ITO, UDAIPUR V. Smt. Neha Manwani, UDAIPUR

ITA 420/JODH/2009

• Counselvise Citation: 42023314 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

1 ITA 420-09 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 420/JODH/2009 ASSTT. YEAR : 2005-06. THE INCOME-TAX OFFICER, VS. SMT. NEHA MANWANI, WARD 2(2), PROP. LIBERTY SALES, UDAIPUR. C-115, PRATAP NAGAR, UDAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.H. GOHEL RESPONDENT BY : SHRI SHRAWAN KUMAR GU PTA DATE OF HEARING : 09.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2005-06. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION OF RS. 5,25,000/- MADE ON ACCOUNT OF FRANCHISEE FEE AND DELETION OF ADDITION OF RS. 2,50,000/- MADE ON ACCOUNT OF INSURANCE POLICY. 3. THE ASSESSING OFFICER TREATED THE AMOUNT PAID ON ACCOUNT OF FRANCHISEE FEE AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION. THE ASSESSING OFFICER ALSO DISALLOWED DEDUCTION ON ACCOUNT OF KEY MAN INSURANCE PAYMENT O F RS. 2,50,000/- BY HOLDING THAT 2 SAME IS NOT ALLOWABLE. THE LD. CIT (A) ALLOWED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE BY PASSING A DETAILED LENGTHY ORDER. 4. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 5. ON THE OTHER HAND, THE LD.COUNSEL OF THE ASSESSE E PLACED RELIANCE ON THE ORDER OF LD. CIT (A). HE FURTHER FILED COPY OF WRITTEN SUBMI SSION. 6. AFTER CONSIDERING THE ORDERS OF THE ASSESSING OF FICER AND LD. CIT (A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A) AS LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT FEES PAID ON ACCOUNT OF FRANCHISEE IS A REVENUE EX PENDITURE. THE FEES WAS PAID BY ASSESSEE WAS NOT REFUNDABLE. THEREFORE, IN OUR VIEW IT CANNOT BE TREATED AS DEFERRED REVENUE EXPENDITURE BUT REVENUE EXPENDITURE IN THE YEAR IN WHICH THE FEES IS PAID. FURTHER, LD. CIT (A) HAS DISCUSSED THE ISSUE. THE LD. CIT (A) HAS ALSO OBSERVED THAT THE FEES PAID BY ASSESSEE IS NON REFUNDABLE AND IT IS N OT AN EXPENDITURE THAT RESULTS IN ENDURING BENEFIT AS ACCESS TO THE FACILITIES WHICH ARE PROVIDED TO THE DEALERS IS NOT DEPENDENT SOLELY ON THE PAYMENT OF SUCH CHARGES, AN D THEREFORE, SAME CONSTITUTES REVENUE EXPENDITURE. IT IS ALSO OBSERVED BY LD. CIT (A) TH AT WHAT IS RELEVANT IS THE PURPOSE OF THE OUTLAY AND ITS INTENDED OBJECT AND EFFECT, CONSIDER ED IN A COMMON SENSE WAY HAVING REGARD TO THE BUSINESS REALITIES. THESE OBJECTIONS OF LD. CIT (A) REMAINED UNCONTROVERTED, THEREFORE, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED I N DELETING THE DISALLOWANCE. 7. KEY MAN INSURANCE EXPENSES WERE DELETED BY LD. C IT (A) BASED ON CBDT CIRCULAR NO. 762 DATED 18.2.1998 WHEREIN IT HAS BEE N CLEARLY STATED THAT THE PREMIUM ON KEYMAN INSURANCE POLICY IS ALLOWABLE BUSINESS EXPEN DITURE. FURTHER, RELIANCE WAS PLACED ON THE DECISION OF TRIBUNAL IN THE CASE OF S UNITA FINLEASE LTD., 118 TTJ 263 AND IN THE CASE OF T.G. ELECTRONIC, 98 TTJ 896 (DEL.). BO TH THE DECISIONS ARE SQUARELY 3 APPLICABLE ON THE FACTS OF PRESENT CASE. ACCORDING LY, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN DELETING THIS ADDITION ALSO. THE ORDE R OF LD. CIT (A) IS CONFIRMED ON BOTH THE ISSUES. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15. 12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- THE ITO WARD 2(2), UDAIPUR. SMT. NEHA MANWANI, UDAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 420/JODH/2009) BY ORDER, AR ITAT JODHPUR.