THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),, AHMEDABAD vs. ADANI WILMAR LTD.,, AHMEDABAD

“4.3. I have carefully considered the Assessment Order and submission filed by the Appellant. The Assessing Officer has contended that the Appellant has made payment for getting ROCP Report to note the market share of the Company in ROCP Product which can help Appellant to make future business strategy hence same is capital expenditure. On such basis, the Assessing Officer has treated such the expenditure as capital expenditure. On other hand the appellant has argued that during the course of assessment proceedings, it had already submitted detailed reply explaining that the expenditure in question was revenue in nature, the Assessing Officer has gone ahead with making the disallowance after assuming that no matter that the expenditure had not resulted into the appellant acquiring any capital asset or any benefit of an enduring nature, it was capital expenditure in nature. On careful consideration of observation of Assessing Officer and contention of Appellant, it can be seen that the fact of the case is similar to the earlier assessment year i.e A.Y. 2011-12 wherein undersigned vide with CO No. 51/Ahd/2018 [Adani Wilmar Ltd.] A.Y. 2012-13 - 4 - order dated 26/04/2016 in appeal No. CIT(A)-1/72/DCIT,Cir- 1(1)(1)/2015-16 has held as under:-

"6.3. I have carefully considered the Assessment Order and the submission filed by the Appellant, the Assessing Officer has observed that the Appellant has made payment for getting ROCP Report to note the market share of the Company in ROCP Product which can help Appellant to make future business strategy hence same is capital expenditure. It was also argued that amount of Rs. 77,43,374/- has been paid for AC Nielsen Org Marg Pvt. Limited for subscription cost of two years hence same proves that Appellant has benefit over the period. On this basis, Assessing Officer treated the expenditure as capital expenditure. On the other hand, Appellant has argued that professional fees paid by Appellant helps it in obtaining information regarding market share of Company in ROCP Product and same will help Appellant to get update for existing market situation of existing products hence such expenditure does not give any enduring benefit hence same cannot be treated as capital expenditure. The Appellant has relied upon decision of Majestic Auto Limited (supra), KJS India Pvt. Limited (supra) and argued that such expenditure is revenue expenditure. In alternate argument, Appellant has stated that even though Assessing Officer has treated such expenditure as capital expenditure and observed that depreciation is allowable @25%, same was not allowed in computation of total income.

On careful consideration of entire facts it is observed that professional fees paid by Appellant are for existing business and not incurred for analyzing the market for new line of business or is not for diversification of its business. By incurring such expenditure, Appellant is constantly getting updates regardling market survey carried out for existing product line and same does not give any enduring benefit or is not in nature of capital expenditure. The expenses are not incurred for exploring the market for a new product and rather expenses is incurred for exploring the circumstances as to how Assessee should manage its existing business more effectively hence relying upon the decision of Hon'ble Delhi ITAT in the case of KJS India Pvt. Limited 45 SOT 17 expenditure incurred by Appellant is business expenditure allowable under Section 37 of the Act. The Hon'ble Punjab and Haryana High Court in the case of Majestic Auto Limited 178 taxman 148 has on similar circumstances held that expenditure incurred for obtaining report on reorganization of its core business and for improving market share and profitability is allowable as revenue expenditure. Considering these facts, expenditure incurred by Appellant is allowable as revenue expenditure. As entire expenditure is allowed as revenue expenditure, alternate claim of Appellant regarding allowability of depreciation on such expenditure does not survive. The ground of the appellant is allowed."

Following the above order the disallowance made by AO treating professional and legal fees as capital expenditure is deleted and appellant gets relief of Rs.39,71,468/-. Thus this ground of appeal is allowed.” with CO No. 51/Ahd/2018 [Adani Wilmar Ltd.] A.Y. 2012-13 - 5 -

10. The CIT(A), in our view, has adjudicated the issue in right perspective. The expenditure claimed by the assessee bears the revenue character. We thus find no error in the order of the CIT(A). Hence, the Ground No.2 of the Revenue is dismissed.

CROSS OBJECTION No. 51/Ahd/2018

“1. On the facts and in the circumstances of the case, the CIT(A) erred in confirming disallowance of expenditure of Rs.1,33,528/- being employees’ contribution to P.F. and ESIC u/s.36(1)(va) of the I.T. Act on the ground that the same was not paid within the time limit prescribed under the relevant Acts even though the payment was made within the time limit prescribed for filing return of income u/s.139(1) of the I.T. Act.

2. On the facts and in the circumstances of the case, the CIT(A) erred in upholding disallowance u/s.14A of the I.T. Act to the extent of exempt income of Rs.7,38,000.”

This Order pronounced in Open Court on 15/11/2019

Sd/- Sd/- (MADHUMITA ROY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 15/11/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।