ACIT, New Delhi V. M/s Ralson (India) Ltd., Delhi

ITA 2845/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61739 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 01-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY
• Keywords: Capital asset; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) SHRI RAJPAL YADAV, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2845/DEL./2011 (ASSESSMENT YEAR : 2003-04) ACIT, CIRCLE 15 (1), VS. M/S. RALSON (INDIA) LTD. , NEW DELHI. J 38, UDYOG NAGAR, ROHTAK ROAD, DELHI 110 041. (PAN : AAACR0281P) CO NO.260/DEL/2011 (IN ITA NO.2845/DEL./2011) (ASSESSMENT YEAR : 2003-04) M/S. RALSON (INDIA) LTD., VS. ACIT, CIRCLE 15 (1 ), J 38, UDYOG NAGAR, NEW DELHI. ROHTAK ROAD, DELHI 110 041. (PAN : AAACR0281P) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI SANJAY PANDEY, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XVIII, NEW DELHI DATED 18.02.2011 FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS ALSO FILED THE CROSS O BJECTION. ITA NO.2845/DEL./2011 CO NO.260/DEL/2011 2 2. THE ASSESSEE IS A MANUFACTURER OF TYRES AND TUBE S OF CYCLES AND RICKSHAWS HAVING ITS FACTORY AT LUDHIANA, PUNJAB. DURING THE RELEVANT PERIOD, THE TURNOVER OF THE COMPANY WAS MORE THAN RS.200 CR ORES. THE RETURN OF INCOME WAS FILED DECLARING ORIGINAL INCOME AT RS.49 ,08,100/- ON 02.12.2003. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 22.03.20 05 AT AN INCOME OF RS.52,44,787/-. A NOTICE U/S 148 WAS ISSUED ON 29. 03.2010 AND THE REASSESSMENT U/S 143(3)/147 WAS COMPLETED ON 30.08. 2010. IN THIS ASSESSMENT, AN ADDITION OF RS.35,45,581/- WAS MADE ON ACCOUNT OF NOT ALLOWING AS REVENUE EXPENDITURE OF THE PURCHASE OF TIN PLATES FOR ADVERTISEMENT AND PUBLICITY DEBITED IN THE PROFIT A ND LOSS ACCOUNT. THE ASSESSEE FILED APPEAL AGAINST THIS ADDITION AND ALS O CHALLENGED THE REOPENING PROCEEDINGS BEFORE THE CIT (A). THE CIT (A) UPHOLD THE REASSESSMENT BUT GRANTED RELIEF TO THE ASSESSEE ON MERITS OF ADDITIO N BY HOLDING AS UNDER :- 5.1 I HAVE CAREFULLY CONSIDERED THE REASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE LD. AR. AS PER THE FACTS OF THIS CASE, THE APPELLANT HAS INCURRED AN EXPENDITURE OF RS.35,45,5 81/- ON ACCOUNT OF PURCHASE OF TIN PLATES FOR ADVERTISEMENT WHICH IS C LAIMED AS EXPENDITURE UNDER THE HEAD ADVERTISEMENT AND PUBLICITY EXPENSES . THE AO HAS TREATED THE SAME AS CAPITAL IN NATURE AND DISALLOWED THE AB OVE AMOUNT. IT IS ARGUED BY THE LD. AR THAT THE APPELLANT IS A LARGE MANUFACTURER OF TYRES AND TUBES FOR CYCLES AND RICKSHAWS HAVING ITS FACTO RY AT LUDHIANA (PUNJAB). THE PRODUCTS NAMELY TYRES AND TUBES ARE S OLD ALL OVER INDIA AND THE TURNOVER OF THE COMPANY FOR THE YEAR UNDER CONS IDERATION WAS RS.220 CRORES. IT IS ARGUED THAT THE EXPENDITURE ON PURCHA SE OF TIN PLATES AT RS.35,45,581/- IS A PART OF THE TOTAL EXPENDITURE O F RS.2,39,84,109/- UNDER THE HEAD ADVERTISEMENT AND PUBLICITY AGAINST THE AB OVE TOTAL TURNOVER OF RS.220 CRORES ON SALES ALL OVER INDIA. IT IS ARGUED THAT THE DURING THE YEAR THE APPELLANT HAS SOLD A TOTAL NUMBER OF 6.37 CRORE TYRES AND TUBES ALL OVER THE COUNTRY. IT IS FURTHER ARGUED THAT THE TIN PLAT ES PURCHASED ARE IN THE SIZE OF 65 CM. X 15 CM AND ARE PASTED ON THE BACK S IDE OF RICKSHAWS CARRYING THE COMPANY'S