TMI Blog2017 (3) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon’ble Mumbai Bench of ITAT in the case of Brightest Circle Jewellery (P)Ltd., (2012 (10) TMI 238 - ITAT, MUMBAI ) clearly supports the plea of the assessee that the expenditure incurred by a person who is not the owner of the trade mark but which is used by an assessee had to be regarded only as a revenue expenditure. We are therefore satisfied that the claim of the assessee for deduction as revenue expenditure deserves to be accepted. - Decided in favour of assessee Disallowance under section 14A read with Rule 8D - Held that:- As the assessee had not earned or received any dividend income during the previous year, we are of the view that there can be no disallowance u/s 14A of the Act. Accordingly the addition made u/s 14A of the Act is directed to be deleted. See Commissioner of Income Tax Versus M/s. REI. Agro Ltd. [2014 (4) TMI 713 - CALCUTTA HIGH COURT]- Decided in favour of assessee - I.T.A No. 96/Kol/2014 - - - Dated:- 1-3-2017 - Sri N.V.Vasudevan, JM and Shri Waseem Ahmed, AM For the Appellant : Shri D.S.Damle, FCA For the Respondent : Shri Anand Kumar Singh, JCIT ORDER Per N.V.Vasudevan, JM This is an appeal by the Assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale consideration based on such report of Chartered Accountants Firm. However, the Licensor alone at its sole discretion may decide not to sell the Spencer Brand name to the Licensee and the Licensee agrees to be bound by such decision of the Licensor 4. As can be seen from the aforesaid clause in the Agreement for use of brand name of SCL, the Assessee was given a right to use SCL s brand name SPENCER S and agreed to spend considerable amount of money on advertising and publicity to popularize SCL s brand. SCL agreed to share advertisement expenses as those expenses will go to increase it s brand value for 5 years from 1.4.2006. The Assessee had a right to purchase the brand name from SCL on the expiry of 5 years on the basis of valuation. 5. In pursuance of the said agreement the assessee incurred certain expenses. The total expenditure debited in assessee s profit and loss account under the head Advertisement and publicity was a sum of ₹ 32,11,12,444/-. The assessee got reimbursement of advertisement expenditure relating to brand enhancement of SCL of a sum of ₹ 29,42,50,444/- as per clause 7.04 of the license agreement referred to above. The Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement for building a brand which has been claimed as an asset by the company i.e. Spencer and Co. It is seen that the parties of the same agreement are treating the same expenditure differently i.e. Spencer Co. treating it as capital expenditure and Spencer's Retail treating as revenue expenditure thereby taking stands favourable to them. The expenditure had been incurred by Spencer's Retail Ltd., out of which ₹ 29,42,50,444/- has been debited in Spencer and Co. and which is also been claimed as capital expenditure by Spencer Co. and the balance of ₹ 2,68,62,000/- is claimed as revenue expenditure in Spencer's Retail Ltd. This company is also said to use the brand hence in view of the above said amount of expenditure is to the tune of ₹ 2,13,90,251/- other than expenditure incurred for music division is treated as capital expenditure. 6. Before CIT(A) the assessee submitted that similar expenditures incurred in A.Y. 2006-07 was allowed by the AO and the details of the expenditures claimed in this year were given by the assessee as follows :- Details of Advertisement expenses incurred by SRL and reimbursement claimed from SCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is owned by SCL. Hence the disallowance made by the AO is confirmed. Therefore, the grounds of appeals 2 3 raised are dismissed. 8. Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal. 9. The ld. Counsel for the assessee submitted that the reason given by the AO for disallowing the expenditure namely the treatment by SCL of the part of the expenditure as capital expenditure cannot be sustained. In this regard it was submitted by him that SCL was the owner of the brand Spencers and therefore expenditure incurred towards brand building was capitalised in their books of account. It was submitted that as far as the assessee is concerned it was only a licencee entitled to use the brand spencers and that too in a later assessment year. It was submitted by him that the AO had not disputed the fact that the expenses claimed by the assessee to the extent of ₹ 2,68,62,000/- as expenses for communication of various promotion offers in the various outsets of the assessee for selling the merchandise and that it had not helped directly in brand building of the brand Spencers . It was submitted by him that CIT(A)on the assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee which was allowed as deduction in the assessment of the Assessee is given as Annexure to this order. The ld.DR placed reliance on the order of CIT(A). 11. We have given a very careful consideration to the rival submissions. The case of the AO was that the expenses on Advertisement and Publicity to the extent reimbursed by SCL was treated by SCL as capital expenditure in their books of accounts. The expenditure to the extent claimed by the assessee should also be considered of the same nature and therefore the expenditure had to be regarded as a capital expenditure. In fact the assessee before the AO had submitted that expenditure claimed by it as deduction, directly benefited the assessee and had not created any brand value for SCL and to that extent alone the assessee claimed deduction of the expenditure as revenue expenditure. The AO had not disputed this claim of the assessee and proceeded only on the basis that the nature of the expenditure had to be capital because of the treatment by SCL of the same expenditure in its books of account. This approach of the AO in our view is not proper. As rightly contended by the ld. Counsel for the assessee, the treatment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re incurred by a person who is not the owner of the trade mark but which is used by an assessee had to be regarded only as a revenue expenditure. We are therefore satisfied that the claim of the assessee for deduction as revenue expenditure deserves to be accepted. 13. Apart from the above we also notice that the revenue at no point of time in either A.Y.2007-08 or A.Y. 2009-10 to 2015-16 disallowed the claim of the assessee for deduction of similar item of expenditure as given in the chart given as annexure to this order. Thus based on the rule of consistency the claim of the assessee ought to have been allowed by the revenue. For the reasons given above we direct that the deduction claimed by the assessee should be allowed as revenue expenditure. We hold and direct accordingly. 14. Ground No.2 raised by the assessee reads as follows :- 2. The Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in making disallowance under section 14A read with Rule 8D on the facts and in the circumstances of the case. 15. The issue raised in ground no.2 is with regard to disallowance of expenses incurred in earning exempt income. The AO di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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