M/S VIKI INDUSTREIS PVT LTD, CHENNAI V. ACIT CORPORATE CIRCLE 3 (2), CHENNAI

ITA 89/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6774 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 10-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS JAYANTHI ANGAYARKANNI
• Assessee Lawyers: D ANAND
• Keywords: Revenue expenditure
• Section: 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , ! . , ! ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.89/CHNY/2019 /ASSESSMENT YEAR: 2014-15 M/S.VIKI INDUSTRIES PVT. LTD., NO.1, KRISHNA STREET, NUNGAMBAKKAM, CHENNAI-600 034. [PAN: AAACV 2003 P] VS. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI-600 034. ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.D.ANAND, ADV. *+) , /RESPONDENT BY : MRS.JAYANTHI ANGAYARKANNI, JCIT , /DATE OF HEARING : 24.04.2019 , /DATE OF PRONOUNCEMENT : 24.04.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI, IN ITA NO.237(T)/CIT(A)/2016-17 DATED 28.09.2018 FOR THE A Y 2014-15. 2. MRS.JAYANTHI ANGAYARKANNI, JCIT, REPRESENTED ON BEHALF OF THE REVENUE AND MR.D.ANAND, ADV., REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.89/CHNY/2019 :- 2 -: 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ONLY ISSU E IN THE ASSESSEES APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN C ONFIRMING THE DISALLOWANCE OF THE EXPENSES RELATING TO THE ADVERT ISEMENT AND BRAND PROMOTION WHICH HAD BEEN CLAIMED BY THE ASSESSEE IN THE YEAR IN WHICH IT WAS INCURRED. IT WAS A PRAYER THAT THE ISSUE IS NO W SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE ASSESSEES OWN CASE IN ITA NO.852/CHNY/2017 DATED 18.06.2018 F OR THE AY 2012-13, WHEREIN, THE CO-ORDINATE BENCH OF THIS TRIBUNAL, AT PARA NOS.2.6 TO 2.8, HAS HELD AS FOLLOWS: 2.6 IN THE INSTANT CASE, WE FIND THAT THE EXPENDIT URE RELATING TO ADVERTISEMENTS, BRAND PROMOTION EXPENSES IS IN THE REVENUE FIELD AND NOT DISPUTED BY THE AUTHORITIES BELOW. THE ONLY ISSUE T O BE CONSIDERED IS WHETHER THE ASSESSEE CAN CLAIM THE ENTIRE EXPENDITURE IN THIS Y EAR ITSELF, EVEN THOUGH IT HAD WRITTEN OFF THIS EXPENDITURE IN THE BOOKS OVER A PE RIOD OF FIVE YEARS. IN THIS CONNECTION, WE MAY REFER TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. V. CIT 225 ITR 802 , WHEREIN, IT WAS HELD AS UNDER: SECTION 37(1) FURTHER REQUIRES THAT THE EXPENDITU RE SHOULD NOT BE OF A CAPITAL NATURE. THE QUESTION WHETHER A PARTICULAR E XPENDITURE IS REVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS MU ST BE DETERMINED ON A CONSIDERATION OF ALL THE FACTS AND CIRCUMSTANCES, A ND BY THE APPLICATION OF PRINCIPLES OF COMMERCIAL TRADING. THE QUESTION MUST BE VIEWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. IF THE OUTGOING OR EXPENDITURE IS SO RELATED TO THE CARRYING ON, OR CONDUCT OF THE BUSINESS, THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFITMAKING PR OCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT C HARACTER, THE POSSESSION OF WHICH IS A CONDITION OF THE CARRYING ON OF THE B USINESS, THE EXPENDITURE MAY BE REGARDED AS REVENUE EXPENDITURE. ANY LIABILI TY INCURRED FOR THE BUSINESS OF OBTAINING A LOAN WOULD BE REVENUE EXPEN DITURE. ORDINARILY, REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF BUSINESS MUST BE ALLOWED IN ITS ENTIRET Y IN THE YEAR IN WHICH IT IS INCURRED. IT CANNOT BE SPREAD OVER A NUMBER OF Y EARS EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HIS BOOKS, OVER A PE RIOD OF YEARS. HOWEVER, THE FACTS MAY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPENDITURE IN A PARTICULAR YEAR TO SPREAD AND CLAIM IT OVER A PERIO D OF ENSUING YEARS. IN FACT, ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR M IGHT GIVE A VERY DISTORTED PICTURE OF THE PROFITS OF A PARTICULAR YE AR. ISSUING DEBENTURES IS AN INSTANCE WHERE, ALTHOUGH THE ASSESSEE HAS INCURRED THE LIABILITY TO PAY THE DISCOUNT IN THE YEAR OF ISSUE OF DEBENTURE, THE PAY MENT IS TO SECURE A BENEFIT OVER A NUMBER OF YEARS. THERE IS A CONTINUI NG BENEFIT TO THE BUSINESS OF THE COMPANY OVER THE ENTIRE PERIOD. THE LIABILITY SHOULD, THEREFORE, BE SPREAD OVER THE PERIOD OF DEBENTURES. ITA NO.89/CHNY/2019 :- 3 -: THE AFORESAID JUDGMENT CLARIFIES THAT THOUGH THE AS SESSEE MAY HAVE WRITTEN OFF THE EXPENDITURE IN ITS BOOKS OF ACCOUNT OVER A PERI OD OF FIVE YEARS, IT MUST BE ALLOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT WAS INCURRED, IF IT IS REVENUE EXPENDITURE, AND IF IT IS WHOLLY AND EXCLUSIVELY IN CURRED FOR THE PURPOSES OF BUSINESS. IN THE CASE UNDER CONSIDERATION, THERE IS NOTHING TO SUGGEST THAT WITH THIS EXPENDITURE, ANY ASSET, TANGIBLE OR INTANGIBLE , HAS BEEN CREATED. THERE IS NO EVIDENCE ON RECORD REGARDING ACCRUAL OF ANY SPECIFI C REVENUE IN THE YEARS UNDER CONSIDERATION OR SUBSEQUENTLY OVER A DEFINED PERIOD WITH THE INCURRING OF SAID EXPENDITURE. THE ASSESSING OFFICER HIMSELF ADMITTED THE PORTION OF EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT AS REVENUE E XPENDITURE. 2.7 MOREOVER, BY FOLLOWING THE ABOVE JUDGEMENT OF T HE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATIO N LTD. V. CIT (SUPRA), IN THE CASE OF AMAR RAJA BATTERIES LTD. V. ACIT 91 ITD 280 , THE HYDERABAD BENCHES OF THE TRIBUNAL HAS HELD THAT A REVENUE EXPENDITURE, I NCOME RELATABLE TO WHICH WILL ARISE FOR A NUMBER OF YEARS, MUST BE ALLOWED IN ITS ENTIRETY IN YEAR IN WHICH IT IS INCURRED EVEN THOUGH THE ASSESSEE PROCEEDS TO WRITE OFF THE SAID EXPENDITURE IN BOOKS OF ACCOUNT OVER A PERIOD OF YEARS. 2.8 FURTHER, IN THE CASE OF TAPARIA TOOLS LTD. V. J CIT [2015] 372 ITR 605, THE HONBLE SUPREME COURT WAS ALSO OF THE OPINION THAT THAT THE REVENUE EXPENDITURE INCURRED IN A PARTICULAR YEAR IS TO BE ALLOWED IN T HAT YEAR, IS TO BE APPLIED. IF THE ASSESSEE CLAIMS THAT EXPENDITURE IN THAT YEAR, THE DEPARTMENT CANNOT DENY IT. THUS, ONCE IT IS NOT IN DISPUTE THAT THE ENTIRE EXP ENDITURE INCURRED BY THE ASSESSEE TOWARDS ADVERTISEMENT & BRAND PROMOTION AS REVENUE IN NATURE, IN VIEW OF THE DECISIONS REFERRED HEREINABOVE, THE DISALLOWANCE OF RS.1,62,93,447/- MADE BY THE ASSESSING OFFICER STANDS DELETED. 4. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 6. AS IT IS NOTICED THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, IN THE ASSESSEES OWN CASE, REFERRED TO SUPRA, ON IDENTICAL REASONING, TH E AO IS DIRECTED TO ALLOW THE ASSESSEES CLAIM OF EXPENDITURE INCURRED TOWARD S ADVERTISEMENT AND BRAND PROMOTION AS REVENUE IN NATURE. ITA NO.89/CHNY/2019 :- 4 -: 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 24 TH DAY OF APRIL, 2019, IN CHENNAI. SD/- SD/- ( . ) ( S. JAYARAMAN ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 24 TH APRIL, 2019. TLN , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF