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TMI Blog2017 (11) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... unts were produced before him, he could not point out any nexus with the exempt income and that of the expenditure relatable to this exempt income. Even the Hon’ble Supreme Court in the case of Godrej & Boyce Mfg. Co. Ltd. (2017 (5) TMI 403 - SUPREME COURT OF INDIA ), has clearly laid down the principle that the satisfaction of the AO must be there for making disallowance under section 14A of the Act read with Rule 8D of the Rules. In the present case, the satisfaction is missing in all the years. Accordingly, we allow the appeals of the assessee on this issue except suo moto disallowance of a sum of ₹ 3,81,528/-in AY 2008-09 be enhanced to as sum of ₹ 6,48,945/- as it has revised the disallowance. The AO will recompute the income accordingly in all these years. - ITA No. 5991/Mum/2012, ITA No. 6249/Mum/2012, ITA No. 6250/Mum/2012, ITA No. 1794/Mum/2014 And ITA No. 1096/Mum/2015 - - - Dated:- 16-11-2017 - SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM For The Revenue : Rajesh Kumar Yadav, DR For The Assessee : Nitesh Joshi, AR ORDER PER BENCH: These five appeals one by the Revenue and four by the assessee are arising out of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year under consideration and balance amount of ₹ 40,65,668/- was disallowed. Aggrieved, assessee preferred the appeal before CIT(A), who deleted the disallowance by observing in Para 7.2 as under: - 7.2 I have carefully gone through the facts of the case. The appellant has also provided with the details of expenses towards sponsorships/ advertisements incurred by the Appellant over last few assessment years. Considering the fact that the Appellant has been incurring such nature of expenses every year and there is no enduring benefit out of these expenses, these expenses cannot be treated as capital nature. The appellant has filed copy of assessment orders for the earlier AY i.e. AY 2007-08 wherein no disallowance has been made by the AO on the issue in hand. Further, it is also seen that in the subsequent year i.e. AY 2009-10 no disallowance has been made on this account. Following rule of consistency, the Assessing Officer is directed to delete the disallowance. This ground is accordingly allowed. 4. Aggrieved, now Revenue is in second appeal before Tribunal. Before us, the learned Senior Departmental Representative heavily relied on the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g exercise as an investment banker. A sample copy of the cut outs of the advertisement published in Economic Times- Mumbai on 17th October, 2007 is already enclosed to the paper book. Further, these expenses have been rightly allowed as admissible revenue expenses in AY 2006-07 and AY 2007-08. They are not of any exceptional nature or one time nature and hence, there is no question of any enduring benefit out of it. The Assessing Officer has allowed 1/3rd of expenditure in the AY 2008-09 on the consideration that these expenses are not of any enduring benefits. There is no provision in the Act to treat the expenditure as deferred revenue (in which expenses are to be allowed over a period of time except under section 35D). Expenditure can either be of revenue or capital in nature. Hence, once the expenditure is ascertained as not of any personal or capital nature, it has to be allowed as deductible expenditure as per the provisions of section 37 of the act. As per section 37 of the Act, an expenditure incurred will be allowed as deduction if it fulfills the following conditions, namely; such expenditure incurred is not in the nature of expenditure described under section 30 to 36 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order further holds that the enduring benefit, if any, on account of brand building would not be in the capital field. (d) Mr. Malhotra, learned Counsel for the Revenue, urges that an expenditure incurred to create/improve a brand would be on capital account. This is in view of the enduring benefit available to the Respondent-Assessee in relation to its brand. It is particularly submitted that amounts received on sale of brand is on capital account and not taxed as Revenue receipts. As also, amount paid to purchase a brand is regarded on capital account. Therefore, the expenditure incurred on brand advertisement cannot be allowed as Revenue expenditure. (e) We find that an identical issue had arisen before this Court in case of CIT v. Jeoffrey Manners Co. Ltd. [2009] 315 ITR 134/180 Taxman 87 (Bom.), wherein the Court was considering a question whether the expenses incurred by the Respondent-Assessee therein for making advertisement films is to be treated as a capital or revenue expenditure. This Court opined that the correct test to be applied in respect of expenditure incurred for making advertisement films was that when the same was incurred in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on brand advertisement, the same is to be allowed as Revenue in nature. Respectively, following Hon ble Bombay High Court in the case of Asian Paints India Limited (supra), we confirm the order of CIT(A) allowing the claim of the assessee and dismiss this issue of Revenue s appeal. Revenue s appeal is dismissed. 9. Coming to assessee s appeals in ITA No. ITA Nos. 6249/Mum/2012, 6250/Mum/2012, 1794/Mum/2014, 1096/Mum/2015 for A.Y. 2008-09, 2009-10, 2010-11,2011-12. The only common issue in all these four years is as regards to the disallowance of expenses relatable to exempt income by the AO and confirmed by CIT(A) by invoking the provisions of section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 (the rules). Briefly stated facts are that the AO noted, the assessee has received dividend income of ₹ 43,26,298/- in AY 2008-09, ₹ 45,55,366/- in AY 2009-10, ₹ 47,70,620/- in AY 2010-11 and ₹ 1,47,57,441/- in AY 2011-12. The assessee claimed these dividend incomes has exempt under section 10(34) of the Act in all the years. The assessee suo moto disallowed a sum of ₹ 6,48,945/- (which was revised before CIT(A) vide computation at ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the expenses incurred may, therefore, be related partly to the exempt income, and partly to the taxable income, but the intention of the legislature to allow the expenses only to the extent they are relatable to the earning of taxable income. It has been clarified unambiguously that in computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee against the income which is claimed as exempt from tax. Circular No.14 of 2001 dated 22.11.2001, and Circular No.8 of 2002 dated 27.8.2002 have also explained the provisions wherein it has been clarified that no expenses relatable to an income exempt from tax would be allowed as a deduction. 6.7 The explanation filed by the assessee is carefully perused and the same is not acceptable, in view of the above referred decisions, and decision of the i1on'ble ITA'F. Special Bench. Mumbai in the case of Daga Capital Management Pvt. Ltd. The assessee has incurred expenses for earning dividend income which is evident from the fact that the assessee itself has disallowed a sum of lts.6,48945/ on estimated basis. Since the expenses related to earning exempt income have been incurred, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances. Neither any basis has been disclosed establishing a reasonable nexus between the expenditure disallowed and the dividend income received. That any part of the borrowings of the assessee had been diverted to earn tax free income despite the availability of surplus or interest free funds available (Rs. 270.51 crores as on 1.4.2001 and ₹ 280.64 crores as on 31.3.2002) remains unproved by any material whatsoever. While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC). 13. From the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X
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