GODREJ & BOYCE MFG CO. LTD, MUMBAI V. ADDL CIT RG 10(2), MUMBAI

ITA 8488/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3608 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A G BHATKAR; K V VISPUTE
• Assessee Lawyers: NITESH JOSH
• Keywords: Capital asset; Depreciation; Business expenditure; Earning of tax free income; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 14A; 115JB; 37(1)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER /. ITA/8488/MUM/2011 , /ASSESSMENT YEAR: 2008-09 GODREJ & BOYCE MFG. CO.LTD. PIROJSHAH NAGAR,VIKHROLI MUMBAI-400 079. PAN:AAACG 1395 D VS. ACIT-10(2) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. /. ITA/8502/MUM/2011 , /ASSESSMENT YEAR: 2008-09 ACIT-10(2) AAYAKAR BHAVAN,MUMBAI- 400 020. VS. GODREJ & BOYCE MFG. CO.LTD. MUMBAI--400 079. /.ITA/658/MUM/2013 , /ASSESSMENT YEAR: 2009-10 GODREJ & BOYCE MFG. CO. LTD. MUMBAI-400 079. VS. ACIT-10(2) AAYAKAR BHAVAN,MUMBAI-400 020. / ITA/189/MUM/2013 , /ASSESSMENT YEAR: 2009-10 ACIT-10(2) AAYAKAR BHAVAN,MUMBAI- 400 020. VS. GODREJ & BOYCE MFG. CO.LTD. MUMBAI--400 079. ./ ITA/6070/MUM/2013 , /ASSESSMENT YEAR: 2010-11 GODREJ & BOYCE MFG. CO. LTD. MUMBAI--400 079. VS. DCIT-10(2) AAYAKAR BHAVAN,MUMBAI-400 020. . / ITA/5659/MUM/2013 , /ASSESSMENT YEAR: 2010-11 DCIT-10(2) AAYAKAR BHAVAN,MUMBAI- 400 020. VS. GODREJ & BOYCE MFG. CO.LTD. MUMBAI--400 079. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: S/SHRI A.G. BHATKAR-(CIT-DR) AND K.V. VISPUTE- (D R) ASSESSEE BY: SHRI NITESH JOSH (AR) / DATE OF HEARING: 23.08.2016 / DATE OF PRONOUNCEMENT: 23.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS OF CS.IT(A)THE ASSESSEE AND THE ASSESSING OFFICERS (AO.S) HAVE FILED CROSS-APPEALS FOR THE ABOVE MENTIONED ASSESSMENT YE ARS(AY.S.).AS MOST OF THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON,SO,WE ARE ADJU DICATING ALL THE APPEALS BY PASSING A SINGLE ORDER.ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF STEEL FURNITURE, SECURITY EQUIPMENTS, TYPEWRITERS, ELECTR ONIC EQUIPMENTS, MACHINE TOOLS, FORK LIFT TRUKS,LOCKS, PRESS TOOLS, REFRIGERATORS AND WASHING MACHINES.THE DETAILS OF DATES OF FILING OF RETURN/ASSESSED INCOME ETC. CAN BE SUMMARISED AS UN DER : A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. A SSESSED INCOME CIT (A)ORDER DT. 2008-09 22.09.2008 35.96 CRORES 29.12.2010 180.71CR ORES 28.09.2011 2009-10 25.09.2009 161.90 CRORES 29.12.2010 169.18 CRORES 16.10.2012 2010-11 27.09.2010 410.94 CRORES 22.02.2013 420.20 CRORES 26.06.2013 8488+5GODREJ & BOYCE 2 ITA/8488/MUM/2011-AY- 2008-09 (ASSESSEES APPEAL) : 2. FIRST GROUND OF APPEAL IS ABOUT DEPRECIATION ON ASS ETS ACQUIRED ON DEMERGER.DURING THE COURSE OF HEARING BEFORE US,AUTHORISED REPRESENTATI VE(AR)AND THE DEPARTMENTAL REPRESENTA -TIVE(DR)AGREED THAT IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN THE EARLIER YEARS(ITA NOS.4540-42/MUM/11,AY.S2005-06 TO 2007-08).IT IS FO UND THAT THE TRIBUNAL HAS DEALT THE ISSUE AS FOLLOW: 3. DURING THE COURSE OF HEARING BEFORE US,AUTHORISED R EPRESENTATIVE(AR)AND THE DEPART - MENTAL REPRESENTATIVE(DR)AGREED THAT IDENTICAL ISSU E WAS DECIDED BY THE TRIBUNAL IN THE EARLIER YEARS(ITA NOS.4538-39/MUM/11,AY.S 2003-04 A ND 2004-05).WE FIND THAT EXCEPT FOR THE AMOUNT INVOLVED WITH REGARD TO DEPRECIATION,THE ASSESSEE HAD RAISED THE IDENTICAL GROUNDS FOR TWO EARLIER AY.S.AND THE TRIBUNAL HAD DECIDE TH E ISSUE AS UNDER :- 17. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND H AVE ALSO GONE THROUGH THE RECORD. WE HAVE CAREFULLY GONE THROUGH THE RELEVANT PROVISIONS I.E. EXPLANATION 2A AND 2B TO SECTION 43(6) AND HAVE ALSO CONSIDERED THE RESPECTIVE AMEND MENTS BROUGHT OUT FROM TIME TO TIME IN THE SAID PROVISIONS. WE FIND THAT THE EXPLANATIONS 2A AND 2B WERE INSERTED BY FINANCE ACT, 1999 W.E.F. 01.04.2000. THE RELEVANT WORDS UNDER CL AUSE 2A WERE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS OF THE DEMERGED COMPANY WHEREAS TH E CORRESPONDING RELEVANT WORDS UNDER CLAUSE 2B WERE THE VALUE OF ASSETS AS APPEARING IN THE BOOKS OF ACCOUNTS. HOWEVER, A SUBSEQUENT AMENDMENT WAS MADE VIDE FINANCE ACT, 200 0 W.E.F. THE SAME DATE I.E. 01.04.2000 VIDE WHICH THE WORDS THE VALUE OF THE ASSETS AS AP PEARING IN THE BOOKS OF ACCOUNT WERE SUBSTITUTED WITH THE WORDS WRITTEN DOWN VALUE OF T HE TRANSFERRED ASSETS AS APPEARING IN THE BOOKS OF ACCOUNT. NOW WE HAVE TO SEE WHETHER ANY C HANGE WAS BROUGHT OUT WITH THE AMENDMENT MADE VIDE FINANCE ACT, 2000 INTO THE RELE VANT PROVISIONS? WE FIND THAT AT THE TIME OF INSERTION OF THE RELEVANT PROVISIONS, THE V ALUE OF THE ASSETS OF THE DEMERGED COMPANY WAS TO BE TAKEN AS ITS WRITTEN DOWN VALUE UNDER C LAUSE 2A, WHEREAS UNDER CLAUSE 2B, THE CORRESPONDING WRITTEN DOWN VALUE OF THE ASSETS OF T HE RESULTING COMPANY WAS MENTIONED AS THE VALUE OF ASSETS AS APPEARING IN THE BOOKS OF A CCOUNT. HOWEVER, IMMEDIATELY, BEFORE THESE PROVISIONS COME INTO OPERATION, AN AMENDMENT WAS