NAME AND THE PRODUCT NAME. T HE ACTUAL TIN PLATE WITH THE ABOVE ADVERTISEMENT WAS ALSO SHOWN BY THE APPELLANT DURING THE ITA NO.2845/DEL./2011 CO NO.260/DEL/2011 3 APPELLATE PROCEEDING AND ITS PHOTOCOPY IS PLACED ON RECORD WHICH SHOWS THE PICTURE OF TYRES AND TUBES WITH APPELLANT COMPA NY'S NAME AND LOGO AND PROMOTIONAL MATERIAL PRINTED ON IT. IT IS ARGUE D THAT CONSIDERING THE SALES ALL OVER INDIA, THE TIN PLATES ARE PRINTED IN DIFFERENT LANGUAGES AND GIVEN TO DEALERS OF CONCERNED STATES FOR PASTING ON THE RICKSHAWS. IT IS ARGUED THAT THE LIFE SPAN OF A TIN PLATES IS LESS T HAN ONE YEAR AND THAT IS WHY IT IS GIVEN TO THE DEALERS EVERY YEAR. IT IS AR GUED THAT SINCE THE TIN PLATES ARE ALREADY GIVEN TO THE DEALERS FOR ADVERTI SEMENTS, THE SAME ARE NO LONGER THE PROPERTY OF THE COMPANY AND HENCE CANNOT BE TREATED AS CAPITAL ASSET. THE ID. AR HAS RELIED UPON THE DECISION IN T HE CASE OF CIT V. LIBERTY GROUP MARKETING DIVISION 315 ITR 125 (P & H ) WHERE IN THE CONTEXT OF NEON SIGN AND GLOW SIGN BOARDS UNDER SIM ILAR FACTS IT WAS HELD BY THE HON'BLE HIGH COURT THAT THE SAME ARE NOT OF ENDURING NATURE AND ARE TO BE TREATED AS REVENUE EXPENDITURE U/S 37 OF THE ACT. IT IS FURTHER ARGUED THAT SIMILAR EXPENDITURE CLAIMED BY THE APPE LLANT HAS BEEN ALLOWED EVERY YEAR BY THE DEPARTMENT AND NO SUCH DI SALLOWANCE HAS BEEN MADE EITHER IN THE PRECEDING YEARS OR IN THE SUCCEE DING YEARS BY SUCCESSIVE AOS IN SCRUTINY ASSESSMENTS MADE U/S 143 (3) OF THE ACT. IN THIS REGARD, THE LD. AR HAS FILED COPIES OF ASSESSM ENT ORDER U/S 143(3) IN ITS OWN CASE FOR A.YS. 2004-05, 2005-06 AND 2006-07 , ON PERUSAL OF WHICH IT IS FOUND THAT NO SUCH DISALLOWANCE WAS MAD E BY THE AO IN SUCH YEARS. UNDER THE FACTS AND CIRCUMSTANCES AS DISCUSS ED ABOVE AND FOLLOWING THE CASE LAW (SUPRA). I AM OF THE FIRM OP INION THAT THE EXPENDITURE FOR PURCHASE OF THE ABOVE TIN PLATES IS CLEARLY A REVENUE EXPENDITURE ALLOWABLE U/S 37 OF THE ACT. THE IMPUGN ED DISALLOWANCE OF RS.35,45,581/- IS, THEREFORE, DELETED. 3. THE ONLY GROUND TAKEN BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.35,45,381/- MADE BY THE ASSESSING OFFICER. T HE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE SUSTENANCE OF THE REASS ESSMENT PROCEEDINGS. 4. NONE ATTENDED ON BEHALF OF THE ASSESSEE. 5. WE HAVE HEARD THE LD. DR. AFTER HEARING, THE AP PEAL AND CROSS OBJECTION ARE DECIDED AS UNDER. AS FAR AS THE REVE NUES APPEAL AGAINST THE DELETION OF ADDITION OF RS.35,45,581/- IS CONCERNED , WE HOLD THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF TYRES AND TUBES OF CYCLE AND RICKSHAWS AND THE SAME ARE BEING SOLD THROUGH ITS DEALERS ALL OVER INDIA. THE PERUSAL OF THE PAPER BOOK AVAILABLE ON RECORD SHOWS THAT INDIV IDUAL COST OF EACH PLATE ITA NO.2845/DEL./2011 CO NO.260/DEL/2011 4 COMES AROUND RS.17.05. THIS FACT IS EVIDENT FROM T HE COPY OF THE BILLS AVAILABLE ON RECORD. THESE TIN PLATES ARE PRINTED IN VARIOUS LANGUAGES AT VARIOUS PLACES AND THE SAME WERE FOR ADVERTISEMENT AND THESE PLATES WERE FIXED ON THE RICKSHAWS AT VARIOUS PLACES. THESE PL ATES WERE FOR ADVERTISEMENT AND PUBLICITY OF THE PRODUCT MANUFACTURED BY ASSESS EE AND SOLD THROUGH THE NETWORK OF DEALERS ALL OVER INDIA. THE TURNOVER OF THE COMPANY DURING THE RELEVANT PERIOD WAS AROUND