Income Tax Appellate Tribunal - Chennai
Dorcas Market Makers P Ltd., Chennai vs Department Of Income Tax on 24 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' Bench Chennai
Before Shri Abraham P. George, Accountant Member
and Shri V. Durga Rao, Judicial Member
.....
ITA No. 67/Mds/2012
Assessment year : 2007-08
The Asst. Commissioner of M/s. Dorcas Market
Income Tax, Company v. Makers P. Ltd.,
Circle-I(4), Block 38,
Chennai. 6th Avenue,
Anna Nagar East,
Chennai-600 102.
(PAN : AABCD0728L)
(Appellant) (Respondent)
AND
C.O. No. 19/Mds/2012
(In ITA No. 67/Mds/2012)
Assessment Year 2007-08
M/s. Dorcas Market v. The Asst. Commissioner
Makers P. Ltd., of Income Tax,
Block 38, Company Circle-I(4),
6th Avenue, Chennai.
Anna Nagar East,
Chennai-600 102.
(Cross Objector) (Respondent)
Department by : Shri Anirudh Rai,
CIT-DR
Assessee by : Ms. G. Vardini Karthik
Date of Hearing : 24.07.2012
Date of Pronouncement : 31.07.2012
2
ITA No.67/Mds/2012 &
CO 19/Mds/2012
ORDER
PER V. DURGA RAO, JUDICIAL MEMBER:
This appeal by the Revenue and the cross objection by the assessee were heard originally on 15-06-2012 and order was passed in ITA No.67/Mds/2012. Subsequently, it was brought to our notice by the Registry that the second ground in this appeal as also the cross objections in C.O. No. 19/Mds/2012 were not disposed of. We, therefore, directed the Registry to post this appeal as well as the cross objections for hearing. Accordingly they were heard on 24-07-2012 to dispose of the second ground of appeal as also the cross objection.
2. The first ground raised by the Revenue in the appeal relating to disallowance u/s 14A and invoking the provisions of Rule 8D has already been decided by the Tribunal vide order dated 15-06-2012 and the same will stand.
3. Coming to the next ground of appeal relating to the disallowance of expenditure on advertisement, the brief facts are that the assessee had incurred an amount of Rs. 8,37,35,020/- during the previous year relevant to the assessment year 2007-08. During the course of assessment 3 ITA No.67/Mds/2012 & CO 19/Mds/2012 proceedings, the AO on examination of the Balance Sheet found that ` 8,37,35,020/- was shown as a deferred revenue expenditure in the asset side of the Balance Sheet. However, computing the taxable income the assessee has claimed this whole sum as revenue expenditure. She further examined item No.17 of the Accounting Policies and found that the aforesaid deferred revenue expenditure represented advertisement expenditure incurred during the year which was deferred for write off over a two year period. The assessee submitted before the AO that the expenditure related to the product launch of Medimix sandal and Medimix dry skin soaps. The AO did not accept the explanation of the assessee because the benefit of such product launch expenditure is usually spread over a period of more than one year. Therefore, claiming the entire expenditure, the benefit of which is spread over a longer period, as revenue expenditure in the year of incurring such expenditure only for the purpose of computing taxable income was held not to be in order. Since the benefit of expenditure would spread over a span of two years, the expenditure was held to be allowable for the assessment years 2008-09 and 2009-10. Accordingly, the 4 ITA No.67/Mds/2012 & CO 19/Mds/2012 amount was disallowed and added back to the total income of the assessee.
4. On being aggrieved, the assessee carried the matter before the CIT(A). It was submitted before the learned CIT(A) that whether the benefit accrues in the same year itself or in the subsequent years, as long as the expenditure was incurred in the course of business and was expended in the current year, the same ought to be allowed in the current year. The learned counsel for the assessee further submitted that the expenditure incurred with respect of product launch, sales promotion and advertisement is revenue expenditure in the course of business ought to be allowed in the year in which it was incurred. It cannot be spread over the next two years on the ground that the amount spent is a large amount. He relied on the following decisions :
i) CIT v. Jai Parabolic Springs Ltd, 306 ITR 42 (Del),
ii) CIT v. Mangal Tirth Estates Ltd, 303 ITR 366 (Mad),
iii) DCIT v. Core Health Care Ltd, 308 ITR 263 (Guj.),
iv) DCIT v. M/s. Godrej Tea Ltd, 4 ITR (Trib) 649 (Mum)
v) Guruji Entertainment Network v. ACIT (ITAT -Del). 5 ITA No.67/Mds/2012 &
CO 19/Mds/2012 The learned CIT(A) after considering the explanation of the assessee and by following the decision in the case of Mangal Thirth Estates Ltd. (supra) and also the decision in the case of Brilliant Tutorials (292 ITR 399) and M/s. Southern Roadways Ltd. (265 ITR 404) has observed that any expenditure not being a capital expenditure or personal expenses laid out or expended fully and exclusively for the purpose of business or profession should be allowed. The CIT(A) finally held that all the above case laws covered the issue involved in this appeal and allowed the claim of the assessee.
5. On being aggrieved, the Revenue carried the matter before the Tribunal. The learned DR supported the order passed by the AO. On the other hand, the learned counsel for the assessee re-iterated the submissions which had been made before the learned CIT(A) and further relied on the Special Bench decision of the Tribunal, Ahmedabad Bench in the case of ACIT v. Ashima Syntex Ltd. (2009) 117 ITD 1 (Ahd)(SB).
6. We have heard both the sides, perused the records and gone through the orders of the authorities below. The issue 6 ITA No.67/Mds/2012 & CO 19/Mds/2012 involved in this appeal is whether the expenditure incurred by the assessee has to be allowed in the year under consideration, i.e. assessment year 2007-08 or 2008-09 and 2009-10. According to the AO the benefit of expenditure should be spread over in a span of 2 years and the expenditure was held to be allowable for the assessment years 2008-09 and 2009-10. On appeal, the learned CIT(A) by following various decisions of the jurisdictional High Court, allowed the claim of the assessee.
7. In the case of Ashima Syntex Ltd. (supra), the Special Bench of the Tribunal has considered various decisions. The Special Bench considered the very same issue and held that so far as corporate advertisement expenses, exhibition expenses, public relation expenses, cultural programme expenses, quota expenses and sales promotion expenses were concerned, since said expenses did not result in creation of any tangible or intangible asset and, moreover, there was no evidence regarding accrual of any specific revenue in years under consideration or subsequently over a defined period with incurring of said expenditure, those expenses could be allowed entirely in year in which they were incurred. In the present 7 ITA No.67/Mds/2012 & CO 19/Mds/2012 case it is not the case of the Revenue that the assessee has not incurred the expenditure. It is an admitted fact that the expenditure incurred by the assessee is revenue in nature. We therefore, following the jurisdictional High Court decisions and other decisions, relied upon by the learned CIT(A) in his order as also the Special Bench decision of the Ahmedabad Bench of the Tribunal in the case of Ashima Syntex Ltd. (supra) dismiss this ground of appeal raised by the Revenue.
8. Insofar as the Cross Objection filed by the assessee is concerned, we find that the same merely supports the order passed by the learned CIT(A). In view our finding above the cross objection has become infructuous and therefore it is dismissed as infructuous.
9. In the result, the appeal filed by the Revenue is treated as partly allowed for statistical purposes, as we have remitted the issue regarding section 14A of the Act back to the file of the Assessing Officer vide our order dated 15-6-2012. The cross objection is dismissed as infructuous. 8 ITA No.67/Mds/2012 &
CO 19/Mds/2012 Order pronounced on Tuesday, the 31st of July, 2012, at Chennai.
Sd/- Sd/-
(Abraham P. George) ( V.Durga Rao )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Chennai,
Dated the 31st July, 2012.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file