Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Bharti Retail Ltd., New Delhi on 28 September, 2017
1 ITA No. 5736/Del/2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 5736/DEL/2014 ( A.Y 2011-12)
DCIT Vs Bharti Retail Ltd.
Circle-2(1) No. 1, Aravali Crescent,
New Delhi Nelson Mandela Road,
Vasant Kunj, Phase-II
New Delhi
AADCB1093N
(APPELLANT) (RESPONDENT)
Appellant by Sh. Purushottam Anand,
Adv
Respondent by Sh. R. C. Dande, Sr. DR
Date of Hearing 26.09.2017
Date of Pronouncement 28.09.2017
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the revenue against the order dated 14/08/2014 passed by CIT(A)-V, New Delhi.
2. The grounds of appeal are as under:-
1. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in holding that the expenses on account of Real Estate Research.
Due Diligence Expenditure and Marketing Research Expenditure as Revenue in nature and thereby deleting the disallowance of Rs.1,60,21,516/- by ignoring the fact that the assessee would be 2 ITA No. 5736/Del/2014 deriving enduring benefit from these expenses.
2. Alternatively and without prejudice to the above, Ld.CIT(A) ought to have considered the expenses in the nature of preliminary expenses as per Section 35D(2) of the Act and therefore, allowable only as per provision of Section 35D(1)
3. The Company is engaged in the business of retailing a variety of household and consumer products through departmental stores under various formats and is expanding the chain with multiple consumer friendly format stores in India. It offers food and grocery categories, fresh fruits and vegetables, meat and poultry, dairy products, staples, FMCG and processed foods, electronics and appliances, clothing and footwear, furniture and furnishing, and other household articles. At present company has the operation in nine states includes stores in Punjab, Rajasthan, Haryana, and Uttar Pradesh, Delhi, Uttaranchal, Madhya Pradesh, Chhattisgarh. The return of income declaring at loss of Rs.263,30,37,806/- was filed on 29/9/2011. The case was selected for scrutiny. Notice u/s 143(2) of the Act was issued on 7/9/2012 and was served on the assessee. Subsequently, notice u/s 142(1) of the Act along with questionnaire was issued on 17/07/2013. In compliance thereto, the Assessee's Representative attended the assessment proceedings from time to time and filed necessary details as called for which were examined and placed on record. During the year, the assessee company incurred losses due to the reason submitted that since the assessee company is in the business of retailing and in the early years of its operations/opening of the stores, it took time for the customers to know about the stores and visit the stores to purchase goods and hence, the sales were low during the year. Further, being in the initial stages of business and inception, the costs of the company were relatively higher and the margins were lower due to tough market competitive environment. Due to this reason, the revenue of the company was lesser than the expenses incurred by it and hence, there were losses during the current year under consideration.
3 ITA No. 5736/Del/20144. The AO, following its own assessment order for the AY 2010-11, disallowed the following expenses appearing under the head 'legal and professional charges' claimed by the appellant as revenue in nature alleging that the appellant has derived benefit of enduring nature by the incurrence of the said expenses and hence, the same are capital in nature:
S. No. Particulars of Expenditure Amount (Rs.) 1 Due Diligence Expenses 32,10,983/-
2 Marketing Research Expenses 1,28,10,583/-
Total 1,60,21,516 While disallowing the above expenses, the AO had inadvertently made an excess disallowance of Rs. 11,32,246 thereby making a total disallowance of Rs. 1,71,53,762 instead of Rs 1,60,21,516 and computed the assessed loss at Rs. 261,58,84,040. Since, this was a mistake apparent from record, the assessee filed a rectification application under section 154 of the Act with the AO on 04 March 2014 for rectifying the same. The assessment order was rectified by the AO vide its order dated 19 March 2014 and the assessed loss was rectified and computed at Rs. 261,70,16,290.
5. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
6. The Revenue is before us.
7. The Ld. AR during the course of hearing submitted that the grounds of appeal contested in the present appeal are already decided in favour of the assessee in Assessee's own case for Assessment Year 2010-11 by the ITAT Delhi being ITA No.4196/Del/2014 dated 12/6/2017.
8. The Ld. DR could not controvert the contentions of the Ld. AR.
4 ITA No. 5736/Del/20149. We have heard both the parties and perused the ITAT order in assessee's own case being ITA No. 4196/Del/2014 DCIT Vs. Bharti Retail Ltd. dated 12/6/2017 wherein it is held in Para 7 as under:-
"7. After considering the rival contentions, we do not find any merit in the departmental appeal. The assessee has explained that these expenditure are incurred in the normal course of retail business of the assessee and are recurring and periodical in nature and requires constant updating from time to time. Therefore, these are not capital expenditure in nature. The assessee explained that these expenses have been incurred for setting-up stores under the existing business and no new line of business has been established. The assessee also explained that stores are taken on lease and are not owned by the assessee. The market research has been conducted for the existing business to assess the marketing attractiveness and preference of the customers. In earlier as well as subsequent years similar expenditure have been incurred by the' assessee which are lesser than the expenses claimed in the assessment year under appeal. The market and real estate expenditure are in the nature of identifying fresh markets/areas for the assessee's existing line of business which would contribute to the increase in revenue of the assessee and was meant for the efficient expansion of the business And therefore, the same could not be treated as capital expenditure in nature. Further, A.O has failed to point out while incurring these expenditure what capital has been accumulated by the assessee. Considering the nature of business of the assessee and that assessee has been setting-up stores for providing household items to the public, would clearly support the explanation of the assessee that the aforesaid expenses have been incurred 'wholly and exclusively' for the purpose of business'. The Ld. CIT(A) on proper appreciation of facts and material on record, correctly held that these expenses are not capital in nature. Considering the facts of the case in the light of findings of the Ld. CIT(A) and the discussion above, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the entire addition. The departmental appeal fails and is accordingly dismissed."
Thus, the issues contested in the present appeal are squarely covered by the order of the ITAT, hence, the Revenue's appeal is dismissed.
5 ITA No. 5736/Del/201410. In result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 28th September, 2017.
Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 28/09/2017
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date
1. Draft dictated on 26/09/2017 PS
2. Draft placed before author 27/09/2017 PS
3. Draft proposed & placed before .2017 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
6 ITA No. 5736/Del/2014
Sr.PS/PS 28.09.2017
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 28.09.2017 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.