DCIT CIR 2, KALYAN V. RAMESH P. BUDHWANI, PROP.M/S.P.K.MARKETING, ULHASNAGAR

ITA 6014/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHI RAM KARTIKEYAN LD
• Assessee Lawyers: BHAVYA GOYAL LD
• Keywords: Gift; Commercial expediency
• Section: 143(3); 37(1); 37

Judgement Text

ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.6014/MUM/2017 ( / ASSESSMENT YEAR:2013-14 D CIT - CIRCLE - 2 KALYAN, 2 ND FLOOR MOHAN PLAZA, KHADAKPADA WAYALE NAGAR KALYAN (W)-421 301. / VS. SHRI RAMESH P.BUDHWANI PROP. M/S. P.K. MARKETING SHOP NO.1-2, KAILASH COMPLEX NR. BASHARAM SOCIETY ESIS ROAD ULHASNAGAR-421 002 . ./ ./PAN/GIR NO. AATPB-5167-C ( ! /APPELLANT ) : ( '#! / RESPONDENT ) APPELLANT BY : ABHI RAM KARTIKEYAN - LD. DR RESPONDENT BY : BHAVYA GOYAL LD. AR / DATE OF HEARING : 18/03/2019 / DATE OF PRONOUNCEMENT : 06/06/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- TAX (APPEALS)-3, THANE, [IN SHORT REFERRED TO AS C IT(A)], APPEAL NO.1082-THN/16-17 DATED 05/07/2017 QUA DELETION OF CERTAIN ADDITION OF RS.173.59 LACS MADE BY LD. AO ON ACCOUNT OF SALES PROMOTION EXPENSES. ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 2 2. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], MS. BHAVYA GOYAL, AT THE OUTSET, SUBMITTED THAT THE FACTS OF THE PRES ENT CASE STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE DECISIO N OF THIS TRIBUNAL RENDERED IN THE CASE OF DCIT VS. SHRI VINOD NARAINDAS KISHNANI [ITA NO. 6227/MUM/2016 DATED 26/10/2018]. THE COPY OF THE ORDER HAS BEEN PLACED ON RECORD. ALTHOUGH LD. DR SUPPORTED THE STA ND OF LD. AO BUT FAILED TO CONTROVERT THE AFORESAID SUBMISSIONS. 3 FACTS QUA THE ADDITION ARE THAT THE ASSESSEE HAS BEEN SADDLED WITH IMPUGNED DISALLOWANCE ON ACCOUNT OF SALES PROMOTION EXPENSES IN SCRUTINY ASSESSMENT U/S 143(3) ON 31/03/2016. THESE EXPENSES REPRESENT PURCHASE OF TOBACCO PRODUCTS (CIGARETTES) WHICH ARE CLAIMED TO BE DISTRIBUTED AS GIFT ARTICLES. THE LD. AO OPINED THAT FREE OF COST DISTRIBUTION PROMOTES THE HIGHER CONSUMPTION OF THE SAID COMMODITY WHICH IS PROHIBITED U/S 5(3) OF THE THE CIGARETTES AND OTHER TOBACCO PRODUCTS (PROHIBITION OF ADVERTISEMENT AND REGULATI ON OF TRADE AND COMMERCE, PRODUCTION, SUPPLY AND DISTRIBUTION ACT, 2003 (COTP ACT) AND THEREFORE, THE SAME WERE TO BE DISALLOWED IN TE RMS OF EXPLANATION TO SECTION 37 OF THE INCOME TAX ACT, 1961. ALTHOUGH TH E ASSESSEE DEFENDED ITS STAND, HOWEVER, NOT CONVINCED, LD. AO DISALLOWED THE SAME. 4. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH SUCCESS BEFORE LD. FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDER DATED 05/07/2017 WHEREIN THE MATTER WAS CONCLUDED IN ASSESSEES FAVO R BY MAKING FOLLOWING OBSERVATIONS: - 5.0 GROUND NO. 1 IS DIRECTED AGAINST THE ADDITION OF RS. 1,73,59,41 1/- OUT OF SALES PROMOTION EXPENSES BY APPLYING THE PROVISIONS OF EXPLANATION 1 TO SECTION 37(1) OF THE ACT. ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 3 (I) I HAVE CAREFULLY CONSIDERED THE SUBMI SSIONS OF THE APPELLANT, THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, CAS E LAWS RELIED UPON BY THE APPELLANT AND THE FACTS OF THE CASE. (II) ON PERUSAL OF THE ABOVE, THE REASONS GIVEN BY THE AO FOR DISALLOWING AN AMOUNT OF RS.1,76,13,187/- OUT OF SALES PROMOTIO N EXPENSES IS NOT JUSTIFIABLE FOR THE REASONS DISCUSSED BELOW: - (A) LN FACT, SECTION 5(3) OF COTP ACT, 2003 APPLIES ONLY W HERE A PERSON BY CONTRACT OR OTHERWISE PROMOTES OR AGREES TO PROMOTE THE CONSUMPTION OF TOBACCO PRODUCTS, WHEREAS IN THE APPELLANT'S CASE N O SUCH CONTRACT HAS BEEN ENTERED. FURTHER, THE APPELLANT HAS NOT PROMOTED AN Y SPECIFIC BRAND OR A SPECIFIC MANUFACTURE. (B)THE APPELLANT DOES NOT MANUFACTURE OR DEAL IN OR ADVERTISES ANY SUCH PRODUCTS I.E. TOBACCO OR GUTKA. THE MEANING OF 'AD VERTISE' TO MEAN PUBLICIZE A PRODUCT IN ORDER TO PROMOTE SALES OF THOSE PRODUC TS. IN THE CASE OF THE APPELLANT, THERE WAS NO INTENTION OR INTEREST IN PR OMOTING THE SALE OF TOBACCO PRODUCTS BUT TO PROMOTE SALES OF ONLY THOSE LIQUOR PRODUCTS WHICH HE DEALS AS A DISTRIBUTOR. (C)IN FACT, THE GOVT. HAS NOT PROHIBITED THE MANUFA CTURE OF TOBACCO PRODUCT AND THE APPELLANT IS ALSO NOT A MANUFACTURER, THEREFORE THE PROVISIONS OF SECTION 5(3) OF COTP ACT ARE NOT APPLICABLE. IN THE CASE OF THE APP ELLANT, IT IS NOT EVEN CONCERNED WHETHER THE PRODUCTS ARE CONSUMED OR NOT AS THEY AR E DISTRIBUTED BOTH TO SMOKERS AND NON-SMOKERS ALIKE. MERE DISTRIBUTION DOES NOT T ANTAMOUNT TO PROMOTION OF CONSUMPTION, UNLESS THE DISTRIBUTOR ACTIVELY PROMOT ES THE PRODUCT. IF THAT IS THE MEANING OF THE COTP ACT, EVERY SHOPKEEPER WHO SELLS TOBACCO PRODUCTS WILL BECOME AN OFFENDER UNDER THIS ACT AND WHAT IS PROHI BITED BY LAW, IS ONLY SALE OF TOBACCO PRODUCTS TO MINORS AND PUBLIC ADVERTISEMENT . (D)THE EXPLANATION TO SECTION 37(1) SPEAKS OF ANY E XPENDITURE INCURRED FOR ANY PURPOSE WHICH PURPOSE IS AN OFFENCE OR WHICH PURPOS E IS PROHIBITED BY LAW, NO DEDUCTION SHALL BE ALLOWED. THEREFORE, THERE CANNOT BE ANY DISPUTE THAT THE PURPOSE FOR WHICH THE IMPUGNED EXPENDITURE IS INCUR RED IS TO PROMOTE SALE OF LIQUOR PRODUCTS AND THEREFORE, IT IS NEITHER AN OFFENCE NO R PROHIBITED BY ANY LAW. WHAT IS PROHIBITED IS ONLY CERTAIN SPECIFIED ACTIVITIES AS SALE TO MINORS, ADVERTISEMENT IN MEDIA ETC BUT THIS IS NOT IN THE CASE OF THE APPELLANT. (E) IN CBDT CIRCULAR NO. 772 DATED 23 RD DECEMBER, 1998 IN PARA 20.1 SPEAKS OF THE AMENDMENT WHICH WILL RESULT IN DISALLOWANCE OF CERT AIN CLAIMS MADE BY ASSESSEE IN RESPECT OF PAYMENT OF EXTORTION MONEY, HAFTA, BRIBE S ETC AND UNLAWFUL EXPENDITURE IS NOT AN ALLOWABLE DEDUCTION. THUS, IN ORDER TO ATTRA CT THE EXPLANATION, THE PAYMENT BY ITSELF MUST CONSTITUTE VIOLATION OF LAW. THE PUR CHASE OF TOBACCO PRODUCTS IS NOT A PAYMENT WHICH VIOLATES ANY LAW. (F) THEREFORE, THE PROVISIONS OF SECTION 5(3) OF COTP ACT, 2003, ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT, THEREFORE, EXPLANATION 1 TO SECTION 37(1) OF THE ACT ARE ALSO NOT APPLICABLE AS THE DISTRIBUTION OF TOBACCO AND GUTKA FOR APPELLANT'S SALES PROMOTION OF ITS BUSINESS IS NOT AN OFFENCE AND NOT PROHIBITED BY LAW. (G) FOR THE PURPOSE OF DISALLOWANCE UNDER EXPLANATION T O SECTION 37(1), THE FOLLOWING BASIC PRINCIPLES ARE TO BE FULFILLED : A) THE EXPENSE SHOULD HAVE BEEN INCURRED IN PROCEEDINGS LAUNCHED FOR INFRACTION OF LAW B) THE AO SHOULD EXAMINE THE RELEVANT ACT TO FIND OUT WHETHER THE EXPENSE IS IN THE NATURE OF PENALTY C) EXPENSE SHOULD BE RELATED TO ILLEGALLY NOT TO IRREGULARITY OR PROCEDURAL FORMALITIES' EXPENSES ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 4 HAVING NEXUS WITH THE OFFENCES ARE ON THE SAME FOOT ING AND ARE HIT BY EXPLANATION TO SECTION 37(1). WHEREAS, IN THE CASE OF THE APPEL LANT, THE ABOVE CONDITIONS HAVE NOT BEEN VIOLATED AS NO OFFENCE HAS BEEN COMMITTED UNDER ANY LAW. (III) THE AR OF THE APPELLANT HAS PLACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS. THE AFORESAID SIMILAR ARGUMENTS WER E CONSIDERED BY THE JURISDICTIONAL HON'BLE HIGH COURT IN THE CASE OF BR IHAN MAHARASHTRA SUGAR SYNDICATE LTD. VS. CIT REPORTED IN 320 ITR 658 AND THE HIGH C OURT ON PAGE 661 OBSERVED AS ... ',............ CANNOT BE SAID TO BE AGAINST PUBLIC POLICY. IT IS SUBMITTED THAT RIGHT TO TRADE IN LIQUOR MAY BE A TRADE WHICH IS RES-EXTRA C OMMERCIUM. NEVERTHELESS, THE STATE ALLOWS SAFE OF LIQUOR. ONCE THAT BE THE C ASE AND TRADING THE LIQUOR IS PERMITTED THE QUESTION OF PUBLIC POLICY WOULD NOT A RISE. PUBLIC POLICY, IT IS SUBMITTED WOULD BE IN THE EVENT OF THE CONTRACT IS IMMORAL OR AGAINST THE STATE INTEREST. THERE IS NO IMMORALITY INVOLVED IN THE CO NTRACT. THERE IS NO BAR IN THE MILITARY OFFICERS IN THE ARM ED FORCE DRAWING LIQUOR OR DRINKING. THE VERY FACT THAT THEY CAN PURCHASE THE SAME FROM CDS MUST RESULT IN REJECTING THAT CONTENTION.' THEREFORE, THE ISSUE INVOLVED IN THE APPEAL WAS SQU ARELY COVERED IN PRINCIPLE BY THE AFORESAID DECISION OF THE JURISDICTIONAL HON'BLE BO MBAY HIGH COURT IN THE CASE OF THE APPELLANT. (IV) THIS ISSUE HAS BEEN EXAMINED AND ADJUDICATED IN APPELLANT'S OWN CASE FOR OTHER YEAR A.Y. 2009-10, A.Y. 2010-11 AND A.Y, 20 12-13 WHEREIN THE SAME ADDITION ON SAME ISSUE ARE ALREADY