ACIT, New Delhi V. M/s. Spice Distribution Ltd., New Delhi

ITA 4447/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5448 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: AJAY V OHRAROHIT GARG
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure
• Section: 37

Judgement Text

ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 4447/DEL/2012 ASSESSMENT Y EAR: 2009-10 ASSTT.COMMISSIONER OF INCOME TAX, VS SPICE D ISTRIBUTION LTD., CIRCLE-9(1), ROOM NO. 163, 60-D, STREET NO. C-5, C.R. BUILDING, SAINIK FARM, NEW DELHI. NEW DELHI. (PAN: AABCH8481N) C.O. NO. 411/DEL/2012 ASSESSMENT Y EAR: 2009-10 M/S SPICE DISTRIBUTION LTD., VS ACIT, CIRCLE-9(1), NEW DELHI. NEW DELHI. (APPELLANT) (RESPON DENT) APPELLANT BY: SHRI RENUKA JAIN GUPTA, SR. DR RESPONDENT BY: S/SHRI AJAY VOHRA, ROHIT GA RG O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XII, NEW DELHI DATED 28.05.2012 IN APPEAL NO.383/11-12 FOR THE AY 2009-10. 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.2,87,85,001/- MADE BY THE ASSESS ING ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 2 OFFICER BEING 25% OF TOTAL EXPENDITURE OF RS.11,51,40,004/- ON ACCOUNT OF ADVERTISEMENT EXPEN SES AS THESE EXPENSES ARE RELATED TO BRAND BUILDING AND HE NCE CAPITAL IN NATURE. 3. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD PLACED BEFORE US. DURING THE AR GUMENTS, LD. COUNSEL OF THE ASSESSEE SUBMITTED A COPY OF THE DECISION OF IT AT DELHI G BENCH IN ASSESSEES OWN CASE WHEREIN APPEAL OF THE REVENUE I N ITA NO. 4898/DEL/2011 HAS BEEN DISMISSED BY UPHOLDING ORDER OF THE COMMISSIONER OF INCOME TAX(A) WHICH DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BEING 25% OF TOTAL EXPENDITURE ON ACCOUNT OF ADVERT ISEMENT EXPENSES, DISMISSING THE CONTENTION OF THE REVENUE THAT THESE EXPENSES ARE RELATED TO BRAND BUILDING, HENCE CAPITAL IN NATURE. 4. ON SPECIFIC QUERY FROM THE BENCH, THE LD. DR FAI RLY ACCEPTED THAT TO THE BEST OF HIS KNOWLEDGE, ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 IN FAVOUR OF THE ASSESSEE (SUPRA) HAS NO T BEEN MODIFIED OR SET ASIDE EITHER BY THE TRIBUNAL ITSELF OR BY ANY OTHER HIGHER FORUM. 5. THE RELEVANT OPERATIVE PARA I.E. OBSERVATIONS AN D FINDINGS OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 ON T HE IMPUGNED ISSUE READS AS UNDER:- 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDER ATION ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 3 OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL DECISION ON THE ISSUE INVOLVED, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT( A). A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT NO BASIS FOR CONCLUDING THAT 25% OF THE EXPENDITURE ON ACCOUNT O F ADVERTISEMENT AND MARKETING EXPENSES SHOULD BE DISALLOWED HAS BEEN SET OUT WHICH IS A FACT WHICH PREVAILED WITH THE CIT(A) TO UPSET THE FINDING IN T HE ASSESSMENT ORDER AS HAVING BASED ON NO FACTS THE ADMITTED POSITION IS THAT THIS WAS THE FIRST YEAR O F OPERATION OF THE ASSESSEE WHEREIN W.E.F. 9.4.2009 T HE ASSESSEE SUBSTITUTED THE WORD HOT SPOT FOR THE WO RD SPICE. AS SUCH THE ASSESSEE UNDERTOOK SCHEMES OF SALES PROMOTION AND ADVERTISEMENT IN PRINTING AND ELECTRO NIC MEDIA THE ASSESSEE WAS IN THE BUSINESS OF SELLING M OBILE HAND SETS AND OTHER ELECTRONIC ITEMS AND ACCESSORIE S ADMITTEDLY OPERATES IN A HIGHLY COMPETITIVE MARKET WHEREIN THE SPECIFIC BRAND WAS NECESSARILY TO BE ADVERTISED AND MADE KNOWN TO THE PUBLIC AT LARGE TH E FACTUM OF INCURRING THE EXPENDITURE OF SALES PROMOT ION SCHEMES ADVERTISEMENT OF ITS PRODUCTS IN NEWSPAPERS , ELECTRONIC MEDIA, NEON SIGNS AND BANNERS ETC. HAVE NOT BEEN DATED. IN THESE FACTS IT IS AN ADMITTED POSITI ON THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FO R THE BUSINESS OF THE ASSESSEE AND IS NOT A CAPITAL EXPEN DITURE NOR A PERSONAL EXPENSE. NO REASONING OR BASIS HAS B EEN GIVEN BY THE A.O. TO DISALLOW 25% OF THE EXPENSES CLAIMED AS IF THE EXPENDITURE IS CAPITAL IN NATURE THEN DEPRECIATION SHOULD HAVE BEEN ALLOWED AND IF THE EX PENSE IS BEING TREATED AS DEFERRED REVENUE EXPENDITURE TH EN IT IS CONTRARY TO THE SETTLED LEGAL POSITION. IN THE FACT S AS THEY STAND THE EXPENSES INCURRED FOR BRAND BUILDING EXER CISE OF SPICE BRAND HAS RIGHTLY BEEN ALLOWED AS REVENUE EXPENDITURE BY THE CIT(A) RELYING UPON THE ORDER OF THE TRIBUNAL IN A GROUP COMPANIES CASE NAMELY ITO VS. SPICE COMMUNICATIONS LTD. 210 ITR 35, SOT 75, WE AR E FULLY IN CONCURRENCE WITH THE FINDING OF THE COORDI NATE BENCH AS ADVERTISEMENT ETC. CANNOT BE SAID TO BE A CAPITAL ASSET. SIMILARLY PUTTING HOARDINGS, NEON SI GNS ETC. CANNOT BE SAID TO HAVE LED TO THE CREATION OF ANY C APITAL ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 4 ASSET. WE FIND SUPPORT FROM THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SA LORA INTERNATIONAL LTD. 308 ITR 199 DELHI WHEREIN CONSIDERING THE ADVERTISING EXPENDITURE OF APPROXIM ATELY RS.3.08 CRORES THE CONCLUSION OF THE TRIBUNAL NAMEL Y THAT THERE WAS DIRECT NEXUS BETWEEN ADVERTISEMENT EXPENDITURE AND THE BUSINESS OF THE ASSESSEE AND TH AT THE ASSESSEE HAD TO INCUR SUCH EXPENDITURE TO MEET THE COMPETITION IN THE INDIAN MARKET FOR SELLING ITS PR ODUCTS IN INDIA WAS UPHELD. IN THE FACTS OF THE PRESENT CA SE ALSO IT IS IMPERATIVE THAT UNLESS THE ASSESSEE MADE ITS PRODUCTS KNOWN TO THE MARKET ITS BUSINESS WOULD SUFFER. THE JUDGEMENT OF APEX COURT IN EMPIRE JUTE MILLS 124 IT R 1 (S.C.) WHICH HAS CONSIDERED THAT THERE COULD BE CAS ES WHERE THE EXPENDITURE EVEN IF IT WAS INCURRED FOR OBTAINING A BENEFIT OF AN ENDURING NATURE MAY NEVERTHELESS BE ON THE REVENUE ACCOUNT IN WHICH CAS E THE TEST OF ENDURING BENEFIT WOULD BREAK DOWN FULLY SUP PORTS THE VIEW TAKEN. SIMILARLY THE JURISDICTIONAL HIGH C OURT IN CIT VS CASIO INDIA LTD. 335 ITR 196 REFERRED TO A B UNCH OF APPEALS WITH THE LEAD CASE BEING ITA 1820/2010 ENTITLED CIT VS. CITY FINANCE CONSUMERS FINANCE LTD . 335 ITR 29 DELHI HAD HELD THAT EXPENDITURE ON ADVERTISING AND SALES PROMOTION IS TO BE TREATED AS BUSINESS EXPENDITURE U/S 37 OF THE ACT. THE JURISDI CTIONAL HIGH COURT THEREIN CONSIDERING THE APPEAL OF THE REVENUE IN REGARD TO THE CLAIM OF THE ASSESSEE BEF ORE THE A.O. PERTAINING TO AN EXPENDITURE OF RS.4.18 LAKHS FOR ADVERTISING AND SALES PROMOTION WHEREIN THE A.O. HA D RELIED UPON THE JUDGEMENT OF APEX COURT IN MADRAS INDUSTRIAL INVESTMENT CORPORATION VS CIT 225 ITR 80 2 (SC) UPHELD THE ORDER OF THE TRIBUNAL WHICH HAD CONFIRMED THE ORDER OF THE CIT(A) WHO HAD HELD THAT THERE IS NO CONCEPT FOR DEFERRED REVENUE EXPENDITUR E IN THE INCOME TAX ACT, 1961. SIMILAR VIEW WAS TAKEN BY THE JURISDICTIONAL HIGH COURT IN COMMISSIONER OF INCOME TAX VS PEPSI CO INDIA COOLDRINKS LTD. IN ITA 319/20 10 RENDERED ON 30.3.2011 A COPY OF WHICH IS PLACED AT PAGES 155 TO 172. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE BEING SATISFIED WITH THE REASONING AND ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 5 FINDING ARRIVED AT IN THE IMPUGNED ORDER THE DEPARTMENTAL GROUND IS DISMISSED. IN VIEW OF THE FA CT THAT THE FINDING IN THE IMPUGNED ORDER IS CONFIRMED THE C.O. FILED BY THE ASSESSEE IS INFRUCTUOUS AND IS DISMISS EDAS SUCH. 6. ON CAREFUL PERUSAL OF ABOVE ORDER AND IN THE LIG HT OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VI EW THAT THE SOLE GROUND OF THE REVENUE IN THE PRESENT APPEAL IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT G BENCH IN ASSESSEES OWN CASE (SUPRA). RELYING UPON THE JUDG MENT OF HONBLE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT C ORPORATION VS COMMISSIONER OF INCOME TAX 225 ITR 802 (SC) , WE HOLD THAT THERE IS NO CONCEPT FOR DEFERRED REVENUE EXPENDITURE IN THE INC OME TAX ACT. SIMILAR VIEW WAS ALSO REITERATED BY THE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS PEPSICO INDIA COLD DRINK LTD. IN ITA NO. 319/2010 DATED 30.3.2011. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL A ND FOR THE REASONS GIVEN HEREINABOVE, WE ARRIVE TO A CONCLUSION THAT THE FIN DINGS OF COMMISSIONER OF INCOME TAX(A) IN THE IMPUGNED ORDER ARE JUSTIFIED A ND COGENT AND WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH TH E SAME. UNDER THESE CIRCUMSTANCES, SOLE GROUND OF THE REVENUE BEING DEV OID OF MERITS IS DISMISSED. ITA NO.4447DEL/2012 ASSTT. YEAR 2009-10 6 C.O. OF THE ASSESSEE 7. SINCE BY THE FIRST PART OF THIS ORDER, WE HAVE D ISMISSED THE APPEAL OF THE REVENUE UPHOLDING THE FINDINGS OF COMMISSIONER OF INCOME TAX(A) THEREIN AND THE FINDINGS IN THE IMPUGNED ORDER HAVE BEEN UPHELD AND CONFIRMED, THEREFORE, THE C.O. FILED BY THE ASSESSE E BECOMES INFRUCTUOUS AND WE DISMISS THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.02.2014 SD/- SD- (SHAMIM YAHYA ) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 21ST FEBRUARY, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR TRUE CO PY BY ORDER ASSTT. REGISTRAR