ANHEUSER BUSCH INBEV INDIA LTD., MUMBAI V. PR CIT,CIRCLE-1, MUMBAI

ITA 941/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9608 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 26-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Revision of order; Business expenditure; Opportunity of being heard; Principle of natural justice; Bad and doubtful debts; Competent authority; Assessment record; Commercial expediency; Capital expenditure; Set aside
• Section: 37; 6; 263; 2; 143(3); 37(1); 48; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “A” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., Unit No. 301-302, Third Floor Dynasty Business Park B-Wing, Andheri Kurla Road Andheri (E), Mumbai - 400059 PAN: AAICS2238R v. Pr. CIT – Circle - 1 Room No. 330, 3 rd Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Rajan Vora Department by : Ms. Shailja Rai Date of Hearing : 01.11.2021 Date of Pronouncement : 28.01.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the assessee against different orders of the Learned Principal Commissioner of Income Tax, Mumbai-1 [hereinafter in short “Pr.CIT”] dated 31.03.2021 for the A.Ys. 2013-14 and 2014-15, passed u/s. 263 of the Act. 2 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., 2. First we take up the appeal for the Assessment Year 2013-14 in ITA.No. 941/Mum/2021. 3. Brief facts of the case are that, the original return of income was filed by the assessee for A.Y. 2013-14 on 29.11.2013, declaring total income at ₹.(-) 81,27,45,632/-. The case was selected for scrutiny and assessment was completed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (for short “Act”) on 30.10.2017 thereby making certain additions/disallowances aggregating to ₹.48,10,85,765/- and assessing the total income at ₹.(-) 33,16,59,867/-. Ld. Pr.CIT perused the assessment records and observed that the Assessing Officer while completing assessment has allowed the ‘advertisement and publicity expenses amounting to ₹.107,07,17,247/-. He observed that Advertising alcoholic beverages has been banned in India as per the Cable Television Network (Regulation) Amendment Bill which came into effect on 8 th September 2000. The law is very clear that if the expenditure is an offence or prohibited by law, then it shall not be allowed as an expenditure u/s.37(1) of the Act by virtue of insertion of explanation to Section 37 of the Act by Finance Act, 1998 w.e.f. 01-04-1962. He observed that the Assessing Officer without appreciating the legal position allowed the 3 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., ‘advertisement and publicity expenses’ amounting to ₹.107,07,17,247/-. Accordingly, he came to the conclusion that Assessment Order passed on 30.10.2017, u/s.143(3) r.w.s. 144C(13) of the Act for A.Y. 2013-14 is erroneous but also prejudicial to the interests of the Revenue. Hence he issued show cause notice u/s.263 of the Act dated 05.03.2021 to the assessee. 4. In response assessee company filed detailed submissions vide letter dated 17.03.2021. Ld. Pr.CIT observed that, the assessee in its submissions has stated that, revisionary assessment proceedings cannot be initiated unless the conjunctive conditions of Sec. 263 of the Act are satisfied. Further, it is stated that, revision proceedings are not valid where Assessing Officer has duly examined all the records at the time of assessment proceedings with due application of mind and revisionary assessment proceedings cannot be initiated on the possibility of further enquiry. Assessee relying on various judicial pronouncements submitted that the company has not incurred any advertisement and publicity expenditure for any purpose which is prohibited by law. No advertisement expenses are incurred for sale of alcoholic liquor by the company at 4 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., platforms which is prohibited by law. Further, assessee submitted in the same letter dated 17.03.2021 as under: - “Without prejudice to the above, the company submits that it has not incurred any advertisement and publicity expenditure for any purpose which is prohibited by law. ‘Other expenditure’ of Rs.86,43,33,466/- debited to the advertisement and publicity head in the profit and loss account are by no stretch of imagination in that nature of advertisement in television media and is therefore, not prohibited under the regulations of the Cable TV Laws. The same have been incurred wholly and exclusively for the purpose of expenditure u/s.37 of the Act. Further, with respect of the expenditure of Rs.20,63,83,780/- incurred for advertisement of non-alcoholic products in Television Media, we wish to humbly submit that they are regulated under the provisions of the Cable TV Laws and are duly permitted. This is evident from the fact that no adverse action has been taken by any regulatory authority for airing the promotional films of non-alcoholic products made by the assessee in the television media” 5. After considering the detailed submissions of the assessee, Ld. Pr.CIT rejected the same and set aside the Assessment Order with the following observations: - “5.3 From the perusal of records, it can be observed that the assessee is advertising for alcoholic products under the guise of non- alcoholic beverages. Therefore, the AO should have verified the same and made disallowances accordingly. But the Assessing Officer failed to do so, making the assessment order under consideration erroneous and prejudicial to the interest of revenue. 5.4 In addition to the above, it can be observed that the assessee being in the business of mainly alcohol beverage has incurred such advertisement expenses, which are not permissible as per law and hence cannot be allowed u/s.37 of the Income Tax Act, 1961 in light of judicial pronouncement in the case of Liva Healthcare Ltd, Mumbai on 12 September, 2016 held vide I.T.A. No. 904/Mum/ 2013. Section 37 is a residuary provision. An assessee is entitled to deduction of all 5 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., expenditure which is wholly and exclusively laid out or expended for the purposes of the business which has not been expressly covered by any other specific provision of the Act. In order to be eligible for an allowance under this residuary provision, the following conditions are required to be fulfilled: “(i) The expenditure must not be governed by the provisions of sections 30 to 36. (ii) The expenditure must have been laid out wholly and exclusively for the purposes of the business of the assessee. (iii) The expenditure must not be personal in nature. (iv) The expenditure must not be capital in nature." The Explanation to sub-section (1) was inserted by the Finance (No. 2) Act, 1998, with retrospective effect from April 1, 1962, which reads thus: “Explanation.- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.” The purpose for incorporation of this Explanation had been explained by the Central Board of Direct Taxes in Circular No. 772, dated December 23, 1998 ([1999] 235 ITR (St.) 35, 53) as under : "20. Disallowance of illegal expenses. 20.1 Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of such expenditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on account of protection money, extortion, hafta, bribes, etc, as 19 ITA 904 and 945/Mum/2013 business expenditure. It is well decided that unlawful expenditure is not an allowable deduction in computation of income.” 6. In light of the detailed synthesis evaluated in the citation where reliance has been placed clearly crafts out allowability / disallowability of Expenses not covered u/s 30 to 36 of the Act and 6 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., also disallowability of such expenses /fines/ penalties which are in the nature of contravening any other laws. 7. It is found from the assessment records that the AO while making the impugned assessment has failed to verify the claim of assessee made towards expenditure incurred for ‘Advertisement and Publicity’ amounting to Rs.107,07,17,246/-, ignoring the legal provisions that, the expenditure if it is in an offence or prohibited by law shall not be allowed as expenditure u/s.37(1) of the Act. The advertising alcoholic beverages has been banned in India as per Cable Television Network (Regulation) Amendment Bill which come into effect on 08 th September, 2000. The law is very clear that the expenditure if it is an offence or prohibited by law shall not be allowed as an expenditure u/s.37(1) of the Act by virtue of insertion of expenditure to Sec.37 of the Income tax Act, 1961 by Finance Act, 1988 w.e.f. 01.04.1962. 8. Considering the facts of this case and the submission made by the assessee, it is apparent that the assessment, made by the Assessing officer on the issues raised in the Show Cause Notice and replied by the assessee, needed examination and verification. As per explanation 2 to section 263 of the I.T. Act-For the purpose of this section , it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if, in the opinion of the Principal Commissioner or commissioner — a) the order is passed without making inquiries or verification which should have been made; b) The order is passed allowing any relief without inquiring into the claim. 9. In view of the above observations the assessment order passed on 30.10.2017 under section 143(3) r.w.s. 144C(13) of I.T. Act for A.Y. 2013-14 is found to be prejudicial to the interest of the revenue and it is proposed to be revised u/s.263 of the I.T. Act, 1961. It is settled proposition of Law that failure of the A.O. to carry out relevant and meaningful enquiries as warranted by the facts and circumstances of the case renders the assessment order erroneous and prejudicial to the interest of the revenue falling within the parameters of provisions of section 263 of the I.T. Act, 1961. 