ACIT-3(1)(1), MUMBAI, AYAKAR BHAWAN vs. SAMSONITE SOUTH ASIA PVT LTD, ANDHERI

At the outset, ld. Counsel for the assessee submitted that the issues raised by the Revenue in the present appeal are legacy issues and covered by several decisions in assessee's own case, including that by Hon'ble Juri ictional High Court of Bombay for Assessment Year 2012-13 whereby the appeal filed by the Revenue on these issues was dismissed holding in favour of the assessee. The legacy issue in respect of addition made towards advertisement and sales promotion expenses has been adjudicated upon in Assessment Years 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15. Assessee has furnished a chart in this respect which is reproduced for ready reference. It has also placed on record all these above decisions referred in the table forming part of the paper book.

1. Brief facts of the case are that assessee is engaged in the business of manufacturing, marketing and distribution of moulded luggage (hard luggage) and travel accessories as well as importing and 3 Samsonite South Asia Pvt. Ltd. Assessment Year 2010-11

2. Assessee filed its return of income on 30.09.2010, reporting total income at Rs.35,30,32,540/- under the normal provisions of the Act. Ld. Assessing Officer had made disallowance of Rs. 9,76,51,676/- out of the total tabulated expenses by treating the same as capital expenditure on which he allowed depreciation. According to the ld. Assessing Officer, these expenses contributed to the creation of intangible rights in the form of brand rights which are assignable over time. In the first Appeal, ld. CIT(A) carefully examined the submissions made by the assessee and also considered the judicial precedents in assessee's own case as well as similar other precedents relied upon by the assessee. Ld. CIT(A) having considered the facts as well as judicial

From these set of facts for which ld. Counsel reiterated that it is a legacy issue being continued from Assessment Year 2008-09, pointed to the decision for Assessment Year 2012-13 by the Hon'ble Juri ictional High Court of Bombay in assessee's own case in ITA No.1755 of 2018 dated 05.02.2025. The substantial questions of law before the Hon'ble High Court are exactly the same which the Revenue has taken in the present appeal before us, except for the change that before the Hon'ble Court, it dealt with the order of the Tribunal, whereas before us, Revenue is contesting on the order of ld. CIT(A). Ld. Counsel compared the substantial questions of law before the Hon'ble Court with that of the grounds raised by the Revenue in Form 36 and demonstrated their similarity.

We have perused both from the records and we are in agreement with the submission of the ld. Counsel. We take note of the observations and findings given by the Hon'ble Court on the substantial questions of law, whereby it took note of the findings of the Tribunal that assessee is not the owner of the brand ‘Samsonite’ and therefore, expenses incurred by the assessee could not have been regarded as capital expenses. Hon'ble Court found no error in the approach or the reasons assigned by the Tribunal for interference. Hon'ble Court in Para 7 held that advertisement and sales promotion expenses have been correctly regarded as revenue expenses and the arguments about cost branding has been adequately and evenly correctly dealt by the Tribunal. It thus, declined to admit the appeal

Having perused the Tribunal's impugned order and the material on record, we are satisfied that neither the above questions nor any other substantial questions of law are involved in this appeal.

The Tribunal has crucially noted that the assessee in this case was not the owner of the brand "Samsonite." Therefore, the expenses incurred by the assessee could not have been regarded as capital expenses.

Besides, in this case, the disallowance was made were only on ad-hoc basis without indicating any rational. The Tribunal, therefore, interfered with such disallowance. We do not find any error in the approach or in the reason assigned by the Tribunal for interference.

The Tribunal has also correctly observed that there was no question of deferred revenue expenditure. This view of the Tribunal aligns with the decision of the Hon'ble Supreme Court in Tapadia Tools Ltd. Vs. Joint Commissioner of Income Tax, Nashik, particularly, paragraphs 18 to 20 thereof.

The expenditure incurred under the head "advertisement and sales, promotion expenses" have been correctly regarded as revenue expenses in the facts of the present case. The arguments about 'cost branding' has been adequately and even correctly dealt with by the Tribunal.

For all the above reasons, the questions of law as proposed are not involved and in any event, cannot be regarded as substantial questions of law.

For all the above reasons, we decline to admit this appeal. The appeal is dismissed without any costs order.”

1. With this order of the Hon'ble High Court, we also perused the order of the Coordinate Bench of ITAT, Mumbai for Assessment Year 2012-13 in ITA No. 1934/Mum/2017. The factual matrix in this respect, as noted in Para 16 are extracted below for ready reference: “16. On this issue Assessing Officer noted that the assessee company had debited a sum of Rs. 64,04,38,650/- under the head "Advertisement & Sales Promotion" in its Profit & Loss Account. He observed that from a perusal of the total expenses claimed by the assessee company during the year under consideration, it was observed that the expenditure debited under the head "Advertisement & Sales Promotion" is the single major expenditure that the assessee company has debited during the year under consideration. That it accounts for almost 11.24% of the total expenses debited including cost of material sold, personnel expenses, operating expenses, interest and depreciation claimed. That further, it represents a 36.72% share of the total Selling, General & Administrative Expenses debited in its profit & loss account and also shows a whopping 66,70% increase as compared to the expenses debited under the same head in the previous year.”

2. Observations and findings of the Coordinate Bench allowing the appeal of the assessee for which Revenue went in appeal before the Hon'ble Court in the decision referred above are dealt in Para 21 to Para 26 which are extracted below for ready reference: “21. We have heard both the Counsel and perused the records. Learned Counsel the assessee submitted that this addition has been made totally on surmises and conjectures. Learned counsel submitted that assessing officer has not at all made any case that assessee's expenditure are in the nature of AMP expenditure aimed at benefiting the foreign associated enterprise. Learned counsel submitted that the brand belongs the AE and not to the assessee and hence there cannot be any reason for the assessing officer allocating expenditure on advertisement and sales promotion on brand building since the brand doesn't belong to the assessee. In this regard Id counsel placed reliance upon following case laws;

Furthermore learned counsel submitted that the allocation of 50% out of advertisement expenditure and 60% out of sales promotion expenses as capital expenditure towards brand building is totally without any basis and based upon surmises.

Per Contra learned departmental representative relied upon the order's of the authorities below, he claimed that assessee has created intangible rights assignable over a number of years. 24. Up on careful consideration, we note that assessee has incurred expenditure on advertisement and sales promotion. The assessing officer & DRP have held on an adhoc basis that a certain portion out of the above is aimed at brand building and the same is to be held as capital expenditure and the assessee can be granted depreciation their upon. When this is considered in light of the fact that the brand doesn't belong to the assessee and it is not the case of the revenue that assessee has incurred expenditure aimed at benefiting the associated enterprise this addition is clearly not sustainable. When the brand doesn't belong to the assessee there is no question of incurring expenditure over building of brand and assessee creating any intangible rights assignable over a number of years.

Moreover, it is implicit in the order of the revenue that these are deferred revenue expenditure for the purpose of the business of the assessee as they are allowing depreciation their upon. Further, there is no question of disallowance of the same as it is also settled law that in taxation laws there is no concept of deferred revenue expenditure. The case laws referred by the learned Counsel of the assessee duly indicate that expenditure incurred by the assessee company to maintain its corporate image which resulted in increased sales of the product is to be allowed as revenue expenditure. We find that these case laws are duly applicable to the facts of the present case.

Hence in the background of aforesaid discussion and precedents, we set aside the orders of the authorities below which allocated ad hoc percentage out of advertisement and sales promotion as depreciable capital expenditure. We hold that the entire expenditure is a revenue expenditure allowable as such.”

Before us nothing has been brought on record by the Revenue to controvert the observations and findings of the Coordinate Bench as well as of the Hon'ble High Court in assessee's own case which is a legacy issue dealt year after year and held in favour of the assessee. There being no material difference in the factual matrix and the applicable law and the matter squarely covered by assessee's own case including that by the Hon'ble juri ictional High Court (supra), we do not find any reason to interfere with the findings arrived at by ld. CIT(A) to allow the claim of the assessee. Accordingly, grounds raised by the Revenue are dismissed.

In the result, appeal of the Revenue is dismissed. Order is pronounced in the open court on 30 September, 2025 (Saktijit Dey) Accountant Member