ACIT - 7(3), MUMBAI V. M/s. WARNER LAMBERT INDIA LTD., MUMBAI

ITA 954/MUM/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2587 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-12-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 08-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAGATI KUMAR
• Keywords: Capital asset; Business income; Depreciation; Advance ruling; Wholly owned subsidiary; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR. V.P. AND SHRI B.RA MAKOTAIAH, AM I.T.A. NOS. 954 & 3063/MUM/2006 (ASSESSMENT YEARS : 1999-2000 & 2001-02) THE ASSISTANT COMMISSIONER OF INCOME TAX-7(3), AAYAKAR BHAVAN, R.NO.615, M.K.ROAD, MUMBAI-400 020. VS. M/S. WARNER LAMBERT INDIA LTD. PFIZER PHARMACEUTICAL INDIA PVT.LTD., PFIZER CENTRE, 5, PATEL ESTATE, OFF. S.V.ROAD, JOGESHWARI(W), MUMBAI-400 102. PAN: AAACW0787H (APPELLANT) (RESPONDENT) APPELLANT BY : MR. PRAGATI KUMAR, DR RESPONDENT BY : MR. DILIP THAKKAR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THESE ARE TWO APPEALS FILED BY THE INCOME-TAX DEPARTMENT FOR THE ASSESSME NT YEARS 1999-2000 AND 2001-02. THE SINGLE COMMON ISSUE RAI SED IN THE APPEALS IS WHETHER THE ASSESSEE IS ENTITLED TO DEDUCT THE EXPENDITURE ON ADVERTISEMENT AND SALES PROMOTION IN COMPUTING THE PROFITS OF ITS BUSINESS. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE MANUFACTURE AND SALE OF BREATH FRESHENERS, CHEWING GUM, DRUGS AND MEDICINES. THE BREATH FRESHENERS AND CHEWING GU M ARE MANUFACTURED AND MARKETED UNDER THE BRAND NAMES OF HALLS AND CHICLETS RESPECTIVELY. IN RESPECT OF THE YEARS UNDER APPEAL, THE ASSESSEE INCURRED THE FOLLOWING EXPENDITURE; HEAD OF EXPENSES ASSESSMENT YEAR 1999-2000 ASSESSMENT YEAR 2001-02 ADVERTISEMENT 4,83,01,000 6,03,00,000 SALES PROMOTION 5,94,31,000 2,70,19,000 TOTAL 10,77,32,000 8,73,19,000 ITA NOS.3063 & 954/MUM/06 2 IN MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 19 99-2000, THE ASSESSING OFFICER NOTICED THAT THE TOTAL SALES FOR THE YEAR WERE RS.58.91 CRORES AGAINST WHICH THE EXPENSES INC URRED ON ADVERTISEMENT AND SALES PROMOTION AGGREGATED TO RS.10,77,32,000/- AND FOR THE IMMEDIATELY PRECEDING YEAR THE EXPENDITURE AMOUNTED TO RS.17.28 CRORES FOR SALES O F RS.61.16 CRORES. BASED ON THESE FIGURES HE TOOK THE VIEW THA T THE EXPENSES WERE NOT INCURRED FOR PROMOTION OF SALES O NLY FOR THE YEAR, BUT THEY WERE INCURRED FOR BUILDING UP THE BR ANDS AND HENCE HAVE TO BE CAPITALIZED AS INTANGIBLE ASSETS. HE REFERRED TO THE PROVISIONS OF SECTION 32(1)(II) OF THE INCOME T AX ACT AS AMENDED BY THE FINANCE (NO.2) ACT, 1998 WITH EFFECT FROM 1.4.1999. ACCORDING TO THE ASSESSING OFFICER SUCH H EAVY EXPENDITURE ON ADVERTISEMENT AND SALES PROMOTION WA S INCURRED TO PROPAGATE AND BUILD THE BRANDS OWNED BY THE ASSE SSEE