DCIT CIR 6(1), MUMBAI vs. AMAR TEA P. L TD, MUMBAI

The Revenue’s appeal relate to the relief granted by learned CIT(A) in respect of the advertisement expenses incurred by the assessee.

We have heard the parties and perused the record. We noticed that the identical issue came to the consideration of the Coordinate Bench of the Tribunal in assessee’s own case relating to A.Y. 2008-09 in and the Tribunal has decided the issue in favour of the assessee by following decision rendered in assessee’s own case in earlier years. For the sake of convenience, we extract below the observations made by the Tribunal in the above said case :-

We have considered the above submissions of Id. Representatives of parties and the orders of authorities below as also the earlier orders of Tribunal, the hon'ble High Court as well as Hon'ble Apex Court (supra). Since the issue in respect of disallowances made by AO are identical and the Id. CIT(A) has also deleted the disallowances made by AO by following earlier orders of Tribunal in assessee's own case, we in the absence of any other material on record uphold the order of Id. CIT(A) by rejecting the grounds of appeal taken by department. Hence, both the grounds taken by department are rejected At the time of hearing learned AR submitted that the assessee has entered into a new development and franchises agreement with Haskukhrai & Co. on 1st April 1999 and as per that agreement also, the assessee has undertaken to bear cost of advertisement of the brand “Society Tea/T-Town”. Accordingly,

We have heard learned Departmental Representative and perused the record. We noticed from the agreement dated 1.4.1999 that the assessee has undertaken to bear cost of advertising of the product “Society Tea/T-Town”. Hon'ble Bombay High Court as well as the Tribunal has given due cognizance to the above said fact under the old agreement and accordingly the claim of the assessee was allowed in the earlier years. For the sake of convenience, we extract below the operative portion of the order dated 20.2.2008 passed by Hon'ble Bombay High Court in and others in assessee’s own case : “4. The issue pertains to for expenses towards advertisement incurred by the assessee in advertising the brand name in terms of the agreement which they had with the holder of the brand. Both commissioner (Appeals) and ITAT have recorded findings of fact that these expenses were allowable. Considering the fact that revenue has riot preferred appeal for 2 years, the fact that another year appeal has been dismissed and there are concurrent findings of fact, we do not find the question as framed would arise and consequently, appeal stands dismissed.”

We shall now take up the appeal filed by the assessee for AY 2009-10, wherein the assessee is contesting the addition made by the AO u/s 14A of the Act, which has since been confirmed by Ld CIT(A). Before us the Ld A.R placed reliance on the decision rendered by Hon’ble Delhi High Court in the case of Chemvest Limited (ITA 749/2014 dated 20-09-2015), wherein it was held that the disallowance u/s 14A is not called for when no dividend is received. The Ld A.R, accordingly, contended that the disallowance u/s 14A should not exceed the dividend income.

We heard the parties on this issue and perused the record. During the year relevant to AY 2009-10, the assessee has received dividend income of Rs.97,885/- and the AO has disallowed a sum of Rs.6,59,583/- by applying the provisions of Rule 8D. From the Balance Sheet furnished by the assessee, we notice that the assessee has held an investment of Rs.25.11 crores in mutual fund units as at 31.3.2009. The Share holders fund stand at Rs.19.32 crores. Besides the above, the assessee has received unsecured loans from directors and share holders. It is not clear as to whether these unsecured loans are interest bearing or interest free. If the interest free funds available with the assessee is in excess of the investments, then there is no requirement to make any disallowance of interest expenditure under Rule 8D(2)(ii) of the I.T Rules as per the decision of Hon’ble Bombay High Court rendered in the case of HDFC Bank Ltd (366 ITR 505). Since the details of interest free funds available with the assessee are not fully brought on record, we are of the view that this issue requires examination at the end of the AO. Besides the above, the assessee has placed reliance on certain other case laws also. Hence we prefer to set aside the issue relating to the disallowance made under Rule 8D(2)(iii) also to the file of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for fresh examination after affording adequate opportunity to the assessee.

We shall now take up the C.O filed by the assessee for AY 2010-11. Following two issues are contested by the assessee:- (a) Disallowance made u/s 14A of the Act. (b) Disallowance of purchases.

The first issue relates to the disallowance made u/s 14A of the Act. An identical issue was restored to the file of the AO by us in AY 2009-10. Consistent with the view taken therein, we restore this issue to the file of the AO for fresh examination of the issue.

The next issue relates to the disallowance of purchases. The AO as well as Ld CIT(A) disallowed a sum of Rs.47,558/- out of purchases account, since the assessee failed to furnish the details relating to the above said claim. Before us also, the assessee did not furnish any material to support the claim of purchases. Under these set of facts, we have no other option but to confirm the order passed by Ld CIT(A) on this issue.

In the result, all the appeals filed by the revenue are dismissed. The appeal of the assessee filed for AY 2009-10 is treated as allowed and the Cross objection filed by the assessee for AY 2010-11 is treated as partly allowed.