Moet Hennessy India Pvt. Ltd., Mumbai V. ACIT, Special Range-6, New Delhi

ITA 5003/DEL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7857 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 03-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Keywords: Gift; Transfer pricing; Residential status; International transaction; Non-deduction of tax; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 250; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5003/DEL/2017 (ASSESSMENT YEAR : 2012-13) ITA NO.5004/DEL/2017 (ASSESSMENT YEAR : 2013-14) M/S. MOET HENNESSY INDIA PVT. LTD., VS. ACIT, SPECI AL RANGE 6, 1903, 19 TH FLOOR, NEW DELHI. INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, MUMBAI 400 013. (PAN : AACCM4079L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUMIT MANGAL, ADVOCATE SHRI SAKSHAM SINGHAL, CA REVENUE BY : MS. PRAMITA M. BISWAS, CIT DR DATE OF HEARING : 10.04.2019 DATE OF ORDER : 24.04.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOS ED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, M/S. MOET HENNESSY INDIA PVT. LTD . (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 2 APPEALS SOUGHT TO SET ASIDE THE IMPUGNED ORDERS DAT ED 02.06.2017 & 21.06.2017 PASSED BY THE COMMISSIONER OF INCOME-T AX (APPEALS)-6, NEW DELHI, QUA THE ASSESSMENT YEARS 20 12-13 & 2013-14 RESPECTIVELY ON THE GROUNDS INTER ALIA THAT :- ITA NO.5003/DEL/2014 (AY 2012-13 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6 ('LD. CIT(A)') UNDER SECTION 250 OF THE ACT IS BAD IN LAW AND ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE EXPEN SES INCURRED BY APPELLANT ON ADVERTISEMENT AND SALES PROMOTION W ERE IN THE NATURE OF CAPITAL EXPENSE AND THEREBY DISALLOWING T HE SAID EXPENSES. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY NOT FOLLOWING THE PRIN CIPLE OF CONSISTENCY, DESPITE THERE BEING NO CHANGE IN FACTS . ITA NO.5004/DEL/2014 (AY 2013-14 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6 ('LD. CIT(A)') UNDER SECTION 250 OF THE ACT IS BAD IN LAW AND ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE EXPEN SES INCURRED BY APPELLANT ON ADVERTISEMENT AND SALES PROMOTION W ERE IN THE NATURE OF CAPITAL EXPENSE AND THEREBY DISALLOWING T HE SAID EXPENSES. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE ROAD ACCESS CHARGES INCURRED BY APPELLANT WERE IN THE NATURE OF CAPITAL EXPENSE AND THEREBY DISALLOWING THE SAID EXPENSES. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE EXPEN SES INCURRED BY APPELLANT ON BANK GUARANTEE CHARGES PAID TO BANK S WERE LIABLE FOR TAX DEDUCTION AND THEREBY DISALLOWING SA ID EXPENSES DUE TO ALLEGED FAILURE TO DEDUCT TAX. ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 3 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY NOT FOLLOWING THE PRIN CIPLE OF CONSISTENCY, DESPITE THERE BEING NO CHANGE IN FACTS . 6. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT AN D WITHOUT PREJUDICE TO ONE ANOTHER. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE IS INTO THE BUSINESS OF BULK IMPORT OF WINES AND SPIRITS FROM GROUP COMPANIES A ND DISTRIBUTION OF THE SAME. INITIALLY, THE CASE WAS REFERRED TO T HE TRANSFER PRICING OFFICER FOR COMPUTATION OF ARMS LENGTH PRICE (ALP) QUA INTERNATIONAL TRANSACTIONS, BUT THE LD. TPO HAS NOT DRAWN ANY ADVERSE INFERENCE IN RESPECT OF ALP OF INTERNATIONA L TRANSACTIONS FOR AY 2012-13 AS WELL AS AY 2013-14. 4. ASSESSEE DEBITED AN AMOUNT OF RS.12,33,64,847/- AND RS.14,69,15,576/- IN PROFIT & LOSS ACCOUNT ON ACCOU NT OF ADVERTISEMENT & SALES PROMOTION EXPENSES FOR AYS 20 12-13 & 2013-14 RESPECTIVELY. AFORESAID EXPENSES HAVE BEEN TREATED AS REVENUE IN NATURE BY THE ASSESSEE. HOWEVER, DECLIN ING THE CONTENTIONS RAISED BY THE ASSESSEE, AO TREATED THE ADVERTISEMENT & SALES PROMOTION EXPENSES AS CAPITAL IN NATURE ON TH E GROUND THAT THE SAME HAVE BEEN INCURRED TO PROPAGATE THE BRAND NAME OF THE ASSESSEE IN THE MARKET HAVING ENDURING BENEFIT TO T HE ASSESSEE. 5. IN AY 2013-14, AO MADE ADDITION OF RS.67,01,490/ - DEBITED BY THE ASSESSEE IN THE P&L ACCOUNT ON ACCOUNT OF RO AD ACCESS ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 4 CONSTRUCTION CHARGES ON THE GROUND THAT THE ASSESSE E HAS NOT FILED ANY WRITTEN SUBMISSIONS TO PROVE THE FACT THAT THE SAME ARE REVENUE IN NATURE. AO ALSO MADE ADDITION OF RS.9,81,336/- DEBITED BY THE ASSESSEE IN P&L ACCOUNT ON ACCOUNT OF BANK GUARANTE E COMMISSION ON THE GROUND THAT THE ASSESSEE HAS NOT DEBITED TDS ON THESE EXPENSES BY DISALLOWING THE SAME UNDER SECTION 40A (IA) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). 6. ASSESSEE CARRIED THE MATTER BY WAY OF APPEALS BE FORE THE LD. CIT (A) WHO HAS CONFIRMED THE ASSESSMENT ORDERS BY PARTLY ALLOWING THE APPEALS. FEELING AGGRIEVED, THE ASSES SEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEALS QUA AYS 2012-13 & 2013-14. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 IN ITA NO.5003/DEL/2014 (AY 2012-13) ITA NO.5004/DEL/2014 (AY 2013-14) 8. GROUND NO.1 IN ITA NO.5003/DEL/2014 (AY 2012-13) AND ITA NO.5004/DEL/2014 (AY 2013-14) NEED NO FINDINGS BEING GENERAL IN NATURE. ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 5 GROUND NO.2 IN ITA NO.5003/DEL/2014 (AY 2012-13) ITA NO.5004/DEL/2014 (AY 2013-14) 9. UNDISPUTEDLY, ASSESSEE HAS DEBITED AN AMOUNT OF RS.12,33,64,847/- AND RS.14,69,15,576/- IN PROFIT & LOSS ACCOUNT ON ACCOUNT OF ADVERTISEMENT & SALES PROMOTION (AMP) EXPENSES FOR AYS 2012-13 & 2013-14 RESPECTIVELY AND TREATED THE EXPENSES AS REVENUE IN NATURE. IT IS NOT IN DISPUTE THAT AS SESSEE IS AN IMPORTER AND DISTRIBUTOR OF WINE AND SPIRITS IN IND IA AND BEARING ROUTINE RISK. IT IS ALSO NOT IN DISPUTE THAT IN AY 2009-10, FIRST TIME AMP EXPENSES INCURRED BY THE ASSESSEE WERE BROUGHT TO TAX BY THE REVENUE UNDER TRANSFER PRICING PROVISIONS BY MAKING ALP ADJUSTMENT OF RS.6,64,70,841/- WHICH HAVE BEEN DELE TED BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 2 3.08.2018 IN ITA NO.1906/DEL/2014 , AVAILABLE AT PAGES 123 TO 131 OF THE PAPER BOOK. 10. NOW, THE AO AS WELL AS LD. CIT (A) HAS HELD THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF AMP EXPENSES BEING CAPITAL IN NATURE ON THE GROUND THAT THESE EX PENSES ARE GIVING LONG LASTING BENEFIT TO THE ASSESSEE OF ENDURING NA TURE AND BROUGHT THE SAME TO TAX. 11. CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD . CIT (A), LD. AR FOR THE ASSESSEE CONTENDED INTER ALIA THAT T HE ASSESSEE BEING ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 6 IMPORTER AND DISTRIBUTOR OF WINE AND SPIRITS IN IND IA IS BEARING ENTREPRENEURIAL RISK AND HAS JUST INCURRED THE ADVE RTISEMENT AND SALE PROMOTION EXPENSES IN ORDER TO BOOST ITS SALES ; THAT THE EXPENSES ARE GENERALLY IN THE NATURE OF GIFTS, DISP LAY AT RETAIL OUTLETS, DISTRIBUTION OF POINT OF SALE MATERIAL (PO SM), RENT OF WAREHOUSE USED TO STORE POSM, CUSTOM DUTY CHARGED O N POSM, DISCOUNT SCHEMES, PR AGENCY FEES, SALARY OF MARKETI NG STAFF, MARKET VISIT EXPENSES OF THE MARKETING STAFF, EXPEN SES INCURRED ON EVENTS ETC. AND HAS BROUGHT ON RECORD THE DETAIL LI ST OF EXPENSES AS ANNEXURE A ANNEXED WITH THE SYNOPSIS; THAT THESE EXPENDITURE DOES NOT PASS ON ENDURING AND LONG TERM BENEFIT TO THE ASSESSEE AND AS SUCH CANNOT BE TREATED AS CAPITAL IN NATURE AND RELIED UPON THE DECISIONS OF HONBLE DELHI HIGH COURT IN MONTO MOTORS LTD. (2012) 19 TAXMANN.COM 57 (DELHI AND JUBLIANT FOODWO RKS (P.) LTD. (2014) 52 TAXMANN.COM 215 (DELHI) . 12. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVE NUE RELIED UPON ASSESSMENT ORDER AS WELL AS ORDER PASSED BY TH E LD. CIT (A) AND CONTENDED THAT SINCE THE ASSESSEE IS INTO IMPOR T AND DISTRIBUTION OF PREMIUM PRODUCTS IN INDIA AND IT ES TABLISHES THE BRAND IMAGE, IT CERTAINLY HAS LONG LASTING ENDURING BENEFITS, SO AMP EXPENSES RESULTING IN BETTER SALES OF THE ASSES SEE COMPANY HAVING LONG LASTING BENEFITS. ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 7 13. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, ARGUMENTS ADDRESSED BY LD. ARS OF THE PAR TIES OF THE APPEALS AND ORDERS PASSED BY THE REVENUE AUTHORITIE S, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS : - AS TO WHETHER ADVERTISEMENT AND SALES PROMOTION EX PENSES INCURRED BY THE ASSESSEE BEING AN IMPORTER AND DIST RIBUTOR OF WINE AND SPIRITS IN INDIA IN THE FORMS OF GIFTS, DI SPLAY AT RETAIL OUTLETS, DISCOUNT SCHEMES, CUSTOM DUTY CHARGED ON P OSM, ETC. ARE REVENUE IN NATURE AS CONTENDED BY THE ASSESSEE? 14. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE HIGH COURT OF DELHI IN CASE OF MONTO MOTORS LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- 4. IN VIEW OF THE FACTUAL MATRIX WHICH IS AVAILABL E ON RECORD AND AS THE ASSESSING OFFICER HAS NOT DEALT WITH THE FACTUAL MATRIX IN DETAIL WE ARE NOT INCLINED TO ADMIT THE PRESENT APPEAL. THE ADVERTISEMENT EXPENSES AS PER THE FINDINGS OF BOTH THE CIT (APPEALS) AND THE TRIBUNAL WERE NOT OF CAPITAL NATU RE. ADVERTISEMENT EXPENSES WHEN INCURRED TO INCREASE SA LES OF