TMI Blog2010 (12) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction of Ad film is fully allowable as business expenditure in the previous year as he failed to appreciate the decision of the Hon ble Supreme Court in the case of Madras Industrial Investment Corporation, 225 ITR 802. 3. These grievances being inter -connected, are taken up together. The relevant material facts are like this. The assessee is engaged in production, marketing, sale distribution of food products. During the course of assessment proceedings, the Assessing officer noticed that the assessee has claimed deduction of ₹ 10,93,93,677/- in respect of advertising expenses. It appears that the Assessing officer proceeded on the basis that entire advertising expenses pertain to production of advertisement films. The Assessing officer noted that the assessee company is in the business of marketing food products and atta manufactured by a particular millar with which company has an agreement. The assessee company is not in the business of producing advertisement films but thsese advertisement films have been in fact used for marketing of products. The Assessing officer was of the view that the production of advertisement film does not constitute business expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same in television is with the motive of creating awareness and to capture more business in the Indian market. Reliance was placed on the judgment of the Hon ble Supreme Court in the case of Empire Jute Manufacturing Co., 124 ITR 1(SC) and the decision of the Tribunal in the case of IAC vs Joshi Formulas Pvt. Ltd.,42 TTJ 259(Ahd). It was in this backdrop that the CIT (A) deleted the disallowance and in doing so, he relied upon the Tribunal s decision in assessee s own case for the assessment year 1997-98. The Assessing officer is aggrieved and is in appeal before us. 4. Learned Departmental Representative primarily relies upon the order of the Assessing officer as also the Hon ble Bombay High Court judgement in the case of Patel International Film Ltd. (supra). It is pointed out that the Tribunal s decision for the assessment years 1997-98 and 1998-99 does not deal with specific arguments raised by the Assessing officer with regard to applicability of Hon ble Jurisdictional High Court s judgment in the case of Patel International Film Ltd (supra). We are thus urged to follow the Hon ble Jurisdictional High Court judgment in the case of Patel International Film Ltd (supra) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner confirmed the action of the Assessing officer, the Tribunal allowed the claim of the assessee and held that entire expenses of ₹ 60,000/- for purchase of film was in the nature of business expenditure as the purpose of the purchasing the film was to show to its customers that by use the colour. On these facts, the Hon ble Bombay High Court was of the view that while whatever expenditure is normally incurred for advertisement purpose by an assessee is regarded as revenue expenditure and is allowed as business expenditure, on the facts of the present case, the expenditure on purchase of film Pamposh cannot be said to be advertisement expenditure. Their Lordships held that by purchasing the film, the assessee company did not indulge in any advertisement at all but advertisement was to be indulged in after the asset was acquired by the assessee company. In other words, the assessee that was acquired by the assessee company was capital asset to be used for the purpose of advertisement of the business that the assessee company was going to carry on in future and, therefore, the expenditure will have to be regarded as a capital expenditure and not revenue expenditure. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or right or benefit of enduring nature had been created or acquired by the assessee by production of the advertisement film. The Tribunal noted that the assessee to keep mass interest in its product has to continuously strive to keep on advertising its products in ever increasingly novel ways and methods, through the media and as such the expenditure incurred on the production of the advertisement film was in the nature of revenue expenditure. The only ground based on which the revenue has approached this court is as pointed out earlier that the Tribunal ignored the ratio of the judgement in Patel International Film Ltd,(1976) 102 ITR 219(Bom). We may point out, that on facts there the assessee company was in the business of processing and printing movie films in a processing and printing laboratory purchased by them. It subsequently purchased a film processor in the laboratory to serve as a model for exhibition to induce confidence in its customers by way of advertisement and claimed the amount spent on the purchase as business expenditure. After considering the facts a learned Bench of this Court noted as under:- In other words, the asset that was acquired by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following grievance: On the facts and in the circumstances of the case as well as in law, the learned CIT (A) has erred in holding that the expenditure of ₹ 2,18,977/- incurred on obtaining club membership fee is allowable as business expenditure. 9. The Representatives fairly agree that this issue is covered in favour of the assessee by the Hon ble Bombay High Court judgement in the case Otis Elevator Co. (I) Ltd., v. CIT, 195 ITR 682 (Bom), wherein, the Hon ble High Court has held that the club membership fees paid by the assessee is to be allowed as deduction. This view has also been followed in assessee s own case for the assessment years 1997-98 and 1998-99 also. The decision of the Tribunal in assessee s own case for the assessment years 1997- 98 and 1998-99 has not been carried in appeal before the Hon ble High Court. Learned Departmental Representative, however, dutifully relied upon the order of the Assessing officer. 10. In view of above discussion and respectfully following the decision of the Hon ble Bombay High court as also the decision of the co-ordinate bench in assessee s own case, we uphold the action of the CIT (A) and decline to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT v. Lake Palace Hotels Motels (P)Ltd., 258 ITR 562 (Raj) as also the judgement of the Hon ble Supreme Court in the case of CCE vs Acer India Ltd., (No2) and Ors, 3 RC 421 (SC). It was submitted by the learned Counsel for the assessee that the software expenses are revenue expenses in nature and in view of the legal precedents cited by him, the same constitute admissible deduction. 14. We have considered the rival contentions and perused the material on record. We have noted that the Special Bench of this Tribunal in the case of Amway India Enterprises (supra) had an occasion to deal with the question of deductibility of expenditure on computer software. The Special Bench after elaborately considering the judicial precedents on the issue has laid down the guidelines in the light of which, the deductibility of such expenses are to be considered. The Tribunal s decisions relied upon by learned Counsel for the assessee have been duly considered in the said Special Bench decision and the judgement of the Hon ble High Court is also prior to the Special Bench decision, which do not directly cover the issue of deductibility of software expenses. In these circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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