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ITA 6457/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3459 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH SENIOR
• Keywords: Capital receipt; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6457/DEL./2015 (ASSESSMENT YEAR : 2012-13) DCIT, CIRCLE 16 (1), VS. M/S. MAIL TODAY NEWSPAPERS PVT. LTD., NEW DELHI. F 26, CONNAUGHT PLACE, NEW DELHI 110 001. (PAN : AAFCM1533J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL AGGARWAL, ADVOCATE SHRI SHAILESH GUPTA, ADVOCATE REVENUE BY : SHRI AMIT KATOCH, SENIOR DR DATE OF HEARING : 31.01.2019 DATE OF ORDER : 25.02.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DCIT, CIRCLE 16 (1), NEW DELHI (HER EINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 15.09.2015 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, NEW DELHI Q UA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA T HAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION AMOUNTING TO RS.12,86,04,197/- MADE BY THE AO BY TR EATING ADVERTISEMENT AND SALES PROMOTION EXPENSES AS REVEN UE EXPENSES ITA NO.6457/DEL./2015 2 RELYING COMPLETELY ON THE SUBMISSIONS OF THE APPELL ANT AND COMPLETELY IGNORING THE REASONS GIVEN BY THE AO? 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS A ND IS NOT TENABLE ON FACTS AND IN LAW. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS INTO THE BUSI NESS OF PUBLICATION OF NEWSPAPER AND PERIODICALS. ASSESSIN G OFFICER, NOTICING HUGE EXPENSES OF RS.12,86,04,197/- ON ACCO UNT OF ADVERTISEMENT AND SALES PROMOTIONS, PROCEEDED TO HO LD THAT SINCE EXPENSES INCURRED BY THE ASSESSEE ON ADVERTISEMENT AND SALES PROMOTION ARE TO PROTECT THE BRAND NAME OF THE ASSE SSEE GIVING IT ENDURING BENEFIT, THE SAME ARE TREATED AS CAPITAL I N NATURE AND THEREBY DISALLOWED THE SAME AND CONSEQUENTLY MADE A DDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION MADE BY TH E AO BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENU E HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.6457/DEL./2015 3 5. AT THE VERY OUTSET IT IS BROUGHT TO OUR NOTICE B Y THE LD. AR FOR THE ASSESSEE THAT THE ISSUE AS TO DISALLOWANCE OF ADVERTISEMENT AND SALES PROMOTION EXPENSES HAS ALREADY BEEN DECID ED IN FAVOUR OF THE ASSESSEE IN AY 2010-11 BY THE CO-ORDINATE BE NCH OF THE TRIBUNAL WHICH ORDER HAS BEEN FURTHER UPHELD BY THE HONBLE HIGH COURT, THERE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE. 6. PERUSAL OF THE ORDER DATED 27.04.2017 PASSED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.4252/DEL/2 014 IN ASSESSEES OWN CASE FOR AY 2010-11 GOES TO PROVE THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLO WING THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN C ASE OF EMPIRE JUTE COMPANY LIMITED VS. CIT 124 ITR 1. OPERATIVE PART OF THE FINDINGS RETURNED BY THE HONBLE APEX COURT AS WELL AS CO-ORDINATE BENCH OF THE TRIBUNAL ARE EXTRACTED FOR READY PERUS AL AS UNDER :- 12. HONBLE SUPREME COURT IN CASE OF EMPIRE JUTE CO. LTD VS. CIT (SUPRA) HAS HELD AS UNDER: BY THE COURT: (I) IT IS NOT A UNIVERSALLY TRUE PRO POSITION THAT WHAT MAY BE A CAPITAL RECEIPT IN THE HANDS OF THE PAYEE MUST NECESSARILY BE CAPITAL EXPENDITURE IN RE LATION TO THE PAYER. THE FACT THAT A CERTAIN PAYMENT CONST ITUTES INCOME OR CAPITAL RECEIPT IN THE HANDS OF THE RECIP IENT IS NOT MATERIAL IN DETERMINING WHETHER THE PAYMENT IS REVENUE OR CAPITAL DISBURSEMENT QUA THE PAYER. (II) THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING AN ADVANTAGE OF ENDURING BEN EFIT, MAY, NONE THE LESS, BE ON REVENUE ACCOUNT AND THE T EST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSE E THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ITA NO.6457/DEL./2015 4 ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHER E THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDIT URE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TES T. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF ASSESSEE'S BUSINESS TO BE CARRIED ON MOR E EFFICIENTLY OR MORE PROFITABILITY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVE NUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR A N INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. (III) WHAT IS AN OUTGOING OF CAPITAL AND WHAT IS OUTGOING AN ACCOUNT OF REVENUE DEPENDS ON WHAT THE EXPENDITURE IS CALCULATED TO EFFECT FROM A PRACTICA L AND BUSINESS POINT OF VIEW RATHER THAN UPON THE JURISDI C CLASSIFICATION OF THE LEGAL RIGHTS, IF ANY, SECURED , EMPLOYED OR EXHAUSTED IN THE PROCESS. THE QUESTION MUST BE V IEWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPE DIENCY. 13. RESPECTFULLY FOLLOWING SAME, WE ARE OF CONSIDE RED OPINION THAT EXPENDITURE INCURRED BY ASSESSEE TOWARDS ADVER TISEMENT AND SALES PROMOTION ARE FOR THE PURPOSES OF MAKING CUST OMERS AWARE OF ASSESSEES EXISTENCE AND ITS PRODUCTS/SERVICES, INCLUDING IMPROVEMENT, IF ANY, IN THE MARKET WHICH MAY OR MAY NOT RESULT IN SALES. WE ARE, THEREFORE, INCLINED TO UPHOLD FIN DINGS OF LD. CIT(A). ACCORDINGLY, GROUND RAISED BY REVENUE STAND S DISMISSED. 7. DECISION RENDERED BY THE CO-ORDINATE BENCH OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 HAS BEEN AFFI RMED BY HONBLE DELHI HIGH COURT IN ITA 52/2018 VIDE ORDER DATED 17.01.2018. IN THE SUBSEQUENT YEAR, THE REVENUE ITSELF HAS ACCEPTED THE ADVERTISEMENT AND SALES PROMOTION EXPE NSES AS REVENUE EXPENSES. 8. FOLLOWING THE DECISION RENDERED BY THE CO-ORDINA TE BENCH OF THE TRIBUNAL, AFFIRMED BY HONBLE DELHI HIGH COURT IN ASSESSEE'S OWN CASE FOR AY 2010-11, WE ARE OF THE CONSIDERED V IEW THAT ITA NO.6457/DEL./2015 5 ADVERTISEMENT AND SALES PROMOTION EXPENSES INCURRED BY THE ASSESSEE ARE MERELY FOR THE PURPOSE OF CREATING AWA RENESS IN THE MINDS OF THE CUSTOMERS AS TO THE EXISTENCE OF THE A SSESSEE AND ITS PRODUCTS/SERVICES/IMPORTANCE, IF ANY, IN THE MARKET WHICH MAY OR MAY NOT YIELD ANY RESULT/SALES. CONSEQUENTLY, FIND ING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE L D. CIT(A), PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF FEBRUARY, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH ) VICE PRESIDENT JUDICIAL MEMBER DATED THE 25 TH DAY OF FEBRUARY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-6, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.