TaxTMI 
TaxTMI 
2013 (1) TMI 264
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....nd void and uncalled for. 3. That in the facts and circumstances of the case of the appellant firm the order of the learned CIT(A) in upholding disallowance of Rs.2,50,000/- out of advertisement and sales promotion expenses is altogether arbitrary, illegal and uncalled for. 4. That the learned CIT(A) has grossly erred in confirming disallowances of Rs.15,334/- in respect of written of assets and Rs.19,254/- in respect of receivables which is arbitrary and uncalled for. 5 That the order of the learned CIT in confirming disallowance of 1/4th car expenses and depreciation at Rs.21,055/- is arbitrary and uncalled for." I.T.A. no.735/Del./2011[AY 2005-06] 1. "That the order of the learned CIT(A) is against law and facts. 2. That in the facts and circumstances of the case of the appellant firm the order of the learned CIT(A) in confirming disallowance of Rs.2.01.648/- out of advertisement expenses is altogether arbitrary, illegal and void and uncalled for. 3. That in the facts and circumstances of the case of the appellant firm, the order of the learned C....
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....firming disallowance of repairs and maintenance expenses of Rs.62,924/- is altogether arbitrary and uncalled for. 6. That the learned CIT(A) has grossly erred in confirming disallowances of Rs.75,000/- suffered in respect of sale of vehicles is illegal and uncalled for." Liberty Enterprises I.T.A. no.738/Del./2011 [AY 2004-05] 1. "That the order of the learned CIT(A) is against law and facts. 2. That in the facts and circumstances of the case of the appellant, the order of the learned CIT(A) in confirming disallowance of advertisement expenses amounting to Rs.3,39,547/- is altogether arbitrary, illegal and void and uncalled for. 3. That the order of the learned CIT(A) in upholding disallowance of 1/4th car expenses and depreciation is arbitrary and uncalled for. 4. That in the facts and circumstances of the case of the appellant the order of the learned CIT(A) in confirming disallowance of claim of actual bonus expenses paid at Rs.1,72,951/- is altogether arbitrary, illegal, void and uncalled for. 5 That the learned CIT (A) has further erred in c....
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....and facts. 2. That the order of the learned CIT(A) in confirming disallowance of car expenses and depreciation at 1/4th of expenses at Rs.2,74,000/- is altogether arbitrary, illegal and void and uncalled for. 3. That the order of the learned CIT(A) in confirming disallowance of Rs.1,83,178/- out of advertisement and publicity expenses is arbitrary, illegal and uncalled for. 4. That the learned CIT(A) has further erred in upholding disallowances of Rs.67,790/- out of business promotion expenses which is arbitrary and uncalled for. 5 That the order of the learned CIT(A) in upholding disallowance in respect of written off unrealized securities amounting to Rs.34,740/- is altogether, arbitrary, illegal and uncalled for." I.T.A. Nn.742/Del./2011 [AY 2006-07] 1. "That the order of the learned CIT(A) is against law and facts. 2. That in the facts and circumstances of the case of the appellant the order of the learned CIT(A) in confirming disallowance of depreciation on car amounting to Rs.60,054/- is highly arbitrary, illegal and void and uncalled for. ....
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....1) of the Income-tax Act, 1961 (hereinafter referred to as the Act), was selected for scrutiny with the service of a notice u/s 143(2) of the Act issued on 10.5.2005. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee firm, hitherto engaged in the business of footwear and other goods, entered into a trademark license agreement dated 31.3.2003 with M/s Liberty Shoes Ltd., Karnal [LSL],making available 'Liberty' brand exclusively to LSL w.e.f 1.4.2003. and the previous agreement in operation w.e.f. 1.4.2001 was cancelled. This agreement further mentioned that LSL had been using the brand since 1986 and shall continue to use it till perpetuity irrespective of this agreement. The agreement dated 31.3.2003, stated to be valid for a period of 7 years, granted exclusive licence for a period of 7 years to use the trademark globally on and in connection with the goods manufactured or sold by or for the L.S.L. in accordance with the LFC's minimum quality standard and manufacturing specifications. In lieu of granting the exclusive licence, LSL. during the term of this agreement agreed to pay licence fees as per terms referred to in cla....
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....; "1.05 The issue is considered. It is noted that the same is covered by the consolidated order dated 03.09.2010 of this office in the case of the appellant for the Asstt. Years 2001-02,2002-03 & 2003- 04 The relevant para 4.03 and 4.04 from that order is reproduced below:- "The issue is examined. The AO held that the royalty received is to be taxed under the head income from other sources'. The appellant challenged the findings of the AO on the basis of the order of the CIT(A)-I, Ludhiana in its case for the A. Y.2000-01. The order relied upon by the appellant is referred to. It is noted that the CIT(A) decided the issue in favour of the department and held royalty income is to be assessed under the head Income from other Sources'. Relevant extracts there from is extracted below:- "The next ground of appeal is regarding Royalty Income for Trade Brand. The Learned Counsel has submitted that the income was generated during the course of business only and hence be allowed. The Assessing Officer has, however, noted in the assessment order that this income as treated as income from 'Other Sources' in the earlier ....
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....have heard both the parties and gone through the facts of the case as also the decision relied upon by the ld. AR. Indisputably, the income from royalty in respect of Liberty brand earlier used by the other group entities has been assessed under the head 'Income from Other Sources' and the decision of the AO/ld. CIT(A) has been accepted by the assessee. The aforesaid agreement dated 31.12.2003 further mentioned that LSL had been using Liberty brand since 1986 and shall continue to use it till perpetuity irrespective of the said agreement. Though the assessee tried to distinguish the facts on the ground that in the year under consideration exclusive right of use of brand 'Liberty' was allowed to Liberty Shoes Ltd., the assessee did not explain as to how this fact can change the nature of income. Accordingly, following the past history of the case and orders of his predecessors, the ld. CIT(A) held that fees received in lieu of allowing the use of brand 'Liberty' is to be assessed under the head 'Income from other sources'. In nutshell right since 1986, the income from Liberty brand has been assessed under the head ' Income from Other Sources'. The plea of the ld. AR that income on a....
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....hout jurisdiction. The Hon'ble High Court noticed that while deciding I.T.R. No. 35 of 1991 in CIT v. Rieta Biscuits Co. Pvt. Ltd. arising out of orders passed by the Tribunal for the assessment year 1983-84 on the issue of entitlement to deductions under section 32A of the Act, the issue was decided in favour of the assessee and against the Revenue. Accordingly, keeping in view the principles of consistency once the issue on the merits has been decided against the Revenue on the same issue during the subsequent assessment years, Hon'ble High Court did not take a different view on a technical reason. This decision rather supports the case of Revenue, the assessee having all along accepted that income from royalty for use of Liberty brand by LSL since 1986 is to be assessed under the head 'Income from Other sources'. In view of the foregoing, especially when the ld. AR did not place before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no.2 in the appeal of the assessee in Liberty Footwear Company for the AY 2004-05 is dismissed. 8. Ground no.3 i....
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....d the amount in the absence of any evidence that these related to the business of the assessee, all the business activities having already been transferred to Liberty Shoes Ltd. 9. On appeal, the ld. CIT(A) upheld the findings of the AO in the case of Liberty Footwear Company in the AY 2004-05 in the following terms:- "4.02 Relevant extracts from the written submissions filed by the appellant are extracted below:- A.O. has proceeded to disallow some of Rs..2,50,000/- on ad hoc basis out of advertisement from business promotion expenditure incurred during the year. The expenditure was for celebration of Golden Jubliee for promotion of brand held exclusively for propagation of brand publicity and rejoicing of event and expenditure incurred was allowable fully and A. O. had no reason or base to make it an adhoc disallowance. Your honour will kindly appreciate that without any reason of assigning adhoc disallowance as has been done by A.O. On the basis of past history of the assessee never disallowance was ever made out of advertisement and publicity in such a manner. " 4.03 The appellant vide ....
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....5 31.3.2004 To bill No.186 of Expomatrix and Co. for Image Fashion Show11-14Fby,2004, Rs.329259.00(-) D/note 40000. 289259 31.3.2004 To amount paid to Adayar Hotel Ltd. Chennai & Taj Krishan, Hydeabad thro. Anupam Bansal. 18959.96 4.06 It is further noted that, the following bills are in the name of Liberty Shoes Ltd., Karnal instead of appellant, i.e., Liberty Footwear Co.:- Date Particulars Amount 19.2.2004 To bill No.10686 of Lachhman Dass Co., Delhi; c/o 502 pcs. Medal Gold plated. 15180.48 31.3.2004 To bill no.17128 of Luxmi Studio & Color Lab; 9579.60 31.3.2004 Anupam Bansal c/o Liberty Shoes Ltd. 215000 31.3.2004 To bill of Aadi Media Services, New Delhi 13824 31.3.2004 To bill No.2591/01-03 expenses for fashion show at the Grand Vasant Kunj in the name of Liberty Group 24940 4.07 In view of the facts discussed above, it is held that appellant has not been able to establish with the help of the relevant documents that the entire expenses were incurred for the purpose of its business and hence adhoc disallowance out of these expenses made by the A.O. is confirmed." 9.1 In the case of Liberty Foot....
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....curred for business, specifically in view of the fact that the appellant has not carried out any business during the year under consideration. In view of these facts, it is held that the appellant has not been able to establish that these expenses were incurred for business and hence disallowance thereof made by the Assessing Officer, is hereby confirmed." 9.2 In the AY 2006-07 in the case of Liberty Footwera Company, the ld. CIT(A) concluded as under: "3.03 The issue is considered. The appellant enclosed the copy of relevant bills which are in the name of Liberty Shoes Ltd..The appellant further enclosed a copy of its letter dated 24.3.2008 filed before the AO during assessment proceedings, wherein nature of expenses specified as;"expenditure relates to cost of liberty folded, "leaflets with envelops". 3.04 As discussed above, that the appellant has granted the exclusive use of brand 'Liberty' to its sister concern, w.e.f 1.4.2003 and hence cost of Liberty Folded leaflets and envelops etc. cannot be said for the business of the appellant and hence disallowance thereof made by the AO is hereby confirmed." 9.3 In the case of Liberty ....
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.... 25 Taxman.com 257( Delhi). 11. We have heard both the parties and gone through the facts of the case. As is apparent from the aforesaid facts in the case of Liberty Footwear Company in the AY 2004-05, the AO made an adhoc disallowance while the ld. CIT(A) called for the relevant bills and vouchers. Since the assessee failed to produce certain bills referred to in para 4.05 of the impugned order for the AY 2004-05 while bills mentioned in para 4.06 of the said order were in the name of Liberty Shoes Ltd., the ld. CIT(A) upheld the disallowance. The ld. AR ,though referred us to the details placed in the paper book, did not explain as to why the relevant bills and vouchers were not placed before the lower authorities. Even before us situation is no better. In the absence of relevant bills , we are not inclined to interfere with the findings of the ld. CIT(A) in the AY 2004-05.In the AY 2005-06, the assessee did not dispute the findings of the AO that since the assessee has given all the rights to Liberty Shoes Ltd., it did not carry on any business in the period relevant to AY 2005-06, before the ld. CIT(A) and even before us. Even bills for these expenses were not placed before ....
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....ssee Liberty Group Marketing Division, did not explain even the nature of liability nor as to how it related to the business of the assessee. The ld. AR on behalf of the assessee did not place before us any material , controverting these findings of the ld. CIT(A) so as to enable us to take a different view in the matter. Therefore, ground nos. 3 & 4 in the appeal for the AY 2004-05 as also ground n.4 in the appeal for the AY 2006- 07 in the case of Liberty Group Marketing Division are dismissed. 12. Ground no.4 in the appeal for the AY 2004-05 in Liberty Footwear Company relates to disallowance of Rs.15,334/- in respect of written of assets and Rs.19,254/- in respect of receivables. The AO disallowed these amounts in the absence of any proof relating to these amounts. 13. On appeal, the ld. CIT(A) upheld the disallowance in the following manner:- "5.00 Ground of appeal No.6 is as under:- That addition of Rs..34,588/- for assets written off and receivable written off is uncalled for. 5.01 Relevant para 6 from the order of A.O. is reproduced as under:- &nb....
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....assessee did not carry on any business in these years. 16.2 Likewise as per ground no.3 in the AY 2004-05 in the case of Liberty Enterprises, the AO disallowed 1/4th car expenses and depreciation amounting to Rs.7,70,075/- for personal use of car while as per ground no. 2 in the respective appeals, Rs.3,09,943 on account of depreciation on car in the AY 2006-07 & Rs.5,73,395/- in the AY 2007-08 was disallowed on the ground that the assessee did not carry on any business in these years. 17. On appeal, the ld. CIT(A) upheld the disallowance in the AY 2004- 05 in the case of Liberty Footwear Company, since no business was carried on by the assessee as admitted by the assessee in para 2(i) of their letter dated 9th November, 2010 . 17.01 Similarly in the case of Liberty Footwear Company in the AY 2006- 07, the ld. CIT(A) upheld the disallowance in the following terms:- "2.03 The issue is considered. The facts as discussed above are that the appellant hired out its entire business to M/s Liberty Shoes Ltd. with the stipulation that during the term of agreement, no business would be carried out by the appellate firm. It is, therefore, difficult to appreciat....
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....7 in Liberty Group Marketing Division ,the ld. CIT(A) concluded as under: "3.04 The issue is considered. The appellant per para 6 of its letter dated 17.3.2008 filed before the Assessing Officer during assessment proceedings submitted as under:- "That all the cars of the firm are being used by the Directors of Liberty Shoes Ltd. And also by partners in the course of their regular obligation to carry out administrative, manufacturing and sales activities, for which Franchise is paid to the firm". 3.05 The Assessing Officer disallowed the claim of car expenses and of car depreciation on the ground that entire business has been hired out to Liberty Shoes Limited and hence purchase and use of car was held not to be for business purposes of the appellant. The appellant in the written submissions submitted that all cars were used by the Directors of the Liberty Shoes Ltd. and also by its partners to carry out administrative, manufacturing and sales activities. The appellant has, however, not brought on record any evidence such as log book etc. in support its claim of use of cars for its business pur....
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.... quoting the submissions of the assessee that all cars were used by the Directors of the Liberty Shoes Ltd. and also by its partners to carry out administrative, manufacturing and sales activities and the assessee having not produced any evidence such as log book etc. while the entire business was let out as a going concern to Liberty Shoes Ltd. with the stipulation that the assessee firm will not engage itself in the business (clause 4(a) of the Agreement), the ld. CIT(A) upheld the disallowance. Since the ld. AR on behalf of the assessee did not place before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter, accordingly, the aforesaid grounds relating to disallowance of car expenses and depreciation on car, are dismissed. 20. Ground no.4 in the appeal in Liberty Footwear Company for the AY 2005- 06 relates to the disallowance of depreciation of Rs.38,946/- in respect of Central House and Saharanpur Office .The AO disallowed the depreciation, the assessee having transferred all its assets to Liberty Shoes Ltd. 21. On appeal, the ld. CIT(A) upheld the findings of the AO in the following terms:- ....
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....Anand & Anand for renewal of registration of 'Liberty' brand. Since the assessee transferred all the rights to use the trade mark to Liberty Shoes Ltd., the AO disallowed the claim. 25. On appeal, the ld. CIT(A) upheld the disallowance in the AY 2006-07 in the case of Liberty Footwear Company in the following terms "5.04 The issue is considered. The appellant claimed that the payment of 3,00,844/- was made to Anand & Anand, Advocates, New Delhi for renewal of Registration of 'Liberty'. No evidence in support of this claim inter alia, bills of Law Firm, M/s Anand & Anand, Advocates, New Delhi and correspondence, if any carried out with the competent Authority etc. in this regard has been brought on record. It is also difficult to appreciate that trademark/patent is required to be renewed every year. Further clause4(f) of the agreement reads as under; Reimbursement of Expenses: The LFC shall have the right of reimbursement from the LSL of all reasonable expenses incurred by the LFC on behalf of LSL during the terms of this Agreement of any renewal thereof in connection with the maintenance of the Trade Mark in the T....
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.... can be owned by two firms nor the assessee furnished a copy of relevant bills of the advocate in order to ascertain the exact nature of services rendered by the said advocate. Accordingly, the ld. CIT(A) upheld the disallowance. Since the ld. AR on behalf of the assessee did not place before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take different view in the matter, we are not inclined to interfere . Accordingly, ground no.4 in the appeals in the case of Liberty Footwear Company for the AYs 2006-07 & 2007-08 as also ground no.4 in the appeal for the AY 2007-08 in the case of Liberty Group Marketing Division are dismissed. 28. Next ground no.3 in the appeal in the case Liberty Footwear Company for the AY 2007-08 relates to disallowance of property tax of Rs.69,995/-.The AO disallowed the amount since property was used by Liberty Shoes Ltd. 29. On appeal, the ld. CIT(A) upheld the disallowance in the following terms' " The issue is considered. The appellant claimed to have paid property tax to the MC Delhi for the buildings situated at 4/42 & 11/51,Punjabi Bagh, New Delhi. The appellant as per letter da....
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....ppeal, the assessee, inter alia, contended that the AO himself allowed exgratia for the same staff, he did not allow bonus. However, the ld. CIT(A) while detailing the bonus account given in para 3.14 of the impugned order, rejected the claim for deduction on the ground that the amount included Rs.27,000/- on account of bonus payable and thus, the claim that the amount was claimed on payment basis was not correct. Since the assessee did not furnish any evidence that the amount was claimed on payment basis while Rs.24,000/- was claimed by specifying the salary of the last year, the ld. CIT(A) upheld the findings of the AO. 35. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee merely reiterated their submissions before the ld. CIT(A) while the ld. DR supported the findings of the ld. CIT(A). 36. We have heard both the parties and gone through the facts of the case. Indisputably and as pointed out by the ld. CIT(A), the assessee did not furnish any evidence before the lower authorities that the amount was claimed on payment basis. The ld. AR claimed that exgratia paid to same staff had been allowed by t....
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....O disallowed the claim for depreciation on additions to the building, having not been used for the purpose of business of the assessee. 41.2 In ground no.5 in the appeal for the AY 2006-07 in Liberty Group Marketing Division, the issue relates to disallowance of depreciation of Rs.77,084 on additions to building. The AO disallowed the claim, the building. having not been used for the purpose of business of the assessee. 42. On appeal, the assessee Liberty Enterprises, inter alia, contended in the AY 2006-07 that building i.e. Administrative block at Gharaunda was used by a public limited company i.e. Liberty Shoes Ltd..In the light of submissions of the assessee, the ld. CIT(A) upheld the findings of the AO in the following terms:- "The issue is considered. The appellant claimed to have constructed the new building costing Rs.25,58,690/ - and further for Rs.21,41,660/- during the year under consideration and claimed depreciation thereon. The AO disallowed the claim of depreciation on the addition of new building claimed to be made during the year on the ground that the same was not said to be used for purpose of business of the appellant besides the fact....
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....er, we are not inclined to interfere. Accordingly, .ground no.3 in the appeal in the case Liberty Enterprises for the AYs 2006-07 & 2007- 08 as also ground no.5 in the appeal for the AY 2006-07 in Liberty Group Marketing Division, are dismissed. 45. Ground no.4 in the appeal in the case Liberty Enterprises for the AY 2006-07 relates to claim of passenger tax of Rs.2,21,110/-.The AO disallowed the claim, the assessee having transferred its business activities to M/s Liberty Shoes Ltd. while bus was transporting the employees of the said company and no expenses on a/c of diesel/petrol or driver's salary had been claimed. In nutshell, the AO concluded that the liability was of the said company. 46. On appeal, the ld. CIT(A) upheld the findings of the AO in the following terms: "4.02 Relevant extracts from the written submissions filed by the appellant are as under:- "The appellant encloses herewith a copy of his reply dt.18.3.2008 filed in asstt. Proceedings as also details of Passenger tax paid account (Ref Para 3 of our letter). Kindly treat the same as our submissions in this ground of appeal while appreciating the facts, franchise ....
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....s Ltd. and the liability was of the said company. 50. On appeal, the ld. CIT(A) upheld the findings of the AO, the assessee having not justified the claim in view of letting out of .its entire business as a going concern and expenses were now required to be met by the lessee. 51. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. AR reiterated their submissions before the lower authorities while the ld. DR supported the findings in the impugned order of the ld. CIT(A). 52. We have heard both the parties and gone through the facts of the case. Indisputably. the entire business activities of the assessee have been transferred to M/s Liberty Shoes Ltd., to whom the assessee leased out its entire assets, including the building. Since the ld. AR on behalf of the assessee did not dispute the aforesaid findings of facts recorded by the ld. CIT(A) nor placed before us any material, controverting the aforesaid findings of the ld. CIT(A), so as to enable us to take different view in the matter, we are not inclined to interfere . Accordingly, .ground no.5 in the appeal in Liberty Enterprises for the AY 2006-07, is dismissed. 53. Ground....
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....he aforesaid findings of the ld. CIT(A).The ld. AR on behalf of the assessee merely reiterated their submissions before the lower authorities while the ld. DR supported the findings in the impugned order of the ld. CIT(A). 60. We have heard both the parties and gone through the facts of the case. As is apparent from the aforesaid facts, the assessee did not adduce any justification for these expenses before the AO while before the ld. CIT(A) it was claimed that legal charges were paid against challenging performance of the business agreement in the Court. However, no documents/evidence in support of this claim were placed before the ld. CIT(A). The situation is no better before us. The ld. AR on behalf of the assessee did not refer us to any such document, evidencing that services were rendered by the aforesaid three persons in relation to performance of the business agreement nor as to how this agreement relates to the assessee. In these circumstances, especially when the ld. AR on behalf of the assessee did not place before us any material, controverting the aforesaid findings of the ld. CIT(A), so as to enable us to take different view in the matter, we are not inclined to in....
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....dition to furniture made by the AO is hereby confirmed" 67. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. AR merely reiterated their submissions before the lower authorities while the ld. DR supported the findings in the impugned order of the ld. CIT(A). 68. We have heard both the parties and gone through the facts of the case. Indisputably, the furniture and fixture purchased by the assessee was used by Liberty Shoes Ltd. and not for the business purposes of the assessee. Since the ld. AR on behalf of the assessee did not dispute these findings of facts recorded by the ld. CIT(A) nor placed before us any material, controverting the aforesaid findings of the ld. CIT(A), so as to enable us to take different view in the matter, we are not inclined to interfere. Therefore, ground no.6 in the appeal in the case of Liberty Group Marketing Division for the AY 2006-07 is dismissed 69. Next ground no. 5 in the appeal in the case of Liberty Group Marketing Division for the AY 2007-08 relates to disallowance of Rs.4,22,025 on account of establishment expenses. The AO disallowed the establishment expenses of Rs.4,22,025 out of Rs.1,5....