COMPANY AND BUILDING UP OF BRAND IDENTITY AND BRAND POPULARITY WAS VERY IMPORTANT FOR A COMPANY TO SUST AIN ITS PRODUCTS IN THE MARKET AND TO INCREASE ITS MARKET S HARE. HE EQUATED BRAND VALUE TO GOODWILL AND HELD THAT THE T ANGIBLE EFFECT OF BRAND VALUE WAS THE EXTRA PROFIT OVER A NU MBER OF YEARS WHICH COMPANIES NOT POSSESSING BRANDS DO NOT EARN AND THIS IS PARTICULARLY SO IN THE CONSUMER PRODUCTS SECTOR. HE HELD THAT THE BRAND VALUE DOES NOT MERELY PROVIDE A SHORT TER M ADVANTAGE TO THE ASSESSEE BUT CONFERS A BENEFIT OF ENDURING N ATURE AND THEREFORE, LIKE GOODWILL, IT HAS TO BE TREATED AS A CAPITAL ASSET. IN THIS VIEW OF THE MATTER, HE DISALLOWED THE EXPENDIT URE ON ADVERTISEMENT AND ON SALES PROMOTION WHICH AGGREGAT ED TO RS.10,77,32,000/-. 3. FOR SIMILAR REASONS THE AGGREGATE EXPENDITURE OF RS.8,73,19,000/- WAS DISALLOWED IN THE ASSESSMENT M ADE FOR THE ASSESSMENT YEAR 2001-02. IT MAY BE ADDED THAT I N THE ITA NOS.3063 & 954/MUM/06 3 ASSESSMENT ORDERS THE ASSESSING OFFICER SOUGHT TO B UTTRESS HIS CONCLUSION BY REFERENCE TO CERTAIN JUDGEMENTS, INCL UDING THE JUDGEMENT OF THE SUPREME COURT IN THE CELEBRATED CA SE OF ASSAM BENGAL CEMENT COMPANY LTD. VS. CIT,(1955) 27 ITR 34. 4. ON APPEAL, THE CIT(A) RECORDED A FINDING IN PARA GRAPH 9 OF HIS ORDER FOR THE ASSESSMENT YEAR 1999-2000 TO THE EFFECT THAT THE BRANDS NAMELY HALLS AND CHICLETS WERE THE PROPE RTY OF M/S. WARNER LAMBERT PHARMACEUTICAL COMPANY (USA) OF WHIC H THE ASSESSEE WAS A WHOLLY OWNED SUBSIDIARY PERMITTED TO MANUFACTURE AND MARKET THE PRODUCTS UNDER THE BRAND NAMES. HE ALSO RECORDED A FINDING THAT PRIOR TO 2 ND JULY, 1995 ON WHICH DATE THE ASSESSEE COMPANY WAS INCORPORATED AS AN IN DIAN COMPANY, THE BREATH FRESHENERS AND CHEWING GUM WERE BEING MANUFACTURED BY WARNER HINDUSTAN LTD. IN INDIA SINC E 1969 AND THUS HALLS AND CHICLETS WERE FAMILIAR BRANDS IN INDIA SINCE THAT YEAR, ALMOST FOR THREE DECADES. HE FURTHER NOT ED THAT THE EXPENDITURE WAS INCURRED FOR ADVERTISEMENTS AND SAL ES PROMOTIONS IN THE NEWSPAPERS, RADIO AND TELEVISION. HAVING RECORDED THESE FINDINGS, HE TOOK THE VIEW THAT THER E WAS NO QUESTION OF ASSESSEE COMPANY INCURRING EXPENDITURE ON ADVERTISEMENT AND SALES PROMOTION TO BUILD UP ANY B RANDS OF WHICH IT WAS NOT EVEN THE OWNER. HE HELD THAT THE E XPENDITURE WAS BEING INCURRED BY THE ASSESSEE EVERY YEAR AND I T WAS IN THE NATURE OF RECURRING EXPENDITURE IN THE REVENUE FIEL D AND CANNOT BE CONSIDERED AS CONFERRING ANY ENDURING ADVANTAGE TO THE ASSESSEE OR TO RESULT IN THE ACQUISITION OF ANY INT ANGIBLE ASSETS WITHIN THE MEANING OF THE STATUTORY PROVISION REFER RED TO BY THE ASSESSING OFFICER. HE ALSO OBSERVED THAT THE EXPEN DITURE ON ADVERTISEMENT AND SALES PROMOTION WERE CONSIDERED A ND ALLOWED BY THE ASSESSING OFFICER AS REVENUE EXPENDITURE. I N THIS VIEW OF THE MATTER, THE CIT(A) DIRECTED THE ASSESSING OFFIC ER TO ALLOW THE EXPENDITURE ON ADVERTISEMENT AND SALES PROMOTION AS REVENUE ITA NOS.3063 & 954/MUM/06 4 EXPENDITURE. THIS ORDER OF THE CIT(A) FOR THE ASSE SSMENT YEAR 1999-2000 WAS FOLLOWED BY HIM IN THE APPEAL FOR THE ASSESSMENT YEAR 2001-02 ALSO AND THUS THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN BOTH THE YEARS. 5. IT IS AGAINST THE AFORESAID DECISION OF THE CIT( A) THAT THE REVENUE HAS PREFERRED APPEALS TO THE TRIBUNAL. THE CONTENTION OF THE REVENUE BEFORE US IS THAT FIRSTLY THE CIT(A) HAS NOT DISCUSSED THE AUTHORITIES CITED BY THE ASSESSING OF FICER IN THE ASSESSMENT ORDER AND THUS THE IMPUGNED ORDERS ARE N ON- SPEAKING ORDERS, AND SECONDLY, THAT THE CIT(A) HAS FAILED TO APPRECIATE THAT FOR THE YEARS UNDER CONSIDERATION T HE SALES HAVE SHOWN DECLINE COMPARED TO THE EARLIER YEARS WHICH I NDICATES THAT THE OBJECT OF THE ASSESSEE IN INCURRING THE EX PENDITURE WAS NOT TO ADVERTISE OR PROMOTE ITS PRODUCTS. LASTLY, I T IS CONTENDED THAT THE ASSESSEE WAS ACTUALLY CREATING A BRAND IN INDIA AND IT WAS WITH THIS END IN VIEW THAT THE EXPENDITURE WAS INCURRED AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER. IT WA S THUS PLEADED THAT THE DISALLOWANCE OF THE EXPENDITURE FOR BOTH T HE YEARS SHOULD BE UPHELD. 6. THE CONTENTION OF THE ASSESSEE BEFORE US, ON THE OT HER HAND, IS THAT THE EXPENDITURE HAS BEEN ACCEPTED TO BE REVENUE IN NATURE AND ALLOWED IN THE ASSESSMENTS MADE FOR THE EARLIER YEARS WHICH ARE ALL SCRUTINY ASSESSMENTS AND THUS T HERE IS NO JUSTIFICATION FOR MAKING A DEPARTURE IN THE YEARS U NDER APPEAL. IT IS FURTHER CONTENDED THAT THERE IS NO DISPUTE RA ISED BY THE DEPARTMENT AGAINST THE FINDING OF THE CIT(A) THAT T HE ASSESSEE COMPANY WAS NOT THE OWNER OF THE BRANDS IN QUESTION AND THEREFORE THERE WAS NO QUESTION OF ANY BRAND BUILDI NG EXERCISE BEING CARRIED OUT BY THE ASSESSEE BY INCURRING THE EXPENDITURE. IT IS CONTENDED FURTHER THAT THE ASSESSEES CLAIM T HAT NO INTANGIBLE ASSETS WERE CREATED BY IT BY INCURRING THE ITA NOS.3063 & 954/MUM/06 5 EXPENDITURE AND THAT ADVERTISEMENT AND SALES PROMOT ION EXPENSES HAVE ALWAYS BEEN CONSIDERED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS IS SUPPORTED BY THE FOLLOWING AUTHORITIES:- I) CIT VS. BERGER PAINTS (INDIA) LTD., 254 ITR 503(CAL ) II) DCIT VS. CORE HEALTHCARE LTD., (2009) 308 ITR 263(GUJ) III) CIT VS. SALORA INTERNATIONAL (2009) 177 TAXMANN 456(DEL) IV) CIT VS. GEOFFREY MANNERS & CO.LTD. (2009) TIOL 93HC-MUM-IT(JUDGEMENT OF THE BOMBAY HIGH COURT, COPY FILED) 7. IN THE COURSE OF THE ARGUMENTS, OUR ATTENTION WA S ALSO DRAWN TO A CHART TO PROVE THE FACT THAT EVEN AS A P ERCENTAGE OF THE SALES, THE EXPENDITURE INCURRED CANNOT BE SAID TO BE UNREASONABLY HIGH AND THAT FOR THE ASSESSMENT YEAR 1999-2000, IT AMOUNTED TO 18.29% OF THE SALES AND FOR THE ASSE SSMENT YEAR 2001-02 IT AMOUNTED TO 13.61% OF THE SALES. 