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TMI Blog2021 (10) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... were furnished before the Assessing Officer - HELD THAT:- AO has made disallowance under section 35D of the Act without verifying the requisite condition that said expenses were incurred before commencement of the business or in connection with the expansion or setting up of new unit by the assessee. AO has also not brought on record how the benefit of expenses on advertisement spills out to future years. AO being a quasi-judicial authority cannot disallow merely on presumption basis. CIT(A) has deleted the disallowance following the decision of the Hon ble High Court and holding that even advertisement expenses incurred by the assessee on brand image as revenue in nature. We find that the Tribunal in assessment year 2009-10 [ 2019 (1) TMI 464 - ITAT DELHI] in the case of the assessee itself has held the advertisement expenses as revenue in nature As decided in own case since the genuineness of the expenditure is not in dispute and the dispute is only regarding capital or revenue expenditure in nature decided the issue in favour of the assessee holding that the expenditure incurred by the assessee on glow sign boards and a neon sign boards is revenue in. nature and allowable as ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary (salary due minus(-) payment recovered from OIPL) paid to Mr Pramod Saxena only. DR did not find any mistake in the accounting entry carried out by the assessee. In the circumstances, we uphold the order of Ld. CIT(A) on the issue. Disallowance on account of the depreciation claimed on POS terminals - assessee claimed the depreciation at the rate of 60% claiming the POS terminals as part of the computer, whereas AO allowed the depreciation at the rate of 15% treating the POS terminals as part of plant and machinery - HELD THAT:- We find that this issue is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2009-10 [ 2019 (1) TMI 464 - ITAT DELHI] wherein Tribunal has allowed the depreciation at the rate of 60% on POS terminals. Depreciation at the rate of 60% percent on UPS - AO treated the UPS as not part of the computer and only part of plant and machinery and allowed the depreciation at the rate of 15% only - CIT(A) allowed the claim of the assessee - HELD THAT:- As issue in dispute is covered in favour of the assessee by the order of the Tribunal in assessment year 2008-09 and 2010-11 [ 2019 (2) TMI 993 - ITAT D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement and publicity expenses when compared to previous year was not substantiated with documentary evidences and these expenses are of enduring benefit, are in the nature of capital. 3. On the facts and under the circumstances of the case, the Id. CIT(A) has erred in deleting the disallowance of ₹ 31,72,877/- on account of disallowance out of cost of equity placement amounting to ₹ 31,72,877/- treating it as revenue expenditure instead of capital expenditure without appreciating the facts that equity placement expenses are of enduring benefit and to be treated as capital in nature instead of revenue expenditure". 4. On the facts and under the circumstances of the case, the Id. CIT(A) has erred in deleting the disallowance of ₹ 20,10,202/- made on account of employees recruitment by treating it as revenue expenditure instead of capital expenditure without appreciating the facts that the expense are of enduring benefit and to be treated as capital in nature instead of revenue expenditure. 5. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 1,12,82,802/- made by the Assessing Officer on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. The assessment under section 143(3) of the Act was completed on 29/12/2009 after making certain addition/disallowances. On further appeal, the Ld. CIT(A) allowed partly to the assessee. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the parties appeared through Video Conferencing facility. The assessee filed a paper-book (pages 1 to 76 ) physically as well as electronically. 4. Qua the ground No. 1 (one), the learned DR submitted that Ld. CIT(A) has allowed the consultancy charges of ₹ 9,37,061/- as revenue expenditure though same are in the nature of the capital expenditure in view of the enduring benefit to the assessee. 4.1 The Learned Counsel of the assessee, on the other hand, relied on the order of the learned CIT(A) and submitted that Learned CIT(A) has allowed the expenses in view of the remand report submitted by the Assessing Officer and, therefore, Assessing Officer is not justified in agitating this issue again before the Tribunal. 4.2 We have heard rival submission of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deleted the disallowance after observing that genuineness of the expenses was not doubted by the Assessing Officer in the remand report and the assessee duly deducted tax at source on the impugned payments. In our opinion, there is no infirmity in the finding of the Learned CIT(A) on the issue in dispute, accordingly, we uphold the same. The ground No. 1 (one) of the appeal of the Revenue is accordingly dismissed. 5. The ground No. 2(two) relates to disallowance of ₹ 1,33,04,522/- by the Assessing Officer on account of advertisement and marketing expenses. 