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TMI Blog2016 (9) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the assessing officer was neither erroneous nor prejudicial to the interests of the Revenue. 1.3 That the CIT erred on facts and in law in failing to appreciate that both the issues with respect to which the impugned revisionary order has been passed had been examined by the assessing officer in the course of the original assessment proceedings and that the view of the assessing officer was in accordance with law. 2. That the CIT erred on facts and in law in setting the assessment order and directing the assessing officer to examine afresh the issue of allowability of advertisement and publicity expenses amounting to Rs. 14,66,00,000 and to make "disallowance of expenses found to be capital in nature". 2.1 That the CIT erred on facts and in law in passing the impugned order on grounds other than the grounds stated in the show cause notice, inasmuch as in the show cause notice, the only issue which was raised pertained to the terms over which the above expenditure was allowable, thereby agreeing that the same was revenue in nature, whereas in the impugned order, the CIT has questioned the classification of the expenditure as revenue expenditure. 2.2 The CIT err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to pass order u/s 263 of the Act after considering the comments of the Assessing Officer. The ld CIT held:- i. on the issue of advertisement and publicity that the amounts spent by the assessee under this head was not actually spent only on advertisement but for exhibition, campaigns, corporate films etc. which resulted into enduring benefit to be realized over a longer period and further the AO has not caused proper enquiries to ascertain the revenue nature of the claim but accepted it without a verification. Therefore, the order was found to be erroneous and prejudicial to the interest of the revenue and it was set aside with a direction to the AO to cause sufficient enquiries in order to ascertain the nature of expenditure and to make disallowance of expenses found to be capital in nature. ii. On the issue of corporate social responsibility expenditure that these expenses comprising of expenditure on helping poor children and medical care and CSR related activities are not business expenses and hence this deserves to be disallowed and added to the income of the assessee. The assessee aggrieved with the order has filed this appeal before us challenging the order passed u/s 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relied on the letter dated 10.11.2009 of the AO and letter dated 18.11.2009 by the assessee during the course of assessment proceedings. He further neither submitted that expenditure are allowable and are not capital in nature nor incurred for non-business purposes. He further argued that in case the issue is debatable, the provisions of section 263 cannot be exercised. He further submitted that there is no concept of deferred revenue expenditure under the Income Tax Act with respect to advertisement and publicity expenditure . Therefore according to him the order of the LD AO is correct and there is no error and also passed after due inquiry. Hence on this count it cannot be revised u/s 263 by ld CIT. On CSR expenditure he submitted they are held to be allowable by many courts. He further submitted that the view taken by the Assessing Officer cannot be said to be unsustainable and therefore the order u/s 263 is not a valid order. He relied on plethora of case laws to support his argument. 9. The ld DR submitted that the AO has failed to do sufficient enquiry and also did not make proper enquiry, before allowing the expenditure and therefore, in absence of proper enquiry the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to us as in the original assessment this issue was duly examined and a conscious decision has been arrived by the ld AO at in allowing those expenditure. We do not subscribe to the view that provision of section 263 of the act can be used to make inquiry by the ld AO in the manner desired by the ld CIT and according to his satisfaction. Hon'ble Delhi High court in case of CIT V Sunbeam Auto Private Limited 332 ITR 167 has held that where it is found that opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the CIT to vary that opinion and ask for fresh inquiry. Further Honourable Delhi high court in CIT V Vodaphone Essar South Limited [212 taxmann 184] has held that CIT Could not chose to follow route of section 263 of the act to treat an expenditure as capital expenditure when ld AO has allowed these expenditure as revenue expenditure after due inquiry. Further, the assessee has stated that expenditure on publicity and advertisement is to be treated as revenue in nature and is allowable fully in the year in which it is incurred. The above proposition is also supported by several judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the government directive is not allowable. Further, as submitted by the ld AR that assessee is one of the Navratna PSU and is under legal obligation to incur these expenditures according to the policy of the Govt. of India. Such expenditure is held to be allowable as a business expenditure in several judicial precedents notably amongst them is Hon'ble Delhi High Court in case of CIT Vs. DTTDC Ltd 350 ITR 1 wherein, expenditure on development of flyovers etc was held to be allowable. Furthermore, coordinate bench in 96 ITD 186 has held that even implementation of the 20 points programmes expenditure are also allowable u/s 371(1) of the Income Tax Act in case of Public Sector Undertaking. In view of these judicial precedents the above expenditure on CSR activities of the assessee cannot be held to be disallowable. It was not shown before us that the view taken by the Assessing Officer is erroneous in allowing these expenditures. In view of above discussion it is apparent that the order of ld AO is not unsustainable in law, there are judicial precedents where in such claim is allowable in case of assessee, Therefore, and on this count the jurisdiction invoked by ld CIT u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act. In this connection he has further submitted that in fact 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the Assessing Officer at the relevant time was unsustainable in law. We find no merit in the said contentions. Firstly, it is not in dispute when the Order of the Commissioner was passed there were two views on the word 'profit' in that section. The problem with section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of section 263 particularly when as stated above we have to take into account the position of law as it stood on the date when the Commissioner passed the order dated 5-3-1997 in purported exercise of his powers under section 263 of the Income-tax Act." 14. In allowing both the above expenditure the ld AO has taken a plausible view. The ld CIT may not agree with the view taken by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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