JCIT (OSD), New Delhi V. M/s. Sports & Leisure Apparels Ltd., New Delhi

ITA 5036/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66043 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 05-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K KEDIA SENIOR
• Assessee Lawyers: PN SHASTRI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) SHRI I.C. SUDHIR, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5036/DEL./2011 (ASSESSMENT YEAR : 2008-09) JCIT (OSD), CIRCLE 9 (1), VS. M/S. SPORTS & LEISUR E APPARELS LTD., NEW DELHI. B 25, NIRLAC BUILDING, QUTAB INSTITUTIONAL AREA, NEW DELHI 110 016. (PAN : AAACS2959M) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI M.P. RASTOGI, ADVOCATE & P.N. SHASTRI, CA REVENUE BY : SHRI R.K. KEDIA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XII, NEW DELHI DATED 26.08.2011 FOR THE A SSESSMENT YEAR 2008- 09. 2. THE ASSESSEE COMPANY WAS DERIVING INCOME FROM MA NUFACTURE AND SALE OF GARMENTS UNDER THE BRAND NAME LACOSTE UNDER LI CENCE FOR USING THE BRAND FROM DEVENLARY SA, FRANCE AND MONTAIGNE SA, FRANCE. 3. THE GROUNDS OF APPEAL TAKEN BEFORE US READ AS UN DER :- ITA NO.5036/DEL./2011 2 1. 'THE LD. CIT(A) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.3,55,072/- MADE BY AO OUT OF THE EXPENSES INCURRED ON FOREIGN TRAVELING.' 2. 'THE LD. CIT(A) ERRED, IN LAW AND ON THE FACTS A ND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.9,53,250/- MADE BY AO OUT OF THE EXPENSES INCURRED ON ADVERTISEMENT.' 3. 'THE LD. CIT(A) ERRED, IN LAW AND ON THE FACTS A ND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.5,20,974/- MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTI ON 195 AND SECTION 9(1)(VII) OF THE INCOME TAX ACT.' 4. 'THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, AD D OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE H EARING OF THIS APPEAL.' 4. IN GROUND NO.1, THE ISSUE INVOLVED IS DELETING T HE ADDITION OF RS.3,55,072/- MADE OUT OF THE FOREIGN TRAVELING. D URING THE YEAR, THE ASSESSEE HAS DEBITED TOTAL EXPENDITURE OF RS.17,75,359/- TOW ARDS THE FOREIGN TRAVELING OF DIRECTORS AND OTHER PERSONNEL. THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION. THE AS SESSING OFFICER DISALLOWED 20% OF SUCH EXPENSES IN THE ABSENCE OF ANY EXPLANAT ION. THE CIT (A) HAS GRANTED THE RELIEF ON THE BASIS OF EARLIER YEAR REL IEF GRANTED BY CIT (A) AND ALSO HELD THAT THERE WAS NO ELEMENT OF PERSONAL EXP ENDITURE. THE CIT (A) HAS GIVEN THE RELIEF ON THE BASIS OF DETAILS ENCLOSED O N FOREIGN TRAVEL BY THE VARIOUS PERSONS WHO WERE IN EMPLOYMENT OF THE COMPA NY BY STATING THAT THERE WAS NO PERSONAL EXPENDITURE. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSING OFFICER HAS NOT PINPOINTED ANY EXPENDITURE RELATABLE TO THE PER SONAL NATURE OF THE PERSONS WHO HAVE TRAVELED. LD. DR HAS ALSO NOT BROUGHT OUT ANY EVIDENCE AGAINST THE ITA NO.5036/DEL./2011 3 FINDINGS OF CIT (A). THEREFORE, WE FIND NO FAULT I N THE ORDER OF THE CIT (A) ON THIS ISSUE AND DISMISS THIS GROUND OF REVENUES APPEAL. 6. IN GROUND NO.2, THE ISSUE RAISED IS AGAINST THE DELETION OF ADDITION OF RS.9,53,250/- ON ACCOUNT OF THE EXPENSES INCURRED O N ADVERTISEMENT. DURING THE YEAR, THE ASSESSEE HAS DEBITED RS.2,69,39,331/- TOWARDS ADVERTISEMENT AND MARKETING EXPENSES. IN ASSESSING OFFICERS VIEW, C ERTAIN EXPENDITURE HAVE BEEN INCURRED FOR ADVERTISING THE BRAND BY CALLING CELEBRITIES AND MAKING EXPENDITURE ON ACCOUNT OF EVENT MANAGEMENT. THIS A MOUNT INCLUDES PAYMENT OF RS.7,04,198/- FOR VISIT OF SOHA ALI KHAN, FILM A CTRESS AND RS.12,02,302/- TOWARDS EVENT MANAGEMENT AND CELEBRITY MANAGEMENT. THE ASSESSING OFFICER HELD THAT THE EXPENDITURE WAS INCURRED FOR BUILDING UP ITS BRAND WHICH IS BRINGING ENDURING BENEFIT TO THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED 50% OF THE EXPENDITURE. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING THAT IN A DYNAMIC MARKET, THERE IS NO SCOPE OF AN ENDURING NATURE OF ONE SET OF PRODUCT DISPLAY OVER THE OTHER AS THE MA RKET OF THE PRODUCT IS WIDELY SPREAD OVER THE LENGTH AND BREADTH OF OUR VA ST COUNTRY. THE CIT (A) HAS ALSO OBSERVED THAT THE LA-COSTE BRAND FROM FRAN CE IS AVAILABLE IN THE SMALLER TOWN AS WELL AS THE LARGE CITIES AND HELD T HAT NO ENDURING BENEFIT HAS BEEN MADE OUT OF THESE EXPENSES. THE LD. AR ALSO R ELIEF ON THE FOLLOWING DECISIONS :- ITA NO.5036/DEL./2011 4 (I) CIT VS. ADIDAS INDIA MARKETING PVT. LTD. 195 ITR TAXMAN 256 (DEL.); (II) CIT VS. INDIAN ALUMINIUM INDUSTRIES LTD. 80 TAXMAN 243 (KERALA); (III) CIT VS. SALORA INTERNATIONAL LTD 308 ITR 19 9 (DEL.) 7. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE FIND THAT BEFORE DISALLOWING ANY EXPENDITURE, THE ASSESSING OFFICER HAS TO DECIDE THE NATURE OF EXPENDITURE WHETHER IT IS A CAPITAL OR REVENUE. ON CE THE EXPENDITURE HAS HELD TO BE CAPITAL THEN THE ASSESSEE SHALL BE ENTITLED T O DEPRECIATION ON SUCH EXPENDITURE. AD HOC DISALLOWANCES ONLY BY MAKING T HE OBSERVATION THAT THE EXPENDITURE HAS BROUGHT ENDURING BENEFIT SHALL NOT BE A SUFFICIENT CAUSE FOR MAKING DISALLOWANCES. THEREFORE, IN OUR CONSIDERE D VIEW, THE CIT (A) IS JUSTIFIED IN DELETING THE ADDITION. THIS GROUND IS DISMISSED. 8. IN GROUND NO.3, THE ISSUE INVOLVED IS DELETING T HE ADDITION OF RS.5,20,974/- MADE BY ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 195 AND SECTION 9(1)(VII) OF THE INCOME TAX ACT. 9. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING THAT LA-COSTE IS A REGISTERED BRAND OF OWNERSHIP COMPANY. THE ASSESSEE IS A LICENSEE AS IT PAYS LI CENSE FEE TO THE OWNER OF LA- COSTE FRANCE. THE ASSESSEE CANNOT FILE THE SUIT AS ONLY OWNER OF THE BRAND CAN FILE THE SUIT. SINCE THE ASSESSEE HAS ONLY LICENCE TO MANUFACTURE IN INDIA, THE ASSESSEE AS WELL AS THE OWNER OF THE BRAND HAS SHAR ED THE EXPENDITURE TO ITA NO.5036/DEL./2011 5 SAFEGUARD THEIR INDIVIDUAL INTEREST. IN OUR CONSID ERED VIEW, ALTHOUGH THE ASSESSEE HAS CLAIMED REIMBURSEMENT OF EXPENSES BUT THE CORRECT FACTS HAS NOT BEEN BROUGHT OUT WHO IS ENGAGING THE PERSONS TO FIG HT THE CASES REGISTERED AGAINST THE COUNTERFEITING THE PRODUCT. HOW THE AS SESSEE IS SHARING AND UNDER WHICH AGREEMENT, THE ASSESSEE IS SHARING 50% OF THE EXPENSES AND REIMBURSING THE BALANCE. THEREFORE, IN OUR CONSIDE RED VIEW, THIS ISSUE REQUIRES A RELOOK AT THE LEVEL OF THE ASSESSING OFF ICER TO BRING THE CORRECT FACTS ON THE RECORD SO THAT THE ISSUE CAN BE DECIDED IN R IGHT PERSPECTIVE. IN VIEW OF THESE FACTS, WE RESTORE THIS ISSUE TO THE FILE OF T HE ASSESSING OFFICER. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF DECEMBER, 2012. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF DECEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.