EMPEE BREWERIES LIMITED (SINCE AMALGTED WITH UNITED BREWERIES LTD), TIRUVALUVAR V. DCIT CORPORATE CIRCLE 2 (1), CHENNAI

ITA 616/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5050 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDIPCIT
• Assessee Lawyers: D ANAND
• Keywords: Gift; Business income; Set aside

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NOS. 616 & 617/CHNY/2018 /ASSESSMENT YEARS: 2007-08 & 2009-10 M/S.EMPEE BREWERIES LTD., [SINCE AMALGAMATED WITH UNITED BREWERIES LTD.] NO. 788/2, KUTHAMBAKKAM, THIRUMAZHISAI (PO), THIRUVALLUR DISTRICT, TAMIL NADU 602 107. [PAN : AAACE9764A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2( 1), CHENNAI. ( /APPELLANT) ( /RESPONDENT) ./ I.T.A. NOS. 1019 & 1020/CHNY/2018 /ASSESSMENT YEARS: 2007-08 & 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2( 1), CHENNAI 600 034. VS. M/S.EMPEE BREWERIES LTD., NO. 788/2, KUTHAMBAKKAM, THIRUMAZHISAI (PO), THIRUVALLUR DISTRICT, TAMIL NADU 602 107. ( /APPELLANT) ( /RESPONDENT) ASSESSEE BY : SHRI D. ANAND, ADVOCATE DEPARTMENT BY : SHRI SAILENDRA MAMIDI, PCIT / DATE OF HEARING : 07.05.2019 /DATE OF PRONOUNCEMENT : 21.05.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX I.T.A. NOS. 616, 617, 1019 & 1020/CHNY/18 2 (APPEALS) 6, CHENNAI, DATED 28.12.2017 PERTAINING TO ASSESSMENT YEAR 2007-08 AND ORDER DATED 27.12.2017 PERTAINING TO ASSESSMENT YEAR 2009- 10. SINCE COMMON ISSUE HAS BEEN RAISED IN THE APPEALS, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF BREVITY. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING 7.5% OF THE SALES AND PROMOTION EXPENSES AS EXCESSIVE AND THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING 92.5% OF THE SALES AND PROMOTION EXPENSES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF INDIAN MADE FOREIGN LIQUOR (IMFL) AND IT IS SUPPLYING THE SAME TO M/S. TAMIL NADU STATE MARKETING CORPORATION [TASMAC]. THE ASSESSEE HAS CLAIMED THE MARKETING AND SALES PROMOTION EXPENSES DURING THE YEARS UNDER CONSIDERATION. THE EXPENSES WERE ON ACCOUNT OF PURCHASE OF GIFT ARTICLES WHICH WERE SAID TO BE GIVEN TO THE CUSTOMERS AT THE RETAIL SHOPS OF TASMAC. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE ABOVE SAID ASSESSMENT YEARS BY FOLLOWING HIS ORDER FOR EARLIER ASSESSMENT YEARS IN ASSESSEES OWN CASE. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE I.T.A. NOS. 616, 617, 1019 & 1020/CHNY/18 3 ASSESSMENT YEARS 2010-11 AND 2008-09., THE LD. CIT(A) ALLOWED THE EXPENSES TO THE EXTENT OF 92.5% AND CONFIRMED THE DISALLOWANCE OF 7.5%. 4. ON BEING AGGRIEVED, BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ONCE THE LD. CIT(A) HAS NOT DISPUTED INCURRING OF SALES PROMOTION EXPENSES IN THE BUSINESS LINE OF THE ASSESSEE, THE LD. CIT(A) HAS ERRONEOUSLY RESTRICTED THE DISALLOWANCE OF 7.5% OF THE TOTAL CLAIM AND PRAYED FOR DELETING THE SAME. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT ONCE THE LD. DR HAS OBSERVED THAT THE INCURRING OF SALES PROMOTION EXPENSES ARE EXCESSIVE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING 92.5% OF THE SAME AND THE SAME IS LIABLE TO BE SET ASIDE. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR SIMILAR DISALLOWANCE, WHICH WAS SUBJECT MATTER IN APPEAL AND BY FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2010-11, 2002-03 & 2004-05 VIDE ORDER DATED 25.03.2015, THE COORDINATE BENCHES OF THE TRIBUNAL DECIDE THE ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 [CROSS APPEALS] IN I.T.A. NO. 2677/MDS/2016 & ITA NO. 2590/MDS/2016 VIDE ORDER DATED 28.04.2017 BY OBSERVING AS UNDER: I.T.A. NOS. 616, 617, 1019 & 1020/CHNY/18 4 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE DISALLOWANCE OF SALES PROMOTION EXPENSES WAS CONSIDERED BY THIS TRIBUNAL FOR THE ASSESSMENT YEARS 2010-11, 2003-04 AND 2004-05. IN FACT, THE ASSESSEE IS MANUFACTURING INDIAN-MADE FOREIGN LIQUOR AND SUPPLYING THE SAME TO TAMIL NADU STATE MARKETING CORPORATION. TAMIL NADU STATE MARKETING CORPORATION, IN TURN, IS SELLING THE SAME TO THE CUSTOMERS THROUGH RETAIL OUTLETS ACROSS THE STATE. FOR THE PURPOSE OF PROMOTING INDIAN-MADE FOREIGN LIQUOR MANUFACTURED BY ASSESSEE- COMPANY, THEY ARE SUPPLYING SOME GIFT ARTICLES TO THE CUSTOMERS AT THE RETAIL VENDING SHOPS. THE ASSESSEE CLAIMED THE EXPENDITURE WHILE COMPUTING THE TOTAL INCOME. IN FACT, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON VARIOUS REASONS. THE CIT(APPEALS) FOR THE ASSESSMENT YEARS 2010-11, 2003-04 AND 2004-05, ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT IT IS AN EXPENDITURE FOR THE PURPOSE OF BUSINESS. THE ORDERS OF THE CIT(APPEALS) FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2010-11 WERE, IN FACT, CONFIRMED BY THIS TRIBUNAL IN I.T.A. NO.2162, 2647, 2648 AND 2649/MDS/2014 BY ORDER DATED 25.03.2015. IN FACT, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE CIT(APPEALS) FOLLOWED THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2010-11. 5. SINCE THE CIT(APPEALS) HAS FOLLOWED THE ORDER OF THIS TRIBUNAL AND RESTRICTED THE DISALLOWANCE TO 7.5% AND ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF 92.5%, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE BUSINESS OF MANUFACTURE AND SALE OF IMFL BY THE ASSESSEE, INCURRING OF SALES AND PROMOTION EXPENSES ARE INEVITABLE AND THE POSSIBILITY OF UNREASONABLENESS AND EXCESSIVENESS OF THE CLAIM ALSO CANNOT BE RULED OUT AND THEREFORE, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE OF 7.5% OF THE TOTAL SALES PROMOTIONAL EXPENSES BEING EXCESSIVE AND UNREASONABLENESS AND ALLOWED 92.5% OF THE TOTAL CLAIM OF THE ASSESSEE. BOTH THE COUNSELS COULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT(A). HOWEVER, JUST BECAUSE THE I.T.A. NOS. 616, 617, 1019 & 1020/CHNY/18 5 REVENUE PREFERRED FURTHER APPEAL AGAINST THE ORDERS OF THE TRIBUNAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT, WE CANNOT TAKE A DIFFERENT VIEW. THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 21 ST MAY, 2019 IN CHENNAI. SD/ - SD/ - (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 21.05.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.