TaxTMI 
TaxTMI 
TaxTMI 
2013 (7) TMI 657
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....e assessee and therefore, the expenses relatable thereto were not for the business purpose of the assessee and in the alternative were capital in nature ? [D] Whether the Appellate Tribunal has substantially erred in not appreciating that the Brand Rasna was not owned by the assessee and any advertisement expenses incurred for augmenting the brand value cannot be considered to be wholly and exclusively for the purpose of its own business ? [E] Whether the order of the Appellate Tribunal is perverse on facts since it has not considered the fact that the Rasna Branch is not owned by the assessee ? From the judgment of the Tribunal under challenge, we noticed that the Tribunal relied on its earlier decision in case of this very assessee to rule in favour of the respondent. Learned counsel for the Revenue candidly pointed out that such earlier decision of the Tribunal was carried in appeal by the Revenue in Tax Appeal No. 352 of 2012, which was dismissed by Order dated 30th October 2012, making following observations :- 5. The facts are not in dispute. The assessee had claimed advertisement expenses incurred by it for promotion of its products under the Rasna brand....
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....rsonal expense, nor does it fall within any of the exceptions carved out under sub-section (2B) of the Act. Thus, the expenditure in question does satisfy the requirements of section 37 of the Act. Is it then permissible for the revenue to go beyond the statutory provision and say that such expenditure is not incurred wholly and exclusively for the purpose of the assessees business merely because incidentally the owner of the brand and other manufacturers of products under the same brand name also obtain some benefit because of such advertisements? 8. At this juncture, it may be germane to refer to the decision of this court in Commissioner of Income Tax, Gujarat II v. Raipur Manufacturing Company Ltd., (supra) on which reliance has been placed by the learned counsel for the assessee. The facts of the said case were that the Raipur Mills Employees' Co-operative Credit Society Ltd., was established for the benefit of the employees of the assessee-company, Raipur Manufacturing Co. Ltd., and the members of the society were employees of the assessee-company. The managing committee of the society consisted of the officers of the assessee-company nominated by the assessee a....
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....lp the society nor out of any philanthrophical motives but purely from a business point of view. We find that there were two alternatives before the assessee-company, viz., one to stick to its legal rights and to resist all the demands of the workers to get reimbursement from the funds of the company, and thus to invite the possibility of a strike, stoppage of work and rowdyism in the mill premises and, as a result of this, a substantial loss in production. The second alternative was to make some sacrifice and thus to purchase peace so that the company could go on with its production and would thereby be able to make its usual profits with the co-operation of its workers. The company has obviously chosen the second alternative which to the best of its judgment was more conducive to its business interests. " Thus, the finding of the Tribunal was that this payment was made by the assessee-company to buy peace and to see that the employees were contented and that there was no disturbance in the smooth working of its factory because of strike, stoppage of work or rowdyism in the mill premises. There are a large number of decisions laying down as to what is business expedienc....
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....tion to do. But, even a voluntary act if performed for commercial expediency would still be an expenditure falling within section 10(2)(xv) if it can be shown that it was intended for the purpose of making or increasing the profits of the assessee-company. It has also been urged that the payment has been made not to the employees of the assessee company but to the employees of the managed company, a different entity altogether. Here again, if it can be shown that there was a very important nexus between the assessee-company and the managed company which necessitated the assessee-company making the payment to the employees of the managed company, then again it would be possible for the assessee company to satisfy us that the expenditure was one which fell within the ambit of section 10(2)(xv). Now, it cannot be seriously disputed that the bonus was paid by the managed company to their employees in order to increase the efficiency of the working of the company. An increased efficiency of that company would incidentally result in higher and better profits, and the assessee-company would be as much interested in the working of the managed company being more efficient as the managed com....
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....y the provisions of section 10(2)(xv) : that the matter has to be viewed in the light of principles of commercial trading and commercial expediency and what is required is that the expenditure must be germane to the business of the assessee and not something which is de hors the business. " xxx xx xxx xxxxxx. The first alternative was to refuse to make any payment and to stick to its strict rights; and the other alternative which was not altogether an imaginary one in the light of the events that had happened in the past was to invite strike, stoppage of work and rowdyism in the mill premises and thus suffer a substantial loss in production. If in order to avoid such consequences which might lead to loss to the assessee company, the assessee-company decided to purchase peace so that the company could go on with its production by securing the co-operation of its workers, and the company decided to make this payment, it cannot be said that the payment was not made out of commercial expediency. Just as in the case of Tata Sons Ltd. (supra) an attempt was made to secure the contented and satisfactory working of the officers of the managed company, in the instant case, the assessee-co....