M/s Modi Revlon Private Limited, New Delhi V. Addl. CIT, Range 5, New Delhi

ITA 5/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2204 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 02-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Rule of consistency; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NOS.5/DEL/2009 & 2063/DEL/2009 ASSESSMENT YEARS : 2005-06 & 2006-07 M/S MODI REVLON PVT.LTD., 1400, MODI TOWER, 98, NEHRU PLACE, NEW DELHI 110 019. PAN NO.AAACM5901B. VS. ACIT/DCIT, CIRCLE-5(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NOS.155/DEL/2009 & 3083/DEL/2009 ASSESSMENT YEARS : 2005-06 & 2006-07 ACIT/DCIT, CIRCLE-5(1), NEW DELHI. VS. M/S MODI REVLON PVT.LTD., 1400, MODI TOWER, 98, NEHRU PLACE, NEW DELHI 110 019. PAN NO.AAACM5901B. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR, ADVOCATE. REVENUE BY : SMT.KAVITA BHATNAGAR, CIT-DR. ORDER PER R.C.SHARMA, AM : THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) FOR AY 2005-06 & 2006-07, IN THE MA TTER OF ORDER PASSED U/S 143(3) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIAN COMPANY FORMED AS A RESULT OF JOINT VENTURE BETWEEN MODI MUNDIPHARMA PVT.LTD. (MMPL) AND REVLON MAURITI US LIMITED (RML) FOR MANUFACTURING AND MARKETING OF REVLON PRODUCTS IN I NDIA AND NEIGHBOURING COUNTRIES ON AN EXCLUSIVE BASIS. MMPL AND RML HAD INVESTED IN THE RATIO OF ITA-5, 2063, 155 & 3083/D/2009 2 74:26 TO FORM THE ASSESSEE COMPANY. AS PER THE JOI NT VENTURE AGREEMENT, MMPL WAS RESPONSIBLE FOR THE SETTING UP, MANUFACTURING, DISTRIBUTION AND MARKETING OF THE REVLON PRODUCTS IN THE DESIGNATED TERRITORY WHE REAS RML WAS RESPONSIBLE FOR PROVIDING KNOW-HOW, TRADE MARK ETC. THE ASSESSEE HA D ENTERED INTO A TECHNICAL KNOW-HOW AGREEMENT WITH REVLON MAURITIUS LTD. FOR T HE SUPPLY OF TECHNICAL KNOW-HOW TO MANUFACTURE THE GOODS. AS PER THE SAID AGREEMENT, IN CONSIDERATION FOR THE SUPPLY OF KNOW-HOW, ASSESSEE SHALL PAY EVER Y YEAR ROYALTY (NET OF TAXES) AT THE RATE OF 5% ON DOMESTIC SALES AND 8% ON EXPORT S ALES. DURING THE YEAR, ASSESSEE PAID ROYALTY OF RS.4,73,06,822/- TO RML IN PURSUANCE OF THE GRANT OF RIGHT TO USE THE TECHNICAL KNOW-HOW. THE AO DISALL OWED THE ASSESSEES CLAIM OF EXPENDITURE ON ACCOUNT OF ROYALTY BY OBSERVING THAT THE ROYALTY PAID BY THE ASSESSEE TO THE KNOW-HOW LICENSOR IS NOT AN EXPENDI TURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS OF THE ASSESSEE, RATHER I T IS BEING INCURRED IN PART FOR THE BUSINESS OF THE SISTER CONCERNS OF THE ASSESSEE, I. E. ITS CONTRACT MANUFACTURER M/S KAMAKHYA COSMETICS AND