DCIT, CIR-6(1), kOLKATA, Kolkata V. M/s Birla Corporation Ltd., Kolkata

ITA 367/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6421 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA
• Assessee Lawyers: A DHDHWENALA
• Keywords: Gift

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.367/KOL/2017 ASSESSMENT YEAR:2008-09 DCIT, CIRCLE-6(1), P-7, CHOWRINGHEE SQUARE, KOLKATA-69 / V/S . M/S BIRLA CORPORATION LTD., 9/1 R.N. MUKHERJEE ROAD, KOLKATA-001 [ PAN NO.AABCB 2075J ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOUMYAJIT DASGUPTA, ADDL. CIT-DR /BY RESPONDENT SHRI A. DHDHWENALA, /DATE OF HEARING 20-03-2018 /DATE OF PRONOUNCEMENT 03-05-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-23, KOLKATA DATED 18.11.2016. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6(1), KOLKATA U/S 154/154/115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 31.03.2015 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT PRESENTS GI VEN TO THE STOCKIEST AND DEALERS WERE SALES PROMOTION IN NATURE AND 20% OF T HE SAID MOUNT WAS TAXABLE FRINGE BENEFIT, IGNORING THE FACT THAT PRESENTS GIV EN TO THE DEALERS AND STOCKIEST ITA NO.367/KOL/2017 A.Y 2008-09 DCIT, CIR-6 KOL. VS. M/ BIRLA CORPORA TION LTD. PAGE 2 WERE GIFT IN NATURE AND AS SUCH, 50% OF SUCH EXPEND ITURE WAS TAXABLE FRINGE BENEFIT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE CBDTS CIRCULAR NO.8 DATED 29.08.2005, VIDE ANSWER TO Q NO 7 OF THE SAID CIRCULAR. 3. FOR THAT THE APPELLANT RESERVES THE RIGHT TO AD TO, ALTER OR AMPLIFY THE ABOVE GROUNDS OF APPEAL. SHRI SOUMYAJIT DASGUPTA, LD. DEPARTMENTAL REPRESENT ATIVE APPEARED ON BEHALF OF REVENUE AND SHRI A. DHDHWENALA, LD. AUTHORIZED REPR ESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. SOLE ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOU NT OF FRINGE BENEFIT EXPENSES INCURRED BY ASSESSEE. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS I NCURRED EXPENDITURE UNDER THE HEAD GIFT TO STOCKIEST AND DEALERS WHICH WERE TRE ATED AS SALES PROMOTION AND PUBLICITY. THE GIFTS WAS TAXED UNDER THE FBT @ 20% IN THE ASSESSMENT FRAMED UNDER SECTION 115WE(3) DATED 31.12.2010. HOWEVER THE AO S UBSEQUENTLY RECTIFIED THE SAME UNDER SECTION 154/115WE(3) OF THE ACT BY TREATING T HE IMPUGNED GIFTS FOR FRINGE BENEFIT TAX @ 50% ON SUCH EXPENSE. ACCORDINGLY, AO ADDED THE DIFFERENCE OF 30% OF GIFTS EXPENSE OF 47,81,249 ONLY TO THE VALUE OF FRINGE BENEFIT AMOUN T OFFERED BY ASSESSEE AND THE AMOUNT APPLICABLE TO FRINGE BENEFI T TAX. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 3. ORDER U/S. 154, GROUNDS OF APPEAL, SUBMISSION O F THE ARS WERE DULY CONSIDERED. IN THE PRESENT CASE, THE ASSESSING OFFI CER PASSED THE ORDER U/S. 154/115WE(3) OF IT ACT MENTIONING THAT GIFT TO STOC KIEST AND DEALER TO BE CHARGED AT THE RATE OF 50% INSTEAD OF 20% AS THEY A RE NOT SALES PROMOTION CASES. IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2007-08, CIT-6 HAS TREATED THE GIFT AS A SALES PROMOTION EXPENSE FOLLO WING THE HON'BLE TRIBUNAL ORDER ITA NO.1813-KOL-2010 FOR THE ASSESSMENT YEAR2 006-07 WHERE IN GIFTS WERE TREATED AS SALES PROMOTION EXPENSES. FOLLOWING THE DECISIONS IN THE ASSESSMENT YEAR 2006-07 AND 2007-08 IN THE ASSESSEE S OWN CASE, I ALSO, IN THE PRESENT APPEAL TREAT THE GIFT AS SALES PROMOTION EX PENSES AND DIRECT THE AO TO CHARGE FBT @ 20% INSTEAD OF 50%. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. ITA NO.367/KOL/2017 A.Y 2008-09 DCIT, CIR-6 KOL. VS. M/ BIRLA CORPORA TION LTD. PAGE 3 5. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF AU THORITIES BELOW AS FAVOURABLE TO THEM SO FAR LD. AR FOR THE ASSESSEE FILED PAPER BOO K WHICH IS RUNNING PAGES FROM 1 TO 19. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE FIN D THAT ISSUE IN THE PRESENT CASE OF REVENUE HAS ALREADY BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.904/KOL/2014 DATED 14.03.2017, WHEREIN THE TRIBUNAL HELD AS UNDER:- 6. WE HAVE PERUSED THE CASE RECORDS, ANALYZED THE F ACTS AND CIRCUMSTANCES AND HAVE CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFOR E US. WE ARE INCLINED TO ANALYSE THE LEGAL SITUATION FIRST AND THEN CORRELATED TO TH E FACTS SITUATION IN ORDER TO APPRECIATE THE ISSUE. SECTION 115WB(2) OF THE ACT S PECIFIES VARIOUS EXPENSES, WHICH ARE CONSIDERED TO BE IN THE NATURE OF FRINGE BENEFI TS. CLAUSE (D) OF THE SAID SECTION TREATS EXPENDITURE ON SALES PROMOTION INCLUDING PUB LICITY AS TAXABLE FRINGE BENEFIT AND CLAUSE (O) TREATS EXPENDITURE ON GIFTS PROVIDED BY THE EMPLOYER AS TAXABLE .FRINGE BENEFIT. AS PER SECTION 115WC(1)(C), 20% OF THE EXP ENSES INCURRED ON SALES PROMOTION INCLUDING PUBLICITY ARE TO BE TREATED AS TAXABLE FRINGE BENEFIT AND AS PER SECTION 115WC(1 )(D) 50% OF EXPENDITURE ON GIFTS AR E TO BE TREATED AS TAXABLE FRINGE BENEFIT. THE ASSESSEE HAS CONSIDERED THE IMPUGNED A MOUNT UNDER SECTION.115WB(D) WHEREAS AO HAS CONSIDERED THE SAME UNDER SECTION. 1 15WB(O). KEEPING IN VIEW THE BUSINESS EXIGENCY ONLY 20% OF THE EXPENDITURE INCUR RED ON SALES PROMOTION INCLUDING PUBLICITY HAS BEEN TAKEN AS TAXABLE FRINGE BENEFIT WHEREAS IN CASE OF GIFTS WHICH ARE PURELY GIVEN WITHOUT ANY CONSIDERATION OUT OF ONE'S OWN VOLITION HAVING VERY LITTLE BUSINESS ; CONSIDERATION, 50% OF THE EXPENDITURE ON SUCH GIFTS IS BEING TREATED AS TAXABLE FRINGE BENEFIT. THE LEGISLATIVE INTENT IS A LSO CLEAR FROM THE FACT THAT W.E.F 1-4- 08 EXPENDITURE ON DISTRIBUTION OF SAMPLES EITHER FR EE OF COST OR AT CONCESSIONAL RATE HAS BEEN EXCLUDED FROM