1. It has also been held in many cases that the Commissioner is not necessarily required to record a final conclusion on the point on the issue in hand. An order found erroneous will generally be 7 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., prejudicial to the interest of revenue, if it has implication of revenue escapement. 1. Considering the same, in exercise of powers conferred u/s.263 of the Income Tax Act, 1961, set-aside the order made u/s.143(3) r.w.s. 144C(13)of I.T. Act, 1961 passed on 30.10.2017, on the issues discussed above. The AO will examine the decisions relied upon by the assessee if any, as also other decisions on the said issue and decide the issue in accordance with law. The A.O. is directed to reframe the assessment afresh after giving due opportunity to the assessee before passing his order. The A.O. will complete the assessment in the light of the discussion made in this order after considering the prevailing Law and the submissions of the assessee.” Similarly, facts being identical Ld. Pr.CIT issued same directions for the Assessment Year 2014-15. 6. Aggrieved assessee preferred appeal before us raising following identical grounds for both the appeals under consideration: - “On the facts and circumstances of the case and in law, the learned PCIT has: On validity of the revision proceedings: 1. erred in initiating the revision proceedings under section 263 of the Act, without appreciating that section 263 of the Act cannot be invoked unless the conjunctive conditions that assessment order passed is erroneous in law as well as prejudicial to the interests of the revenue, are satisfied; 2. erred in initiating revisionary assessment proceedings under section 263 of the Act, with a view to start the fishing/ roving enquiries in the matter without establishing that the order passed by the learned Assessing Officer (“AO”) is not in accordance with law, therefore the initiation of revisionary assessment proceedings is bad in law; 3. erred in initiating revisionary assessment proceedings under 263 of the Act, without appreciating that section 263 cannot be 8 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., invoked in case where the view taken by the learned PCIT is based on a presumption that no enquiry or verification was made at the time of regular assessment proceedings, whereas the learned AO had made sufficient enquires, verification of the facts and submissions made by the Appellant; 4. erred in setting-aside the issue with directions to the learned AO for reframing the assessment afresh after considering prevailing law and submissions of the Appellant, without appreciating the fact that the learned AO has considered the submissions of the Assessee in the original assessment and cannot be said to be erroneous/ prejudicial to the interest of the revenue; On merits of allowability of Advertisement and Publicity expenses: 5. erred in holding that the entire advertisement and publicity expenses incurred by the Appellant are not permissible under The Cable Television Networks (Amendment) Rules, 2009 (“Cable TV Rules"), without appreciating the fact that out of the total advertisement and publicity expenditure of Rs 107,07,17,246 debited to the profit and loss account, only Rs 20,63,83,780 is governed and permitted under the Cable TV Rules, and the balance expenditure of Rs 86,43,33,466 is in the nature of sales promotion, market research, brand promotion etc. which are not regulated nor prohibited under the Cable TV Rules. 6. erred in holding that the Appellant is advertising for alcoholic products under the guise of non-alcoholic beverages without appreciating the fact that the media advertisements of the Appellant are towards non-alcoholic products which are not prohibited under any law 7. erred in holding that the Appellant being in the business of mainly alcoholic beverages has incurred such advertisement and publicity expenses which are not permissible under law and cannot be allowed under section 37 of the Act, without appreciating the fact that the expenditure incurred by the Appellant is wholly and exclusively incurred for the purpose of its regular business, which is not in violation of any law and is accordance with the principles of commercial expediency. 8. erred in directing the AO to frame a fresh assessment to verify and decide the allowability of the advertisement and publicity expenditure incurred by the Appellant under the Cable TV Rules, without appreciating that the adjudication of a contravention by the Appellant under the Cable TV Rules is outside the purview of powers 9 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., and functions of the learned PCIT / AO under the provisions of the Act. where there were no adverse findings by any regulatory authority under Cable TV Rules for the impugned expenditure incurred by the Assessee. Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted. The Appellant craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of appeal at any time before, or at the time of, hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law.” 7. At the time of hearing, Ld. AR of the assessee submitted that assessee is making advertisement in specific way over the years. First time the Ld. Pr.CIT raised this issue in the revision proceedings and he specifically brought to our notice Page No. 2 of the 263 order to highlight the submissions made by the assessee that Ld. Pr.CIT cannot initiate the revisionary proceedings on the possibility of making further enquiry. Further he stated that assessee has not incurred any advertisement and publicity expenditure for any purpose which is prohibited by law. He submitted that in Para No 5.1 of the 263 order, Ld. Pr.CIT observed that the expenditure under the head advertisement and publicity needed verification in the light of the Cable Television Network (Regulation) Amendment Bill and he relied on his brief submissions filed before us for the sake of brevity, we reproduce the same. 10 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., “Brief background 1. Anheuser Busch InBev India Limited (formerly known as SABMiller India Limited) was incorporated as a public limited company under the Companies Act, 1956 on 18 November 1988 and is primarily engaged in the business of brewing, packaging, distribution, marketing and sale of beer. Assessment proceedings 2. For the year under consideration, the Appellant filed its original return of income on 29 November 2013 declaring a loss of Rs 81,27,45,632. 3. The said return was subsequently selected for complete scrutiny by issue of a notice under section 142(1)7143(2) of the Income Tax Act, 1961 ("Act") dated 15 September 2014. 4. During the course of scrutiny assessment proceedings for the subject AY, the learned Assistant Commissioner of Income Tax, Circle 11(1)(2), Mumbai ("AO") issued various notices seeking for details/ information in connection with the return of income filed by the Company to which the Company has duly filed all submissions. 5. Specifically, the learned AO vide a notice dated 10 November 2015 sought for information relating to the major expenses debited to the trading and profit and loss account for the year. Advertisement and publicity expenditure being one of the major heads of its expenditure, the Assessee vide its letter dated 3 August 2016 filed a detailed break-up of the advertisement and publicity expenditure debited to the profit and loss account as below along with the party wise details of the expenditure incurred by the Assessee. (Refer Page No 79-93 of the paperbook for the copy of the letter dated 3 August 2016) PARTICULARS AMOUNT (RS.) Prints and Production 6,46,07,713 Media-TV/Outdoor 20,63,83,780 Media - Radio and Others 1,34,32,338 Agency Fees 4,72,82,254 Public Relations 27,96,195 Events & Promotions 18,86,62,157 Market Survey expenses 6,02,97,270 General Marketing Expenses 3,10,90,258 Trade Promotion and Advocacy 6,97,51,727 Outlet Tie-up expenses 64,76,339 POS/Signages 15,22,37,920 Merchandise/ Giveaways 93,07,428 Other marketing expenses 21,83,91,867 Total 1,07,07,17,246 11 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., 6. Accordingly, all the information/ documents which were relevant for making the decision on allowability of such expenditure under section 37 of the Act were in possession of the learned AO at the time of the assessment proceedings and it was well within the knowledge of the learned AO that the Company was claiming deduction for such expenditure. Post analyzing the case, and after due application of mind, the learned AO vide draft assessment order dated 19 December 2016 concluded that the disallowance is to be made on certain other issues and not towards the issue of advertisement and publicity expenditure under section 37 of the Act. 7. Further, the Appellant had claimed similar advertisement and publicity expenditure in the past years also, however, no disallowance was made by the Ld. AO/CIT on the ground that the Appellant is prohibited from advertising its products as per the Cable Television Network (Regulation) Amendment Bill. 8. Thereafter, the Assessee obtained directions from the Hon'ble Dispute Resolution Panel vide an order dated 5 September 2017 and the assessment proceedings were completed under section 143(3) read with section 144C(13) of the Act by the learned AO vide a final assessment order dated 30 October 2017 assessing the total loss of the Appellant at Rs 33,16,59,867. Proceedings under section 263 of the Act: 9. The Principal Commissioner of Income Tax -1, Mumbai (“PCIT”) vide notice dated 5 March 2021 initiated revisionary proceedings under section 263 of the Act, asking to show cause regarding the allowability of advertisement and publicity expenditure incurred by the Appellant. 10. The PCIT was of the view that since the Appellant is engaged in the business of brewing, and sale of alcoholic beer, it is prohibited from advertising its products as per the Cable Television Network (Regulation) Amendment Bill and the learned AO has completed the original assessment without making any verification of facts relating to the Advertisement and Publicity expenditure. 11. In response to the show cause notice issued by the learned PCIT, the Appellant vide a submission dated 17 March 2021 filed a detailed objections against the initiation of revisionary proceedings as well as on the merits of the case. (Refer Page No 61-78 of the paperbook for the copy of the letter dated 3 August 2016) 12. However, the learned PCIT disregarded the submissions made by the Appellant and passed an order under 263 of the Act by setting aside 12 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., the order passed under section 143(3) read with rule 144C(13) of the Act dated 31 March 2021 and directed the learned AO to reframe the assessment afresh after considering prevailing law and submissions of the Appellant. Aggrieved by the said order of learned PCIT the Appellant has preferred the present appeal before your Honours. Appeal before the Hon’ble Tribunal Ground 1 to 4 - Initiation of revisionary proceedings under section 263 of the Act is without authority of law and jurisdiction Revisionary assessment proceedings cannot be initiated unless the conjunctive conditions of section 263 of the Act are satisfied 13. Section 263(1) of the Act states that: “The Principal Commissioner or The Commissioner may Call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” In view of the above, it is aptly clear that there are two pre-requisites for the Principal Commissioner to exercise the power of revision under section 263 of the Act:  The order passed by the AO should be erroneous; and  The error must be such that it is causes prejudice to the interests of the revenue. 15. We wish to place reliance on the following judicial precedents which have interpreted the powers of revision of Commissioner under section 263 of the Act:  Malabar Industrial Co. Ltd vs Commissioner of Income Tax [2000] (243 ITR 83) (SC) (Refer Page No 95-99 of the legal paperbook) 5......... “A bare reading of provisions of s. 263 makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo motu under 13 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent—if the order of the ITO is erroneous but is not prejudicial to the Revenue or ff it is not erroneous but is prejudicial to the Revenue—recourse cannot be had to s. 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase ‘prejudicial to the interests of the Revenue’ is not an expression of art and is not defined in the Act. Understocd in its ordinary meaning it is of wide import and is not confined to loss of tax.” ......... “The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the AO accepting the same as such will be erroneous and prejudicial to the interest of the Revenue.” .... (emphasis supplied)  CIT v. Gabriel India Ltd. (203 ITR 108) (Bom)(HC) (Refer Page No 101-106 of the legal paperbook 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by 14 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income- tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo-motu revision because the first requirement, viz., that the order is erroneous, is absent.” (Emphasis supplied)  Smt. Lila Choudhury v. CIT [2008] 289 ITR 226 (Gau)(HC) (Refer Page No 107-113 of the legal paperbook “An erroneous order does not mean a wrong order; it does not mean an order with which the Commissioner is unable to agree. An erroneous order would be an order which suffers from a patent lack of jurisdiction; the error must be with reference to jurisdiction. Prejudicial to the interest of the Revenue would mean an erroneous order which goes against the interest of Revenue collection. Both the conditions must pre-exist to enable the CIT to exercise the power under Section 263. Having Said that, it will not be necessary to burden this order with any further description or narration. The foundation for the exercise of the power being the formation of an opinion or conclusion, there is no escape from the view that the CIT must record his conclusions in the matter before setting aside an order of assessment in exercise of the power under Section 263. It will again be futile to embark upon any discussion as to the "intensity" or "strength" of the conclusion that must be reached by 15 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., the CIT before setting aside an assessment under Section 263 as the answer to the said question would really depend on the facts that may be confronting the Commissioner in any given case. The position can be best resolved by saying that in certain situations the opinion or conclusion recorded would be the final opinion; in other Situations it may be ‘less than final’. What would be necessary for our purposes is to take note of the fact that there has to be an opinion that the assessment which has been set aside is, indeed, erroneous and prejudicial to the interest of Revenue. Furthermore, the power under Section 263 being quasi-judicial such conclusion must be reached after hearsay the assessee which is mandated by the statute itself and after recording the reasons for the conclusions reached, a requirement, imposition of which, would be consistent with the well-settled principles of exercise of quasi-judicial powers.” (Emphasis supplied)  Ms. Aristo Pharmaceuticals Pvt. Ltd vs PCIT -2 (2018) ITA No. 2982/Mum/2017 & 554/Mum/2018 dated 7 December 2018 (Refer Page No 115-125 of the legal paperbook). In the said case, the Ld. CIT had initiated Section 263 proceedings on the ground that that A.O. has not applied his mind and has allowed the claim of expenses viz. Medical Conference Expenses which were prohibited by Medical Council of India (MCI) vide notification dated 10th December, 2009. However, the Hon’ble Tribunal has quashed Section 263 proceedings on the ground that if there are two views possible and the A.O. has adopted one view, with which the id. CIT is not in agreement, the order cannot be said to be liable to be visited with the revisionary order by the Id. CIT. 19. In this view of the matter, we are of the considered opinion that firstly the A.O. has made the examination and in his opinion these expenditures were allowable. Hence, he has not made any disallowance. This is a legally permissible view. In any case, as held by the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) if there are two views possible and the A.O. has adopted one view, with which the ld. CIT ts not in agreement, the order cannot be said to be liable to be visited with the revisionary order by the Id. CIT. Accordingly, the order under 263 passed by the Ld. CIT is hereby quashed. Accordingly, we decide the issue in favour of the assessee.  PRAVARDHAN SEEDS PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (2019) ITA No. 667/Hyd/2017 dated 30 January 2019 (Refer Page No 127-134 of the legal paperbook) 16 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., 9.10 Further, in our view, no doubt, AO has not applied his mind, but, the CIT has not established how the order of AO is prejudicial to the interests of revenue. Looking at the facts submitted before us and the findings of Hon'ble Jurisdictional High Court that the seeds cannot be produced without basic agricultural activities, in our view, CIT should not stop merely on finding that the order is erroneous but also has to establish that the order of AO is prejudicial to the interests of revenue. In the given case, the only missing link is the verification of lease agreement with the farmers and activities whether it is similar to the Prabhat Agri Biotech or not. This could also be verified by Id. CIT and established that it is prejudicial to the interests of revenue. Ld. CIT has failed in this aspect. This is in line with the decision of Hon'ble Supreme Court in the case of Malabar Industrial co. Ltd., 243 ITR 83(SC) and CIT Vs. Green World Corporation 314 ITR 81 (SC). Therefore, in our view, no doubt, the assessment order is erroneous but not prejudicial to the revenue considering the case law submitted before us. As per the Hon'ble AP High court, seeds cannot be produced without basic agricultural activities. The assessee has sold the seeds and must have carried out the agricultural activities in order to produce the seeds. Hence, we set aside the order of CIT passed u/s 263 of the Act and the order of the AO is restored. Accordingly, ground raised by the assessee are allowed. 