TaxTMI 
TaxTMI 
2007 (2) TMI 174
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....ion. The assessment year involved herein is the assessment year 1997-98. The petitioner is a 100 per cent. subsidiary of Coca Cola South Asia India Holding, Hongkong, which in turn is a subsidiary of Coca Cola Asia Holding, Singapore, and the ultimate holding company of the petitioner is "The Coca Cola Company U.S.A. ("TCCC" for short). TCCC is the registered owner in India of the trade marks such as Coca Cola, Coke, Fanta and Sprite. The petitioner had entered into an agreement with the TCCC on June 1, 1993, pursuant to which an ordinary gratuitous non-exclusive licence was granted to the petitioner and, accordingly the petitioner has been manufacturing and selling non alcoholic beverage basis also known as "concentrates" and beverages made out of such concentrates. The business activity of the petitioner comprises of blending, bottling and distribution of non-alcoholic beverages. Instead of setting up its own factory, the petitioner has entered into an arrangement with bottlers, fillers, wooden crate manufacturers, etc. so that the "concentrate" sold by the petitioner are used in the manufacture of non-alcoholic beverages under their strict supervision and marketed throughout t....
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....confirmed by some of the parties by sending their reply to the Assessing Officer. The above disallowance included disallowance of expenses incurred in the earlier years and ad hoc disallowance of Rs. 2,00,00,000. Thus, out of the sum of Rs. 73,79,03,469 claimed as marketing expenses, the Assessing Officer allowed Rs. 55,79,29,126 and disallowed Rs. 17,99,74,343, the particulars of which are as follows: Rs. Rs. (i) Difference 2,12,04,099 (11 parties) (ii) No reply 3,90,28,917 (14 parties) (iii) Earlier years 9,97,41,327 (7 parties) ----------- 15,99,74,343 (iv) Ad hoc 2,00,00,000 ------------ 17,99,74,343 ------------ The petitioner filed an appeal before the Commissioner of Income-tax (Appeals) ("the CIT (A)" for short), inter alia, challenging the disallowance of service charges and marketing expenses made by the Assessing Officer. After making detailed enquiries the Commissioner of Income-tax (Appeals) by his order dated August 14, 2003, held that the following factors were relevant for determining the allowability of service charges incurred by the petitioner and the nature of service charges rendered by the CCI Inc. to the petitioner: "(i) CCI Inc. has been ....
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.... to the appellant and other entities in India. (v) There are expenses embedded in the service charges claimed by the appellant and embedded in the reimbursed cost of the appellant to the CCI Inc. which are not allowable in nature as per income-tax law. These include foreign travel expenses of wives of employees for their pleasure trips, capital expenditure on purchase of software etc. (vi) There are expenses on various services directly provided to the appellant for supply of bases and concentrates of the beverages and various other aspects which have been discussed in detail in the appellate order for the assessment year 1998-99." Accordingly, the Commissioner of Income-tax (Appeals) held that since the services rendered by the CCI Inc. benefited not only the petitioner but also benefited other group companies, disallowance has to be made to that extent and since the disallowance made by the Assessing Officer was less than 25 per cent. of the total service charges claimed, the Commissioner of Income-tax (Appeals) upheld the disallowance made by the Assessing Officer. As regards the disallowance of the marketing expenses of Rs. 17,99,74,343 made by the Assessing Officer, the C....
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....sallowance of marketing expenses amounting to Rs. 10,00,00,000. According to the Revenue the Commissioner of Income-tax (Appeals) ought to have made disallowance of marketing expenses at Rs. 13,03,94,46 as computed below: Rs. Rs. (i) Difference 94,35,775 (ii) No reply 95,64,184 (iii) Earlier years 5,76,75,624 ----------- 7,66,75,583 (iv) Ad hoc as in the 2,00,00,000 asstt. Order (v) Capital expenditure 3,37,18,863 on films/TV and brand building (bal.fig) ------------ 13,03,94,446 ------------ Thus, the specific issues raised in the appeal filed by the petitioner as well as the Revenue were, whether the Commissioner of Income-tax (Appeals) was justified in making disallowance of marketing expenses and if so, whether: (a) The prior period expenditure ought to be Rs. 4,11,61,718 as determined by the Commissioner of Income-tax (Appeals) or should it be Rs.5,76,75,624 as calculated by the Department (i.e. a difference of Rs.1,65,13,906); (b) Whether disallowance of Rs. 31,19,919 made by the Commissioner of Income-tax (Appeals) on account of "differences/no reply" was justified when the payments were made by account-payee cheques and constituted a small fraction of t....
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....e aforesaid orders passed by the Tribunal, the present petition is filed. Mr. Dastur, learned senior advocate appearing on behalf of the petitioner submitted that the Tribunal seriously erred in restoring the matter to the file of the Assessing Officer for de novo consideration of the entire claim of service charges and marketing expenses, instead of adjudicating upon the issues specifically raised in the appeal. Relying upon the decisions in the case of Raja Vikramaditya Singh (deed.) v. CIT [1988] 169 ITR 55 (MP), Saurashtra Packaging P. Ltd. v. CIT [1993] 204 ITR 443 (Guj), Rajesh Babubhai Damania v. CIT [2001] 251 ITR 541 (Guj), Rameshchandra M. Luthra v. Asst. CIT [2002] 257 ITR 460 (Guj), Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC), Mr. Dastur submitted that if all the basic facts required for the disposal of an appeal are on record, then the Tribunal must decide the issues raised in the appeal instead of remanding the matter back to the lower authorities. In the present case the Tribunal has not even considered the specific issues raised in the appeal. Relying upon the decision of the apex court in the case of CIT v. Chandulal Keshavlal and Co. [1960] 38 ITR 601 ....
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....exclusively for the purpose of business. Relying upon a Full Bench judgment of this court in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351, Mr. Kotangale submitted that the basic purpose of an appeal in an income-tax matter is to ascertain the correct tax liability of the assessee and for that purpose the Appellate Tribunal under section 254 of the Income-tax Act has wide powers to consider the entire proceedings and pass such orders thereon as it thinks fit. In the present case, in the absence of any material facts or break up of the expenses given by the petitioner, the Tribunal was justified in remanding the matter to the Assessing Office for de novo consideration. While disposing of the miscellaneous application, the Tribunal has clarified that the disallowance on remand shall not exceed the disallowance made in the original assessment. Accordingly, Mr. Kotangale submitted that no interference is called for in a writ jurisdiction and the petition is liable to be dismissed. Having considered the rival submissions, we are of the opinion that in the facts of the present case, the arguments advanced on behalf of the petitioner deserve acceptance. In the pr....
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....)]. The Tribunal was required to decide as to whether the said differences/no reply cases deserved to be allowed as the payments were made by account payee cheques and constituted a small fraction of the total expenditure of Rs. 73,79,03,469. The Tribunal was required to decide whether the Commissioner of Income-tax (Appeals) was justified in making the disallowance of marketing expenses amounting to Rs. 2 crores on ad hoc basis and whether disallowance of the expenditure incurred on production of short duration advertisement film, etc., and brand building capital expenditure was in accordance with law. However, in the impugned order dated October 5, 2005, the Tribunal has not dealt with any of the above specific issues raised in the appeal and restored the issue to the file of the Assessing Officer with a direction to the Assessing Officer first to ascertain and determine the actual amount of service charges which pertain to the year in question and then to adjudicate the question of allowability thereof as per law. The Tribunal directed the petitioner to furnish necessary documents, details, particulars, information, books and other evidence in support of their entire claim of s....
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....wance of service charges of Rs. 10,80,04,482 confirmed by the Commissioner of Income-tax (Appeals), service charges amounting to Rs. 3,37,06,617 were incurred in the earlier year and that amount is not allowable in the year in question. Having quantified the claims which relate to earlier years, the Tribunal was not justified in remanding the matter to the Assessing Officer to redetermine the service charges which are relatable to earlier years. Similarly, whether service charges and marketing expenses were incurred wholly and exclusively for the purposes of business was not an issue raised in the appeal. The specific grounds raised in the appeal against the order of the Commissioner of Income-tax (Appeals) were, whether the services rendered benefited group companies, whether the expenses were incurred to take care of the TCCC brand image, whether rendering service to the bottlers could be a ground for making disallowance, whether disallowance of foreign travel expenses of the wives was justified, whether disallowance of marketing expenses ought to have been enhanced as claimed by the Revenue, whether disallowance could be made on ad hoc basis and whether expenditure on films/TV.....