SALES PROMOTION AND PUBLICIT Y EXPENSES AND, THEREFORE, NOT TO BE CONSIDERED AS TAXABLE FRINGE BENEFIT. THEREFORE, AN EXPENDITURE, WHICH HAS DIRECT NEXUS WITH THE SALES PROMOTION AND PUBLICITY CANNOT BE CLASSIFIED UNDER CLAUSE(O) AS GIFTS. IN ANY VIEW OF THE MATTER, UNDER SUCH CIRCUM STANCES, IN CASE OF TWO VIEWS, THE VIEW FAVOURABLE TO ASSESSEE HAS TO BE TAKEN. WE FIN D CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE ID. COUNSEL FOR THE ASSESSEE. TH AT SINCE THE ARTICLES DISTRIBUTED HAD DIRECT NEXUS WITH THE SALES ACHIEVED THROUGH STOCKI EST/DEALER ETC., THEREFORE, EXPENDITURE WAS PURELY FOR SALES PROMOTION PURPOSES . IT WAS NOT INCURRED FOR GIVING THE GIFTS, WHICH HAVE NORMALLY TO BE GIVEN WITHOUT ANY CONSIDERATION OUT OF ONE'S OWN VOLITION FURTHER, IT IS NOT DISPUTED THAT PRESENTAT ION ARTICLES CARRIED THE NAME OR LOGO OF THE ASSESSEE AND, THEREFORE, THE USE WAS FOR THE PURPOSES OF ADVERTISEMENT.. UNDER SUCH CIRCUMSTANCES, THE IMPUGNED EXPENDITURE IS TO BE TREATED AS EXPENDITURE ON SALES PROMOTION INCLUDING PUBLICITY AND COULD NOT BE CLAS SIFIED UNDER CLAUSE (O) TREATING IT AS GIFT. FURTHER WE OBSERVED THAT IN ASSESSEE'S OWN CASE IN ITA NO.1813/KOI/2013, THE TRIBUNAL HAS TAKEN A VIEW REGARDING THE CBDT CI RCULAR NO.8 DATED 29-8-2015 ON WHICH RELIANCE WAS PLACED BY THE AO, THE CIRCULAR W AS ANALYSED AND THE OBSERVATION OF THE' BENCH WAS THAT INTERPRETATION OF CBDT CANNO T BE ACCEPTED. THE VERY PREMISE THAT THAT THE IMPUGNED EXPENDITURE IS WITHOUT CONSI DERATION, IN THE HUMBLE OPINION OF THE BENCH, IS WRONG BECAUSE THE OBJECT/CONSIDERATIO N IS SALES PROMOTION. GIFTS ARE ITA NO.367/KOL/2017 A.Y 2008-09 DCIT, CIR-6 KOL. VS. M/ BIRLA CORPORA TION LTD. PAGE 4 NORMALLY GIVEN WITHOUT ANY CONSIDERATION OUT OF ONE 'S OWN VOLITION BUT IN THE PRESENT CASE VARIOUS ITEMS WERE GIVEN IN TERMS OF TRADE SCH EME DEPENDING UPON SALES TARGETS ACHIEVED BY STOCKIEST! DEALERS. THEREFORE, IS NOT C ORRECT AS PER THE PRINCIPLE OF LAW. MOREOVER, FACTS SITUATION PREVALENT FOR THE ASSESSM ENT YEAR 2006-07 ARE IDENTICAL WITH THAT OF PRESENT ASSESSMENT YEAR AND, THEREFORE, WE ARE INCLINED TO MAINTAIN STATUS QUO FOLLOWED THE PRONOUNCEMENTS GIVEN BY ITAT KOLKATA B ENCH IN ASSESSEES OWN CASE AND ACCORDINGLY THE RELIEF GRANTED BY LD. CIT(A) TO THE ASSESSEE IS SUSTAINED. THIS GROUND OF APPEAL BY THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE SAME, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROUND OF REVENUE S APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 03/05/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-6(1), P-7, CHWRINGHEE SQ. K OLKATA-69 2. /RESPONDENT-M/S BIRLA CORPORATION LTD., 9/1 R.N.MUK HERJEE ROAD, KOL-001 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,