DCIT, New Delhi V. M/s. Mail Today Newspapers Pvt. Ltd., New Delhi

ITA 4252/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3362 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Capital receipt; Capital expenditure
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 4252/DEL/2014 (ASSESSMENT YEAR: 2010-11) A APPELLANT BY : MS. RACHNA SINGH, SR. DR RESPONDENT BY : SH. SALIL AGGARWAL, SH. SHAILESH GUPTA, ADVS. DATE OF HEARING : 25.04.2017 DATE OF PRONOUNCEMENT : 27.04.2017 O R D E R PER BEENA A. PILLAI, J.M : 1. THE PRESENT APPEAL HAS BEEN PREFERRED BY REVENUE AGAINST ORDER DATED 19.05.2014 PASSED BY LD. CIT (A )-9, NEW DELHI, FOR ASSESSMENT YEAR 2010-11 ON FOLLOWING GRO UNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO BY TREATING ADVERTISEMENT & SALES PROMOTION EXPENSES AS REVENUE EXPENSES BY COMPLETELY RELYING UPON THE SUBMISSIONS OF THE ASSESSEE AND COMPLETELY IGNORING THE REASONS GIVEN BY THE AO? 2. THAT THE ORDER OF THE LD. C!T(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. DCIT CIRCLE-6(1), NEW DELHI VS. MAIL TODAY NEWS PAPERS PVT. LTD. F- 26, CONNAUGHT PLACE NEW DELHI GIR/PAN: AAFCM1533J (APPELLANT) (RESPONDENT) 2 ITA NO.4252/DEL/2014 (AY 2010-11) 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO.EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FOREGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME DECLARING A LOS S OF RS. 3,73,30,202/- ON 13.10.2010. RETURN WAS PROCESSED U NDER SECTION 143(1) OF THE ACT AND WAS SELECTED FOR SCRU TINY. IN RESPONSE TO NOTICES UNDER SECTION 143(2) AND 142(1) REPRESENTATIVES, ASSESSEE ATTENDED PROCEEDINGS AND FURNISHED REQUISITE DETAILS. 3. LD. AO OBSERVED THAT ASSESSEE DERIVES REVENUE FROM SALE OF PUBLICATION AND ADVERTISEMENT PUBLISHED THEREIN. DURING ASSESSMENT PROCEEDINGS LD. AO NOTED THAT YEAR UNDER CONSIDERATION IS 3 RD YEAR OF OPERATION OF ASSESSEE AND EXPENSES ON ADVERTISEMENT AND SALES PROMOTION ARE INCURRED T O PROPAGATE THE BRAND NAME OF ASSESSEE IN MARKET. LD. AO, THUS, HELD EXPENSES TO BE CAPITAL IN NATURE AND DIS ALLOWED THE SAME HOLDING IT TO BE ENDURING IN NATURE. 4. AGGRIEVED BY ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE ADDITI ON. 5. AGGRIEVED BY ORDER OF LD. CIT(A), REVENUE IS IN AP PEAL BEFORE US NOW. 6. LD. CIT DR SUBMITTED THAT GROUND NO. 2, 3 AND 4 AR E GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICA TION. SHE SUBMITTED THAT ONLY ISSUE HAS BEEN RAISED IN GROUND NO. 1 IS REGARDING TREATMENT OF EXPENSES INCURRED, TOWARDS 3 ITA NO.4252/DEL/2014 (AY 2010-11) ADVERTISEMENT AND SALES PROMOTION EXPENSES BEING RE VENUE IN NATURE BY LD. CIT(A). 7. SHE SUBMITTED THAT EXPENSES HAVE BEEN INCURRED IN RELATION TO ADVERTISEMENT AND SALES PROMOTION TO PR OPAGATE BRAND NAME OF ASSESSEE IN THE MARKET AND HENCE HAS GIVEN RISE TO AN ENDURING BENEFIT TO ASSESSEE. HE SUBMITT ED THAT ANY EXPENSES INCURRED WHICH GIVE RISE TO ANY ENDURING B ENEFITS WOULD WOULD HAVE TO BE NECESSARILY CONSIDERED AS CA PITAL EXPENDITURE LD. CIT DR SUBMITTED THAT, THROUGH THES E ADVERTISEMENT AND PROMOTIONS, ASSESSEE HAS DEVELOPE D BRAND NAME, WHICH IS A TANGIBLE ASSET. THIS WOULD INCREAS E BUSINESS OF ASSESSEE, AS THE IMAGE GETS IMPRINTED IN MINDS O F CUSTOMERS WHICH IS NOT VERY EASY TO DISLODGE. LD. C IT, DR SUPPORTED ORDER PASSED BY ASSESSING OFFICER AND ALS O HAS RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD., VS. CIT , REPORTED IN 27 ITR 34, AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JT. CIT REPORTED IN 126 TAXMANN 544 . 8. ON THE CONTRARY LD. COUNSEL SUBMITTED THAT ASSESSE E HAS BEEN INCURRING SIMILAR EXPENSES ON ADVERTISEMEN T AND SALES PROMOTION IN PRECEDING AS WELL A SUBSEQUENT A SSESSMENT YEARS, WHICH HAS BEEN ACCEPTED BY DEPARTMENT. HE SU BMITTED THAT AUTHORITIES HAVE NOT DISPUTED GENUINENESS OF E XPENSES IN ANY OF ASSESSMENT YEARS. HE PLACED RELIANCE UPON FO LLOWING DECISIONS: HONBLE SUPREME COURT IN THE CASE OF CIT VS. J.K CHARITABLE TRUST, REPORTED IN 308 ITR 161; 4 ITA NO.4252/DEL/2014 (AY 2010-11) HONBLE SUPREME COURT IN THE CASE OF RADHSOAMI SATSANG VERSUS CIT REPORTED IN 193 ITR 321; HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VERS US CORE HEALTH CARE LTD REPORTED IN 308 ITR 263 9. LD. COUNSEL SUBMITTED THAT ASSESSEE HAS TO INCUR T HESE EXPENSES TO MAKE AN EXISTENCE IN MARKET AND THEREFO RE, IT CANNOT BE CONSIDERED TO BE ENDURING NATURE. HE SUBM ITTED THAT THESE EXPENSES ARE INCURRED EVERY YEAR BY ASSE SSEE. HE RELIED UPON CERTAIN DECISIONS WHEREIN TESTS HAS BEE N LAID DOWN TO ESTABLISH THREE NATURE OF AN EXPENSES. HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO.LTD VS. CIT REPORTED IN 124 ITR 1; HONBLE SUPREME COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS CO.LTD VERSUS CIT REPORTED IN 177 IT R 377; HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CAS IO INDIA LTD., REPORTED IN 335 ITR 196; HONBLE DELHI HIGH COURT IN THE CASE OF CIT VERSUS CITI FINANCIAL CONSUMER FIN. LTD., REPORTED IN 335 ITR 29 ; HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VERSUS GEOFERRY MANNERS AND COMPANY LTD REPORTED IN 315 ITR 134; 10. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORD PLACED BEFORE US AND DECISIONS RELIED UPON BY THEM. 11. LD. AO HAS ALREADY RECORDED THAT YEAR UNDER CONSIDERATION IS 3 RD YEAR OF SINCE ITS COMMENCEMENT. THIS MEANS THAT BUSINESS HAS BEEN CARRIED ON SINCE PAST TWO ASSESSMENT YEARS. 12. HONBLE SUPREME COURT IN CASE OF EMPIRE JUTE CO. L TD VS. CIT (SUPRA) HAS HELD AS UNDER: 5 ITA NO.4252/DEL/2014 (AY 2010-11) BY THE COURT: (I) IT IS NOT A UNIVERSALLY TRUE PROPOSITION THAT WHAT MAY BE A CAPITAL RECEIPT IN THE HANDS OF THE PAYEE MUST NECESSARILY BE CAPITAL EXPENDITURE IN RELATION TO THE PAYER. THE FACT THAT A CERTAIN PAYMENT CONSTITUTES INCOME OR CAPITAL RECEIPT IN THE HANDS OF THE RECIPIENT IS NOT MATERI AL IN DETERMINING WHETHER THE PAYMENT IS REVENUE OR CAPITAL DISBURSEMENT QUA THE PAYER. (II) THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, MAY, NONE THE LESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT I S MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABILITY WHILE LEAVIN G THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AN D MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. (III) WHAT IS AN OUTGOING OF CAPITAL AND WHAT IS OUTGOING AN ACCOUNT OF REVENUE DEPENDS ON WHAT THE EXPENDITURE IS CALCULATED TO EFFECT FROM A PRACTICAL AND BUSINESS POINT OF VIEW RATHER THAN UPON THE JURISDIC CLASSIFICATION OF THE LEGAL RIGHT S, IF ANY, SECURED, EMPLOYED OR EXHAUSTED IN THE PROCESS. THE QUESTION MUST BE VIEWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. 6 ITA NO.4252/DEL/2014 (AY 2010-11) 13. RESPECTFULLY FOLLOWING SAME, WE ARE OF CONSIDERED OPINION THAT EXPENDITURE INCURRED BY ASSESSEE TOWARDS ADVER TISEMENT AND SALES PROMOTION ARE FOR THE PURPOSES OF MAKING CUSTOMERS AWARE OF ASSESSEES EXISTENCE AND ITS PRODUCTS/SERV ICES, INCLUDING IMPROVEMENT, IF ANY, IN THE MARKET WHICH MAY OR MAY NOT RESULT IN SALES. WE ARE, THEREFORE, INCLINE D TO UPHOLD FINDINGS OF LD. CIT(A). ACCORDINGLY, GROUND RAISED BY REVENUE STANDS DISMISSED. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2017. SD/- SD/- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 27.04.2017 @M!T