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TMI Blog2015 (5) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [2009 (10) TMI 648 - ITAT DELHI] in which it was held that by incurring expenditure on advertisement and sales promotion, assessee does not acquire any fixed capital assets.- Decided against revenue. Rent paid by director of the company in her individual capacity - Held that:- As per section 291 of the Act, 1956 provides for general powers of the board to its directors and directors serve as agents of the company and therefore, any transaction carried out by the directors on behalf of the company is a valid transaction. Keeping in view the fact that the company had used this premises for carrying out its business in Mumbai, which was undisputed by the Ld. AO, thus hold that the disallowance made by the Ld. A.O. on this ground was unjustified. - Decided against revenue. - I.T.A. No. 1465/Del/2013 - - - Dated:- 16-4-2015 - Smt. Diva Singh And Shri T.S. Kapoor JJ. For the Appellant : Shri T. Vasanthan, Sr. DR For the Respondent : Shri Ankit Agarwal, CA ORDER Per T.S. Kapoor, AM: This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 24.01.2013. The grounds of appeal taken by Revenue are reproduced as under: 1. Whether on the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature. 2.3 As regards the 4th ground of appeal, Ld. D.R. submitted that the assessee had claimed the expense under the head rent and utility amounting to ₹ 10,83,990/- and form the copies of rent agreement filed by assessee it was clear that the director had entered into the agreement with the land lord in her individual capacity. There was no authorization made by Assessee Company in favour of Smt. Shobhna Bhatia, director and moreover, the rented apartment was to be used for residential purposes and not for business purposes and, therefore, the A.O. has rightly made the disallowance. 3. Ld. A.R. on the other hand filed a synopsis whereby he submitted brief arguments in support of deletion made by Ld. CIT(A). Regarding the 1st addition made by A.O. on account of excessive salary, the Ld. A.R. submitted that the salary was paid to two directors who were brother and sister and promoter directors of the company. Both were highly qualified and regarding their qualification, Ld. A.R. invited our attention to paper book pages 36-43 where details of their qualification and experience earned by these directors were placed. He submitted that the directors of the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to above technical fault, was to be refunded to the customers and ICICI bank which had to provide additional administrative services and bear the cost due to the said portal failure of the assessee and therefore, the assessee was charged for such incidents, which was termed by the bank as penalty even though it was just a recovery of administrative charges which was incurred in normal course of business and, therefore, Ld. CIT(A) has rightly deleted the same. 3.2 Arguing upon 3rd ground of appeal, Ld. A.R. submitted that the expenses incurred by the assessee were revenue in nature as the allegation made by A.O. that these expenses are of enduring nature, is not correct as the assessee required publicity only for a very short period for a particular event. It was submitted that specific invoice of suppliers to whom such payments were made, clearly show that such hoardings were made for a limited period of 5-7 days only, therefore, he submitted hat Ld. CIT(A) has rightly appreciated the facts and has rightly deleted the addition. 3.3 As regards the 4th ground of appeal, Ld. A.R. submitted that there was no doubt that the accommodation was residential accommodation but it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the current year only that the appellant could secure success by getting contracts for ticketing for event like IPL matches at Mumbai and Delhi and the Commonwealth Youth Games in Pune. It was pleaded that considering the nature of the company i.e. Entertainment and Media, the professional expertise and qualifications of both the directors played a vital role in the performance of the company. The Ld. AR also argued that the appellant could achieve success by begging important contracts through professional work done by the two directors, which cannot be measured by the record of day-to-day affairs of the company. It was also submitted that both directors are chargeable to tax at the maximum marginal rate and had paid tax on the above income. Therefore no tax avoidance was ever intended by the appellant company. Regarding the disallowance under section 40 A (2), the Ld. Counsel drew my attention to the following cases: (i) Hive Communication P Ltd vs. CIT (2011) 201 Tax man 99 (Delhi); (ii) CIT vs. Edwar Keventer (P) Ltd (1978) 115 ITR 149 (Calcutta); and (iii) Abbas Wazir(P) Ltd. vs. CIT (2004) 265 ITR 77 (Allahabad). 5.1 We find that Ld. CIT(A) has made a finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowable. In this regard, the Ld. AR relied upon the decision of the Kerala High Court in the case of CIT vs. Catholic Syrian Bank Ld. (2003) 130 Taxman 447/(2004) 265 ITR 177, in which it was held that whenever any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under section 37(1}, the Assessing Officer is required to examine the scheme of the provisions of the relevant statute providing for payment of such impost notwithstanding the nomenclature of the impost as given by the statute, to find out whether it is compensatory or penal in nature. The authority has to allow deduction under section 37(1) wherever such examination reveals the concerned impost to be purely compensatory in nature. 5.3 We find from the above findings of Ld. CIT(A) that the nature of expenses is not in the nature of penalty but are expenses in the normal cause of business and we are in agreement with the findings of Ld. CIT(A) and, therefore ground No.2 of Revenue s appeal is also dismissed. 5.4 Coming to ground No.3 regarding disallowance of advertisement expenses, we find that the purpose of advertisement expense incurred by as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of ITO vs. Spice Communications ltd. (2010) 35 SOT 78, in which it was held that by incurring expenditure on advertisement and sales promotion, assessee does not acquire any fixed capital assets. 5.5 We are in agreement with the findings of Ld. CIT(A) and, therefore, ground No.3 of revenue s appeal is also dismissed. 5.6 As regards ground nO.4 of appeal, we find that assessee had incurred expenses of ₹ 27,000/- per month for making payment of rent for a flat at A/40, 1st floor of building known as Ganga Bhawan Cooperative Housing Society, Mumbai in view of lease and license agreement entered on 01.02.2008 which is placed at paper book pages 111-117. The said agreement has been entered into for a period of 11 months by Mrs. Shobhna Bhatia and the accommodation no doubt is a residential accommodation and the period of lease agreement is from 01.03.2008 to 31.01.2009. In the agreement, there is no mention about the fact that the said premises was taken on rent by Assessee Company and Mrs. Shobhna Bhatia was acting as agent of above said assessee company. Since the above said agreement expired on 31.01.2009, therefore on 1st Feb 2009 vide agreement dated 01.02.2009 which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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