TMI Blog2011 (1) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee and Pepsi shows that the assessee was given a particular territory in Haryana, boundaries whereof are specifically defined in the agreement for the purposes of bottling, selling and distributing of the beverages - Naturally, therefore, in order to augment its profits in the said territory, it was the business decision of the assessee to advertise and publicize the product for maximizing its sale. The expenditure was, thus, incurred by the assessee for its own benefit. Clause 18 of the agreement authorized the assessee to undertake appropriate advertising and sales promotion activity for the beverage. Membership fee - since the Assessing Officer had allowed the deduction of 50 per cent of Rs. 2 lakhs u/s 37(2) of the Act, it was clear that the Assessing Officer himself accepted the fact that the expenditure incurred was for the business purpose, otherwise, the entire amount would have been disallowed by the Assessing Officer - Held that the assessee was entitled to entire deduction as claimed. - IT APPEAL NOS. 966 OF 2009 AND 836 OF 2010 - - - Dated:- 25-1-2011 - A. K. SIKRI AND M. L. MEHTA, JJ. Sanjeev Sabharwal and N.P. Sahni for the Appellant. Satyen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were in fact hired by Pepsi and as per the agreement with the 20th Century Finance Corporation Ltd., the coolers were installed in the premises of various distributors including in the premises of the assessee. It was also not in dispute that the amount of Rs. 3,45,177 in respect of coolers installed in the territory assigned to the assessee, was, in fact, paid by the assessee to Pepsi. So much so, Pepsi had given a certificate to this effect confirming that the aforesaid charges were recovered by it from the assessee in respect of visi coolers. 3. In these circumstances, we are of the opinion that the Tribunal rightly allowed this claim as business expenditure which could not be denied merely on the ground that there was no written agreement between Pepsi and the assessee for payment of the aforesaid amount. The amount is represented as hire charges for the coolers which were installed in the premises of the assessee and it would be clearly business expenditure. 4. Insofar as, second question of law proposed by the revenue is concerned, it relates to the expenditure incurred on advertisement and publicity. The assessee had incurred an expenditure of Rs. 91,99,946 on aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein, i.e., its trademark and trade address, etc., were exhibited. From this, it is sought to be argued that by specific agreement in writing, the assessee agreed to give advantage to Pepsi in respect of publicity and advertisement carried out by the assessee for Pepsi's product. In these circumstances, argued the learned counsels, the CIT(A) was justified in apportioning the expenditure and the principles laid down by the Supreme Court in the case of Sassoon J. Davis Co. (P.) Ltd. (supra) would not be applicable. We are unable to accept the aforesaid submission of the learned counsel for the appellant. In Sassoon J. Davis Co. (P.) Ltd. case (supra), the Supreme Court categorically held that when the expenditure is incurred for promoting the business to earn profits merely because from the said expenditure, some third party has benefited, cannot be a reason to disallow the expenditure. Instead of analyzing that judgment in detail, our purpose would be served by referring to a Division Bench judgment of this Court in CIT v. Dalmia Cement (P.) Ltd. [2002] 254 ITR 377/121 Taxman 706, wherein the judgment of Supreme Court in Sassoon case (supra) and some other judgments are take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or laid down or whether it was wholly or exclusively for the purpose of the business. The reasonableness of the expenditure could be gone into only for the purpose of determining whether, in fact, the amount was spent. When we apply the aforesaid test to the facts of this case, it becomes manifest that all the ingredients laid down in section 37(1) of the Act are satisfied. It is not in dispute that the expenditure is, in fact, incurred. The Assessing Officer or the CIT(A) did not question the amount incurred by the assessee on the advertisement. It is also not the case of the revenue that the expenditure is of the nature described in sections 30 to 36 of the Act. The expenditure is not capital expenditure or personal expenditure of the assessee either. It is also clear that the entire quantum of expenditure was for the purpose of business and, therefore, it is wholly for the purpose of business. We are also of the opinion that the expenditure was exclusively incurred for the purpose of the business and promote the sales by the assessee. Therefore, it was incurred wholly or exclusively for the purposes of business. 9. The agreement entered into between the assessee and Pepsi s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial expediency and not from the point of view whether the amount was advanced for earning profits." 11. It is clear from the highlighted portion extracted above that the Apex Court went to the extent of observing that once such an expenditure is incurred even in a case where business is not that of the assessee itself, that would not be of any consequence. We may also take note of another judgment of this Court in CIT v. Nestle India Ltd. [2008] 296 ITR 682. In this case the assessee had claimed deduction of Rs. 2 lakhs under section 37(2) of the Act, the expenditure incurred was paid towards club membership fees but the Assessing Officer made a disallowance of Rs. 1 lakh, i.e., 50 per cent of the membership fee paid under section 31(2) of the Act. The view of the Assessing Officer was accepted by the CIT(A) but the Tribunal allowed the entire expenditure. Dismissing the appeal of the revenue, this Court observed that since the Assessing Officer had allowed the deduction of 50 per cent of Rs. 2 lakhs under section 37(2) of the Act, it was clear that the Assessing Officer himself accepted the fact that the expenditure incurred was for the business purpose, otherwise, the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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