M/S.CHENNAI PETROLEUM CORPOR vs. THE DEPUTY COMMISSIONER OF I

T.C.A.No.117 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 14.10.2020 CORAM THE HON'BLE MR.JUSTICE T.S.SIVAGNANAM AND THE HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.117 of 2020 and C.M.P.No.4064 of 2020 M/s.Chennai Petroleum Corporation Limited, 536, Anna Salai, Teynampet, Chennai-600 018. PAN : AAACM4392C ... Appellant -vs- The Deputy Commissioner of Income-tax, Larger Tax Payer Unit - Appeals, Chennai-600 101.

... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order dated 20.03.2019 made in I.T.A.No.309/Chny/2014 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment year 2007-08. For Appellant : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan For Respondent : Mr.T.Ravikumar Senior Standing counsel 1/6 http://www.judis.nic.in T.C.A.No.117 of 2020 JUDGMENT (Judgment of the Court was delivered by T.S.Sivagnanam, J.) This appeal has been filed by the assessee under Section 260 A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 20.03.2019 made in I.T.A.No.309/Chny/2014 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai ('the Tribunal' for brevity) for the assessment year 2007-08. 2.This appeal has been filed by raising the following substantial questions of law:- "1.Whether the Tribunal was right in law in holding that the expenditure incurred towards sponsorship of international Tennis Event is not an allowable deduction u/s.37 of the Act. 2.Whether the Tribunal was right in law in holding that the contribution to International Tennis event pursuant to the communication dated 07.01.2004 received from Chief Secretary to Government of Tamilnadu inviting the assessee company to be a founder member of the Consortium of Sponsors is only applicable of income and cannot be allowed as deduction. and 2/6 http://www.judis.nic.in T.C.A.No.117 of 2020 3.Whether the Tribunal was right in law in concluding that the expenditure was advertisement expenditure with the name of the assessee displayed in the tournament and hence ought to have appreciated that the expenditure constituted business expenditure allowable u/s 37(1)." 3.We have heard Mr.R.Vijayaraghavan, learned counsel appearing for the appellant and Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the respondent. 4.We have perused the findings recorded by the Tribunal in paragraph 13.5 of the impugned order, which reads as follows: “13.5 We heard the rival submissions and perused the material on record. The short issue involved in the present appeal is whether the sponsorship expenditure of Rs.50 lakhs towards tennis tournament incurred by the assessee is allowable as a deduction. The AO had not assigned any reasons for disallowances except stating that in the earlier years similar disallowance was made. However, the ld. CIT(A) had allowed by placing reliance on the orders of his predecessor in the earlier years. The submission of the ld. Counsel that the expenditure was 3/6 http://www.judis.nic.in T.C.A.No.117 of 2020 incurred only on the direction of the Government of Tamil Nadu cannot be accepted for the reasons that from the perusal of the letter of the Chief Secretary of Government of Tamil Nadu dated 27.01.2004 vide DO letter No.1044/Secy./2004-5, it is clear that the Government of Tamil Nadu had only extended an invitation to participate on the occasion of the sponsorship of the tennis tournament. This invitation cannot be construed as a mandatory direction of the Government of Tamil Nadu. The ratio of the decision of Hon'ble Jurisdictional High Court in the case of Cheran Transport Corporation Ltd. (supra) is not applicable to the facts of the present case. The facts of the case are that the assessee, a Govt. of Tamil Nadu undertaking made a contribution to Flag Day Fund and Chief Minister Rehabilitation Funds both under the direction of the Government and the assessee being a Government undertaking is obliged to obey the direction of the Government, whereas in the present case there is no mandatory direction from the Government to make a contribution towards the tennis tournament nor the assessee is a State Government undertaking. In the present case, there is nothing to show that the assessee established the nexus between the contribution to the tennis tournament and the benefit which the assessee's business received by virtue of such contribution. In the 4/6 http://www.judis.nic.in T.C.A.No.117 of 2020 absence of these nexus, the expenditure cannot be allowed as a deduction and is nothing but application of income and reliance in this regard can be placed on the decision of the Full Bench of Hon'ble Madhya Pradesh High Court in the case of Addl. CIT vs. Kuber Singh Bhagwandas [1979] 118 ITR 379 (MP-FB). Therefore, we reverse the findings of the ld. CIT(A) on this issue. Thus, the grounds of appeal filed by the Revenue are allowed.” 5.In the assessee's own case in T.C.A.Nos.111 and 112 of 2020 to the same issue the above questions were considered and the appeals filed by the assessee were dismissed. Following the said decision in the assessee's own case, the present tax case appeal is dismissed and there is no substantial question of law arises for consideration. No costs. Consequently, connected miscellaneous petition is closed. (T.S.S., J.) (V.B.S., J.) 14.10.2020 [5/5] Index : Yes/No Speaking Order/Non-speaking Order cse 5/6 http://www.judis.nic.in T.C.A.No.117 of 2020 T.S.Sivagnanam, J. and V.Bhavani Subbaroyan, J. cse T.C.A.No.117 of 2020 and C.M.P.No.4064 of 2020 14.10.2020 [5/5] 6/6 http://www.judis.nic.in