DCIT, NEW DELHI vs. M/S. MAIL TODAY NEWSPAPERS PVT. LTD., NEW DELHI

1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the addition made by the AO by treating advertisement & sales promotion expenses as revenue expenses by completely relying upon the submissions of the assessee and completely ignoring the reasons given by the AO?

2. That the order of the Ld. C!T(A) is erroneous and is not tenable on facts and in law.

4. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing.

3. Ld. AO observed that assessee derives revenue from sale of publication and advertisement published therein. During assessment proceedings Ld. AO noted that year under consideration is 3rd year of operation of assessee and expenses on advertisement and sales promotion are incurred to propagate the brand name of assessee in market. Ld. AO, thus, held expenses to be capital in nature and disallowed the same holding it to be enduring in nature. 4. Aggrieved by assessment order, assessee preferred appeal before the Ld. CIT(A) who deleted the addition. 5. Aggrieved by order of Ld. CIT(A), revenue is in appeal before us now. 6. Ld. CIT DR submitted that ground No. 2, 3 and 4 are general in nature and does not require any adjudication. She submitted that only issue has been raised in ground No. 1 is regarding treatment of expenses incurred, towards advertisement and sales promotion expenses being revenue in nature by Ld. CIT(A). 7. She submitted that expenses have been incurred in relation to advertisement and sales promotion to propagate brand name of assessee in the market and hence has given rise to an enduring benefit to assessee. He submitted that any expenses incurred which give rise to any enduring benefits would would have to be necessarily considered as capital expenditure Ld. CIT DR submitted that, through these advertisement and promotions, assessee has developed brand name, which is a tangible asset. This would increase business of assessee, as the image gets imprinted in minds of customers which is not very easy to dislodge. Ld. CIT, DR supported order passed by assessing officer and also has relied upon decision of Hon’ble Supreme Court in the case of Assam Bengal Cement Co. Ltd., vs. CIT, reported in 27 ITR 34, and decision of Hon’ble Bombay High Court in the case of Taparia Tools Ltd. vs. Jt. CIT reported in 126 Taxmann 544. 8. On the contrary Ld. Counsel submitted that assessee has been incurring similar expenses on advertisement and sales promotion in preceding as well a subsequent assessment years, which has been accepted by Department. He submitted that authorities have not disputed genuineness of expenses in any of assessment years. He placed reliance upon following decisions: • Hon’ble Supreme Court in the case of CIT vs. J.K Charitable Trust, reported in 308 ITR 161;

• Hon’ble Supreme Court in the case of Radhsoami Satsang versus CIT reported in 193 ITR 321; • Hon’ble Gujarat High Court in the case of DCIT versus core health care Ltd reported in 308 ITR 263 9. Ld. Counsel submitted that assessee has to incur these expenses to make an existence in market and therefore, it cannot be considered to be enduring nature. He submitted that these expenses are incurred every year by assessee. He relied upon certain decisions wherein tests has been laid down to establish three nature of an expenses. • Hon’ble Supreme Court in the case of Empire Jute Co.Ltd vs. CIT reported in 124 ITR 1; • Hon’ble Supreme Court in the case of Alembic Chemical Works Co.Ltd versus CIT reported in 177 ITR 377; • Hon’ble Delhi High Court in the case of CIT vs. Casio India Ltd., Reported in 335 ITR 196; • Hon’ble Delhi High Court in the case of CIT versus Citi Financial consumer Fin. Ltd., Reported in 335 ITR 29; • Hon’ble Bombay High Court in the case of CIT versus Geoferry manners and company Ltd reported in 315 ITR 134;

“By the court: (i) It is not a universally true proposition that what may be a capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material in determining whether the payment is revenue or capital disbursement qua the payer. (ii) There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of assessee's business to be carried on more efficiently or more profitability while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. (iii) What is an outgoing of capital and what is outgoing an account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the jurisdic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency.”