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TMI Blog2014 (8) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... nse is capital and the assessee will get enduring benefit. 3. On the facts and in the circumstances of the case and in law, the learned CIT (A) has been in deleting the addition of Rs. 1,09,10,366/* made by the AO by capitalizing 25% of advertisement expenses. 3.1. The Ld. CIT(A) ignored the fact that the assessee will get enduring benefit by display of advertisement. 4. On the facts and in the circumstances of the case and in law, the learned CIT (A) has been in deleting the addition of Rs. 8,44,4721 made by the AO on account of sundry balances written off. 4.1. The Ld. CIT (A) ignored the fact that the assessee could not file any documentary evidences in support of its claim during the course of assessment proceedings. 5. On the facts and in the circumstances of the case and in law, the learned CIT (A) has been in deleting the addition of Rs. 6,58,349/* made by the AO on account of late deposit of ESI Contribution l.e. employee's share u/s 2(24)(x) of the Act. 5.1. The Ld. CIT (A) ignored the fact that the assessee could not file any documentary evidences in support of its claim during the course of assessment proceedings. 6. On the facts and in the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said agreement together with post termination covenant and as per agreement even after termination of agreement upto 2 years, assessee cannot use it and everything given in terms of the agreement has to be returned to the persons concerned, could not work in such line and moreover before giving same franchisee to any persons, permission of the principal is needed which is specially incorporated and it is also stipulated that when there is no sale, no fee is to be paid. It is an important right. The Pizza Domino is the franchisor and moreover assessee is not deriving any enduring benefit in this arrangement and so far as case laws cited by the Assessing Officer and reiterated by the Ld. D.R. before the bench is concerned, same is distinguishable on facts and issue in those cases is not exactly the same. Therefore, CIT(A) which discussing and considering all these facts has rightly concluded to allow the relief to the assessee. Therefore, action of the CIT(A) needs to be confirmed which may be confirmed. 7. In order to counter the submission of the Ld. Counsel for the assessee, Ld. DR submitted that case laws cited by the Ld. Counsel for the assessee are not applicable to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del.), he has concluded to delete the impugned the addition as per para.7.1 of his order as under: "I have carefully considered the Assessment order and the submissions and documentary evidences produced before me by the appellant. I have also examined the sample invoices furnished before me. After going through the arguments put forward by the appellant and perusal of documents and examining the nature of advertisement expenditure and analyzing the nature of the market in which the appellant operates, it is observed that the appellant is in business of manufacturing and selling food products which essentially is advertisement driven. Due to continuous growth of Indian economy and economic liberalization large multi-national FMCG, Food and Beverage companies are setting up their business ventures in India. In order to cater to the increased competition the companies in the market introduce different new food products, start new stores in order to have a wider presence and start new promotion activities. All this effort of the companies has to be supported by extensive advertising and promotion in the market. Even if the brand name of the company is well established in the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Domino's Pizza, which is very famous and advertisement could hardly boost its sale when actual sale has decreased in this case during the year under consideration. Therefore, there was no justification for CIT(A) to allow the relief when A.O. has only capitalized 25% in such expenditure whereas 75% has been allowed to the assessee because part of it was of enduring nature. So, relying upon CIT(A) order at page 23 para. 7.1 and decision of Supreme Court as in the case of Sasson J. David and Co. P. Ltd. vs. CIT(supra) and 197 ITR 422 (SC) it was pleaded for reversal of the impugned order of this issue. 13. Ld. Counsel for the assessee while relying upon order of CIT(A) on this issue has pleaded that the assessee is in food industry and there is lot of a competition. So, advertisements are necessary to run the business. All details of expenditure have been given from pages 108-229 of the paper book filed, which were of different nature and are necessary for the purposes of business. Therefore, disallowance at 25% of the advertisement expenditure as made by the Assessing Officer is unwarranted and uncalled for. By filing chart of expenditure for more than 10 years, assessee's Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts books of accounts. While carrying out day-to-day transactions, there are some instances where the amount for the sale of pizza is not recovered from the customer, such as customer paid short, soiled notes are received and at times not accepted by the bank, Pizza delivered on time still customer insists that it is late and does not pay at all, non approval by the Bank of the payment made through credit card, delivery personnel may be absconding with cash he has collected for the delivery sales he has made during the day or with the amount of imprest paid to him, in case of credit sales to corporate customers, sometimes the amount paid is less than the actual amount as per invoice. Therefore, it was pleaded for deletion of the impugned addition and reliance was placed in the case of CIT vs. Global Capital Ltd., 306 ITR 332, CIT vs. Automation Ltd., 292 ITR 345 (Del. And CIT vs. Mortgan Securities & Credits P. Ltd., 292 ITR 339 (Del.). CIT(A) while considering and accepting the plea of the assessee has concluded to delete the impugned addition as per para.6.1 of his order which reads as under: "6.1 I have carefully gone through the order of the Assessing Officer and the detailed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and CIT(A) while considering the entirety of facts, circumstances and material on record has justifiably allowed the relief to the assessee. Since, no contrary material or evidence has been furnished nor any infirmity or flaw has been pointed out or noticed, therefore, while concurring with the conclusion, we uphold the decision of CIT(A) in this regard by confirming his action and dismiss this ground of appeal of the Revenue. 19. The next ground relates to assessee claim for deduction of Rs. 8,53,071/- u/s 36(1)(va) of the Act for employees contribution to ESI. The Assessing Officer disallowed an amount of Rs. 6,58,349/-, as this amount was deposited after the due date. 20. Assessee took up the matter in appeal and it was submitted in the appeal proceedings that employees' share of contribution towards ESI which was not deposited by the due date has been deposited during the year itself, or before filing of the return. Hence, the deduction of such payment needed to be allowed to the assessee in the relevant assessment year. Relying upon Delhi High Court in the CIT vs. AIMIL Ltd., 321 ITR 508 (Del.) and CIT vs. Alom Extrusions Ltd., 319 ITR 306 (SC), assessee submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee towards the donation to CRY and CRY is a recognized institution and donation made to it is allowable as deduction u/s 35AC of the Act, but the Assessing Officer disallowed the said deduction as at the time of assessment the assessee was not able to produce the evidence of the receipt of the donation at that point of time. The assessee has requested the CRY and has got the receipt now, which was produced. Therefore, pleaded that deduction should be allowed and CIT(A) allowed the relief accordingly. 26. But, it is the strong contention of the Ld. DR in appeal before this bench that, if any receipt was obtained and filed before CIT(A), he has not followed the procedure as laid down under Rule 46A of the I.T. Rules, 1962 and without associating Assessing Officer with the appeal proceedings or seeking remand report form him, the deletion of the addition could not be ordered. It was thus urged for reversal of the order or in alternative matter should be set aside on the file of the Assessing Officer for re-consideration of the issue. Whereas, Ld. Counsel for the assessee has relied upon order of CIT(A) and pleaded for his confirmation. 27. We have heard both the sides, considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9,06,977/- was disallowed by the Assessing Officer as prior period expenses on the ground that such expenses did not pertain to the relevant period under consideration. Assessee challenged such action of the Assessing Officer before first appellate authority and while relying upon case of Vijay Lakshmi Engg. Works Ltd. vs. ACIT, [TIOL 211-ITAT(Mad.)]. The Mumbai bench of ITAT held that each item is to be analyzed individually, as to when the liability arises and in the case of Sony India P. Ltd. vs. DCIT, 315 Income Tax Rules, 1962(AT) 150 (Del.), it has been observed that the expenses, categorized as prior period expense by the auditors, was disallowed by the Assessing Officer in assessment year 2003-04. These expenses were accordingly categorized because there was a retrospective revision of prices by the dealers. Further, in respect of a revised return being filed by the assessee for assessment year 2002-03, claiming therein such expense, was also disallowed by the Assessing Officer. The tribunal held that when the Assessing Officer has placed reliance on the comment of the auditors, a definite stand is taken by the Assessing Officer that these expenditure pertains to assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the liability got crystallizedin the current year only and that the appellant should be allowed the deduction of this expense in current _assessment. In allowing this expense I am also guided by the ratio of decision in case of Exxon Mobil (Supra) which has been relied upon by the appellant. As a result, out of the total additions of Rs. 9,06,977 made by the Assessing Officer, addition amounting to Rs. 5,87,297 (Rs.5,20,000+Rs.4,24,297+Rs.43,000) is deleted as these expenses crystallized in the current assessment year. However, as the appellant was unable to substantiate its contention in respect of other expenses. I hold that the Assessing Officer was correct in disallowing the balance expenses for Rs. 3,19,680/- since they did not pertain to the relevant period under consideration and the appellant was unable to establish why such expenses could be allowed during assessment year 2005-06." 37. Aggrieved by part relief given to the assessee by CIT(A), department has come up in appeal while relying upon Assessing Officer's or4der, it was pleaded for setting aside the order of CIT(A) and restoring that of the Assessing Officer. It was further submitted that since expenses did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are revenue in nature and therefore should be allowed as claimed by the assessee. However, Assessing Officer held in the assessment order that - "On going through the details it is found that these cannot be verified in absence of books of accounts. Therefore, I hold that the relocation expense debited in P&L account amounting to Rs. 20,53,590/- is not a revenue expenditure but capital expenditure, hence not allowable form income of assessee. Thus, Rs. 20,53,590/- is disallowed and added to the total income of the assessee." 43. Assessee challenged the action of the Assessing Officer in appeal and raised various pleas to support the claim and reliance was also placed on the decision of Hon'ble Supreme Court in the case of Eastern Investment Limited vs. CIT (1951) 20 ITR 1, 4 (SC) to satisfy the expenditure incurr3ed wholly and exclusively for the purposes of business, etc. (a) though the question must be decided on the facts of each case the final conclusion is one of law; (b) it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned; (c) it is enough to show that the money was expended "not of necessity and with a view to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. I agree with the contentions of the appellant that they are not capital expenditure and the appellant was justified in claiming the said expenses as revenue expenditure. Thus, this ground of appeal is accepted and the disallowance made by the Assessing Officer on account of store relocation expenses for Rs. 20,53,590/- is hereby deleted. 46. Aggrieved by the order of CIT(A), department has come up in appeal and it was strongly pleaded that Assessing Officer has disallowed the claim of the assessee giving appropriate reasons and CIT(A) has deleted the addition by considering the submission of the assessee in the light of various documents, invoices, agreements furnished by the assessee before CIT(A) and from the paper book filed, there is no indication that assessee has ever apply for admission of additional evidence and CIT(A) has categorically stated that various documents, invoices, agreements were furnished by the assessee before first appellate authority and it appears that neither Assessing Officer has been associated with the appeal proceedings nor any remand report has been obtained form him. Ld.DR has also relied upon the decision reported in 135 ITR 421 (Del.) and 251 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h action of the Assessing Officer before CIT(A) and reiterated the submissions as made before the Assessing Officer to contend that the debentures was subscribed by M/s Infrastructure Lasing & Financial Services Ltd. and since the debentures were due for redemption but due to unavailability of adequate surplus funds available with the assessee, it was not in a position to redeem the debentures. The assessee company had to therefore, re-negotiate with the subscribers of the debentures and was successful in getting the terms restructured for redemption of the debentures. For carrying out these functions, the assessee had to make a one time payment of Rs. 15 lakhs. The restructuring fee paid by the assessee company is similar to the processing fee which is charged by banks while processing the loans to a borrower. So, placing reliance on India Cements Ltd. vs. CIT, 60 ITR 52, CIT vs. Secure Meters Ltd. (2010) 321 ITR 611 (Raj.), CIT vs. ITC Hotels Ltd., MANU/KA/0610/2009(ITA No.377 of 2004), Hon'ble Karnataka High Court held that expenditure incurred in connection with the issue of debentures has to be treated as revenue expenditure and in the case of CIT vs. Modi Industries Ltd.(supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance whose order should be reversed and that of the Assessing Officer be restored. 54. Ld.Counsel for the assessee while relying upon the order of CIT(A) has pleaded for confirmation and besides reiterating the case laws as cited by the assessee before first appellate authority, which was incorporated in the impugned order, further reliance was placed on CIT vs. ITC Hotels Ltd., 334 ITR 109 (Kar.) to plead for confirmation of the impugned order. 55. We have heard both the sides, considered the material on record as well as basis and reasoning as given by the CIT(A). It is not in dispute that due to non-availability of finances, assessee was not in a position to negotiate the debentures issue which got matured during the year under consideration. So, he has arranged the finance by paying Rs. 15 lakhs to M/s Infrastructure Leasing & Financial Services Ltd. 55.1 In the light of case laws cited by Ld. CIT(A) and in the absence of any contrary decision or evidence produced or any higher courts orders having been placed to support the plea raised by the department, we do not find any reasonable ground to interfere in the order passed by the CIT(A), which is confirmed and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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