Procter & Gamble Home Products Ltd. Vs ACIT (ITAT Mumbai)
The Income Tax Appellate Tribunal partly allowed appeals filed by Procter & Gamble Home Products Ltd. for Assessment Years 2007-08 and 2008-09 against orders passed by the Commissioner of Income Tax (Appeals). The disputes involved ad-hoc disallowance of professional fees, trade incentive expenses treated as capital expenditure, taxation of notional rental income from shared premises, disallowance of related expenses, and transfer pricing adjustments. The assessee did not press the transfer pricing grounds during hearing, and those grounds were dismissed.
For AY 2007-08, the Assessing Officer disallowed Rs. 10 lakh out of professional fees claimed by the assessee on the ground that certain payments appeared capital in nature and complete details were not furnished. The Tribunal noted that similar disallowances had been deleted in the assessee’s own case for earlier assessment years. It observed that the Assessing Officer had not specified which items of professional fees were not wholly and exclusively incurred for business purposes. Following earlier orders in the assessee’s favour, the Tribunal deleted the ad-hoc disallowance.
The Assessing Officer had also disallowed 20% of trade incentive expenses amounting to Rs. 6.66 crore by treating them as capital expenditure incurred for brand promotion resulting in enduring benefit. The assessee explained that the expenditure consisted of incentive schemes and reimbursements paid to distributors as part of sales promotion and pricing strategies. The Tribunal held that such expenses formed part of the assessee’s business model and were revenue in nature. Relying on various judicial precedents including the Bombay High Court decision in the assessee’s own case, the Tribunal held that expenditure incurred for brand promotion and sales incentives is allowable as business expenditure even if incidental benefits accrue to third parties. Accordingly, the disallowance was deleted.
