Commissioner Of Income Tax, Iv vs M/S.Hindustan Coca Cola ...
2011 Latest Caselaw 1910 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI


+                    ITAs No.1526/2010 & 1531/2010

%
                       Date of Decision: 01.04.2011

                               ITAs No.1526/2010

Commissioner of Income Tax, IV                          .... APPELLANT
              Through: Mr.Kamal             Sawhney,    Sr.   Standing
                       Counsel.

                                   Versus

M/s.Hindustan Coca Cola Marketing                      .... RESPONDENT
Co. Pvt. Ltd.
              Through: None.



                                    AND


                               ITAs No.1531/2010

Commissioner of Income Tax, IV                          .... APPELLANT
              Through: Mr.Kamal             Sawhney,    Sr.   Standing
                       Counsel.

                                   Versus

M/s.Hindustan Coca Cola Beverages                      .... RESPONDENT
Pvt. Ltd.
              Through: None.

CORAM:
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA


1.   Whether reporters of Local papers be                  NO


ITAs No1526/2010 & 1531/2010                                Page 1 of 6
      allowed to see the judgment?
2.   To be referred to the reporter or not?                  NO

3.   Whether the judgment            should   be             NO
     reported in the Digest?


A.K. SIKRI, J. (ORAL)

*

1. The issue involved in both the appeals is common, which

pertains to two assessment years. The Assessing Officer had

passed assessment orders, which inter alia allowed deductions to

the assessee in respect of service charges paid by the assessee

on distribution, marketing, technical and operating matters, etc.

treating the same as Revenue in nature. Likewise, the Assessing

Officer had also allowed expenditure on account of

advertisements, publicity and sales promotion treating the same

as business expenditure. The orders of the Assessing Officer

were revised by the Commissioner of Income Tax in exercise of

its power under Section 263 of the Income Tax Act (hereinafter

referred to as "the Act"), as the Commissioner was of the view

that the Assessing Officer had not considered the matters in

detail and there was a possibility that the expenditure incurred

on both the aforesaid counts gave enduring benefit to the

assessee and, therefore, should have been amortized treating

the same as capital in nature. We may note that before the

Commissioner of Income Tax, the assessee had taken a specific

plea that the expenditure incurred were revenue in nature. It

was also stated that the matter was examined at length by the

Assessing Officer, who had even sought for details of the service

charges as well as advertisement expenditure during the course

of assessment proceedings, which was duly provided by the

assessee. The copies of the letters vide which the information

was provided were also enclosed by the assessee in reply to the

notice given by the Commissioner of Income Tax. The

Commissioner, however, did not accept the plea and observed as

under:-

"3.1 The issue regarding the nature and purpose of service charges and its allowability as revenue expenditure has not been examined properly by the Assessing Officer. The assessee's reply shows that service charges are paid for advisory and support services which appear to give an enduring benefit to the assessee. The Assessing Officer is directed to re- examine the details of the service charges and decide the issue in accordance with law specifically determining whether advantage of enduring nature brining longterm benefits to the assessee is created by incurring the expenditure."

3.2 Regarding advertisement, publicity and sales promotion expenses also, it is found that although details were submitted before the Assessing Officer which has not been properly examined from the point of view of capitalization as these appear to provide enduring benefit to the assessee."

2. It is clear from the above that only on the ground that the

Assessing Officer had not properly examined the expenditure,

the Commissioner directed the Assessing Officer to re-examine

it. The plea of the assessee that assessee had furnished the

details of these expenses, which was considered by the

Assessing Officer before allowing the same as Revenue

expenditure is not even controverted. The Commissioner, in his

wisdom, thought that the expenditure incurred on the aforesaid

count appears to be capital in nature as it gives an enduring

benefit to the assessee. Even the Commissioner was not

categorical about the nature of expenditure and that is the

reason that he remitted the case back to the Assessing Officer to

re-examine the details. It is stated at the cost of repetition that

the statement of the assessee that the matter was duly

examined by the Assessing Officer on the basis of non-supply by

the assessee, who had satisfied himself that the expenditure was

incurred for smooth running of its day-to-day business and has

not resulted in the creating of any asset or benefit of enduring

nature was not even controverted by the Commissioner. Thus,

merely because the Commissioner has mainly been influenced

that by the fact that there may be other view possible, the

Commissioner could not have exercised his power under Section

263 of the Act on that basis alone. In these circumstances, the

Income Tax Appellate Tribunal rightly set aside the orders of the

CIT(A) in the following manner:

"We have carefully considered the submissions. We find that as rightly pointed out by the ld. Counsel of the assessee, information on all the issues and the details were submitted before the Assessing Officer by way of submissions by the assessee, pursuant to the notice under Section 143(2) of the Act. Admittedly, after perusal of these details, the Assessing Officer did not find that the expenditure were capital in nature. Hence he did not make any disallowance in the assessment order on account of capital expenditure in this regard. Now the ld. CIT's conclusion is that these expenditures might have been capital in nature. The Assessing Officer has not properly examined the same. We do not find any cogent basis for this conclusion. Seeking the details of expenditure from the assessee and assessee's submissions are sufficient evidence in this regard that AO had examined the issue and after due examination the Assessing Officer did not find the expenditure to be capital in nature. It cannot be said there was no proper application of mind by the Assessing Officer. If in the CIT's opinion these expenditures might have been capital in nature then it can be said that two views are possible on the issue. Under such circumstances, if the Assessing Officer has adopted one of the views then held by the Apex Court decision in the case of Mallabar industrial Co. Ltd. cited above, provisions of Section 263 are not attracted. Although, we find that there is no basis whatsoever for the ld. CIT to form the opinion that any expenditure in this regard might have been capital in nature. This is purely an assumption by the ld. CIT. Hon'ble M.P. High Court decision in Ratlam Coal Ash Co. case cited above also supports our view."

3. We do not find any merit in these appeals. No question of law

arises. The appeals are dismissed.

A.K. SIKRI, J.

APRIL 01, 2011                                     M.L. MEHTA, J.
Dev