Hindustan Coca- Cola Marketing Pvt. Ltd., Gurgaon v. CIT, New Delhi

ITA 2625/DEL/2011 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 262520114 RSA 2011
Assessee PAN AABCH1541D
Bench Delhi
Appeal Number ITA 2625/DEL/2011
Duration Of Justice 2 month(s) 9 day(s)
Appellant Hindustan Coca- Cola Marketing Pvt. Ltd., Gurgaon
Respondent CIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 29-07-2011
Date Of Final Hearing 25-07-2011
Next Hearing Date 25-07-2011
Assessment Year 2006-2007
Appeal Filed On 20-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER & SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO. 2625/DEL/2011 ASSESSMENT YEAR: 2006-07 HINDUSTAN COCA-COLA MARKETING PVT. LTD. VS. CIT ORCHID CENTRE 3 RD FLOOR DELHI IV DLF GOLF COURSE ROAD SECTOR-53 NEW DELHI. GURGAON. AABCH1541D (APPELLANT) (RESPONDENT) APPELLANT BY : SH. A JAY VOHRA & SH. SACHIT JOLLY ADV. RESPONDENT BY : SH. R.I.S. GILL SR. DR ORDER PER I.P. BANSAL J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT DELHI IV NEW DELHI DATED 16.03.2011 U/S 263 OF INCOME TAX ACT 1961 (ACT). 2. IN THE PRESENT APPEAL THE ASSESSEE HAS CHALLENGE D THE VALIDITY OF IMPUGNED ORDER. THOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT HAS ERRED IN INVOKING THE POWERS U/S 263 AND THE MATTER IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F ASSESSEE ITSELF DATED 10.03.2011 FOR A.Y. 2003-04. ITA NO. 2625/D/2011 2 3. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT L D. CIT HAS EXERCISED POWER U/S 263 TO MAKE DISALLOWANCE OF RS. 377.30 LAKH INCURRED BY THE ASSESSEE AS ADVERTISEMENT EXPENDITU RE. HE SUBMITTED THAT LD. CIT HAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ADVERTISEMENT ARE IN THE NATURE OF CAPITAL EXPENDIT URE THEREFORE ELIGIBLE FOR DEPRECIATION @ 25%. THEREFORE NET AMOUNT OF R S. 282.99 LAKH (NET OF DEPRECIATION) IS IN THE NATURE OF CAPITAL WHICH HAS BEEN WRONGLY ALLOWED AS REVENUE EXPENDITURE. THE ASSESSEE THOUG H HAS TAKEN A PLEA BEFORE LD. CIT THAT ON THE SAME ISSUE IN RESPECT OF ASSESSEES CASE FOR A.Y. 2003-04 THE ITAT HAD CANCELLED THE ORDER U/S 2 63 PASSED BY CIT WHICH WAS LATER ON CHALLENGED BY THE DEPARTMENT IN THE HIGH COURT AND THE SAID CASE WAS HEARD ON 10.03.2011 THEREFORE T ILL THEN THE PROCEEDING U/S 263 SHOULD BE POSTPONED. LD. CIT HA S TURNED DOWN SUCH REQUEST OF THE ASSESSEE ON THE GROUND THAT THERE IS A TIME LIMITATION TO PASS ORDER U/S 263. THE DETAILS OF EXPENDITURES HA VE BEEN DESCRIBED IN THE ORDER OF CIT AND WHICH IS AS UNDER: - (I) POS SIGNS (WALL PAINTING) - RS. 36.80 LACS (II) ICE CHESTS - RS. 115.83 LACS (III)AWNINGS - RS. 27.18 LACS (IV) NEON SIGNS - RS. 0.22 LACS (V) CONSUMER PROMOTION - RS. 197.27 LACS TOTAL RS.377.30 LACS 4. HE SUBMITTED THAT THE COPY OF THE TRIBUNAL ORDER IN RESPECT OF A.Y. 2003-04 FOR WHICH YEAR ALSO LD. CIT HAD INVOKED POW ER U/S 263 IS PLACED AT PAGES 88 TO 99 OF THE PAPER BOOK THE SAID ORDER IS DATED 06.03.2009 ITA NO. 2625/D/2011 3 PASSED IN ITA NO. 2010/DEL/2008. THE OBSERVATIONS OF THE TRIBUNAL WHILE QUASHING THE ORDER U/S 263 WERE AS UNDER: - 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. BEFORE PROCEEDING WIT H THE DETERMINATION OF THE APPEAL IT MAY BE MENTIONED THAT THE ASSESSEE DID NOT FILE ANY PAPER BOOK AND THUS THE SHOW CAUSE NOTICE ISSUED TO IT HAS NO T BEEN PLACED ON RECORD. DURING THE COURSE OF HEARING THE LEARNED DR PLACED ON RECORD THE QUESTIONNAIRE DATED 22.10.2005 ISSUED BY THE AO IN THE COURSE OF ASSESSMENT. FROM THE QUESTIONNAIRE IT IS CLEAR THAT NO QUERY WAS RAI SED REGARDING THE EXPENDITURE UNDER CONSIDERATION. THE LEARNED DR HAD ALSO FILED A COPY OF ASSESSMENT ORDER. ON PERUSAL THEREOF IT IS FOUN D THAT THERE IS NO DISCUSSION IN THE ORDER RE GARDING THE EXPENSES. THEREFORE FROM THE RECORDS OF T HE TRIBUNAL IT TRANSPIRES THAT NEITHER ANY Q UERY WAS RAISED WITH THE ASSESSEE NOR ANY DISCUSSION WAS MADE IN THE ASSESSMENT ORDER REGARDING THE DEDUCTIBILITY OF THE AFORESAID EXPENDITURE. THEREFORE THE ORDER IS PRIMA FACI E ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVE NUE AS EXPENDITURE OF RS. 490.91 LAKH WAS ALLOWED TO BE DEDUCTED WITHOUT ANY ENQUIRY WHATSOEVER. THIS VIEW FINDS SUPPORT FROM THE DECISION OF HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. (SUPRA) AND HONBLE ORISSA HIGH COURT IN THE CASE OF UMASHANKAR RICE MILL (SUPRA). THE QUESTION TH US BEFORE US IS WHETHER THE CIT EXERCISED HER JURISDICTION ON THE AFORESAID GROUND OR NOT? UNFORTUNATELY IN THE ABSENCE OF THE QUESTIONNAIR E ITA NO. 2625/D/2011 4 ISSUED BY HER THE ANSWER TO THIS QUESTION HA S TO BE FOUND OUT FROM THE TENOR OF HER ORDER. PARAGRAPH 1 OF THE ORDER READS - FROM AN EXAMINATION OF THE INCOME-TAX ASSESSMENT RECORDS OF M/S HINDUSTAN COCA COLA MARKETING COMPANY PVT. LTD. ABDUL FAIZAL ROAD BENGALI MARKET NEW DELHI FOR THE A.Y. 2002-03 IT TRANSPIRED THAT IN THE ASSESSMENT MADE VIDE ORDER DATED 14.03.2006 U/ S 143(3) THE DEDUCTION U/S 37(I) OF EXPENDITURE BEING CAPITAL IN NATURE HAS BEEN WRONGLY ALLOWED. WH ILE COMPUTING THE BUSINESS INCOME A DEDUCTION OF RS. 490.91 LAKHS (RS. 124.80 LAKHS TOWARDS DEALERS SIG N BOARDS AND RS. 366.11 LAKHS TOWARDS GLOW SIGNS) INCLUDED IN ADMINISTRATION SELLING AND DISTRIBU TION EXPENSES HAS BEEN ALLOWED. THESE EXPENDITURE WAS RELATED TO AN ADVANTAGE BEING FOR ENDURING BENEFIT IN NATURE. THE DECISION OF HONBLE SUPREME COURT IN CASE OF ASSAM BENGAL CEMENT CO. VS. CIT 27 ITR 34 CLEARLY APPLIES FAILURE TO TREAT THE EXPENDITURE AS CAPITAL EXPENDITURE HAD RESULTED IN OVER ASSESSMENT AND EXCESS CARRY FORWARD LOSS AMOUNTING TO RS. 490.91 LAKH (UNQUOTE). ON EXAMINATION OF THIS PARAGRAPH IT IS SEEN THAT ON PERUSAL OF THE RECORDS IT WAS FOU ND BY HER THAT A DEDUCTION OF RS. 490.91 LAKH HAS BE EN GRANTED TOWARDS THE EXPENDITURE INCURRED ON DEALERS SIGN BOARDS AND GLOW SIGNS WHICH ENNURED A BENEFIT OF ENDURING NATURE TO THE ASSESSEE AND THEREFORE IT WAS CAPITAL EXPENDITURE. THEREFORE THE ASSESSMENT RESUL TED IN OVER ASSESSMENT OF THE LOSS BY AN AMOUNT OF RS. 490.91 LAKH. NEITHER THIS PARAGRAPH NOR PARAGRAPH NO. 2 DEALING WITH THE MERITS OF T HE CASE MENTIONS THAT THE ORDER WAS ERRONEOUS A ND ITA NO. 2625/D/2011 5 PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOU NT OF FAILURE OF THE AO TO MAKE ANY ENQUIRY. IN THE CASE OF SMT. R.G. UMARANEE (SUPRA) IT WAS HELD THAT AN ORDER OF ASSESSMENT CANNOT BE REVISED ON A GROUND WHICH IS NOT MENTIONED IN THE SHOW CAUS E NOTICE. SUCH WAS ALSO THE FINDING OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAGADHARI ELECTRIC SUPPLY COMPANY (SUPRA). THEREFORE IN ABSENCE OF ANY CLEAR MENTION OF THE FAILURE OF THE AO TO EXAMINE THE EXPENSES THIS ISSUE COULD NOT HAVE BEEN MADE A GROUND FOR REVISION OF THE ORDER. THE TRIBUNAL DOES NOT HAVE POWERS TO TRAVERSE BEYOND THE SHOW CAUSE NOT ICE AND THE ORDER OF THE CIT. IN VIEW THEREOF IT IS HELD THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THIS CASE THE DECISIONS IN THE CASE OF SWAR UP VEGETABLE PRODUCTS INDUSTRIES LTD. AND UMASHANKAR RICE MILL (SUPRA) ARE NOT APPLICABLE. THE ONLY GROUND ON WHICH THE ORDER WAS REVISE D CAN BE SAID TO BE THAT THE EXPENDITURE W AS CAPITAL IN NATURE WHICH WAS ALLOWED AS REV ENUE EXPENDITURE BY THE AO. WE HAVE ALREADY DISCUSSED THAT THE MATTER IS A DISPUTED ONE AND RIVAL DECISIONS EXIST IN THIS MATTER. IN THE CASE OF LIBERTY GROUP MARKETING DIVISION (SUPRA) HONB LE PUNJAB & HARYANA HIGH COURT HELD THAT GLOW SIGN BOARDS DO NOT BRING INTO EXISTENCE AN Y ASSET NOR LEAD TO AN ADVANTAGE OF ENDURING BENEFIT TO THE ASSESSEE. EVEN IF THIS CASE DOES NOT SETTLE THE ISSUE IN FAVOUR OF THE ASSESSE E IT CAN BE SAID THAT TWO VIEWS ARE POSSIBLE IN T HE MATTER. IN SUCH CIRCUMSTANCES THE CIT CANN OT SUBSTITUTE HIS JUDGMENT IN PLACE OF THE JUDGME NT OF THE AO AND HOLD THE ORDER TO BE ERRONEOUS AND ITA NO. 2625/D/2011 6 PREJUDICIAL TO THE INTEREST OF THE REVENUE. I N THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT T HE LD. CIT ERRED IN REVISING THE ORDER U/S 263(1) O F THE ACT. 4. IN THE RESULT THE APPEAL IS ALLOWED. 5. HE FURTHER REFERRED TO THE DECISION OF HONBLE H IGH COURT VIDE WHICH THE AFOREMENTIONED ORDER OF THE TRIBUNAL WAS UPHELD. THE SAID ORDER IS DATED 10.03.2011 IN ITA NO. 410/2010 AND C OPY OF WHICH IS PLACED AT PAGE 102 OF THE PAPER BOOK AND THE OBSERV ATIONS OF THEIR LORDSHIPS IN THAT ORDER ARE AS UNDER: - THE ASSESSEE HAD FILED ITS RETURN FOR THE AY 2003- 04 DECLARING LOSS OF RS. 79 47 74 050/-. ASSESSMENT WAS CARRIED OUT UNDER THE PROVISIONS OF SEC. 143(3) OF THE INCOME-TAX ACT AND WAS COMPLETED BY THE AO AT A LOSS OF RS. 35 59 74 060/-. THE MATTER WAS THEREAFTER TAKEN UP BY THE CIT(A) WHO PASSED ORDERS DATED 31.3.2008 IN EXERCISE OF POWER U/S 263 OF THE ACT. ACCORDING TO HIM THE ASSESSEE HAD CLAIMED TH E DEDUCTION OF RS. 490.91 LACS COMPRISING OF EXPENDITURE TOWARDS DEALER SINGS BOARDS AND ALSO ADMINISTRATION SELLING AND DISTRIBUTION EXPENSES. THE COMMISSIONER WAS OF THE OPINION THAT THESE EXPENSES WERE CAPITAL IN NATURE AS THEY WERE INCURRED FOR ENDURING BENEFIT AND THE AO HAS WRONGLY ALLOWED THE SAME U/S 37(I) OF THE ACT. THIS ORDER OF THE COMMISSIONER WAS CHALLENGED BY THE ASSESSEE BY PREFERRING APPEAL BEFORE THE TRIBUN AL AND THE TRIBUNAL HAS SET ASIDE THE SAID ORDER VIDE IMPUGNED DECISION DATED 6.3.2009 INTER ALIA ON THE GROUND THAT IN THE MATTER LIKE THIS TWO VIEWS WERE POSSIBLE AND THEREFORE IT WAS NOT PERMISSIBLE FOR THE ITA NO. 2625/D/2011 7 CIT(A) TO SUBSTITUTE HIS JUDGMENT IN PLACE OF THE JUDGMENT OF THE AO AND HOLD THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNDER SIMILAR CIRCUMSTANCES IN THE CASE OF THIS VE RY ASSESSEE THE COMMISSIONER HAD PASSED ORDERS U/S 263 OF THE ACT ALBEIT ON THE ISSUE OF DEPRECIATION WHICH AROSE IN THAT CASE AND THE SAID ORDER WAS SET ASIDE BY THE ITAT. APPEALS THERE AGAINST I.E. ITA 1391/2010 1394/2010 AND 1396/2010 HAVE BEEN DISMISSED BY THIS COURT VIDE ITS DETAILS JUDGMENT DATED 14 TH JANUARY 2011 INTER ALIA OBSERVING AS UNDER: - REGARD BEING HAD TO THE WIDER EXPANSION OF THE DEFINITION AFTER THE AMENDMENT OF SECTION 32 BY THE FINANCE ACT (2) 1998 AND THE AUDITORS REPORT AND T HE EXPLANATION OFFERED BEFORE THE AO WE ARE OF THE CONSIDERED OPINION THAT THE TRIBUNAL IS JUSTIFIED I N HOLDING THAT IF TWO VIEWS WERE POSSIBLE AND WHEN TH E AO HAD ACCEPTED ONE VIEW WHICH IS PLAUSIBLE ONE IT WAS NOT APPROPRIATE ON THE PART OF THE COMMISSIONER TO EXERCISE HIS POWER U/S 263 SOLELY ON THE GROUND THAT IN THE BOOKS OF ACCOUNTS IT WAS MENTIONED AS GOODWILL AND NOTHING ELSE. AS HAS BEEN HELD BY THE APEX COURT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA) MAX INDIA LTD. (SUPRA) AND CIT VS. VIMGI INVESTMENT P. LTD. [2007] 290 ITR 505 (DELHI) ONCE A PLAUSIBLE VI EW IS TAKEN IT IS NOT OPEN TO THE COMMISSIONER TO EXERCISE THE POWER U/S 263 OF THE ACT. FOLLOWING THE AFORESAID JUDGMENT WE ARE OF THE VIE W THAT NO QUESTION OF LAW ARISES FOR CONSIDERATION. THIS APPEAL IS ACCORDINGLY DISMISSED. ITA NO. 2625/D/2011 8 6. LD. AR FURTHER REFERRED TO THE DECISION OF THE T RIBUNAL IN THE CASE OF THE ASSESSEE ITSELF IN RESPECT OF A.Y. 2004-05 C OY OF WHICH IS PLACED AT PAGES 103 TO 108 OF THE PAPER BOOK IN WHICH ALSO SIMILAR POWERS WERE EXERCISED BY LD. CIT AND THE ORDER U/S 263 WAS QUAS HED BY THE TRIBUNAL VIDE ITS ORDER DATED 30.10.2009. IT WAS FURTHER SU BMITTED THAT THE SAID ORDER OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBL E DELHI HIGH COURT VIDE ITS DECISION DATED 1.04.2011 IN ITA NOS. 1526/ 2010 AND 1531/2010 AND COPY OF SUCH ORDER IS PLACED AT PAGES 109 & 110 OF THE PAPER BOOK. 7. IN VIEW OF ABOVE DISCUSSION IT WAS THE SUBMISSI ON OF LD. AR THAT THE ISSUE RAISED BY ASSESSEE IS COVERED IN FAVOUR O F ASSESSEE AND THEREFORE THE ORDER PASSED BY CIT U/S 263 SHOULD B E QUASHED. 8. ON THE OTHER HAND LD. DR RELYING UPON THE ORDER OF LD. CIT. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ISSUE IS SQUARELY C OVERED BY THE AFOREMENTIONED TWO DECISIONS OF ITAT & HONBLE DELH I HIGH COURT IN RESPECT OF ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2003-04 & 2004- 05. IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD. CI T THAT THE MATTER HAS ALREADY BEEN HEARD AND DECISION OF DELHI HIGH COURT IS AWAITED. HOWEVER SUCH REQUEST OF ASSESSEE HAS BEEN TURNED D OWN BY LD. CIT ON THE GROUND THAT LIMITATION IS INVOLVED TO PASS ORDE R U/S 263. HOWEVER LATER ON HONBLE DELHI HIGH COURT HAS UPHELD THE OR DER OF TRIBUNAL IN RESPECT OF A.Y. 2003-04. IT IS NOT THE CASE OF LD. CIT THAT THE FACTS OF THAT ITA NO. 2625/D/2011 9 CASE ARE IN ANY WAY DIFFERENT FROM THE FACTS OF THE PRESENT YEAR. THEREFORE APPLYING THE SAME RATIO WE FIND NO JUSTI FICATION FOR INVOCATION OF POWER U/S 263. THEREFORE WE CANCEL THE ORDER P ASSED U/S 263 AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (K.G. BANSAL) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 29.7.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR