TMI Blog2014 (6) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... would, as it appears to us, is in the nature or assumes the nature of a project. Apart from the coming into existence of a brand value, there are issues with regard to its valuation and cost - as a relationship between the expenditure and the asset, assuming its existence, has to be direct for it to be considered as forming part of its cost, and which cannot be said to be so in the instant case - Just because an expenditure is debited in books as toward brand building, which it purportedly is, and a statutory recognition has since been accorded to such intangible assets, as a 'brand', would not by itself imply that an advantage in the capital field, or of enduring value to the business, has arisen to the assessee upon incurring the expenditure - there was no basis to hold that the expenditure incurred in the regular course of its business by the assessee, has translated or manifested in, or resulted in the acquisition of, a capital asset or a in a profit making apparatus by the assessee, or of it being in the nature of capital expenditure, i.e., per se - it has been rightly treated by it as revenue expenditure, admissible u/s.37(1) of the Act. We decide accordingly – Decided ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record. 3.1 The first question, therefore, before us is whether the assessee's case can be said to be covered in its favour by the tribunal's order deciding the assessee's appeal against the revision order u/s. 263 for A.Y. 2006-07. The operating part of the said order (supra), also referred to by the ld. AR, is contained at para 9 thereof, which reads as under: '9. Thus from the facts of the case we do not find that these expenses incurred by the assessee has resulted in any kind of addition or augmentation of any profit making asset. Thus the view taken by the A.O. is prima facie correct view and, therefore, we do not find any reason to hold that such an order is erroneous or it is prejudicial to the interest of the Revenue. Thus the conclusion drawn by the Ld. CIT in the impugned order is not tenable both in law and on facts and accordingly we cancel the impugned order passed u/s.263. In the result, the grounds taken by the assessee are allowed and the appeal of the assessee is also treated as allowed.' Clearly, the tribunal had only expressed a prima facie view; holding that in its view the A.O.'s view is, prima facie, a correct vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that a capital asset can be said to have been acquired. 3.2 We have examined the expenditure profile, i.e., for the three years - being A.Ys. 2006-07, 2009-10 and 2010-11, for which its composition is on record. The same consists predominately of expenditure on advertisement. A sustained advertisement campaign, as it appears, presumably to create public awareness and consciousness of the brand, and of the product characteristics, has been launched, impinging the public mind. Further, as it appears - from the incurring of expenditure on legal and professional expenses, the firm has hired consultants for the purpose. It is for this reason that sustained and concerted advertising campaigns are generally undertaken, i.e., to create brand consciousness/value. The other expenditure incurred, viz. on product display, visual display in stores, product launch, exhibition expenses, staff recruitment, legal and professional expenses, are essentially ancillary or toward sub-serving the brand building exercise through the advertisement campaign. The only other expenditure incurred is on repairs and maintenance, which is, at Rs. 17.98 lacs, only for A.Y. 2006-07, so that the same appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of brand equity or loyalty, leading to an increased sales or customer base on that account, or of any price premium, has come into existence. There has been no enquiry on these lines and, resultantly, no empirical data or objective facts on record for us to hold so. The assessee stating that no such advantage had actually come into existence, it cannot possibly be called upon to prove a negative. 3.3 It may be argued that the assessee having admittedly incurred the expenditure on brand building, it cannot retract from the same; its books of account, reflecting its understanding, represent its' correct state of affairs. That is, the onus is on the assessee to show that its accounts - duly audited, with the Auditors expressing an expert opinion thereon, do not, despite being so, represent a true state of its affairs. True, and for which we may refer to the decision by the hon'ble apex court in the case of Pullangode Rubber Produce Company Ltd. vs. State of Kerala Anr. [1973] 91 ITR 18 (SC). However, the assessee has not, it needs to be appreciated, considered the expenditure in its accounts as on capital account. The expenditure being heavy, it has only, in accord with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the capital field, or of enduring value to the business, has arisen to the assessee upon incurring the expenditure. Rather, the business being competitive, and prudence and conservatism being fundamental accounting assumptions, capitalization of such expenses, or ascribing lasting/abiding value to such expenses, could only be done on sound footings and cogent basis. Reference in this context may be made with profit to the decision by the apex court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC). 4. In view of the foregoing, we find no basis to hold that the impugned expenditure, incurred in the regular course of its business by the assessee, has translated or manifested in, or resulted in the acquisition of, a capital asset or a in a profit making apparatus by the assessee, or of it being in the nature of capital expenditure, i.e., per se. The same, therefore, has been rightly treated by it as revenue expenditure, admissible u/s.37(1) of the Act. We decide accordingly. 5. In the result, the assessee's appeal (for A.Y. 2009-10) is allowed, and the Revenue's appeal (for A.Y. 2010-11) is dismissed. Order pronounced in the open court on June 20, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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