16. In view of the above, it is clear that twin conditions of order being ‘erroneous’ and ‘prejudicial to the interests of the revenue’ are to be cumulatively satisfied to invoke proceedings under section 263 of the Act. Revisionary proceedings are not valid where AO has duly examined all the records at the time of assessment proceedings with due application of mind 17. During the course of scrutiny assessment proceedings for the subject AY, the learned AO issued a notice dated 10 November 2015 seeking for information relating to the expenses debited to the trading and profit and loss account including advertisement and publicity expenditure. The Assessee vide its letter dated 3 August 2016 filed a detailed break-up of the advertisement and publicity expenditure debited to the profit and loss account along with the party wise details of the expenditure incurred by the Assessee. (Refer Page No 79-93 of the paperbook for the copy of the letter dated 3 August 2016) 18. Accordingly, all the information/ documents which were relevant for making the decision on allowability of such expenditure under section 37 of the Act were in possession of the learned AO at the time of the 17 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., assessment proceedings and it was well within the knowledge of the learned AO that the Company was claiming deduction for such expenditure. Accordingly, post analyzing the case, and after due application of mind, the learned AO concluded that the disallowance is to be made on certain other issues and not towards the issue of advertisement and publicity expenditure under section 37 of the Act. 19. Therefore, the order passed by the learned AO was correct and in accordance with the provisions of law. 20. Reliance in this regard is placed on the decision of the Hon’ble Bombay High Court in case of Moil Limited vs. Commissioner of Income- tax (396 ITR 244) (Refer Page No 135139 of the legal paperbook) wherein it is held that the provisions under section 263 cannot be invoked where the Assessee has submitted the relevant details and the AO is satisfied about the admissibility of the claim based on the details submitted. Further reliance is also placed on the following judicial precedents:  Nirav Modi (2017) (SC) approving Bombay High Court decision reported as 390 ITR 292 (Bom) (Refer Page No 135-139 of the legal paperbook)  Tata Motors Ltd. [2019] ITA No.3425 dated 5 March 2021 (Refer Page No 143-174 of the legal paperbook)  IBM India Private Limited (ITA No 598/Bang/2011) dated 5 July 2013 (Refer Page No 175-210 of the legal paperbook) 21. The Appellant humbly submits that there is a distinction between “lack of enquiry” and “inadequate enquiry”. If there is an enquiry, even inadequate, that would not by itself give occasion to pass an order under section 263 of the Act merely because the AO has a different opinion in the matter. Such a course of action is open only in cases of lack of enquiry. Revisionary assessment proceedings cannot be initiated on the – possibility of further enquiry: 22. In this regard, we humbly wish to submit before your Honours that where an AO has made an enquiry, the assessment order cannot be set- aside and revised under section 263 of the Act, merely because the Commissioner feels that some more enquiries and verifications could have been made by the AO while making an assessment. Reliance in this regard is placed on the following judicial precedents:  Salora International Ltd. [2005] ITA No.2004 (Delhi) (Trib.) dated 14 January 2005 (Refer Page No 211-216 of the legal paperbook) 18 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd.,  Amrik Singh [2003] ITA no. 230 (Mag.) (Chd.) (Trib.) dated 2 August 2001 Refer Page No 217-222 of the legal paperbook)  Baljees [2003] ITA no. 427 & 428 (Chd.) (Trib.) dated 28 November 2002 Refer Page No 223-226 of the legal paperbook) 23. In the instant case, the learned AO had requested for details of the expenditure during the assessment proceedings and after duly considering the submission filed by the Assessee, has allowed the claim. 24. Further, where there are two views possible and the AO has adopted one of the two possible views, then his order cannot be held to be erroneous/ prejudicial to the interest of the revenue and thereby proceedings under section 263 of the Act will not be sustained. 25. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case Malabar Industrial Co. Ltd vs Commissioner of Income Tax [2000] (243 ITR 83) (SC) (Refer Page No 95-99 of the legal paperbook) wherein it is held that where two views are possible on a particular issue and the AO has adopted one view, then the same shall not be termed as prejudicial to the interest of the Revenue only because CIT disagrees to the view, unless the view taken by the AO is unsustainable in law. Reliance is also placed on the decision in the case of CIT vs. Max India Ltd (295 ITR 282) (SC). Applicability of Explanation 2 to Section 263 of the Act 26. As per Explanation 2 to section 263(1) of the Act, an order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Commissioner: a) the order is passed without making inquiries or verification which should have been made; b) the order is passed allowing any relief without inquiring into the claim, c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or d) the order has not been passed in accordance with any decision which is prejudicial to the Assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the Assessee or any other person. 27. The Appellant submits that based on the following reasons tabulated below, conditions as set out in Explanation 2 to Section 263(1) are not satisfied to make the order erroneous: 19 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., Condition Reason Clause (a) The order is passed without making inquiries or verification which should have been made Clause (b) The order is passed allowing any relief without inquiring into the claim During assessment proceedings the AO had issued notice dated 10 November 2015, where the learned AO has enquired into various expenses debited to Profit & Loss account. The Appellant filed the details of advertisement and publicity expenses incurred by the Company and provided break-up of the expenditure debited under the head 'Advertisement and Publicity'. The Assessee has also furnished party wise details of major payments under this head. The AO after examining the documents, did not make any addition to the total income. Therefore, it is not a case of order being passed without inquiries. Accordingly, condition a) and b) is not satisfied Clause (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; The order has not been made in violation of any order, direction or instruction issued by the CBDT under section 119 of the Act. Accordingly, condition c) is not satisfied Clause (d) The order is not against any decision which is prejudicial to the assessee rendered by the jurisdictional High court or Supreme Court in the case of the assessee or any other person The AO has not passed the order disregarding any decision of the jurisdictional Bombay High Court or the Supreme Court as there are no decision which squarely cover the Appellant's case. Accordingly, condition d) is not satisfied 28. In the present case none of the above-mentioned reasons are satisfied. Revisionary assessment proceedings cannot be initiated in case of Inadequate enquiry versus lack of enquiry 29. Without prejudice to the Appellant's contention that submissions have been made by the Appellant pursuant the enquiry made by the AO during the course of assessment proceedings, in respect of issue which is subject matter of proceedings under Section 263 of the Act, the Appellant 20 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., further contends that based on facts of the case, this case can at the most be considered to be of an inadequate enquiry as against lack of enquiry. The assessment order cannot be set aside and revised under Section 263 of the Act, merely because the Commissioner felt that inadequate enquiry has been made and further enquiry could have been made by the AO while making an assessment. 30. Reliance in this regard is also placed on the following decisions: • Vikas Polymers (2012) (341 ITR 537) (Delhi HC) (Refer Pq. 245 to 252 of Legal Paperbook): • Sunbeam Auto Ltd. (2011) (332 ITR 167) (Delhi HC): • Indus Best Hospitality & Realtors Pvt. Ltd. (ITA No. 3125/Mum/2017) dated 19 January 2018: • Instant Holdina Ltd. (ITA No. 2345/Mum/2015) (Mum Trib.) No mention in the assessment order of the aspects examined cannot be a ground for initiating revisionary proceedings: 31. Where the AO has raised a query, which was answered to his satisfaction and not reflected in his order, a conclusion cannot be drawn by the Commissioner that no enquiry for that issue was made by the AO. Reliance in this regard is placed on the following decisions:  CIT vs. Gabriel India Ltd (1993) (203 ITR 108) (SC) (Refer Page No 101-106 of the legal paperbook)  Anil Shah vs ACIT (2007) ITA no. 2020 (Mumbai ITAT) dated 21 April 2006 (Refer Page No 227-232 of the legal paperbook)  CIT v. Ashish Rajpal [2009] 320 ITR 674 (Delhi) (HC) (Refer Page No 233-243 of the legal paperbook)  CIT v. Vikas Polymers 201213411ITR 537 DelhiHC Refer P-. 245 to 252 of Le: al Paperbook) 32. Accordingly, in the instant case, the issue relating to the expenses debited to the profit & loss account in the nature of ‘Advertisement and Publicity’ was submitted to the learned AO but since the AO was satisfied with the response, this fact was not reproduced in the order passed by the learned AO. Hence, it cannot be held that no proper enquiry was made by the learned AO granting your Honour the jurisdiction under section 263. 21 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., Without Prejudice to the above no revisionary proceedings can be initiated if assessment order is in pursuance of DRP directions 33. The power of revision of PCIT is restricted only to orders which are passed by the AO. Under new scheme of assessment, draft order is passed by learned AO against which assessee may file objections before the DRP. Further, the directions issued by the DRP are binding on the learned AO and final order is passed by the learned AO without further going into the merits of the case. 34. Upon receipt of the directions, the AO shall complete the assessment without providing any further opportunity of being heard to the assessee. Where assessment order is passed post DRP directions (where DRP has the power of enhancement), revisionary powers cannot be exercised under section 263, as such order cannot be construed to be an order passed by the AO. Commissioner of co-ordinate rank is not empowered to determine whether final assessment order pursuant to DRP (i.e. body consisting of three Commissioners) is erroneous and prejudicial ‘to the interest of the Revenue. 35. Therefore, in facts of the present case no action can be taken under section 263 of the Act. Prayer Given all of the above, after considering the factual details/ documents and legal submissions, the Appellant wishes to humbly submit that as none of the reasons required to invoke proceedings under section 263 of the Act are satisfied, your Honour may be pleased to quash the order dated 31 march 2021 passed by the learned PCIT under section 263 of the Act. Ground No. 5 to 7 - Allowability of Advertisement and Publicity expenses (Rs.107,07,17,246) 1. At the outset, the Appellant submits that it has not incurred any advertisement and publicity expenditure for any purpose which is prohibited by law. No advertisement expenses are incurred for sale of alcoholic liquor by the company at platforms which is prohibited by law. 2. The learned PCIT has held entire advertisement and publicity expenses incurred by the Appellant are not permissible under The Cable Television Networks (Amendment) Rules, 2009 ("Cable TV Rules"). However, during the course of the revisionary proceedings, it was submitted that out of the total advertisement and publicity expenditure of Rs 107,07,17,246 debited to the profit and loss account, only Rs 20,63,83,780 is governed and permitted under the Cable TV Rules and the 22 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., balance expenditure of Rs 86,43,33,466 is in the nature of sales promotion, market research, brand promotion etc. which are not regulated nor prohibited under the Cable TV Rules. 3. The expenditure incurred under the head Advertisement and Publicity expenses of the profit and loss account broadly comprises of expenditure under the following broad categories: Sl No. Nature of Expense Description Amount (INR) Remarks 1 Sales promotion expenses Brand penetration material such as T- shirts, key chains, calendars, photos, glasses, gift cards provided to the retailers/ wholesalers to have brand penetration and create brand awareness (upon purchase of certain specified quantity) 86,43,33,466 Regular business expenditure incurred wholly and exclusively for the purpose of the business and is outside the purview of the cable TV law 2 Branding activities Expenses incurred for promoting consumer experiences including costs incurred for purchase of glasses, mugs, openers, ice buckets, dispensers, etc 3 Signage and brand awareness in liquor outlets Creating awareness of its brands by incurring expenses on the signboards, display material, glow boards etc. at retail outlets across the country. These are displayed inside the premises of the retail outlets in order to bring more visibility around product as well as of the brand. 3 Sponsorship and event management expenses Sponsorship of various events to enhance the brand experience for its customers such as music events, film festivals etc 4 Market research, census and survey expenses These are consultant costs incurred by the Company to have in-depth and detailed studies to understand particular markets, consumer behaviour, consumption trends, preference of the consumers etc. 5. Advertisement of nonalcoholic products in television Expenses incurred for broadcasting advertisements, celebrity endorsements for non-alcoholic product 2.0,63,83,780 Expenditure regulated and under the Cable TV Law and in the absence of any adverse action by the concerned regulatory authority the same is allowed under section 37(1) of the Act Total 107,07,17,246 Sales promotion expenses (other than media advertisements) debited under the head of "advertisement and publicity" expenses are not prohibited under any law - INR 86,43,33,466 36. It is to be noted that Hon'ble DRP vide its directions dated 25 March 2021 for AY 2016-17 has given relief of Rs. 78,64,81,962 on the following 23 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., categories of expenditure out of total expense of Rs. 129,79,03,945 forming part of the advertisement and publicity expenditure debited to the profit and loss account (The order of DRP is non appealable order): • Sales Promotion Expenses amounting to Rs. 40,02,26,449 by concluding that the promotional activities (such as beer samples, gifts, etc) were given only to existing consumers and are not open advertisements and allow the claim accordingly. • Signage and brand awareness in liquor outlets amounting to 22,08,39,422 • Market research, census and survey expenses and Other Expenses amounting to 16,54,16,090. 37. The activities such as organizing private events, contests, press conferences, gifting and giveaways to distributors and wholesalers, etc. are undertaken with a view to push the sales to retailers and consumers. Such expenditure incurred by the Company are purely in the nature of sales promotion and brand extension activities and are not advertisements which are prohibited by any law. 38. In this regard, the Appellant wishes to place reliance on the ruling of the jurisdictional Mumbai Tribunal in the case of Cobra Indian Beer Private Limited vs DIT (ITA No 2761/Mum/2012) dated 12 June 2015 (Refer Page No 253-262 of the legal paperbook) wherein the tribunal held that expenditure incurred by the Assessee for organizing private events/press conference, designing advertisement stalls, photographer charges, etc. were not hit by explanation 1 to section 37(1) of the Act as the same are not prohibited by law. 39. Further, the reliance is also placed on the decision of Kolkata Tribunal in the case of Jahangir Biri Factory (P) Ltd Vs DCIT [2009] ITA no. 1173 (Kol) dated 27 March 2009 (Refer Page No 263-267 of the legal paperbook) wherein the expenses incurred by the Assessee under prize coupon scheme for users of its tobacco product was held to be not in infringement of law and the therefore expenses does not fall within the mischief of prohibitory regulation and hence cannot be disallowed. The tribunal further noted that: • the Assessee is entitled to make effort to boost up sale of its products by resorting to any means, provided there is no infringement of law or it involves any obscenity; • The prohibitory regulation has been introduced to curb proliferation of tobacco addiction chewing. etc. The prize coupon scheme however cannot proliferate the habit of tobacco smoking. Only the existing consumers are the beneficiaries of the scheme; • Incentive by way of prize coupons is given to them to induce them not to change brand. Therefore. there is no element of open advertisement 24 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., in the prize coupon scheme of the Assessee and. consequently. there has been no violation of the law. Hence, there was no infringement of law and the expense under consideration does not fall within the tescivef of the Explanation to s. 37(1) of the Act, and hence, is otherwise allowable. 40. Further. reliance is placed on the ruling of the Kolkata Tribunal in the case of JCIT vs ITC Ltd (Kotkata ITAT) - ITA No. 1541 -(Kolkata ITAT) dated 7 September 2007 (Refer Page No 269-309 of the legal paper book), wherein the tribunal held that the advertisement expenditure incurred by the Assessee by way of sponsorship of events/sports was for promoting its product/corporate image and such expenditure was revenue in nature and incurred for the purpose of the business. 41. It is also pertinent to note the Act also recognizes that there is a distinction between expenditure on advertisement as well as expenditure on sales promotion and in this regard a reference may be made to the provisions of sections 37(3A) to 3(C) of the Act that were on the statute book in the 1980. 42. Reliance is also placed on the judgment of the jurisdictional Hon’ble Bombay High Court in Brihan Maharashtra Sugar Syndicate Limited vs. Deputy CIT 320 ITR 658 (Refer Page No 311-315 of the legal paperbook) where the Court had to consider whether expenditure incurred by the assessee therein for sales promotion was allowable under section 37 of the Act The assessee therein was a liquor manufacturer and was banned from direct media and television advertising of its products. Its major customer viz., the Canteen Stores Department was debarred from directly accepting free samples from a liquor manufacturer. The assessee found it commercially expedient to offer sample of its products at various military functions so that the military personnel develop a taste for it and the assessee thereafter would secure larger orders from the Canteen Stores Department. In such circumstances, the Court found that the amount has been spent by way of commercial expediency for promoting the sale of the assessee’s product and was m the nature of sales promotion expenditure and was not against public policy and, therefore, was allowable. Applying the principle laid down in the aforesaid judgment, it would be clear that the expenditure referred to hereinbefore is to be regarded as expenditure on sales promotion and, therefore, has to be allowed as a deduction. 43 Further, expenses incurred for market research, census, surveys, etc are undertaken to gain an understanding of the current market trends, consumer preferences, product feasibility and develop knowledge of the industry. Knowing the potential and current customers and their purchasing preferences allows the Company to modify its products to increase sales. Such expenses are also incurred by the Company to understand its customer base and business strategies, which can give the company a competitive edge in the industry. These expenses are not in the nature of advertisement expenses which are prohibited by any law and are purely incidental to the regular business of the Assessee. 25 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., 44. Given the above, your Honour would appreciate that the expenses to the tune of Rs 86.43,33,466 debited to the advertisement and publicity head in the profit and loss account are not in the nature of media advertisements and hence are not governed by the provisions of the Cable TV Rules which are applicable only for advertisements made in Television Media. 45. Accordingly. other expenses of INR 86,43,33,466 debited to the advertisement and publicity head in the profit and loss account are not prohibited under any law and have been incurred wholly and exclusively for the purpose of the business of the Appellant and the same is allowable expenditure under section 37 of the Act. Advertisement of non-alcoholic products in television media are not prohibited by the Cable TV Rules – INR 20,63,83,780/- 46. Out of the total expenditure debited to the ‘advertisement and publicity’ head in the profit and loss account, INR 20,63,83,780 has been incurred for promotion of non-alcoholic products such as water/soda on television media which is also not prohibited under the Cable TV Rules. 47. In this regard, we wish to invite your Honour’s kind attention to the following provisions of Cable Television Networks Regulation Act (hereinafter referred to as “the CTN Act’). Section 6 of the Cable Television Networks Regulation Act (hereinafter referred to as “the CTN Act”) provides that no person shall transmit or re-transmit through cable services any advertisement unless such advertisement is in conformity with the prescribed advertisement code. Sections 16, 17 and 18 of the CTN Act make provisions for punishment of offences and contravention of the provisions of the Act. The CTN Rules are framed pursuant to the CTN Act, 1985. Rule 7 of the CTN Rules deals with the advertising code. 48. In this regard, we wish to invite your Honour’s kind attention to the following provisions under the Cable TV Rules as under: "7. Advertising Code. - (1) Advertising carried in the cable service shall be so designed as to conform to the laws of the country and should not offend morality, decency and religious susceptibilities of the subscribers. (2) No advertisement shall be permitted which (i)... (viii) promotes directly or indirectly production, sale or consumption of(A) cigarettes, tobacco products, wine, alcohol, liquor or other intoxicants; Provided that a product that uses a brand name or logo, which is also used for cigarettes, tobacco products, wine, alcohol, liquor, or other intoxicants, may be advertised on cable services subject to the following conditions that (i) the story board or visual of the advertisement must depict only the product being advertised and not the prohibited products in any form or manner, 26 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., (ii) the advertisement must not make any direct or indirect reference to prohibited products; (iii) the advertisement must not contain any nuances or phrases promoting prohibited products; (iv) the advertisement must not use particular colours and layout or presentations associated with prohibited products; (v) the advertisement must not use situations typical for promotion of prohibited products when advertising the other products: Provided further that – (i) ... (ii) all such advertisements found to be genuine brand extensions by the Ministry of Information and Broadcasting shall be previewed and certified by the Central Board of Film Certification as suitable for unrestricted public exhibition and are in accordance with the provisions contained in sub- clause (i) to (v) of the first proviso, prior to their telecast or transmission or retransmission.” 49. Given the above, your Honours would note that advertisement in any media network is highly regulated through the Central Board of Film Certification (‘CBFC”) from Ministry of Information and Broadcasting (“MIB”) prior to the telecast, transmission or retransmission of the advertisement. 50. Further, we wish to submit that airing the promotional films of non- alcoholic products made by the Appellant in the television media have passed all regulatory requirements before aired. 51 The Appellant wishes to highlight that no advertisement expenses have been incurred for sale of beer by the Appellant at platforms which is prohibited by law. The same is supported by the fact that no regulatory authority have taken any adverse view on the Appellant during the year. Accordingly, in the absence of any adverse findings by any regulatory authority, the deduction of the genuine expenditure incurred by the Appellant cannot be denied on the general presumption that such expenditure incurred is for promotion of sale of beer. 52. Further, the Appellant submits that the expenditure incurred by the Company is wholly and exclusively for the purpose of the business and in accordance with principles of business expediency and allowable under section 37 of the Act. 53. It is a settled principle of law and our humble submission that the revenue authorities cannot sit in the armchair of the business to decide the necessity, quantum of the expenditure to be incurred or the price of the 27 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., product at which it is to be solid. If the expenditure is incurred wholly and exclusively for the purpose of the business and there is commercial expediency for incurrence of the expenditure, then the same is allowable expenditure under section 37 of the Act. What is commercial expediency in a given facts and circumstances of a case is the sole discretion of the Assessee and not of the revenue authorities. Reliance in this regard can be placed on the following rulings:  CIT vs. Malayalam Plantation Ltd (53 ITR 140) [SC] wherein it was held that The expression ‘or the purpose of the business‘ is wider in scope than the expression ‘for the purpose of earning profits’. Its range is wide; it may take in not only the day to day running of a business but also the rationalization of its administration and modernizaton of &s machinery, it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee Shall incur it in his capacity as a person carrying on the business.  CIT vs. Walchand & Co. Pvt. Ltd. (1967) 65 ITR 0381 [SC] wherein it was held that In applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the Revenue; Tribunal is empowered only to find out if an expenditure is not real or it is not incurred by the assessee as a trader, or if it is not wholly and exclusively laid out for business purposes, but it cannot determine the reasonableness of the expenditure or determine what portion of the expenditure, in its view, is fair.  CIT vs. Harichand Shri Gopal (231 Taxmann 79) [Delhi HC] wherein The Court held that it was the prerogative and right of the assessee to decide whether it should incur expenditure on advertisement or brand building for the agarbati and it was not open to the Assessing Officer to question the assessee’s wisdom and prudence in incurring such expenditure by adopting a subjective standard of 28 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., reasonableness. Therefore, expenditure incurred was allowed under section 37(1). 54. Further, reliance is placed on the following decisions in this regard:  SA Builders 288 ITR 1 (SC)  CIT vs Calcutta Discount Co Ltd 91 ITR 8 (SC)  CIT vs Keshavial Chandulal 59 ITR 120 (Guj)  Flipkart India Pvt Ltd. (ITAT Bang)  Hero Cycles Pvt. Ltd. (Civil Appeal No. 514 of 2008) (SC) dated 5 November 2015  Dresser-Rand India Private Limited (141 TTJ 385) (Mumbai ITAT) dated 7 September 2011  M/s. La Renon Healthcare Pvt. Ltd. (ITA No. 2380/Ahd/2015) (Ahmedabad ITAT) dated 23 September 2019 Ground No. 8 - Adjudication of a contravention by the Appellant under the Cable Tv Rules is outside the purview of powers and functions of the learned PCIT/AO under the provisions of the Act 55. The appellant submits that it is not within the powers and functions of the Income tax authorities to interpret the provisions of the Cable TV Law to form an opinion that the Appellant has contravened and make an assessment under the Act in the absence of any adverse findings/order against the Appellant by any authorized authority under the Cable TV Law. It is not under the powers and functions of the Income tax authorities to adjudicate whether the Appellant has violated any provisions/ regulations of any Act or Law other than Income tax Act, 1961. 56. Only in case there is a clear finding of any contravention of the provisions of any law by the concerned regulatory authority, the AO is within his power to disallow the corresponding expenditure incurred by the Assessee. However, the income tax authorities are not competent authority to adjudicate the legality or legitimacy of any expenditure incurred by the Assessee under other laws which is outside their jurisdiction and subject matter expertise. 57. The Appellant submits that before the expenditure can be disallowed by virtue of Explanation (1) to section 37(1) of the Act, the AO has to demonstrate that by incurring the expenditure the Assessee has violated a law. That has to be demonstrated by establishing that the regulator concerned with regulating the law has found the assessee to be in violation thereof or the assessee has himself admitted that it has incurred an expenditure which is in violation of the law. 58. In this regard, the Appellant also refers to a judgment of the Madras High Court in Cholamandalam MS General Insurance Company Limited vs. Deputy Commissioner of Income-tax 411 ITR 386 (Refer Page No 317-317 of the legal paperbook). In this case the Tribunal had held that the payment of reinsurance premium to a foreign reinsurer was contrary to the provisions of the Insurance Act and, therefore, was to be disallowed having 29 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., regard to Explanation 1 below section 37(1). The Tribunal held that the provisions of the IRDA Regulations which permitted reinsuring the risk with a foreign reinsurer were inconsistent with the provisions of the Insurance Act and, hence, the payment of the reinsurance premium was prohibited by law and, therefore, was not allowable as a deduction. Dealing with this contention the High Court observed that “the Tribunal erred in coming to the conclusion that it is not the intention of the Parliament to authorize an Indian Insurer to have reinsurance outside the country ignoring the provisions of the Insurance Act.” The Court emphasized that the Tribunal had no jurisdiction to declare any provision of the Regulation to be inconsistent with the provisions of the Insurance Act, as the same was wholly outside the purview of the Tribunal. In the light of the aforesaid, it would be clear that an Assessing Officer cannot interpret the provisions of the Cable TV law to form an opinion that the said law has been violated and, accordingly, to arrive at a conclusion that the expenditure so incurred is not to be allowed for tax purposes. 59. Further, reliance in this regard can be placed on the following rulings:  Dr. Anil Gupta vs Addl. Commissioner of Income Tax, Circle-7, Jaipur Income Tax Appeal No. 485 / 2008 connected with Cross Objection Civil No. 48 / 2016 dated 18 July 2017 (Refer Page No 365-372 of the legal paperbook) “11. Counsel for the respondent has strongly relied upon explanation but in view of the observations made by the AO where he has allowed the part expenses of the hospital, in that view of the matter, we are of the opinion that the CIT(A) observations which are made by the CIT are required to be accepted. The explanation cannot come into play on appeal which was filed at this stage. Even otherwise in income tax proceedings the medical ethics will not be taken into consideration. At the most even if it is a «professional misconduct it is to be dealt with b Medical Council of India. The income tax authority cannot decide the medical ethics when the original authority has partly allowed the expenses.  Gestetner Duplicators Private Limited vs. CIT (117 ITR 1) [SC] (Refer Page No 329337 of the legal paperbook) wherein it was held that The Court had to consider whether the assessee was entitled to a deduction made by way of a contribution to an approved provident fund under Section 36(1)(iv) of the Act. The Court held that It was not open to the taxing authorities to question the recognition granted by the Commissioner to the provident fund maintained by the assessee in any of the relevant years on the ground that the assessee’s provident fund did not satisfy any particular condition mentioned in rule 4. 30 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., lt would be conducive to judicial discipline and maintaining of certainty and uniformity in administering the law that the taxing authorities should proceed on the basis that the recognition granted and available for any particular assessment year implies that the provident fund satisfied all the conditions under rule 4 of Part A of the Fourth Schedule and should not sit in judgment over it.  ACIT vs. A.K. Menon & Ors. (215 ITR 364) [SC] (Refer Page No 339-342 of the legal paperbook) wherein it was held that Special Court has no jurisdiction to sit in appeal over the assessment of the tax liability of a notified person by the authority or Tribunal or Court authorised to perform that function by the statute under which the tax is levied. The Special Court has, therefore, has no jurisdiction to determine whether or not any assessment of the tax liability of a notified person by the appropriate authority is bona fide or reasonable or justified or enforceable.  K.N.Narayana lyer vs. CIT (202 ITR 774) [Karnataka HC] (Refer Page No 343-346 of the legal paperbook) wherein it was held that When the liquidator himself does not choose or find it necessary to avoid a particular transfer, or to recover the property concerned, itis not open to a stranger like the ITO to ignore it and treat the transferred asset as remaining with the liquidator relying on section 531A of the 1956 Act  Keerthi Estates P Ltd (ITA 271/Hyd/2016) (Refer Page No 347-355 of the legal paperbook), wherein after considering the decision of Karnataka High Court in case of Mamta Enterprises which was relied upon by the DR the Tribunal held as under; 8........It is fact that at the time of approval, the corporation and the builders aware that it is not possible to complete the project as per the proposed plan as there are certain adjustments need to be made at the time of actual execution. As long the actual completion of the projects are within the parameters of approval, the corporation/approving authorities permit the projects as approved willy the nominal fine or compounding fee This is the reason, the corporation has the clause intact in the rules books If the projects are illegal, which is an offence and cannot be cured, the whole project cannot be approved by the approving authorities, as the same is subject matter of public safety. The penalty can be classified as two types; one charged for violation of law in the nature of offence, which cannot be pardoned by compounding and the second is charged for violation of certain rules which are not in the nature of offences and can be cured by compounding. In the 31 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., case of housing/commercial projects, the corporation aware that there will be certain deviations at the time of approval and no project can be completed without any deviation, The question is, the extent of deviation In case it is within the permissible limits, the approving authorities, allow with compounding the deviation by levying compounding fees, In the given case, the project was completed and the deviations are within the limits, for which the Bangalore Mahanagar Palike has approved the project by compounding fees, which is not in the nature of offence nor prohibition of any law. Henco, it is allowable u/s 37(1) of the Act.”  Max Hospital, Pitampura vs. Medical Council of India (W.P. No. 1334/2013) (Delhi HC) (Refer Page No 357-364 of the legal paperbook) dated 10 January 2014 wherein it was held that The observations dated 27.10.2012 made by the Ethics Committee do reflect upon the infrastructure facilities available in the Petitioner hospital and since it had no jurisdiction to go into the same, the observations were uncalled for and cannot be sustained. Since the MCI had no jurisdiction to go into the infrastructure facilities, need not also go into the aspect that in the year 2011, the facilities available in the hospital were inspected and were found to be in order. Prayer: 60. Given all of the above, after considering the factual details/ documents and legal submissions, the Appellant wishes to humbly submit that the expenditure incurred by the Appellant is wholly and exclusively for the purpose of the business and in accordance with principles of business expediency and allowable under section 37 of the Act. 61. Accordingly, the Appellant wishes to humbly submit that as none of the conditions required to invoke proceedings under section 263 of the Act are satisfied, we request your Honour’s to quash the order dated 31 March 2021 passed by the learned PCIT under section 263 of the Act.” 8. On the other hand, Ld. DR submitted that no information on nature of expenses filed before the Assessing Officer or Ld. Pr.CIT and from the records of assessment Ld. Pr.CIT clearly observed that Assessing Officer has not made further enquiry on the legality of allowing the above said 32 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., expenditure. He brought to our notice Page No. 259 of the Paper Book which is the case law relied by the assessee in the case of Cobra Indian Beer Private Ltd., v. DIT in ITA.No. 2761/Mum/2012 dated 12.06.205 in which he brought to our notice Para No. 11 of the order and highlighted that the assessee has not incurred any expenditure on publicity advertisement but it was incurred for organizing private events/press conference etc., and he submitted that this case is distinguishable to the case of the assessee. Further, he submitted that other case laws relied by the Ld. AR are distinguishable. Further he also submitted that assessee has not submitted any evidences relating to expenses before the Assessing Officer. Finally, he relied on the 263 order and submitted that Ld. Pr.CIT was right in setting aside the Assessment Order. 9. In the rejoinder Ld. AR submitted that the issue is not on allowability of expenses rather non verification of the expenses by the Assessing Officer as per the facts on record. Assessing Officer has made exhaustive verification. 