Income Tax Appellate Tribunal - Mumbai
Loreal India P. Ltd, Mumbai vs Assessee on 12 June, 2013
आयकर अपीलीय अिधकरण, आई' आई खंडपीठ मुंबई अिधकरण 'आई INCOME TAX APPELLATE TRIBUNAL MUMBAI - 'I' BENCH MUMBAI सव[ौी बी.आर बी आर.् िमƣल,Ûयाियक एवं राजेÛि, िमƣल Ûयाियक सदःय /एवं ि लेखा सदःय Before S/Sh.B.R.Mittal,Judicial Member & Rajendra,Accountant Member आयकर अपील सं/.ITA No. 1043/M/2011,िनधा[ िनधा[रण वष[/ Assessment Year 2005-05 M/s.Loreal India Pvt.Ltd. ACIT 6(3) Aaykar Bhavan, A-Wing Rhone Poulenc House, Mumbai-400020 S K Ahire Marg, Worli, Mumbai-400025 Vs. PAN: AAACL0738K (अपीलाथȸ/ Assessee ) (ू×यथȸ/ Respondent) आयकर अपील सं/.ITA No. 722/M/2011,िनधा[ िनधा[रण वष[/ Assessment Year 2005-05 ACIT 6(3) Aaykar Bhavan, M/s.Loreal India Pvt.Ltd.
Mumbai-400020 A-Wing Rhone Poulenc House,
S K Ahire Marg, Worli,
Vs. Mumbai-400025
PAN: AAACL0738K
(अपीलाथȸ/ Assessee ) (ू×यथȸ/ Respondent)
अपीलाथȸ
अपीलाथȸ ओर से/ Assessee by :Non
ू×यथȸ कȧ ओर से/Respondent by :Shri Pritamsingh and Ms.Neeraja Pradhan
सुनवाई कȧ तारȣख/ Date of Hearing :12.06.2013
घोषणा कȧ तारȣख / Date of Pronouncement :12.06.2013
आयकर अिधिनयम,
अिधिनयम 1961 कȧ धारा ( 1 ) 254 के अÛतग[ त आदे श
Order u/s.254(1)of the Income-tax Act,1961(Act)
Per Rajendra,A.M:
Challenging the order dtd.11.10.2010 of the CIT(A)-12,Mumbai,Assessing officer (AO) and the assessee have filed cross-appeals raising following Grounds of Appeal:
ITA/1043/M/2011 -
"Ground No 1. Relief allowed only in the form of redirection in respect of Rs. 31,91,010/-being Unutilized Modvat Credit as at 31 March 2005 added to the Closing Stock under section 145A of the Act 1.1.On the facts and circumstances of the case and in law, the CIT (A) erred in redirecting the AO to carry out the necessary exercise under Section 145A of the Act by changing the opening stock and purchases along with closing stock to verify the evident nil impact of adjustments under Section 145A of the Act.
1.2.The Appellant prays that the AO be instructed to directly delete the addition of Unutilized Modvat Credit of Rs.31,91,010/-made to the Closing Stock as at 31 March 2005. Appellant craves leave to add to, alter, and amend the above grounds of appeal at or before the hearing of this appeal."
ITA/722/M/2011 "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in allowing the expenditure of Rs.9,24,86,243/- incurred on advertisement ignoring the fact that the said expenditure resulted in creating a benefit of enduring nature and thus is capital in nature and cannot be allowed as deduction u/s.37(1) of the Income-tax Act, 1961"
"The appellant prays that the order of Ld. CIT (A) on the above grounds be set aside and that of the Assessing Officer be restored"
"The appellant craves leave to amend which may be necessary or alter any ground or add a new ground"
ITA/1043/M/2011:
2.Assessee-company,engaged in the business of manufacturing and trading in cosmetics,filed its return of income on 31.10.2005 declaring total income of Rs.NIL after set off of loss brought forward losses amounting to Rs.45.45 Crores.AO finalised the assessment order u/s.143(3) of the Act,on 26.12.2008,determining the total income at Rs.NIL. During the assessment proceedings AO made certain additions and disallowances.One of the disallowance pertained to disallowance of Rs.31.9 lakhs u/s.154A of the Act and that is the first Ground of appeal.
2.1.During the assessment proceedings AO found that the assessee was following exclusive method of accounting as far as Central Excise levies were concerned. She invited attention of the Assesses-Company to the provisions of section 145-A of the Act and asked it to show cause as to why the balance in the CENVAT Credit should not be added back to the total income in view of the provisions of section 145A of the Act ? He directed the assessee to file a working as per the provisions of section 145A by following inclusive as well as exclusive method.As pet the AO 'in spite of repeated opportunities', assessee failed to furnish a computation following the inclusive method. AO noted that as per Appendix B of the Tax Audit Report the Auditor had mentioned that the company followed exclusive method of accounting. She held that in the absence of relevant information, it had not been feasible to compile the details of deviation from the method of valuation prescribed u/s. 145A of the Act.Finally she held that after the insertion of Section 145A of the Act, all assessees were bound to follow the inclusive method of accounting,that if an assessee was not following the inclusive method of accounting it have to mention the impact of section 145A on the profit in the return of income ,that the assessee had not produced the relevant records,that in the instant case assessee had failed to discharge its onus of furnishing the impact of Section 145A on the profits for the year under consideration.She found that the balance outstanding as per Annexure 7 to the Tax Audit Report worked out to Rs.31,90,010/-.AO added back the said amount to the total income of the assessee .
2.2.Against the order of the AO assessee preferred an appeal before the First Appeal Authority (FAA).After considering the submissions of the assessee and the assessment order she held that the issue of unutilized Modvat was decided by his predecessor while deciding the appeals for the AY.2002-03.Following the order for the AY 2002-03 she directed the AO if there was any change in the closing stock at the end of a particular year there must be necessarily correspond - ing adjustment in the opening stock,that necessary action should be taken in this regard. 2.2.During the course of hearing before us, no-one appeared on behalf of the aassessee company. Departmental Representative (DR) supported the order of the AO.From the records it is found that notice of hearing sent by the Registry of ITAT,Mumbai was received by the assessee in time. As the assessee has chosen not to argue the matter or engage a representative, so we are deciding the matter on the basis of available material. From the records it is found that assessee did not furnish details desired by the AO.FAA has directed the AO to take necessary action about adjustments to be made as per the provisions of section 145A of the Act.In our opinion order of the FAA does not suffer from any infirmity. Therefore,upholding the order of the FAA,we decide Effective Ground of Appeal against the assessee .
As a result,appeal filed by the assessee stands dismissed.
ITA/722/M/2011
3.In the appeal filed by the AO effective Ground of appeal pertains to disallowance of advertise - ment expenditure.During the assessment proceedings AO found that there were certain items such as Brand Promotions Expenses, Market re-search Expenses, Public Relation Fees etc. under the head advertisement expenses amounting to Rs. 9.24 Crores.She directed the assessee to furnish details of the said expenditure and also asked to show cause as to why, these expenses should not be capitalised. After considering the submissions of the assessee, AO held that the expenses brought benefit to the assessee for years to come, that all the expenses incurred by the company were not of enduring nature, that expenses related to Market Research, Brand Promotion on various occasions, model fees incurred for advertisement of films would bring benefit to the assessee beyond the AY under consideration.Relying upon the various judgments of the Hon'ble Supreme Court and Bombay High Court, she held that expenses amounting to Rs. 9.24 crores were to be treated as capital expenditure. She disallowed the said amount and added back it to the total income of the assessee.
3.1.Against the order of the AO assessee preferred an appeal before the FAA.After considering the submissions of the assessee and the assessment order, FAA held that expenditure incurred by the assessee under the head advertisement expenses was deductible under section 37(1) of the Act if it was revenue in nature,that any capital expenditure incurred was not allowable deduction, that whether a particular expenditure was capital/revenue depended upon various factors relevant to the case concerned and the nature of expenditure incurred, that advertisement expenditure incurred by the appellant for launching a new product was allowable as revenue expenditure in the case under consideration as observed by the Delhi Tribunal in the case of Modi Olivetti Ltd., that Hon'ble Delhi High Court had held that advertisement expenses were revenue in nature as they did not bring any capital asset into existence that perusal of the AO's order showed that no instance had been detailed to indicate that the expenses had resulted in enduring benefit to the assessee-company,that in the immediate succeeding AY.(AY 2006-07),on the similar facts and circumstances,AO did not capitalise the advertisement expenses.Finally FAA held that expenditu
-re on advertisement was required to be incurred on year to year basis,that the yearly expenditure by itself was sufficient to prove that same did not have lasting value, that these expenses did not result in acquisition of any asset by the assessee company, that said expenditure did not bring any advantage of enduring nature to the assessee.Relying upon the order of the Mumbai ITAT delivered in the case of Metro Shoos Pvt.Ltd.(258 ITR 106-AT),FAA held that expenditure incurred by the appellant under the head advertisement expenses was revenue expenditure,that AO had quantify the certain amount of expenditure as capital in nature without giving specific details of expenses which could be treated as capital expenses, that such adhoc disallowances should not be sustained.Finally,FAA deleted the addition made by the AO. 3.2.Before us,DR submitted strongly relied upon the order of the AO.As stated earlier,nobody appeared before us,on behalf of the assessee company.We have perused the order of the AO and FAA.We find that out of total expenditure of 78.22 Crores. AO had disallowed Rs. 9.24 Crores under the head advertisement expenses.FAA has rightly pointed out that basis for arriving at the figure at Rs. 9.24 crores is not known.AO has mentioned that certain items were to be allowed as revenue expenditure and the items which gave enduring benefit were to be disallowed.We find that AO has nowhere mentioned specific items which could be treated as expenditure resulting in enduring benefit to the assessee. In absence of any details in the assessment order, in our opinion, FAA has rightly deleted the additions made by the AO. Generally the advertisement expenditure are considered revenue expenditure because they do not bring any capital asset into existence. If AO can prove that certain items resulted in enduring benefit situation can change. But,in the case under consideration such distinguishing facts are not available.Therefore, upholding the order of the FAA we decide the grounds filed by the AO against him.
As a result, appeal filed by the AO stands dismissed.
As a result,appeals filed by the assessee and AO stands dismissed.
पǐरणामतः िनधा[ǐरती और िनधा[ǐरती-अिधकारȣ Ʈारा दाǔखल कȧ गई अपीलɅ िनरःत कȧ जाती हɇ .
Order pronounced in the open court on 12th June,2013.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 12जून,2013 को कȧ गई ।
Sd/- Sd/-
(बी.आर
बी आर.् िमƣल.B.R.Mittal
िमƣल ) (राजेÛि/Rajendra)
Ûयाियक सदःय /JUDICIAL MEMBER लेखा सदःय /ACCOUNTANT MEMBER
th
मुंबई/Mumbai,Ǒदनांक/Date:12 ,June,2013
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. Assessee /अपीलाथȸ
2. Respondent /ू×यथȸ
3. The concerned CIT (A) /संबƨ अपीलीय आयकर आयुƠ
4. The concerned CIT /संबƨ आयकर आयुƠ
5. DR "B" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध बी खंडपीठ,आ.अ.Ûयाया.मुंबई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai