THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A No.653 of 2014 DATE: 24.10.2014 Between:
The Commissioner of Income Tax – VI, Hyderabad.
… Appellant And M/s. J.C. Brothers Jewellers, Hyderabad.
… Respondent This Court made the following:
THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.653 of 2014 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal dated 30.06.2011 in relation to the Assessment Year 2006-07, on the following suggested questions of law:
1. Whether on the facts and in the circumstances of the case, the appellate tribunal is justified in holding that advertisement charges paid by M/s.J.C. Brothers Jewellers to M/s. Jeans Cornerate is only a reimbursement of expenses to sister concern and that the provisions of Section 194C of Income-tax Act is not applicable?
2. In the face of the advertisement work being carried out by outside agencies, and not associate concern, whether the appellate tribunal is justified in holding that the same does not constitute advertisement expenses within the meaning of Section 194C of the Act and hence disallowable by reason of omission to deduct tax at source under Section 40(a)(ia) of the Income-tax Act?
We have heard Mr.S.R.Ashok, learned Senior Standing Counsel for the appellant and perused the findings of the learned Tribunal.
It appears the learned Tribunal had found that the assessee has reimbursed the expenditure incurred on account of advertisement made by its sister concern. So, it is not a case of payment and since it is reimbursement, the question of deduction of tax at source does not arise and the learned Tribunal has correctly held that this is an allowable deduction. It is also correctly held that while the amount spent was found to be genuine, the question of the necessity of incurring of huge amount for advertisement cannot be questioned. Since the assessee incurred the expenditure directly for promotion of its business, the amount has to borne exclusively by the assessee and it cannot be shared by a third party so to say.
Hence, we are of the agreement that this sort of expenditure is not in the nature of capital expenditure. We are of the view that no element of law is involved in this matter.
Therefore, the appeal is dismissed. No costs.
K.J. SENGUPTA, CJ SANJAY KUMAR, J Date: 24.10.2014 va