8. ON A CAREFUL CONSIDERATION OF THE RIVAL CONTENT IONS AND THE AUTHORITIES CITED BEFORE US, IT SEEMS TO US THA T THE DECISION OF THE CIT(A) ON THE ISSUE IS UNEXCEPTIONABLE AND R EQUIRES TO BE UPHELD. THERE IS A FINDING OF FACT RECORDED BY THE CIT(A) TO THE EFFECT THAT THE ASSESSEE COMPANY IS NOT THE OWNER O F THE BRANDS HALLS AND CHICLETS AND THAT IT WAS THE HOLDING COMP ANY IN USA WHICH OWNED THE BRANDS. THERE IS ALSO A FINDING REC ORDED BY HIM THAT BREATH FRESHENERS AND CHEWING GUM UNDER TH E AFORESAID BRAND NAMES WERE BEING MANUFACTURED IN I NDIA SINCE 1969 BY A COMPANY CALLED WARNER HINDUSTAN LTD. AND THUS THESE BRANDS WERE NOT UNFAMILIAR IN INDIA AND THERE FORE THERE WAS NO NEED FOR INCURRING ANY EXPENDITURE IN BUILDI NG THE ABOVE BRANDS IN INDIA. THESE FINDINGS HAVE NOT BEEN DISP UTED BEFORE US BY THE REVENUE. IF THAT IS SO, THE EXPENDITURE O N ADVERTISEMENT AND SALES PROMOTION MUST BE HELD TO H AVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES ITA NOS.3063 & 954/MUM/06 6 BUSINESS. LONG YEARS BACK, THE ALLAHABAD HIGH COUR T CONSIDERED THE QUESTION OF ALLOWABILITY OF ADVERTIS EMENT EXPENSES IN THE CASE OF HINDUSTAN COMMERCIAL BANK L TD., IN RE (1952) 21 ITR 853. IN THIS CASE, THE EXPENDITURE ON ADVERTISEMENT WAS INCURRED AT THE TIME WHEN NEW BRA NCHES OF THE BANK WERE OPENED AND INAUGURATED. THERE WAS THU S A SPECIAL ADVERTISEMENT CAMPAIGN WHICH WAS VIEWED BY THE REVENUE AUTHORITIES AS CONFERRING AN ENDURING BENE FIT UPON THE ASSESSEE. THIS VIEW WAS DISAPPROVED BY THE ALLAHABA D HIGH COURT AND REPELLING THE CONTENTION OF THE REVENUE THAT THE OPENING OF NEW BRANCHES WAS AN ADVANTAGE FOR THE EN DURING BENEFIT OF THE BANK AND WAS IN THE NATURE OF CAPITA L EXPENDITURE, THE HIGH COURT HELD (PAGE 363-364 OF THE REPORT) TH AT; EVERY EXPENDITURE INCURRED BY A BUSINESS CONCERN FOR THE PURPOSE OF ITS BUSINESS IS BOUND TO RESULT IN SOME BENEFITS TO ITS BUSINESS AND, THE MERE FACT, THAT THE BENEFIT IS NOT CONFINE D TO ONE YEAR, DOES NOT TO OUR MINDS ANSWER THE QUESTION. EVERY BU SINESSMAN WHO CARRIES ON BUSINESS WANTS TO CARRY ON HIS BUSIN ESS NOT ONLY AT THE SCALE AT WHICH HE HAD BEEN DOING SO BUT ALSO WANTS TO EXTEND IT AS MUCH AS HE CAN. IT IS ONE OF THE ORDIN ARY INCIDENTS OF A BUSINESS. ...... IT IS MERELY A CASE WHERE FO R THE PURPOSE OF EXTENDING THE BUSINESS NEW BRANCHES HAD BEEN OPENE D AND CERTAIN EXPENSES HAD BEEN INCURRED BY WAY OF ADVERT ISEMENT ETC. WE THINK THAT IT CANNOT BE SAID THAT AN EXPE NDITURE OF THIS KIND BRINGS IN AN ADVANTAGE FOR THE ENDURING BENEFI T OF THE TRADE AND IS, THEREFORE, CAPITAL