TaxTMI 
TaxTMI 
2021 (5) TMI 549
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....s, assessee has raised the following 6 grounds:- "1. The Learned CIT(A) erred in Law and on facts in holding that the payment of Rs. 9,13,00,000 made to Lakme Ltd and Rs. 1,82,00,000 made to Lakme Exports Ltd. under agreement dated 27.3.96 are not deductible as revenue expenditure. 2. The Learned CIT(A) erred in holding that the payment made to Lakme Ltd and Lakme Exports Ltd. under the agreement dated 27.3.96 constitute capital expenditure. 3. He failed to appreciate that the agreement with Lakme Ltd and Lakme Exports Ltd. merely seek to align the marketing operation of the appellant for a period of 10 years. 4. He further failed to appreciate that Lakme Ltd and Lakme Exports Ltd. have not given up their right to manufacture, produce or process the articles covered by the agreement. 5. He failed to appreciate that Lakme Ltd and Lakme Exports Ltd. have not given up their source of Income. 6. He also failed to appreciate and ought to have held that by virtue of the agreement with Lakme Ltd. and Lakme Exports Ltd. the appellant has not acquired any capital asset or a right." 3. The original assessment was framed by DCIT, specia....
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....age in the revenue field and not in the Capital field and accordingly allow the expense. The relevant directions of the Tribunal reads as under:- "10. There is no dispute about the legal position laid down by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. (Supra) and Coal Shipment Pvt. Ltd. (supra) relied on by the learned Counsel for the assessee as well as directed on by the Revenue. The basic question is whether advantage obtained by the assessee is in capital field or revenue field. The question can be answered only by referring to the relevant materials on record. The learned Counsel has argued that the arrangement between the parties would reduce the cost of assessee but nothing has been brought on record to substantiate the same. The cost incurred by the assessee prior to and after the agreement has to examined and the onus being on the assessee, it is the duty of the assessee to place such material on record. There is no reference to any material to substantiate the same. Further, it is seen from the terms of the agreement that Lakme Cos. had given up the marketing of restricted products but it is not clear as to how such product would be so....
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.... factors put a severe strain on profitability. In view of the above, the company decided to enter into a Strategic Alliance with Lakme Ltd and Lakme Exports Ltd, the major players also engaged in manufacture and sale of personal products. The Company together with Hindustan Unilever Ltd (formerly Hindustan Lever Ltd.) and Lever India Exports Ltd (hereinafter referred to as HUL Group) entered into an agreement with Lakme Ltd and Lakme Exports Ltd. Under the agreement, Lakme Ltd and Lakme Exports Ltd. have agreed not to engage in the direct marketing/ selling/distribution of the products manufactured by them in the retail market for a period of 10 years. For this, the assessee has paid Rs. 9,13,00,000 to Lakme Ltd. and Rs. 1,82,00,000 to Lakme Exports Ltd. 6. He explained that during the course of original assessment proceeding, the assessee was called upon to justify the deductibility of these payments. The assessee vide its letter dated 20.8.1998 submitted that; Lakme Ltd and Lakme Exports Ltd have not given up their basic right to manufacture/produce the said products for subsequent sale/marketing. However, they were required to sell such products through a Joint Venture compan....
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....id to Lakme Ltd. and Lakrne Export Ltd. is fully allowable as revenue expenditure under sec 37(1) of the Act. For this, the assessee pointed out and the relevant points are as under:- a) Lakme Ltd. and Lakme Exports Ltd, had agreed to market, distribute, sell their products through the assessee and its associates merely for a period of 10 years. b) Lakme Ltd. and Lakme Exports Ltd. had not given up their basic right to manufacture, produce, process the specified articles. C) Lakme Ltd. and Lakme Exports Ltd. had not given up their source of income. d) The assessee did not acquire any capital assets or a right under the agreement. 9. The learned Counsel for the assessee further narrated from the facts of the case, that before CIT(A) the complete detail in respect to the directions of Hon'ble ITAT, provided certain clarification and details to substantiate that this arrangement helped the company in reducing cost, promotion expenses and achieve higher profitability. The Assessee drew our attention to written submissions filed, wherein assessee has filed a table showing the year wise advertisements and promotion expenses incurred by the assessee ....
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....also considering the sales increased, which is not study in the calendar years 1995 to 2000. 12. We have also considered the decision of Hon'ble Supreme Court in the case of Empire Jute Company Ltd. Vs. CIT (1980) 124 ITR 1 (SC), wherein, Hon'ble Supreme Court has observed as under:- "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none-the-less, be on revenue account and the test of enduring benefit may break down. lt is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assesse's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. ....