TaxTMI 
TaxTMI 
2022 (4) TMI 1571
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.... Case No. PN/CIT(A)-1/DC.Cir. 1(1), Pn/70/05-06/No. PN/CIT(A)- 1/DC.Cir. 1(1), Pn/108/05-06 143(3) 4 2003-04 144/Pun/2007 357/Pun/2007 Assessee Revenue CIT(A)-1, Pune order dated 12.12.2006 Case No. PN/CIT(A)-1/DC.Cir. 1(1), Pn/70/05-06/No. PN/CIT(A)- 1/DC.Cir. 1(1), Pn/108/05-06 143(3) 5 2004-05 896/Pun/2008 825/Pun/2008 Assessee Revenue CIT(A)-1, Pune order dated 15.03.2004 Case No. PN/CIT(A)-1/DC.Cir. 1(1), Pn/318/06-07 143(3) Heard both the parties and case files perused. 2. It emerges during the course of hearing at the outset that we do not need to adjudicate upon all the issues raised herein as the learned coordinate bench's earlier order(s) have already disposed the same. Both the parties are ad idem that we need to decide only three identical issues in all these cases i.e. disallowance of service charges, travelling expenditure and depreciation claims; as the case may be, involving varying sums. We thus treat the first and foremost assessment year herein AY 2000-01 involving assessee's and the Revenue's cross appeals ITA Nos. 610 & 1015/Pun/2004 as the "lead" year. 3. We now advert to the foregoing twin "lead" cases and note that the assess....
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....ed with reference to the business activity carried on by it and not of all the group companies taken as a single unit. Only such expenses as have been incurred by the assessee in the business of Concentrates can be allowed as deduction and not the obligations of other group companies suo motu discharged by it or the expenses which are not incurred wholly and exclusively for its business purpose. This argument does not hold water and is accordingly jettisoned. 11.1. The next argument of both the sides - for and against - is about this issue being a covered matter. At this juncture, it is relevant to note that similar disallowance of Service charges was made by the AO in his order for the immediately preceding assessment year. As against the total expenditure of Rs. 46.75 crore incurred by the assessee towards service fee to CCI Inc., the AO made disallowance of Rs. 10.80 crore (nearly 25%) on similar grounds of the services rendered by CCI Inc. to the bottlers not for the business purpose of the assessee. The ld. CIT(A) confirmed the addition by holding that such expenditure was not wholly and exclusively for the purpose of the assessee's business because that was benefitting ....
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.... mentioned in the agreement dated 01.04.1995 which were to be rendered by CCI Inc. In the latter agreement dated 01.04.1997, such services continued to exist but certain additional services were added through clauses 2 to 4, which are exclusively meant for the assessee and not the Bottlers. This divulges that the extent of services rendered by CCI Inc. to the assessee in the later Agreement dated 01.04.1997 increased vis-à-vis the services provided for in the Agreement dated 01.04.1995. Insofar as the rendition of services to the Bottlers is concerned, there is no change in their scope in the two Agreements. This establishes that the services rendered by CCI Inc. to Bottlers in the A.Y. 1997-98 were of similar nature as given in the assessment year under consideration. The point for determination is only the deductibility of service charges paid by the assessee to CCI Inc. for rendering services to the bottlers. Thus, even though there is some change in the facts from the preceding year to the current year by means of substitution of the Agreement expanding the scope of services, but such change has no impact on the issue for determination, being the services rendered to the....
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....es in full. At the cost of repetition, it is once again made clear that the deduction is being allowed so as to maintain consistency in the view of the Tribunal as the matter is sub judice before the Hon'ble High Court notwithstanding the fact that the Department has a good arguable case." 5. Mr. Meena vehemently sought to pin-point the change in factual position since the assessee had stopped its bottling activity in the impugned assessment year(s). And also that the corresponding service agreement had undergone a sea change and therefore, we need to independently examine its claim than following the preceding detailed discussion by the learned coordinate bench, We find no merit in the Revenue's instant argument as it is clear from a perusal of the assessment findings in par 6.1, page 27 dated 31st March, 2003 that the assessing authority had itself admitted the relevant factual position herein to be similar as in AY 1999-2000 wherein the taxpayer has already succeeded. We therefore adopt judicial consistency to accept assessee's impugned service charge claim of Rs. 52,92,79,442/- in entirety and allow its corresponding ground Nos. 2(a) to (i) in appeal ITA No. 610/Pu....
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....t the travelling expenditure was incurred for the purposes of its business. * Sample vouchers as mentioned in the assessment order do not explain how the Appellant's business interests were served. Our Submissions: 20.2. The Assessing Officer's contention that the Appellants did not file details of travelling expenses is factually incorrect. 20.3. The appellants filed details of travelling expenditure on 511-February 2003. Supporting vouchers giving complete details of person travelling, place visited, purpose for which he travelled and signature of person authorizing such travel were also filed. The Assessing Officer had then required the appellants to file the said details in the following format: Name Educational qualification Salary Purpose of travel Date of travel Amount spent: It was submitted to the A.O that all details except education qualification and salary had already been submitted. Data on salary had been separately produced in the form of Form 24 -"Annual TDS Return for Salaries". Notwithstanding the fact that details of educational qualification would have to be compiled from individual personnel files and was not really relevant to the....
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.... by large customers, CCI, on behalf of the assessee negotiates with multiple bottlers to obtain their mutual participation in a chain wide promotion. During the retail marketing convention, plans and strategies for expanding business are discussed. Bottlers are informed of the various promotions planned along with these retail customers, and the buy-in of the bottlers is secured. This is a very important convention as it smoothens business relationship and ensures that the retail customers do not switch loyalty to competitor's products. The convention is also an important platform to booster goodwill among the customers of your assessee and strengthen business relationship. It is for this reason that the spouses of the bottlers and key customers were also invited to join the convention. Certain key managers of CCI were also required to travel with their spouse to ensure social interaction. 2. Voucher no 96406 These are moving and relocation expenses of a manager of CCI from Delhi to Bangalore. Your assessee's business interests are spread throughout the length and breadth of the country. It has however only one plant at Piran gut and 50 odd employees. Its business i....
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....the appellants, and reimbursed to Coca Cola India in terms of the service agreement." 6.2 I have considered the facts of the case. It is an admitted fact that the appellant has not considered the traveling expenses reimbursed to CCI Inc. employees as a part of the service agreement. There is no other contractual obligation on record which justifies the reimbursement of the traveling expenses of CCI Inc. employees who visit different places for the business of the appellant as well as for the business of HCCBPL and other matter of the Coca Cola group as a whole. In such a situation, it could not be stated that the reimbursement of the traveling expenses has been done only and exclusively for the purpose of business of the appellant and the appellant's claim that these have been reimbursed in terms of the service agreement is neither proved nor is acceptable in the light of the fact that service charges have separately been debited and disclosed in schedule 14. Ground nos. 18 to 20 are, therefore, decided against the appellant." 7. We have given our thoughtful consideration to rival pleadings and found no reason to accept either party's stand in entirety. We make it clear ....
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....g depreciation disallowance on coolers amounting to Rs. 2,01,90,507/- made in both lower proceedings. The CIT(A)'s detailed discussion confirming the impugned disallowance reads as under:- "5. Grounds no. 13 to 17 taken by the appellant is with respect to disallowance of depreciation on coolers amounting to Rs. 2,01,90,507/-. The assessing officer has discussed this issue in Para 7 of the assessment order. The appellant had claimed 25% depreciation on coolers. The assessing officer did not allow the claim of depreciation holding that the appellant's business is manufacture and sale of beverage base and not manufacture and sale of beverages (soft drinks). Though the appellant was owner of cooler, coolers were provided either to the bottlers or vendors and thus utilized by others and as such not for the purposes of business of the appellant. As the appellant failed to fulfill the conditions stipulated u/s. 32, the assessing officer disallowed the claim of depreciation on.. coolers and added Rs. 2,01,90,507/- to the total income. 5.1 During the appellate proceedings, the appellant vide submission dated 23.10.2003 submitted as under: "19.1 The appellant's business is ....
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.... Section 32. 19.7. The A O has claimed that since the Appellants are no longer engaged in the business of manufacture and sale of beverage, deprecation cannot be claimed on these assets. 19.8. The AO has failed to appreciate that the business of the appellants is inextricably linked to the demand for bottled beverage. The appellants participate in the activity of placing coolers purely for the furtherance of its own business interests and for earning more income. As explained above, market research has shown that the sale of cool drinks increase by almost 43% if sold in a chilled condition, The most important ingredient in the manufacture of cool drinks and the one from which the drinks derive their unique flavour is the concentrate manufactured by the appellants. Naturally such a huge increase in the sale of cool drinks creates a huge demand for the beverage base, as the cool drinks cannot be manufactured without this beverage base. The investment made by the appellants in these coolers thus gives the appellant a very good return, and is essential for its business growth. 19.9. The Appellants provide coolers at retail outlets for the purpose of meeting mutually agreed sale....
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.... beverage base supplied by the appellants. 19.15. As can be seen, the ownership of the cooler vests at all times with the Appellants and the appellant has the right to move the cooler from one outlet to another as per its business needs. The coolers are thus an important asset used by the Appellant to achieve its business plans. 19. 16. The appellants further submit that contractual obligation may be one reason for incurring expenditure but need not be the only reason. It is the normal business practice in the industry in which the appellant operates to place coolers at the retail outlets to ensure chilled availability. There is thus an obligation cast by trade and industry practices on the appellant to provide such coolers. Further these coolers are placed as part of the joint promotion activity with bottlers in their areas" 5.2 I have gone through the assessment order, the submissions of the appellant. It is an admitted fact that there is an agreement with the bottlers but the assets remains as utilized for the purpose of the bottlers. These do not generate 'sales' of concentrate but directly help the bottlers linked to the Coca Cola group including HCCBPL. If these....
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....oregoing lead cases. This appeal ITA No. 1103/Pun/2005 partly succeeds to this limited extent. 13. Third assessment year herein 2002-03 involves the assessee's and the Revenue's cross appeals ITA No. 256 & 356/Pun/2007. The assessee's 13th to 18th substantive grounds and the Revenue's second to fourth substantive grounds raise the common issue of disallowance of service charges made by the Assessing Officer to the extent of Rs. 5,45,88,227/- as restricted to 30% only in the CIT(A)'s order. We draw support from our foregoing discussion to delete the impugned disallowance in entirety and accept and reject the assessee's and the Revenue's corresponding substantive grounds. Latter's appeal ITA No. 356/Pun/2007 fails accordingly. 14. The assessee's 19th to 22nd and 23rd to 28th substantive grounds raise the twin issues of reimbursement of travelling expenses and disallowance of depreciation on coolers to the tune of Rs. 6,65,88,746/- which are allowed to the extent of 90% and in entirety; respectively in light of our foregoing detailed discussion in the corresponding lead case (supra). We make it clear that we have upheld the impugned disallowance o....