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2019 (2) TMI 2111 - AT - Income TaxDisallowance of payment for trademark to associated enterprises - Ground directed against the order of the AO holding that no recognizable benefit was passed on the appellant and therefore, there was no rationale for paying for trademark to the associated enterprises - HELD THAT - We find that the revenue has brought no material on record to show that the operation of the order of the Tribunal passed in the assessment years 2007-08, 2008-09 2009-10 and 2010-11, 2011-12 2012-13 has been stayed by the Hon'ble High Court 2017 (2) TMI 1537 - DELHI HIGH COURT That being so, the facts being identical, respectfully following the precedent, we set aside the order of the AO and allow this ground of appeal of the assessee. Ad-hoc disallowance being 30% of the total expenditure incurred by the assessee on advertisement and publicity - assessee submitted that any disallowance on account of advertisement and sales promotion expenses holding the same to be incurred for brand building for the entities owing brand shall not be sustainable in law and the expenses were incurred for advertisement/marketing support activities etc. and are incidental to carrying on the business - HELD THAT - Aa decided in earlier assessment years 2007-08, 2008-09 2009-10 vide order dated 29.04.2016 2016 (7) TMI 21 - ITAT DELHI the advertisement expenditure incurred by the assessee is incurred wholly for the purpose of its business and profession and ought to be allowed deduction in entirety. Further, the assessing officer has clearly made an ad-hoc disallowance of advertisement expenditure incurred by the assessee, which is not permissible under the law. We are of the considered view that AO was not justified in making such ad-hoc disallowances and therefore, direct the assessing officer to delete the adjustment on this account - Thus allow this ground of appeal of the assessee. Disallowance on account of delay in deposit of employee's contribution towards Provident Fund u/s. 36(1)(va) - HELD THAT - The issue has been decided against the assessee and in favour of the revenue by the Hon'ble Delhi High court in the case of CIT Vs M/s. Bharat Hotels Ltd. 2018 (9) TMI 798 - DELHI HIGH COURT concluding amounts constituting deductions from employees' salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. Levying interest u/s. 234A and 234B - HELD THAT - We find that it is not in dispute that the return of income was filed by the assessee on 29.11.2014 as evident from the assessment order passed by the AO - also not in dispute that the due date for filing the return of income was 30.11.2014. Section 234A provides that where a return of income for any assessment year under sub-section (1) of Section 139 of the Act is furnished after the due date ending on the date of furnishing of return then assessee shall be liable to pay simple interest @ 1% for every month or part of a month comprised in the period commencing on the date immediately following the due date. Thus, it is not in dispute that the return of income was filed by the assessee within the due date prescribed in sub-section (1) to Section 139 and therefore, no interest u/s. 234A was leviable on the assessee. Hence, we delete the interest levied u/s. 234A and allow this ground of appeal of the assessee. Charging of interest u/s. 234B - assessee submitted that it was consequential. Therefore, this ground of appeal of the assessee is dismissed.
Issues Involved:
1. General grounds of appeal by the assessee. 2. Disallowance of payment for trademark to associated enterprises. 3. Ad-hoc disallowance of advertisement and publicity expenditure. 4. Disallowance of delayed deposit of employee's contribution towards Provident Fund. 5. Levying of interest under Sections 234A and 234B of the Income Tax Act. Issue-Wise Detailed Analysis: 1. General Grounds of Appeal: The counsel for the assessee submitted that ground nos. 1 to 1.2 were general in nature and thus, these grounds of appeal were dismissed. 2. Disallowance of Payment for Trademark: Ground nos. 2 to 2.4 pertained to the AO's order holding that no recognizable benefit was passed to the appellant, thus disallowing Rs. 12,14,96,000/- paid for the trademark to associated enterprises. The counsel for the assessee argued that this issue was covered in favor of the appellant by prior Tribunal orders for assessment years 2007-08 to 2012-13. The DRP noted that this was a legacy issue consistently decided in favor of the assessee by the Tribunal. The Tribunal found no material changes in the factual matrix and followed the precedent, setting aside the AO's order and allowing the appeal on this ground. 3. Ad-hoc Disallowance of Advertisement and Publicity Expenditure: Ground nos. 3 to 3.2 challenged the AO's ad-hoc disallowance of Rs. 3,80,70,000/- being 30% of the total expenditure on advertisement and publicity. The counsel for the assessee stated that this issue was also covered in favor of the appellant by earlier Tribunal orders. The Tribunal noted that the AO had disallowed the expenses on the ground that the brand was not owned by the assessee, and thus, the expenses were for the benefit of the brand owner. However, the Tribunal had previously held that such advertisement expenditure was incurred wholly for the purpose of the assessee's business and should be allowed in entirety. Following the precedent, the Tribunal vacated the disallowance and allowed the appeal on this ground. 4. Disallowance of Delayed Deposit of Employee's Contribution Towards Provident Fund: Ground no. 4 addressed the disallowance of Rs. 26,79,798/- due to delayed deposit of employee's contribution towards Provident Fund. The AO disallowed the amount based on CBDT Circular No. 22/2015, stating that such claims are governed by Section 36(1)(va) of the Act. The assessee argued that the amounts were paid before the due date for filing the return of income under Section 139(1). The Tribunal referred to the Delhi High Court's decision in CIT Vs. Bharat Hotels Ltd., which held that amounts deducted from employees' salaries and deposited beyond the stipulated period are not deductible. Consequently, the Tribunal found no error in the AO's order and dismissed the appeal on this ground. 5. Levying of Interest Under Sections 234A and 234B: Ground no. 5 concerned the levy of interest under Sections 234A and 234B. The AO charged interest under Section 234A for late filing of the return. The assessee contended that the return was filed within the statutory time limit. The Tribunal confirmed that the return was filed within the due date and thus, no interest under Section 234A was leviable. As for interest under Section 234B, the AR of the assessee submitted that it was consequential, and this ground was dismissed. Conclusion: The appeal of the assessee was partly allowed, with the Tribunal setting aside the AO's orders on trademark payment and advertisement expenditure disallowance, while upholding the disallowance for delayed Provident Fund deposits and dismissing the interest under Section 234B. The Stay Petition filed by the assessee was dismissed as infructuous. The order was pronounced in the open court on 26/02/2019.
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