2012 (12) TMI 1029 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of technical and marketing fees.
2. Validity of reopening of assessment beyond four years.
3. Disallowance of provision for bad and doubtful debts.

Summary:

Issue 1: Deletion of Addition on Account of Technical and Marketing Fees
The Revenue's appeal contested the deletion of an addition of Rs. 17,61,22,206/- on account of technical and marketing fees. The Assessing Officer (AO) had treated the payment of Rs. 216,765,792/- to M/s Seagram Manufacturing Pvt. Ltd. as capital expenditure, arguing that it was for acquiring trademark and technical know-how, thus not allowable as revenue expenditure. The AO allowed depreciation on the amount but disallowed the balance. The Ld. Commissioner of Income Tax (Appeals) [CIT(A)] reversed this, noting that the payment was for day-to-day business activities and did not result in any enduring benefit or capital asset acquisition. The CIT(A) relied on the ITAT decision in Shaw Wallace Distilleries Ltd. vs. ACIT, which was affirmed by the Hon'ble Jurisdictional High Court. The Tribunal upheld the CIT(A)'s decision, agreeing that the payment was for enhancing business efficiency and not for acquiring a capital asset.

Issue 2: Validity of Reopening of Assessment Beyond Four Years
The assessee's cross-objection challenged the reopening of the assessment beyond four years. However, since the Tribunal affirmed the CIT(A)'s order on the merits, the issue of reopening was deemed academic and not addressed.

Issue 3: Disallowance of Provision for Bad and Doubtful Debts
The AO disallowed a provision for bad and doubtful debts amounting to Rs. 2,70,509/- based on clause (i) of explanation 1 of section 115JB of the I.T. Act, which was upheld by the CIT(A). The Tribunal agreed with the CIT(A), noting that the amendment leading to the disallowance was effective on the date of assessment and applicable to the relevant financial year.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s decisions on all issues. The order was pronounced in the Open Court on 14/12/2012.