Molson Coors India Pvt. Ltd. (formerly known as M/s Mount Shivalik Breweries Ltd.) , Derabassi v. ACIT, C-2(1), Chandigarh

ITA 931/CHANDI/2018 | 2013-2014
Pronouncement Date: 28-02-2020 | Result: Allowed

Appeal Details

RSA Number 93121514 RSA 2018
Assessee PAN AAACM9806D
Bench Chandigarh
Appeal Number ITA 931/CHANDI/2018
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant Molson Coors India Pvt. Ltd. (formerly known as M/s Mount Shivalik Breweries Ltd.) , Derabassi
Respondent ACIT, C-2(1), Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2020
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-02-2020
Date Of Final Hearing 17-12-2019
Next Hearing Date 17-12-2019
Last Hearing Date 27-06-2019
First Hearing Date 22-10-2019
Assessment Year 2013-2014
Appeal Filed On 04-07-2018
Judgment Text
B IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH ! ' # $ %! BEFORE SHRI SANJAY GARG JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA ACCOUNTANT MEMBER ./ ITA NO. 931/CHD/2018 / ASSESSMENT YEAR : 2013-14 MOLSON COORS INDIA PRIVATE LIMITED (FORMERLY KNOWN AS MOUNT SHIVALIK BREWERIES LIMITED) MOHANGRAM P.O. BHANKARPUR DERABASSI MOHALI PUNJAB-140201. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1) CHANDIGARH. ./ PAN NO: AAACM 9806 D / APPELLANT / RESPONDENT / ASSESSEE BY: SHRI SANDIPAN BASU CA ! / REVENUE BY: SMT. CHANDRAKANTA SR.DR ' #$ / DATE OF HEARING : 17/12/2019 %&'($ / DATE OF PRONOUNCEMENT: 28/02/2020 / ORDER PER: ANNAPURNA GUPTA ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I CHANDIGARH [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 18/04/2018 U/S 250(6) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE A.Y. 2 013-14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DISALLOWANCE UPHELD BY THE LD. COMMISSIONER OF INCO ME TAX (APPEALS)-1 (LD. CIT (APPEALS) IS BAD IN LAW AND CO NTRARY TO FACTS AND PROVISIONS OF THE INCOME TAX ACT 1961 (THE ACT). ITA 931/CHD/2018 MOLSON COORS INDIA P LTD. VS ACIT 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) ERRED IN UPHOLDING THE ACTION OF THE L EARNED ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1) [LD. AO] IN DISALLOWING A SUM OF INR 2 47 33 747 ON ACCOUNT OF SALES PROMOTIO N EXPENSES ALLEGING THAT THE SAME WAS IN THE NATURE OF PRIOR P ERIOD EXPENSE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) FAILED TO APPRECIATE THAT THE LIABILITY TO PAY TO T HE DEALERS CRYSTALLIZED DURING THE SUBJECT AY UNDER CONSIDERAT ION AND CONSEQUENTLY THE AFORESAID EXPENSES CANNOT BE CONSI DERED AS PRIOR PERIOD EXPENSES. THAT THE APPELLANT RESERVES ITS RIGHT TO ALTER AM END WITHDRAW AND ADD ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TI ME OF HEARING OF THIS APPEAL. 2. THE SOLITARY ISSUE INVOLVED IN THE PRESENT APPEA L RELATES TO THE DISALLOWANCE OF SALES PROMOTION EXPENSES TREATI NG THEM AS PRIOR PERIOD EXPENSES AMOUNTING TO RS. 2 47 33 747/ -. 3. AT THE OUTSET ITSELF THE LD. COUNSEL FOR THE AS SESSEE HAS CONTENDED THAT GENUINENESS OF THESE EXPENSES WAS NE VER DOUBTED AND THE ONLY REASON FOR MAKING DISALLOWANCE WAS THA T THEY WERE FOUND TO BE PRIOR PERIOD EXPENSES. IN THIS REGARD THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IT WAS EXPLAINED TO THE AUTHORITIES BELOW THAT THE SALES PROMOTION EXPENSES RELATED TO THE SCHEMES FLOATED BY THE ASSESSEE DURING THE PRECEDIN G YEAR WHICH WAS PAYABLE ON SLAB WISE LIFTING OF STOCKS BY THE D EALERS. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT DUE TO HU GE LOSSES IN THE ASSESSEE COMPANY IT HAD NOT ACKNOWLEDGED ITS L IABILITY TO PAY SALES PROMOTION EXPENSES IN THAT YEAR AND HAD ACKNO WLEDGED THE SAME IN THE IMPUGNED YEAR ITSELF BY ISSUING CREDIT NOTICE AND ITA 931/CHD/2018 MOLSON COORS INDIA P LTD. VS ACIT 3 MAKING PAYMENT AND OTHERWISE TO THE VARIOUS DEALERS . THE LD. COUNSEL THEREFORE HAS CONTENDED THAT SINCE THE LI ABILITY ITSELF WAS ACKNOWLEDGED BY THE ASSESSEE IN THE IMPUGNED YE AR IT CRYSTALLIZED IN THE IMPUGNED YEAR AND THEREFORE WA S RIGHTLY CLAIMED ON ACCRUAL BASIS IN THE IMPUGNED YEAR. OUR ATTENTION WAS DRAWN TO THE SUBMISSIONS MADE BY THE LD. COUNSEL FO R THE ASSESSEE IN THIS REGARD BEFORE THE LD. CIT(A) REPRO DUCED AT PARA 7.1 OF THE ORDER AS UNDER: THE COMPANY HAS ANNOUNCED CERTAIN SALES PROMOTION SCHEMES DURING THE YEAR 2011-12 WHICH WERE PAYABLE BASED ON SLAB WISE LIFTING OF STOCKS BY THE DEALERS. SINC E THE COMPANY WAS RUNNING INTO LOSSES AND IT WAS NOT ABLE TO PAY THE SCHEMES IT DECIDED TO DEFER THE PAYMENT OF THE SE SCHEMES AS WELL AS ITS ACCOUNTING IN THE YEAR 2011- 12 AS DUE TO LOSSES IT WAS NOT CERTAIN THAT THE COMPANY WILL BE ABLE TO PAY FOR THOSE SCHEMES. THE DETAILS OF THE EXPENSES IS ENCLOSED. SINCE THE SAME CRYSTALLIZED DURING THE YEAR THE SA ME ARE ALLOWABLE BUSINESS EXPENDITURE DURING THE YEAR. 4. THE LD DR ON THE OTHER HAND COUNTERED THE CONT ENTION OF THE LD AR OF THE ASSESSEE STATING THAT THE LIABILIT Y HAD ACCRUED IN THE PRECEDING YEAR AS PER THE ADMISSION OF THE ASSE SSEE ITSELF AND THEREFORE HAD BEEN RIGHTLY DISALLOWED AS PRIOR PERI OD EXPENSES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW.THE ISS UE TO BE ADJUDICATED IS WHETHER SALES PROMOTION EXPENSES ACC RUED IN THE ITA 931/CHD/2018 MOLSON COORS INDIA P LTD. VS ACIT 4 IMPUGNED YEAR AS CLAIMED BY THE ASSESSEE OR WERE P RIOR PERIOD EXPENSES AS HELD BY THE REVENUE. THE CONTENTION OF THE ASSESSEE THAT THE LIABILITY T O PAY THE EXPENSES WAS ACKNOWLEDGED BY IT IN THE IMPUGNED YEA R ONLY HAS NOT BEEN CONTROVERTED OR EVEN DISPUTED BY THE REVEN UE.THEREFORE WHEN THE LIABILITY WAS ACKNOWLEDGED ONLY THEN THE O BLIGATION TO PAY THE SAME AROSE AND IT IS AT THIS POINT ONLY THA T THE LIABILITY CAN BE SAID TO HAVE ACCRUED. A LIABILITY ACCRUES ON LY WHEN THE OBLIGATION TO PAY BECOMES DEFINITE/CERTAIN AND ONE OF THE COMPONENTS LENDING DEFINITENESS TO THE LIABILITY IS ITS ACKNOWLEDGEMENT BY THE PARTY ON WHICH IT ARISES. IN THE LIGHT OF THE SAME THERE IS NO DOUBT THAT THE LIABILITY ACC RUED IN THE IMPUGNED YEAR ONLY. THE REVENUE WE FIND IS RELATING THE ACCRUAL OF THE LIABILITY TO THE HAPPENING OF THE EVENT TO WHICH THE LIABILITY IS RE LATED/FIXED WHICH IN THE PRESENT CASE IS THE SALES UNDERTAKEN BY VARI OUS AGENTS /DEALERS TO WHOM PAYMENT IS TO BE MADE TO INCENTIVI ZE SALE.BUT THAT ALONE IS NOT SUFFICIENT FOR ACCRUAL OF LIABILI TY AS IT IS THE HAPPENING OF THE EVENT TO WHICH THE LIABILITY IS RE LATED COUPLED WITH THE ACKNOWLEDGEMENT OF THE LIABILITY WHICH F IXES THE OBLIGATION TO PAY AND HENCE THE ACCRUAL OF LIABILI TY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE HO LD THAT THE LIABILITY TO PAY THE SALES PROMOTION EXPENSES OF RS . 2.47 CRORES ITA 931/CHD/2018 MOLSON COORS INDIA P LTD. VS ACIT 5 ACCRUED IN THE IMPUGNED YEAR AND ARE ALLOWABLE TO T HE ASSESSEE ON MERCANTILE BASIS U/S 37(1) OF THE ACT. THE A.O. IS DIRECTED TO ALLOW THE SAID CLAIM OF THE ASSESSEE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY 2020. SD/- SD/- ' # $ %! (SANJAY GARG) (ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER )& / DATED: 28/02/2020 *RANJAN &* + - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' . / CIT 4. ' . ( )/ THE CIT(A) 5. /0 1 $ 1 23405 / DR ITAT CHANDIGARH 6. 046# / GUARD FILE &* ' / BY ORDER / ASSISTANT REGISTRAR