10. Considered the rival submissions and material placed on record, we observed that Ld. Pr.CIT while verifying the assessment records observed that assessee has incurred advertisement and publicity expenses 33 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., amounting to ₹.1,07,07,17,247/- and Assessing Officer allowed the expenses without appreciating the legal position. He observed that assessee manufactures and markets alcoholic beverages which is banned in India for advertisement as per Cable Television Network (Regulation) Amendment Bill which came into effect on 08 th September, 2000. He is of the view that the advertisement made by the assessee in Cable Television in order to promote the alcoholic drinks manufactured by the assessee but it advertises nonalcoholic beverages in order to promote the alcoholic beverages which is against the regulations of the cable television laws. However, Ld. AR submitted before Ld. Pr.CIT as well as before us that the expenditure claimed by the assessee under the head “advertisement and publicity expenses” which includes sales promotion expenses, branding activities, sponsorship and event management expenses and market research and survey expenses, these are all regular business expenditure incurred wholly and exclusively for the purpose of business which does not fall under the category of advertisement in television. Therefore, these expenses are the sales promotion expenditure to the extent of ₹.86,43,33,466/-. Therefore, these expenses are not the expenditure which Ld. Pr.CIT has raised the issue of the expenditure which is spent on activities which is unlawful and in the 34 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., nature of contravening any other laws. Therefore, the issue to be addressed on the issue of illegal expenses only to the extent of ₹.20,63,83,780/-. We observe from the record that Ld. Pr.CIT initiated the revision proceedings with the view that the advertisement and publicity expenses incurred by the assessee in the television are not admissible due to the fact that these are illegal and contravenes the Cable Television Networks (Regulation) Act, 1995. On a careful consideration we observe that assessee is advertising in the same mode of advertisement in earlier years as well as continued to advertise in subsequent years, we also observe that no authority who approves the advertising in the television has initiated any proceedings under the Cable Television Networks (Regulation) Act, 1995 as per which assessee has contravened any of the Act of the Cable Television Networks (Regulation) Act or levied any fines/penalties. In absence of any proceedings against the assessee, it clearly indicates that the advertisement made by the assessee in the televisions are within the provisions of the above said Cable Television Networks (Regulation) Act, 1995. Therefore, in the absence of any such proceedings the Income-tax authorities have no jurisdiction to presume that assessee has contravened any provision of the Cable Television Networks (Regulation) Act merely because assessee 35 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., has several products to market some of them may be prohibited to advertise and others are not. One cannot presume that the assessee is only promoting the products for which advertisements are prohibited as long as the advertisements are allowed to broadcast in the televisions which is approved by the proper authority, the assessee cannot be penalized by invoking the provisions of Cable Television Networks (Regulation) Act, 1995. On a careful consideration of the records we observe that in the absence of any adverse remark or penalties levied by the broadcasting authorities the Assessing Officer need not go into verification of regular expenditure which assessee was regularly claiming over the years. We observe that Assessing Officer has also collected several information before allowing the expenses claimed by the assessee. Therefore Ld. Pr.CIT cannot invoke the provisions of section 263 of the Act to reassess the completed assessment merely on the basis of presumption or with the view that assessee may have contravened the Cable Television Networks (Regulation) Act, 1995. Therefore, in this case Assessing Officer has allowed the expenditure in the absence of any adverse actions against the assessee. Ld. Pr.CIT cannot initiate revisionary proceedings in order to initiate another possible enquiry. ITAT Benches of Delhi and Chandigarh has held that Ld. Pr.CIT cannot initiate 36 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., such actions, for the sake of brevity we, reproduce the decision of the ITAT Delhi bench in the case of Solara International Ltd., v. Addl. CIT in ITA.No. 1999/Del/2004 dated 14.01.2005. “19. As to the specific issues raised by the learned CIT in the impugned order under section 263, he has alleged that the assessing officer routinely accepted Chartered Accountant's certificate in respect of bad debts and deviation from provisions of section 145A. However, the learned CIT has not pointed out any omission or defect or infirmity in the certificate submitted by the Chartered Accountant during the course of assessment proceedings. In respect of expenditure on discount, commission and incentives, the learned CIT has not able to state anything specifically except that according to him, business promotion expenses included entertainment expenditure of Rs. 10,46,913. There is no further finding in the order of the learned CIT that the assessment order resulted into under- assessment on that score. It is pointed by the learned counsel for the assessee that in the order passed by the assessing officer in pursuance to the impugned order under section 263, no such disallowance has been made. In respect of MODVAT accounting and its impact on valuation of goods, the learned CIT has held that the assessing officer should have consulted an expert. We find that no such expert was consulted while completion of the assessment order for the earlier assessment years as well as the assessment orders made subsequent to impugned order under section 263. It is noteworthy that learned CIT did not feel it necessary to do so himself before making the impugned order. The observations of the learned CIT in relation to rate of interest paid to directors are based on scant material, The same applies to the finding of the learned CIT that royalty paid by the assessee represented capital expenditure and should not have been allowed. The learned CIT has not based these observations on any proper examination of the facts of the case. It is important to bear in mind that it is equally true that a disallowance should not be made without. proper enquiry and in a perfunctory manner. We do not see any basis for the observation of the learned CIT that royalty payments of the assessee were disallowable as capital expenditure. That being so the impugned order under section 263 itself has been made on subjective opinion without indepth examination of facts of the case. In the case of Malabar Industrial Co. Ltd. (supra), the Hon'ble Supreme Court have held that an order cannot be said to be erroneous and prejudicial to the interest of revenue merely because the superior officer takes a different view of the matter. We find considerable substance in the contention of 37 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., the learned counsel for the assessee that the impugned order under section 263 has been made without finding any prima facie error in the assessment order, except the unsubstantiated finding that royalty payments represented capital expenditure. As to the bad debts here again the claim of the assessee was supported by a certificate of the Chartered Accountant. The learned CIT has not pointed out as to in what manner or in what respect the Chartered Accountant had gone wrong. In short, we find that the learned CIT has cancelled the assessment in question more or less on the allegation that the assessment was completed routinely without proper enquiry. For the purpose of holding an assessment order to be erroneous and prejudicial to the interests of revenue on that ground, there should be omission or failure to make such enquiry as was essential on the facts and circumstances of the case. Merely because from a perfectionist point of view it is felt that some more enquiries and verifications could have been made by the assessing officer, the order cannot be declared to be erroneous. In the case before us, we find that the assessment order has been made by the assessing officer in accordance with the past history of the case. For the main objection raised by the learned CIT in relation to royalty allowed by the assessing officer no prima facie case has been made out that the view taken by the assessing officer is erroneous. We, therefore, hold that the impugned order under section 263 is not legally sustainable. We quash the order under section 263 and allow this appeal filed on 263 and allow this appeal filed by the assessee.” 11. By considering the above observations, we are of the view that Ld. Pr.CIT has initiated the proceedings merely based on presumption and also having a different opinion on the subject of allowability of expenditure on such advertisement in the Television. Therefore, we set aside the order passed by the Ld. Pr.CIT u/s. 263 of the Act for the assessment year under consideration. Grounds raised by the assessee in this regard is allowed. 38 ITA NOs 941 & 942/MUM/2021 (A.Ys: 2013-14 & 2014-15) M/s. Anheuser Busch InBev India Ltd., 12. Since the issue involved in A.Y. 2014-15 are exactly similar to A.Y.2013-14, we dismiss the order passed u/s. 263 in A.Y. 2014-15 also. We order accordingly. 13. In the result, appeals filed by the assessee are allowed. Order pronounced on 28.01.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 28.01.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum