DCIT, New Delhi v. M/s Paramount Surgimed Ltd.,, New Delhi

ITA 5013/DEL/2015 | 2011-2012
Pronouncement Date: 20-11-2017 | Result: Dismissed

Appeal Details

RSA Number 501320114 RSA 2015
Assessee PAN AAACP0814A
Bench Delhi
Appeal Number ITA 5013/DEL/2015
Duration Of Justice 2 year(s) 3 month(s) 15 day(s)
Appellant DCIT, New Delhi
Respondent M/s Paramount Surgimed Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 20-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 20-11-2017
Assessment Year 2011-2012
Appeal Filed On 05-08-2015
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA JUDICIAL MEMBER ITA NO. 5013/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT CIRCLE 19(2) NEW DELHI. VS. M/S. PARAMOUNT SURGIMED LTD. PLOT NO. 1 LSC OKHLA INDL. AREA PHASE-II NEW DELHI 110 020 PAN AAACP0814A (APPELLANT) (RESPONDENT) O R D E R PER SUDHANSHU SRIVASTAVA J.M. THIS APPEAL HAS BEEN PREFERRED BY THE DEPA RTMENT AGAINST THE ORDER DATED 22.5.2015 PASSED BY THE LD. CIT(A) -7 F OR ASSESSMENT YEAR 2011-12 WHEREIN THE LD. CIT(A) HAS ALLOWED THE ASSE SSEES APPEAL IN ENTIRETY. ASSESSEE BY: SHRI R.C. PANDEY SR. DR DEPARTMENT BY : S HRI PIYUSH KAUSHIK ADVOCATE DATE OF HEARING 21/08 /2017 DATE OF PRONOUNCEMENT 20/11/ 2017 ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED DECLARING AN INCOME OF RS. 1 36 55 545/-. THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLE TED U/S 143 (3) OF THE INCOME TAX ACT 1961 (HEREIN AFTER CALLED THE ACT) AT A TOTAL INCOME OF RS. 1 75 10 422/- AFTER MAKING A DISALLOWANCE OF RS. 37 96 092/- U/S 37 OF THE ACT AND FURTHER DISALLOWANCE OF RS. 58 78 5/- U/S 14A OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT ASSESSEE HAD INCURRED RS. 53 30 738/- ON ADVERTISEM ENT AND PUBLICITY EXPENSES. IT WAS FURTHER OBSERVED THAT RS. 47 45 11 6/- HAD BEEN INCURRED ON PROMOTION OF OSIM BRAND AND RS. 5 85 622/- HAD BEEN INCURRED ON ADVERTISEMENT AND PUBLICITY MATERIAL. T HE AO WAS OF THE OPINION THAT THE AMOUNT OF RS. 47 45 116/- WAS INCU RRED ON PROMOTING A BRAND WHOSE BENEFIT WAS SPREAD OVER A PERIOD OF TIM E. ACCORDINGLY THE AO PROCEEDED TO DISALLOW 80% OF THE AMOUNT AND ADDE D THE SAME TO THE INCOME OF THE ASSESSEE BY TREATING IT AS DEFERR ED REVENUE EXPENDITURE TO BE CLAIMED @20% IN SUCCESSIVE YEARS AND THE REMAINING 20% WAS ALLOWED AS A DEDUCTION FOR THE YEAR UNDER C ONSIDERATION. FURTHER THE AO ALSO WORKED OUT THE VALUE OF AVERAG E INVESTMENT DURING THE YEAR AND PROCEEDED TO DISALLOW 0.5% OF THE AVER AGE VALUE OF ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 3 INVESTMENT AND THEREAFTER MADE A DISALLOWANCE OF RS. 58 785/- U/S 14A OF THE ACT. 2.1 ON APPEAL BEFORE THE LD. CIT (A) BOTH THE ADDITIONS / DISALLOWANCES WERE DELETED BY THE LD. FIRST APPELLA TE AUTHORITY. NOW THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENG ED THE DELETION OF BOTH THE DISALLOWANCES. 3. LD. SR. DR SUBMITTED THAT AS FAR AS THE DISALLOWANCE U/S 37 OF THE ACT WAS CONCERNED THE AO HAD RECORDED A FINDIN G THAT SUBSTANTIAL AMOUNT HAD BEEN INCURRED ON PROMOTION OF A BRAND AN D THEREFORE THE AO WAS ABSOLUTELY CORRECT IN ONLY ALLOWING 20% AS D EDUCTION IN THE CURRENT YEAR AND HOLDING THAT THE BALANCE WAS DEFER RED REVENUE EXPENDITURE TO BE ALLOWED AS DEDUCTION @ 20% IN FOU R SUCCESSIVE YEARS. ON THE ISSUE OF DISALLOWANCE U/S 14A IT WAS SUBMIT TED THAT THE AO HAS NOTED THAT THE ASSESSEE WAS HAVING COMMON INFRASTRU CTURE AND COMMON PERSONNEL FOR EARNING INCOME UNDER VARIOUS HEADS AN D FURTHER THE ASSESSEE WAS ALSO USING ITS ADMINISTRATIVE MANAGER IAL AND INFRASTRUCTURAL SET UP FOR EARNING EXEMPT INCOME. ACCORDINGLY THE AO WAS CORRECT IN RESORTING TO INVOCATION OF RULE 8D(2) OF THE ACT AN D MAKING A DISALLOWANCE. ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 4 4. IN RESPONSE THE LD. AUTHORISED REPRESENTATI VE RELIED ON THE FINDINGS OF THE LD. CIT (A) AND SUBMITTED THAT BOTH THE ISSUES HAD BEEN ANALYSED AND DISCUSSED AT LENGTH IN THE IMPUGNED OR DER AND IT WAS PRAYED THAT THE IMPUGNED ORDER SHOULD BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND H AVE ALSO PERUSED THE MATERIAL ON RECORD. AS FAR AS THE ISSUE OF DISALLOW ANCE OF RS. 37 96 092/- IN RESPECT OF ADVERTISEMENT AND PUBLICITY EXPENSES IS CONCERNED IT HAS BEEN SUBMITTED THAT THE EXPENDITURE ON ADVERTISEMEN T AND PUBLICITY COMPRISED OF EXPENDITURE ON PRESS ADVERTISEMENT FILM SCREENING IN VARIOUS THEATRES SMS CAMPAIGN HOARDINGS BROCHUR ES PAMPHLET ETC. IT IS SEEN THAT THE ADVERTISEMENT WAS NOT SPECIFICALLY ONLY OF OSIM BRAND BUT OF DIFFERENT PRODUCTS OF OCIM. IT IS ALSO SEEN THAT THERE IS NO ALLEGATION OF ANY PART OF EXPENDITURE NOT BEING WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED OUT BY THE COMPANY. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS NOT BROUGH T OUT ANY SPECIFIC INSTANCES TO DEMONSTRATE THAT PARTICULAR ITEMS OF E XPENDITURE PERTAIN TO PROMOTION OF THE BRAND. EVEN DURING THE PROCEEDINGS BEFORE US THE DEPARTMENT COULD NOT DEMONSTRATE WITH EVIDENCE IT S CLAIM THAT THE EXPENDITURE INCURRED IN RESPECT OF ADVERTISEMENT AN D PUBLICITY EXPENSES HAD SUBSTANTIAL AMOUNT OF BRAND PROMOTION EXPENSES. HOW THE AO HAS ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 5 SEGREGATED THE ADVERTISEMENT EXPENSES INTO ADVERTIS EMENT EXPENSES AND BRAND PROMOTION EXPENSES IS ALSO NOT DISCERNIBL E FROM THE AOS ORDER. THE LD. CIT (A) WHILE ALLOWING THE ASSESS EES CLAIM FOR DEDUCTION OF ENTIRE EXPENDITURE HAS RELIED ON FEW O F THE JUDGMENT OF THE HONBLE DELHI HIGH COURT LIKE CIT VS. M/S. SPICE DI STRIBUTION LIMITED IN ITA NO. 597/2014 CIT VS. SBI CARDS & PAYMENT SERVI CES PRIVATE LIMITED IN ITA NO. 603/2014 CIT VS. ADIDAS INDIA MARKETIN G (P) LTD. REPORTED IN 195 TAXMAN256 AND CIT VS. VODAFONE ESSAR SOUTH L TD. IN ITA NO. 594/2014. THE RATIO OF ALL THE ABOVE SAID JUDGMENTS OF HONBLE HIGH COURT OF DELHI IS THAT ADVERTISEMENT EXPENDITURE IS NORMALLY TO BE TREATED AS REVENUE IN NATURE BECAUSE ADVERTISEMENTS DO NOT HAVE LONG LASTING EFFECT ON THE GENERAL PUBLIC. THE HONBLE DELHI HIG H COURT HAS ALSO HELD THAT UNDER THE INCOME TAX ACT THERE IS ONLY A REFER ENCE TO CAPITAL OR REVENUE EXPENDITURE AND THERE IS NO REFERENCE TO DE FERRED REVENUE EXPENDITURE. IT HAS ALSO BEEN HELD THAT ADVERTISEME NT EXPENDITURE IN THE PRESENT DAY CONTEXT SHOULD PRIMARILY BE TREATED AS REVENUE EXPENDITURE UNLESS THERE ARE SPECIAL CIRCUMSTANCES AND REASONS TO HOLD THAT THE EXPENDITURE WAS CAPITAL IN NATURE. IT HAS ALSO BEEN HELD THAT WHERE EXPENDITURE WAS INCURRED TO POPULARISE A PRODUCT I T WAS FOR BUSINESS PROMOTION. ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 6 5.1 IN THE FACTS OF THE PRESENT CASE IT IS EVID ENT THAT THE AO HAS NOT DEMONSTRATED WITH COGENT EVIDENCE ANY SPECIAL CIRC UMSTANCES OR REASONS TO HOLD THAT THE IMPUGNED EXPENDITURE WAS C APITAL IN NATURE. IT IS ALSO NOTE-WORTHY THAT NO SPECIFIC INSTANCES HAVE BEEN POINTED OUT BY THE AO IN THIS REGARD. LD. SR. DR WHILE ARGUING ON BEHALF OF THE DEPARTMENT ALSO COULD NOT CITE ANY JUDICIAL PRECED ENTS IN FAVOUR OF THE REVENUE WHICH WERE IN OPPOSITION TO THE JUDGMENTS RE LIED UPON BY THE LD. CIT (A). IN THE GIVEN CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE DO NOT CALL FOR ANY INTERFERENCE ON OUR PART AND WE DEEM IT APPROPR IATE TO DISMISS GROUND NO. 1 OF THE DEPARTMENTAL APPEAL. 5. 2 AS FAR AS GROUND NO. 2 RELATING TO DISALLO WANCE U/S 14A OF THE ACT IS CONCERNED THE LD. CIT (A) HAS GIVEN A FINDING T HAT THE ASSESSEE DID NOT HAVE ANY EXEMPT INCOME DURING THE YEAR AND THAT THE INVESTMENTS BEING HELD BY IT WERE IN THE NATURE OF STRATEGIC IN VESTMENTS. THEREAFTER THE LD. CIT (A) HAS PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. WHEREIN UNDER IDENTICAL CIRCUMSTANCES DISALLOWANCE U/S 14A DELET ED BY THE ITAT WAS UPHELD BY THE HONBLE DELHI HIGH COURT. ON THIS IS SUE ALSO THE DEPARTMENT COULD NOT NEGATE THE FINDINGS OF THE LD. CIT (A) THAT THE ITA NO. 5013//DEL/2015 DCIT VS. M/S. PARAMOUNT SURGIMED LTD. 7 ASSESSEE DID NOT HAVE ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. THEREFORE WE FIND THAT THE LD. CIT (A) HAS RIGHTLY APPLIED THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. AND WE FIND NO REASO N TO INTERFERE ON THIS ISSUE ALSO. ACCORDINGLY WE DISMISS GROUND NO. 2 OF THE DEPARTMENTAL APPEAL. 6. IN THE FINAL RESULT THE APPEAL FILED BY TH E DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.11.2017. . SD/- SD/- (R.K.PANDA) (SUDH ANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20.11.2017 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI