Hindustan Coca-Cola Marketing Company Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 6455/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3978 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Non-deduction of tax; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 1 IN THE INCOME TAX APPELLATE TRIBUNAL [DELHI BENCHES : C NEW DELHI ] BEFORE SHRI S. K. YADAV , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I. T. APPEAL NO S . 6684 & 6685 (DEL) OF 20 14 ASSESSMENT YEAR S : 2005 - 06 & 2006 - 07 . ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE : 12 (1), N E W D E L H I. VS. M/S. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., 13 ABUL FAZAL ROAD, BENGALI MARKET, N E W D E L H I. PAN : A ABCH 1541 D I. T. APPEAL NO. 6455 (DEL) OF 20 14 ASSESSMENT YEAR: 2006 - 07 . M/S. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., 13 ABUL FAZAL ROAD, BENGALI MARKET, N E W D E L H I. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE : 12 (1), N E W D E L H I. PAN : A ABCH 1541 D (APPELLANT S ) (RESPONDENT S ) ASSESSEE BY : SHRI ROHIT GARG, C. A.; DEPARTMENT BY : MS. MEETA SINGH, CIT [DR]; SHRI S. L. ANURAGI, SR. D. R.; DATE OF HEARING : 17. 0 5 .201 8; DATE OF PRONOUNCEMENT : 09 .0 8 .201 8. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 2 O R D E R . PER PRASHANT MAHARISHI, A.M . : 01 THESE ARE THE THREE APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE FOR TWO ASSESSMENT YEARS INVOLVING SIMILAR GROUNDS AND, THEREFORE , THEY ARE DISPOSED OFF, BY THIS COMMON ORDER . 02 NOW WE 1 ST TAKE UP THE APPEAL OF THE ASSESSMENT YEAR 2005 06. I .T.A. NO. 6684 ( DEL) OF 2014 [ASSESSMENT YEAR: 2005 - 06 ] : 03 FIRST, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO. 664/ DEL/ 2014 . THE LEARNED DY. COMMISSIONER OF INCOME TAX, CIRCLE 12(1), NEW DELHI, HAS FILED APPEAL FOR ASSESSMENT YEAR 2005 - 06 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) X, NEW DELHI, DATED 29.09.2014 IN THE CASE OF THE ASSESSEE 04 THE REVENUE HAS RAISED EFFECTIVELY FOLLOWING 4 GROUNDS OF APPEAL : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) ERRED IN DELETING THE ADDITION OF RS. 1,45,78,201/ - MADE ON ACCOUNT OF SERVICE CHARGES WH ICH ARE OF CAPITAL NATURE. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 3 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) ERRED IN DELETING THE ADDITION OF RS.1,51,02,232/ - MADE ON ACCOUNT OF ADVERTISEMENT EXPENSES WHICH ARE OF CAPITAL NATURE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) ERRED IN DELETING THE ADDITION OF RS.7,60,577/ - MADE ON ACCOUNT OF CESSATION OF LIABILITY IN CASE OF STATIC CREDITORS. 4. WHETHER ON THE FACTS AND CIRCUMS TANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) ERRED IN SETTING ASIDE THE ASSESSMENT ORDER OF THE A SSESSING O FFICER ON THE GROUND OF PROVISION FOR DOUBTFUL DEBTS WRITTEN OFF IN THE NAME OF DIRECTION TO THE A.O. TO ALLOW THE SAME AFTER VERIFICA TION OF SPECIFIC DETAILS TO BE PROVIDED BY THE ASSESSEE WHEN NO SUCH POWER IS VESTED IN THE LD. CIT (A PPEALS ) IN SECTION 251 (1 ) OF THE I . T . ACT, 1961 . 05 THE BRIEF FACTS OF THE CASE FOR ASSESSMENT YEAR 2005 - 06 ARE STATED THAT ASSESSEE, M/S. HINDUSTA N COCA COLA MARKETING COMPANY PVT. LTD., IS ENGAGED IN THE BUSINESS OF TRADING OF NON - ALCOHOLIC BEVERAGES . THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2005 DECLARING A LOSS OF RS. 68,18,45,728/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 4 ASSESSING OFFICER MADE SEVERAL ADDITIONS AND ASSESSED THE TOTAL LOSS OF THE ASSESSEE AT RS. 63,12,34,326/ - . THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED CIT (APPEALS) WHO PARTLY ALLOWED THE APP EAL OF THE ASSESSEE . THE MAJOR ADDITIONS, WHICH WERE CONTESTED BY THE ASSESSEE, WERE DELETED . THEREFORE, THE LEARNED ASSESSING OFFICER AGGRIEVED HAS PREFERRED THIS APPEAL . 06 THE FIRST GROUND OF APPEAL IS WITH RESPECT TO THE ADDITION OF RS. 1,45 ,78,201/ - DELETED BY THE LEARNED CIT (APPEALS) WHICH WAS HELD TO BE SERVICE CHARGES BEING IN THE NATURE OF CAPITAL EXPENDITURE . THE ASSESSEE HAS PAID SERVICE CHARGES AMOUNTING TO RS. 1,94,37,601/ - TO COCA COLA INDIA INC., IN CONNECTION WITH CERTAIN ADVI SORY AND SUPPORT SERVICES RECEIVED BY IT DURING THE SUBJECT PERIOD . THE ASSESSEE RECEIVED SUCH SERVICES IN THE COURSE OF CARRYING ON ITS DAY - TO - DAY BUSINESS AND IS IN NATURE OF ACCOUNTING SUPPORT, MARKETING ADVICE AND OTHER SUPPORT SERVICES . THE ASSESSEE HAS PAID IT AT THE RATES AS AGREED IN THE WRITTEN AGREEMENT APPROVED BY THE RESERVE BANK OF INDIA . THE ASSESSEE HAS INCURRED SIMILAR SERVICES EXPENSES, WHICH WERE ALLOWED TO IT IN THE PAST . HOWEVER, DURING THE CURRENT YEAR THE LEARNED ASSESSING ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 5 OFFIC ER HELD THAT SERVICE CHARGES ARE PAID FOR AVAILING TECHNICAL KNOW - HOW IN THE FIELD OF ACCOUNTING AND MARKETING AND, THEREFORE, IT IS CAPITAL EXPENDITURE IN NATURE . THE LEARNED ASSESSING OFFICER ALLOWED DEPRECIATION @ 25% THEREON . 07 THE ASSESSEE ON A PPEAL BEFORE THE LEARNED CIT (APPEALS) SUBMITTED THE COPIES OF THE AGREEMENT SHOWING THE NATURE OF SERVICES RENDERED . SEVERAL DECISIONS WERE ALSO RELIED UPON BY THE ASSESSEE . IT WAS FURTHER CONTENDED THAT SIMILAR DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 20 03 - 04 AND RELIEF WAS GRANTED BY THE LEARNED CIT (APPEALS) . FOR ASSESSMENT YEAR 2004 - 05 THE LEARNED COMMISSIONER OF INCOME TAX INVOKED PROVISIONS OF SECTION 263, WHICH WAS QUASHED BY THE ITAT, AND FURTHER THAT ORDER WAS CONFIRMED BY THE HONBLE SUPREME CO URT . IN NUTSHELL , IT WAS STATED THAT THESE ARE NOT THE CAPITAL EXPENDITURE, BUT REVENUE IN NATURE . THE LEARNED CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE REJECTING THE CONTENTION OF THE LEARNED ASSESSING OFFICER THAT THE IMPUGNED EXPENDITURE ARE CAPI TAL IN NATURE AND HOLDING THAT THE SAME ARE REVENUE IN NATURE AND ARE ALLOWABLE TO THE ASSESSEE FOR THE REASON THAT CO - ORDINATE BENCH FOUND NO ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 6 REASON TO HOLD THAT THE ABOVE EXPENDITURE ARE CAPITAL IN NATURE. 08 ON APPEAL BEFORE US, THE LEARNED DEPARTME NTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER . 09 THE LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED CIT ( APPEALS). 10 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS . THE IMPUGNED EXPENDIT URE INCURRED BY THE ASSESSEE WAS FOR AVAILING CERTAIN SERVICES IN THE FIELD OF ACCOUNTING, MARKETING ADVICE AND SUPPORT SERVICES . THE ABOVE SERVICES ARE UTILIZED BY THE ASSESSEE FOR CARRYING ON DAY - TO - DAY BUSINESS ACTIVITIES . NO ENDURING BENEFIT WAS FOUND TO BE AVAILABLE TO THE ASSESSEE BY RECEIPT OF SUCH SERVICES . EVEN IF IT IS A KNOW - HOW EVEN THEN IT WILL NOT GIVE ANY BENEFIT TO THE ASSESSEE UNLESS THE ASSESSEE IS INDEPENDENTLY ABLE TO PERFORM THESE ACTIVITIES WITHOUT THE HELP OF THE SERVI CE PROVIDER IN FUTURE . NO SUCH EVIDENCES ARE PLACED BY REVENUE ON RECORD. THE NATURE OF THE SERVICES IS STATED TO BE IN THE FORM OF BASIC SERVICES ON SALES , DISTRIBUTION, AND ACCOUNTING . IT WAS STATED BY THE ASSESSEE TO BE OF ROUTINE NATURE . THE LEARNED ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 7 ASSESSING OFFICER COULD NOT BRING ANY MATERIAL TO SHOW THAT SUCH EXPENDITURE ALLOWED TO THE ASSESSEE IN 2003 - 04 WAS CONTESTED BY REVENUE AT HIGHER FORUM . THE CO - ORDINATE BENCH HAS ALSO HELD IN ORDER PASSED QUASHING THE ORDER OF THE TRIBUNAL UNDER SECTION 263 OF THE ACT FOR AY 2003 - 04 HOLDING THAT THERE IS NO ERROR IN ALLOWING THE CLAIM OF THE ASSESSEE OF THIS EXPENDITURE AS REVENUE EXPENDITURE FOR ASSESSMENT YEAR 2004 - 05. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEA RNED CIT (APPEALS) IN DELETING THE ADDITION OF RS. 1,45,78,201/ - ON ACCOUNT OF SERVICE CHARGES . GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS DISMISSED . 11 GROUND NO. 2 IS WITH RESPECT TO HOLDING THAT THE ADVERTISEMENT EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 1,51,02,232/ - IS CAPITAL EXPENDITURE IN NATURE, WHICH WAS HELD BY THE LEARNED CIT (APPEALS) AS REVENUE EXPENDITURE . DURING THE YEAR, THE ASSESSEE HAS INCURRED ADVERTISEMENT EXPENDITURE OF RS. 2,01,36,310/ - FOR PUSHCARTS , KIOSKS, SIGNBOARDS , GLOW - SIGNS ETC. THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT SAME ARE CAPITAL IN NATURE DESPITE THE EXPLANATION OF THE ASSESSEE THAT THESE ARE ROUTINE EXPENDITURE ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 8 INCURRED ON MARKETING, SALES, AND DISTRIBUTION OF COCA COLA PRODUCTS . ASSESSEE FURTHER EXPLAINED THE NATURE OF THE BUSINESS AND STATED THAT THE ABOVE EXPENDITURE DOES NOT CREATE ANY CAPITAL ASSET, BUT HAS VERY SHORT LIFE . THE ASSESSING OFFICER REJECTED THE SAME AND STATED THAT THE ASSESSEE IS HAVING AN ENDURING NATURE BENEFIT BY INCURRING THIS EXPENDITURE AND, THEREFORE, HE HELD THEM TO BE CAPITAL EXPENDITURE . HE ALLOWED DEPRECIATION @ 25% THEREON AND MADE THE NET ADDITION OF RS. 1,51,02,232/ - . THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED CIT (APPEALS) . THE LEARNED CIT (APPEALS) HELD THAT THE ABOVE EXPENDITURE ARE NOT CAPITAL EXPENDITURE, BUT REVENUE EXPENDITURE IN NATURE . THE LEARNED CIT (APPEALS) RELIED UP ON SEVERAL DECISIONS OF VARIOUS HIGH COURTS . THEREFORE, REVENUE HAS CHALLENGED THE ABOVE DELETION. 12 THE LEARNED DEPARTMEN TAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ORDER OF THE LEARNED ASSESSING OFFICER , WHEREAS THE LEARNED AUTHORIZED REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED CIT ( APPEALS). 13 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE ASSESSEE HAS INCURRED EXPENDITURE FOR ADVERTISEMENT ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 9 ON CERTAIN MATERIALS . THAT EXPENDITURE ARE FOR THE ADVERTISEMENT OF THE BEVERAGES MANUFACTURED AND SOLD BY THE ASSESSEE . THE ABOVE MATERIAL IS APPROPRIATELY DISPLAYED AT VARIOUS LOCATIONS, PLACES, AN D ARE, THEREFORE, TEMPORARY IN NATURE . THEY DO NOT HAVE ANY USEFUL LIFE OF LONGER PERIOD. THEREFORE, THEY DO NOT GIVE ANY BENEFIT OF ENDURING NATURE TO THE ASSESSEE . THE LEARNED CIT (APPEALS) HAS DELETED THE ADDITION BASED ON THE DECISION OF HONBLE HIGH C OURT IN CIT VS. SALORA INTERNATIONAL 308 ITR 199 AND CIT VS. PEPSICO HOLDINGS PVT. LTD . IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) IN HOLDING THAT ADVERTISEMENT EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE I N NATURE . ACCORDINGLY, GROUND NO. 2 OF THE APPEAL IS DISMISSED. 14 GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO THE CESSATION OF LIABILITY OF RS. 7,60,577/ - DELETED BY THE LEARNED CIT (APPEALS) . THE LEARNED CIT (APPEALS) NOTED THAT SEVERAL CREDITORS IN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE REMAINED STATIC FOR PAST THREE YEARS . THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THOSE CREDITORS . ASSESSEE SUBMITTED THAT THEY ARE PAYABLE AND ARE OUTSTANDING . IT WAS FURTHER STATED THAT ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 10 THERE IS NO CESSATION OF LIABILITY OF THIS AMOUNT AS THE LIABILITY IS EXISTING. THE LEARNED ASSESSING OFFICER HELD THAT ASSESSEE DID NOT FURNISH ANY EVIDENCE TO SHOW THAT THESE CREDITORS ARE STILL PAYABLE AND NOR FILED ANY CONFIRMATION OR ANY EVIDENCE TO SHOW THAT THEY HAVE BEEN P AID IN SUBSEQUENT YEARS . IN VIEW OF THIS, HE MADE AN ADDITION OF RS. 7,60,577/ - AS CESSATION OF LIABILITY . THE LEARNED CIT (APPEALS) DELETED THE ABOVE ADDITION HOLDING THAT MERELY BECAUSE THE CREDITORS ARE OUTSTANDING FOR A LONG TIME THE LIABILITY TO PAY T HOSE CREDITORS CANNOT BE CEASED . HE FURTHER HELD THAT THE LIABILITIES ARE STILL PAYABLE AND, THEREFORE, THERE IS NO REASON IN TREATING THOSE CREDITORS AS INCOME UNDER SECTION 41(1) OF THE ACT. 15 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDER OF THE LEARNED ASSESSING OFFICER . HE SUBMITTED THAT WHEN THE ASSESSEE COULD NOT PROVE THAT WHEN THESE CREDITORS HAVE BEEN PAID BY THE ASSESSEE, THERE IS NO REASON TO NOT TO MAKE ANY ADDITION UNDER SECTION 41 (1 ) OF THE ACT . 16 THE LEARNED A UTHORIZED REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED CIT ( APPEALS). 17 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THERE ARE SEVERAL CREDITORS OUTSTANDING IN THE BOOKS OF ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 11 ASSESSEE FOR A LONG TIME AND ASSESSEE COULD NOT PROV E WHEN THE Y ARE PAID IN SUBSEQUENT YEARS. THEREFORE , THE LEARNED ASSESSING OFFICER MADE THE ADDITION UNDER SECTION 41(1) OF THE ACT . ACCORDING TO HIM, SUCH LIABILITIES NO LONGER EXIST . BEFORE THE LEARNED ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT (APPEALS) THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE WITH RESPECT TO THE SUBSISTENCE OF SUCH LIABILITY . IT IS ALSO NOT BY THE ASSESSEE THAT THEY HAVE NOT BEEN CLAIMED AS EXPENDITURE IN EARLIER YEARS OR OTHERWISE HOW THEY HAVE BEEN CREATED. AS THE ASSESSEE H AS FAILED TO SHOW THAT THESE LIABILITIES ARE SUBSISTING NATURALLY, THE ASSESSEE HAS FAILED TO SHOW THAT THESE LIABILITIES HAVE NOT BEEN CEASED . THE ASSESSEE ALSO DID NOT SHOW THAT WHEN IN THE SUBSEQUENT YEARS THESE LIABILITIES HAVE BEEN PAID. ASSESSEE ALSO COULD NOT PROVE THAT THESE LIABILITIES HAVE NOT BEEN TAKEN AS DEDUCTION OR EXPENDITURE IN EARLIER YEARS. THEREFORE WHEN THE ASSESSEE HAS FAILED TO SHOW THAT THE LIABILITIES ARE SUBSISTING OR THEY HAVE NOT BEEN CLAIMED AS DEDUCTION IN EARLIER YEARS, OR TO SHOW WHEN THEY HAVE BEEN PAID, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED ASSESSING OFFICER IN MAKING AN ADDITION UNDER ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 12 SECTION 41(1) OF THE ACT OF RS. 7,60,577/ - . ACCORDINGLY GROUND NO . 3 OF THE APPEAL OF THE REVENUE IS ALLOWED. 18 GROUND NO. 4 OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE OF PROVISION OF DOUBTFUL DEBTS WRITTEN OFF . DURING THE YEAR, ASSESSEE HAS CLAIMED DEDUCTION OF RS. 2,00,36,494/ - ON ACCOUNT OF PROVISION OF DOUBTFUL DEBTS WRITTEN OFF . THE ASSESSEE SUBMITTED IN RESPONSE TO THE QUERY THAT THE PROVISION IS MADE BY THE ASSESSEE ON YEAR - TO - YEAR BASIS AS PROVISION FOR BAD AND DOUBTFUL DEBTS . OUT OF THAT PROVISION WHENEVER SUCH DEBT BECOMES BAD THEN THE SAME IS WRITTEN OFF T O THE PROFIT AND LOSS ACCOUNT. T HE LEARNED ASSESSING OFFICER DISALLOWED THE ABOVE SUM HOLDING THAT THE EXPLANATION FURNISHED BY THE ASSESSEE IS VAGUE. ACCORDINGLY RS. 2,00,36,494/ - WAS ADDED TO THE TOTAL INCOME . THE LEARNED CIT (APPEALS) DELETED THE ABOVE DISALLOWANCE HOLDING THAT ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 36(2) OF THE ACT . FURTHER, THE SUM IS WRITTEN OFF . 19 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNED AUTHORIZED R EPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED CIT (APPEALS). ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 13 20 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ORDER OF THE LOWER AUTHORITIES . THE LEARNED CIT (APPEALS) HAS DEALT WITH THIS ISSUE IN GROUND NOS. 4 AND 5 OF THE APPEAL AT PA GE NOS. 15 TO 17 OF HIS ORDER AS UNDER : - GROUND NO. 4 & 5 OF APPEAL ARE AGAINST AOS ACTION IN DISALLOWING THE CLAIM OF THE APPELLANT ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS WRITTEN BACK AMOUNTING TO RS.1,33,898/ - AND DISAL LOWANCE OF PROVISION FOR DOUBTFUL DEBTS WRITTEN OFF AMOUNTING TO RS.2,00,36,494/ - . THE ASSESSING OFFICER MADE THIS DISALLOWANCE MERELY ON THE GROUND THAT THE APPELLANT FAILED TO FURNISH EVIDENCE TO SHOW HOW AND WHEN SUCH AMOUNT HAD BEEN OFFERED BY IT FOR TAXATION PURPOSES. ON THE OTHER HAND, THE APPELLANT HAS SUBMITTED THAT IT HAD OFFERED THE PROVISION FOR DOUBTFUL DEBTS FOR THE RESPECTIVE YEARS FOR TAXATION PURPOSES AND SAME WAS VERIFIABLE FROM THE APPELLANTS EARLIER YEARS ACC OUNTS. CONSEQUENTLY WRITING OFF SUCH DEBTS WAS AN ALLOWABLE EXPENDITURE. ON CONSIDERING THE FACTS OF THE CASE IT IS OBSERVED THAT THE APPELLANTS ACCOUNT DO SHOW THAT PROVISION FOR DOUBTFUL DEBTS HAD BEEN OFFERED FOR TAXATION IN EARLIER YE ARS. THE APPELLANT HAS FILED THE RECONCILIATION STATEMENT ALONG WITH STATEMENT OF FACTS WHICH REPRODUCED AS UNDER : - PARTICULARS. AMOUNT REMARKS OPENING BALANCE 9,79,04,788 AS PER SCHEDULE C OF FINANCIAL STATEMENTS PROVISION MADE DURING THE YEAR 6,98,75,725 DISALLOWED IN THE COMPUTATION OF INCOME RECLASSIFICATION OF PROVISION FOR DOUBTFUL DEBTS (5,08,365) WRITTEN BACK DURING THE YEAR (1,33,898) CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME SET OFF AGAINST (2,00,36,494) CLAIMED AS DEDUCTION IN THE ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 14 DURING THE YEAR COMPUTATION OF INCOME CLOSING BALANCE : 14,71,01,756 AS PER SCHEDULE C OF FINANCIAL STATEMENT. IT IS OBSERVED THAT THE APPELLANT HAS NOT GIVEN THE COMPLETE DETAILS OF RS. 2,00,36,494/ - AS THEY ARE BEING TREATED AS PART OF COMPOSITE AMOUNT IN SUCH A SITUATION WHETHER THE CONDITIONS AS LAID DOWN UNDER SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT ARE SATISFIED OR NOT CANNOT BE EXAMINED IN RESPECT OF EACH ITEM INCLUDED IN COMPOSITE AMOUN T. THE ASSESSING OFFICER IS DIRECTED TO ALLOW SUCH WRITING OFF OF THE AMOUNTS ONLY WHEN THE APPELLANT PROVIDES THE SPECIFIC DETAILS OF EACH ITEM OF PROVISIONS SHOWING EXACTLY WHEN THESE AMOUNTS WERE INCLUDED IN THE SALES AND REMAINED OUTSTANDING IN T HE SHAPE OF DEBTOR. GROUNDS NO. 4 & 5 ARE PARTLY ALLOWED. 21 WE HAVE CAREFULLY PERUSED THE ORDER OF THE LEARNED CIT (APPEALS) AND WE DO NOT FIND ANY REASON TO DISTURB THE FINDING OF THE LEARNED CIT (APPEALS) AS THE ASSESSEE HAD WRITTEN OF F THE BAD DEBTS FROM THE PROVISIONS OF BAD AND DOUBTFUL DEBTS CREATED IN EARLIER YEARS OUT OF THE INCOME SHOWN IN THE EARLIER YEARS, WHICH IS WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT, THE CLA IM OF THE ASSESSEE IS CORRECT. IT SATISFIED THE CONDITIONS ENVI SAGED UNDER SECTION 36(1)(II) AND 36(2)OF THE ACT FOR CLAIM OF BAD DEBTS . ACCORDINGLY, GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS DISMISSED. 22 IN THE RESULT, APPEAL OF THE REVENUE FOR AY 2005 - 06 IS PARTLY ALLOWED. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 15 ITA NO 6685 & 6455/DEL/20 14 AY 2006 - 07 23 NOW WE TAKE UP THE APPEAL FOR THE ASSESSMENT YEAR 2006 07 FILED BY BOTH THE PARTIES. 24 W E COME TO THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2006 - 07 . THE LEARNED ASSESSING OFFICER HAS FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) X, NEW DELHI, DATED 29.09.2014 RAISING 4 EFFECTIVE GROUNDS OF APPEAL CHALLENGING VARIOUS DISALLOWANCES DELETED BY THE LEARNED CIT (APPEALS) . THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) HAS ERRED IN DELETING THE ADDITION OF RS.1,38,64,065/ - ON ACCOUNT OF CAPITALIZATION OF SERVICE CHARGE WHICH ARE OF ENDURING NATURE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) HAS ERRED IN DELETING THE ADDITION OF RS.69,77,437/ - ON ACCOUNT OF CAPITALIZATION OF ADVERTISEMENT EXPENSES , WHICH ARE OF ENDURING NATURE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPEALS ) ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF ASSESSEE OF ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 16 RS.2,28,64,473/ - , 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A PPE ALS ) ERRED IN DELETING THE ADDITION OF RS.7,61,884/ - ON ACCOUNT OF CESSATION OF LIABILITY. 25 THE ASSESSEE HAS ALSO FILED THE APPEAL AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RAISING THE GRIEVANCE VIDE GROUND NO. 2 OF THE APPEAL WHERE THE LEARNED CIT (APPEALS) CONFIRMED THE ADDITION / DISALLOWANCE ON ACCOUNT OF EXCESS, SHORTAGE AMOUNTING TO RS. 20 , 89,501/ - . THIS IS THE ONLY GRIEVANCE OF THE ASSESSEE. 26 FOR THE YEAR ASSESSEE FILED RETURN OF INCOME ON 30.11.2006 SHOWING LOSS OF RS. 25,80,27,830/ - AND ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS MADE ON 30.12.2008 DETERMINING TAXABLE INCOME OF ASSESSEE RS. NIL . THE LEARNED ASSESSING OFFICER MADE DISALL OWANCE OF RS. 1,87,77,379/ - . THE ASSESSEE CHALLENGED THE ABOVE DISALLOWANCE BEFORE THE LEARNED CIT (APPEALS), WHO ACCEPTED THE DISALLOWANCE ON ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 17 ACCOUNT OF EXCESS SHORTAGE OF THE BREAKAGE LOSS OF RS. 20,89,501/ - ALLOWED THE CLAIM OF THE ASSESSEE. 27 COMING TO THE ONLY GRIEVANCE OF THE ASSESSEE, THE BRIEF FACTS OF THE DISALLOWANCE IS THAT THE LEARNED ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED EXCESS BREAKAGE AND SHORTAGE COMPARED TO EARLIER YEARS AND, THEREFORE, EXPLANATION WAS ASKED FOR . THE AS SESSEE SUBMITTED THAT DURING THE YEAR, THERE WAS A FLOOD IN MUMBAI AND, THEREFORE, APPROXIMATELY 60,000 CASES WERE DESTROYED . THE INSURANCE CLAIM RECEIVED OF RS. 1.12 CRORES IS ALREADY SHOWN AS INCOME . IT WAS FURTHER STATED THAT 1,00,000 CASES WERE PULLED BACK BY THE ASSESSEE FROM MARKET IN VIEW OF EXCEPTIONAL QUALITY ISSUES . THE LEARNED ASSESSING OFFICER FURTHER EXAMINED THE ISSUE AND FOUND THAT PULL BACK WAS ON ACCOUNT OF EXPIRY OF THE PRODUCTS . HE FURTHER NOTED THAT EXPLANATION OF THE ASSESSEE IS UNS ATISFACTORY . HE HELD THAT IN TYPE OF THE BUSINESS IN WHICH A SSESSEE IS ENGAGED, EVERY YEAR THERE WOULD BE PRODUCTS HAVING EXPIRED THEIR SHELF LIFE AND, THEREFORE, IT IS A NORMAL TRANSACTION . HE, THEREFORE, STATED THAT CLAIM OF THE ASSESSEE IS NOT ACCEPTA BLE AND HENCE, HE MADE ADDITION OF RS. 20,89,501/ - . THE ASSESSEE CHALLENGED THE SAME BEFORE THE ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 18 LEARNED CIT (APPEALS) . THE LEARNED CIT (APPEALS) CONFIRMED THE SAME IN ABSENCE OF COMPLETE DETAILS AND EVIDENCES . HOWEVER, HE HELD THAT IT WOULD BE REASONABLE A ND JUSTIFIED IF THE INVENTORY LOSS CLAIMED BY THE APPELLANT IS RESTRICTED AT 70% OF THE C LAIM. HE FURTHER FOLLOWED THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2008 - 09. THEREFORE, ASSESSEE IS AGGRIEVED. 28 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMI TTED THAT THE ORDER OF THE LEARNED CIT (APPEALS) WAS CHALLENGED BY ASSESSEE BEFORE THE CO - ORDINATE BENCH FOR ASSESSMENT YEAR 2009 - 10 . AN IDENTICAL ISSUE HAS BEEN DISCUSSED VIDE GROUND NO. 4 WHERE THE ISSUE HAS BEEN SET ASIDE TO THE FILE O F THE LEARNED ASSESSING OFFICER . HE FURTHER SUBMITTED THAT THIS GROUND IS NOT PRESSED AT THIS MOMENT. 29 AS THE ASSESSEE IS NOT WILLING TO PRESS THIS GROUND OF APPEAL WE DISMISS THE APPEAL OF THE ASSESSEE. 30 COMING TO THE APPEAL OF THE REVENUE, THE FIRST GROUND OF APPEAL IS WITH RESPECT TO DELETING THE ADDITION OF RS. 1, 38, 64, ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 19 065/ ON ACCOUNT OF SERVICE CHARGES HELD TO BE CAPITAL EXPENDITURE AGAINST THE REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. THIS GROU ND IS IDENTICAL TO GROUND NO. 1 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005 06. WE HAVE ALREADY DEALT WITH THIS ISSUE IN APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005 06. FOR THE SIMILAR REASONS GIVEN THEREIN, WE DISMISS GROUND NO. 1 OF TH E APPEAL OF THE REVENUE HOLDING THAT SERVICE CHARGES PAID BY THE ASSESSEE OF RS. 1, 38, 64, 065/ IS REVENUE EXPENDITURE IN NATURE. 