Commissioner Of Income Tax (Central), Ludhiana v. M/S Glen Appliances Pvt. Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 858 of 2010 (O&M) Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s Glen Appliances Pvt. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. for the appellant. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 520, 735 and 858 of2010 as according to the learned counsel, identical questions of law areinvolved therein. For brevity, the facts are being taken from ITA No.858 of 2010. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 17.11.2008 passed by the Income Tax AppellateTribunal, Delhi Bench “C”, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 1564(Del)/2006, for the assessment year 2003-04,claiming the following substantial questions of law:- “(i)Whether on the facts and circumstances of the case and in law, the ITAT has erred in holding that thedifferential expenses on account of trade fair andexhibition, advertising and publicity and salespromotion are not in the nature of deferred revenueexpenditure? (ii)Whether on the facts and circumstances of the caseand in law, the ITAT has erred in holding that theexpenses should be allowed for the assessment yearunder consideration only, although the benefit of theexpenses would be availed by the assessee over anumber of years?” 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee is a marketing companywith brand name 'GLEN' and is engaged in the trading of kitchenappliances and other fast moving consumer goods like electric irons,utensils, other cooking accessories etc. It filed return for theassessment year 2003-04 on 28.11.2003 declaring an income ofRs.79,16,580/-. The said return was processed under Section 143(1) ofthe Act on 1.6.2004. Notice under Section 143(2) of the Act was issuedon 30.11.2004. The assessee claimed to have incurred an expenditureof Rs.36,01,153/- by organizing a trade fair and exhibition and alsoincurred Rs.1,60,75,876/- and Rs.44,13,323/-, respectively on accountof advertisement and sales promotion. The Assessing Officer held allthese expenses as not wholly related to the relevant previous year andtreated the differential expenses over and above the amount spent inthe last assessment year as a deferred revenue expenditure. The Assessing Officer estimated that the benefits of such expenditure wouldaccrue over a period of two years and, therefore, allowed a sum ofRs.50,66,980/- being 50% of the differential expenses ofRs.1,01,33,960/- to the assessee vide order dated 8.11.2005. Feelingaggrieved, the assessee took the matter in appeal and theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] videorder dated 20.3.2006 affirmed the order of the Assessing Officer.Dissatisfied with that order, the assessee approached the Tribunal whovide order dated 17.11.2008 allowed the appeal and deleted theaddition made by the Assessing Officer and affirmed by the CIT(A).Hence, the present appeal by the revenue. 4.We have heard learned counsel for the appellant. 5.According to the learned counsel for the revenue, theexpenses which were incurred by the assessee on account of trade fairand exhibition, advertising and publicity and sales promotion weredeferred revenue expenditure, the benefit of which was to be availed bythe assessee over a number of years. 4.We have heard learned counsel for the appellant. 5.According to the learned counsel for the revenue, theexpenses which were incurred by the assessee on account of trade fairand exhibition, advertising and publicity and sales promotion weredeferred revenue expenditure, the benefit of which was to be availed bythe assessee over a number of years. 6.We are unable to accept the submission of the learnedcounsel. The Tribunal while accepting the plea of the assessee hadheld that the expenses incurred by the assessee on the aforesaidactivities were revenue in nature and the entire amount was admissiblein the year in which it was incurred. The finding recorded is as under:- “We have considered the facts of the case and rivalsubmissions. The finding of the AO that even if theclaim of the assessee that constant advertisement isneeded in view of short public memory is accepted, the benefit accruing to the brand name “GLEN”cannot be ruled out. There is no evidence in supportof this finding. Further, the learned CIT(Appeals)upheld the view of the assessee that the benefit willaccrue over a period of two years by relying on thedecision of Hon'ble Supreme Court in the case ofMadras Industrial Investment Corporation Ltd.(supra). Nothing has been brought on record toshow that the benefit will accrue over a period of twoyears. The advertisement expenses are in the natureof revenue expenses. It is not a case where a loantaken on discount will stay with the assessee for aperiod of 10 years. Therefore, the decision ofHon'ble Supreme Court in the case of MadrasIndustrial Investment Corporation Ltd. (supra) is notapplicable to the facts of this case. As theexpenditure is revenue in nature, the decision ofHon'ble Madras High Court in the case of BrilliantTutorials (P) Ltd. (supra) supports the case of theassessee for deduction of the expenditure in theyear of its incurring. In the case of Amar RajaBatteries Ltd., the Tribunal, after considering thecase of India Discount Company, 75 ITR 191,pointed out that the issue in this behalf is clear, i.e. ithas to be decided on the basis of law. Theexpenditure is also in revenue field and, therefore, the whole of the expenditure is to be allowed in the year of its incurring. In view of the aforesaidjudgments and the order, we hold that theexpenditure is revenue in nature and, therefore, ithas to be allowed in full in this year.” 8.Learned counsel for the revenue was unable to point outany irregularity or illegality in the aforesaid finding recorded by theTribunal which may warrant interference by this Court. Accordingly, nosubstantial question of law arises in these appeals. The appeals beingdevoid of merit are dismissed. (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE ITA No. 858 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 520 of 2010 Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s Glen Appliances Pvt. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 858 of 2010 (Commissioner of Income Tax (Central), Ludhiana v. M/s Glen Appliances Pvt. Ltd). (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE ITA No. 858 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 735 of 2010 Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s Glen Appliances Pvt. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 858 of 2010 (Commissioner of Income Tax (Central), Ludhiana v. M/s Glen Appliances Pvt. Ltd). (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE ITA No. 858 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 735 of 2010 Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s Glen Appliances Pvt. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 858 of 2010 (Commissioner of Income Tax (Central),Ludhiana v. M/s Glen Appliances Pvt. Ltd). (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE