TMI Blog2023 (3) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... ails/heads of the expenditures incurred and in lump sum claimed the said expenditure as revenue in nature . Hence, we are inclined to remand the instant case to the file of the Assessing Officer for decision afresh, suffice to say, by affording reasonable opportunity of being heard to the Assessee. Assessee is also directed to produce the bifurcated details and documents in relation to the expenses incurred on account of advertising and publicity expenses as claimed. Further, the primary onus would be upon the Assessee to establish the nature of the expenses before the Assessing Officer. Appeal filed by the Assessee stands allowed for statistical purposes. - ITA No. 2812/Del/2019 - - - Dated:- 15-2-2023 - SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI N. K. CHOUDHRY , JUDICIAL MEMBER For the Appellant : Sh. Bipul Matta , Ld. CA For the Respondent : Sh. Jitender Chand , Ld. Sr. DR ORDER PER N. K. CHOUDHRY , J. M. This appeal has been preferred by the Assessee against the order dated 30.01.2019, impugned herein, passed by the learned Commissioner of Income-tax (Appeals)- 36, New Delhi (in short Ld. Commissioner ), u/s. 250(6) of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e building of brand image of Nirvana is giving advantage of enduring benefit to the assessee, still it would be on revenue account as there is no creation of a tangible or intangible asset of enduring nature to the assessee. The Hon ble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 , has held that no tests for distinguishing between capital and revenue expenditure is paramount or conclusive. There is no all-embracing formula which can provide a ready solution to the problem, whether it is a capital expenditure or revenue expenditure. Their Lordships have held that even tests of enduring benefit at times gets failed as not each and every advantage of enduring nature can be of capital field. The most celebrated observations of their Lordships on this account are reproduced hereinbelow (head note) : There may be cases where expenditure, even if incurred for obtaining 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital expenditure. The detail of such expenses have already been filed as annexure G-51 vide letter dated 12.12.2017. The nature of expenses warrants that these expenses do not create any tangible or intangible assets and cannot be considered as capital expenditure. 4. The Assessing Officer after examining the claim of the Assessee, found not acceptable on the following reasons: 4.2. The assessee has basically submitted that the above expenditure is revenue expenditure and not capital expenditure and has cited number of case laws in its support. The reply of the assessee, along with the case laws submitted by it has been considered. The assessee has tried to explain that the nature of these expenses is revenue since this will result in enhanced sales due to enhanced publicity and trade name of the assessee. The submission made by the assessee is considered but there is not much force in the arguments of the assessee on this issue. There is no dispute or doubt that advertising, marketing and business promotion increases the awareness, popularity and the visibility of the Livpure brand and will lead to better sales and turnover and therefore, increased profit and revenues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t these expenses have substantially benefited the Livpure brand and have enhanced the image of this brand in the market. Thus, these expenses have given the enduring benefit to the assessee. Thus, these expenses cannot be said to have incurred on revenue account . 4.5 This is a fact that the Advertisement, Marketing and Business Promotion Expenses to the tune of Rs. 26,85,34,669/- have been incurred by the assessee and claimed against the taxable income in connection with the advertisement, marketing and business promotion. It cannot be denied that benefit of such huge expenses which is nearly 24% of the total expenditure (Rs. 79.77 Cr) in the initial years for the establishment of its product in the market the advantages would flow to the Company in long run and the Brand-Image would ultimately result in better sales prospects of the assessee Company. Such aggressive advertisement and business promotion in the nature of blitzkrieg creates an enduring advantage to the Company and its main owner, as the image gets imprinted in the minds of the customers which is not very easy to dislodge. 4.6 Details of these expenditure show that the expenditure is incurred on the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R has stated that this also includes expenses incurred on maintenance of website, SMS, exhibition expenses, sales promotion schemes, rent for advertisement space, dealer meet expenses, professional fee, training expenses etc. The AR has stated that the appellant has not incurred any capital expenditure on advertisement expenses and the brand of the appellant is self generated and no capital expenditure has been incurred thereon. The AO made the addition on account of expenditure incurred cr advertisement, marketing, sales promotion by treating the same as capita expenditure. The AR of the appellant has stated that the expenditure incurred on advertisements as well as sales promotion schemes is to facilitate the trading operations or enabling the management and conduct of the appellant's business to be carried on more efficiently or more profitably. The AO has observed that the advertising, marketing and business promotion will increase the awareness, popularity and the visibility of the Livpure brand but the AO has held that this benefit will flow to the appellant in the long run and thus give an enduring benefit. Therefore, the AO held that these expenses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,622/-. Further, in its Profit and Loss Account, the Assessee also claimed advertising and publicity expenses of Rs.26,85,34,669/- as revenue in nature , which were disallowed by the Assessing Officer by treating the same as capital in nature , on the grounds that the expenditures are incurred for establishment of brand Livpure . There is no denial to the fact that these expenses have been incurred to increase the awareness and popularity of the Livpure brand and to enhance the profit and revenue for the Assessee in long run. Thus these expenses have given enduring benefit to the Assessee and cannot be said to have incurred on revenue account wholly and exclusively for the purposes of Assessee s business. We observe that there are so many heads of expenses which the Assessee has claimed to have been incurred. The Assessing Officer though gone into the legality/status of the expenditures but without bifurcating different heads of the expenditures treated all the expenditures as capital in nature and therefore in our view determination qua nature of different head of expenditures has not been done properly and in real sense. We further observe that the Assessee also did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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