TMI Blog2021 (4) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to decide what would be good for the assessee in promoting its business and therefore, decision cannot be arrived at by the Assessing Officer based on his own personal perceptions and it should be left to the decision of the assessee, who is the best person, who knows that what would be best for his business activity. Bearing the above legal principle in mind, if we test the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal, we have no hesitation to hold that the order passed by the CIT(A) is a well reasoned order. We support such conclusion with the following reasons. Admittedly, MRF Pace Foundation is part of the assessee-organisation and the expenditure incurred for the Foundation has been claimed as a business expenditure under Section 37 of the Act. Therefore, it is clear that the Assessing Officer assumed certain matters, which were not on record and attempted to compare the expenditure incurred to that of giving donations. Firstly, the concept of charity or donation can never be implanted to the present facts, which were clearly explained by the assessee in their reply to the show cause notice issued by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Honourable Ms.Justice R.N.Manjula For the Appellant : Mr.Vikram Vijayaraghavan, For M/s.Subbaraya Aiyar, Padmanabhan Ramamani For the Respondent : Mr.T.Ravikumar, Senior Standing Counsel COMMON JUDGMENT T.S.SIVAGNANAM, J. These appeals, by the assessee filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ), are directed against the common order dated 11.03.2011, passed by the Income Tax Appellate Tribunal 'A' Bench, Chennai (for brevity the Tribunal ) in I.T.A.Nos.1678/Mds/2010 and 1679/Mds/2010 for the assessment years 2006-07 and 2007-08 respectively. 2.The appeals were admitted on 20.12.2019, to decide the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure incurred towards business promotion in the form of MRF Pace Foundation is being charity in nature and hence not an allowable deduction? (ii) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred towards business should be only in the nature of advertisement by way of sponsors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national team and State/District teams, some of them have brought laurels to the country. Because of this, MRF gets huge publicity especially in TV Media and promotes the MRF brand, thereby helping sale of MRF products in India and in other countries. 7.The assessee further stated that they export their products to 65 countries, some of which are cricket playing countries and therefore, promotion of this sport makes a lot of business sense and the expenditure incurred is wholly and exclusively for the purposes of the company's business and is therefore, an allowable expenditure. The assessee placed reliance on the decision of the Calcutta Tribunal in JCIT vs. ITC Limited [2008 112 ITD 57] and stated that based on the legal position, the expenditure is purely an expenditure incurred for the purpose of business. 8.The Assessing Officer did not agree with the assessee on the ground that they have not sponsored any sports activity for its sales promotion, instead it has formed Pace Foundation for the purpose of training fast bowlers for the game of cricket, the expenditure cannot be treated on par with the expenditure incurred for sponsorship of sports and other events. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on by the assessee in the case of CIT vs. Delhi Cloth and General Mills Co. Ltd. [(1978) 115 ITR 0659 (Delhi)]. With the above observations, the appeal was allowed by order dated 26.07.2010. 12.Aggrieved by the same, the Revenue preferred appeals before the Tribunal contending that the CIT(A) committed an error in deleting the addition of ₹ 1.70 Crores being the expenditure on MRF Pace Foundation. It was contended that the amount spent was in the nature of appropriation of profit and not a charge on profit and hence, does not fall under Section 37(1) of the Act. The assessee was also on appeals before the Tribunal on other issues, which we are not concerned. The Tribunal allowed the Revenue's appeals and restored the order passed by the Assessing Officer. 13.The Tribunal was of the view that the assessee having not sponsored any sport activity for its sales promotion, but formed Pace Foundation for training bowlers and such activity cannot, by any stretch of imagination, be treated as business activity. Further, the Tribunal observed that if such expenses are allowed to this assessee or any other assessee, they can evade tax by such gimmick. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the assessee, who is the best person, who knows that what would be best for his business activity. 18.Bearing the above legal principle in mind, if we test the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal, we have no hesitation to hold that the order passed by the CIT(A) is a well reasoned order. We support such conclusion with the following reasons. 18.1.Admittedly, MRF Pace Foundation is part of the assessee-organisation and the expenditure incurred for the Foundation has been claimed as a business expenditure under Section 37 of the Act. Therefore, it is clear that the Assessing Officer assumed certain matters, which were not on record and attempted to compare the expenditure incurred to that of giving donations. 18.2.Firstly, the concept of charity or donation can never be implanted to the present facts, which were clearly explained by the assessee in their reply to the show cause notice issued by the Assessing Officer. Once we steer clear of this issue, by holding that it is never the case of the assessee that what was spent was in the nature of donation, the Assessing Officer cannot draw a parallel or assume certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court because the Assessing Officer did not examine the claim of the assessee that the aid given to the residents living in the vicinity of the factory of the assessee therein as a business expenditure. Since there was no factual finding, the matter stood remanded to the Assessing Officer for fresh decision. Therefore, the said decision cannot be treated as a precedent. 21.As already observed, the expenditure incurred by the assessee in the Pace Foundation cannot be regarded as a donation and it was never the case of the assessee, nor there was anything on record for the Assessing Officer to draw such a conclusion. Secondly, the assessee has been able to point out certain facts before the Assessing Officer as well as before the First Appellate Authority as to how the training of pace bowlers has helped them in a business activity. The contentions placed by the assessee have not been found to be false or baseless. In such circumstances, it is best for the Department to leave it to the assessee to take a decision as to what is best for them and for the health of the company. These aspects were rightly taken note of by the CIT(A) by observing that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