BROUGHT OUT IN EXPLANATION 2B AND THE RELEVANT WORDS WERE SUBSTITUTED WITH WRITTEN D OWN VALUE OF THE TRANSFERRED ASSETS. HOWEVER, THE OTHER RELEVANT WORDS AS APPEARING IN THE BOOKS OF ACCOUNT WERE NOT OMITTED. IF WE TAKE THE CONTENTION OF THE ASSESSEE AS CORREC T, THEN IN THAT EVENT THERE WOULD NOT HAVE BEEN ANY IMPACT OR CHANGE IN THE INTERPRETATION OF THE RELEVANT PROVISIONS EVEN AFTER THE AMENDMENT MADE BY FINANCE ACT, 2000. IF, AS CONTEND ED BY THE LD. COUNSEL FOR THE ASSESSEE, THE INTENTION OF THE LEGISLATURE HAS BEEN THAT THE WRITTEN DOWN VALUE AS APPEARING IN THE BOOKS OF ACCOUNT MAINTAINED UNDER THE COMPANIES ACT BE AD OPTED, THEN IT WILL NOT BE UNDERSTANDABLE AS TO WHAT WAS THE PURPOSE OF IMMEDI ATE AMENDMENT MADE VIDE FINANCE ACT, 2000, SUBSEQUENT TO THE INSERTION OF THE RELEVANT P ROVISIONS MADE VIDE FINANCE ACT, 1999 BOTH W.E.F. 01.04.2000. 17.1 WHEN WE READ THE RELEVANT WORDS PRIOR TO AMEND MENT MADE VIDE FINANCE ACT, 2000 I.E. THE VALUE OF ASSETS AS APPEARING IN THE BOOKS OF A CCOUNT AND THE WORDS APPEARING AFTER THE AMENDMENT MADE VIDE FINANCE ACT, 2000 I.E. THE WRI TTEN DOWN VALUE OF THE ASSETS AS APPEARING IN THE BOOKS OF ACCOUNT, AND IF THE CONT ENTION OF THE ASSESSEE IS TO BE ACCEPTED, THEN, THE WORDS APPEARING BEFORE AMENDMENT AND AFTE R AMENDMENT MADE VIDE FINANCE ACT 2000, WILL GIVE THE SAME MEANING, RESULTING TO INFE RENCE THAT THE LEGISLATURE HAS NOT MADE ANY AMENDMENT IN THE SAID SECTION AND THE SAID AMENDMEN T WILL BECOME MEANINGLESS AND RENDERED REDUNDANT. HOWEVER, IN OUR VIEW, THE PARLI AMENT HAS NOT MADE A FUTILE EXERCISE IN AMENDING THE RELEVANT PROVISIONS VIDE FINANCE ACT, 2000. HENCE, WE AGREE WITH THE VIEW TAKEN BY THE LD. AO AFTER REFERRING TO THE MEMORAND UM EXPLAINING THE PROVISIONS OF FINANCE BILL, 1999 THAT PROVISIONS RELATING TO THE DEMERGER OF COMPANIES WERE INTRODUCED BASED ON CERTAIN PRINCIPLES ONE OF WHICH WAS THAT THE DEMERG ERS SHOULD BE TAX NEUTRAL AND SHOULD NOT 8488+5GODREJ & BOYCE 3 ATTRACT ANY ADDITIONAL TAX LIABILITY. THE VALUE OF THE ASSETS OF THE DEMERGED COMPANY SHOULD BE THE SAME WHEN TRANSFERRED TO THE RESULTING COMPANY. THE AMENDMENT MADE BY FINANCE ACT, 2003 W.E.F. 01.04.2004, IN OUR VIEW, IS CURATIVE AN D CLARIFICATORY IN NATURE. THE OMISSION OF THE WORDS AS APPEARING IN THE BOOKS OF ACCOUNT HA VE NEITHER TAKEN AWAY NOR AFFECTED ANY RIGHTS OF THE ASSESSEE WHICH WERE ACCRUED TO HIM BE FORE THE SAID AMENDMENT. THE AMENDMENT MADE VIDE FINANCE ACT, 2003 HAS JUST REMOVED THE AM BIGUITY. IT HAS NEITHER TAKEN AWAY ANY RIGHT OF ANY ASSESSEE NOR HAS GIVEN ANY NEW RIGHT T O THE REVENUE. 18. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL IN THE CASE OF GODREJ INDUSTRIES LTD. (SUPRA) AND WE AGREE WITH THE VIEW TAKEN BY THE TRI BUNAL IN THE SAID CASE THAT THE EMPHASIS OF THE LEGISLATURE IN EXPLANATION 2B AFTER THE AMENDME NT MADE VIDE FINANCE ACT, 2000 WAS THAT THE VALUE OF THE BLOCK OF ASSETS IN THE CASE OF RES ULTING COMPANY SHALL BE THE WRITTEN DOWN VALUE OF THE ASSETS OF THE DEMERGED COMPANY IMMEDIA TELY BEFORE THE DEMERGER. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LOWER AUTHORITIES THAT ONLY THE WRITTEN DOWN VALUE OF THE TRANSFERRED ASSETS OF THE DEMERGED COMPANY A S PER THE ACCOUNTS MAINTAINED UNDER THE INCOME TAX ACT SHALL ACCORDINGLY CONSTITUTE THE WRI TTEN DOWN VALUE OF THE BLOCK OF ASSETS OF THE RESULTING COMPANY. 19. NOW COMING TO SOME IMPORTANT DECISIONS RELIED U PON BY THE LD. COUNSEL FOR THE ASSESSEE AS MENTIONED HEREIN BELOW: 1. CIT VS. TRIVENI ENGINEERING & INDUSTRIES LTD. AN D OTHERS (DOD:05.08.2010) (DELHI HC); 2. CIT VS. KERALA ELECTRIC LAMP WORKERS LTD. 261 ITR 721 (KERLA HC); 3. SEDCO FOREX INTERNATIONAL DRILL INC AND OTHERS 279 ITR 310 (SC) ; 4. DCIT VS. CORE HEALTH CARE LTD. 298 ITR 194 (SC ); 5. CIT VS. SREE SENHA VALLI TEXTILES P. LTD. 259 ITR 77 (MAD. HC); 6. CIT VS. VATIKA TOWNSHIP PVT. LTD. AND OTHERS CIVIL APPEAL NO.8750 OF 2014 DECIDED ON SEPTEMBER 5, 2014. 20.WE HAVE PERUSED THE AFORESAID DECISIONS AND FOUN D THAT THE HONBLE HIGH COURTS AND HONBLE SUPREME COURT IN THE ABOVE SAID DECISIONS A RE UNANIMOUS TO HOLD THAT WHERE A SUBSTANTIVE RIGHT HAS BEEN AFFECTED BY THE AMENDMEN T, THE AMENDMENT, IF NOT SO EXPRESSIVELY PROVIDED UNDER THE RELEVANT STATUTE, WILL HAVE TO B E TAKEN PROSPECTIVELY. HOWEVER, THE ABOVE DECISIONS CANNOT BE APPLIED TO THE FACTS AND CIRCUM STANCES OF THE PRESENT CASE. IN THE PRESENT CASE, AS OBSERVED ABOVE BY US, THE OMISSION OF THE WORDS AS APPEARING IN THE BOOKS OF ACCOUNT NEITHER HAVE IN ANY WAY AFFECTED ANY SUBST ANTIVE RIGHT ALREADY VESTED IN THE ASSESSEE NOR HAS TAKEN AWAY ANY SUCH RIGHT WHICH WAS ACCRUIN G TO THE ASSESSEE BEFORE SUCH OMISSION. IN FACT, THE CURATIVE AMENDMENT WAS MADE BY THE PAR LIAMENT VIDE FINANCE ACT, 2000 AND ONLY THE AMBIGUITY HAS BEEN REMOVED VIDE FINANCE ACT, 20 03 SO AS TO BRING CLARITY. IN OUR HUMBLE VIEW, WHATEVER RIGHTS HAD ACCRUED TO THE ASSESSEE I N VIEW OF THE AMBIGUITY IN THE PROVISIONS AT THE TIME OF THEIR INSERTION VIDE FINANCE ACT, 1999, THE SAME HAD BEEN TAKEN AWAY/CLARIFIED IMMEDIATELY BY REMOVING THE AMBIGUITY THROUGH AMEND MENT MADE VIDE FINANCE ACT, 2000. HENCE, WITHOUT GOING INTO THE DETAILS OF THE FACTS OF THE VARIOUS CASE LAWS, WE HAVE NO HESITATION TO HOLD THAT THE PROPOSITION LAID THEREI N CANNOT BE APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND. THESE GROUNDS AR E ACCORDINGLY DECIDED AGAINST THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE,WE DECIDE THE EFFE CTIVE GROUND OF APPEAL (GOA,1-3)AGAINST THE ASSESSEE. CONSIDERING THE ABOVE,GROUND NO.1 IS DECIDED AGAINS T THE ASSESSEE. 