MAIT Nos. 140 & 142 of 2007 (1) HIGH COURT OF MADHYA PRADESH: JABALPUR (Division Bench) MAIT No. 140/2007 Commissioner of Income Tax, Bhopal Appellant/Revenue Versus M/s Godrej Foods Limited Respondent/Assessee With MAIT No. 142/2007 Commissioner of Income Tax, Bhopal Appellant/Revenue Versus M/s Godrej Foods Limited Respondent/Assessee Coram: Hon ble Shri Justice Ajay Kumar Mittal, Chief Justice Honble Shri Justice Vijay Kumar Shukla, Judge Appearance: Shri Sanjay Lal, Advocate for Appellants/Revenue. Shri Mukesh Agarwal, Advocate for Respondents/Assessee. JUDGMENT (Oral) (23.01.2020) Per: Ajay Kumar Mittal, Chief Justice: Both present appeals preferred by Revenue under Section 260A of Income Tax Act, 1961 (in short Act) are involving identical substantial question of law framed vide order dated 30.11.2007 and therefore, are disposed of by this common order. 2. present appeals i.e. MAIT No.140/2007 and MAIT No.142/2007 have arisen out of orders dated 30.03.2007 passed by Income Tax MAIT Nos. 140 & 142 of 2007 (2) Appellate Tribunal, Indore (for brevity Tribunal) in ITA No.615/IND/2005 (assessment year 2001-02) and ITA No.73/IND/2006 (assessment year 2002-03) respectively. 3. For sake of brevity, facts are taken from MAIT No.140/2007. appeal was admitted on 30.11.2007 for determination of following substantial question of law:- (i) Whether in facts and circumstances of case Income Tax Appellate Tribunal was justified in law in deleting addition of Rs.5,32,75,978/- made by Assessing Officer on account of deferred Revenue expenditure? 4. facts leading to present appeal are that assessee is in status of Company and engaged in manufacturing and trading of Vanaspati, Refined edible oils, almonds and fruit drinks etc. assessee submitted its return of income declaring loss of Rs.34,92,86,201/-. return was processed under Section 143(1) of Act and was selected for scrutiny and thereafter, notice under Section 143(2) of Act was issued to assessee. assessee claimed deduction of Rs.6,65,94,973/- as deferred revenue expenditure on account of advertisement, publicity, holding conferences, market research, subsidy, various launch schemes, selling and distribution etc. Assessing Officer vide order dated 19.03.2004 (Annexure A-1) held that expenses were incurred for accounting year below line in books of account but assessee had claimed in full for computing total income as revenue expenditure incurred during year. expenditure was likely to give benefit for not less than five years and therefore, was in nature of capital expenditure and hence, above expenditure was MAIT Nos. 140 & 142 of 2007 (3) added back to assessee s income and following assessment order for assessment year 2000-01, only 1/5th expenditure of Rs.1,33,18,995/- out of total expenditure of Rs.6,65,94,973/- was allowed to assessee for assessment year 2001-02 and remaining amount of Rs.5,32,75,978/- was added to income of assessee. Being aggrieved by order, assessee preferred appeal before learned Commissioner of Income (Appeals-I), Bhopal [for short CIT(A)]. CIT(A) vide order dated 18.05.2005 (Annexure A-2) partly allowed appeal of assessee deleting addition of remaining amount of Rs.5,32,75,978/-. Dissatisfied with that order, Revenue approached Tribunal. Tribunal by order dated 30.03.2007 (Annexure A-3) affirmed decision of CIT(A) and dismissed appeal of Revenue. Hence, present appeal by Revenue. 5. Learned counsel for appellant submitted that deduction in question was pertaining to expenses incurred in advertisement, publicity and sales promotion etc. of business which would be giving continuing benefit to business of assessee-Company and therefore, Assessing Officer did not commit any error in spreading over expenditure for five years and allowing only 1/5th thereof for current assessment year but both authorities below only on ground that for assessment years 1993-94 and 1996-97 similar claim was allowed to assessee and his appeal claiming same benefit for assessment year 2000-01 was allowed by Appellate Authority on 22.01.2004, deleted addition of Rs.5,32,75,978/-. To bolster his submission, learned counsel for appellant relied upon judgment of Supreme Court in Madras MAIT Nos. 140 & 142 of 2007 (4) Industrial Investment Corporation Ltd. vs. Commissioner of Income- tax, (1997) 91 Taxman 340 (SC). 6. On other hand, learned counsel for assessee argued in support of impugned order and prayed that cogent reasons have been assigned by learned Tribunal while passing order and therefore, this appeal be dismissed. 7. Having heard learned counsel for parties, we find that there is no merit in appeals. 8. learned Tribunal while considering appeal came to conclusion that in earlier years, Assessing Officer had allowed deduction of similar advertisement expenses in favour of assessee in scrutiny proceedings, which was accepted by Department. order had attained finality. advertisement expenditure, claimed by assessee, is in nature of revenue expenditure and since it was adjudged as such, it has to be allowed in year under consideration in which it was incurred wholly and exclusively for purpose of business. Learned counsel could not point out any perversity or illegality in findings recorded by Tribunal and therefore, no interference is called for on that ground raised by appellant in these appeals. 9. Examining case law relied upon by learned counsel for appellant, question before Supreme Court in Madras Industrial Investment Corporation (supra) was as to whether discount on debentures could be treated as expenditure and entire amount of discount was to be allowed in year related to year of issue itself. MAIT Nos. 140 & 142 of 2007 (5) Supreme Court held that although while issuing debentures at discount assessee has incurred liability to pay discount in year of issue of debentures but by such payment assessee would secure benefit over number of years and there would be continuing benefit to business of company over entire period and therefore, such liability should be spread over period of debentures issued. We have carefully gone through said decision of Supreme Court and are of considered view that said decision is not applicable to facts and circumstances of present case. In present case, expenditure on advertisement and sales promotion has been claimed for deduction as revenue expenditure. advertisement and sales promotion is necessity of business and thus, integral part of business activity. Therefore, expenses incurred on advertisement etc. are not for acquisition of asset or right of permanent character, therefore, cannot be said to be capital expenditure. It is but revenue expenditure. 10. similar question: as to whether expenses on account of advertisement, publicity and sales promotion in relation to business are in nature of deferred revenue expenditure and although benefit of such expenses would be availed by assessee over number of years but should it be allowed for relevant assessment year for which assessee claims exemption, also came up for consideration before Division Bench of Punjab and Haryana High Court in Commissioner of Income Tax vs. M/s Glen Appliances Pvt. Ltd., ITA No.858/2010 decided on 2nd May, 2011. Bench also considered judgment of Supreme Court in MAIT Nos. 140 & 142 of 2007 (6) Madras Industrial Investment Corporation (supra) and held in favour of assessee as under:- 6. We are unable to accept submission of learned counsel. Tribunal while accepting plea of assessee had held that expenses incurred by assessee on aforesaid activities were revenue in nature and entire amount was admissible in year in which it was incurred. finding recorded is as under:- "We have considered facts of case and rival submissions. finding of AO that even if claim of assessee that constant advertisement is needed in view of short public memory is accepted, benefit accruing to brand name "GLEN" cannot be ruled out. There is no evidence in support of this finding. Further, learned CIT(Appeals) upheld view of assessee that benefit will accrue over period of two years by relying on decision of Hon'ble Supreme Court in case of Madras Industrial Investment Corporation Ltd. (supra). Nothing has been brought on record to show that benefit will accrue over period of two years. advertisement expenses are in nature of revenue expenses. It is not case where loan taken on discount will stay with assessee for period of 10 years. Therefore, decision of Hon'ble Supreme Court in case of Madras Industrial Investment Corporation Ltd. (supra) is not applicable to facts of this case. As expenditure is revenue in nature, decision of Hon'ble Madras High Court in case of Brilliant Tutorials (P) Ltd. (supra) supports case of assessee for deduction of expenditure in year of its incurring. In case of Amar Raja Batteries Ltd., Tribunal, after considering case of India Discount Company, 75 ITR 191, pointed out that issue in this behalf is clear, i.e. it has to be decided on basis of law. expenditure is also in revenue field and, therefore, whole of expenditure is to be allowed in year of its incurring. In view of aforesaid judgments and order, we hold that expenditure is revenue in nature and, therefore, it has to be allowed in full in this year." 8. Learned counsel for revenue was unable to point out any irregularity or illegality in aforesaid finding recorded by Tribunal which may warrant interference by this Court. Accordingly, no substantial question of MAIT Nos. 140 & 142 of 2007 (7) law arises in these appeals. appeals being devoid of merit are dismissed. 11. In view of foregoing reasons coupled with fact that learned counsel for Revenue has failed to point out any illegality or perversity in findings recorded by learned Tribunal warranting any interference, substantial question of law is answered in favour of assessee and against Revenue. Accordingly, both appeals stand dismissed. Let copy of this order be retained in record of MAIT No.142/2007. (AJAY KUMAR MITTAL) (VIJAY KUMAR SHUKLA) CHIEF JUSTICE JUDGE s/ Digitally signed by SACHIN CHAUDHARY Date: 2020.02.19 11:52:01 +05'30' Commissioner of Income-tax, Bhopal v. Godrej Foods Limited