Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon V. Deputy Commissioner of Income-tax, New Delhi

ITA 2699/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2160 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 06-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Assessee Lawyers: MEENAL GOYAL
• Keywords: Depreciation; Business expenditure; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 250; 32

Judgement Text

1 , , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI , '# . $ , & ' BEFORE MS. SUSHMA CHOWLA, V.P & DR. B.R.R. KUMAR, A .M. ( / ITA NO. 2699/DEL/2015 ) / ASSESSMENT YEAR: 2001-02 HINDUSTAN COCA-COLA BEVERAGES PVT.LTD., ORCHID CENTRE, 3 RD FLOOR, DLF GOLF COURSE ROAD, SECTOR-53, GURGAON-122001. PAN-AAACH3005M ..... ........ /APPELLANT VS THE DCIT, CIRCLE-12(1),NEW DELHI . / RESPONDENT / APPELLANT BY: SH. AJAY VOHRA, SR.ADV., SH. GAURAV JAIN, ADV, SH. ADITYA VOHRA & MS. MEENAL GOYAL, CA / RESPONDENT BY: MS. PARAMITA M.BISWAS, CIT DR ) / DATE OF HEARING : 05.03.2020 / DATE OF PRONOUNCEMENT: 27.04.2020 / ORDER PER SUSHMA CHOWLA, VP THE PRESENT APPEAL FILED BY ASSESSEE IS AGAINST OR DER OF CIT(A)-4, NEW DELHI DATED 30.03.2015 RELATING TO ASSESSMENT YEAR 2001-02 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TA X ACT, 1961 (IN SHORT THE ACT). ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- THE APPELLANT PREFERS FOLLOWING GROUNDS IN APPEAL AGAINST THE ORDER DATED MARCH 30, 2015 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, NEW DELHI [HEREINAFTER REFERRED TO AS CIT(A)] UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 [HEREINAFTE R REFERRED TO AS ACT]. 1.0 THAT THE ORDER PASSED BY CIT(A) PARTLY ALLOWIN G THE APPEAL FILED BY THE APPELLANT WITHOUT APPRECIATING FACTS ON RECO RD IS BAD IN LAW AND IS LIABLE TO BE QUASHED; 2.0 DISALLOWANCE OF NON-COMPETE FEES 2.1 THAT THE LD. CIT(A) ERRED IN LAW IN HOLDING THA T THE AMOUNT OF RS. 50,64,83,985 CLAIMED ON ACCOUNT OF NON-COMPETE FE ES WAS CAPITAL EXPENDITURE IN NATURE NOT ELIGIBLE AS A REVENUE EXP ENDITURE BY MERELY FOLLOWING ORDERS FOR EARLIER YEARS; 2.2 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE EXPENDITURE INCURRED DID NOT RESULT IN CREATION OF AN ASSET OF ENDURING NATURE WHILE HOLDING THAT THE APPELLANT HAS ACQUIRED AN ASSET OF ENDURING NATURE; 2.3 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE SCOPE OF THE AGREEMENT WAS LIMITED TO A PARTICULAR TERRITORY AND THAT THE BOTTLERS WERE FREE TO CARRY ON BUSINESS AND WERE IN FACT CAR RYING ON BUSINESS IN OTHER TERRITORIES; 2.4 THAT THE LD. CIT(A) ERRED IN DISALLOWING EXPEN DITURE IGNORING THE SETTLED LEGAL POSITION THAT THE NOMENCLATURE USED B Y AN ASSESSEE IN THE BOOKS OF ACCOUNT IS NOT DECISIVE OF THE FACT THAT W HETHER AN EXPENDITURE IS REVENUE OR CAPITAL IN NATURE; 2.5 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) ERRE D IN LAW IN NOT ALLOWING DEPRECIATION ON THE NON-COMPETE FEE EXPEND ITURE, HELD TO BE IN THE NATURE OF CAPITAL EXPENDITURE; 2.6 THE LD. CIT(A) FAILED TO APPRECIATE THAT IF THE EXPENDITURE IS CONSIDERED AS CAPITAL IN NATURE CONSTITUTES AN INT ANGIBLE ASSET AND ACCORDINGLY ELIGIBLE FOR DEPRECIATION. 3.0 DISALLOWANCE OF EXPENDITURE INCURRED ON ICE BOX ES 3.1 THAT THE LD. CIT(A) ERRED IN LAW IN HOLDING THA T EXPENDITURE INCURRED TOWARDS ICE BOXES PROVIDED TO HAWKERS / DE ALERS, CARRYING THE BRAND NAME OF THE APPELLANT, WAS CAPITAL IN NATURE ELIGIBLE FOR DEPRECIATION AND NOT REVENUE EXPENDITURE AS CLAIMED ; ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 3 3.2 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT S IMILAR CLAIM WAS ALLOWED BY LD. CIT(A) AS REVENUE IN NATURE IN APPEL LANTS OWN CASE FOR AY 2004-05 AND AY 2005-06. 3. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSE E IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 4. THE GROUND OF APPEAL NOS. 2 TO 2.6 RAISED BY THE ASSESSEE IS AGAINST THE TREATMENT OF NON-COMPETE FEE OF RS.50,64,83,985 /- AS CAPITAL EXPENDITURE. IN THE ALTERNATE VIDE GROUND NO.2.5, T HE ASSESSEE HAS RAISED THAT INCASE EXPENDITURE IS HELD TO BE CAPITAL IN NA TURE THEN DEPRECIATION IS TO BE ALLOWED ON THE SAME. 5. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE HA D CLAIMED DEDUCTION OF RS.50,64,83,985/- AS NON-COMPETE FEE AMORTIZED. TH E ASSESSEE EXPLAINED THAT DURING THE YEAR UNDER CONSIDERATION, IT HAD AC QUIRED RUNNING BUSINESS OF VARIOUS BOTTLERS DIRECTLY OR THROUGH AMALGAMATI ON. THE NON-COMPETE FEE WAS PAID TO THE BOTTLERS FOR NOT DISCLOSING THE CON FIDENTIAL INFORMATION RELATING TO THE BUSINESS AND FOR NOT COMPETING IN SIMILAR LINE OF BUSINESS IN THEIR RESPECTIVE TERRITORIES FOR A PERIOD OF FIVE Y EARS. THE ASSESSEE FOLLOWED PRACTICE OF CHARGING AMOUNTS TO P&L A/C ON A PRO-R ATA BASIS TO BE FULLY WRITTEN OFF OVER THE PERIOD OF BENEFIT. THE ASSESS ING OFFICER RELYING ON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1999-2000 DISA LLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT IT WAS AN ITEM OF C APITAL EXPENDITURE. THE CIT(A) HAD UPHELD THE SAID ADDITION IN ASSESSMENT Y EAR 1999-2000. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE BY VIR TUE OF NON-COMPETE FEE, ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 4 TOGETHER WITH CONSIDERATION FOR THE PURCHASE OF THE BUSINESS, HAD ACQUIRED NEW BUSINESS AND THE SAID PAYMENTS WERE THUS FOR TH E PURPOSE OF ACQUIRING INCOME GENERATING BUSINESS UNDERTAKING. THE DEPREC IATION CLAIMED ON THE SAID EXPENDITURE BEING CAPITAL WAS ALSO DENIED BY T HE ASSESSING OFFICER. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER AG AINST ASSESSEE WHICH ASSESSEE IS IN APPEAL. 6. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 DECIDED BOTH T HE ISSUES AGAINST THE ASSESSEE IN TURN FOLLOWING THE RATIO LAID DOWN BY H ONBLE DELHI HIGH COURT IN SHARP BUSINESS SYSTEM VS CIT [2012] 211 TAXMAN 5 76 (DEL.). HENCE, THE ORDER OF ASSESSING OFFICER WAS UPHELD TO THE EXTENT THAT THE PAYMENT OF NON- COMPETE FEE WAS A CAPITAL EXPENDITURE AND THE ASSES SEE WAS NOT ENTITLED TO CLAIM DEPRECIATION U/S 32 OF THE ACT ON THE SAID CA PITAL EXPENDITURE. HE FURTHER POINTED OUT THAT THE HONBLE DELHI HIGH COU RT IN ASSESSEES OWN CASE HAS ADMITTED BOTH ISSUES AS QUESTION OF LAW AN D THE SAME ARE PENDING FOR ADJUDICATION. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN VIEW OF THE ISSUE DECIDED AGAINST THE ASSESSEE BY THE TR IBUNAL (SUPRA), WE UPHOLD THE ORDER OF THE CIT(A) AND HOLD THAT THE PAYMENT O F NON-COMPETE FEE WAS CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE, O N WHICH THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION U/S 32 OF THE AC T. THE TRIBUNAL HAD RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF SHARP BUSINESS ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 5 SYSTEM VS CIT (SUPRA) AND APPLIED THE SAME. WE DEC IDE BOTH THE MAIN ISSUES AND ALTERNATE GROUNDS AGAINST THE ASSESSEE. ADMITTEDLY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE HAS ADMITTED THE ISSUES FOR ADJUDICATION AND THE SAME ARE PENDING. THUS, GROUND NOS.2 TO 2. 6 RAISED BY THE ASSESSEE ARE DISMISSED. 8. NOW, COMING TO GROUND OF APPEAL NOS. 3 TO 3.2 WH ICH IS AGAINST THE DISALLOWANCE OF EXPENSES INCURRED ON ICE BOXES PROV IDED TO DEALERS. WE FIND THAT THE TRIBUNAL (SUPRA) WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 VIDE PARA 2.3 HELD THAT THE EXPENDITURE INCURRED ON ICE CHESTS/ICE BOXES, PUSHCARTS, DEALER SIGN BOA RD WAS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET FOR T HE ENDURING BENEFIT OF THE BUSINESS OF THE ASSESSEE AND HELD THE SAID EXPENDIT URE TO BE CAPITAL IN NATURE. HOWEVER, THE EXPENDITURE INCURRED ON ELECT RIC SPECTACULARS, NEON SIGNS, ARTWORK, GLOW SINGS AND NEON SIGNS WAS ALLO WED AS BUSINESS EXPENDITURE. THE HONBLE HIGH COURT HAS ALSO ADMIT TED THE ISSUE RAISED BY THE ASSESSEE AS TO WHETHER EXPENDITURE INCURRED TOW ARDS ICE BOXES AND DEALER SIGN BOARD PROVIDED TO HAWKERS/DEALERS CARRY ING ON BRAND NAMES OF THE ASSESSEE WAS CAPITAL IN NATURE. 9. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT WHER E THE ASSESSEE WAS NOT IN THE OWNERSHIP THEN THE EXPENDITURE NEEDS TO BE ALLOWED AS REVENUE EXPENDITURE. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT IN CIT VS HONDA SIEL POWER PRODUCTS LTD. [200 7] 300 ITR 56 (DEL.). ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 6 HE FURTHER STATED THAT THOUGH THE EXPENDITURE ON IC E BOXES WAS DISALLOWED IN ASSESSMENT YEAR 2002-03 BUT NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON EXPENDITURE TOTALING RS.8.91 C RORES (APPROX.) IN ASSESSMENT YEAR 2003-04. FURTHER, IN ASSESSMENT YE AR 2004-05 THOUGH THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS.4.87 CRORES (APPROX.) BUT THE CIT(A) HAD DELETED THE SAME AND NO APPEAL H AS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A). HE FURTHER ST RESSED IN ASSESSMENT YEAR 2005-06, SIMILAR RECURRING EXPENDITURE FOR CAR RYING ON BUSINESS WAS INCURRED AND CLAIMED AS REVENUE EXPENDITURE AMOUNTI NG TO RS.5.10 CRORES (APPROX.), WHICH WAS ALLOWED. 10. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN PRESENT GROUND IS IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE ON ICE BOXES WHICH WERE PROVIDED T O THE HAWKERS AND ON SIGNAGES. THE SAID EXPENDITURE TOTALING TO RS.15,30 ,88,574/- WAS DISALLOWED BY THE ASSESSING OFFICER. THE PLEA OF T HE ASSESSEE THAT THE LIFE OF BOTH SIGNAGES AND ICE BOXES WAS VERY SHORT AND DO N OT HAVE ANY ENDURING BENEFIT TO THE ASSESSEE BUT EXPENDITURE AS REVENUE IN NATURE WERE NOT ACCEPTED BY THE ASSESSING OFFICER. THE CIT(A) ALLO WED THE CLAIM OF EXPENDITURE ON SIGNAGES AS REVENUE EXPENDITURE IN V IEW OF THE ORDER OF THE ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 7 TRIBUNAL IN ASSESSMENT YEAR 2002-03. HOWEVER, THE EXPENDITURE INCURRED ON ICE BOXES WAS HELD TO BE CAPITAL IN NATURE BEING PART OF PLANT & MACHINERY, ELIGIBLE FOR DEPRECIATION AT APPLICABLE RATES. THE ASSESSEE IS IN APPEAL ON THE SAME ON THE GROUND THAT THE AFORESAID ICE BOXES WERE NOT IN POSSESSION OF THE ASSESSEE HENCE, NOT OF ENDURING B ENEFIT TO THE ASSESSEE. THE ASSESSEE EXPLAINED THAT SINCE THE PRODUCT SOLD BY IT WERE TO BE SOLD ON PARTICULAR TEMPERATURE, THE ICE BOXES WERE USED BY THE HAWKERS FOR SELLING THE ITEMS AT AFORESAID TEMPERATURE. 12. THE HONBLE DELHI HIGH COURT IN CIT VS HONDA SI EL POWER PRODUCTS LTD. (SUPRA) WHILE DECIDING THE ISSUE OF ADVANCES MADE FOR OWNERSHIP OF TOOLS AND DIES WHICH REMAINED WITH THE MANUFACTURE R, HAD ALLOWED THE SAME AS REVENUE EXPENDITURE AS IT FACILITATED THE T RADING OPERATIONS OF THE ASSESSEE. 13. WE FURTHER FIND THAT DESPITE THE NON-ALLOWANCE OF EXPENDITURE IN ASSESSMENT YEAR 2002-03, THE ASSESSING OFFICER HIMS ELF HAS ALLOWED THE EXPENDITURE IN TOTAL AMOUNTING TO RS.8.91 CRORES (A PPROX.) IN ASSESSMENT YEAR 200-3-04 AND RS.4.87 (APPROX.) CRORES HAS BEEN ALLOWED IN ASSESSMENT YEAR 2004-05 BY THE CIT(A) AND RS.5.10 CRORES (APPR OX.) IN ASSESSMENT YEAR 2005-06. IN THE TOTALITY OF THE ABOVE SAID FACTS A ND CIRCUMSTANCES AND FOLLOWING THE CONSISTENCY APPROACH, WE ARE OF THE V IEW THAT THE EXPENDITURE INCURRED ON ICE BOXES, MERITS TO BE ALLOWED AS DEDU CTION IN THE HANDS OF THE ITA NO. 2699/DEL/2015 ASSESSMENT YEAR: 2001-02 8 ASSESSEE. HENCE, THE CLAIM OF THE ASSESSEE IS ALLO WED IN ENTIRETY. GROUND OF APPEAL NOS. 3 TO 3.2 RAISED BY THE ASSESSEE ARE TH US ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2020. SD/- SD/- SD/- SD/- (DR. B.R.R. KUMAR) (SUSHMA CHOWLA) /ACCOUNTANT MEMBER /VICE PRESIDENT / ) DATED : 27 TH APRIL, 2020 * AMIT KUMAR * *)+),-./0)10.2 COPY OF THE ORDER IS FORWARDED TO : 1. 34) / THE APPELLANT 2. ,534) / THE RESPONDENT 3. ) 6. 7 8) / THE CIT(A) 4. 9)) 6.) / THE PR. CIT 5. 6. ) 0:;),-.- <) )) < ) / DR, ITAT, DELHI ;'=)>)2) GUARD FILE. ) * / BY ORDER , 50.),-. // TRUE COPY // ? @A'B , )) )< ) ASSISTANT REGISTRAR, ITAT, DELHI