The Commissioner Of Income Tax, Rohtak v. M/S The Atlas Cycle Industries Limited, Sonepat

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No.91 of 2002 Date of decision: 20.7.2010 The Commissioner of Income Tax, Rohtak -----Appellant Vs. M/s The Atlas Cycle Industries Limited, Sonepat ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Krishan Kumar Mehta, Advocate for the revenue.Mr. Akshay Bhan, Advocate for the assessee. Adarsh Kumar Goel,J. 1.This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (for short, ‘the Act’) against order dated17.1.2001 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘A’,New Delhi in ITA No.3412/Del/94 for the assessment year 1988-89,proposing to raise following substantial questions of law:- “i) Whether, on the facts and circumstances of the case, theIncome tax Appellate Tribunal was justified in law inallowing the expenditure of Rs.2,39,800/- being the cost ofmaster production of ‘Atlas Goldline cycle’ films andnegatives when it was not disputed that it was a Capitalexpenditure? ii) Whether, on the facts and circumstances of the case, theITAT was justified in upholding the CIT(A)’s order directing deletion of disallowance made under section 40(c) of theIncome Tax Act, 1961?” 2.The assessee derives income from manufacture and sale ofcycles. During the assessment year in question, the assessee claimedexpenditure under the head ‘Advertisement’ towards the cost of productionof film which was disallowed on the ground that the capital expenditure wasnot permissible under section 37(3) of the Act. On appeal, the CIT(A)upheld the plea of the assessee that the expenditure was permissible undersection 37(3) of the Act which view was upheld by the Tribunal. Furtherdisallowance by the Assessing Officer was in respect of payments made toofficers of the assessee under section 40(c) of the Act by holding thepayments to be disproportionate. On appeal, the CIT(A) deleted the additionon that account which view was upheld by the Tribunal. 3.We have heard learned counsel for the parties and perused the record.4.As regards question (i), the matter is concluded against therevenue by our recent order dated 8.7.2010 in CIT v. M/s Nuware IndiaLimited in ITC No.19 of 1999, wherein following judgment of HimachalPradesh High Court in Mohan Meakin Breweries Limited v. CIT (1979)118 ITR 101 and other judgments, it was held that expenditure onadvertisement even if it is in the nature of capital expenditure is coveredunder section 37(3) of the Act. Accordingly, this question has to be decidedagainst the revenue and in favour of the assessee. 5.As regards, question (ii), we have, in the case of the assessee inITA No.163 of 2002 (The CIT, Rohtak v.M/sThe Atlas Cycle Industries Limited, Sonepat), decided the issue against the revenue and in favour of the assessee. 6.In view of above, this appeal is dismissed. (Adarsh Kumar Goel) Judge July 20, 2010‘gs’ (Ajay Kumar Mittal) Judge