RS.200 CRORES. THE AUTH ORIZED DEALERS WERE LOCATED IN VARIOUS PARTS OF INDIA. THESE TIN PLATE S WERE DISTRIBUTED TO VARIOUS DEALERS. THEY HAVE PLACED THEM ON THE RICKSHAWS AT ALL OVER INDIA. THESE PLATES WERE NOT IN THE POSSESSION OF ASSESSEE FOR T HE REST OF THE TIME. ASSESSEE WAS ALSO NOT AWARE ABOUT THE CONDITION OF THESE PLA TES THEREAFTER. THUS, IN OUR CONSIDERED VIEW, THESE TIN PLATES WERE NOT OF A LIF E WHICH CAN PROVIDE BENEFIT OF ENDURING NATURE. IN VIEW OF THE DECISION OF HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LIBERTY GROUP MAR KETING DIVISION 315 ITR 125 (P& H) WHEREIN THE NEON SIGN AND GLOW SIGN BOARDS UNDER SIMILAR FACTS HAVE BEEN HELD NOT HAVING BENEFIT OF ENDURING NATURE AND THE AMOUNT WAS TREATED AS REVENUE EXPENDITURE ALLOWABLE U/S 37 OF THE ACT. IN OUR CONSIDERED VIEW, THIS EXPENDITURE ON THE TIN PLATES USED FOR THE ADVERTISEMENT BY PLACING ON THE RICKSHAWS AT VARIOUS PLACES AT AL L OVER INDIA WAS A REVENUE EXPENDITURE. SIMILAR EXPENDITURE WAS TREATED AS RE VENUE IN PRECEDING AND SUCCEEDING ASSESSMENTS BY REVENUE AUTHORITIES. ALT HOUGH THE PRINCIPLES OF RES ITA NO.2845/DEL./2011 CO NO.260/DEL/2011 5 JUDICATA IS NOT APPLICABLE TO THE INCOME-TAX PROCEE DINGS, HOWEVER, IN THE PAST AND SUBSEQUENT YEARS, SUCH EXPENDITURE HAS BEEN TRE ATED AS REVENUE IN NATURE AND WITHOUT ANY COGENT REASON, THE REVENUE SHOULD N OT HAVE DISTURBED THE SAME. THEREFORE, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) IN GRANTING THE RELIEF. 6. AS FAR AS THE CROSS OBJECTION OF THE ASSESSEE, W E HAVE PERUSED THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING O FFICER AND ALSO THE REPLY FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS. WE FIND THAT THE ASSESSING OFFICER HAS ASKED JUSTIFICATION FOR THE A DMISSIBILITY OF THE EXPENDITURE INCLUDING THE TIN PLATES EXPENDITURE. HOWEVER, IN THE REPLY TO THIS QUERY, IT IS PLACED AT PAGE 2 & 3 OF THE PAPER BOOK , NOTHING HAS BEEN STATED WITH REGARD TO THE TIN PLATES EXPENDITURE. FURTHER THERE IS NOTHING MENTIONED IN THE ASSESSMENT ORDER ITSELF ABOUT THIS EXPENDITU RE. THE RECORD SHOWS THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED BY GETTING THE NECESSARY APPROVAL FROM THE COMMISSIONER, DELHI-V, NEW DELHI AFTER RECORDING THE REASONS WHICH WERE SUPPLIED TO THE ASSESSEE FOR FIL ING THE OBJECTION. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSING OF FICER WHILE FINALIZING THE INITIAL ASSESSMENT HAS NOT APPLIED HIS MIND. NO DI SCUSSION HAS BEEN MADE ABOUT THIS PARTICULAR EXPENDITURE IN THE ASSESSMENT ORDER. THE REPLY OF THE ASSESSEE TO THE QUERY IS ALSO SILENT ON THE ISSUE, THUS IT IS CLEAR FROM THE RECORDS THAT THE ASSESSMENT ORDER WAS PASSED WITHOU T ANY APPLICATION OF MIND ITA NO.2845/DEL./2011 CO NO.260/DEL/2011 6 AND SUCH NON-APPLICATION OF MIND IS CLEAR FROM THE ORDER OF THE ASSESSMENT ITSELF. THEREFORE, IN OUR CONSIDERED VIEW, WE FIND NO FAULT IN THE ORDER OF CIT (A) IN UPHOLDING THE REOPENING OF THE ASSESSMENT PR OCEEDINGS. WE DISMISS THE CROSS OBJECTION. 7. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF JUNE, 2012. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 22 ND DAY OF JUNE, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XVIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.