TMI Blog2016 (7) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be accepted. - Decided in favour of assessee Treatment to the reusable artwork expenses - revenue or capital - Held that:- The Tribunal, while deciding the appeals for the AY. s. 1998-99, 2007-08 and 2008-09 had decided the issue in favour of the assessee held that as considering the average life span of such artwork, which was only less than six months, it could not be inferred that any capital apparatus had come into existence which could be the source of income generation for the assessee. The “artworks” was not capital expenditure - Decided in favour of assessee Disallowance of foreign travel expenditure - Held that:- Departmental authorities have not doubted genuineness of the incurring of expenditure. They have not brought anything to prove that the expenditure had element of personal use. It is the prerogative of an assessee to incur or not to incur an expenditure and to decide its business needs. Therefore, reversing the order of the FAA and following order of the Tribunal for the earlier AY. , we decide the third ground of appeal in favour of the assessee. - ITA/3343/Mum/2013, ITA/3688/Mum/2013 - - - Dated:- 29-6-2016 - Sh. Rajendra, Accountant Member A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every year in order to study the product ingredients, that the expenses incurred by it had to be allowed as revenue expenses, that the assessee was purchasing different raw material in a small quantity for carrying on experiments for existing products as well as for new products, that for storing such items cold storage charges were also incurred, that it would try to make improvement in the existing products by way of studying ingredient of different raw material, that the assessee was operating in the fast moving consumer goods industry, that it had lot of competition in the market, that the product development study would help it to understand the rival products and features of their products by studying their ingredient, that the product cost development included cost of material consumed for developing new product packing, that the expenses incurred to solve problems/complaints relating to existing products and to study the effect of competitors products. After considering the order of the AO and the submission of the assessee, the FAA held that PDE were incurred for purchase of various ingredients of the product like pulp, soda, apple juice, concentrate etc. , for hiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey would manufacture finished products and sell it in the market, that the assessee would undertakes in-house manufacturing and sale of fruit juices at its various factories. After going through the details of all the expenses allocated by the assessee towards the sale of NABB, the AO asked it to explain as to why the advertisement expenses like POP material special event advertisement, giveaway advertisement, trade fair participation fees, display, Holdings, banners, glow signs etc. should not be allocated towards the NABB units. He further asked the assessee to produce the basis for allocation of expenses to NABB unit Silvassa which were eligible for deduction u/s. 80 IB of the Act. In its response, dated 19/09/2011, the assessee stated that the allocation of expenses were made on the basis of sale of assessee-company and its franchisee, that accordingly ratio was arrived at 68: 32 respectively, that it was claiming Cenvat Credit for service tax levied to advertisement expenses and for claiming the same ratio of sales were worked out, that it was carrying on business in different category of products, that the advertisement expenses which were having direct nexus with Frooty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30% of above ₹ 4. 23 Crores. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. Before him, it was contended that it had claimed deduction u/s. 80 IB in respect of profit of its Silvassa unit, that while preparing P L a/c. of the unit for calculating profit from sale of NABB the advertisement expenses having direct nexus with NABB were considered, that the AO had allocated 32% of the advertisement expenses that were booked under various heads, that the above expenses were booked under the head advertisement expenses, that same were not directly connected with the sale of NABB, that the assessee was also in the business of manufacturing and selling other range of products, that the said expenditure could not be allocated to NABB sale segment, that NABB were used to produce Frooty and Appy, that expenses were directly related to those to products were considered to arrive at profit of Silvassa unit, that the advertisement related expenses which were not having direct nexus with NABB were wrongly allocated by the AO. After considering the submission of the assessee and the assessment order, the FAA held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO and confirmed by the FAA. So, we hold that there was no justification to recalculate the advertisement expenditure with regard sale of NABB products namely Frooty and Appy. We find that while deciding the appeal is in the case of Blue Star (supra), the Tribunal has dealt with the similar issue. In that case the AO had calculated and allocated the corporate expenses while computing deduction u/s. 80 IB of the Act, that in the return of income the assessee had claimed deduction u/s. 80 IB at ₹ 18. 76 Crores, that the deduction was claimed in respect of assessee s industrial unit situated at Dadra (Silvassa), that the AO allowed the deduction of ₹ 15. 17 Crores only, that the variation in deduction was mainly due to reduction of amount of duty drawback from net sales of the Dadra unit and allocation of corporate expenses including the advertisement expenses, that the assessee had, while computing the deduction u/s. 80 IB, allocated 50% of advertisement expenses in the ratio of turnover of Dadra unit to total turnover of the company, that general advertisement expenses incurred by the assessee for building its corporate brand were not allocated, that the AO alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He accordingly held that the expenditure was capital in nature. The Commissioner (Appeals) confirmed this that considering the average life span of such artwork, which was only less than six months, it could not be inferred that any capital apparatus had come into existence which could be the source of income generation for the assessee. The artworks was not capital expenditure. Respectfully, following the above order, we decide the second ground of appeal in favour of the assessee. 12. Last ground of appeal is about disallowance of foreign travel expenditure of ₹ 14. 21 lakhs. During the assessment proceedings, the AO directed the assessee to furnish the details of foreign travel expenditure of Directors. He further directed the assessee to submit the justification for foreign travel and to furnish the purpose for which the Directors had undertaken the foreign travel and the benefits derived by the company out of the foreign travel expenditure. The assessee explained the foreign travel expenditure had been incurred for the purpose of business and was allowable as detectable expenditure u/s. 37(1) of the Act. The AO held that assessee had not quantified the exact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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