M/s. T & T Motors Ltd, New Delhi V. ACIT, New Delhi

ITA 3621/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8195 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 27-01-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 24-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SENIOR
• Assessee Lawyers: K V S R MANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH A, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.3621/DEL/2009 ASSESSMENT YEAR : 2006-07 M/S. T & T MOTORS LIMITED, VS. ACIT, CIRCLE 16 (1 ), 212, OKHLA INDUSTRIAL ESTATE, NEW DELHI. PHASE III, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.V.S.R. MANIAN, CA DEPARTMENT BY : SHRI AJAY KUMAR, SENIOR DR ORDER PER A.K. GARODIA, ACCOUNTANT MEMBER : THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT (APPEALS)-XIX, NEW DELHI DATED 6.7.2009 FOR ASSESSM ENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS O F THE CASE IN CONFIRMING HE ADDITION OF RS.6,13,539/- MADE BY THE ASSESSING OFFICER TO THE VALUE OF FRINGE BENEFITS D ECLARED BY THE ASSESSEE COMPANY. THE ADDITION MADE IS WRONG AND B AD IN LAW AND SHOULD BE DELETED. 2. THE LD. CIT (A) HAS ERRED IN LAW BY CATEGORIZING THE SELLING AND DISTRIBUTION EXPENSES AS EXPENDITURE IN CURRED FOR SALES PROMOTION. 3. IT IS CONTENDED THAT THE LD. CIT (A) HAS FAILED TO RECOGNIZE THE CLARIFICATION OF THE CBDT WHICH IS BI NDING ON ALL ITA NO.3621/DEL/2009 2 THE REVENUE AUTHORITIES ADMINISTERING THE INCOME TA X LAW. AS PER THE CLARIFICATION SELLING AND DISTRIBUTION EXPE NSES, COMMISSION OR BROKERAGE, INCENTIVES, REBATE AND DIS COUNT ETC. CANNOT FALL UNDER SALES PROMOTION EXPENSES. 4. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO ONE A NOTHER. 5. THE APPELLANT PRAYS THAT HE MAY BE ALLOWED TO AD D, AMEND, ALTER, MODIFY OR FOREGO ANY OF THE GROUNDS A T THE TIME OF HEARING. 3. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSIN G OFFICER IN THE ORDER PASSED BY HIM U/S 115WE (3) THAT ASSESSEE HAS INCUR RED AN EXPENDITURE OF RS.30,67,696/- ON ACCOUNT OF PROVIDING CAR ACCESSOR IES TO THE CUSTOMERS FREE OF COST. THE AO WAS OF THE OPINION THAT THE SAME I S COVERED BY THE PROVISION OF SECTION 115WB (2)(B) AND FBT IS PAYABL E ON THAT. AO CONFRONTED THE ASSESSEE FOR THE SAME AND AFTER CONS IDERING THE REPLY OF THE ASSESSEE, HE MADE AN ADDITION OF RS.6,13,539/- BEIN G 20% OF RS.30, 67,696/- INCURRED BY THE ASSESSEE TOWARDS PROVIDING FREE OF COST (FOC) CAR ACCESSORIES. AO TREATED THIS AMOUNT OF RS.6,13,539 /- FOR PAYMENT OF FRINGE BENEFIT TAX. BEING AGGRIEVED, THE ASSESSEE GOT THE MATTER IN APPEAL BEFORE CIT (APPEALS) BUT WITHOUT SUCCESS AND NOW THE ASSES SEE IS IN FURTHER APPEAL BEFORE US. 4. LEARNED AR FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS, WHICH WERE RAISED BY HIM BEFORE THE LEARNED CIT (APPEALS) . IT IS POINTED OUT BY HIM THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFF ICER HAD MADE THE ITA NO.3621/DEL/2009 3 ADDITION ON THE BASIS THAT THE IMPUGNED AMOUNT HAS BEEN INCURRED FOR PROVIDING/SHOWING HOSPITALITY TO ITS CUSTOMERS AND THEREBY ATTRACTING THE PROVISIONS OF SECTION 115WB(2)(B). IT IS SUBMITTED THAT THE NATURE OF EXPENDITURE FALLING UNDER CLAUSE (B) OF SECTION 115 WB(2) INCLUDES PROVISIONS RELATING TO EXPENDITURE ON HOSPITALITY O F EVERY KIND BY THE EMPLOYER TO ANY PERSON WHETHER BY WAY OF PROVISION OF FOOD OR BEVERAGES OR IN ANY OTHER MANNER EXCLUDING FOOD OR BEVERAGE PROV IDED TO THE EMPLOYEE IN THE OFFICE OR FACTORY. IT IS THE SUBMISSION OF THE ASSESSEE THAT PROVIDING ACCESSORIES TO ITS CUSTOMERS FREE OF COST BY NO STR ETCH OF IMAGINATION CAN BE CONSIDERED AS HOSPITALITY EXPENDITURE PROVIDED TO T HE CUSTOMERS. IT IS ALSO SUBMITTED THAT ON THIS ASPECT, LEARNED CIT (APPEALS ) HAS NOT HELD THAT THE PROVISIONS OF CLAUSE (B) OF SECTION 115WB (2) ARE A PPLICABLE. IT IS SUBMITTED THAT IN THE PRESENT CASE, AS PER THE CIT (APPEALS), THE PROVISIONS OF CLAUSE D OF SECTION 115WB (2) ARE APPLICABLE. R EGARDING THIS ALSO, IT WAS SUBMITTED THAT CLAUSE (D) OF SECTION 115WB (2) IS F OR SALES PROMOTION AND THE IMPUGNED EXPENDITURE CANNOT BE HELD TO BE SALES PROMOTION EXPENSES BECAUSE THESE EXPENSES WERE INCURRED AFTER THE SALE WERE COMPLETED AND THIS EXPENDITURE ARE IN THE NATURE OF SELLING EXPENDITUR E AND NOT SALES PROMOTION EXPENSES. IT WAS ALSO SUBMITTED THAT CIRCULAR NO.8 OF 2005 DATED 29.8.2005 ISSUED BY CBDT IS RELEVANT AND THE REPLY TO QUESTIO N NOS.58 TO 61 ARE ITA NO.3621/DEL/2009 4 RELEVANT AS PER WHICH, THE IMPUGNED EXPENSES CANNOT BE CONSIDERED AS SALES PROMOTION EXPENSES. RELIANCE WAS PLACED ON THE JUD GEMENT OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. T UTICORIN ALKALI CHEMICALS AND FERTILISERS 261 ITR 80 (MAD.). 5. AS AGAINST THIS, LEARNED DR FOR THE REVENUE SUPP ORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE ORDER OF AUTHORITIES BELOW. WE FIND THAT IN THE PAPER BOOK, THE ASSESSE E HAS SUBMITTED DETAILS AND SUPPORTING OF FOC ACCESSORIES SUPPLIED AGAINST SALE OF VEHICLES ON SAMPLE BASIS ON PAGES 11 TO 56 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO SUBMITTED COPY OF APPROVAL FOR DISCOUNT/FOC FOR AUT HORIZING THE PROVIDING OF FOC ACCESSORIES. IN THE SAME DISCOUNT FORMAT, T HERE IS A COLUMN FOR REASON FOR DISCOUNT. PAGE 32 OF THE PAPER BOOK IS THE APPROVAL OF DISCOUNT/FOC FOR THE CUSTOMERS, M/S. MEERA & COMPAN Y LIMITED. IN THE SAID PAGE, REASON FOR DISCOUNT HAS BEEN STATED AS UP COUNTRY CUSTOMER, DISCUSSED AT THE TIME OF ORDER BOOKING. THIS OBSE RVATION REGARDING REASONS FOR PROVIDING FOC ACCESSORIES CLEARLY SHOWS THAT IT WAS NOT PROVIDED AFTER COMPLETION OF SALE BUT IT WAS AGREED TO BY THE ASSE SSEE AT THE TIME OF DISCUSSION WHILE ORDER WAS BOOKED. SIMILARLY, THER E IS SIMILAR APPROVAL ON PAGE 38 OF PAPER BOOK FOR THE