2022 (10) TMI 838 - AT - Income Tax

Disallowance of brand promotion expenses - Allowable revenue or capital expenditure - HELD THAT - As decided in own case 2017 (6) TMI 1374 - ITAT DELHI we fully concur with the findings of the Id. CIT (Appeals) also because similar recurring expenses incurred in earlier years have been allowed as Revenue expenses. The decisions relied upon by the Id. CIT (Appeals) also strengthen the finding arrived at by him under the facts and circumstances of the present case on the issue. The Hon ble Supreme court in the case of Empire Jute Company 1980 (5) TMI 1 - SUPREME COURT has been pleased to hold that it is only when an enduring advantage is in the capital field that the expenditure would be disallowable. If advantage of enduring benefit is in the Revenue field it would be on the Revenue account - Decided in favour of assessee. Late deposit of employee provident fund - HELD THAT - As The Co-ordinate Bench of Tribunal in the case of Innovision Ltd. 2022 (10) TMI 792 - ITAT DELHI has decided the issue in favour of the assessee. In parity, we see that no error has been committed by the CIT(A) while granting relief to the assessee. We thus decline to interfere with the order of the CIT(A). Inadvertent mistake as assessee has wrongly offered exempt income received by way of dividend as short term capital gain which is otherwise not taxable in law - CIT-A held that income inadvertently offered as taxable income under the head Short Term Capital Gain is exempt income indeed and not susceptible to taxation - HELD THAT - CIT(A), in our view, has rightly applied the underlying principles of CBDT Circular No.14 dated 11.04.1955 wherein it was observed that the Department should not take advantage of the ignorance of the assessee and collect more tax without the same being due. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by the authority of law. Acquiescence cannot take away from a party, the relief that he is entitled to. Thus, where the CIT(A) found on facts that the redemption amount of investment also comprises of certain exempt dividend income which has been wrongly offered for capital gain tax, the action of the CIT(A) in granting suitable relief cannot be faulted. In the absence of any rebuttal on facts, we see no reason to interfere with the relief granted by the CIT(A) in accord with law. We thus see no merit in the Ground No.2 of the Revenue s Appeal.

Summary

Issues Involved:
1. Disallowance of brand promotion expenses.
2. Addition on account of late deposit of employee provident fund.
3. Deletion of addition on account of short-term capital gain on sale of mutual funds.

Detailed Analysis:

1. Disallowance of Brand Promotion Expenses:
The primary issue concerns the disallowance of brand promotion expenses claimed by the assessee as revenue expenditure. The assessee, engaged in the manufacture and sale of country liquor and Indian made foreign liquor (IMFL), initially capitalized these expenses in its books but later claimed them as revenue expenses in the tax return. The Assessing Officer (AO) treated these expenses as capital in nature, granting depreciation and disallowing the balance. The CIT(A) partially allowed the claim, treating a portion as revenue expenditure and the rest as capital expenditure. Upon appeal, the Tribunal referenced a similar case from the previous year (AY 2008-09) where such expenses were deemed revenue in nature due to their routine business nature. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal, as the expenses were integral to the business's marketing and sales activities and did not result in any enduring benefit in the capital field.

2. Addition on Account of Late Deposit of Employee Provident Fund:
The second issue pertains to the addition made by the AO due to the late deposit of the employee provident fund. The CIT(A) deleted this addition, and the Tribunal upheld this decision, referencing a similar case (Innovision Ltd.) where the issue was decided in favor of the assessee. The Tribunal found no error in the CIT(A)'s order, thus dismissing the Revenue's appeal on this ground.

3. Deletion of Addition on Account of Short-Term Capital Gain on Sale of Mutual Funds:
The third issue involves the deletion of an addition made by the AO concerning short-term capital gain on the sale of mutual funds. The assessee claimed that the amount in question was actually exempt dividend income, mistakenly offered as short-term capital gain. The CIT(A) examined the details and found that the income was indeed exempt. The Tribunal supported the CIT(A)'s decision, citing the CBDT Circular No.14, which emphasizes that the department should not take advantage of an assessee's ignorance to collect more tax than due. The Tribunal also referenced the case of Smt. Raj Rani Gulati vs. CIT, where similar relief was granted. Consequently, the Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) rightly granted relief based on the facts and applicable law.

Conclusion:
The Tribunal dismissed the Revenue's appeals on all grounds, upholding the CIT(A)'s decisions regarding the treatment of brand promotion expenses, the late deposit of the employee provident fund, and the correction of an inadvertent mistake related to short-term capital gain on mutual funds. The judgments were consistent with past decisions and legal principles, ensuring that the assessee was not unfairly taxed beyond their due liability.