Airport Authority of India, New Delhi V. ITO, New Delhi

ITA 5162/DEL/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0734 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 05-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PARMITA M BISWAS
• Keywords: Depreciation; Question of law; Set aside
• Section: 143(3); 92B; 260A

Judgement Text

1 ITA NO. 5162/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 5162/DEL/2012 ( A .Y 2013-14) DCIT CIRCLE 16(1) ROOM NO. 312, C. R. BUILDING NEW DELHI AAFCM1533J (APPELLANT) VS MAIL TODAY NEWSPAPERS PVT. LTD. F-26,CONNAUGHT PLACE NEW DELHI (RESPONDENT) APPELLANT BY MS. PARMITA M. BISWAS, CIT DR RESPONDENT BY SH. SALIL AGGARWAL, ADV & SH. SATISH GUPTA, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 13/6/2017 PASSED BY CIT(A)-37, NEW DELHI FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS. 11,41,12,337/- INCURRED ON ADVERTISEMENT AND SALES PROMOTION OF PRODUCT, BRAND PROMOTION, DEVELOPMENT OF MARKET AND CUSTOMER RELAT IONS DATE OF HEARING 08.06.2020 DATE OF PRONOUNCEMENT 11.06.2020 2 ITA NO. 5162/DEL/2012 MADE BY THE ASSESSING OFFICER (THE AO) BEING CAPITA L IN NATURE, BY IGNORING A FACT THAT THE EXPENDITURE WA S INCURRED ON DEVELOPMENT OF VARIOUS INTANGIBLES AS DEFINED UN DER SUB- CLAUSE (A), (F) AND (I) OF CLAUSE (II) OF EXPLANATI ON BELOW SUB- SECTION(2) OF SECTION 92B OF THE INCOME TAX ACT, 19 61 (THE ACT)? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS.11,41,12,337/- INCURRED ON DEV ELOPMENT OF INTANGIBLES BY OVERLOOKING PROVISIONS OF CLAUSE (II) OF EXPLANATION BELOW SUB-SECTION (2) OF SECTION 92B OF THE ACT R.W.S 32(1)(II) OF THE ACT? 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 09.05.2 007. IT PUBLISHES MAIL TODAY, AN ENGLISH DAILY NEWSPAPER AND FURTHE R DISPLAYS ITS PUBLICATION ON MAILTODAY.IN. IT DERIVES REVENUE FROM THE SALE OF THE SAID PUBLICATIONS AND ADVERTISEMENTS PUBLISHED THEREIN. RETURN DECLARING LOSS OF RS. 28,33,36,161/- WAS E-FILED ON 28.11.2013 BY THE ASSESSEE. THE ASSE SSEE CLAIMED EXPENSES OF RS. 11,41,12,337/- ON ACCOUNT OF ADVERTISEMENT AND SALES PROMOTIONS. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT OF ADVER TISEMENT AND SALES PROMOTION INCURRED IN THE INITIAL STAGE OF BUSINESS , (THIS BEING FIFTH YEAR OF OPERATIONS) BY THE ASSESSEE, IS CONSIDERED AS CAPIT AL IN NATURE DUE TO TWO REASONS. FIRST IT HAS BEEN INCURRED IN THE INITIAL STAGE OF THE COMMENCEMENT OF THE BUSINESS OF THE ASSESSEE AND SECONDLY IT IS GOI NG TO GIVE ENDURING AND LONG TERM BENEFITS TO THE ASSESSEE. THEREFORE, THE ASSES SING OFFICER HELD THAT THE CLAIM OF RS. 11,41,12,337/- ON ACCOUNT OF ADVERTISI NG AND SALES PROMOTION EXPENSES IS TREATED AS CAPITAL IN NATURE. THE ASSES SING OFFICER FURTHER HELD THAT THE NATURE OF THESE EXPENSES IS NOT DEPRECIABLE AND THUS, DISALLOWED THE DEPRECIATION CLAIM ON THIS EXPENSE. 3 ITA NO. 5162/DEL/2012 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSING OFFICER RIGHTLY DISALLOWED THE CLAIM OF T HE ASSESSEE AS THESE EXPENSES INCURRED IN THE INITIAL STAGE OF THE COMMENCEMENT O F THE BUSINESS OF THE ASSESSEE AND IT IS GOING TO GIVE ENDURING AND LONG TERM BENEFITS TO THE ASSESSEE. THUS, IT IS CAPITAL IN NATURE. THE LD. DR FURTHER S UBMITTED THAT THE DEPRECIATION CANNOT BE ALLOWED IN THE PRESENT CASE AS THE SAME IS NOT COMING UNDER THE PURVIEW OF SPECIFIED INTANGIBLES. THUS, T HE LD. DR SUBMITTED THAT THE CIT(A) WAS NOT RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE AND THE ASSESSMENT ORDER BE UPHELD. 6. THE LD. AR SUBMITTED THE CHART SHOWING BRIEF HIS TORY OF ADVERTISEMENT AND SALES PROMOTION EXPENSES AS CLAIMED BY THE ASSE SSEE AND TREATMENT ACCORDED BY REVENUE AS UNDER:- S NO. ASSESSMENT YEAR EXPENDITUR E CLAIMED IN P & L ACCOUNT ASSESSMENT ORDER U/S 143(3) AND STATUS OF DISALLOWANCE BY AO (WHETHER ALLOWED OR DISALLOWED) STATUS OF DISALLOWANCE BEFORE CIT(A) STATUS IN ITAT STATUS IN HIGH COURT 1 2008-09 120167272 DISALLOWED BY AO ALLOWED BY LD. CIT(A) NO APPEAL IN HONBLE ITAT BY DEPARTME NT N.A 2 2009-10 197800334 ALLOWED U/S143(1) N.A N.A N.A 3 2010-11 93729000 DISALLOWED BY AO ALLOWED BY LD. CIT(A) DEPARTME NTAL APPEAL DISMISSED BY HONBLE DEPARTMENTAL APPEAL DISMISSED BY HONBLE COURT OF DELHI 4 ITA NO. 5162/DEL/2012 ITAT 4 2011-12 158234858 DISALLOWED BY AO APPEAL IS PENDING BEFORE CIT(A) N.A N.A 5 2012-13 128604197 DISALLOWED BY AO ALLOWED BY LD. CIT(A) DEPARTME NTAL APPEAL DISMISSED BY HONBLE ITAT BEFORE ITAT NO APPEAL PREFERRED BY DEPARTMENT IN HIGH COURT 6 2013-14 114112337 DISALLOWED BY AO ALLOWED BY LD. CIT(A) IMPUGNED APPEAL N.A THUS, THE LD. AR SUBMITTED THAT THE ISSUE IS DECIDE D IN FAVOUR OF THE ASSESSEE AT THE APPELLATE STAGE BY THE TRIBUNAL AND THE HON BLE HIGH COURT. THEREFORE, THE LD. AR PRAYED THAT THE PRESENT APPEAL BE DISMIS SED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ISSUE CONTESTED IN THE PRESENT APPEAL BY THE REVENUE HAS ALREADY BEEN DECI DED IN FAVOUR OF THE ASSESSEE FOR A.Y. 2010-11 AS WELL AS A.Y. 2012-13 B Y THE TRIBUNAL. IN FACT, THE HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBU NAL IN A.Y. 2010-11. THE HONBLE HIGH COURT IN A.Y. 2010-11 (PR. CIT VS. MAI L TODAY NEWSPAPERS PVT. LTD. ORDER DATED 17.01.2018) HELD AS UNDER: THE QUESTION OF LAW URGED IN THIS APPEAL UNDER SEC TION 260A OF THE INCOME TAX ACT, 1961 (THE ACT) BY THE REVENUE IS WITH RESPECT TO THE CORRECTNESS OF THE INCOME TAX APPELLATE TRIBUNALS (ITAT) DECISION THAT RS.9,37,29,000/-, WHICH HAD BEEN DISALLOWED FROM TH E SALES PROMOTION EXPENDITURES BY THE ASSESSING OFFICER (AO), FELL IN THE REVENUE STREAM RATHER THAN THE CAPITAL STREAM. THE ASSESSEE WAS ENGAGED I N THE BUSINESS OF PUBLICATION OF NEWSPAPER AND PERIODICALS; ITS REVEN UE IS DERIVED FROM THE SALE OF PUBLICATION AND ADVERTISEMENTS PUBLISHED IN SUCH NEWSPAPERS. THE 5 ITA NO. 5162/DEL/2012 ASSESSEE CLAIMED EXPENDITURE TO THE TUNE OF RS. 18. 