PRODUCTS ARE USUALLY TREATED AS A REVENUE EXPENDITU RE, SINCE THE MEMORY OF PURCHASERS OR CUSTOMERS IS SHORT. ADVERTI SEMENT ARE ISSUED FROM TIME TO TIME AND THE EXPENDITURE IS INC URRED PERIODICALLY, SO THAT THE CUSTOMERS REMAIN ATTRACTE D AND DO NOT FORGET THE PRODUCT AND ITS QUALITIES. THE ADVERTISE MENTS PUBLISHED/DISPLAYED MAY NOT BE OF RELEVANCE OR SIGN IFICANCE AFTER LAPSE OF TIME IN A HIGHLY COMPETITIVE MARKET, WHERE IN THE PRODUCTS OF DIFFERENT COMPANIES COMPETE AND ARE AVA ILABLE IN ABUNDANCE. ADVERTISEMENTS AND SALES PROMOTION ARE C ONDUCTED TO INCREASE SALE AND THEIR IMPACT IS LIMITED AND FE LT FOR A SHORT DURATION. NO PERMANENT CHARACTER OR ADVANTAGE IS AC HIEVED AND IS PALPABLE, UNLESS SPECIAL OR SPECIFIC FACTORS ARE BROUGHT ON RECORD. EXPENSES FOR ADVERTISING CONSUMER PRODUCTS GENERALLY ARE A PART OF THE PROCESS OF PROFIT EARNING AND NOT IN THE NATURE OF CAPITAL OUTLAY. THE EXPENSES IN THE PRESENT CASE WERE NOT INCURRED ONCE AND FOR ALL, BUT WERE A PERIODICAL EX PENSES WHICH HAD TO BE INCURRED CONTINUOUSLY IN VIEW OF THE NATU RE OF THE BUSINESS. IT WAS AN ON-GOING EXPENSE. GIVEN THE FAC TUAL MATRIX, IT IS DIFFICULT TO HOLD THAT THE EXPENSES WERE INCURRE D FOR SETTING THE PROFIT EARNING MACHINERY IN MOTION OR NOT FOR EARNI NG PROFITS. ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 8 15. SIMILARLY, AGAIN HONBLE HIGH COURT OF DELHI IN CASE OF JUBLIANT FOODWORKS (P.) LTD. (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF MONTO MOTORS LTD. (SUPRA). 16. WHEN WE EXAMINE THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE RATIO OF MONTO MOTORS LTD. (SUPRA), IT IS PROVED ON RECORD THAT THE ASSESSEE HAS INCURRED PERIODICAL EX PENSES ON ACCOUNT OF ADVERTISEMENT AND SALES PROMOTION WHICH IS TO INCREASE THE SALES OF PRODUCTS IN ORDER TO REMIND THE CUSTOM ER FROM TIME TO TIME SO THAT THEY DO NOT FORGET THE PRODUCTS AND IT S QUALITIES. HONBLE HIGH COURT HAS HELD THAT WHEN THE ADVERTISE MENT EXPENSES ARE INCURRED TO INCREASE THE SALE OF THE PRODUCTS, THE SAME ARE TREATED AS REVENUE EXPENDITURE BECAUSE THE MEMORY O F PURCHASERS OR CUSTOMERS IS SHORT-LIVED. SO, IN THE INSTANT CA SE, THE REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THA T ADVERTISEMENT AND SALES PROMOTION EXPENSES HAVE CREATED LONG LAST ING BENEFITS TO THE ASSESSEE, BECAUSE ADVERTISEMENT AND SALES PROMO TION ARE GENERALLY MADE IN ORDER TO INCREASE THE SALES AND T HEIR IMPACT IS LIMITED AND FELT FOR A SHORT DURATION BY THE CUSTOM ERS. 17. HONBLE SUPREME COURT IN EMPIRE JUTE CO. LTD. (1`980) 3 TAXMAN 69 (SC) HELD THAT, NO TEST IS PARAMOUNT OR CONCLUSIVE TO ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 9 DISTINGUISH BETWEEN CAPITAL AND REVENUE EXPENDITURE , HOWEVER HELD THAT :- WHEN AN EXPENDITURE IS MADE NOT ONLY ONCE AND FOR ALL, BUT WITH A VIEW TO BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE (OR THE ENDURING BENEFIT OF A TRADE, THERE IS VERY GOOD REASON (IN THE ABSENCE OF SPECIAL CIRCUMSTANCES LEADING TO AN OPPOSITE CONCLUSION) (OR TREATING SUCH AN EXPENDITURE AS PRO PERLY ATTRIBUTABLE NOT TO REVENUE BUT TO CAPITAL. THIS TEST, AS THE PARENTHETICAL CLAUSE SHOWS, MUST YIELD WHERE THERE ARE SPECIAL CIRCUMSTANCES LEADING TO A CONTRA RY CONCLUSION AND, AS POINTED OUT BY LORD RADCLIFFE IN CIT V. NCH ANGA CONSOLIDATED COPPER MINES LTD. [1965158 ITR 241 (PC ), IT WOULD BE MISLEADING TO SUPPOSE THAT, IN ALL CASES, SECURING A BENEFIT FOR THE BUSINESS WOULD BE PRIMA FACIE CAPIT AL EXPENDITURE 'SO LONG AS THE BENEFIT IS NOT SO TRANSITORY AS TO HAVE NO ENDURANCE AT ALL'. THERE MAY BE CASES WHERE EXPENDI TURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFI T, MAY, NONETHELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE O F ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS 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 TH E EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TES T. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT O F THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENT LY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHE D 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 CO NCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHO UT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN C ASE. 18. HONBLE GUJARAT HIGH COURT IN CASE CITED AS DCIT VS. CORE HEALTHCARE LTD. (2009) 308 ITR 263 (GUJARAT) HAS HELD THAT, EVEN BRAND PROMOTION EXPENSES ARE REVENUE IN NATUR E, HENCE DEDUCTIBLE U/S 37 (1) OF THE ACT BECAUSE SUCH EXPEN DITURE DO NOT CREATE ANY INTANGIBLE INTEREST AND MERELY BECAUSE O F THE FACT THAT ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 10 EXPENDITURE MAY BRING SOME BENEFIT OF ENDURING NATU RE TO THE ASSESSEE, THAT FACTOR ALONE IS NOT SUFFICIENT TO TR EAT THE EXPENDITURE AS CAPITAL EXPENDITURE. SO, THE ADVERTISEMENT EXPE NSES EVEN TO CREATE THE BRAND IMAGE IS ALLOWABLE AS A REVENUE EX PENDITURE. 19. SO, IN THIS CASE, ASSESSEE HAS UNDISPUTEDLY INC URRED ADVERTISEMENT AND SALES PROMOTION EXPENSES PERIODIC ALLY, AND NOT AT ONCE JUST TO REFRESH THE PRODUCT AND QUALITY TO BE SOLD IN THE MEMORY OF ITS CUSTOMERS. SO, IT CANNOT BE HELD TO BE IN THE NATURE OF ENDURING BENEFIT FOR A TRADER. 20. SO, WE ARE OF THE CONSIDERED VIEW THAT FOLLOWIN G THE RATIO LAID DOWN BY HONBLE SUPREME COURT AND HONBLE HIGH COURTS, DISCUSSED IN THE PRECEDING PARAS, ADVERTISEMENT AND SALES PROMOTION EXPENSES HAVE BEEN INCURRED BY THE ASSESS EE JUST TO ENHANCE ITS SALES AND PROFIT AND CANNOT BE TREATED AS CAPITAL IN NATURE. CONSEQUENTLY, ADVERTISEMENT AND SALES PROM OTION EXPENSES DEBITED BY THE ASSESSEE TO THE TUNE OF RS.12,33,64, 847/- & RS.14,69,15,576/- FOR AYS 2012-13 & 2013-14 ARE ORD ERED TO BE TREATED AS REVENUE IN NATURE AND ADDITION MADE/CONF IRMED BY THE LD. AO/CIT (A) ON THIS SCORE IS ORDERED TO BE DELETED. HENCE, GROUND NO.2 OF ITA NO.5003/DEL/2014 (AY 2012-13) AND ITA NO.5004/DEL/2014 (AY 2013-14) IS DETERMINED IN FAVO UR OF THE ASSESSEE. ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 11 GROUND NO.3 IN ITA NO.5004/DEL/2014 (AY 2013-14) 21. ASSESSEE CLAIMED TO HAVE MADE CERTAIN PAYMENTS FOR ROAD IMPROVEMENT, WIDENING AND CONSTRUCTION CHARGES IN O RDER TO FACILITATE EASY MOVEMENTS OF VEHICLES ON THE ROAD W HICH HAS BEEN TREATED AS EXPENSES OF CAPITAL NATURE ON THE GROUND THAT ASSESSEE HAS NOT FILED ANY EVIDENCE; THAT ROAD ACCESS CONSTR UCTION CHARGES WILL NOT GIVE ANY ENDURING BENEFIT TO THE ASSESSEE. LD. AR FOR THE ASSESSEE FAIRLY CONCEDED THAT HE HAS NOT BROUGHT ON RECORD THE COMPLETE FACTS IN ORDER TO TREAT THESE EXPENSES AS REVENUE IN NATURE. IN VIEW OF THE MATTER, THIS ISSUE IS REMANDED BACK TO THE AO TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE, HENCE GROUND NO.3 OF ITA NO.5004/DEL/2014 (AY 2013- 14) IS DETERMINED IN FAVOUR OF THE ASSESSEE FOR STA TISTICAL PURPOSES. GROUND NO.4 IN ITA NO.5004/DEL/2014 (AY 2013-14) 22. AO BY INVOKING THE PROVISIONS CONTAINED U/S 40A (IA) AND NOTIFICATION NO.56/2012 DATED 31.12.2012 ISSUED BY THE CBDT DISALLOWED AN AMOUNT OF RS.9,81,336/- DEBITED BY TH E ASSESSEE IN P&L ACCOUNT ON ACCOUNT OF BANK GUARANTEE COMMISSION . 23. UNDISPUTEDLY, THE ASSESSEE HAS MADE CERTAIN PAY MENTS TO SCHEDULED BANKS QUA BANK GUARANTEE PROVIDED BY THE BANKS ON ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 12 WHICH TDS WAS NOT DEDUCTED. THE LD. CIT (A) WHILE RELYING UPON THE NOTIFICATION NO.56/2012 DATED 31.12.2012 ALLOWE D PART RELIEF TO THE ASSESSEE FOR THE BANK GUARANTEE COMMISSION P AID POST- ISSUANCE OF THE NOTIFICATION. 24. WHEN WE EXAMINE THE ASSESSMENT ORDER AO AS WELL AS CIT (A) HAVE ACCEPTED THE PROPOSITION PUT FORTH BY THE ASSESSEE THAT BANK GUARANTEE COMMISSION DOES NOT COVER UNDER THE DEFINITION OF INTEREST, HENCE SECTION 194A IS NOT APPLICABLE TO SUCH PAYMENT. IT IS ALSO SETTLED PRINCIPLE OF LAW THAT IN CASE OF BANK GUARANTEE COMMISSION, SECTION 194H OF THE ACT, WHERE PRINCIPA L AGENT RELATIONSHIP ARE NOT THERE, IS ALSO NOT APPLICABLE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION RENDERED BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN KOTAK SECURITIES LTD. VS. DCIT (2012) 18 TAXMANN.COM 48 (MUM.) . 25. NOW, IT IS TO BE SEEN AS TO WHETHER BANK GUARAN TEE COMMISSION PAID BY THE ASSESSEE CAN BE DISALLOWED B Y FOLLOWING THE NOTIFICATION NO.56/2012 DATED 31.12.2012. FOR READY PERUSAL, AFORESAID NOTIFICATION IS EXTRACTED AS UNDER :- NOTIFICATION NO. SO 3069(E) [NO.56/2012 (F. NO.27 SECTION 197A OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - NO DEDUCTION IN CERTAIN CASES - SPECIFIED PAYMENT UNDER SECTION 197A(1F) NOTIFICATION NO. SO 3069(E) [NO.56/2012 (F. NO. 275/53/2012-IT(B)), DATED 31-12 -2012 ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 13 [SUPERSEDED BY NOTIFICATION NO. SO 2143(E) (N0.47/2016 (F.NO.275/53/2012-IT(B), DATED 17-6-201 6] IN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTION (IF) OF SECTION 197A OF THE INCOME-TAX ACT, 1961 (43 OF 1961), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THAT NO DEDUCTION OF TAX UNDER CHAPTER XVII OF THE SAID ACT SHALL BE MADE ON THE P AYMENTS OF THE NATURE SPECIFIED BELOW, IN CASE SUCH PAYMENT IS MADE BY A PERSON TO A BANK LISTED IN THE SECOND SCHEDULE TO T HE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934), EXCLUDING A FO REIGN BANK, NAME :- (I) BANK GUARANTEE COMMISSION; (II) CASH MANAGEMENT SERVICE CHARGES; (III) DEPOSITORY CHARGES ON MAINTENANCE OF DE MAT ACCOUNTS; (IV) CHARGES FOR WAREHOUSING SERVICES FOR COMMODIT IES; (V) UNDERWRITING SERVICE CHARGES; (VI) CLEARING CHARGES (MICR CHARGES); (VII) CREDIT CARD OR DEBIT CARD COMMISSION FOR TRAN SACTION BETWEEN THE MERCHANT ESTABLISHMENT AND ACQUIRER BAN K. 2. THIS NOTIFICATION SHALL COME INTO FORCE FROM TH E 1ST DAY OF JANUARY, 2013. 26. BARE PERUSAL OF THE NOTIFICATION IN THE INSTANT CASE GOES TO PROVE THAT THIS NOTIFICATION IS CLARIFICATORY IN NA TURE. APPLICABILITY OF THE AFORESAID NOTIFICATION TO A PERIOD PRIOR TO THE PERIOD OF ITS ISSUE HAS BEEN EXAMINED BY HONBLE DELHI HIGH COURT IN CASE OF PR.CIT VS. MAKE MY TRIP INDIA PVT. LTD. ITA 136/201 9 BY RETURNING FOLLOWING FINDINGS :- 11. THE ABOVE NOTIFICATION WAS REFERRED TO IN THE ORDER OF THE CIT (A) BUT NOT DISCUSSED. THE ASSESSEE IS RIGHT IN CO NTENDING THAT BY VIRTUE OF THE ABOVE NOTIFICATION NO TDS IS DEDUCTIBLE FROM PAYMENTS MADE TOWARDS CREDIT CARD OR DEBIT CARD COMMISSION FOR T RANSACTION BETWEEN THE MERCHANT ESTABLISHMENT AND ACQUIRER BANK. THI S APPLIES TO THE CHANGES PAID TO THE BANKS FOR PROVIDING PAYMENT GAT EWAY IN THE CASE ON HAND. 27. FURTHERMORE, AS PER SECOND PROVISO TO SECTION 4 0A (IA) OF THE ACT, DISALLOWANCE CANNOT BE MADE BECAUSE BANK G UARANTEE COMMISSION PAID BY THE ASSESSEE TO SCHEDULED BANKS HAS BEEN DULY ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 14 INCLUDED IN THE TOTAL INCOME OF THE BANKS AS THEY A RE TAX RESIDENT OF INDIA AND THEY HAVE DULY PAID THE TAX ON SUCH GUARA NTEE COMMISSION. SO, UNDER SECOND PROVISO TO SECTION 40 A (IA), NO DISALLOWANCE CAN BE MADE. SO, DISALLOWANCE OF RS.9 ,81,336/- MADE BY THE AO AND RESTRICTED BY THE LD. CIT (A) TO RS.7,92,680/- IS NOT SUSTAINABLE IN THE EYES OF LAW, HENCE ORDERE D TO BE DELETED. HENCE, GROUND NO.4 OF ITA NO.5004/DEL/2014 (AY 2013 -14) IS DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.3 IN ITA NO.5003/DEL/2014 (AY 2012-13) AND GROUND NO.5 & 6 IN ITA NO.5004/DEL/2014 (AY 2013-14) 28. GROUND NO.3 IN ITA NO.5003/DEL/2014 (AY 2012-13 ) AND GROUNDS NO.5 & 6 IN ITA NO.5004/DEL/2014 (AY 2013-1 4) NEED NO FINDINGS BEING GENERAL IN NATURE. 29. RESULTANTLY, THE APPEAL IN ITA NO.5003/DEL/2014 (AY 2012- 13) IS ALLOWED AND THE APPEAL IN ITA NO.5004/DEL/20 14 (AY 2013- 14) IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF APRIL, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 24 TH DAY OF APRIL, 2019/TS ITA NO.5003/DEL/2014 ITA NO.5004/DEL/2014 15 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-6, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.