M/s. Gemini Distilleries (Pondicherry) Pvt. Ltd., Pondicherry V. ITO, Pondicherry

ITA 2303/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3995 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A. NO.2303/MDS/2016 / ASSESSMENT YEAR : 2005-2006 M/S. GEMINI DISTILLERIES (PONDICHERRY) PVT. LTD, NO.159, NEDARAJAPPA IYER STREET, PONDICHERRY 605 001. [ PAN AABCG 4378H] VS. THE INCOME TAX OFFICER, WARD I(3) PONDICHERRY ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. B. RAMAKRISHNAN, FCA /RESPONDENT BY : SHRI. A .V. SREEKANTH, IRS, JCIT. / DATE OF HEARING : 08 - 11 - 2016 ! / DATE OF PRONOUNCEMENT : 23 - 11 - 2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, IT ASSAILS AN ORDER DATED 01.07.2016 OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS)- PUDUCHERRY. IT HAS ALTOGETHER RAISED SIX GROUNDS O F WHICH GROUND NO.1 IS GENERAL IN NATURE NEEDING NO SPECIFIC ADJUD ICATION. ITA NO.2303/MDS/2016 :- 2 -: 2. VIDE ITS GROUND NOS.2 TO 4, GRIEVANCE RAISED BY T HE ASSESSEE IS ON A DISALLOWANCE OF MARKETING AND BRA ND PROMOTION EXPENDITURE OF B9,68,943/-, WHICH WAS CONFIRMED LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. FACTS APROPOS ARE THAT ASSESSEE DERIVING ROYALTY INCOME AND HAD FILED ITS RETURN OF INCOME DISCLOSING A LOSS OF B3,39,380/-. ASSESSEE WAS RECEIVING ROYALTY INCOME FROM M/S. RAVIKUMAR D ISTILLERIES LTD FOR USE OF ITS TRADE MARKS AND BRAND NAME. LD. ASSESSI NG OFFICER NOTING THAT ASSESSEE WAS NOT DOING ANY MANUFACTURING AND W AS ALSO NOT DOING ANY TRADING SELLING ACTIVITIES, SOUGHT TO DIS ALLOW THE MARKETING AND BRAND PROMOTION EXPENSES OF B9,68,943/- CLAIMED BY THE ASSESSEE. EXPLANATION OF THE ASSESSEE WAS THAT AS PER THE POLICY OF GOVERNMENT OF PONDICHERRY, SALES TAX REBATE WAS AVA ILABLE ONLY WERE LIQUOR WAS SOLD AT A MINIMUM PRICE OF B600/- PER CA SE. ONE CASE REQUIRED FORTY EIGHT BOTTLES OF LIQUOR HAVING 180 M L OR TWENTY FOUR BOTTLES WITH 380 ML OR TWELVE BOTTLES WITH 650 ML. CONTENTION OF THE ASSESSEE WAS THAT THOUGH ACTUAL SALE PRICE WAS LES S THAN B600/- BILLINGS HAD TO BE DONE AT B600/- FOR AVAIL ING THE SALES TAX BENEFITS. AS PER THE ASSESSEE THE DIFFERENCE WAS BEING BOOKED AS BRAND AND MARKETING PROMOTION EXPENSES. LD. ASSESS ING OFFICER HOWEVER DID NOT ACCEPT THIS CONTENTION. ACCORDING TO HIM, M/S. RAVIKUMAR DISTILLERIES LTD WAS MARKETING AND SELLIN G ON BEHALF OF ITA NO.2303/MDS/2016 :- 3 -: ASSESSEE COMPANY. CLAIM OF BRAND AND MARKETING PRO MOTION EXPENDITURE AS PER THE LD. ASSESSING OFFICER WAS ON LY TO GET THE SALES TAX BENEFIT AND THIS WAS NOT AN ACCEPTABLE METHOD. ACCORDING TO HIM, IT WAS HIT BY EXPLANATION TO SEC. 37(1) OF THE ACT. HE DISALLOWED CLAIM OF MARKETING AND BRAND PROMOTION EXPENDITURE. 4. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT IT WAS INDENTIFYING PROSPECTIVE BUYERS FOR M/S . RAVIKUMAR DISTILLERIES LTD AND IN THE PROCESS INCURRING MARK ETING EXPENDITURE. AS PER ASSESSEE, IT WAS NOT A BUSINESS EXPENDITURE AS SUCH BUT DEFICIENCY IN INCOME. FURTHER ACCORDING TO IT, IF IT WAS NOT C ONSIDERED AS BUSINESS EXPENDITURE IT HAD TO BE ALLOWED AS BUSINESS LOSS. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT IMPRES SED. HE CONFIRMED THE ORDER OF LD. ASSESSING OFFICER. 5. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT BILLED AMOUNT WAS NOT RECEIVABLE SINCE THERE W AS AN AGREEMENT BY THE ASSESSEE WITH ITS CUSTOMERS TO RECEIVE LOWE R AMOUNT THAN WHAT WAS BILLED. HENCE, THE DIFFERENCE COULD ONLY BE CON SIDERED AS IRRECOVERABLE DEBT OR BUSINESS LOSS. AS PER LD. A UTHORISED REPRESENTATIVE THE CLAIM WAS DISALLOWED ARBITRARIL Y. 6. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.2303/MDS/2016 :- 4 -: 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT ASSESSEE WAS NOT DOING ANY MANUFACTURING AND ALSO ASSESSEE NOT DOING ANY TRADING OR SELLING ACTIVITIES. IF WE ARE TO BELIEV E WHAT HAS BEEN STATED IN THE ASSESSMENT ORDER, M/S. RAVIKUMAR DISTILLERIE S LTD WAS MANUFACTURING THE LIQUOR. EXCEPT FOR STATING THAT I T WAS PROVIDING MARKETING EXPENDITURE, NO EVIDENCE WAS PRODUCED BY THE ASSESSEE TO SUPPORT THE CLAIM. IF ASSESSEES VERSION IS TO BE B ELIEVED, THE CLAIM WAS ON ACCOUNT OF REALIZATION FROM SALES BEING LESS THA N THE BILLED AMOUNT. ADMITTEDLY, BILLED AMOUNTS WERE KEPT ARTIFICIALLY H IGHER SO AS TO CLAIM SALES TAX BENEFITS. WHATEVER ANGLE WE LOOK AT IT, EXPENDITURE CLAIMED WAS NOT ALLOWABLE. IF IT WAS TO EVADE SALES TAX, IT WAS DEFINITELY HIT BY EXPLANATION TO SEC.37(1) OF THE ACT. IF IT WAS I NCURRED FOR SELLING NO EVIDENCE IN SUPPORT WAS PRODUCED. IF IT WAS A CLAI M OF BAD DEBTS, ASSESSEE COULD NOT SHOW A WRITE- OFF OF BAD DEBTS I N ITS BOOKS. IN SUCH CIRCUMSTANCES, IN OUR OPINION THE DISALLOWANCE WAS RIGHTLY MADE BY THE LOWER AUTHORITIES. WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. 8. GROUNDS NO.2 TO 4 STAND DISMISSED. 9. VIDE ITS GROUND NOS.5 & 6, GRIEVANCE OF THE ASSESS EE IS THAT VEHICLE MAINTENANCE OF B 53,746/- WAS DISALLOWED B Y THE LD. ASSESSING OFFICER. ITA NO.2303/MDS/2016 :- 5 -: 10. LD. ASSESSING OFFICER DISALLOWED ABOVE CLAIM, SINCE ASSESSEE COULD NOT PRODUCE DETAILS OF VEHICLES NOR EVIDENCE FOR EXPENDITURE. FIXED ASSETS SCHEDULE OF THE ASSESSEE DID NOT SHOW ANY VEHICLE. THOUGH ASSESSEE ARGUED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT EXPENDITURE WAS INCURRED ON VEHICLES OWNED BY ITS EMPLOYEES, THERE WAS NO EVIDENCE PRODUCED IN SUPPO RT. LD.CIT(A) ALSO NOTED THAT VOUCHERS PRODUCED BY THE ASSESSEE D ID NOT SHOW THE NAME OF THE EMPLOYEES. BEFORE US ALSO, LD. AUTHORIS ED REPRESENTATIVE COULD NOT PROVIDE ANY EVIDENCE TO JUSTIFY THE CLAIM OF THE EXPENDITURE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ERS OF THE LOWER AUTHORITIES. GROUND NOS. 5 & 6 STAND DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD DAY OF NOVEMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23RD NOVEMBER, 2016 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF