TMI Blog2018 (10) TMI 1491X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 147 - MADRAS HIGH COURT) and Cox & Kings (2011 (9) TMI 1175 - ITAT MUMBAI) has allowed the claim of the assessee in similar circumstances. Thus claim of the assessee is not liable to be declined. The expenses is also liable to be allowed in the relevant year in accordance with law. Accordingly, this issue is decided in favour of the assessee. Addition u/s 14A - Held that:- Since, the assessee did not earned the exempt income, therefore, there should not disallowance u/s 14A. - I.T.A. No.1727/Mum/2016 - - - Dated:- 3-8-2018 - Shri G. S. Pannu, AM And Shri Amarjit Singh, JM For the Revenue : Shri Ram Tiwari (Sr. AR) For the Assessee : Shri B. V. Jhaveri ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 25.01.2016 passed by the Commissioner of Income Tax (Appeals)-22 Mumbai [hereinafter referred to as the CIT(A) ] relevant to the AY. 2011-12. 2. The assessee has raised the following grounds: - 1. Being aggrieved against order of the Commissioner of Income Tax (Appeals)- 22, Mumbai, this appeal petition is being filed Lo consider the following grounds of appeal, which are independent and without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue nature and incurred for day to day business policy decisions, 8) On the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in confirming disallowance u/s 14A @0.5% of average Investments amounting to ₹ 78,403/-. On the facts, the provisions of S.14A are not applicable. 9) On the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in holding that initiation of penalty proceedings u/s.271(1)(c) of the Act is premature and not maintainable 10) The appellant craves leave to add, amend, modify, substitute, and or cancel any of the grounds of appeal. 3. The brief facts of the case are that the assessee filed its return of income for the A.Y. 2011-12 on 2011-12 declaring total income to the tune of ₹ 20,65,98,287/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny and notice u/s 143(2) of the I.T. Act, 1961 was issued and served upon the assessee. The notice u/s 142(1) of the Act dated 19.07.2013 was also issued and served upon the assessee. The assessee is a company and is engaged in the business of Reclaiming of rubber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch substances that do not adversely affect human health or environment. After getting the registration, the assessee would be entitled to Export product in the European Countries. For the Registration purpose, the assessee paid the aggregate sum of ₹ 1,08,69,332/- for the registration with the Reach, the details of which is as under: - Particulars Euros Ind. Rs. Page No. Joint Submission for Buta 1, 2, Dien 5,050 3,71,155 21 Joint submission for Carbon Black 1,11,000 81,63,828 22 Fees for registration of substances above 1000 tonnes (Carbon Black) 23,250 17,03,016 23 Fees for registration of substances in the range of 100 to 1000 tonnes (Buta Diene) 8,625 6,31,333 24 1,08,69,332 Thereafter, the assessee paid the renewal charges in subsequent years, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 8,03,706/- is in respect of product registration in Poland. Likewise payments have been made in Vietnam. Russia, Ghana and China etc. We find that the export over the years have increased from the export sale of ₹ 26, crores in financial year 1998-99 to the exports have grown to ₹ 160 crores in financial year 2005-06 an increase of more than 600%. Accordingly, these expenses are rightly allowed by CIT(A) and we confirm the same. This issue of Revenue s appeal is dismissed. 5. The Mumbai ITAT in the case of USV Ltd. Vs. DCIT (2012) 24 taxmann.com 218 (Mum) has also decided such type of issue and the relevant finding has been given in para no. 45 as under: - 45 We have considered the submissions of the Ld. Representative of the parties and the orders of the authority below. The Department has not disputed the fact that by ANDA registration, the assessee has completed the statutory requirement to sell the product in USA market and in the absence of such registration, the assessee may not be able to sell its product without hindrance. Considering the above facts, we agree with the Commissioner (Appeals) that such expenditure has been incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses for marketing his product in European Countries after getting the certification from Reach and after making the necessary payment to the said association as well as making the payment to the firm who assisted for the registration in the Reach. Both the expenses are correlated with each other. These expenses are revenue in nature and in this regard. We also find in support of the law mentioned above (supra). Taking into account of all the facts and circumstances, we set aside the finding of the CIT(A) on this issue and allow the claim of the assessee. The alternative relief claimed ground nos. 3, 5, 6 is not required to be adjudicated being academic in nature. ISSUE NO 7:- 8. Under this issue the assessee has claimed the confirmation of the disallowance of 4/5 professional charges paid to M/s. Avalon Consulting of ₹ 60,36,000/-. In the year of assessment, the assessee appointed M/s. Avalon Consulting to study the strategy developments and business plan for its business of re-claimed rubber. The areas of study has been assigned as under.: - 1 Assessment of the customers segment to reaffirm the company growth plans and identification of future areas of vulne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o now has been restricted to the cases of debentures. 10. The Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. Vs. CIT (225 ITR 802 (SC) has held in para no. 15, 16 as under.: - 15. The judgment in Madras Industrial Investment Corporation Ltd. Vs. CIT was cited by the Ld. counsel for the Revenue to justify the decision taken by the courts below. We find that the court categorically held even in that case that the general principle is that ordinarily revenue expenditure incurred wholly and exclusively for the purpose of business is to be allowed in the year in which it is incurred. However, some exceptional cases can justify spreading the expenditure and claiming it over a period of ensuing years. It is important to note that in that judgment, it was the assessee who wanted spreading the expenditure over a period of time and had justified the same. It was a case of Issuing debentures at discount; whereas the assesses had actually incurred the liability to pay the discount in the year of issue of debentures itself- The court found that the assesses could still be allowed to spread the said expenditure over the entire period of five years, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period. 11. The Hon ble Supreme Court held in the above said decision that there should not be split of revenue expenses accepted some exceptional cases such as amortization etc. The concept of advertisement expenses is also similar to the study mentioned above for the future purpose mentioned above related to the existing business of the assessee. The Hon ble Madras High Court in the case of CIT Vs. Brilliant Tutorials Pvt. Ltd. (supra) and the Hon ble Mumbai ITAT in the case of Cox Kings (supra) has allowed the claim of the assessee in similar circumstances. In view of the said circumstances, we are of the view that the claim of the assessee is not liable to be declined. The expenses is also liable to be allowed in the relevant year in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO 8: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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