9911796707
TMI Blog2022 (4) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... d in his detailed discussion that the assessee had been including these travelling charges as part and parcel of service charges only till AY 1999-2000 which have been separately accounted in the impugned assessment year onwards. We reiterate that the assessee's service agreement issues have already been decided against the department all along as well in the preceding paragraphs. That being the case, we find no substance in the Revenue's vehement arguments supporting the impugned disallowance in principle since the very claim stands accepted all along in principle. Quantification of the impugned travelling expenses disallowance - Although the assessee had to indeed perform its reimbursement obligation regarding travelling expenditure to payee group, we hardly see any reason for the latter entity's employees right to claim the same regarding their family members as well. This is coupled with the fact that there is no complete reconciliation between the corresponding travelling expenses vis- -vis the assessee's business requirement involving the group company employees' travel to sufficiently discharge its onus of having incurring this expenditure wholly and excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e files perused. 2. It emerges during the course of hearing at the outset that we do not need to adjudicate upon all the issues raised herein as the learned coordinate bench's earlier order(s) have already disposed the same. Both the parties are ad idem that we need to decide only three identical issues in all these cases i.e. disallowance of service charges, travelling expenditure and depreciation claims; as the case may be, involving varying sums. We thus treat the first and foremost assessment year herein AY 2000-01 involving assessee's and the Revenue's cross appeals ITA Nos. 610 1015/Pun/2004 as the lead year. 3. We now advert to the foregoing twin lead cases and note that the assessee's substantial ground Nos. 2(a) to (i) as well as the Revenue's pleadings in its 1st to 4th grounds challenge correctness of the CIT(A)'s action partly confirming assessment findings disallowing services charges payments of Rs. 52,92,79,442/- to the extent of 30% only. It is in this factual background that the assessee seeks to delete the entire service charges disallowance whereas the Revenue's endeavour is to restore the assessment findings rejecting this entire clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides - for and against - is about this issue being a covered matter. At this juncture, it is relevant to note that similar disallowance of Service charges was made by the AO in his order for the immediately preceding assessment year. As against the total expenditure of Rs. 46.75 crore incurred by the assessee towards service fee to CCI Inc., the AO made disallowance of Rs. 10.80 crore (nearly 25%) on similar grounds of the services rendered by CCI Inc. to the bottlers not for the business purpose of the assessee. The ld. CIT(A) confirmed the addition by holding that such expenditure was not wholly and exclusively for the purpose of the assessee's business because that was benefitting the bottlers. When the matter finally came up for consideration before the Tribunal, the disallowance came to be deleted vide its order dated 30-06-2008, whose copy has been placed on record. 11.2. Here it is pertinent to mention that the immediately preceding year was governed by the Service agreement dated 1.4.1995. However, the year in question came to be covered by a new Service agreement effective from 1.4.1997, whose copy has been placed at page 1 of the paper book. While discussing the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services to the Bottlers is concerned, there is no change in their scope in the two Agreements. This establishes that the services rendered by CCI Inc. to Bottlers in the A.Y. 1997-98 were of similar nature as given in the assessment year under consideration. The point for determination is only the deductibility of service charges paid by the assessee to CCI Inc. for rendering services to the bottlers. Thus, even though there is some change in the facts from the preceding year to the current year by means of substitution of the Agreement expanding the scope of services, but such change has no impact on the issue for determination, being the services rendered to the bottlers. As such, we find it difficult to hold that the facts for the year under consideration have undergone change vis- -vis the immediately preceding year qua the issue of deductibility of service charges paid for the plant maintenance of the unrelated bottlers. This very issue has been examined by the Tribunal in its order for A.Y. 1997-98 and a decision has been rendered that such expenses are allowable in terms of section 37(1) of the Act. Albeit there is a massive force in the contentions of the ld. DR, but we d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, we need to independently examine its claim than following the preceding detailed discussion by the learned coordinate bench, We find no merit in the Revenue's instant argument as it is clear from a perusal of the assessment findings in par 6.1, page 27 dated 31st March, 2003 that the assessing authority had itself admitted the relevant factual position herein to be similar as in AY 1999-2000 wherein the taxpayer has already succeeded. We therefore adopt judicial consistency to accept assessee's impugned service charge claim of Rs. 52,92,79,442/- in entirety and allow its corresponding ground Nos. 2(a) to (i) in appeal ITA No. 610/Pun/2004. The Revenue's corresponding 1st to 4th substantial grounds in its cross appeal ITA 1015/Pun/2004 as well the main case itself stand dismissed to this limited extent. 6. Next comes the assessee's third substantive ground that both the learned lower authorities have erred in law and on facts in disallowing travelling expenditure of Rs. 9,59,49,374/- in both the lower proceedings. Both the learned counsel invited our attention to the CIT(A)'s detailed discussion regarding the instant issue as follows:- 6. The grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f person authorizing such travel were also filed. The Assessing Officer had then required the appellants to file the said details in the following format: Name Educational qualification Salary Purpose of travel Date of travel Amount spent: It was submitted to the A.O that all details except education qualification and salary had already been submitted. Data on salary had been separately produced in the form of Form 24 - Annual TDS Return for Salaries . Notwithstanding the fact that details of educational qualification would have to be compiled from individual personnel files and was not really relevant to the issue on hand, sample data on the same was provided. Based on the fact that the appellants could not provide this one piece of irrelevant data for all the persons travelling, a sweeping statement has been made that evidence as desired was not provided. 20.4. The contention of the A.O at page 43, that the travelling expenses should be disallowed because it has been incurred by persons who are not on the payroll of the appellants is also without any basis. It is respectfully submitted that for the purpose of claiming deduction on travelling, the person travelling need not be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oster goodwill among the customers of your assessee and strengthen business relationship. It is for this reason that the spouses of the bottlers and key customers were also invited to join the convention. Certain key managers of CCI were also required to travel with their spouse to ensure social interaction. 2. Voucher no 96406 These are moving and relocation expenses of a manager of CCI from Delhi to Bangalore. Your assessee's business interests are spread throughout the length and breadth of the country. It has however only one plant at Piran gut and 50 odd employees. Its business interests are looked after totally by CCI Depending on the business needs of the assessee, CCI transfers its managers to different places in the country. The voucher relates to the relocation expenses of one such manager who was transferred from Delhi to Bangalore. It is to be noted that if CCI had not been there, your assessee would have had to incur the same expenditure for transferring its employee. 3. Voucher no 94856 These are expense of T V S Krishnan. Mr. Krishnan advises the assessee on environment management. These are his travel expense from Delhi to Pune. Mr. Krishnan advises the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the traveling expenses has been done only and exclusively for the purpose of business of the appellant and the appellant's claim that these have been reimbursed in terms of the service agreement is neither proved nor is acceptable in the light of the fact that service charges have separately been debited and disclosed in schedule 14. Ground nos. 18 to 20 are, therefore, decided against the appellant. 7. We have given our thoughtful consideration to rival pleadings and found no reason to accept either party's stand in entirety. We make it clear first of all that the CIT(A) himself held in his detailed discussion in para 4.5 that the assessee had been including these travelling charges as part and parcel of service charges only till AY 1999-2000 which have been separately accounted in the impugned assessment year onwards. We reiterate that the assessee's service agreement issues have already been decided against the department all along as well in the preceding paragraphs (supra). That being the case, we find no substance in the Revenue's vehement arguments supporting the impugned disallowance in principle since the very claim stands accepted all along in principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verages (soft drinks). Though the appellant was owner of cooler, coolers were provided either to the bottlers or vendors and thus utilized by others and as such not for the purposes of business of the appellant. As the appellant failed to fulfill the conditions stipulated u/s. 32, the assessing officer disallowed the claim of depreciation on.. coolers and added Rs. 2,01,90,507/- to the total income. 5.1 During the appellate proceedings, the appellant vide submission dated 23.10.2003 submitted as under: 19.1 The appellant's business is inextricably linked with the growth of the bottling industry, as the concentrate manufactured by the appellants has no other commercial use, except as raw material in the manufacture of cool drinks. As the name suggests, cool drinks are meant to be served in a chilled condition. Market research undertaken in India has shown that the sale of cool drinks increased by almost 43% if sold in a chilled condition. Cool drinks cannot be produced without concentrate. The increase in sale of cool drinks thus directly benefits the appellants as it results in a proportionate increase in demand for concentrate. The A.O has failed to appreciate the sound busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from which the drinks derive their unique flavour is the concentrate manufactured by the appellants. Naturally such a huge increase in the sale of cool drinks creates a huge demand for the beverage base, as the cool drinks cannot be manufactured without this beverage base. The investment made by the appellants in these coolers thus gives the appellant a very good return, and is essential for its business growth. 19.9. The Appellants provide coolers at retail outlets for the purpose of meeting mutually agreed sales targets, as part of its efforts to achieve its own business plans. It may be noted that this placement of coolers by the appellant is over and above similar activities, which are undertaken by the bottlers themselves in their respective territories (See the audited accounts of the bottlers at page 67 to page 125 of the Paper Book I). 19.10. The coolers also serve as an advertising medium as they prominently bear the advertising logo and name of the Appellants. A consumer entering the outlet would see the cooler and cool drinks displayed therein, and would be induced to consume the products. Hence it is beneficial for your appellant to undertake this activity, so as to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant to provide such coolers. Further these coolers are placed as part of the joint promotion activity with bottlers in their areas 5.2 I have gone through the assessment order, the submissions of the appellant. It is an admitted fact that there is an agreement with the bottlers but the assets remains as utilized for the purpose of the bottlers. These do not generate 'sales' of concentrate but directly help the bottlers linked to the Coca Cola group including HCCBPL. If these advertise any product, it is the product of the Coca Cola company or bottlers and the whole agreement relating to marketing expenses need not be repeated here. As such, the disallowance has rightly been made and on sound footing is upheld. Grounds nos. 13 to 17 are decided against the appellant. 10. We have given our thoughtful consideration to vehement contentions and find no merit in the Revenue's stand. It emerges during the course of hearing that not only the learned lower authorities had accepted the assessee's identical depreciation claim pertaining to cooler provides to the bottlers/vendors by allowing the same in preceding years throughout but also the learned counsel sought to invi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s appeal ITA No. 356/Pun/2007 fails accordingly. 14. The assessee's 19th to 22nd and 23rd to 28th substantive grounds raise the twin issues of reimbursement of travelling expenses and disallowance of depreciation on coolers to the tune of Rs. 6,65,88,746/- which are allowed to the extent of 90% and in entirety; respectively in light of our foregoing detailed discussion in the corresponding lead case (supra). We make it clear that we have upheld the impugned disallowance of travelling expenses to the tune of 10% in above terms. This assessee's appeal ITA No. 256/Pun/2007 is partly allowed to this limited extent. 15. We now advert to the assessee's and the Revenues cross appeal ITA No. 144 357/2007 for AY 2003-04. Suffice to say, assessee's 13th to 15th substantive grounds and Revenue's first substantive ground raising service charge disallowance issue of Rs. 15,28,78,125/- which has been restricted to 30% in CIT(A)'s order, is being decided in taxpayer's favour and against the department in light of or finding in preceding paragraphs. The assessee's corresponding substantial grounds stand accepted while the Revenue's first substantive ground as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