82 CRORES AS SALES PROMOTION EXPENSES. JUSTIFYING SUCH EXPENSES, THE A SSESSEE RELIED UPON VARIOUS HEADS OF ITS EXPENDITURES. THE AO WAS OF TH E OPINION THAT THE EXPENDITURE WAS UNDULY HIGH FOR A NEW ENTRANT AND D ISALLOWED HALF THE AMOUNT I.E. RS. 9,37,29,000/-. IT WAS HELD THAT THE AMOUNT WAS IN ALL PROBABILITY, MEANT TO CREATE AN ASSET I.E. BRAND OF AN ENDURING NATURE AND THUS, FELL IN THE CAPITAL STREAM. THE CIT(A) DISAGR EED AND SET ASIDE THE AOS DECISION. THE ITAT AFFIRMED THAT JUDGMENT. LEARNED COUNSEL RELIED UPON THE JUDGMENT IN EMPIRE JUTE CO. LTD. VS. COMMISSIONER OF INCOME TAX, (1980) 124 ITR 1 (SC) T O SAY THAT THE RATIO OF THAT JUDGMENT FAIRLY IMPLIES TO LEAD TO CONCLUSION THAT THE HIGH DEGREE OF EXPENDITURE IN THIS CASE AND DISALLOWED BY THE AO, ACTUALLY MEANT CREATION OF AN ASSET OR RESULTED IN AN ENDURING CAPITAL ADVANTA GE TO THE ASSESSEE. THIS COURT IS OF THE OPINION THAT THE CONCURRENT FI NDINGS ON THE QUESTION URGED, ARE JUSTIFIED. AS TO THE NATURE OF ADVERTISI NG EXPENDITURE, THE POINTED DECISION OF THE COURT IN COMMISSIONER OF INCOME TAX VS. SALORA INTERNATIONAL, (2009) 308 ITR 199 WAS DECISIVE. THE ADVERTENCE TO EMPIRE JUTES CASE (SUPRA), IS NOT APT IN THE CIRCUMSTANCES OF THE CAS E. THE COURT FURTHER RE- COLLECTS THAT LATER DECISION IN ALEMBIC CHEMICAL WO RKS CO. LTD. VS. CIT (1989) 177 ITR 377 HAS CAUTIONED THE ADMINISTRATIVE AUTHOR ITIES AND THE COURTS FROM APPLYING HITHERTO THE ADMINISTRATIVE AUTHORITIES AN D THE COURTS FROM APPLYING HITHERTO BRIGHT LINE TEST TO EXPENDITURE RESULTING IN A CAPITAL ADVANTAGE BASED UPON TRADITIONAL NOTIONS. FOR THE FOREGOING REASONS, NO SUBSTANTIAL QUESTION OF LAW ARISES. APPEAL IS THEREFORE, DISMISSED. THUS, THE ISSUE INVOLVED IN THE PRESENT CASE IS ALS O IDENTICAL. THE ADVERTISEMENT AND SALES PROMOTION EXPENSES INCURRED BY THE ASSESSEE ARE MERELY FOR THE PURPOSE OF PUBLICITY OF TRADE NAME/B RAND NAME WHICH RESULTS INTO ENHANCEMENT OF SALES. THEREFORE, THE CIT(A) W AS RIGHT IN ALLOWING THE 6 ITA NO. 5162/DEL/2012 APPEAL OF THE ASSESSEE AS THE ISSUE IS ALREADY COVE RED IN EARLIER YEARS. THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2020 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 11/06/2020 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 5162/DEL/2012 DATE OF DICTATION 10.06.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.06.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 2 . 0 6 . 2 0 2 0 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 2 . 0 6 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 2 . 0 6 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER