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TMI Blog2017 (3) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... s business and popularity only in South India. The assessee wanted to use the brand name spencers for its retailing business in respect of various products through its supermarkets at various locations in India. SCL and the assessee entered into an agreement dated 15.09.2005 whereby SCL permitting use of 'Spencers ' trade mark of SCL by the assessee on a licence basis. Article 7 of the agreement which is relevant for a decision in the present appeal, provides as follows :- " ARTICLE 7 Brand Building 7.01 The Licensor agrees with the Licensee that its Brand name Spencer's is popular only in select few places in South India. 7.02 The Licensee will be utilizing the Spencer's Brand name for rolling out Retail Stores through its Supermarkets/Hypermarkets at various locations in India and needs to spend considerable amount of money on advertising and publicity to popularize Spencer's Brand name. 7.03 The Licensor shall benefit from such advertisement and publicity expenditure likely to be incurred by the Licensee on pan India basis. 7.04 The Licensor therefore agrees to co-share the advertisement and publicity expenses likely to be incurred by the Licensee over a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers/price offers in the store /catchment area for selling the merchandise of the assessee and did not help in creating the value for spencer brand and therefore they were claimed as usual advertisement and promotion expenses by the assessee as deduction and as a revenue expenditure. To the extent the assessee recovered charges from Spencers by way of reimbursement of advertisement expenditure from SCL, those expenses could be said to be brand building expenditure which benefitted only SCL and therefore the same was claimed as deduction by the assessee. The undisputed fact was that SCL had treated the expenditure incurred by the assessee which was reimbursed to the assessee as towards its brand building cost was claimed as a capital expenditure and depreciation on the intangible asset was claimed by SCL. The AO was of the view that the nature of the expenditure cannot be different in the hands of the assessee and he held that the expenditure was a capital expenditure and cannot be allowed as deduction. The following were the observations of the AO in this regard :- "An analysis of facts and submissions given by the assessee it is seen that this amount of expenditure towards the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as revenue expenses in the Profit and Loss Account of the Assessee. The broad nature of these expenses incurred by the Assessee for its own retailing business was given as under : Print Media Leaflet printing In store advertisement Loyalty Programs Samples Sales Promotion 7. The CIT(A) however confirmed the order of AO for a total different reasons namely that the assessee did not furnish any evidence to prove that the expenditure which it had claimed as deduction was for building company's own brand. His observations in this regard were as follows :- "I have gone through the various clauses from 7.01 to 7.05 of the trade mark licensing agreement. On perusal of the same, it is inferred that the entire money spent for the advertisement and publicity is only to popularize the Spencers brand name which is owned by the SCL. No evidence was furnished to prove that balance expenditure was incurred for private apparel brands i.e company's own brands. Since the AR of the assessee did not give the basis for allocation of the expenditure and also did not furnish any evidence on the extent of benefit accrues to the assessee company, the entire expenditure incurred by the assessee is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... censed the said mark to one company which in turn had sub-licenced the same to the assessee. The licencee from the owner of the trade mark incurred advertisement expenditure which was reimbursed by the assessee(sub-licencee). The revenue took the stand that the reimbursement of advertisement expenditure for promoting brand name 'Nakshatra' as capital expenditure. The Tribunal however held that the expenditure was revenue in nature and was to be allowed as deduction. It was held in this case that the expenses even if considered the promoting brand name 'Nakshatra' was capital only in so far as the owner of the brand 'Nakshatra' is concerned and the benefit that the assessee derives by advertisement expenditure for using the brand was only revenue expenditure. 10. The ld. Counsel for the assessee also fled before us a chart showing as to how the revenue, in all the assessments completed u/s 143(3) of the Act, for various assessment years except the present A.Y.2008-09, has allowed similar expenditure as a deduction. It was submitted by him that applying the rule of consistency also the expenditure in question had to be allowed as a deduction and as a revenue expenditure. The chart g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire expenditure had to be regarded as not expended to improve sales of the Assessee but the brand of SCL, We are of the view that it was not the case of the AO that the expenditure was towards Advertisement and Publicity and that such expenses did benefit the Assessee in its sales and did not promote the brand of SCL. The only reason given by the AO was that the treatment of the expenses in the books of SCL and the Assessee cannot be different and since SCL treated similar expenses as capital expenditure, the expenditure claimed by the Assessee should also be regarded as capital expenditure. The case of the CIT(A) that the expenditure claimed by the Assessee did not promote the sales of the Assessee. This conclusion of the CIT(A) is not correct because the nature of expenses incurred by the Assessee was given (though it was a general description) and not disputed by the AO. The conclusion of the CIT(A) in this regard is not based on any material. Even otherwise, the question whether expenditure promoted the brand of SCL or was incurred to promote the sales of the Assessee becomes academic. The decision of the Hon'ble Mumbai Bench of ITAT in the case of Brightest Circle Jewellery (P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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