3. THE ASSESSEE HAD RAISED FOUR ADDITIONAL GROUNDS FOR THE YEAR UNDER CONSIDERATION,VIDE ITS LETTER DATED 30.12.2015.AFTER CONSIDERING THE MATER IAL AVAILABLE ON RECORD,WE ARE OF THE OPINION THAT ADDITIONAL GROUNDS RAISED BY THE ASSES SEE ARE LEGAL IN NATURE.HENCE,SAME ARE BEING ADMITTED. 8488+5GODREJ & BOYCE 4 3.1. DURING THE COURSE OF HEARING THE AR FAIRLY CONCEDED THAT FIRST TWO ADDITIONAL GROUNDS HAVE BEEN DECIDED AGAINST THE ASSESSEE BY THE HONB LE BOMBAY HIGH COURT(328ITR81).WE FIND THAT THE ASSESSEE HAD ARGUED THAT PROVISIONS O F SECTION 14A WERE NOT APPLICABLE ON DIVIDEND FROM SHARES/ UNITS OF MUTUAL FUNDS(ADDL.GO A-2),THAT RULE 8D OF THE INCOME-TAX RULES,1962 COULD NOT BE APPLIED FOR COMPUTING THE D ISALLOWANCE U/S.14A(ADDL.GOA-3).WE FIND THAT BOTH THE ISSUES STAND DECIDED AGAINST THE ASSESSEE,AS ADMITTED BY THE AR,SO,SAME ARE DISMISSED. 4. ADDITIONAL GROUND NO.3 PERTAINS TO THE STRATEGIC IN VESTMENT MADE FOR BUSINESS PURPOSES. DURING THE COURSE OF HEARING THE AR STATED THAT THE IN THE STATEMENT OF FACTS THE ASSESSEE HAD FURNISHED DETAILS OF STRATEGIC INVESTMENTS,THAT THE TRIBUNAL HAS DEALT WITH THE ISSUE IN MANY A CASES AND HAS HELD THAT THE PROVISIONS OF SECTION 1 4A CANNOT APPLY FOR THE STRATEGIC INVESTMENT,THAT THE ISSUE STANDS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE AY.2004-05 TO 2006-07(SUPRA).THE DR REFERRE D TO THE CASE OF M/S. INDIA INFOLINE LTD.(ITA/2490/MUM/2013-AY-2008-09 DT.1.12.2015) .O N A QUERY BY THE BENCH,HE COULD NOT EXPLAIN AS TO HOW THE FACTS FOR THE CASE UNDER CONS IDERATION WERE DIFFERENT FROM THE FACTS OF THE EARLIER YEARS.IT IS FOUND THAT THE IN THE CASE OF M/S. INDIA INFOLINE LTD.(SUPRA),THE TRIBUNAL HAS NOT TAKEN NOTE OF THE CASES OF GARWARE WALL ROP ES LIMITED(ITA/5408/MUM/2012),JM FINANCIA LIMITED(ITA/4521/MUM/2012) AND ORIENTAL ST RUCTURAL ENGINEERS (P). LTD. (216 TAXMAN92).WE FURTHER FIND THAT THE TRIBUNAL,IN ITS ORDER FOR THE EARLIER YEARS (SUPRA),HAS DEALT WITH THE ISSUE AS UNDER: 6. VIDE ITS LETTER,DATED 22.02.2016,THE ASSESSEE HAD F ILED FURTHER ADDITIONAL GROUNDS OF APPEAL FOR WITH A REQUEST TO ADMIT THE SAME.IN ITS LETTER THE ASSESSEE HAD STATED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD EARNED DIVIDEN D INCOME,THAT IT WAS CLAIMED EXEMPT U/S. 10(34) OF THE ACT,THAT IT WAS CONTENDED THAT ASSESS EE HAD NOT INCURRED AN EXPENSE TOWARD INCOME OF DIVIDEND INCOME, THAT NO AMOUNT WAS REQUI RED TO BE DISALLOWED SECTION 14A OF THE ACT,THAT THE AO HAD DISALLOWED AN AMOUNT OF RS. 18. 03 CRORES U/S.14A, THAT THE FAA HAD REDUCED THE DISALLOWANCE TO RS.48.33 LAKHS, THAT TH E ASSESSEE HAD TAKEN A GROUND BEFORE THE FAA IN RESPECT OF NON-APPLICABILITY OF PROVISION OF SECTION 14 A TO DIVIDEND SUBJECTED TO TAX UNDER SECTION 115-O/115-R OF THE ACT, THAT THE FAA DID NOT ADJUDICATE THE SAID GROUND, THAT WHILE FILING THE APPEAL BEFORE THE TRIBUNAL ABOVE G ROUND WAS IN INADVERTENTLY NOT TAKEN, THAT DURING THE YEAR UNDER APPEAL APPROXIMATELY 95% OF T HE INVESTMENTS MADE BY THE ASSESSEE WERE IN ITS GROUP COMPANIES/SUBSIDIARIES.REFERRING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF THE GARWARE WALL ROPES LTD (65SOT86),THE ASSESSEE S TATED THAT ABOVE DECISION WAS RENDERED AFTER THE FILING OF THE APPEAL, THAT THE ISSUE INVO LVED WAS LEGAL ONE, THAT THERE WAS REASONABLE AND SUFFICIENT CAUSE FOR NOT RAISING THE ISSUE EARL IER.DURING THE COURSE OF HEARING BEFORE US,THE AR MADE THE SAME SUBMISSION THAT ARE PART OF THE LETTER OF THE ASSESSEE DATED 22/02/2016.DR LEFT THE ISSUE OF ADMISSION OF ADDITI ONAL GROUNDS TO THE DISCRETION OF THE BENCH. 7. AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE OPINION THAT ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE LEGAL IN NATURE. HENCE,SAME SHOULD ADMITTED. WE FIND THAT WHILE DECIDING THE APPEAL,THE FAA HAD NOT ADJUDICAT ED THE ISSUE RAISED BY THE 8488+5GODREJ & BOYCE 5 ASSESSEE.THEREFORE, WE ARE OF THE OPINION,THAT IN T HE INTEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJU DICATION OF THE ISSUE.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE MATTER. BOTH THE ADDITIONAL GROUNDS OF APPEAL,RAISED BY THE ASSESSEE VIDE ITS LETTER DATED 22/02/2016,ARE DECIDED IN ITS FAVOUR,IN PART. CONSIDERING THE ABOVE,WE DECIDE THE ADDITIONAL GROU ND NO.3 IN FAVOUR OF THE ASSESSEE ,IN PART. 5. FOURTH ADDITIONAL GROUND OF APPEAL IS ABOUT DISALLO WANCE MADE AS PER THE PROVISIONS OF SECTION 14A OF THE ACT.BEFORE US,THE AR FAIRLY CONC EDED THAT THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE,BY THE ORDERS OF THE TRIBUNAL FOR THE EARLIER AY.S.WE FIND THAT WHILE DECIDING THE APPEALS FOR AY.2005-06 TO 2007-08,THE ISSUE WAS DEA LT AS UNDER: 5. DURING THE COURSE OF HEARING BEFORE US,THE AR FAIRL Y CONCEDED THAT ADDITIONAL GROUND HAD TO BE DECIDED AGAINST THE ASSESSEE,THAT HON'BLE BOMBAY HIGH COURT HAD DECIDED THE ISSUE AGAINST THE ASSESSEE.WE FIND THAT THE HONBLE COURT HAD DISMISSED THE APPEAL OF THE ASSESSEE WITH REGARD TO ADHOC DISALLOWANCE MADE U/S . 14A OF THE ACT FOR COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT (328ITR81).RESPECTFUL LY FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT ADDITIONAL GROUND NO.1 IS DECIDED AGAINS T THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE,WE DECIDE THE ADDL .GROUND NO.4 AGAINST THE ASSESSEE. ITA/8502/M/11 (AY :08-09)(BY REVENUE ): 6. FIRST GROUND OF APPEAL,RAISED BY THE AO,PERTAINS TO DELETION OF DISALLOWANCE OF INTEREST EXPENSES U/S.14A OF THE ACT.REPRESENTATIVES OF BOTH THE SIDES AGREED THAT IDENTICAL ISSUE WAS DECIDED AGAINST THE AO BY THE TRIBUNAL WHILE ADJUDI CATING THE APPEALS OF THE EARLIER THREE AY.S.(SUPRA).WE WOULD LIKE TO REPRODUCE THE RELEVAN T PORTION OF THE ORDER AND SAME READS AS UNDER: 11. THE SOLITARY GROUND OF APPEAL,FILED BY THE AO,IS AB OUT RESTRICTING THE DISALLOWANCE IN RESPECT OF MANAGERIAL/ADMINISTRATIVE EXPENSES TO 1 % OF DIVIDEND INCOME AND DELETING THE DISALLOWANCE OF INTEREST EXPENDITURE.DURING THE ASS ESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 48 33.44 LAKHS DURING THE YEAR AND HAD CLAIMED IT AS EXEMPT.HE ASKED THE ASSESSEE AS TO WH Y EXPENSES ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME SHOULD NOT BE DISALLOWED.AFTER CONS IDERING THE SUBMISSION OF THE ASSESSEE,THE AO MADE A DISALLOWANCE OF RS.17.42 CRO RES UNDER THE HEAD INTEREST EXPENDITURE,INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT.HE FURTHER HELD THAT EXEMPT DIVIDEND INCOME COULD NOT HAVE BEEN EARNED WITHOUT INCURRING OF INDIRECT EXPENSES I.E.ADMINISTRATIVE AND MANAGERIAL EXPENSES.HE MADE DISALLOWANCE OF 60.90 LAKHS UNDER THE HEAD INDIRECT EXPENSES. 12. AGGRIEVED BY THE ORDER OF THE AO THE AA PREFERRED A N APPEAL BEFORE THE FAA AND MADE DETAILED SUBMISSION.AFTER CONSIDERING THE ASSESSMEN T ORDER AND THE SUBMISSION OF THE ASSESSEE ,THE FAA HELD THAT WHILE COMPLETING THE A SSESSMENTS FOR THE AY.S 07-08 AND 2008-09 THE AO HIMSELF HAD STATED THAT ASSESSEE HAD NOT USE D BORROWED FUNDS FOR MAKING INVESTMENT AND THAT THE ASSESSEE HAD MADE INVESTMENT FROM HIS OWN FUNDS,THAT THE TRIBUNAL WHILE DECIDING THE APPEALS FOR THE AY.S 1998-99 TO 2001-0 2 HAD HELD THAT DEPARTMENT COULD NOT ESTABLISH NEXUS BETWEEN THE BORROWING AND THE INVES TMENT IN THE DIVIDEND EARNING SHARES, THAT THE TRIBUNAL HAD INDIRECTLY HELD THAT NO INVES TMENTS WERE MADE OUT OF BORROWINGS, THAT NO EXPENSES COULD BE ATTRIBUTED TO EARNING OF DIVID END INCOME, THAT PRIOR TO AY 98-99 THE AO HAD NOT MADE SUCH DISALLOWANCE IN ANY OF THE YEARS, THAT IN THE AY.S 03-04 AND 04-05 THE AO HAD MADE DISALLOWANCE OF RS.46.95 LAKHS AND 36.29 L AKHS RESPECTIVELY BEING THE INTEREST 8488+5GODREJ & BOYCE 6 EXPENDITURE AND MANAGERIAL/ADMINISTRATIVE EXPENSES, THAT IN THOSE YEARS THE AO HAD MADE ESTIMATION OF SUCH EXPENSES AT THE RATE OF 1% OF DI VIDEND INCOME,THAT THERE WAS NO EVIDENCE THAT INVESTMENTS WERE MADE OUT OF BORROWED FUNDS.FI NALLY HE DELETED THE ADDITION OF 17,42,14,000/-.WITH REGARD TO DISALLOWANCE MADE UND ER THE HEAD MANAGERIAL/ADMINISTRATIVE EXPENSES THE FAA HELD THAT IN THE CASE OF GROUP CO MPANIES GODREJ AGROVET LTD. AND GODREJ INDUSTRIES LTD. THE TRIBUNAL HAD RESTRICTED THE EXP ENSE TO THE EXTENT OF 2-5% OF THE DIVIDEND INCOME.FINALLY, HE HELD THAT IT WOULD BE SUFFICIENT AND JUSTIFIED TO ATTRIBUTE EXPENSES EQUIVALENT TO 1% OF THE DIVIDEND RECEIVED AS EXPENS ES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME U/S.14A OF THE ACT. 13. DURING THE COURSE OF HEARING BEFORE US,THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.THE AR SUPPORTED THE ORDER OF THE FAA.AFTER C ONSIDERING THE AVAILABLE MATERIAL WE FIND THAT THE TRIBUNAL HAD ,WHILE DECIDING THE APPE ALS FOR EARLIER YEARS,GIVEN A FINDING THAT THE ASSESSEE HAD NOT USED BORROWED FUNDS TO EARN EX EMPT INCOME,THAT THE FAA DISCUSSED THE ISSUE AT LENGTH AND HELD THAT THERE WAS NO EVIDENC E TO PROVE THAT THE ASSESSEE HAD NOT USED ITS OWN FUNDS FOR EARNING EXEMPT INCOME.IN THESE CIRCUM STANCES,WE ARE OF THE OPINION THAT THERE IS NO LEGAL INFIRMITY IN THE ORDER PASSED BY THE FA A AS FAR AS INTEREST EXPENDITURE IS CONCERNED. WE FURTHER FIND THAT FAA HAD RESTRICTED THE ADMINISTRATIVE/MANAGERIAL DISALLOWANCE @ 1%.THE AO HAD NOT GIVEN ANY REASON FOR MAKING THE DISALLOWANCE. THEREFOERE, CONFIRMING THE ORDER OF THE FAA,WE DECI DE THE EFFECTIVE GOA AGAINST THE AO. WE FIND THAT THE HONBLE BOMBAY HIGH COURT HAS DECI DED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE,IN THE CASE OF HDFC BANK LTD.