M/S INDIA BULLION AND JEWELLERS ASSOCIATION LTD, MUMBAI V. DY CIT CIRCLE- 4(1)(2), MUMBAI

ITA 725/MUM/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1391 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 28-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PROVIDING MELTING; HALL MARKING; ASSAYING
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI S. RIFAUR RAHMAN, AM 1. आयकरअपीलसं./ I.T.A. No. 725/Mum/2020 (ननधधारणवर्ा / Assessment Year: 2014-15) M/s India Bullion And Jewellers Association Ltd. 185, Sheikh Memon Street, Mumbai-400 002 बनाम/ Vs. DCIT Cir-4(1), R. No. 678, 6 th floor, Aayakar Bhavan, M. K. Road, Mumbai-400 020 स्थधयीलेखधसं./जीआइआरसं./PAN No. AAACT1449D (अपीलधथी/Appellant) : (प्रत्यथी / Respondent) अपीलधथीकीओरसे/ Appellant by : Shri Prateek Jain, Ld. AR प्रत्यथीकीओरसे/Respondent by : Shri R. N. D’Souza, Ld. DR सुनवधईकीतधरीख/ Date of Hearing : 14.07.2022 घोर्णधकीतधरीख / Date of Pronouncement : 10.10.2022 आदेश / O R D E R Per Amit Shukla, Judicial Member: 1. The aforesaid appeal has been filed by assessee against the order dated 04.12.2019 passed by the Ld. CIT (Appeals)-9, Mumbai, for the quantum of assessment passed u/s 143(3) for A.Y. 2014-15. The assessee had taken the following grounds:- 2 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. 1. On the facts and circumstances of the Appellant's case the Id. CIT(A) erred in confirming the action of Id. A.O. in holding that the expenses incurred by the appellant for organizing the summit were capital in nature. 2. On the facts and circumstances of the Appellant's case the Id. CIT(A) erred in confirming the action of Id. A.O. in making a disallowance of deferred expenses amounting to Rs. 3,80,43,067/- claimed by the appellant, for the reasons stated in the impugned order or otherwise. 2. The facts in brief are that appellant company is an association set up by the Reserve Bank of India for maintaining ethical trade in the market and set a code of conduct for fair trading activities in the market. It is an apex association of Manufactures, Traders and Businessman from the Bullion Industry. The Association collects the membership fees from the members every year which is been offered as income on year to year basis. The appellant association also indulges in activity of gold/silver melting, gold/silver assaying, computer tounch and hallmarking. Further, the appellant also redresses problems relating to trade by giving timely advice and assistance in legal issues. The appellant association also sends 3 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. regular delegations to the government policy make to discuss issue afflicting the members of the association. 3. The Association was functional with full-fledged facilities like melting/refining, assaying, Dharam-Kanta, testing, etc. but the activities of the Association got standstill in the year 1980, because of Gold Control Act had come into existence. In year 2000, Gold Control Act was removed and the Association was again revived, but due to shortage of funds, the appellant was unable to restore its activities. Further in year 2012, the members of the Association decided that there was an urgent need to revive the Association for representation to the Government agencies to solve the day to day problem of Industry. Also, the appellant had started to lose its importance as comparison to the other newly formed bodies like GJF. For bringing out the Association to the limelight, it was decided to conduct annual event, India International Bullion Summit (IIBS) which must be held every year and peoples from the industry and government authorities should be called so that they could understand the needfulness and problems of the Industry. 4 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. 4. In October 2013, the appellant organized ‘India International Bullion Summit (IIBS) for which it had incurred expenditure of Rs.3,80,43,067/- which included event expenses, advertisement, travelling, etc. In the books of accounts, the appellant reflected the said expenditure as 'Deferred current assets' under the head 'non- current assets', instead of debiting the same as annual expenditure in P&L account. The Auditor has treated the said expenditure as capital in nature, however while filing the return of income, the assessee had claimed expenditure in the computation of income as deduction from its income as revenue expenditure. 5. The AO noted that assessee is a no profit and no loss entity and there is hardly expenditure /receipts in the profit and loss account and this was, one time significant expenditure incurred to bring out the assessee into limelight. He also took note of the fact that the several years, the assessee could not revive its activity due to shortage of fund and for 20 years, no such expenditure was incurred. Thereafter, Ld. AO held that view taken by the Auditor is correct as assessee will get benefit of the expenditure over the large period of years and if this was the period expenditure allowable as deduction in the current year, the Auditor would have charged the 5 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. same to the profit and loss account and not capitalize as non- current long term capital asset. Thus, he disallowed the deferred revenue expenditure of Rs. 3,80,43,067/-. 6. Ld. CIT(A) noted that after the organizing the International Bullion Summit, over the period of time, the revenue has increased the details of expenditure incurred in organizing the Bullion Summit for the AY 2015-16 to 2019-20 was noted as under:- A.Y. Total Amount Expenditure Revenue earned from the summit Percentage of Summit expenses debited to the P&L A/c. 2014-15 38043607 Nil Nil 2015-16 23642462 Nil One tenth 2016-17 24853498 N.A. One tenth 2017-18 1741670 9484879 One tenth 2018-19 1346383 10068729 Full 2019-20 5434642 12585729 Full 7. Thus, CIT(A) deduced that the expenses incurred in the Summit was strictly reduced from AY 2017-18 onwards, because the event gained popularity over the period and many of the expenses were sponsored by the members, because of the increase 6 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. in the brand value of the association. Thus, he held that these expenses had resulted into enduring benefit to the association in the form of increase in membership as well as sponsorship for the expenses to be incurred for the annual summit. The organization of summit directly resulted in the increase of the capacity of the association to earn income from various sources and it has led to increase in the membership. Thus, membership was only the profit making apparatus of the appellant association and accordingly, he concurred with the finding of AO as well as view taken by the Auditors. 8. We have heard the rival submissions and also perused the relevant findings given in the impugned order as well as material placed on record. As noted above, the Auditors have treated the expenditure incurred on International Bullion summit during the year under consideration as capital expenditure and have classified as intangible asset under the head ‘non-current assets’ in the balance sheet. However, the appellant association has claimed the deduction of entire amount of Rs. 3,80,43,067/- while computing the total income in the return of income. The appellant company was collecting yearly membership fees from the members and also 7 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. earning revenue by providing melting, hall marking, assaying services which was mostly utilized by its members. Since for more than two decades the activities of the association were stand still, however from the financial year 2013-14, it started gaining momentum after an international event was organized called ‘India International Bullion Summit’ which was addressed by now Hon’ble Prime Minister of India who had addressed the industry and various peoples from different government agencies. The issue here is, whether the expenditure incurred on such a summit is revenue in nature or it is capital expenditure which has given rise to any enduring benefit or any kind of intangible asset. The plea of ‘enduring benefit’ has to be seen in the context of the economical realities of the business and whether the expenditure is part of the profit earning process to enable the assessee to carry on business then it has to be reckoned as revenue expenditure. Even if the expenditure has given some advantage of ‘enduring benefit’ in the business, it cannot be held as it is capital expenditure. Before us, it has been pointed out that in AY 2018-19, expenditure on account of organization summit have been allowed by the AO as revenue expenditure in the order passed u/s 143(3) and in AY 2015-16, the 8 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. same stands allowed by the Ld. CIT(A). In AY 2016-17 and 2019-20, the same stands accepted, though no scrutiny assessment has been passed. Thus, it was contended that such expenditure not only is a regular expenditure, but also has been held as revenue expenditure. This fact also goes to show that it is a recurring expenditure incurred by the assessee and it cannot be held that the international summit conducted in this year has given a long term asset or intangible asset giving ‘enduring benefit’ to the assessee or creating any profit making apparatus. Before us, the detail of expenditure incurred on summit has also been given which are as under:- SR. NO. PARTICULARS 1 A-l FLOWERS DECORATORS 2 ADWORLD 3 BRANDSOL MERCHANDISING LLP 4 GLOBAL ADVERTISES 5 GAUTAM ADVERTISING 6 GLOBAL ADVERTISES 7 IN DO MAX INTERNATSONA 8 KATALYST INERTAINMENT P LTD 9 KANCHANA DESIGN STUDIO 10 LAKHANI HIRES AND CATERS 11 MOONSTUCK ADVERTISING 12 MINI MAX ADS PVT LTD 13 NORVICSON ADVERTISING 14 REPLIKATEINC 15 RASIK PUBLICITY CO 16 ORION & DIGITAL PVT LTD 17 O'MARK PR & EVENT 18 RADICAL DESIGNS 19 SILVER EMPORIUM PVTTLD 20 THE AWARD GALLERY 21 TALENT & BEYOND ENT PVT LTD 22 RISING EVENTS 23 NETBIZ SYSTEMS 24 MANALUAGTAP NATURE OF EXPENSES AMOUNT FLOWERS DECORATION 82880 BANNER EXP 48262 LAPEL PIN,FLAG 447205 DISPLAY HORDING CHARG 489622 ADVERTISEMENT 1208926 ADVERTISEMENT 489622 ADVERTISEMENT 521289 FASHION SHOW 615398 DRESS EXP 53000 HOTEL FOOD 9130629 PRINTING EXP 2817526 HORDINGSEXP 1421000 ADVERTISEMENT 77584 EVENT EXP 2981751 ADVERTISEMENT 1292773 ADVERTISEMENT 56653 ADVERTISEMENT 133091 EVENT EXP ' 254390 SILVER ARTICLE 811280 TROPHY EXP 625801 FASHION SHOW 1230000 D!NNER,SHOW SETUP 10172818 WEBSITE EXP 359000 FASHION SHOW 2723107 TOTAL RS 38043607 9 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. 9. From the nature of the expenditure, it cannot be held that these are capital expenditure creating any intangible asset or any enduring benefit to the assessee. Even though Auditors may have classified it has to be a capital expenditure and capitalized as intangible asset, but it has not change the character of the expenditure incurred which is prima facie can be seen from details as incorporated above is revenue expenditure. Otherwise, it is a trite law that nature of income and expenses merely by entry in the books of account does not define the character of the income or allowability of expenditure. Thus, it cannot be held that aforesaid expenditure incurred on Indian International Bullion Summit is a capital expenditure. Accordingly, the deduction claimed by the assessee is allowed. 10. In the result, the appeal filed by the assessee is allowed. Orders pronounced in the open court on 10 th October, 2022. Sd/- Sd/- (S. Rifaur Rahman) (Amit Shukla) Accountant Member Judicial Member मुंबई Mumbai;नदनधंक Dated : 10/10/2022 Sr.PS. Dhananjay आदेशकीप्रतितितिअग्रेतिि/Copy of the Order forwarded to : 1. अपीलधथी/ The Appellant 2. प्रत्यथी/ The Respondent 10 I. T . A . N o. 725/ Mu m / 2 0 2 0 M/s India Bullion And Jewellers Association Ltd. 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. नवभधगीयप्रनतनननध, आयकरअपीलीयअनधकरण, मुंबई/ DR, ITAT, Mumbai 6. गधर्ाफधईल / Guard File आदेशानुसार/ BY ORDER, .उि/सहायकिंजीकार (Dy./Asstt.Registrar) आयकरअिीिीयअतिकरण, मुंबई/ ITAT, Mumbai