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2016 (11) TMI 258 - BOMBAY HIGH COURT

2016 (11) TMI 258 - BOMBAY HIGH COURT - TMI - Addition on account of guarantee commission chargeable to its Associate Enterprises - Held that:- Tribunal by the impugned order held that the external comparable of HSBC Bank and Allahabad Bank to determine 3% as the ALP of the commission is not appropriate. This for the reason that the financial year to which the data obtained from HSBC Bank and Allahabad Bank are not indicated. Moreover, the circumstances in which the guarantee was given coupled w .....

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sue was raised by the Revenue alluding to the fact that no appeal to the High Court was filed by the Revenue on this issue. - Expenditure on advertisement on television - Held that:- The expenditure on corporate advertisement films is in respect of ongoing business. The expenditure for advertisement of a brand or corporate name of an existing ongoing business is in the nature of maintaining the brand and/or corporate image and it is not for creation of a brand. Further, the test of enduring .....

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untouched, it would be on revenue account. The entire expenditure, the Court observed, has to be looked at from a businessman's point of view. In the present facts, the expenditure on account of corporate advertisement is to essentially maintain the corporate image and not create a corporate image. Further, the impugned order holds on facts that the corporate advertisement expenditure facilitates the business having a direct impact on sales and profitability of the Respondent-Assessee. Thus the .....

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appeal under Section 260A of the Income Tax Act, 1961 ( the Act ) challenges the order dated 29 October 2013 passed by the Income Tax Appellate Tribunal ( Tribunal ). 2. The impugned order relates to Assessment Year 2006-07. 3. The Revenue has urged the following questions of law for our consideration : (A) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition made by the Assessing Officer on account of guarantee commission charge .....

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essee charged 0.20% of the guarantee amount as its commission from its A.E. The Assessing Officer held that such a transaction would be an International Transaction under Section 92B of the Act. On examination, the Assessing Officer held that HSBC charges at the rate of 0.15% to 3% P.A. while Allahabad Bank also charges at the rate of 3% P.A. as commission. Therefore, the Assessing Officer arrived at the Arms Length Price (ALP) of commission for giving of guarantee to Banks on loan advanced to i .....

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. (c) On appeal, the Tribunal by the impugned order held that the external comparable of HSBC Bank and Allahabad Bank to determine 3% as the ALP of the commission is not appropriate. This for the reason that the financial year to which the data obtained from HSBC Bank and Allahabad Bank are not indicated. Moreover, the circumstances in which the guarantee was given coupled with the terms and conditions of charging 3% commission by the two Banks not known. Besides, internal comparable available a .....

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(d) Mr. Malhotra, learned Counsel appearing for the Revenue, very fairly states that the order of the Tribunal for the issue raised herein also arose for the earlier Assessment Years and the decision on this aspect had been accepted. (e) Therefore, the question raised herein does not give rise to any substantial question of law. Thus, not entertained. 5. Re. Question No.(B) : (a) The Respondent-Assessee incurred expenditure on advertisement on television aggregating to ₹ 29.99 crores. Thi .....

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ould endure over a period of years and therefore fall in the capital field. This view was taken by the Assessing Officer in his final order after his draft Assessment order taking an identical view was upheld by the D.R.P. (c) On appeal to the Tribunal, the impugned order allowed the Respondent Assessee's appeal by inter alia holding that the expenditure is revenue in nature, even if the same is incurred for promotion of a corporate brand, as it facilitates the business of the Assessee and r .....

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al account and not taxed as Revenue receipts. As also, amount paid to purchase a brand is regarded on capital account. Therefore, the expenditure incurred on brand advertisement cannot be allowed as Revenue expenditure. (e) We find that an identical issue had arisen before this Court in case of CIT vs. Jeoffrey Manners & Co. Ltd. 315 ITR 134, wherein the Court was considering a question whether the expenses incurred by the Respondent-Assessee therein for making advertisement films is to be t .....

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