(383ITR529).C ONSIDERING THE ABOVE,WE DECIDE THE FIRST GROUND OF APPEAL AGAINST THE AO. 7.NEXT GROUND OF APPEAL IS ABOUT GAIN ON PREPAYMENT OF SALES TAX DEFERRAL LOAN.IT WAS BROUGHT TO OUR NOTICE THAT ISSUE STANDS COVERED AGAINST THE AO BY THE ORDER OF THE TRIBUNAL FOR THE AY.2005-06(ITA/6867/MUM/2011 & C.O.176/MUM/2012 DTD .26.06.2013 ).WE WOULD LIKE TO REFER TO THE RELEVANT PORTION OF THE SAID ORDER AND IT READS AS FOLLOW: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND C AREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCES BROUGHT ON R ECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS TAKEN BENEFIT OF THE SCHEME OFFERED BY THE, GOVERN MENT OF MAHARASHTRA. AS PROVIDED IN CIRCULAR NO.496 DATED 25.09.1987 AND CIRCULAR NO.674 'DATED 29.12.1993 ISSUED BY THE CBDT, ALTHOUGH THE SALES TAX COLLECTED FROM THE CUSTOMERS IS A TRADIN G RECEIPT, ON ACCOUNT OF DEFERRAL SCHEME, THE SAME IS DEEMED TO HAVE BEEN PAID. AS A RESULT, IT AMOUNT S TO DISCHARGE OF THE ABILITY TO PAY SALES TAX. ON CE THE LIABILITY IS DISCHARGED THE UNPAID DEFERRALS AS SUMES A CHARACTER OF LOAN. IN THE LIGHT OF THE ABOVE CIRCULARS OF THE CBDT, 'S ALES' TAX COLLECTED BY THE ASSESSEE, WHICH IS NOT PAID INTO THE GOVERNMENT TREASURY YET DEEMED TO HAV E BEEN PAID IS NOTHING BUT THE LOAN GRANTED BY THE GOVERNMERIT TO THE ASSESSEE . THEREFORE, SUCH A LOAN CANNOT BE TREATED AS A TRADING LIABILITY. FACTS 'ON RECORD SHOW THAT DURING THE YEAR UNDER C ONSIDERATION THE GOVERNMENT OF MAHARASHTRA INTRODUCED THE NET PRESENT VALUE (NPV) UNDER MAHARA SHTRA ACT NO.XX OF 2002 & RULE 31D OF BST RULES 1959 NOTIFIED VIDE GOVT. NOTIFICATION NO.STR- 12.02/CR-002/TAXATION-L, DATED 16.11.2002, WHERE UNDER THE ELIGIBLE UNDERTAKING WAS PERMITTED TO PREPAY THE LOAN AMOUNT. UNDER THE SAID SCHEME, THE PREPAYMENT WAS ALLOWED AT THE NPV OF T HE LOAN REPAYABLE AT THE END OF THE LOAN PERIOD. THE ASSESSEE AVAILED THE BENEFITS OF THIS SCHEME A ND GOT A REMISSION IN THE AGGREGATE LOAN LIABILITY AMOUNTING TO RS.9,92,92,718/-. IT IS FURTHER SEEN T HAT ON 12.12.2002 THE GOVERNMENT OF MAHARASHTRA ANNOUNCED A SCHEME OF 'PREMATURE REPAYMENT OF THE AMOUNT OF DEFERRED TAX BY THE ELIGIBLE UNITS AT NPV'. THE INDUSTRIES WHO HAD AVAILED THE INCENTIVE S OF THE SALES TAX SCHEME WERE PERMITTED TO PREMATURELY REPAY THE DEFERRED SALES TAX LIABILITY BY ARRIVING AT NPV BY APPLYING A SPECIFIC DISCOUNT . THE ASSESSEE AVAILED THE BENEFIT OF THE SCHEME ANN OUNCED ON 12.12.2002 AS UNDER: SALES TAX LIABILITY RS.18,79,58,925/- LESS : PREMATURE REPAYMENT RS. 8,86,66,207/- 8488+5GODREJ & BOYCE 7 SURPLUS ACCRUED ON THE ABOVE RS. 9,92,92,718/- THIS SURPLUS HAS BEEN TREATED AS CAPITAL RECEIPT, W HICH HAS BEEN TAXED BY THE ASSESSING OFFICER U/S 41(1) OF THE ACT. CONSIDERING THESE FACTS; WE FIND FORCE IN THE CONTENTION OF THE COUNSEL THAT THE IS SUES ARE SQUARELY COVERED BY THE DECISION OF THE SPECIA L-BENCH OF THE TRIBUNAL IN THE CASE OF SULZER INDIA LTD. (SUPRA). THE TRIBUNAL HAS HELD AS UNDER: 'THE ASSESSEE WAS LIABLE TO PAY SALES TAX AMOUNTS C OLLECTED FROM 1-11-1989 TO 31- 10-1996, PAYMENTS OF WHICH WERE DEFERRED UNDER THE SCHEME, AND THE AMOUNTS WERE PAYABLE AFTER TWELVE YEARS IN SIX EQUAL ANNUA L INSTALMENTS COMMENCING FROM 1-5-2003/ WHICH MEANT THAT THE LIABILITY WAS PAYA BLE IN FUTURE, LATER ON THE STATE GOVERNMENT CAME OUT WITH A SCHEME BY WHICH IT WAS P ROVIDED THAT IF SOME DEALERS OPTED, THEN THEY COULD PAY THE FUTURE LIABILITY AT A DISCOUNTED VALUE OR WHAT ONE MAY CALL NET PRESENT VALUE IMMEDIATELY. THUS, IN THIS S ITUATION, IT COULD NOT BE CONSTRUED AS REMISSION OF LIABILITY, BECAUSE THE STATE GOVER NMENT HAD NOT WAIVED OF ANY OF THE LIABILITY AS GIVEN IN THE ILLUSTRATIONS. HAD THE S TATE GOVERNMENT ACCEPTED LESSER AMOUNT AFTER TWELVE YEARS OR REDUCED SUCH INSTALME NTS, THEN IT COULD HAVE BEEN A CASE OF REMISSION OR CESSATION. HOWEVER, IN THE INS TANT CASE THE STATE GOVERNMENT HAD CHOSEN TO RECEIVE THE MONEY IMMEDIATELY WHICH W AS RECEIVABLE FROM 1-5-2003 TO 1-5-2008. THE AMOUNT OF RS.337.13LAKHS WAS ACTU ALLY PAID TO SICOM ON 30-10- 2002, THUS, IT DID NOT SATISFY THE CONDITION OF AC TUAL REMISSION IN PRAESENTI. IT WAS A SIMPLE CASE OF COLLECTING THE AMOUNT AT NET PRESEN T VALUE WHICH WAS DUE LATER ON AND EVEN THE FORMULA FOR COLLECTING THE NET PRESEN T VALUE WAS ALSO GIVEN BY THE SICOM AND THE AMOUNTS HAD BEEN PAID AS PER THAT FOR MULA, THEREFORE, SUCH PAYMENT OF NET PRESENT VALUE OF A FUTURE LIABILITY COULD NOT BE CLASSIFIED AS REMISSION OR CESSATION OF THE LIABILITY SO AS TO ATTRACT THE PROVISIONS OF SECTION 41(L)(A) [PARA L08}' CONSIDERING FACTS IN TOTALITY, IN THE LIGHT OF THE AFORESAID DECISION OF THE TRIBUNAL SPECIAL BENCH WHICH HAS BEEN RIGHTLY FOLLOWED BY TH E CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A) . FOR THE REASONS STATED ABOVE, IT WAS TO BE HELD THAT THE DEFERRED SALES TAX LIABILI TY BEING THE DIFFERENCE BETWEEN THE PAYMENT OF NET PRESENT VALUE AGAINST THE FUTURE LI ABILITY CREDITED BY THE ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS OF ACCOUNT WAS A CAPITAL RECEIPT AND COULD NOT BE TERMED AS REMISSION/CESSATION OF LIABI LITY AND, CONSEQUENTLY, NO BENEFIT WOULD 'ARISE TO THE ASSESSEE IN TERMS OF SECTION 4 L(L)(A) [PARA L09]. THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY DIS MISSED. 5. BEFORE PARTING, THE DR HAS RELIED UPON THE DECIS ION OF JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF HINDUSTAN FOODS LTD 328 LTR 392. HOWEVER WE FIND THAT IN THAT CASE THE ASSESSEE COMPANY UNILATERALLY TRANSFERRED THE UNCLAIMED AMOUNT OF T HE DEBENTURE REDEMPTIONS TO ITS GENERAL RESERVE WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS OF SEC.205C OF THE COMPANY ACT, 1956 WHEREIN IT IS PROVIDED THAT SUCH UNCLAIMED AMOUNT HAS TO BE TRANS FERRED TO 'INVESTOR EDUCATION AND PROTECTION FUND'. THUS, THE FACTS ARE CLEARLY DISTINGUISHABLE AND THE RELIANCE ON THE AFORESAID JUDGMENT IS MISPLACED. RESPECTFULLY,FOLLOWING THE ABOVE,WE DECIDE GROUND N O.2 AGAINST THE AO. 8. LAST GROUND OF APPEAL DEALS WITH PROVISION MADE FOR SERVICE CONTRACT.THE AR AND THE DR AGREED THAT THE TRIBUNAL,WHILE DECIDING THE APPEALS FOR THE AY.1992-93,1996-97 AND 1997-98 (ITA/3329/MUM/99 & C.O.322/M/99 DTD.31.12.2004 AND ITA/4934 & 4935/MUM/2000 DTD. 8.2.2005)HAD DECIDED THE IDENTICAL ISSUE AGAINST TH E AO.WE ARE REPRODUCING PARAGRAPH 2 OF 8488+5GODREJ & BOYCE 8 THE ORDER FOR THE AY.1992-93(PG.38 OF THE PAPER BOO K)OF THE ORDER OF THE TRIBUNAL(SUPRA)AND SAME READS AS UNDER: IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) ON 30/1/95 FIXING INCOME AT RS.11,89,09,910/- WHICH WAS REVISED SUBSEQUENTLY GI VING APPEAL EFFECT AT RS.11,68,83,397/-. LATER ON ASSESSING OFFICER NOTICED THAT AN AMOUNT O F RS.292.21 LAKHS CLAIMED BY THE ASSESSEE AS EXPENSES ON ACCOUNT OF PROVISION OF FREE SERVICE S UNDER PRODUCT WARRANTY WAS DEBITED TO PROFIT AND LOSS ACCOUNT. THIS WAS A PROVISION MADE FOR ESTIMATED UNASCERTAINED FUTURE COST THAT MAY OR MAY NOT INCUR UNDER WARRANTY PERIOD. AS SESSING OFFICER OPINED THAT THIS WAS NOT ALLOWABLE ITEM AND THE TAXABLE INCOME ESCAPED FROM THE ASSESSMENT NET. AFTER RECORDING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED NOTICE U/S .148. ASSESSEE OBJECTED THE ABOVE REOPENING AND DISALLOWANCE CONSEQUENTLY MADE BEFORE THE CIT(A). RESPECTFULLY,FOLLOWING THE SAME,GROUND NO.3 IS DECI DED AGAINST THE AO. ITA/658/MUM/2013-AY.2009-10. 9. FOLLOWING OUR ORDER FOR THE EARLIER YEAR,GROUNDS NO .1 TO 3 AND FIRST TWO ADDITIONAL GROUNDS ARE DECIDED AGAINST THE ASSESSEE.ADDITIONAL GROUNDS NO.3-4 ARE ALLOWED IN ITS FAVOUR,IN PART. 10. GROUNDS NO.4-6 PERTAIN TO EXPENDITURE INCURRED ON B RAND IMPROVEMENT.IT WAS BROUGHT TO OUR NOTICE THAT THE TRIBUNAL,WHILE DECIDING THE APP EAL FOR THE AY.2009-10 IN THE CASE OF GODREJ INDUSTRIES LTD.(ITA/3428&3737/MUM/2013,DTD. 1.06.2016),A SISTER CONCERN,HAD HELD AS UNDER: 3. GROUND NO.1: IN THIS GROUND, THE ASSESSEE HAS CH ALLENGED THE ACTION OF THE LOWER AUTHORITIES IN HOLDING THAT EXPENDITURE INCURRED ON BRAND IMPROVEMENT WAS CAPITAL IN NATURE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTUR ING / PROCESSING / TRADING IN INDUSTRIAL CHEMICALS. IT WAS NOTED BY THE ASSESSING OFFICER T HAT ASSESSEE SHARED EXPENSES WITH ITS OTHER GROUP COMPANIES ON ACCOUNT OF PAYMENT MADE TO M/S I NTERBRAND, A COMPANY ENGAGED IN CREATION AND DEVELOPMENTS OF BRANDS AND CLAIMED THE SAID EXPENDITURE AS REVENUE EXPENDITURE. IT WAS HELD BY THE ASSESSING OFFICER THAT THE SAID EXPENDITURE WAS NOT REVENUE EXPENDITURE AND IT WAS CAPITAL EXPENDITURE FOR THE REASONS THAT CHANGE IN THE BRAND / LOGO SYMBOLISED GODREJ'S NEW CORPORATE IDENTITY AND TH E REFURBISHMENT OF ITS MASTER BRAND. THE AIM WAS TO CONSOLIDATE GODREJ'S PRESENCE IN VARIOUS BUSINESS AREA. IT WAS FINALLY HELD BY THE ASSESSING OFFICER AFTER GOING THROUGH THE NATURE OF EXPENSES THAT THESE AMOUNTS WERE INCURRED IN REBRANDING THE GODREJ BRAND AND ENHAN CING THE GODREJ BRAND AND, THEREFORE, THESE WERE CAPITAL EXPENDITURE AS BRAND CONSTITUTE D AN INTANGIBLE ASSET. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE SAME AS CAPITAL ASSE T AND ALLOWED DEPRECIATION @20% AND BALANCE AMOUNT WAS TREATED AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME. 4. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFO RE THE LD.CIT(A) WHEREIN ASSESSEE MADE DETAILED SUBMISSIONS TO SHOW THAT THE IMPUGNED EXPE NSES WERE NOT CAPITAL EXPENDITURE AND THESE ARE REVENUE EXPENSES. BUT THE LD.CIT(A) UPHEL D THE ORDER OF THE ASSESSING OFFICER AND TREATED THESE EXPENSES AS CAPITAL EXPENDITURE WIT H THE FOLLOWING OBSERVATIONS: '6.3 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSIONS OF APPELLANT AND PAPER BOOK FILED BY THE APPELLANT AND ALSO PERUSED THE GODREJ NEW BRAN D DESIGN WHICH WAS SHOWN TO ME. 'GODREJ' BRAND IS A TRADEMARK UTILIZED BY GODREJ G ROUP OF COMPANIES. THIS IS AN INTANGIBLE ASSET AS PER SEC.32. THIS INTANGIBLE ASSET WAS MODI FIED BY INTERBRAND (CONSULTANT) TO GIVE IT A FLAVOR OF YOUTH, VIBRANCY & MODERN LOOK. IN DOING SO EXCEPT THE NAME 'GODREJ' WHOLE DESIGN AND CHARACTER WAS CHANGED. THIS COMES INTO A CATEG ORY OF TOTAL RENEWAL OR RENOVATION OF BRAND. APPELLANT'S CONTENTION THAT JUST ONLY COLOUR S ARE MODIFIED. IN DOING SO, CONSULTANT 8488+5GODREJ & BOYCE 9 TOTALLY CREATED THE NEW INTANGIBLE ASSET WHICH IS TOTALLY DIFFERENT FROM EARLIER ONE. HENCE THIS PROCESS OF RENEWAL OR RENOVATION, CREATED A NEW IN TANGIBLE ASSET. HON'BLE SUPREME COURT IN THE CASE OF BALIWALA NAND KISHORE VS. CIT 224 ITR 414 HELD THAT RENEWAL OR RENOVATION OF ASSET IS IN CAPITAL NATUR E. THE APPELLANT HAD RELIED ON THE DECISION OF EMPIRE JUTE CO. LTD. VS. CIT - 124 ITR 1 AND AL EMBIC-CHEMICAL WORKS LTD. VS. CIT - 177 ITR 377. DEPRECIATION OF THE INTANGIBLE ASSET IN IN COME-TAX ACT WAS NOT IN EXISTENCE. THIS CAME INTO OPERATION FROM THE YEAR 1998. MOREOVER T HOSE TWO DECISIONS CAN BE DISTINGUISHED AS NO NEW ASSET WAS CREATED. FOR THE AFORESAID REASONS, AS THE EXPENDITURE INCU RRED AND PAID TO INTERBRAND (CONSULTANT) IS IN THE NATURE OF CAPITAL EXPENDITURE. THIS EXPE NDITURE IS NOT ALLOWED TO DEDUCT FROM P&L ACCOUNT. HENCE, THIS GROUND OF APPEAL IS DISMISSED . A.O'S ORDER OF ALLOWING DEPRECIATION ON THE ABOVE EXPENDITURE IS UPHELD. 5. WHILE DECIDING THIS APPEAL, THE LD.CIT(A) RELIED UPON HIS EARLIER ORDER PASSED IN THE CASE OF OTHER GROUP COMPANIES OF THE ASSESSEE, VIZ. M/S GODREJ & BOYCE MFG. CO LTD FOR A.Y. 2009-10. IT WAS BROUGHT TO OUR NOTICE THAT THE AP PEAL OF THE SAID COMPANY IS STILL PENDING AND THIS ISSUE WAS OPEN FOR ADJUDICATION BY US. 6. DURING THE COURSE OF HEARING, LD.COUNSEL OF THE ASSESSEE MADE VEHEMENT' ARGUMENTS TO CONTEND THAT THE IMPUGNED EXPENSES ARE REVENUE EXPE NSES. IT WAS SUBMITTED THAT GODREJ IS AN OLD BRAND AND MAY BE MORE THAN 100 YEARS'OLD. T HE EXPENSES INCURRED DURING THE YEAR, THROUGH M/S. INTERBRAND ARE FOR RENEWAL AND IMPRO VEMENT. OUR ATTENTION WAS DRAWN ON THE COPY OF THE AGREEMENT WITH M/S. INTERBRAND TO SHOW THE SCOPE OF SERVICES FOR WHICH THE PAYMENT WAS MADE. IT WAS SUBMITTED THAT PERUSAL OF THE AGREEMENT CLEARLY SHOWS THAT IT WAS MENTIONED THEREIN THAT GODREJ BRAND ALREADY EXISTED AND WHAT WAS REQUIRED WAS TO MAKE DESIRED IMPROVEMENT IN THE NAME. IT WAS SUBMITTED THAT NO NEW ASSET HAD COME INTO CREATION. FINALLY RELIANCE WAS PLACED ON THE DECISION OF HON 'BLE ITAT IN THE CASE OF FINE JEWELLERY (INDIA) LTD V ACIT 30 TAXMAN.COM 323 AND FINE JEWE LLERY INDIA LTD VS ACIT 151 ITO 385 WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED ON BR AND BUILDING BY THE ASSESSEE, WHO WAS MANUFACTURER AND EXPORTER OF JEWELLERY WAS TO BE AL LOWED AS BUSINESS EXPENDITURE. FINALLY OUR ATTENTION WAS DRAWN ON WRITTEN SUBMISSIONS FIL ED BEFORE THE CIT(A) WHEREIN FACTS WERE DISCUSSED IN DETAIL AND RELIANCE WAS PLACED IN SUP PORT OF JUDGEMENTS IN SUPPORT OF THE CLAIM OF THE ASSESSEE. 7. PER CONTRA, THE LD.DR OPPOSED THE SUBMISSIONS OF THE ASSESSEE AND SUBMITTED THAT IT WAS A CASE OF RE-LAUNCH OF THE BRAND WHICH GAVE RISE TO A N INTANGIBLE ASSET AND, THEREFORE, LOWER AUTHORITIES HAVE RIGHTLY CAPITALISED THE EXPENSES INCURRED ON THE SAME. 8.WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSE E IN DETAIL AND GONE THROUGH THE JUDGMENTS RELIED UPON BY IT. WE HAVE ALSO GONE THRO UGH THE ORDER OF THE LOWER AUTHORITIES AND SUBMISSIONS OF THE LD. DR. WE HAVE READ THE AGREEM ENT ENTERED INTO BETWEEN GODREJ GROUP AND INTERBRAND, UK FOR IMPROVEMENTS IN THE GODREJ BRAND. IT IS A MATTER OF PUBLIC KNOWLEDGE THAT BRAND 'GODREJ' HAS BEEN EXISTING FOR LAST MAN Y YEARS. THE TERMS OF THE AGREEMENT ITSELF SUGGEST THAT DESIRED IMPROVEMENTS WERE REQUIRED TO BE MADE IN THE GODREJ BRAND WHICH WAS ALREADY EXISTING. IT WAS FURTHER SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THERE WAS NO CHANGE IN GODREJ LOGO, THE LOGO, THE SIGNAGE, THE SIZE OF THE BRAND NAME AS ALL OF THESE REMAINED TO BE THE SAME AS THEY WERE BEFO RE. THE ONLY CHANGE WAS CHANGE IN THE COLOUR AND COLOUR COMBINATION WHICH WAS BROUGHT IN LINE WITH THE LIKES OF THE YOUTH. IN ANY CASE, WE HAVE CONSPICUOUSLY NOTED THAT THE NAME OF THE BRAND 'GODREJ'REMAINED AS IT IS, I.E. GODREJ. UNDER THESE CIRCUMSTANCES, ONE CANNOT CON TEND AT ALL THAT THERE WAS ANY TYPE OF ACQUISITION OF NEW INTANGIBLE ASSET. THE GODREJ BR AND WAS WITH THIS GROUP AND REMAINED AS IT IS.THERE WAS NO CHANGE IN THE OWNERSHIP OF THE BRAN D. IN THE GIVEN FACTS, AT THE BEST, IT COULD BE ARGUED THAT THERE WAS SOME IMPROVEMENTS IN THE L OOKS AND APPEARANCE OF THE BRAND. UNDER THESE CIRCUMSTANCES, IT CANNOT BE CONTENDED THAT THERE WAS CREATION OF A NEW CAPITAL ASSET. IT WAS SETTLED WAY BACK BY HON'BLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO LTD VS CIT 124 ITR 1 THAT FOR THE PURPOSE OF TREATING AN EXPENDITURE AS CAPITAL EXPENDITURE, TWIN CONDITIONS ARE MUST, VIZ. (I) THERE SHOULD BE BENEF IT OF ENDURING NATURE; (II) THE EXPENDITURE MUST GIVE RISE TO CREATION OF NEW CAPITAL ASSET. TH E OBSERVATIONS OF HONBLE SUPREME COURT WERE REITERATED IN SUBSEQUENT JUDGMENT IN THE CASE OF ALEMBIC CHEMICAL WORKS LTD VS CIT 8488+5GODREJ & BOYCE 10 177 ITR 377 (SC) AND THEREAFTER MANY JUDGMENTS CAME FROM VARIOUS COURTS FROM ALL OVER THE COUNTRY WHEREIN SIMILAR VIEWS WERE TAKEN. IN THE FA CTS OF THE CASE BEFORE US, ADMITTEDLY, THERE IS NO CREATION OF NEW ASSET THUS, THE IMPUGNED EXPE NDITURE CANNOT BE HELD TO BE A CAPITAL EXPENDITURE. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE MURNBAI BENCH OF ITAT IN THE CASE OF FINE JEWELLERY (INDIA) LTD VS ACIT (SUPRA) AS HAS BEEN RELIED UPON BY THE LD.COUNSEL WHEREIN IT HAS BEEN HELD THAT EXPENDITURE INCURRE D BY THE ASSESSEE ON CREATION OF BRAND WAS ALLOWABLE AS REVENUE EXPENDITURE U/S 37(1) OF THE INCOME-TAX ACT. THE LD.COUNSEL ALSO RELIED UPON OTHER JUDGEMENTS FROM MUMBAI BENCH IN THE CAS E OF BRIGHTEST CIRCLE JWELLERY PVT LTD (ITA NO.4511/MUM/2011 DATED 11 TH MAY, 2012) WHICH HAS BEEN AUTHORED BY ONE OF US, I.E. HON'BLE JM, WHEREIN IDENTICAL ISSUE WAS INVOLVED A ND AFTER DISCUSSING THE ENTIRE LAW ON THIS ISSUE IT WAS HELD BY THE CO-ORDINATE BENCH THAT EX PENDITURE INCURRED ON BRAND BUILDING WAS REVENUE IN NATURE. THUS, UNDER THESE FACTS AND CIR CUMSTANCES OF THIS CASE AND IN VIEW OF THE CLEAR POSITION OF LAW AS DISCUSSED ABOVE, WE HOLD THESE EXPENSES ARE REVENUE EXPENSES AND DIRECT THE ASSESSING OFFICER TO TREAT THE SAME AS S UCH AND ALLOW THE SAME AND, THEREFORE, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER. AS THE FACTS OF BOTH THE CASES ARE IDENTICAL,EXCEPT THE AMOUNTS INVOLVED,SO,RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GROUNDS NO.3-6 IN FAVOUR OF THE ASSESSEE. ITA/189/MUM/2013-AY.2009-10: 11. FIRST GROUND OF APPEAL,IS IDENTICAL TO THE FIRST GR OUND RAISED BY THE AO IN THE EARLIER AY. SO,SAME IS DECIDED AGAINST HIM,FOLLOWING OUR ORDER FOR THAT YEAR. 12. GROUND NO.2 DEALS WITH CLAIM MADE BY THE ASSESSEE W ITH REGARD TO THE INTEREST ON 64 BONDS, AMOUNTING TO RS.56,643/-.DURING THE ASSESSME NT PROCEEDINGS,THE ASSESSEE MADE A CLAIM THAT THE ABOVE INTEREST-AMOUNT RECEIVED BY IT WAS EXEMPT, THAT THE SAME WAS OFFERED AS TAXABLE INCOME BY IT, WHILE FILING THE RETURN.HOWEV ER, THE AO REFUSED TO ENTERTAIN THE CLAIM. 13. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PREFERRE D AN APPEAL BEFORE THE FAA.HE HELD THAT THE CLAIM MADE BY THE ASSESSEE WAS A LEGAL CLA IM,THAT THE ASSESSEE AHD INADVERTENTLY TREATED TAX FREE INCOME AS TAXABLE ITEM. RELYING UP ON THE JUDGMENT OF JUTE CORPORATION OF INDIA (87 ITR68) OF THE HONBLE APEX COURT HE DIREC TED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 14. BEFORE US,THE DR AND THE AR SUPPORTED THE ORDERS OF THE AO AND THE FAA RESPECTIVELY. WE FIND THAT THE ISSUE OF ALLOWING A CLAIM BY THE F AA NOW STANDS DECIDED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT,DELIVERED IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERES (349 ITR 336).THE HONBLE COURT HAS,AFTER CONSIDERI NG THE CASE OF GOETZ INDIA LTD.,HELD AS UNDER: AN ASSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIO NAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONA L CLAIMS BEFORE THEM. THE APPELLATE AUTHORITIES HAV E THE DISCRETION TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. THE APPELLATE AUTHORITIES HAVE JURISDICT ION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS, WHICH B ECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS W HICH WERE AVAILABLE WHEN THE RETURN WAS FILED. THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUE D LIBERALLY AND NOT STRICTLY. THERE MAY BE SEVERAL 8488+5GODREJ & BOYCE 11 FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CASE MUST BE CONSIDERED ON ITS OWN FACTS. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT,GROUND NO .2 IS DECIDED AGAINST THE AO. ITA/6070/MUM/2013-AY.2010-11: 15. GROUNDS NO.1-6 AND ADDITIONAL GROUNDS NO.3-4 ARE DE CIDED IN FAVOUR OF THE ASSESSEE AND ADDITIONAL GROUNDS NO.1-2 ARE DISMISSED,FOLLOWING O UR ORDERS FOR THE EARLIER YEARS. ITA/6070/MUM/2013-AY.2010-11: 16. ALL THE FOUR GROUNDS,RAISED BY THE AO,FOR THE YEAR UNDER APPEAL,HAVE BEEN ADJUDICATED IN EARLIER AY.S.FOLLOWING THE SAME,GROUNDS NO.1-4 ARE DECIDED AGAINST THE AO. AS A RESULT,APPEALS FILED BY THE ASSESSEE STAND PAR TLY ALLOWED AND THE APPEALS OF THE AO IS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD , AUGUST,2016. 23 , 2016 SD/- SD/- ( / R.L.NEGI ) ( / RAJENDRA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23.08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.