TaxTMI 
TaxTMI 
2021 (10) TMI 730
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....,33,04,522/- on account of advertisement and marketing expenses treating it as revenue expenditure instead of capital expenditure without appreciating the facts that advertisement and publicity expenses when compared to previous year was not substantiated with documentary evidences and these expenses are of enduring benefit, are in the nature of capital. 3. On the facts and under the circumstances of the case, the Id. CIT(A) has erred in deleting the disallowance of Rs. 31,72,877/- on account of disallowance out of cost of equity placement amounting to Rs. 31,72,877/- treating it as revenue expenditure instead of capital expenditure without appreciating the facts that equity placement expenses are of enduring benefit and to be treated as capital in nature instead of revenue expenditure". 4. On the facts and under the circumstances of the case, the Id. CIT(A) has erred in deleting the disallowance of Rs. 20,10,202/- made on account of employees recruitment by treating it as revenue expenditure instead of capital expenditure without appreciating the facts that the expense are of enduring benefit and to be treated as capital in nature instead of revenue expenditure. ....
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.... assessee filed return of income electronically on 12/11/2007, declaring loss of Rs. 19,09,19,350/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. The assessment under section 143(3) of the Act was completed on 29/12/2009 after making certain addition/disallowances. On further appeal, the Ld. CIT(A) allowed partly to the assessee. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the parties appeared through Video Conferencing facility. The assessee filed a paper-book (pages 1 to 76 ) physically as well as electronically. 4. Qua the ground No. 1 (one), the learned DR submitted that Ld. CIT(A) has allowed the consultancy charges of Rs. 9,37,061/- as revenue expenditure though same are in the nature of the capital expenditure in view of the enduring benefit to the assessee. 4.1 The Learned Counsel of the assessee, on the other hand, relied on the order of the learned CIT(A) and submitted that Learned CIT(A) has allowed the expenses in view of t....
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....s in entering benefit to the assessee. Thus, the ground taken by the revenue itself is not sustainable in absence of any finding of the Assessing Officer, which could support the ground. Further, the Ld. CIT(A) has deleted the disallowance after observing that genuineness of the expenses was not doubted by the Assessing Officer in the remand report and the assessee duly deducted tax at source on the impugned payments. In our opinion, there is no infirmity in the finding of the Learned CIT(A) on the issue in dispute, accordingly, we uphold the same. The ground No. 1 (one) of the appeal of the Revenue is accordingly dismissed. 5. The ground No. 2(two) relates to disallowance of Rs. 1,33,04,522/- by the Assessing Officer on account of advertisement and marketing expenses. 5.1 Qua the ground, the learned DR supported the grounds and submitted that no evidences of expenses incurred wholly and exclusively for the purpose of the business, were furnished before the Assessing Officer. He submitted that advertisement of brand gives enduring benefit to the assessee and, therefore, these are capital in nature and liable to be disallowed as business expenses. 5.2 On the contrary, the L....
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....Y. 2003-04 to 2005-06 in the decisions dated 20.04.2012 while allowing the claim of advertisement and publicity expenditure as revenue expenditure incurred wholly and exclusively for the purpose of business. In DCIT vs. Core Healthcare Ltd. 308 ITR 363, the Hon'ble Gujarat High Court has held that advertisement expenses incurred by the assessee to create brand image were allowable as revenue expenditure In any case the action of the AO in invoking the provisions of Section 35D(2Hd)Js not in order as the impugned expenditure is not incurred in connection with extension or setting up of a new unit after commencement of business. Therefore, following the above decisions of the Hon'ble High Courts and the Hon'ble Tribunal Delhi ITAT, it is held that advertisement and publicity expenses of Rs. 1,47,82,802/- is revenue expenditure incurred wholly and exclusively for the purpose of business of the appellant and is allowable as such Disallowance of Rs. 1,33,04,522/- is directed to be deleted. These grounds of appeal are ruled in favour of the appellant." 5.4 We find that the Learned Assessing Officer has made disallowance under section 35D of the Act without verifying the re....
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....e as revenue expenditure in nature. The order of the CIT(A) is thus upheld and th^ ground raised by the revenue is dismissed." 5.5 Following the finding of the Tribunal in assessment year 2009-10, the Tribunal in assessment year 2008-09 and 2010-11 has allowed the advertisement expenses in terms of section 37(1) of the Act. The relevant finding of the Tribunal is reproduced as under: "11. On a perusal of the order dated 7/1/2019 in ITA No. 3812/Del/2015 for assessment year 2009-10 in assessee's own case, we find that the a coordinate Bench of this Tribunal considered the contentions on either side in the light of the decisions cited before them and reached a conclusion that the decisions in the cases of PepsiCo Holdings India Private Ltd (supra) and Orient Ceramics and Industries Ltd (supra) are applicable to the facts of the case. Further, since the genuineness of the expenditure is not in dispute and the dispute is only regarding capital or revenue expenditure in nature decided the issue in favour of the assessee holding that the expenditure incurred by the assessee on glow sign boards and a neon sign boards is revenue in. nature and allowable as deduction under s....
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.... nature and should be capitalized. Further, the provisions of Section 35 D(1)(ii) of Act, specifies that where an assessee, being an Indian Company, incurred any expenditure in connection with the extension of his undertaking, the assessee shall, in accordance with and subject to the provisions of this Section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the extension of the business is completed. The assessee's case falls under the category of sub section 2(d) of Section 35 D of Act. Further as per Section 35D(2)(iii), the expenditure referred to conducting market survey or any otner survey necessary for the business of the assessee is also held to be of capital in mature. In the case of the assessee, through market survey ROs are being appointed and necessary business are being carried out after making survey only. So any expenses incurred for undertaking such survey or paid to an agency which is indulged in such work are held to be capital in nature. In view of the same, Rs. 3,52,541 is allowed to be amortised during the year under consideration, and the balance....
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....ablish that expenses incurred are before commencement of the business or in connection with extension of or setting up of new unit after commencement of the business, and, therefore disallowance under section 35 D(1)(ii) of the Act by the Assessing Officer is not justified. The order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the finding of the Learned CIT(A) on the issue in dispute. The ground No. 3 (three) of the appeal of the Revenue is accordingly dismissed. 7. The ground No. 4 (four) of the appeal relates to disallowance of Rs. 20,10,200/- on account of employees recruitment expenses. 7.1 The Learned DR relied on the finding of the Learned Assessing Officer, whereas learned Counsel of the assessee relied on the finding of the Learned CIT(A) on the issue in dispute. 7.2 We have heard rival submission of the parties and perused the relevant material on record. The Assessing Officer disallowed a sum of Rs. 20,10,202/- being the payment incurred for employee's recruitments, holding that the assessee fetch benefit of such expenses for longer time. The Ld. CIT(A) relying on the order of the Tri....
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....resented 1/3rd remuneration paid to Mr. Pramod Saxena (i.e. Managing Director ) for running affairs of OIPL. 8.2 Before us, the Learned DR relied on the order of the Assessing Officer. 8.3 On the contrary, the Learned Counsel of the assessee submitted that amount recovered from OIPL was credited to salary account of Sri Pramod Saxena and deduction of only net salary was claimed by the assessee. 8.4 We have heard rival submission of the parties and perused the relevant material on record. The Ld. CIT(A) has deleted the addition of observing as under: "14.2 The AO added Rs. 1,12,82,802/- as he noticed from the Schedule to accounts in related party disclosure that this amount is shown as expenses recovered from Oxigen Infovision (P) Ltd. (OIV) but was not credited as a separate item in the P & L A/c of the appellant company. The Ld. AR has stated that the said amount was recovered from OIV remuneration will be paid by OIV to the Managing Director. The said remuneration was on account of the cost of time spent by the Managing Director of the appellant company, Shri Pramod Saxena in running the affairs of OIV. It is further stated that the appellant paid total remunera....
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....ly following the decision of the Hon'ble ITAT, Delhi, depreciation on POS terminals is allowed @ 60% as claimed by the appellant. Consequently, disallowance of depreciation computed by the AO at Rs. 5,19,41,056/- is deleted. This ground of appeal is ruled in favour of the appellant." 9.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that this issue is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2009-10 (ITA No. 3812/Del/2015 dated 07/01/2019). The relevant finding of the Tribunal is reproduced as under: "8. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Hon'ble Delhi High Court in the case of Pr. CIT Vs. Connaught Plaza Restaurant has considered the issue i.e. Higher rate of depreciation on POS TERMINALS and has upheld the decision of the Tribunal where it has been held that assessee is entitled to depreciation @ 60% on POS TERMINALS. The relevant observation of the Hon'ble High Court reads as under:- "The revenue's appeal urges that a subst....
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....;ble High Court in the case of Connaught Plaza restaurants (supra) which the coordinate Bench of this Tribunal followed in assessee's own case for assessment year 2009-10. Since the facts are identical and are covered by the decision of the Hon'bl.e jurisdictional High Court, we find it difficult to countenance the arguments advanced on behalf of the Revenue. While respectfully following the same we hold that this ground of Revenue is devoid of any merits and is liable to be dismissed. We, accordingly, uphold the findings of the Ld. CIT(A) and dismiss ground no. 3." 9.4 Respectfully following the finding of the Tribunal (supra), we uphold the finding of the Learned CIT(A) on the issue in dispute and dismiss the ground No.6 (six) of the appeal of the Revenue. 10. The ground No. 7 (seven) of the appeal relates to the depreciation claimed by the assessee at the rate of 60% percent on UPS. 10.1 The Assessing Officer treated the UPS as not part of the computer and only part of plant and machinery and allowed the depreciation at the rate of 15% only. The Ld. CIT(A) allowed the claim of the assessee observing as under: "16.2. I have carefully considered the asses....
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....n the contention of the revenue and ground no. 4 is accordingly dismissed." 10.3 Respectfully following the finding of the Tribunal (supra), the finding of the Ld. CIT(A) on the issue in dispute is upheld. The Ground No. 7 of the appeal of the Revenue is accordingly dismissed. 11. The ground No. 8 (eight) of the appeal relates to disallowance under section 14A of the Act. 11.1 Brief facts qua the issue in dispute are that the Assessing Officer observed investment in shares and mutual funds by the assessee and thus invoking Rule 8D of the Rules made disallowance of Rs. 4,86,094/-. The Ld. CIT(A) deleted the disallowance in view of the binding precedent of the Hon'ble jurisdictional High Court. 11.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The finding of the Learned CIT(A) on the issue in dispute is reproduced as under: "l7.3 In the recent past in a number of decisions pronounced by the Hon'ble Courts and Tribunals, it has been ruled that provisions of section 14A cannot be invoked where no exempt income has been earned in the previous year. Hon'ble Delhi High Court in the case of Chemnives....
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....iew of the above legal position on the issue, I hold that the AO was not justified in making the disallowance of Rs. 53,627/- which is ordered to be deleted. These grounds are ruled in favour of the appellant." 12.2 Before us, the Learned DR submitted that the issue in dispute is covered against the assessee in view of the decision of the Hon'ble Delhi High Court in the case of CIT Vs. M/s. Bharat Hotels Ltd. (2019), 410 ITR 417 (Del. HC). 12.3 On the contrary, the Learned Counsel of the assessee submitted that in subsequent decision, in the case of Principal Commissioner of Income Tax Vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018, dated 10th September, 2018), the Hon'ble Delhi High Court has reversed the decision in the case of Bharat hotels Ltd (supra). 12.4 We have heard rival submission of the parties on the issue dispute. We find that Hon'ble Delhi High Court in the case of Bharat Hotels Ltd (supra) has held as under: "Question No.2 7. The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside provisions of the Employees‟ Provident Funds and Miscellaneous Provisions Act....