5.1 Qua the ground, the learned DR supported the grounds and submitted that no evidences of expenses incurred wholly and exclusively for the purpose of the business, were furnished before the Assessing Officer. He submitted that advertisement of brand gives enduring benefit to the assessee and, therefore, these are capital in nature and liable to be disallowed as business expenses. 5.2 On the contrary, the Learned Counsel of the assessee relied on the order of the Learned CIT(A) and submitted that advertisement expenses are of the routine nature for promotion of the sales during the year under consideration and, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Core Healthcare Ltd. 308 ITR 363, the Hon'ble Gujarat High Court has held that advertisement expenses incurred by the assessee to create brand image were allowable as revenue expenditure In any case the action of the AO in invoking the provisions of Section 35D(2Hd)Js not in order as the impugned expenditure is not incurred in connection with extension or setting up of a new unit after commencement of business. Therefore, following the above decisions of the Hon'ble High Courts and the Hon'ble Tribunal Delhi ITAT, it is held that advertisement and publicity expenses of ₹ 1,47,82,802/- is revenue expenditure incurred wholly and exclusively for the purpose of business of the appellant and is allowable as such Disallowance of ₹ 1,33,04,522/- is directed to be deleted. These grounds of appeal are ruled in favour of the appellant." 5.4 We find that the Learned Assessing Officer has made disallowance under section 35D of the Act without verifying the requisite condition that said expenses were incurred before commencement of the business or in connection with the expansion or setting up of new unit by the assessee. The Learned Assessing Officer has also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in assessment year 2008-09 and 2010-11 has allowed the advertisement expenses in terms of section 37(1) of the Act. The relevant finding of the Tribunal is reproduced as under: "11. On a perusal of the order dated 7/1/2019 in ITA No. 3812/Del/2015 for assessment year 2009-10 in assessee's own case, we find that the a coordinate Bench of this Tribunal considered the contentions on either side in the light of the decisions cited before them and reached a conclusion that the decisions in the cases of PepsiCo Holdings India Private Ltd (supra) and Orient Ceramics and Industries Ltd (supra) are applicable to the facts of the case. Further, since the genuineness of the expenditure is not in dispute and the dispute is only regarding capital or revenue expenditure in nature decided the issue in favour of the assessee holding that the expenditure incurred by the assessee on glow sign boards and a neon sign boards is revenue in. nature and allowable as deduction under section 37 (1) of the Act. 12. In the absence of any compelling reasons to take a different view in assessee's own case for an earlier year, we find it difficult to deviate from the view taken by a coordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee shall, in accordance with and subject to the provisions of this Section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the extension of the business is completed. The assessee's case falls under the category of sub section 2(d) of Section 35 D of Act. Further as per Section 35D(2)(iii), the expenditure referred to conducting market survey or any otner survey necessary for the business of the assessee is also held to be of capital in mature. In the case of the assessee, through market survey ROs are being appointed and necessary business are being carried out after making survey only. So any expenses incurred for undertaking such survey or paid to an agency which is indulged in such work are held to be capital in nature. In view of the same, ₹ 3,52,541 is allowed to be amortised during the year under consideration, and the balance amount of ₹ 31,72,877/- is disallowed and added back to the total income of the assessee . Penalty u/s 271 (1)(c) of the Act is also initiated for concealment of income and for furnishing of inaccurate particulars. Disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act by the Assessing Officer is not justified. The order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the finding of the Learned CIT(A) on the issue in dispute. The ground No. 3 (three) of the appeal of the Revenue is accordingly dismissed. 7. The ground No. 4 (four) of the appeal relates to disallowance of ₹ 20,10,200/- on account of employees recruitment expenses. 7.1 The Learned DR relied on the finding of the Learned Assessing Officer, whereas learned Counsel of the assessee relied on the finding of the Learned CIT(A) on the issue in dispute. 7.2 We have heard rival submission of the parties and perused the relevant material on record. The Assessing Officer disallowed a sum of ₹ 20,10,202/- being the payment incurred for employee's recruitments, holding that the assessee fetch benefit of such expenses for longer time. The Ld. CIT(A) relying on the order of the Tribunal in the case of DCIT Vs Sapient Corp. Private Limited (supra) deleted the disallowance holding that payment made to recruitment agencies was revenue in nature. The finding of the Ld. CIT(A) is reproduced as under: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel of the assessee submitted that amount recovered from OIPL was credited to salary account of Sri Pramod Saxena and deduction of only net salary was claimed by the assessee. 8.4 We have heard rival submission of the parties and perused the relevant material on record. The Ld. CIT(A) has deleted the addition of observing as under: "14.2 The AO added ₹ 1,12,82,802/- as he noticed from the Schedule to accounts in related party disclosure that this amount is shown as expenses recovered from Oxigen Infovision (P) Ltd. (OIV) but was not credited as a separate item in the P & L A/c of the appellant company. The Ld. AR has stated that the said amount was recovered from OIV remuneration will be paid by OIV to the Managing Director. The said remuneration was on account of the cost of time spent by the Managing Director of the appellant company, Shri Pramod Saxena in running the affairs of OIV. It is further stated that the appellant paid total remuneration due to the Managing Director and recovered 1/3rd of the amount (paid to the MD). Further, the appellant company debited its books of account initially with the total remuneration of the Managing Director and subsequently after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is ruled in favour of the appellant." 9.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that this issue is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2009-10 (ITA No. 3812/Del/2015 dated 07/01/2019). The relevant finding of the Tribunal is reproduced as under: "8. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Hon'ble Delhi High Court in the case of Pr. CIT Vs. Connaught Plaza Restaurant has considered the issue i.e. Higher rate of depreciation on POS TERMINALS and has upheld the decision of the Tribunal where it has been held that assessee is entitled to depreciation @ 60% on POS TERMINALS. The relevant observation of the Hon'ble High Court reads as under:- "The revenue's appeal urges that a substantial question of law arises i.e. whether P.O.S. terminal, is a computer or alternatively falls within the classification of computer peripherals and accessories for the purpose of depreciation. This court notices that for the relevant assessment year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icult to countenance the arguments advanced on behalf of the Revenue. While respectfully following the same we hold that this ground of Revenue is devoid of any merits and is liable to be dismissed. We, accordingly, uphold the findings of the Ld. CIT(A) and dismiss ground no. 3." 9.4 Respectfully following the finding of the Tribunal (supra), we uphold the finding of the Learned CIT(A) on the issue in dispute and dismiss the ground No.6 (six) of the appeal of the Revenue. 10. The ground No. 7 (seven) of the appeal relates to the depreciation claimed by the assessee at the rate of 60% percent on UPS. 10.1 The Assessing Officer treated the UPS as not part of the computer and only part of plant and machinery and allowed the depreciation at the rate of 15% only. The Ld. CIT(A) allowed the claim of the assessee observing as under: "16.2. I have carefully considered the assessment order and written submissions furnished by the Ld. AR. The AO restricted the claim of depreciation @ 15% as against the claim of 60% on UPS on the ground that UPS was not an integral part of the computer system and therefore was eligible for depreciation @ 15%. The Hon'ble jurisdictional ITAT in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance under section 14A of the Act. 11.1 Brief facts qua the issue in dispute are that the Assessing Officer observed investment in shares and mutual funds by the assessee and thus invoking Rule 8D of the Rules made disallowance of ₹ 4,86,094/-. The Ld. CIT(A) deleted the disallowance in view of the binding precedent of the Hon'ble jurisdictional High Court. 11.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The finding of the Learned CIT(A) on the issue in dispute is reproduced as under: "l7.3 In the recent past in a number of decisions pronounced by the Hon'ble Courts and Tribunals, it has been ruled that provisions of section 14A cannot be invoked where no exempt income has been earned in the previous year. Hon'ble Delhi High Court in the case of Chemnivest Vs. CIT -VI (ITA 749/2014) decided on 02.09.2014 has ruled that section 14A will not apply if no exempt income is received during the relevant previous year. The Hon'ble Court ruled as under: "23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court in the case of CIT Vs. M/s. Bharat Hotels Ltd. (2019), 410 ITR 417 (Del. HC). 12.3 On the contrary, the Learned Counsel of the assessee submitted that in subsequent decision, in the case of Principal Commissioner of Income Tax Vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018, dated 10th September, 2018), the Hon'ble Delhi High Court has reversed the decision in the case of Bharat hotels Ltd (supra). 12.4 We have heard rival submission of the parties on the issue dispute. We find that Hon'ble Delhi High Court in the case of Bharat Hotels Ltd (supra) has held as under: "Question No.2 7. The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside provisions of the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (especially Regulation 38 of the Employees‟ Provident Funds Scheme, 1952) and the provisions of the Employees‟ State Insurance Act, 1948. The AO had brought to tax amounts which were deducted by the employer/assessee from the salaries and wages payable to its employees, as part of their contributions. It is not in dispute that the employer's right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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