PHARMACEUTICALS PVT.LTD., AN D ITS DISTRIBUTOR M/S WIN MEDICARE LTD. AS SUCH, THE DEDUCTION OF ROYALTY IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE PROPORTION OF ITS SALES TO THE TOTAL SALES ON WHICH ROYALTY IS CALCULATED AND IS PAYABLE TO THE LICENSO R. THE AO TREATED PART OF ROYALTY PAYMENT AS CAPITAL IN NATURE, THEREFORE DISALLOWED 25% OF ROYALTY PAYMENT. THE BASIC OBJECTION OF THE AO WHILE CAPITALIZING 25% OF THE ROYALTY PAID WAS ON ACCOUNT OF HIS OBSERVATION THAT KNOW-HOW AGREEMENT IS OPEN HANDED IN TERMS OF DURATION AND THAT ASSESSEE HAS EXCLUSIVE RIGHTS TO USE THE KNOW-HOW AND PATENTS AND THE NEW PRODUCTS DEVELOPED BY THE LICENSOR. 3. BY THE IMPUGNED ORDER, CIT(A) TREATED 5% OF THE ROYALTY AS CAPITAL IN NATURE AS AGAINST 25% DETERMINED BY THE AO. BOTH A SSESSEE AND REVENUE ARE IN APPEAL BEFORE US. ASSESSEE IS AGGRIEVED FOR RETAIN ING DISALLOWANCE OF 5% OF THE ROYALTY BY TREATING THE SAME AS CAPITAL EXPENDITURE AND THE REVENUE IS AGGRIEVED FOR ALLOWING 95% OF THE ROYALTY AS REVENUE IN NATUR E. ITA-5, 2063, 155 & 3083/D/2009 3 4. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CONFIR MING DISALLOWANCE OF PROPORTIONATE ADVERTISEMENT AND PUBLICITY EXPENSES AMOUNTING TO RS.14.87 LAKHS. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUND THAT THE KNOW-HOW AGREEMENT BETWEEN RML AND THE ASSESSEE HAD BEEN INI TIALLY FOR A PERIOD CONTAINED IN FOREIGN COLLABORATION LETTER ISSUED BY THE FIPB, GOVT.OF INDIA. ACCORDING TO THEIR LETTER BEARING NO.FC.II.27(94) DATED 14.1.199 4, THE DURATION OF THE AGREEMENT APPROVED WAS 10 YEARS FROM THE DATE OF AGREEMENT OR 7 YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. ACCORDINGLY , THE SEVEN YEARS TERM EXPIRED ON 29.8.2002. PURSUANT TO PRESS NOTE NO.2 OF 2003 DATED 24.6.2003 ISSUED BY GOVT.OF INDIA, THE ASSESSEE MADE A REQUEST TO TH E GOVERNMENT ON 21.7.2003 FOR SEEKING EXTENSION OF TECHNICAL COLLABORATION AGREEM ENT. THE DEPARTMENT OF ECONOMIC AFFAIRS, GOVT.OF INDIA ACCORDED THE APPROV AL BY LETTER OF EVEN NO. DATED 6.8.2003. ACCORDINGLY, THE SUPPLEMENT AGREEMENT DA TED 16.9.2003 WAS EXECUTED BETWEEN RML AND THE ASSESSEE, WHICH IS MADE EFFECTI VE FROM 1.10.2003. CLAUSE 1 OF THE SAID SUPPLEMENT AGREEMENT READS AS UNDER:- THE AGREEMENT WILL CONTINUE FROM 1 OCTOBER 2003 UN TIL SUCH TIME AS BOTH PARTIES MUTUALLY DECIDE TO TERMINATE THE AG REEMENT. 6. ACCORDING TO CLAUSE 3 OF THE AGREEMENT, THIS SUP PLEMENT AGREEMENT IS PART OF THE ORIGINAL ASSESSMENT EXCEPT AS MODIFIED AND T HEREFORE, ALL THE TERMS AND CONDITIONS REMAINED UNCHANGED. THE ORIGINAL KNOW-H OW LICENSE AGREEMENT WAS ENTERED INTO ON 14.1.1994 AT THE TIME OF INCEPTION OF BUSINESS OF THE COMPANY AND THE PAYMENTS OF ROYALTY UNDER THAT AGREEMENT WERE M ADE TILL AUGUST 2002 I.E. FOR A PERIOD OF 7 YEARS FROM THE COMMENCEMENT OF AGREEMEN T AS PER THE APPROVAL OF THE GOI. THE PAYMENT OF ROYALTY IN THE YEAR UNDER ASSE SSMENT WAS MADE IN TERMS OF SUPPLEMENT AGREEMENT DATED 16.9.2003. HENCE, THERE IS NO QUESTION OF ANY FRESH INPUT OF KNOW-HOW/TECHNOLOGY AND THE PAYMENTS ARE O NLY IN RESPECT OF CONTINUED ITA-5, 2063, 155 & 3083/D/2009 4 USE OF BRAND NAME AND PATENTS OWNED BY THE FOREIGN COMPANY. HENCE NO BENEFIT OF ENDURING NATURE IS DERIVED BY ASSESSEE AGAINST T HESE PAYMENTS OF ROYALTY. AS PER VARIOUS CLAUSES OF KNOW-HOW LICENSE AGREEMENT V IS--VIS SUPPLEMENT AGREEMENT DATED 16.9.2003, THE ROYALTY PAYABLE AS N ET SALES OF TAXES THE KNOW-HOW HAS BEEN PROVIDED BY THE CONTRACT MANUFACTURER IN T ERMS OF CLAUSE 4.01 OF THE AGREEMENT FOR LIMITED PURPOSE OF MANUFACTURING REVL ON PRODUCTS ONLY WHEN PASSING ON ANY PROPERTY IN THE SALE TO THE ASSESSEE . OBLIGATIONS OF THE CONTRACT MANUFACTURER WERE CLEARLY DEFINED IN THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND THE CONTRACT MANUFACTURER, ACCORDING TO WHICH O BLIGATION RELATING TO ROYALTY PAYMENT HAS NOT BEEN PASSED ON TO THE CONTRACT MANU FACTURER. THE ENTIRE BENEFIT OF THE KNOW-HOW WAS MEANT FOR MANUFACTURING OF THE PRODUCTS TO BE SUPPLIED TO THE COMPANY AND THERE WAS NO OBLIGATION OF CONTRACT ING MANUFACTURER TO PAY ROYALTY TO THE LICENSOR. SINCE THE ASSESSEE COMPAN Y WAS ENJOYING THE COMPLETE BENEFIT OF THE KNOW-HOW TO RUN ITS BUSINESS, THE EX PENDITURE INCURRED EVERY YEAR ON PAYMENT OF ROYALTY WAS REVENUE IN NATURE AND IS VERY MUCH A BUSINESS EXPENDITURE. THESE EXPENDITURE CANNOT BE CLASSIFIE D AS CAPITAL EXPENDITURE. FROM THE RECORD, WE FOUND THAT ARRANGEMENT ENTERED INTO BY THE ASSESSEE WITH KCPL AND WMPL WAS FOR BONA-FIDE COMMERCIAL NEEDS WHICH CANNO T BE TESTED AGAINST TOUCHSTONE OF TAX AVOIDANCE. THE ROYALTY PAYMENT W AS MADE BY THE ASSESSEE IN THE NORMAL COURSE OF ITS BUSINESS WHICH IS REVENUE IN NATURE, ALLOWABLE U/S 37(1) OF THE ACT. THE KNOW-HOW LICENSE WAS GRANTED WAY BACK IN 1994 IN TERMS OF AN EARLIER AGREEMENT DATED 22.7.1994 AND THE PAYMENT O F ROYALTY WAS IN TERMS OF THE SUPPLEMENTARY AGREEMENT DATED 16.9.2003. EVEN AS P ER PARA 12.01 OF THE AGREEMENT UPON EXPIRATION OR TERMINATION OF THIS AG REEMENT, THE LICENSEE SHALL HAVE NO RIGHT TO EXPLOIT OR IN ANY WAY TO USE THE K NOW-HOW AND SHALL FORTHWITH DISCONTINUE ALL USE OF THE KNOW-HOW AND SHALL NOT T HEREAFTER USE THE KNOW-HOW AND SO ON. THUS, IT IS CLEAR THAT THE KNOW-HOW HAS NOT BEEN SOLD TO THE COMPANY AND THE LICENSOR HAS AN EXCLUSIVE OWNERSHIP OF THE KNOW-HOW, THEREFORE THERE IS NO REASON TO DISALLOW THE EXPENDITURE INCURRED ON ROYA LTY PAYMENT WHICH IS REVENUE IN NATURE, BY TREATING THE SAME AS CAPITAL EXPENDIT URE. ITA-5, 2063, 155 & 3083/D/2009 5 7. THE CIT(A) HAS ACCEPTED ASSESSEES METHOD OF COM PUTING ROYALTY ON THE BASIS OF SALES VALUE OF WML AND ADDITION MADE IN TH IS REGARD OF RS.21.39 MILLION DELETED. HOWEVER, CIT(A) HAS MADE AD-HOC ADDITION OF 5% OF ROYALTY RELYING ON HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF SOUTH ERN SWITCHGEAR. THE CIT(A) HAS MADE A CHART SHOWING COMPARISON OF THE FACTS OF THE CASE OF SOUTHERN SWITCHGEAR AND THE ASSESSEES OWN FACTS AND FOUND O UT THAT ONLY ONE FACT I.E. THE ASSESSEE HAS AN EXCLUSIVE RIGHT TO MANUFACTURE IS C OMMON IN BOTH. THE CIT(A) HAS HELD THAT SINCE ONE OF THE CONDITION MENTIONED IN THAT ORDER NAMELY THE RIGHT TO MANUFACTURE IS EXCLUSIVE IN INDIA IS ALSO APPLI CABLE IN CASE OF ASSESSEE, THEREFORE SMALL PART OF PAYMENT (5% OF ROYALTY) MAD E BY ASSESSEE DESERVES TO BE CAPITALIZED AS AGAINST CAPITALIZATION OF 25% OF ROY ALTY PAID. 8. IN TERMS OF THE AGREEMENT, THERE IS NO DISPUTE T O THE FACT THAT THE ASSESSEE HAD BEEN GIVEN ONLY RIGHT TO USE KNOW-HOW AND THE P ATENTS AND AT NO POINT OF TIME ANY PROPERTY OF ENDURING BENEFIT HAS BEEN TRANSFERR ED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF CIBA INDIA 69 ITR 692, IT CAN SAFELY BE CONCLUDED THAT WHERE THE ASSE SSEE CANNOT ASSIGN OR SUB- LICENSE ANY PART OF THE RIGHT OBTAINED FROM THE KNO W-HOW, THE PAYMENT MADE THEREOF CANNOT BE TERMED AS CAPITAL IN NATURE. IN THE INSTANT CASE, RML HAS NOT PROVIDED ANY ASSETS TO THE ASSESSEE FOR ESTABLISHIN G ANY FACTORY, BY GIVING RIGHT TO USE TECHNICAL KNOW-HOW, NO ASSET OF ENDURING NATURE WAS ACQUIRED AND UPON TERMINATION THE ASSESSEE WAS NOT ENTITLED TO USE TH E INDUSTRIAL PROPERTIES AND KNOW- HOW OF RML. ENDURING BENEFIT CAN BE SAID ONLY IF R IGHT TO MANUFACTURE IS GIVEN EVEN AFTER TERMINATION OF THE AGREEMENT. 9. IN THE RESULT, THE GROUND TAKEN BY THE ASSESSEE WITH REGARD TO REVENUE NATURE OF ROYALTY PAYMENT IS ALLOWED, WHEREAS THE GROUND O F THE REVENUE IS DISMISSED IN BOTH THE YEARS UNDER CONSIDERATION ITA-5, 2063, 155 & 3083/D/2009 6 10. DURING THE YEAR, THE ASSESSEE HAS PAID RS.88.98 LAKHS TO MMPL ON ACCOUNT OF CONSULTANCY CHARGES IN TERMS OF AGREEMENT DATED 1.1.1995. SUCH CONSULTANCY CHARGES WERE PAID IN LIEU OF MMPL PROVIDING ADVISE CONCERNING DAY TO DAY CONDUCT OF THE MANAGEMENT OF THE ASSESSEE COMPANY W ITH REGARD TO SETTING UP AND MONITORING OF DISTRIBUTION AND MARKETING MANAGEMENT , MANUFACTURING OF REVLON PRODUCTS AS PER THE SPECIFICATIONS AND STANDARDS SE T UP BY REVLON INTERNATIONALLY, SUGGEST CHANGES IN THE PRODUCT DESIGN AND THE SPECI FICATIONS BASED ON MARKET FEEDBACK OF NEW PRODUCTS, PRODUCT ADVERTISING POLIC IES AND CAMPAIGN, PRICE NEGOTIATIONS OF VARIOUS INPUTS FROM THE SUPPLIERS E TC. IN ITS ORDER, THE AO HAS ALLEGED THAT CONSULTANCY CHARGES PAID BY THE ASSESS EE WERE NOTHING BUT AN ARRANGEMENT TO SIPHON OUT PART OF THE PROFITS OF TH E ASSESSEE COMPANY TO ITS SISTER CONCERN AND JOINT VENTURES. THE AO HAS ALLOWED ONL Y RS.30 LAKHS AS DIRECTORS REMUNERATION AND DISALLOWED RS.58.98 LAKHS U/S 40A( 2), BY ALLEGING THE SAME AS UNREASONABLE AND EXCESSIVE. THE CIT(A) DELETED THE SAME BY OBSERVING THAT THE AO HAS WRONGLY STATED THAT NO SERVICES HAVE BEEN RE NDERED BY MMPL. A CATEGORICAL FINDING WAS RECORDED BY THE CIT(A) TO T HE EFFECT THAT RENDERING OF SERVICES BY MMPL WAS AMPLY PROVED FROM THE RECORDS, NO DISALLOWANCE WAS WARRANTED U/S 40A(2), AGGRIEVED BY THE SAME, THE RE VENUE IS IN APPEAL BEFORE US. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND FROM THE RECORD THAT THE CONSULTANCY CHARGES HAVE BEEN PAID IN LIEU OF M MPL FOR PROVIDING VARIOUS ADVICES AS DISCUSSED IN ABOVE PARA. MR.U.K.MODI HA S REPRESENTED ONE OF THE JOINT VENTURE PARTIES, MMPL, AS DIRECTOR, IN THE BUSINESS OF COLLABORATION WITH RML. WE FOUND HIM AS AN INSTRUMENT IN NEGOTIATING THE CO LLABORATION AS REPRESENTATIVE OF MMPL FOR WHICH HE HIMSELF GAVE HIS PERSONAL UNDE RTAKING. WE ALSO FOUND THAT MR.U.K.MODI DID NOT RENDER ANY SERVICES IN HIS CAPA CITY AS DIRECTOR OF THE ASSESSEE COMPANY AND IS NOT BEING PAID ANY REMUNERATION TO W ORK AS A DIRECTOR. SUFFICIENT EVIDENCE WAS PRODUCED BEFORE THE AO TO INDICATE THA T MMPL WAS ACTIVELY INVOLVED IN DAY TO DAY ACTIVITIES OF THE ASSESSEE C OMPANY. MMPL HAS DULY INCORPORATED THE CONSULTANCY CHARGES IN HIS INCOME AND PAID DUE TAXES THEREON, IT ITA-5, 2063, 155 & 3083/D/2009 7 CANNOT BE SAID THAT AGREEMENT WAS ENTERED FOR SIPHO NING OF INCOME OF THE SISTER CONCERN. IN VIEW OF THE DECISION OF DHANRAJGIRIJI RAJA NARSINGHJI 91 ITR 544, IT IS UPON THE ASSESSEE TO DECIDE WHAT EXPENSES ARE TO BE INCURRED OR WHAT IS REQUIRED FOR BUSINESS PURPOSES AND IT IS NOT OPEN TO THE REV ENUE TO PRESCRIBE AS TO WHAT EXPENSES ARE TO BE INCURRED BY THE ASSESSEE. THE C ATEGORICAL FINDING RECORDED BY THE CIT(A) WITH REGARD TO REASONABILITY OF THE CONS ULTANCY CHARGES PAID HAS NOT BEEN CONTROVERTED BY LEARNED DR, WE THEREFORE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING DISALLOWANCE MA DE BY THE AO BY INVOKING PROVISIONS OF SECTION 40A(2). 12. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CONFI RMING DISALLOWANCE OF PROPORTIONATE ADVERTISING AND PUBLICITY EXPENSES AM OUNTING TO RS.14.87 LAKHS. 13. WITH REGARD TO ADVERTISING AND PUBLICITY EXPENS ES OF RS.30.51 LAKHS INCURRED BY THE ASSESSEE DURING THE YEAR, IT WAS TH E OBJECTION OF THE AO THAT ADVERTISING EXPENSES OF RS.30.51 LAKHS WERE INCURRE D BY THE ASSESSEE TO PROMOTE THE BRAND REVLON, THEREFORE IT CANNOT BE SAID THA T ADVERTISING EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, OUT OF RS.30.51 LAKHS, HE DISALLOWED R S.14.87 LAKHS AND THE SAME WAS CONFIRMED BY THE CIT(A). 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND FROM THE RECORD THAT AN AGREEMENT WAS ENTERED INTO BY THE ASSESSEE ACCORDIN G TO WHICH WMPL HAS TO BEAR ONLY THE COST OF ADVERTISING AND OTHER EXPENSES REL ATING TO CONSUMER SECTOR. AS THE BENEFIT OF PROMOTION OF BRAND REVLON ACCRUED ONLY TO THE ASSESSEE, THE SAME IS REQUIRED TO BE INCURRED BY ASSESSEE HIMSELF. WE AL SO FOUND THAT INSPITE OF THE AGREEMENT WITH WMPL, THE ASSESSEE WAS NOT PRECLUDED FROM INCURRING ADVERTISING EXPENSES SINCE IT WAS PURELY COMMERCIAL DECISION TA KEN BY THE ASSESSEE. SINCE THE ASSESSEE WAS THE BRAND OWNER, IT HAS VESTED INTERES TS AND INCURRING OF EXPENDITURE FOR PROMOTION OF BRAND WAS IN THE INTEREST OF THE B USINESS OF THE ASSESSEE COMPANY ITA-5, 2063, 155 & 3083/D/2009 8 ONLY. WE ALSO FOUND THAT SIMILAR EXPENDITURE WAS A LLOWED CONSISTENTLY IN THE PAST AND NO DISALLOWANCE HAS BEEN MADE TOWARDS THESE EXP ENSES. EVEN UNDER THE SCRUTINY ASSESSMENT FOR AY 2000-01 & 2001-02, SIMIL AR EXPENDITURE WAS ALLOWED. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES D URING THE YEAR, EVEN ON THE PRINCIPLE OF CONSISTENCY, SUCH EXPENDITURE CANNOT B E DISALLOWED. ON THE SIMILAR REASONING, THE DISALLOWANCE MADE BY THE LOWER AUTHO RITIES DURING AY 2006-07 ALSO STANDS DELETED. ACCORDINGLY, WE DO NOT FIND ANY ME RIT IN THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES ON ACCOUNT OF EXPENDITURE INCURRED FOR ADVERTISING AND PUBLICITY. 15. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED WHEREAS THE APPEALS OF THE REVENUE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18.12.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-5, 2063, 155 & 3083/D/2009 9