CUSTOMER, ABHISEK AUT O INDUSTRIES LIMITED. ITA NO.3621/DEL/2009 5 IN THIS, THE REASON FOR DISCOUNT HAS BEEN STATED AS REGULAR BUYER. THIS OBSERVATION SHOWS THAT FOC ACCESSORIES WAS PROVIDED TO REGULAR CUSTOMERS FOR PROMOTION OF FURTHER SALES AND HENCE THIS IS NO T CORRECT TO SAY THAT SUCH FOC ACCESSORIES WAS PROVIDED AFTER COMPLETION OF SA LE WITH NO ELEMENT OF SALES PROMOTION. SIMILAR IS THE POSITION IN SIMIL AR FORM ON PAGE NO.40 OF THE PAPER BOOK FOR CUSTOMER, ORIENTAL STRUCTURAL EN GINEERS. ON PAGE NO.50 OF THE PAPER BOOK, THERE IS SIMILAR FORM FOR THE CU STOMER, M/S. GAMMON AND THERE, THE REASON FOR DISCOUNT HAS BEEN STATED AS BUYING 2 ND CAR WITHIN ONE YEAR. THIS OBSERVATION ALSO SHOWS THAT FOC ACCESS ORIES WERE PROVIDED TO REGULAR CUSTOMERS IN ANTICIPATION OF SALES PROMOTIO N AND HENCE IT IS NOT CORRECT TO SAY THAT IN PROVIDING FOC ACCESSORIES, T HERE WAS NO ELEMENT OF SALES PROMOTION. IN VARIOUS OTHER SIMILAR FORMS AV AILABLE IN THE PAPER BOOK, DISCOUNT DETAILS ARE PROVIDED BUT REASON FOR DISCOU NT HAS NOT BEEN STATED. ALL THESE FACTS SHOW THAT THE FOC ACCESSORIES PROVIDED BY THE ASSESSEE TO ITS CUSTOMERS CANNOT BE SAID TO BE IN THE NATURE OF SEL LING EXPENSES AND NOT SALES PROMOTION EXPENSES. AS PER THE DISCUSSION ABOVE, W E HAVE NOTED THAT WHENEVER THE REASONS ARE STATED BY THE ASSESSEE IN THE APPROVAL FORM FOR PROVIDING OF FOC ACCESSORIES, IT INDICATES THAT IT WAS GIVEN KEEPING IN MIND THE SALES PROMOTION ELEMENT AND HENCE WE ARE OF THE CONSIDERED OPINION THAT THESE EXPENSES WERE RIGHTLY CONSIDERED BY THE CIT ( APPEALS) AS SALES ITA NO.3621/DEL/2009 6 PROMOTION EXPENSES AND HENCE WE DO NOT FIND ANY REA SON TO INTERFERE IN THE ORDER OF CIT (APPEALS) ON THIS ISSUE. 7. REGARDING THE BOARD CIRCULAR NO.8/2005 DATED 29. 8.2005, WE FIND THAT QUESTIONS NO.58 TO 61 OF THIS CIRCULAR ARE NOT APPL ICABLE IN THIS CASE BECAUSE WE HAVE NOTED ABOVE THAT IN THE PRESENT CASE, FOC A CCESSORIES WERE PROVIDED BY THE ASSESSEE KEEPING IN MIND SALES PROM OTION ELEMENT AND HENCE THIS BOARD CIRCULAR IS NOT APPLICABLE IN THIS CASE. 8. REGARDING JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TUTICORIN ALKALI CHEMICALS AND FERTILISERS (SUP RA), WE FIND THAT THIS JUDGMENT IS NOT APPLICABLE IN THIS CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE ISSUE WAS REGARDING COMMISSION AND DISCOU NT ON SALES ALLOWED BY THE ASSESSEE TO DEALERS WHEREAS, IN THE PRESENT CAS E, THE EXPENSES IN DISPUTE ARE FOC ACCESSORIES PROVIDED BY THE ASSESSEE COMPAN Y TO ITS REGULAR CUSTOMERS KEEPING IN MIND ITS SALES PROMOTION ELEME NT AND HENCE, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF FEBRUARY, 2010. SD/- SD/- (R.P. TOLANI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 5 TH DAY OF FEBRUARY, 2010 TS ITA NO.3621/DEL/2009 7 COPY FORWARDED TO : 1. ASSESSEE 2. A.O. 3. CIT (A) 4. CIT 5. DR DEPUTY REGISTRAR, ITAT, DELHI BENCHES