THE COMMISSIONER OF INCOME TAX V. M/S INDO NISSIN FOODS LTD

ITA/361/2007

AI Insights

The case involves multiple Income Tax Appeals (ITAs) filed by the Commissioner of Income-Tax and the Joint Commissioner of Income-Tax against Indo Nissin Foods Ltd, concerning the nature of expenditures claimed by the respondent for the assessment years 1998-99, 1999-00, and 2001-02. The primary legal issue was whether the expenditures on television advertisement and film production amounted to capital expenditure, which would provide an enduring benefit, or revenue expenditure, which would be deductible in the year incurred. The ITAT had previously ruled in favor of the respondent, leading to the Revenue's appeal to the High Court.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 702943 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 06-11-2012
• Assessment Year: misc
• Other Referred Cases: Assam Bengal Cement Co. Ltd. Vs. Commissioner of Income Tax (1955) 27 ITR 34 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VANI
• Assessee Lawyers: M V SESHACHALA; K V ARAVIND
• Keywords: Advertisement expenditure; Capital expenditure; Enduring benefit; Revenue expenditure
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 06TH DAY OF NOVEMBER, 2012 PRESENT THE HON’BLE MR.JUSTICE K. SREEDHAR RAO AND THE HON’BLE MR.JUSTISCE B.V.PINTO INCOME-TAX APPEAL NO.361 OF 2007 C/W ITA NOS. 360 OF 2007 & 243 OF 2007 IN ITA NO.361 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R. BUILDING QUEENS ROAD BANGALORE 2. THE JOINT COMMISSIONIER OF INCOME-TAX(ASSTS) SPECIAL RANGE- 6 C.R. BUILDING QUEENS ROAD BANGALORE ... APPELLANTS (BY SRI.M V SESHACHALA) AND: M/S INDO NISSIN FOODS LTD RANKA CHAMBERS, ® 2 IV FLOOR, 31 CUNNINGHAM ROAD BANGALROE-560 052 ... RESPONDENT (BY SMT.VANI H, ADV. ) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 11-10-2006 PASSED IN ITA NO. 3487/BNG/2004, FOR THE ASSESSMENT YEAR 1998-99, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO. 3487/BNG/2004,DATED 11-10-2006 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX (ASSTS), SPECIAL RANGE-6,BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA NO. 360 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R. BUILDING QUEENS ROAD BANGALORE 2. THE JOINT COMMISSIONER OFINCOME TAX CIRCLE -11 (3) C.R. BUILDING QUEENS ROAD BANGALORE ... APPELLANTS (BY SRI. K V ARAVIND, ADV.) 3 AND: M/S INDO NISSIN FOODS LTD RANKA CHAMBERS, IV FLOOR, 31 CUNNINGHAM ROAD BANGALROE-560 052 ... RESPONDENT (BY SMT.VANI H, ADV.) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 11-10-2006 PASSED IN ITA NO.3488/BNG/2004, FOR THE ASSESSMENT YEAR 1999-00, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.3488/BNG/2004,DATED 11-10-2006 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE- 11(3),BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA NO. 243 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R. BUILDING QUEENS ROAD BANGALORE 2. THE JOINT COMMISSIONER OFINCOME TAX CIRCLE -11 (1) BANGALORE ... APPELLANTS (BY SRI. K V ARAVIND, ADV.) 4 AND: M/S INDO NISSIN FOODS LTD 3RD FLOOR,CENTENARY BUILDING 28, M G ROAD BANGALROE ... RESPONDENT (BY SMT.VANI H, ADV.) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 11-08-2006 PASSED IN ITA NO.3562/BANG/2004 FOR THE ASSESSMENT YEAR 2001-02, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.3562/BANG/2004 DATED 11-08-2006 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER & CONFIRM THE ORDER PASSED BY THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THESE APPEALS ARE COMING ON FOR FINAL HEARING THIS DAY, SREEDHAR RAO J., DELIVERED THE FOLLOWING:- J U D G M E N T The assessee incurred expenditure for television advertisement film production. The assessee claimed deduction of the said amount as revenue expenditure. The Assessing Officer in the previous year had allowed the deduction but for the assessment year 1998-99, 5 disallowed the expenditure on the ground that the Commissioner has taken a view that the said expenditure amounts to enduring benefit and constitutes a capital expenditure. The Commissioner of Income Tax (Appeals) has confirmed the order. The Tribunal has set aside the order and allowed the deduction. The Revenue aggrieved by the said order has filed this appeal. 2. Sri K.V.Aravind, learned Counsel for the Revenue relied upon the decision of the Supreme Court in Assam Bengal Cement Co. Ltd. Vs. Commissioner of Income Tax reported in (1955) 27 ITR 34 (SC) to contend that any expenditure which has the character of handing out enduring benefit would constitute a capital expenditure. The following substantial question of law is same for consideration which read thus:- “Whether the Tribunal was correct in holding that the expenditure incurred in TV advertisement of Rs.2,10,801/- and in film production of Rs.1,05,78,202/- are revenue in 6 nature and not a capital expenditure as held by the Assessing Officer?” 3. The test of enduring benefit enunciated by the Supreme Court in the above cited case as no application to the facts of the case in hand. The expenditure incurred is dominantly for advertisement to promote the sales. If the contention of the Revenue is upheld, any expenditure incurred for marketing and promoting sales should have to be held as ‘capital expenditure’ and in no case, the deduction can be allowed. Such a contention is illogical and untenable. In the cited case, the compensation was paid during the whole period of lease as protection fees in consideration of which the lesser undertook not to grant any lease, permit or prospecting licence for limestone for the manufacture of cement, in a group of quarries. The said payment of protection fee was held to be a capital expenditure. In the instant case, the facts stand on a different footing. In that view, 7 the substantial question of law is answered against the Revenue. Accordingly, the appeal is dismissed. Sd/- JUDGE Sd/- JUDGE nvj "