TMI Blog2021 (12) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... c percentage of certain expenditure are capital expenditure without pointing out that which nature of expenditure has resulted into creating an intangible asset. Accordingly, we find that the expenditure incurred by the assessee are purely revenue in nature and cannot be considered as capital expenditure. Assessing Officer also did not bring on record any evidence to prove his findings. In view of this, all the grounds raised in appeal by the ld. Assessing Officer are dismissed. - ITA. No. 2605/Del/2017 - - - Dated:- 10-11-2021 - MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : None Department by : Ms. Sarita Singh [CIT] D. R. ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Addl. Commissioner of Income Tax, Special Range 5, New Delhi, against the order passed by the CIT (Appeals) 5, New Delhi, dated 14.02.2017 for assessment year 2012-13, raising the following grounds of appeal:- 1. Ld. CIT (A) has erred in law and on facts in allowing relief on account of disallowance of expenses on advertisement, publicity and business promotion incurred on brand building of E-commerce portal S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture assessee is substantially benefited in creating Snapdeal brand and, thus, these expenditure has given enduring benefit to the assessee. Accordingly, he treated 50% of the above expenditure as capital expenditure and disallowed a sum of ₹ 29,45,50,223/-. The assessment order under Section 143(3) of the Income Tax Act, 1961 (the Act) was passed on 27.03.2015 determining total loss of the assessee ₹ 42,22,74,270/-. 4. Assessee aggrieved with that order preferred an appeal before the ld. CIT (Appeals). The ld. CIT (Appeals) relying upon the several judicial precedents held that the incurring of advertisement, publicity and sales promotion expenditure is wholly necessitated for business purpose, though enduring in the long term cannot be held to be of capital expenditure. Therefore, he deleted the above addition. The ld. Assessing Officer is aggrieved with that. 5. The ld. [CIT] DR vehemently supported the order of the Assessing Officer. 6. Despite notice, none appeared on behalf of the assessee and, therefore, the issue is decided on the merits of the case. 7. We have carefully considered the rival contentions and perused the orders of the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be able to not only retain customers but also to attract more customers and expand its outreach. It is understood that the appellant has also hired Sh. Aamir Khan as its brand ambassador in the year 2015. In the past, Aamir Khan has been associated with brands like Coca Cola, Samsung, Godrej, Tata Sky and Titan watches. 3.4.4 Having discussed the nature of expenses, it is also necessary to now examine whether these expenses could be said to provide an enduring benefit to the appellant or whether these expenses create an intangible asset. The concept of enduring benefit was explained many years ago by Hon'bie Supreme Court in Empire Jute Co. Ltd. (125 ITR 1). The court held that expenditure even if incurred for obtaining a benefit for an indefinite future may still be on revenue account and the test of enduring benefit may not work in aii situations. According to the Supreme Court, what is material to consider in such situation, is the nature of the advantage in the commercial sense and if the advantage in the capital field, the same would be disallowable. If, however, the capital remains untouched and the expense only enables carrying out the business operations more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sio India Ltd. (335 ITR 196) 4. Challenging this order, the instant appeal is preferred by the,Revenue under section 260A of the Act. Having regard to the facts narrated above, we are of the opinion that no question of law arises in this case. According to the Revenue, the expenditure on account of advertisement and sales promotion is capital and not revenue in nature. Such an expenditure on account of advertisement and sales promotion is held by this court to be revenue in nature by answering this question in a batch of appeals with the lead case being I. T. A. No. 1820 of 2010 entitled CIT v. Citi Financial Consumer Fin. Ltd. [2011] 335 ITR 29 (Delhi) (decided on March 30, 2011). It was held that the expenditure on advertisement and sales promotion is to be treated as business expenditure allowable under section 37 of the Act. (iii) Spice Distribution Ltd. (374 ITR 30) 4. The Tribunal has rightly noticed and referred to the decision of the Delhi High Court in CIT v. PepsiCo India Cold Drink Ltd. [2012] 207 Taxman 5/21 taxmann.com 165 wherein, the judgment of the Supreme Court in Madras Industrial Investment Corpn. v. CIT [1997] 225 ITR 802/91 Taxman 340 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference can be made to CIT i/. Salora International Ltd. [2009] 308 ITR 199 (Delhi) and the subsequent decision in ITA No.597/2014 titled CIT v. Spice Distribution Ltd. decided on 19th September, 2014. 3.4.6 As discussed in para 3.4.4 it may also be noted that the presumption drawn by the AO regarding the building of a brand image has also not been approved by the courts, which have held that in a competitive environment, it would be difficult to assess the period of benefit derived from such advertisement and to ascertain whether any 'brand name' was created. I may in this regard cite the decisions of the Punjab and Haryana High Court in the case of Liberty group marketing division (315 ITR 125), the Bombay High Court in the case of Geoffrey Manner and Co, Ltd. (315--ITR 13d), the ITATMumbai decision in the-case of Kaya Ltd. (ITA no. 3175/Mum/2013), Asian Paints Ltd. vs. Addl. CIT (ITA 78Q1/MUM/2010), Fine Jewellery (I) Ltd. (19 ITR 746), Warner Lambert India Ltd. (ITA 954 3063/Mu m/2006), Delhi ITAT decisions in Spice Communications Ltd. (35 SOT 78) and CIT v. Modi Revlon Pvt. Ltd. (78 DTR 342). The judgment of Delhi High Court in CIT v. Adidas India Marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the ld. CIT (Appeals) considered in allowing the claim of the assessee on 4 decisions of the Hon ble High Courts. Further the ld. CIT (Appeals) followed the decision of the Hon ble jurisdictional High Court in the case of Modi Revlon Pvt. Ltd. 210 Taxman 161 [2012] 26 taxmann.com 133 (Delhi). There was nothing in the Income-tax Act; nor was there any material on record suggestive of Page | 7 the fact that the assessee could not claim these expenses as revenue expenditure. The fact remained that as assessee is operating in online marketing business as aggregator which is a highly competent consumer market the assessee had to stay ahead of its competition and thus engage itself in brand promotional activities and has necessarily to incur these expenses. The ld AO Having accepted the fact that the assessee could spend amounts for these activities to the extent of 50 % as revenue expenditure the ld AO could not have held that 50 % of such expenses are capital in nature, in absence of any contrary evidence. In view of this, we do not find any infirmity in the order of the ld. CIT (Appeals) in deleting the above disallowance. Further before us no evidence was placed on record to show ..... X X X X Extracts X X X X X X X X Extracts X X X X
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