31 SECOND GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS. 6 977437/ ADVERTISEMENT EXPENDITURE CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE, BUT HELD BY THE AO AS CAPITAL EXPENDITURE. THIS GROUND OF APPEAL IS IDENTICAL TO GROUND NO. 2 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005 06. WE HAVE ALREADY CONFIRMED THE ORDER OF THE LD. CIT A DELETING THE ABOVE ADDITION FOR THAT YEAR. THEREFORE, WE DO NOT FIND ANY REASON DEVIATE FROM THE SAME. HENCE, WE HOLD THAT ADVERTISEMENT EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE IN NATURE. HENCE, GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 20 32 GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO THE FINDINGS OF THE LD. CIT (APPEALS) WITH RESPECT TO THE EXPENDITURE OF THESE, 28, 64, 743/ WITH RESPECT TO GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE BEFORE THE LD. CIT APPEALS. IN THAT GROUND THE LD. CIT A HAS GIVEN THE DIRECTION THE LD. AO THAT ASSESSEE HAS PROVIDED THE DETAILS OF THE EXPENDITURE SHOWING THE REVERSAL OF SUCH EXPENSES TO BE VERIFIED FROM THE BOOKS OF ACCOUNTS IT WAS THE CLAIM OF THE ASSESSEE THAT THE DETAILS WERE MADE AVAILABLE TO THE AO DURING THE ASSESSMENT PROCEEDINGS, BUT SAME WERE NOT VERIFIED BY HIM ON THE GROUND THAT NO TAX DEDUCTION AT SOURCE HAS BEEN MADE ON SUCH EXPENDITURE. ON S UBMISSION OF RECONCILIATION BEFORE THE LD. CIT A, IT WAS FOUND THAT HE WOULD HAVE MADE DISALLOWANCE ONLY RS. 2,26,15,134/ INSTEAD OF RS. 2,43,72,131/ . THEREFORE THE LD. CIT A DIRECTED THE AO TO VERIFY THESE DETAILS FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IF FOUND CORRECT, TO ALLOW IT AS DEDUCTION. 33 IN OUR OPINION, THE LD. CIT A HAS SET ASIDE THE ISSUE FOR VERIFICATION BEFORE THE LD. AO AND AFTER SUCH VERIFICATION AND DISALLOWANCE IF REQUIRED TO BE MADE, CAN BE MADE BY HIM. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 21 THEREFORE, WE DO N OT FIND ANY REASON FOR GRIEVANCE OF REVENUE WITH THE ABOVE ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT SHOW THAT HOW THE AO IS AGGRIEVED BY THE ABOVE DIRECTION. THEREFORE, GROUND NO. 3 OF THE APPEAL IS DISMISSED. 34 GROUND NO. 4 IS AGAINST DELE TION OF THE ADDITION OF RS. 7, 61, 884/ MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY. IDENTICAL ISSUE IS DECIDED BY US IN APPEAL FOR ASSESSMENT YEAR 2005 06 AS PER GROUND NO. 3. WHILE DECIDING THAT GROUND, WE HAVE ALLOWED THE APPEAL OF THE REVENU E ON THAT GROUND. THE FACTS OF THIS CASE ARE SIMILAR AS IN THE APPEAL OF THE REVENUE FOR A Y 2005 06. THEREFORE, AS PER THE REASONS GIVEN BY US THEREIN, WE ALLOW GROUND NO. 4 OF THE APPEAL OF THE REVENUE. 35 ACCORDINGLY, APPEAL OF THE REVENUE FOR ASSESSME NT YEAR 2006 07 IS PARTLY ALLOWED AND APPEAL OF THE ASSESSEE FOR THE SAME ASSESSMENT YEAR IS DISMISSED. 36 ACCORDINGLY, ALL THE THREE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. ITAS. 6684, 6685 & 6455 (DEL) OF 2014. HINDUSTAN COCA COLA MARKETING CO. PVT. LTD., NEW DELHI. 22 37 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON : 09.08.2018 - SD/ - - SD/ - ( S. K. YADAV ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 09/08/2018 . *MEHTA* COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT (APPEALS); 5. DR, ITAT, ND. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR