DCIT, CIRCLE- 16(2), NEW DELHI vs. MIELE INDIA PVT. LTD., NEW DELHI

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ITA 7556/DEL/2017Status: DisposedITAT Delhi01 October 2019AY 2014-155 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that advertisement expenditure incurred year after year to keep products fresh in the public's mind cannot be considered as giving enduring benefit. Therefore, it cannot be treated as a capital asset.

What were the facts?

The Revenue appealed against the deletion of an addition of Rs. 2,06,37,597/- made by the Assessing Officer on account of advertisement expenditure. The AO treated this expenditure as capital in nature for brand building, while the assessee claimed it as revenue expenditure.

What were the issues?

Whether advertisement expenditure incurred on brand building is revenue or capital expenditure and whether it provides enduring benefit.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES “E”: DELHI

Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT

Hearing: 25.09.2019Pronounced: 01.10.2019

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “E”: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA.No.7556/Del./2017 Assessment Year 2014-2015 M/s. Miele India Pvt. Ltd., The DCIT, Circle-16(2), 1st Floor, Copia Corporate Room No.308, C.R. vs., Suits, Commercial Plot-9, Building, I.P. Estate, Jasola, New Delhi – 025. New Delhi. (Appellant) (Respondent) For Revenue : Shri K. Hauthang, Sr. D.R. For Assessee : Shri Piyush Kaushik, Advocate. Date of Hearing : 25.09.2019 Date of Pronouncement : 01.10.2019 ORDER PER BHAVNESH SAINI, J.M.

This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-22, Delhi, Dated 11.09.2017 for the A.Y. 2014-2015, challenging the deletion of addition of Rs.2,06,37,597/- on account of advertisement expenditure incurred on brand building under section 37 of the I.T. Act, 1961.

2 ITA.No.7556/Del./2017 M/s. Miele India Pvt. Ltd., New Delhi.

2.

The Ld. CIT(A) noted that the only issue involved in this case is disallowance of expenditure for advertisement on sale promotion of Rs.2,06,37,597/- treating the same as expenditure for the future benefits and enduring in nature. The Assessing Officer has observed that by incurring the said expenditure, the assessee is building a brand image of the parent company and capital in nature. The A.O. denied the claim of assessee treating the same as revenue expenditure and disallowed under section 37(1) of the I.T. Act, 1961. The Ld. CIT(A), after considering the submissions of both the parties noted that facts are same with regard to disallowance of advertisement expenses in assessee’s own case from A.Y. 2010-11 onwards. For A.Y- 2013-2014, the Ld. CIT(A) has decided this issue in favour of the assessee. The Ld. CIT(A) found the facts and circumstances of the case are similar, therefore, following his Order for the A.Y. 2013-2014, deleted the entire addition and allowed the appeal of assessee.

3.

Learned Counsel for the Assessee, at the outset submitted that the issue is covered by the Order of ITAT, 3 ITA.No.7556/Del./2017 M/s. Miele India Pvt. Ltd., New Delhi. Delhi Bench in the case of same assessee for the A.Y. 2010- 2011 in ITA.No.724/Del./2016 in which vide Order Dated 11.04.2019, the Departmental Appeal for identical grounds have been dismissed. The findings of the Tribunal in paras 15 and 16 are reproduced as under :

“15. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below qua the issue. It would be pertinent to mention here that during the course of assessment proceedings, the case was referred to the TPO and the TPO framed order u/s 92CA(3) of the Act on 09.01.2014 and no adverse inference was drawn in respect of I.T. notification by the assessee during the year under consideration. This shows that the TPO was satisfied with the AMP expenses incurred by the assessee and did not make any adverse comment in so far as the issue of brand building is concerned.

4 ITA.No.7556/Del./2017 M/s. Miele India Pvt. Ltd., New Delhi.

16.

In our considered opinion, public memory is very short and, therefore, the companies have to incur advertisement expenditure year after year to keep products fresh in the minds of the public. In our considered opinion, such expenditure cannot partake the character of giving any enduring benefit. In our considered opinion, the Assessing Officer has grossly erred in treating such expenditure as intangible asset and on facts of the case, the findings of the Id. CIT(A) needs no interference. Ground No. 2 stands dismissed.”

4.

The Ld. D.R. also stated that issue is covered in favour of the assessee by the Order of the Tribunal above.

5.

Considering the facts of the case in the light of the Order of the Tribunal Dated 11.04.2019 (supra), we are of the view that the issue is covered in favour of the assessee by this Order. Following the same, we dismiss the appeal of the Revenue.

5 ITA.No.7556/Del./2017 M/s. Miele India Pvt. Ltd., New Delhi. 6. In the result, appeal of Revenue dismissed.

Order pronounced in the open Court.

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