EXPENDITURE. AT PAGE 36 7 OF THE REPORT, IT WAS FURTHER OBSERVED THAT; ADVERTISEMENT HAS NO W BECOME A VERY COMMON FEATURE OF EVERY BUSINESS AND THE AMOUN T IS ALWAYS SPENT TO FACILITATE THE BUSINESS AND TO GET BETTER RETURNS. NO CASE HAS BEEN CITED BEFORE US IN WHICH IT HAS BE EN HELD THAT THE AMOUNT SPENT IN A SPECIAL CAMPAIGN OF ADVERTISE MENT MUST NECESSARILY BE A CAPITAL EXPENDITURE. THIS DECISI ON OF THE ALLAHABAD HIGH COURT HAS BEEN REFERRED TO BY THE GU JARAT HIGH ITA NOS.3063 & 954/MUM/06 7 COURT IN DCIT VS. CORE HEALTHCARE LTD. (SUPRA), WHI LE COMING TO THE CONCLUSION THAT AN EXPENDITURE INCURRED BY CORE HEALTHCARE LTD. IN THE SUM OF RS.70 LAKHS AND ODD ON A SPECIAL ADVERTISEMENT CAMPAIGN IS ALLOWABLE AS REVENUE EXPE NDITURE. IN THAT CASE, THE OBJECTION OF THE DEPARTMENT WAS THAT THE EXPENDITURE WAS CAPITAL IN NATURE BECAUSE IT WAS IN CURRED ON A SPECIAL ADVERTISEMENT CAMPAIGN LAUNCHED FOR CREATIN G A CORPORATE IMAGE OF THE COMPANY AND WAS NOT INCURRE D FOR RUNNING THE EXISTING BUSINESS OF THE COMPANY (SEE P AGE 267 OF THE REPORT). THIS OBJECTION WAS REJECTED BY THE GUJ ARAT HIGH COURT APPLYING THE RULINGS OF THE SUPREME COURT IN EMPIRE JUTE COMPANY LTD., (1980) 124 ITR 1 AND ALEMBIC CHEMICAL WORKS COMPANY LTD., (1989) 177 ITR 377 IN WHICH IT WAS HE LD THAT THE NATURE OF THE ADVANTAGE OBTAINED BY THE ASSESSEE BY INCURRING THE EXPENDITURE HAS TO BE CONSIDERED IN A COMMERCIA L SENSE AND THE TEST OF ENDURING BENEFIT IS NOT A CERTAIN OR CO NCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY W ITHOUT HAVING REGARD TO THE PARTICULAR FACTS AND CIRCUMSTA NCES OF THE GIVEN CASE. AFTER ADVERTING TO THE ABOVE RULINGS AN D AFTER REFERRING TO THE JUDGEMENT OF THE ALLAHABAD HIGH CO URT (SUPRA), THE GUJARAT HIGH COURT HELD THAT THE ADVERTISEMENT EXPENSES INCURRED BY THE ASSESSEE ON A SPECIAL ADVERTISEMENT CAMPAIGN AT THE TIME OF INSTALLATION OF ADDITIONAL MACHINERY IN THE EXISTING LINE OF BUSINESS DID NOT RESULT IN ANY ENDURING BEN EFIT. IT NEEDS TO BE CLARIFIED THAT THE AFORESAID JUDGEMENT OF THE GUJARAT HIGH COURT WAS RENDERED AFTER THE MATTER WAS REMANDED TO THEM BY THE SUPREME COURT IN DCIT VS. CORE HEALTHCARE LTD. , (2008) 298 ITR 194. IN CIT VS. BERGER PAINTS (SUPRA) THE CALCUTTA HIGH COURT HELD THAT ADVERTISEMENT EXPENSES ARE NORMALL Y TO BE TREATED AS REVENUE EXPENDITURE SINCE THE MEMORY OF THE PURCHASING MARKET IS SHORT AND ADVERTISEMENT IS NEE DED FROM YEAR TO YEAR AND CANNOT BE MADE ONCE FOR ALL IN ANY SINGLE PARTICULAR YEAR. IN CIT VS. GEOFFREY MANNERS & CO . LTD.(SUPRA), ITA NOS.3063 & 954/MUM/06 8 THE ASSESSEE PRODUCED AN ADVERTISEMENT FILM TO PROM OTE ITS PRODUCTS. THE EXPENDITURE WAS INCURRED FOR PROMOTIO N OF FILMS, SLIDES, ADVERTISEMENT ETC. AND WAS CLAIMED AS A DED UCTION IN COMPUTING ITS PROFITS. THE INCOME TAX AUTHORITIES N EGATIVED THE ASSESSEES CLAIM, BUT THE TRIBUNAL ALLOWED THE SAME . APPROVING THE VIEW TAKEN BY THE TRIBUNAL, THE HONBLE BOMBAY HIGH COURT HELD THAT THE CORRECT TEST TO BE APPLIED IN SUCH A CASE WOULD BE, THAT IF THE EXPENDITURE IS IN RESPECT OF AN ONGOING BUSINESS OF THE ASSESSEE AND THERE IS NO ENDURING BENEFIT, IT C AN BE TREATED AS REVENUE EXPENDITURE. IF, HOWEVER, AND IF IT IS I N RESPECT OF BUSINESS WHICH IS YET TO COMMENCE THEN THE SAME CAN NOT BE TREATED AS REVENUE EXPENDITURE AS EXPENDITURE IS ON A PRODUCT YET TO BE MARKETED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE IS IN THE LINE OF MANUFACTURE AND SALE OF THE BREATH FRESHENERS AND CHEWING GUMS FOR MANY YEARS AND IT I S AN ONGOING BUSINESS. THE PRODUCTS ARE BEING SOLD BY TH E ASSESSEE AND THE SALES FIGURES ARE ALSO NOTED IN THE ASSESSM ENT ORDERS. IT IS NOT THEREFORE A CASE OF A COMPANY WHICH IS YET T O COMMENCE ITS BUSINESS OR MARKET ITS PRODUCTS. WE HAVE ALREAD Y SEEN ON THE BASIS OF THE JUDGEMENTS OF THE ALLAHABAD AND GU JARAT HIGH COURTS THAT THERE IS NO ENDURING BENEFIT DERIVED BY THE ASSESSEE BY INCURRING THE EXPENSES ON ADVERTISEMENT AND SALE S PROMOTION. IN THIS VIEW OF THE MATTER, WE ARE OF TH E VIEW THAT THE JUDGEMENT OF THE BOMBAY HIGH COURT APPLIES IN FAVOU R OF THE ASSESSEE. 9. THE LEARNED CIT DR CITED BEFORE US A RULING OF A UTHORITY FOR ADVANCE RULING IN FOSTERS AUSTRALIA LTD., IN R E (302 ITR 289) (AAR). WE HAVE GONE THROUGH THE RULING AND WE ARE INCLINED TO AGREE WITH THE SUBMISSION MADE ON BEHAL F OF THE ASSESSEE THAT THE AFORESAID RULING WAS RENDERED ON DIFFERENT FACTS. THE QUESTION THERE WAS WHETHER REGISTRATION OF THE AUSTRALIAN COMPANIES TRADEMARK IN INDIA IS ONE OF T HE RELEVANT ITA NOS.3063 & 954/MUM/06 9 FACTORS POINTING TO THE ROOTS IT HAD TAKEN AND THE RECOGNITION IT HAD GAINED IN INDIA AND WHETHER THIS AMOUNTS TO A B USINESS CONNECTION WITHIN THE MEANING OF SECTION 9(1)(I) O F THE INCOME TAX ACT. THIS RULING DOES NOT GOVERN THE PRESENT CA SE WHERE THE FACTS ARE DIFFERENT AND THE CONTROVERSY IS ALSO DIF FERENT. THE OTHER CRITICISM MADE BY THE LEARNED CIT DR THAT THE CIT(A) HAS NOT PASSED A SPEAKING ORDER IS ALSO NOT ACCEPTABLE, SINCE WE FIND THAT IN HIS ORDER FOR THE ASSESSMENT YEAR 1999-2000 HE HAS EXAMINED THE FACTS OF THE CASE IN CONSIDERABLE DETA IL AND HAS RECORDED ALL THE RELEVANT FACTS WHICH ARE NECESSARY FOR THE RESOLUTION OF THE CONTROVERSY. HE HAS ALSO REFERRE D TO THE ASSESSEES ARGUMENTS IN PARAGRAPH 8.1 OF HIS ORDER FOR THAT YEAR IN WHICH THE ASSESSEE HAS EXPLAINED HOW THE JUDGEM ENT OF THE SUPREME COURT IN THE CASE OF ASSAM BENGAL CEMENT CO.(SUPRA), CITED BY THE ASSESSING OFFICER, IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE FIND THAT IN SUB STANCE AND EFFECT THE ESSENCE OF THE AUTHORITIES CITED IN THE ASSESSMENT ORDERS HAS BEEN ADVERTED TO BY THE CIT(A). HIS ORDE RS CANNOT THEREFORE BE VULNERABLE TO THE CHARGE THAT THEY ARE NOT SPEAKING ORDERS. WITH RESPECT, WE REJECT THE CONTENTION OF T HE LEARNED CIT DR. 10. WITH REGARD TO THE QUESTION OF REASONABLENESS O F THE EXPENDITURE, THE SAME IS NOT IN DISPUTE BEFORE US. NO ARGUMENT WAS ADVANCED ON BEHALF OF THE DEPARTMENT THAT EVEN IF THE EXPENSES ARE ALLOWABLE AS REVENUE EXPENDITURE, A PA RT THEREOF SHOULD BE DISALLOWED AS EXCESSIVE OR UNREASONABLE. NEVERTHELESS, WE MAY REFER TO THE CHART FILED ON BE HALF OF THE ASSESSEE BEFORE US DURING THE HEARING FROM WHICH WE FIND THAT THE ASSESSEE HAS BEEN INCURRING THE ADVERTISEMENT A ND SALES PROMOTION EXPENSES SINCE THE ASSESSMENT YEAR 1996-9 7. IN THE THREE YEARS COMMENCING FROM THIS YEAR, THE PERCENTA GE OF THE EXPENDITURE TO THE SALES AMOUNTED TO 28.07%, 26.70% AND ITA NOS.3063 & 954/MUM/06 10 27.93% AND THE EXPENDITURE HAVE BEEN ALLOWED IN THE ASSESSMENTS MADE UNDER SECTION 143(3) OF THE ACT AS STATED BEFORE US ON BEHALF OF THE ASSESSEE. FOR THE YEARS UNDER APPEAL BEFORE US, THE PERCENTAGE OF THE EXPENDITURE TO THE SALES IS MUCH LOWER AT 11.08% AND 13.61% RESPECTIVELY FOR TH E ASSESSMENT YEARS 1999-2000 AND 2001-02. THE EXPEND ITURE DOES NOT APPEAR TO US TO BE UNREASONABLY HIGH OR EX CESSIVE SO AS TO PROVOKE FURTHER EXAMINATION. 11. IN THE LIGHT OF THE DISCUSSION MADE ABOVE, IT F OLLOWS THAT THE PROVISIONS OF SECTION 32(1)(II) OF THE ACT, AS AMENDED BY THE FINANCE (NO.2) ACT, 1988 WITH EFFECT FROM 1.4.1999 ARE NOT APPLICABLE TO THE PRESENT CASE. THE ASSESSEE HAS N OT ACQUIRED ANY INTANGIBLE ASSET ON OR AFTER 1.4.1998 SO THAT O NLY DEPRECIATION WILL BE ALLOWED ON THE SAME AND NOT TH E EXPENDITURE INCURRED IN ACQUIRING THEM. THE EXPENDI TURE WAS INCURRED BY THE ASSESSEE IN THE REVENUE FIELD AND N OT IN THE CAPITAL FIELD, NOR DID THE ASSESSEE ACQUIRE ANY ASS ET, TANGIBLE OR INTANGIBLE, BY INCURRING THE EXPENDITURE ON ADVERTI SEMENT AND SALES PROMOTION. 12. FOR THE ABOVE REASONS WE HOLD, CONCURRING WITH THE ORDERS OF THE CIT(A), THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ADVERTISEMENT AND SALES PROMOTION FOR THE ASSESSMEN T YEAR 1999-2000 AND 2001-02 IS ALLOWABLE AS REVENUE EXPE NDITURE. WE UPHOLD THE ORDERS OF THE CIT(A) AND DISMISS THE APPEALS FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON THIS 3 1 ST DAY OF DECEMBER, 2009. SD/- (B.RAMAKOTAIAH) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 31 ST DECEMBER, 2009. SOMU ITA NOS.3063 & 954/MUM/06 11 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-7, MUMBAI. 4. THE CIT(A)-XXX, MUMBAI 5. THE DR G BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI