Whirlpool of India Ltd., Gurgaon v. ACIT, New Delhi

ITA 4652/DEL/2012 | 2008-2009
Pronouncement Date: 17-04-2014 | Result: Allowed

Appeal Details

RSA Number 465220114 RSA 2012
Assessee PAN AAACW1336L
Bench Delhi
Appeal Number ITA 4652/DEL/2012
Duration Of Justice 1 year(s) 7 month(s) 18 day(s)
Appellant Whirlpool of India Ltd., Gurgaon
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 17-04-2014
Date Of Final Hearing 29-10-2013
Next Hearing Date 29-10-2013
Assessment Year 2008-2009
Appeal Filed On 30-08-2012
Judgment Text
ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG JUDICIAL MEMBER I.T.A.NO.2006/DEL/2011 ASSESSMENT YEAR : 2007-08 I.T.A.NO.4652/DEL/2012 ASSESSMENT YEAR : 2008-09 I.T.A.NO.4653/DEL/2012 ASSESSMENT YEAR : 2009-10 WHIRLPOOL OF INDIA LTD. VS DY.COMMISSIO NER OF INCOME TAX WHIRLPOOL HOUSE PLOT NO.40 LARGE TAXPAYERS UNIT NBCC SECTOR-44 GURGAON-122002 PLAZA SAKET NEW DELHI. (PAN: AAACW1336L) (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI TAPAS RAM MISHRA RESPONDENT BY : SHRI R.S. MEENA C.I.T. DR O R D E R PER CHANDRAMOHAN GARG J.M. THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-LTU NEW DELHI DATED 31.01.2011 IN APPEAL NO. 22/09-10 FOR AY 2007-08; DATED 2.7.2012 IN APPEAL NO. 9/10-11 FOR AY 2008-09 AND DATED 3.7.2012 IN APPEAL NO. 19/ 11-12 FOR AY 2009-10 RESPECTIVELY. ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 2 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 20 06/DEL/2011 FOR AY 2007-08 READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE IMPUGNED ORDER OF THE CIT(A) IS VAGUE BASED ON INCORRECT APPRECIATION OF FACTS BAD IN LA W AND VOID AB INITIO. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) ERRED ON FACTS AND IN LAW IN CONF IRMING THE FRINGE BENEFIT TAX (FBT) ASSESSMENT ORDER ON TH E GROUND THAT THE APPELLANT HAD NOT MADE A CLAIM BY REVISING THE RETURN AND HENCE THE ASSESSING OFFICER HAD RIGHTLY REJECTED THE APPELLANT'S CLAIM. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) ERRED ON FACTS AND IN LAW IN NOT ADJUDICATING UPON THE FACT THE NET EXPENDITURE OF R S 860.56 LACS (RS. 1592.63 LACS- RS.732.07 LACS) INCURRED ON PURCHASE OF GIFT ITEMS COULD NOT BE REG ARDED AS A FRINGE BENEFIT BY ANY STRETCH OF IMAGINATION. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE JUDGMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF GOETZE INDIA LIMITED WAS RENDE RED IN THE CONTEXT ASSESSMENT YEAR 1995-96 AND THAT TH E DECISION OF THE SUPREME COURT WAS NO LONGER APPLICA BLE IN AY 2007-08 IN VIEW OF CHANGE IN SECTION 143(3) O F THE ACT. 5. THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN NO T ACCEPTING THE APPELLANT'S CONTENTION THAT NOTWITHST ANDING THE DECISION IN GOETZE INDIA LIMITED CASE THE CIT (A) HAD THE POWERS TO ADJUDICATE UPON THE APPELLANT'S C LAIM ON MERITS. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) ERRED ON FACTS AND IN LAW IN .NOT ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 3 APPRECIATING THAT THE APPELLANT COULD NOT BE MADE T O SUFFER FBT ON AN EXPENDITURE THAT WAS CLEARLY NOT F RINGE BENEFIT PROVIDED TO ANY EMPLOYEE. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THESE AP PEALS ARE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CONSUMER DURABLE GOODS SUCH AS REFRIGERATORS WASHING MACHIN ES AIR CONDITIONER MICROWAVE OVEN ETC. FOR THE PREVIOUS YEAR ENDING O N 31.3.2007 THE ASSESSEE FILED THE RETURN OF FRINGE BENEFIT TAX (FB T) ON 30.10.2007. THE TOTAL VALUE OF FBT DECLARED IN THE RETURN WAS RS.7 96 65 600. AS PER STATEMENT AND VERSION OF THE ASSESSEE THE APPELLAN T COMPANY LAUNCHES DIFFERENT SCHEMES WHEREIN THE CUSTOMER IS OFFERED ON PURCHASE OF A SPECIFIC ITEM MANUFACTURED BY THE APPELLANT AN APPLIANCE SU CH AS STEAM IRON BLENDER WATCH BED SHEET AND SUCH OTHER SIMILAR IT EMS AS A FREE GIFT. SUCH SCHEMES WERE OFFERED THROUGH A SCRATCH CARD WHERE T HE CUSTOMER IS GIVEN A CARD ON RANDOM BASIS ON PURCHASE OF AN ITEM AND ANY GIFT ITEM SPECIFIED IN THE SCRATCH CARD IS HANDED OVER TO THE CUSTOMER BY THE DEALER. THESE GIFT ITEMS ARE NOT MANUFACTURED BY THE APPELLANT THE SA ME ARE PURCHASED FROM THE MARKET. 4. DURING F.Y.2006-07 THE ASSESSEE PURCHASED GIFTS OF RS.1592.63 LAC FOR THE ABOVE PURPOSE. AS DEALERS ALSO GOT BENEFIT OUT OF THE SCHEME IT WAS DECIDED BY THE ASSESSEE TO RECOVER A PART OF COST O F GIFTS FROM THE DEALERS. IN ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 4 ORDER TO REDUCE THE EXPENSES ON SUCH GIFTS THE GIF T ITEMS WERE SOLD TO THE DEALERS AT REDUCED COST. BY DOING THIS THE DEALER S SHARED THE COST OF GIFT ITEMS AND IF ANY OF THESE ITEMS REMAINED UNCLAIMED AT THE EXPIRY OF THE SCHEME PERIOD THE DEALER WAS FREE TO SELL THESE IT EMS IN THE OPEN MARKET. THE SUM OF RS.732.07 LACS WAS THUS RECOVERED FROM T HE DEALERS BY WAY OF SUCH SALE OF GIFT ITEMS. THIS HAD REDUCED THE EXPE NDITURE ON PURCHASE OF GIFT ITEMS AND ACCORDINGLY CREDITED TO SALES PROMOTION E XPENSES. 5. ON THE APPREHENSION EXPRESSED BY ITS AUDITORS TH AT BEING A PART OF SALES PROMOTION EXPENSES THIS COULD PROBABLY ATTRA CT FRINGE BENEFIT TAX (FBT). SUCH EXPENDITURE RELATED TO SALES PROMOTION WAS INCLUDED IN THE TOTAL VALUE OF FRINGE BENEFIT AS DECLARED BY THE ASSESSEE . LATER DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD RECEIVED L EGAL OPINION TO THE EFFECT THAT SUCH EXPENDITURE OF SALES PROMOTION SHOULD NOT BE A PART OF THE VALUE OF FRINGE BENEFIT. 6. CONSIDERING THE FACT THAT SUCH EXPENDITURE ON GI FTS WAS FOR THE SOLE PURPOSE OF PROMOTING SALES AND DID NOT RESULT IN PR OVIDING DIRECTLY OR INDIRECTLY ANY BENEFIT TO ANY EMPLOYEE THE ASSESS EE HAD SUBMITTED BEFORE THE ASSESSING OFFICER THAT SUCH EXPENDITURE ON PURC HASE OF GIFT ITEMS UNDER SALES PROMOTION COULD NOT BE INCLUDED IN THE VALUE OF FRINGE BENEFIT AND PRAYED BEFORE THE ASSESSING OFFICER FOR REDUCTION I N THE VALUE OF TAXABLE ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 5 VALUE OF FRINGE BENEFIT AND CONSEQUENTIAL BENEFIT O F TAX THEREON. THE ASSESSEE PRAYED BEFORE THE ASSESSING OFFICER FOR AP PROPRIATE RELIEF BY TREATING THE SUM OF RS.860.56 LACS AS NOT BEING LIA BLE TO FBT UNDER CHAPTER XII-H OF THE ACT. THE ASSESSING OFFICER DENIED THE RELIEF. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX(A) WHICH WAS ALSO DISMISSED BY HOLDING THAT IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS COMMISSIO NER OF INCOME TAX 284 ITR 323(SC) THE ASSESSING OFFICER CANNOT ENTERTAIN A CLAIM OF DEDUCTION OTHERWISE THAN A REVISED RETURN. NOW TH E ASSESSEE IS AGAIN BEFORE THIS TRIBUNAL WITH THE GROUNDS AS MENTIONED HEREINA BOVE. 7. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD PLACED BEFORE US. LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE FRINGE BENEFIT TAX (FBT) AS SESSMENT ORDER ON THE GROUND THAT THE APPELLANT HAD NOT MADE A CLAIM BY R EVISING THE RETURN AND HENCE THE ASSESSING OFFICER HAD RIGHTLY REJECTED TH E ASSESSEES CLAIM. LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE AUTHORITIES BELOW ERRED ON FACTS AND IN LAW IN NOT ADJUDICATING UPON THE FACT THAT THE NET EXPENDITURE OF RS. 850.56 LACS INCURRED ON PURCHASE OF GIFT ITEMS GIVEN TO THE CUSTOMERS ON PURCHASE OF SPECIFIED ITEMS MANUFACTURED BY THE ASS ESSEE THEN THE SAME GIFT ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 6 BY WAY OF SCRATCH CARD PROVIDED TO THE CUSTOMERS OF THE ASSESSEE COULD NOT BE REGARDED AS A FRINGE BENEFIT BY ANY STRETCH OF I MAGINATION. LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT THE COMMISSIO NER OF INCOME TAX(A) WAS NOT JUSTIFIED IN NOT APPRECIATING THIS NOTABLE FACT THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA L IMITED VS C.I.T. (2006) 284 ITR 323 (SC) WAS RENDERED IN THE CONTEXT OF ASSESSMENT YEAR 1995-96 AND THAT THE DECISION OF THE SUPREME COURT WAS NO LONGER APPLICABLE IN AY 2007-08 IN VIEW OF CHANGE IN SECTI ON 143(3) OF THE ACT. 8. LD. COUNSEL OF THE ASSESSEE VEHEMENTLY CONTENDED THAT SINCE THE COMMISSIONER OF INCOME TAX(A) ENJOYS COTERMINOUS PO WERS WITH THE ASSESSING OFFICER THEN COMMISSIONER OF INCOME TAX( A) GROSSLY ERRED ON FACTS AND IN LAW IN NOT ACCEPTING THE APPELLANT'S C ONTENTION THAT NOTWITHSTANDING THE DECISION IN GOETZE INDIA LIMITE D CASE THE CIT (A) HAD THE POWERS TO ADJUDICATE UPON THE APPELLANT'S CLAIM ON MERITS WHICH DOES NOT IN ANY WAY IMPINGE UPON THE POWERS OF THE APP ELLATE AUTHORITIES INCLUDING COMMISSIONER OF INCOME TAX(A) AND ITAT. 9. REPLYING TO THE ABOVE LD. DR SUBMITTED THAT WHE N THE ASSESSEE COMPANY ITSELF FILED RETURN OF FRINGE BENEFIT TAX O N 30.10.2007 DECLARING TOTAL VALUE OF FRINGE BENEFIT OF RS.7 95 65 600 THEN ANY FURTHER CLAIM OF THE ASSESSEE CAN ONLY BE ENTERTAINED BY FILING A REVISE D RETURN. THE DR FURTHER ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 7 CONTENDED THAT IN THE ABSENCE OF REVISED RETURN CL AIM OF THE ASSESSEE CANNOT BE ENTERTAINED BY THE ASSESSING OFFICER IN THE LIGH T OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS C .I.T. (SUPRA). THE DR FAIRLY ACCEPTED THAT THIS DECISION OF HONBLE APEX COURT DOES NOT IMPINGE UPON THE POWERS OF THIS TRIBUNAL PROVIDED U/S 254 O F THE ACT. 10. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS AND CONTENTION OF BOTH THE PARTIES WE ARE OF THE OPINION THAT AS PER DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS C .I.T. (SUPRA) WHEN DEDUCTION IS CLAIMED AFTER FILING OF RETURN THEN T HE ASSESSING OFFICER IS NOT EMPOWERED TO ENTERTAIN THAT CLAIM MADE OTHERWISE TH AN BY WAY OF REVISED RETURN REQUIRED TO BE FILED U/S 139(5) OF THE ACT. FURTHER WE OBSERVE THAT OPERATIVE LAST PARA OF ABOVE DECISION OF HONBLE SU PREME COURT READS AS UNDER:- THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME TAX ACT 1 961 IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW P ROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT I N ANY WAY RELATE TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY F ILING A REVISED RETURN. IN THE CIRCUMSTANCES OF THE CASE W E DISMISS THE CIVIL APPEAL. HOWEVER WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF T HE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POW ER OF THE INCOME TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME TAX ACT 1961. THERE SHALL BE NO ORDER A S TO COSTS. ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 8 11. IN VIEW OF ABOVE OBSERVATIONS AND DIRECTIONS OF HONBLE SUPREME COURT WE CLEARLY OBSERVE THAT ALTHOUGH AFTER FILIN G OF RETURN THE ASSESSING OFFICER IS NOT EMPOWERED TO ENTERTAIN THE CLAIM OF THE ASSESSEE FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN AT THE S AME TIME WE ALSO OBSERVE THAT THE HONBLE APEX COURT HAD MADE IT CLEAR THAT THE OBSERVATIONS ON THE ISSUE ARE LIMITED TO THE POWERS OF THE ASSESSING AU THORITY AND DO NOT IMPINGE ON THE POWERS OF THIS TRIBUNAL PROVIDED U/S 254 OF THE ACT. THE SAME VIEW HAS BEEN REITERATED MANY TIMES IN VARIOUS SUBSEQUEN T DECISIONS OF HONBLE SUPREME COURT HONBLE HIGH COURTS AND COORDINATE B ENCHES OF THIS TRIBUNAL AND RESPECTFULLY FOLLOWING THE SAME WE HO LD THAT THE ASSESSING OFFICER IS NOT EMPOWERED TO ENTERTAIN CLAIM FOR DED UCTION OF THE ASSESSEE AFTER FILING OF RETURN OTHERWISE THAN BY FILING A R EVISED RETURN BUT THE POWERS OF THIS TRIBUNAL AS AN APPELLATE AUTHORITY U/S 254 OF THE ACT DO NOT IMPINGE UPON THIS DECISION. 12. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY LAUNCHES DIFFERENT SCHEMES WHEREIN THE CUSTOMER IS OFFERED ON PURCHASE OF SPECIFIC ITEM MANUFACTURED BY THE ASSESSEE AN APPL IANCE OR ARTICLE SUCH AS STEAM IRON BLENDER WATCH BED SHEET AND OTHER SUC H SIMILAR ITEMS AS FREE GIFT THROUGH A SCRATCH CARD WHERE THE CUSTOMER IS G IVEN A SCRATCH CARD ON ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 9 RANDOM BASIS ON PURCHASE OF AN ITEM AND ANY GIFT IT EM SPECIFIED IN THE SCRATCH CARD IS HANDED OVER TO THE CUSTOMER BY THE DEALER ON BEHALF OF THE ASSESSEE. LD. COUNSEL PLACED HIS RELIANCE ON THE R ECENT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF T &T MOTORS LTD. VS ACIT (2012) 247 CTR (DELHI) 384 WHEREIN THEIR LORDSHIPS CATEGORICALLY INTERPRETED THE OBJECT AND PURPOSE BEHIND FBT PROVI SION. THE RELEVANT OPERATIVE PART OF THIS DECISION IS BEING RESPECTFUL LY REPRODUCED AS UNDER:- 16. THE OBJECT AND PURPOSE BEHIND FBT AND SECTION 115WB(2)(D) IS DIFFERENT FROM SECTION 37(3A). EXPENDITURE INCURRED AS STIPULATED IN CLAUSE (I) T O (VIII) HAVE TO BE EXCLUDED AND NOT TO BE TREATED AS SALES PROMOTION EXPENDITURE INCLUDING PUBLICITY. CLAUSE ( VII) TO SECTION 115WB(2)(D) EXPRESSLY STIPULATES THAT EXPENDITURE ON DISTRIBUTION OF SAMPLE EITHER FREE O F COST OR AT CONCESSIONAL RATE IS NOT SALES PROMOTION OR PUBLICITY FOR FBT. 17. A CAREFUL READING OF CLAUSE (I) (II) (IV) (V ) (VI) AND (VIII) OF SECTION 115WB(2)(D) ELUCIDATES THAT THE LEGISLATURE HAS EXCLUDED FROM FBT EXPENDITURE IN FO RM OF PAYMENTS TO THIRD PERSONS. THE EXEMPTION IN THESE C LAUSES IT IS APPARENT HAS BEEN GRANTED BECAUSE THIS IS NO T A FRINGE BENEFIT WHICH IS ENJOYED BY THE 'EMPLOYEE/RECIPIENT ' BUT IT IS AN EXPENDITURE INCURRED FOR THE PURPOSE OF BUSIN ESS AND THE PAYMENT IS INCOME EARNED BY THE THIRD PARTY. IN THE HANDS OF THE SAID RECIPIENT THE EXPENDITURE IS TAXA BLE AS INCOME EARNED. 18. WE MAY REPRODUCE THE FOLLOWING OBSERVATIONS OF MADRAS HIGH COURT IN TUTICORIN ALKALI CHEMICALS AND FERTILIZERS (SUPRA) WHEREIN IT HAS BEEN HELD AS UN DER:- ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 10 THE TERM 'SALES PROMOTION' IS NOT TO BE CONFUSED WI TH THE SALES ACTUALLY EFFECTED. WHILE 'SALES PROMOTION' AR E MEASURES TAKEN BY THE ASSESSEE TO PROMOTE GENERALLY THE SALES OF THE PRODUCTS MANUFACTURED BY IT OR DEALT WITH BY IT INDIVIDUAL SALES MADE IN THE NORMAL COURSE OF B USINESS ON COMMERCIAL TERMS EITHER DIRECTLY TO THE CUSTOMER OR THROUGH ITS WHOLESALE AND OTHER DEALERS TO WHOM UN DER THE TERMS OF TRADE DISCOUNTS AND COMMISSIONS ARE AL LOWED CANNOT BE REGARDED AS SALES PROMOTION. THIS COURT I N THE CASE OF CIT V. INDIA PISTONS LTD. MANU/TN/043412001 : (2001) 250 ITR 279 HAS HELD THAT SALE OF A PRODUCT AT A DISCOUNT DID NOT AMOUNT TO A SALES PROMOTION EXPENS E. IT WAS OBSERVED IN THAT JUDGMENT THAT: THE SALES PROMOTION NORMALLY REFERS TO AN ACTIVITY WHICH IS INTENDED TO PROMOTE THE SALE OF ALL THE PRODUCTS BY WAY OF ADVERTISEMENT OR SPECIAL CAMPAIGNS. OFFERING A DISC OUNT ON THE PRICE IN EFFECT IS ONLY AN INSTANT OF THE SA LE OF THE COMPANY'S PRODUCT AT A LOWER PRICE AND CANNOT BE REGARDED AS EXPENDITURE ON SALES PROMOTION. 19. ON THE BASIS OF FACTUAL MATRIX ON RECORD AND AS FOUND BY THE ASSESSING OFFICER WE ARE OF THE VIEW THAT T HE EXPENDITURE INCURRED ON ACCESSORIES WHICH WERE SUPP LIED TO CUSTOMERS WHO HAVE PURCHASED CARS CANNOT BE TREA TED AS SALE PROMOTION INCLUDING PUBLICITY EXPENSES UNDE R CLAUSE (D). IN THE PRESENT CASE THE SAID EXPENDITU RE CANNOT BE CATEGORIZED AS EXPENSE INCURRED FOR PROMO TION OF SALES WITH A VIEW TO GAIN PUBLICITY AND POPULARI ZE THE PRODUCT. THE CUSTOMERS IN THE PRESENT CASE HAVE PUR CHASED THE CARS THEY HAVE PAID MONEY OR SALE CONSIDERATIO N FOR PURCHASE OF CARS. AS A SALES PACKAGE THE APPELLANT HAS PROVIDED AND GIVEN SOME ACCESSORIES FOR WHICH NO INDEPENDENT OR ADDITIONAL CHARGE HAS BEEN LEVIED. T HE CUSTOMER HOWEVER IN ACTUAL FACT HAS PAID FOR THE SAID ACCESSORIES AS THE COST OF THE ACCESSORIES IS INBUI LT IN THE SALE CONSIDERATION PAID BY THE CUSTOMER. ONLY WHEN A CUSTOMER PAYS THE SALE CONSIDERATION SOME ACCESSOR IES ARE PROVIDED AND FIXED IN THE CAR AS PER MUTUAL AGR EEMENT OR ON THE REQUEST MADE BY THE CUSTOMER. UNTIL AND U NLESS A ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 11 CUSTOMER PURCHASES A CAR NO ACCESSORIES ARE PROVID ED OR FURNISHED. THE CUSTOMER WAS NOT GIVEN A LARGESSE BU T WAS OFFERED AND HAS MANAGED TO GET A BETTER DEAL FOR TH E CONSIDERATION PAID. THE CUSTOMER HAS PAID OUT HIS O F POCKET BUT HE HAS BARGAINED AND SECURED A FAVOURAB LE DEAL. THE INTERPRETATION SUGGESTED BY THE REVENUE I S CONTRARY TO THE INTEREST OF THE CUSTOMERS OR PUBLIC INTEREST. THE INTERPRETATION AS SUGGESTED BY THE REVENUE WOUL D MEAN THAT THE CAR DEALER WOULD HAVE TO PAY FBT IF HE ENTERS INTO AND GIVES A BETTER DEAL TO THE CUSTOMER WHO PURCHASES A CAR WITH EXTRA FITMENTS AND ACCESSORIES . WE DO NOT THINK THAT IT IS THE INTENTION OF THE LEGISLATU RE TO IMPOSE FBT ON THE CAR DEALER WHO OFFERS A BETTER DEAL WITH FITMENTS AND ACCESSORIES TO A CUSTOMER WHO IS MAKIN G PAYMENT FOR PURCHASE OF THE CAR IN QUESTION. 20. IN THIS CONNECTION THE LEARNED COUNSEL FOR THE APPELLANT HAD DRAWN OUR ATTENTION TO QUESTION NO. 6 0 AND THE ANSWER THEREOF IN THE CBDT CIRCULAR NO.8 OF 200 5 DATED 28TH SEPTEMBER 2005 WHICH READS AS UNDER: 60. WHETHER 'SALES PROMOTION' INCLUDES SALES DISCOU NT OR REBATES TO WHOLESALERS OR CUSTOMERS OR BONUS POINTS GIVEN TO CREDIT CARD CUSTOMERS AND IF SO WHETHER FBT IS PAYABLE THEREON? ANS. SALES DISCOUNT OR REBATES ALLOWED TO WHOLESALE DEALERS OR CUSTOMERS FROM THE LISTED RETAIL PRICE M ERELY REPRESENT LESSER REALIZATION OF THE SALE PRICE ITSE LF. THE BONUS POINTS GIVEN TO CREDIT CARD CUSTOMERS ARE ALS O IN THE NATURE OF DEFERRED SALE DISCOUNT. THEREFORE DISCOU NTS OR REBATES OR BONUS POINTS ALLOWED TO CUSTOMERS OR WHO LESALE DEALERS ARE IN THE NATURE OF SELLING EXPENSES AND O UTSIDE THE SCOPE OF THE PROVISIONS OF CLAUSE (D) OF SUB -S ECTION (2) OF SECTION 115WB OF THE INCOME-TAX ACT. ACCORDINGLY SUCH DISCOUNTS OR REBATES ARE NOT LIABLE TO FBT. 21. LEARNED COUNSEL OF THE RESPONDENT ON THE OTHER HAND RELIED UPON ON THE QUESTION NO. 66 AND THE ANSWER G IVEN IN THE SAME CIRCULAR. REFERENCE IS ALSO MADE TO QUESTI ON NOS. ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 12 97 AND 98 WHICH AGAIN FOR THE SAKE OF CONVENIENCE A RE REPRODUCED BELOW:- 66. WHETHER EXPENDITURE ON FREE OFFERS (WITH PRODUC TS) SUCH AS FREEBIES LIKE TATTOOS CRICKET CARDS OR SIM ILAR PRODUCTS TO TRADE OR CONSUMERS (EXCLUDING EMPLOYEE S) IS LIABLE TO FBT? FURTHER WHETHER EXPENDITURE INCURRE D ON THE ARTWORK OR FOR PAYMENT OF ROYALTY CHARGES IN RE SPECT OF SUCH FREEBIES IS LIABLE TO FBT? ANS. ANY EXPENDITURE (INCLUDING EXPENDITURE ON ARTW ORK AND ROYALTY CHARGES) ON FREE OFFERS (WITH PRODUCTS) SUCH AS FREEBIES LIKE TATTOOS CRICKET CARDS OR SIMILAR PR ODUCTS TO TRADE OR CONSUMERS (EXCLUDING EMPLOYEES) IS FOR THE PURPOSES OF SALES PROMOTION AND PUBLICITY AN D ACCORDINGLY LIABLE TO FBT. 97. WHETHER EXPENDITURE ON GIFTS UNDER TRADE SCHEME S OR FOR PROMOTION OF COMPANY'S PRODUCTS TO DISTRIBUTORS/RETAILERS IS LIABLE TO FBT? ANS. ORDINARILY A GIFT IS DEFINED AS ANYTHING GIVE N OR PRESENTED WITHOUT CONSIDERATION. THEREFORE EXPENDI TURE ON GIFTS UNDER TRADE SCHEMES OR FOR PROMOTION OF COMPANY'S PRODUCTS TO DISTRIBUTORS/RETAILERS FALLS WITHIN THE SCOPE OF THE PROVISIONS OF CLAUSE (0) OF SUB -S ECTION (2) OF SECTION 115WB AND ACCORDINGLY IS LIABLE TO FBT . 98. DOES A GIFT TO CUSTOMER FALL UNDER 'SALES PROMO TION' OR 'GIFT'? ANS. IN TERMS OF THE RULES OF INTERPRETATION OF A S TATUTE A SPECIFIC PROVISION IN LAW OVERRIDES A GENERAL PROVI SION. THEREFORE A GIFT TO A CUSTOMER EVEN THOUGH FOR TH E PURPOSES OF SALES PROMOTION WOULD FALL WITHIN THE SCOPE OF THE SPECIFIC PROVISION OF CLAUSE (0) OF SUB-SECTION (2) OF SECTION 115WB RELATING TO 'GIFT'. 22. THE CONTENTION OF THE APPELLANT IS THAT THE ANS WER TO QUESTION NO. 66 GIVEN IN THE CBDT CIRCULAR IS VERY WIDE ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 13 AND GOES BEYOND THE SCOPE OF THE ENACTMENT. A PURC HASER OR CUSTOMER PAYS FOR THE PRODUCT INCLUDING THE FREE BIE. IN MOST OF THE CASES TO STATE THAT THE FREEBIE IS NOT BEING PAID FOR IS A MYTH AND FACTUALLY INCORRECT. INTERPRETAT ION SUGGESTED BY THE APPELLANT/REVENUE IS DEBATABLE. WE CONFINE OURSELVES TO THE FACTUAL MATRIX OF THE PRES ENT CASE. WE DO NOT THINK THAT THE ANSWER TO QUESTION NO. 66 CAN BE APPLIED TO THE PRESENT CASE. IN THE PRESENT CASE I T WILL BE MORE APPROPRIATE TO APPLY THE ANSWER TO QUESTION NO . 60. CARS HAVE A NUMBER OF GADGETS FITTINGS AND ACCESSO RIES. CAR DOES NOT CONSIST OF MERE BODY AND ENGINE. ACCESSORIES FITTINGS AND GADGETS ARE NORMALLY TREA TED AS PART AND PARCEL OF THE VEHICLE ITSELF. CARS WITH SA ME OR SIMILAR BODY AND ENGINE HAVE DIFFERENT MODELS DEPE NDING UPON THE FEATURES AND ACCESSORIES. THE COST PRICE D EPENDS UPON THE FEATURES AND ACCESSORIES. QUESTION NO. 66 WHICH HAS BEEN ANSWERED RELATES TO TATTOOS CARDS OR SIM ILAR PRODUCTS WHICH REALLY DO NOT HAVE ANY CONNECTION O R NEXUS WITH THE PRODUCT WHICH IS SOLD. THE CAR ACCES SORIES ARE PROVIDED FOR BETTER ENJOYMENT AND UTILIZATION O F THE PRODUCT WHICH IS PURCHASED. THE UTILITY OF THE PRO DUCT IMPROVES AND GIVES MORE SATISFACTION TO THE PURCHAS ER WHO IS PAYING THE PRICE. IN ANSWER TO QUESTION NO. 60 THE CBDT HAS OBSERVED THAT DISCOUNTS CANNOT BE TREATED AND REGARDED AS SALE PROMOTION. IT IS A COMMON AND NORM AL MARKET PRACTICE TO SUPPLY UPGRADED PRODUCTS FOR A LOWER PRICE OR INCLUDE EXTRA QUANTITY IN THE SAME PRICE A ND STATE THAT THE ADDITIONAL QUANTITY WHICH IS BEING OFFERE D IS FREE. SUCH CASES WILL BE COVERED BY THE QUESTION AND ANSW ER NO. 60 AND NOT BY THE QUESTION AND ANSWER NO. 66. 23. IN THE PRESENT CASE THE REVENUE DID NOT INVOKE CLAUSE (0) TO SUB-SECTION (2) TO SECTION 115WB. IT WAS NOT THE CONTENTION OF THE REVENUE THAT THE ACCESSORIES GIVE N FREE OF COST AS GIFTS. THIS IS RIGHTLY SO AS GIFTS ARE GIVE N OR PRESENTED WITHOUT CONSIDERATION. CONSIDERATION IN THE PRESENT CASE IS INBUILT AS PER PERSON/CUSTOMER IS P AYING CONSIDERATION FOR PURCHASE OF THE CAR. FOR GIFT UND ER CLAUSE (0) THE SAME SHOULD BE PAID WITHOUT CONSIDE RATION. THERE IS NO FINDING TO THIS EFFECT BY THE ASSESSING OFFICER OR ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 14 BY THE TRIBUNAL. THE ACCESSORIES GIVEN OR INSTALLED IN THE CAR BY THE APPELLANT WERE AKIN TO PROVIDING DISCOUN T OR REBATE INSTEAD OF SAID AMOUNT BEING PAID IN CASH O R BEING REDUCED FROM THE SALE PRICE ACCESSORIES WERE PROVI DED BUT NO SPECIFIC PAYMENT WAS MADE FOR THE ACCESSORIE S INSTALLED. THESE CANNOT BE CLASSIFIED AS GIFTS FOR WHICH NO CONSIDERATION HAS BEEN PAID BY THE CUSTOMERS. 24. IN VIEW OF THE AFORESAID REASONING AND DISCUSSI ON THE TWO QUESTIONS OF LAW MENTIONED ABOVE ARE ANSWERED I N NEGATIVE AND IN FAVOUR OF THE APPELLANT AND AGAINST THE RESPONDENT-REVENUE. IN THE FACTS OF THE PRESENT CAS E THERE WILL BE NO ORDER AS TO COSTS. 13. IN VIEW OF ABOVE DECISION OF HONBLE DELHI HIGH COURT THE ASSESSEE OF THE PRESENT CASE OFFERED DIFFERENT SCHEMES THROU GH A SCRATCH CARD AND PURCHASER/CUSTOMER OF A SPECIFIC ITEM MANUFACTURED BY THE ASSESSEE IS OFFERED VARIOUS ITEMS AS GIFT. IN THE PRESENT CASE ALSO THE REVENUE DID NOT INVOKE CLAUSE O TO SUB-SECTION (2) TO SECTION 115WB OF THE ACT. THE ASSESSEES CLAIM HAS BEEN REJECTED BY THE ASSESSING OFFICER ON LEGAL ISSUE BY HOLDING THAT THE ASSESSING OFFICER WAS NOT EMPOWERE D TO ENTERTAIN THE CLAIM OF THE ASSESSEE OTHERWISE THAN BY FILING A REVISED RETURN. DURING THE HEARING BEFORE US THE DR FAIRLY ACCEPTED THAT IT WAS NOT T HE CONTENTION OF THE REVENUE THAT THE ITEMS WERE GIVEN TO THE CUSTOMERS FREE OF COST AS GIFTS. THE GIFTS ARE GIVEN OR PRESENTED WITHOUT CONSIDERATION BUT IN THE PRESENT CASE CONSIDERATION WAS IN-BUILT AS CUSTOMER WAS PAYING C ONSIDERATION FOR PURCHASE OF A SPECIFIC ITEM MANUFACTURED BY THE ASS ESSEE AND THE GIFT ITEMS ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 15 GIVEN TO THE PURCHASERS/CUSTOMERS BY THE DEALER ON BEHALF OF THE ASSESSEE WERE AKIN TO PROVIDING DISCOUNT OR REBATE INSTEAD OF SAID AMOUNT BEING PAID IN CASH OR BEING REDUCED FROM THE SALE PRICE GIFT ITEMS WERE PROVIDED TO THE CUSTOMERS/PURCHASER BUT NO SPECIFIC PAYMENT WAS MA DE BY THEM FOR THESE GIFT ITEMS. ACCORDINGLY THESE CANNOT BE CLASSIFIE D AS GIFTS FOR WHICH NO CONSIDERATION HAS BEEN PAID BY THE CUSTOMERS. THER EFORE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT OF DELHI IN THE CASE OF T&T MOTORS LTD. VS ACIT (SUPRA) WE HOLD TH AT AS PER CBDT CIRCULAR NO. 8 OF 2005 DATED 28.9.2005 QUESTION NO . 60 CLARIFIES THAT DISCOUNT OR REBATES ARE NOT LIABLE TO FBT AND PRESE NT CASE OF THE ASSESSEE FALLS WITHIN FOUR CORNERS OF ABOVE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF T&T MOTORS VS ACIT (SUPRA) AND CBDT CIR CULAR NO. 8 OF 2005. THEREFORE WE FIND IT JUST AND PROPER THAT THE CLAI M FOR DEDUCTION OF THE ASSESSEE IS ALLOWABLE. AT THE COST OF REPETITION WE FURTHER HOLD THAT THE ASSESSING OFFICER IS NOT EMPOWERED TO ENTERTAIN THE CLAIM FOR DEDUCTION OF THE ASSESSEE AFTER FILING OF RETURN OTHERWISE THAN BY FILING A REVISED RETURN BUT THE POWERS OF THIS TRIBUNAL AS AN APPELLATE AUT HORITY U/S 254 OF THE ACT DO NOT IMPINGE UPON BY THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF GOETZE INDIA LTD. VS C.I.T. (SUPRA). ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 16 14. THUS WE FURTHER HOLD THAT THE ASSESSING OFFICE R RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE WHICH WAS FILED BY WAY OF AN APPLICATION AFTER FILING OF RETURN BECAUSE THE ASSESSING OFFICER WAS NOT EMPOWE RED TO ENTERTAIN THE CLAIM OF THE ASSESSEE OTHERWISE THAN BY FILING A RE VISED RETURN. AT THE SAME TIME AS PER POWERS OF THIS TRIBUNAL PROVIDED U/S 2 54 OF THE ACT WE FIND IT JUST AND PROPER THAT THE CLAIM FOR DEDUCTION OF THE ASSESSEE AFTER FILING OF RETURN CANNOT BE DENIED MERELY ON TECHNICAL GROUNDS IN THE ABSENCE OF REVISED RETURN. THEREFORE WE FIND IT APPROPRIATE THAT THE CLAIM OF DEDUCTION REQUIRES EXAMINATION AND VERIFICATION AT THE END OF ASSESSING OFFICER. ACCORDINGLY WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL EXAMINE AND VERIFY THE CLAIM OF THE ASSESSEE FOR DEDUCTION AND SHALL DETERMINE THE VALU E OF FRINGE BENEFIT AFRESH BY AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASS ESSEE. WITH THESE DIRECTIONS ENTIRE CONTROVERSY AND ALL ISSUES ARE R ESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION WITHOUT BE ING PREJUDICED WITH THE OBSERVATIONS MADE IN THE EARLIER ASSESSMENT ORDER A S WELL AS IN THE IMPUGNED ORDER. 15. THUS ALL GROUNDS OF THE ASSESSEE ARE DEEMED TO BE ALLOWED AS INDICATED ABOVE FOR STATISTICAL PURPOSES. ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 17 GROUNDS RAISED BY ASSESSEE IN ITA 4652/D/12 FOR AY 2008-09 AND 4653/D/12 FOR AY 2009-10 16. FROM BARE READING OF GROUNDS RAISED BY THE ASSE SSEE IN THESE APPEALS WE CLEARLY OBSERVE THAT THE MAIN CONTROVERSY PERTAI NING TO TAXABLE VALUE OF FRINGE BENEFIT IS SIMILAR TO THE ASSESSEES CASE IN ITA NO. 2006/DEL/2011 WHICH HAS BEEN ADJUDICATED AND ALLOWED FOR STATISTI CAL PURPOSES BY EARLIER PART OF THIS ORDER. SINCE SIMILAR CONTROVERSY HAS BEEN DECIDED BY ALLOWING GROUNDS OF THE ASSESSEE IN AY 2007-08 THEREFORE W E ORDER THAT THE OBSERVATIONS AND FINDINGS IN ITA NO. 2006/DEL/2011 SHALL APPLY MUTIS MUTANDIS TO ITA NO. 4652 & 4653/D/2012 FOR AY 2008-09 AND 2 009-10 RESPECTIVELY. 17. IN THE RESULT ALL APPEALS OF THE ASSESSEE ARE DEEMED TO BE ALLOWED IN THE MANNER AS INDICATED ABOVE FOR STATISTICAL PURPO SES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.4.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 17 TH APRIL 2014 GS ITA NO.2006/D/11 4652 4653/D/12 ASSTT.YEAR: 2007-08 2008-09 2009-10 18 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR