TaxTMI 
TaxTMI 
2017 (11) TMI 1284
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...., in ITA No. 5991/Mum/2012 for AY 2008-09, is against the order of CIT(A) deleting the disallowance of expenditure incurred by assessee towards advertisement in media/ magazine amounting to Rs. 40,65,668/- for the reason that the benefit to the assessee is enduring nature over all long for long period of time. For this Revenue has raised following ground No.1- "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 40,65,558/- being 2/3rd of the expenditure of Rs. 60,98,501/- incurred by the assessee towards advertisement in media/magazine which would result in benefit to the assessee of an enduring nature over a long period of time." 3. Briefly stated facts are that the assessee has debited a sum of Rs. 68,23,934/- in its P&L Account on account of advertisement expenses. The AO during the course of assessment proceedings require the assessee to give details and also explain the reasons for increase in advertisement expenses from earlier yeas. The AO on perusal of the details noted that a sum of Rs. 41,72,013/- was payment towards NDTV Ltd. and further a sum of Rs. 19,26,488/- is towards payment to Mudra Co....
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....mainly consists of reimbursement of expenses to Ambit Holdings Private Limited. Firstly, payment made to NDTV Ltd. towards sponsorship expense for program series "In the Ambit of Business" on Union Budget 2008, and secondly, Payment made to Mudra Communications Ltd. for advertisement in Media. The expenses incurred in connection with the Programme "In the Ambit of Business" is related to series of episodes covering topics like expectations from Union Budget 2008, debate on the impact of Budget 2008 on various sectors and economy at large, challenges and opportunities from Budget 2008 etc. The employees of the assessee participate in these programmes and provide their views. The assessee has been incurring such expenses every year. It is also evident from the nature of topics covered in this program on Union Budget which itself is subject to change every year and has limited time value. The expenses incurred on these are of recurring nature. The discussions, views, debates conducted during these series pertain to then prevailing environment which itself is subject to constant change and hence, it does not entail any permanent benefit. Accordingly, the assessee incurs these expenses ....
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....e the Hon'ble High Court question B, which is referred as under: - "(B) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the disallowance made by the Assessing Officer on expenditure on 'Corporate Brand' building, treating such expenditure as revenue in nature?" 7. The learned Counsel for the assessee drew our attention to Para 5 of the judgement of Hon'ble Bombay High Court, wherein exactly identical expenditure as in the case of assessee was incurred and relevant Para 5 reads as under: -- "5. Re. Question No.(B) : (a) The Respondent-Assessee incurred expenditure on advertisement on television aggregating to Rs. 29.99 crores. This expenditure related to advertisements published on television relating not only to individual products manufactured by it but also towards corporate advertisement to the extent of Rs. 5.47 crores. (b) The Assessing Officer disallowed the expenditure claimed towards corporate advertisement amounting to Rs. 5.47 crores on the ground that the same is on capital account as corporate advertisement helps in building the company's brand value. The benefit of such build up of brand value ....
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....ITR 1/3 Taxman 69 to hold that it is not a conclusive test in all cases so that such expenditure is always on capital account. The Court observed that what is to be examined is the nature of advantage obtained in the commercial sense by incurring the expenditure. If the expenditure consists of merely facilitating the assessee to carry on business more profitably leaving the fixed capital untouched, it would be on revenue account. The entire expenditure, the Court observed, has to be looked at from a businessman's point of view. In the present facts, the expenditure on account of corporate advertisement is to essentially maintain the corporate image and not create a corporate image. Further, the impugned order holds on facts that the corporate advertisement expenditure facilitates the business having a direct impact on sales and profitability of the Respondent-Assessee. (f) In the above circumstances, the view taken by the impugned order that corporate advertisement enhances the business of the Assessee resulting in increased sales of its product in Revenue field, is a possible view, on the present facts. Consequently, the question as raised does not give rise to any substant....
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....604/- for AY 2010-11 and a sum of Rs. 1,01,58,963/- for AY 2011-12. The CIT(A) also confirmed the disallowance made by AO for all the AYs. 11. Before us, the learned Counsel for the assessee stated that in any of the years, AO has not recorded any satisfaction as can be seen from the assessment order. The learned Counsel took us through the assessment order whereby the AO has relied on the decision of ITAT special Bench, Mumbai, in the case of ITO Vs. Daga Capital Management P. Ltd. 117 ITD 169 (SB) wherein it is held that Rule 8D is retrospective. The relevant Para 6.6 and 6.7 of the AO's order reads as under: - "6,6 The insertion of section 14A with retrospective effect, from 1.4.1962, is a serious attempt on the part of the Legislature not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total Income under the Act, against the taxable income. The Legislature has further clarified its intention that the expenses incurred can be allowed only to the extent they arc relatable to the earning of the taxable income. The language has, therefore, made an attempt to curb the practice used to reduce the tax ....
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....8D of the Rules will apply. The learned Counsel for the assessee drew our attention to Supreme Court decision in the case of Godrej & Boyce Mfg. Co. Ltd. (supra) and he referred to the relevant page 471, Para 37 & 38, wherein Hon'ble Supreme Court has clearly stated that it is mandatory for the AO with regard to subjective satisfaction on the issue. The relevant observations of the Hon'ble Supreme Court read as under: - "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possi....