DELETED. IN VIEW OF THE ABOVE STATED FACTS AND LEGAL POSITIO N, THE APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED AND THE ADDITION/DISALLOWANC E OF RS. 1,73,59,411/- MADE BY THE AO IS DELETED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX, WE FIND THAT IDENTICAL ISSUE STOOD COVERED IN ASSESSEES FAVOR BY THE CITE D DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL. FOR EASE OF REFERE NCE, THE RELEVANT OBSERVATIONS AS WELL AS CONCLUSION DRAWN BY THE BEN CH MAY BE EXTRACTED IN THE FOLLOWING MANNER: - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE P ARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSM ENT PROCEEDING THE ASSESSING OFFICER DISALLOWED THE SALE PROMOTION EXPENSES HOLD ING THAT THE EXPENDITURE INCURRED ON PURCHASE OF CIGARETTE AND TOBACCO PRODUCT IS NOT ALLOWABLE EXPENDITURE DUE TO DISABLING PROVISION IN SECTION 37(1) OF ACT AS DIST RIBUTION OF TOBACCO PRODUCT IS NOT ALLOWED UNDER SECTION 5(3) OF COTP ACT. WE HAVE PER USED THE PROVISIONS OF SECTION 5 &6 OF COTP ACT, WHICH IS REPRODUCED BELOW: 5. PROHIBITION OF ADVERTISEMENT OF CIGARETTES AND O THER TOBACCO PRODUCTS. - (1) NO PERSON ENGAGED IN, OR PURPORTED TO BE ENGAGE D IN THE PRODUCTION, SUPPLY OR DISTRIBUTION OF CIGARETTES OR ANY OTHER TOBACCO PRO DUCTS SHALL ADVERTISE AND NO PERSON HAVING CONTROL OVER A MEDIUM SHALL CAUSE TO BE ADVE RTISED CIGARETTES OR ANY OTHER TOBACCO ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 5 PRODUCTS THROUGH THAT MEDIUM AND NO PERSON SHALL TA KE PART IN ANY ADVERTISEMENT WHICH DIRECTLY OR INDIRECTLY SUGGESTS OR PROMOTES THE USE OR CONSUMPTION OF CIGARETTES OR ANY OTHER TOBACCO PRODUCTS. (2) NO PERSON, FOR ANY DIRECT OR INDIRECT PECUNIARY BENEFIT, SHALL- (A) DISPLAY, CAUSE TO DISPLAY, OR PERMIT OR AUTHORI SE TO DISPLAY ANY ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT; OR (B) SELL OR CAUSE TO SELL, OR PERMIT OR AUTHORISE T O SELL A FILM OR VIDEO TAPE CONTAINING ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PR ODUCT; OR (C) DISTRIBUTE, CAUSE TO DISTRIBUTE, OR PERMIT OR A UTHORISE TO DISTRIBUTE TO THE PUBLIC ANY LEAFLET, HAND-BILL OR DOCUMENT WHICH IS OR WHICH CONTAINS AN ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT; OR (D) ERECT, EXHIBIT, FIX OR RETAIN UPON OR OVER ANY LAND, BUILDING, WALL, HOARDING, FRAME, POST OR STRUCTURE OR UPON OR IN ANY VEHICLE OR SHALL DISPLA Y IN ANY MANNER WHATSOEVER IN ANY PLACE ANY ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACC O PRODUCT: PROVIDED THAT THIS SUB-SECTION SHALL NOT APPLY IN R ELATION TO- (A) AN ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOB ACCO PRODUCT IN OR ON A PACKAGE CONTAINING CIGARETTES OR ANY OTHER TOBACCO PRODUCT; (B) ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACC O PRODUCT WHICH IS DISPLAYED AT THE ENTRANCE OR INSIDE A WAREHOUSE OR A SHOP WHERE CIGA RETTES AND ANY OTHER TOBACCO PRODUCTS ARE OFFERED FOR DISTRIBUTION OR SALE. (3) NO PERSON, SHALL, UNDER A CONTRACT OR OTHERWISE PROMOTE OR AGREE TO PROMOTE THE USE OR CONSUMPTION OF- (A) CIGARETTES OR ANY OTHER TOBACCO PRODUCT; OR (B) ANY TRADE MARK OR BRAND NAME OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT IN EXCHANGE FOR A SPONSORSHIP, GIFT, PRIZE OR SCHOLARSHIP GIVEN OR AGREED TO BE GIVEN BY ANOTHER PERSON. 6. PROHIBITION ON SALE OF CIGARETTE OR OTHER TOBACC O PRODUCTS TO A PERSON BELOW THE AGE OF EIGHTEEN YEARS AND IN PARTICULAR AREA. - NO PERSON SHALL SELL, OFFER FOR SALE, OR PERMIT SALE OF, CIGARETTE OR ANY OTHER TOBACCO PROD UCT- (A) TO ANY PERSON WHO IS UNDER EIGHTEEN YEARS OF AG E, AND (B) IN AN AREA WITHIN A RADIUS OF ONE HUNDRED YARDS OF ANY EDUCATIONAL INSTITUTION 6. ON CAREFUL PERUSAL OF SECTION 5(1) OF COTP ACT M AKES IT CLEAR THAT ADVERTISEMENT OF TOBACCO PRODUCTS ARE PROHIBITED UNDER THE LAW ON THE PURCHASES WHO ARE ENGAGED IN PRODUCTION, SUPPLY OR DISTRIBUTION, DIRECTLY OR INDIRECTLY. SUBSECTION (2) OF SECTION 5, FURTHER PUTS A CONDITION THAT NO PERSON FOR ANY DIR ECT OR INDIRECT PECUNIARY BENEFIT SHALL DISPLAY, CAUSE TO DISPLAY, OR PERMIT OR AUTHO RISE TO DISPLAY ANY ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT; OR FOR SAL E OR CAUSE TO SALE , OR PERMIT OR AUTHORISE TO SELL A FILM OR VIDEO TAPE CONTAINING A DVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT OR TO DISTRIBUTE, CAUSE TO DI STRIBUTE, OR PERMIT OR AUTHORISE TO DISTRIBUTE TO THE PUBLIC ANY LEAFLET, HAND-BILL OR DOCUMENT WHICH IS OR WHICH CONTAINS AN ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACC O PRODUCT; OR ERECT, EXHIBIT, FIX OR RETAIN UPON OR LAND, BUILDING, WALL, HOARDING, FRAME, POST OR STRU CTURE OR UPON OR M W VEHICLE OR SHALL DISPLAY IN ANY MANNER WHATSOEVER I N ANY PLACE AN> ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT. THE PROVIS O ATTACHED WITH THIS SUB- SECTION FURTHER PRESCRIBES THAT AN ADVERTISEMENT OF CIGARET TES OR ANY OTHER TOBACCO PRODUCT IN OR ON A PACKAGE CONTAINING CIGARETTES OR ANY OTH ER TOBACCO PRODUCT; ADVERTISEMENT OF CIGARETTES OR ANY OTHER TOBACCO PR ODUCT WHICH IS DISPLAYED AT THE ENTRANCE OR INSIDE A WAREHOUSE OR A SHOP WHERE CIGA RETTES AND ANY OTHER TOBACCO PRODUCTS ARE OFFERED FOR DISTRIBUTION OR SALE. SUB SECTION 3 OF SECTION 5 OF THIS ACT PRESCRIBE THAT NO PERSON, SHALL, UNDER A CONTRACT O R OTHERWISE PROMOTE OR AGREE TO PROMOTE THE USE OR CONSUMPTION OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT; OR ANY ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 6 TRADE MARK OR BRAND NAME OF CIGARETTES OR ANY OTHER TOBACCO PRODUCT IN EXCHANGE FOR A SPONSORSHIP, GIFT, PRIZE OR SCHOLARSHIP GIVEN OR AGREED TO BE GIVEN BY ANOTHER PERSON. FURTHER SECTION 6 OF THE COTP ACT PUT CERTA IN CONDITION ON SALE OF TOBACCO PRODUCT TO THE PERSON OF BELOW THE AGE OF 18 YEARS OR WITHIN RADIUS OF HUNDRED METRES OF EDUCATIONAL INSTITUTIONS. 7. WE HAVE SEEN THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD WHICH MAY SHOW THAT ASSESSEE HAS UNDERTAKEN THE PRO MOTION OF SPECIFIC TOBACCO PRODUCT OR SPONSORED THEM. 8. THE LEARNED COMMISSIONER (APPEALS) ON CONSIDERIN G THE CONTENTION OF ASSESSEE CONCLUDED THAT SECTION 5(3) OF COTP ACT APPIIES ONL Y WHERE A PERSON BY CONTRACT OR OTHERWISE PROMOTE OR AGREE TO PROMOTE THE CONSUMPTI ON OF TOBACCO PRODUCTS, HOWEVER THE ASSESSEE NOWHERE , HAS ENTERED INTO A C ONTRACT FOR ANY SPECIFIED BRAND OF TOBACCO PRODUCT THE ASSESSEE IS NOT MANUFACTURER OR DEALER OR ADVERTISER OF ANY SUCH PRODUCT OF THE ASSESSEE IS PROMOTING SALE OF L IQUOR BY DISTRIBUTING THE TOBACCO ITEMS. THE GOVERNMENT HAS NOT PROHIBITED THE MANUFA CTURING OF TOBACCO PRODUCT, THE ASSESSEE IS ALSO NOT A MANUFACTURER THEREOF, AN D THEREFORE, THE PROVISION OF SECTION 5 OF COTP ACT ARE NOT APPLICABLE ON THE ASS ESSEE. THE LEARNED COMMISSIONER (APPEALS) ALSO OBSERVED THAT THE ASSES SEE IS NOT CONCERNED WHETHER THE PRODUCT DISTRIBUTED BY ASSESSEE IS CONSUMED OR NOT. MERE DISTRIBUTION DOES NOT TANTAMOUNT TO PROMOTION OF CONSUMPTION, UNLESS THE DISTRIBUTOR ACTIVELY PROMOTES THE PRODUCT. THE LEARNED COMMISSIONER (APPEALS) AL SO OBSERVED THAT IF THE PROVISION OF COPT ACT IS INTERPRETED IN SUCH A MANN ER, EVERY SHOPKEEPER WHO SELLS TOBACCO PRODUCT WILL BECOME AN OFFENDER. THEREFORE, WE ARE ALSO IN AGREEMENT WITH THE CONCLUSION ARRIVED BY LEARNED COMMISSIONER. 9. THE HON'BLE BOMBAY HIGH COURT IN THE MAHARASHTRA SUGAR SYNDICATE VERSUS DCIT (SUPRA) WHILE CONSIDERING THE ISSUE WHETHER TH E REIMBURSEMENT OF THE LIQUOR DRAWN AND PAID BY THE REGIMENT/UNIT ON AN OCCASION LIKE CELEBRATING THE REGIMENT'S ANNUAL DAY WHICH IS REIMBURSED CAN BE SAID TO BE AG AINST THE PUBLIC POLICY OR NOT. THE HON'BLE BOMBAY HIGH COURT ON THE FACTS THAT ASS ESSEE-COMPANY WAS MANUFACTURER OF INDIAN MADE FOREIGN LIQUOR (IMFL). IT WAS DEPENDING TO A LARGE EXTENT ON ORDERS FROM MILITARY CANTEEN FOR THE SALE OF ITS PRODUCTS. DURING THE RELEVANT ASSESSMENT YEAR, IT OFFERED SAMPLES OF ITS PRODUCTS AT VARIOUS MILITARY FUNCTIONS SO THAT THE PERSONNEL COULD DEVELOP A TAS TE FOR IT AND IT COULD SECURE BIGGER ORDERS FROM THE CSD (CANTEEN STORES DEPARTMENT). TH E MODUS OPERANDI OF OFFERING SUCH SAMPLES WAS THAT THE CONCERNED DEFENCE ESTABLI SHMENT USED TO BUY THE REQUISITE QUANTITY OF COMPANY'S LIQUOR FROM THE ARM Y LIQUOR SHOPS ON ACTUAL PAYMENT AND LATER ON THE REGIMENT OR THE DEFENCE ESTABLISHM ENT FORWARDED THE CASH MEMOS TO THE ASSESSEE-COMPANY FOR REIMBURSEMENT. THE ASSE SSEE CLAIMED SAID AMOUNTS AS BUSINESS PROMOTION EXPENSES. THE ASSESSING OFFIC ER DISALLOWED SUCH EXPENSES ON GROUND THAT IT WAS CLEAR ENTERTAINMENT OF CUSTOM ERS. ON APPEAL, THE COMMISSIONER (APPEALS) UPHELD THE DISALLOWANCE ON T HE GROUND THAT SUCH EXPENSES WERE AGAINST THE PUBLIC POLICY. THE TRIBUNAL UPHELD THE ORDER OF THE COMMISSIONER (APPEALS), ON APPEAL TO THE HIGH COURT IT WAS HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE FOR SALES PROMOTION WAS NOT ALLOWABLE. THE HON'BLE COURT CONCLUDED THAT THE ARM Y UNIT COULD NOT DIRECTLY PURCHASE LIQUOR FROM A MANUFACTURER. LIQUOR HAD TO BE PURCHASED THROUGH CSD. THIS WAS DONE BY THE ARMY UNIT. THE SECOND ASPECT WAS TH AT THE AMOUNTS SPENT BY THE UNIT TOWARDS PURCHASE OF THAT LIQUOR WAS REIMBURSED BY THE ASSESSEE NOT TO ANY ITA NO.6014/MUM/2017 SHRI RAMESH P. BUDHWANI ASSESSMENT YEAR :2013-14 7 INDIVIDUAL BUT TO THE ARMY UNIT ITSELF AND WHICH WE NT INTO THE COFFERS OF THE GOVERNMENT. THERE WAS NO BAR IN TAKING SUCH REIMBUR SEMENT AS EVIDENCED BY RECEIPT. IN OTHER WORDS. SUCH A CONTRACT WAS NOT PR OHIBITED BY LAW NOR WAS IT IN THE NATURE OF BRIBE TO AN OFFICER. THE PUBLIC POLICY WO ULD INVOLVE THAT INCOME AND EXPENDITURE WHICH IS FROM AN ACTIVITY WHICH IS PROH IBITED BY LAW OR IS IMMORAL. ONLY THEN, THE EXPENDITURE COULD HAVE BEEN DISALLOWED. I N THE INSTANT CASE, THE AMOUNT HAD BEEN SPENT BY WAY OF COMMERCIAL EXPEDIENCY FOR PROMOTING THE ASSESSEE'S PRODUCTS. THE FINDING WAS THAT IT WAS BY WAY OF SAL ES PROMOTION. SUCH EXPENDITURE WAS NOT AGAINST PUBLIC POLICY. ONCE THAT BE THE CAS E, THE DEDUCTION WAS ALLOWABLE, 10. CONSIDERING THE DECISION OF HON'BLE JURISDICTIO NAL HIGH COURT THAT AND VIEW OF THE DISCUSSION REFERRED ABOVE, WE DO NOT FIND ANY ILLEG ALITY OR INFIRMITY IN THE ORDER PASSED BY LEARNED COMMISSIONER (APPEALS), WHICH WE AFFIRMED. HENCE, THE GROUND OF APPEAL RAISED BY REVENUE ARE DISMISSED. THE REVENUE IS UNABLE TO BRING ON RECORD ANY DISTIN GUISHING FEATURES. FURTHER, THE GENUINENESS OF THE EXPENDITURE IS NOT UNDER DISPUTE. FACTS AND CIRCUMSTANCES BEING PARI-MATERIA THE SAME, RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENT, WE CONFIRM THE STAN D OF LD. FIRST APPELLATE AUTHORITY. 6. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JUNE, 2019. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06/06/2019 SR.PS : JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '% , , / DR, ITAT, MUMBAI 6. ,./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.