PRESS ADVERTISEMENT, HOARDINGS, NEON SIGN BROCHURES ETC. THE PRESS ADVERTISEMENT COULD NOT BE CONSIDERED AS CAPITAL AS SET ACQUIRED BY THE ASSESSEE. SIMILARLY, PUTTING HOARDI NGS AND NEON SIGNS COULD ALSO NOT BE CONSIDERED ON CAPI TAL FIELD. THESE EXPENDITURES DID NOT CREATE ANY CAPITA L ASSET FOR THE ASSESSEE. EVEN THERE WAS NO BENEFIT O F AN ENDURING NATURE SO AS TO TREAT THE EXPENSES AS CAPI TAL EXPENDITURE. THOUGH BY INCURRING EXPENDITURES ON ADVERTISEMENT AND SALES PROMOTION, THE ASSESSEE HAD NOT ACQUIRED ANY FIXED CAPITAL ASSET, YET THESE EXPENDITURES WERE INCURRED FOR EARNING BETTER PROFI TS AND FOR FACILITATING THE ASSESSEES OPERATION OF PROVID ING CELLULAR MOBILE SERVICES. THUS, THERE EXISTED DIREC T NEXUS BETWEEN THE ADVERTISEMENT AND SALES PROMOTION EXPENSES AND THE CARRYING OUT OF THE BUSINESS ACTIV ITY OF THE ASSESSEE. THEREFORE, THERE WAS NO JUSTIFICATION IN INTERFERING WITH THE ORDER OF THE COMMISSIONER (APP EALS) IN DELETING THE DISALLOWANCE OF 10 PER CENT OF EXPE NSES TOWARDS ADVERTISEMENTS AND SALES PROMOTION INCURRED BY THE ASSESSEE FOR SMOOTH FUNCTIONING AND CARRYING ON ITS BUSINESS EFFECTIVELY, PROFICIENTLY AND PROFITAB LY. THE ORDER OF THE COMMISSIONER (APPEALS) WAS, THUS, TO B E UPHELD. 27. THE AR ALSO PLACED RELIANCE ON THE DECISION OF CIT VS ORIENT CERAMICS & INDUSTRIES LTD. REPORTED IN 358 ITR 49 , WHEREIN HONBLE DELHI HIGH COURT HELD, 7 COMING TO THE EXPENDITURE ON GLOW SIGN BOARDS INCURRED BY THE ASSESSEE, THE ISSUE WAS AS TO WHETH ER THE SAID EXPENDITURE IS REVENUE OR CAPITAL IN NATUR E. THE PLEA OF THE ASSESSEE WAS THAT THESE GLOW SIGN BOARD S ARE OF PERISHABLE NATURE, WHICH THE ASSESSEE HAD DISPLAYED AT THE VARIOUS OUTLETS OF ITS DEALERS AND THEREFORE, THE ENTIRE AMOUNT SHOULD BE TREATED AS REVENUE EXPENDITURE AND WAS ALLOWABLE UNDER SECTION 37 OF THE ACT AS BUSINESS EXPENDITURE. THE ASSESSIN G OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE HOLDING AS UNDER : '4.3 GLOW SIGN BOARDS ARE MADE OF MATERIALS LIKE STEEL/ALUMINUM FRAMES AND PLASTIC SHEETS AND DISPLA Y THE INFORMATION FOR LONG PERIODS SUBJECT TO MINOR R EPAIRS. WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 8 CONSIDERING THE USEFUL LIFE OF THE BOARDS, ASSESSEE - COMPANY WAS RIGHTLY TREATING THE EXPENDITURE AS CAP ITAL EXPENDITURE IN THE EARLIER YEARS I.E., PRIOR TO ASS ESSMENT YEAR 2005-06. THERE IS NO CHANGE IN CIRCUMSTANCES F OR CHANGING THE TREATMENT OF EXPENDITURE FROM CAPITAL TO REVENUE. DURING THE ASSESSMENT YEAR 2005-06 THE ASSESSING OFFICER HAD CONCLUDED THAT THE ASSESSEE COMPANY CANNOT BE ALLOWED TO CHANGE THE ACCOUNTING TREATMENT OF PARTICULAR ITEM WITHOUT ANY BASIS 8. THUS, ONLY ON THE GROUND THAT THE FRAMES OF THES E GLOW SIGN BOARDS ARE MADE OF STEEL/ALUMINUM, THE ASSESSI NG OFFICER CAME TO THE CONCLUSION THAT THE EXPENDITURE INCURRED THEREUPON WAS CAPITAL IN NATURE. HE WAS AL SO INFLUENCED BY THE FACT THAT TILL THE PREVIOUS YEAR, THE ASSESSEE HAD ITSELF APITA1IZED THE EXPENDITURE AND ONLY FROM THE ASSESSMENT YEAR 2005-06, ACCOUNTING POLICY IN REGARD TO INCURRING ON EXPENDITURE ON GLOW SING BOA RDS WAS CHANGED BY THE ASSESSEE. 9. THE CIT(A) DELETED THIS ADDITION HOLDING IT TO B E EXPENDITURE OF REVENUE IN NATURE. 10. THE ORDER OF THE CIT(A) HAS BEEN UPHELD BY THE TRIBUNAL AND IN ARRIVING AT THE CONCLUSION THAT THE EXPENDITURE WAS OF REVENUE NATURE, THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF THE PUNJAB AND HARYANA HIG H COURT IN THE CASE OF CIT V. LIBERTY GROUP MARKETING DIVISION [2009] 315 ITR 125 /[2008] 173 TAXMAN 439 WE HAVE GONE THROUGH THE SAID JUDGMENT RENDERED BY THE PUNJAB AND HARYANA HIGH COURT. THE COURT DEALT WITH THE SAME ISSUE, VIZ., EXPENDITURE ON GLOW SIGN BOARDS AND HELD THE EXPENDITURE TO BE REVENUE IN NA TURE IN THE FOLLOWING MANNER: 14. CONSIDERING THE ABOVE PRINCIPLE OF LAW, IN THE PRESENT CASE, IT IS TO BE SEEN AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE ON GLOW SIGN BOARDS WAS WITH A VIEW TO BRINGING INTO EXISTENCE A N ASSET OR AN ADVANTAGE FOR THE ENDURING BENEFIT OF T HE BUSINESS. IN OUR OPINION, THE EXPENDITURE INCURRED BY THE ASSESSEE ON GLOW SIGN BOARDS DOES NOT BRING INTO EXISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BE NEFIT OF THE BUSINESS, WHICH IS ATTRIBUTABLE TO THE CAPIT AL. THE GLOW SIGN BOARD IS NOT AN ASSET OF PERMANENT NATURE . IT HAS A SHORT LIFE. THE MATERIALS USED IN THE GLOW SI GN BOARDS DECAY WITH THE EFFECT OF WEATHER. THEREFORE, IT REQUIRES FREQUENT REPLACEMENT. THE TRIBUNAL HAS ALS O RECORDED A FINDING THAT THE ASSESSEE HAS TO INCUR EXPENDITURE ON GLOW SIGN BOARDS REGULARLY IN ALMOST EACH YEAR. THIS FACT ITSELF SHOWS THAT THE ADVANTAGE ACC RUED FROM THE USE OF THE GLOW SIGN BOARDS IS NOT OF ENDU RING NATURE. THUS, THE EXPENDITURE BY THE ASSESSEE ON TH ESE GLOW SIGN BOARDS DID NOT BRING INTO EXISTENCE ANY A SSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINE SS. THE ASSESSEE HAS SPENT THE EXPENDITURE ON THE GLOW SIGN BOARDS WITH AN OBJECT TO FACILITATE THE BUSINESS OP ERATION AND NOT WITH AN OBJECT TO ACQUIRE ASSET OF ENDURING NATURE. THEREFORE, THE SAID EXPENDITURE WAS OF REVE NUE WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 9 NATURE AND THE TRIBUNAL HAS RIGHTLY TREATED THE SAM E AS OF REVENUE NATURE. THIS CASE FOLLOWED THE RATIO LAID DOWN BY HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. LIBERTY GROUP MARKETING DIV ISION, REPORTED IN 315 ITR 125. THIS ORDER WAS FOLLOWED BY HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. PEPSICO INDIA HOLDINGS (P) LTD. THE AR ALSO POINTED OUT THAT IN THE CASE OF CIT VS . GEOFFREY MANNERS AND CO. LTD., REPORTED IN 315 ITR 134, HONBLE BO MBAY HIGH COURT HAS FOLLOWED THE DECISION TAKEN IN THE CASE OF L IBERTY GROUP ( SUPRA ). 28. PLACING RELIANCE ON THE ABOVE CITED DECISIONS, THE EXPE NSE COULD NOT BE HELD TO BE CAPITAL IN NATURE, AS NO ENDURING BENEFIT COULD BE ATTAINED. WE THEREFORE, ACCEPT THAT THE EXPENSE SHALL BE REVENUE IN NATURE. 29. AS A RESULT, GROUNDS NO. IV & V ARE ALLOWED, AS WE AC CEPT THE EXPENSE TO BE REVENUE IN NATURE. WE THEREFORE, RES TORE THE ISSUE TO THE FILE OF THE AO, WITH THE DIRECTION THAT THE DISALLOWANCE AS MADE BE DELETED. 30. AS A RESULT OF OUR HOLDING THAT THE EXPENSE OF RS. 1,71,56,104/- IS REVENUE IN NATURE, GROUND NO. VI BECOMES INFRUCTUOUS. 31. GROUND NO. IV & V ARE ALLOWED GROUND NO. VI BECOMES ACADEMIC. 32. GROUNDS NO. VII & VIII PERTAIN TO ADDITION OF RS. 11,76,000/- PLUS GP @ 56%, AND COMING TO RS. 18,34,560/-. 33. THE AR SUBMITTED NO DETAILS COULD BE SUBMITTED BEFORE THE REVENUE AUTHORITIES, BUT HAS NOW SUBMITTED DETAILS, WHICH WOULD PROVE THAT THE ASSESSEE SOLD THE MAKE-UP MATERIALS AND OTHER MATERIALS AS SCRAP. THE AR SUBMITTED, THAT THE ASSESSEE BE ALLOWED TO PROVE THE CLAIM. WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 10 34. THE DR SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 35. AFTER CONSIDERING THE FACTS AND THE EVIDENCE, AS BEING PRODUCED NOW BEFORE US, PERTAINING TO THE DISALLOWANCE, WE ARE OF THE OPINION THAT THIS ISSUE OF SALE OF SCRAP OF RS. 11,76,00 0/- BE RESTORED TO THE FILE OF THE AO. 36. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR RECONSIDER ATION, NEEDLESS TO MENTION THAT ADEQUATE AND REASONABLE OPPOR TUNITY SHALL BE PROVIDED BY THE AO TO THE ASSESSEE TO PRESENT ITS CASE. 37. GROUNDS NO. VII & VIII ARE THEREFORE, ALLOWED FOR STA TISTICAL PURPOSES. 38. IN THE RESULT, THE APPEAL AS FILED IS TREATED AS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015. SD/- SD/- '''# '''# '''# '''# (B R BASKARAN) ( VIVEK VARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 04/03/2015 &/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -18, MUMBAI. 4) THE CIT-8, MUMBAI/CIT -8, MUMBAI. 5) / THE D.R. G BENCH, MUMBAI. 6) '() * COPY TO GUARD FILE. WELLA INDIA HAIRCOSMETICS PRIVATE LIMITED ITA 2238/M/2013 11 +,- / BY ORDER / / TRUE COPY / / . / / 0 + &1! , 2 3 DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS