COMMISSIONER OF INCOME TAX Vs. PREMIER BREWERIES LTD

JUDGEMENT

(1.) Tribunal, Cochin Bench, on a direction given by this Court in OP No. 3740 of 1996, referred several questions under Section 256(2) of the IT Act, arising out of the order of the Tribunal in ITA No. 874/Coch/1993, for the opinion of this Court which we have reframed and stated in para 6 of this judgment.

(2.) Assessee is involved in the business of manufacture and sale of beer. It follows the mercantile system of accounting. It filed return of income for the asst. yr. 1990-91, declaring a total income of Rs. 56,14,990. On going through the accounts, it was noticed that the assessee had claimed Rs. 59,85,644 as marketing expenses and service charges. At the same time, expenditure under the same head for the period relevant for asst. yr. 1989-90 claimed was Rs. 60,750. Due to abnormal increase in the item of expenditure, the assessee was directed to furnish a detailed break up of the amount. Following are the details submitted by the assessee. <p>Rs. 1. Service charges on Kerala Supplies (KSBC) at the rate of Rs. 2 per dozen paid to R.J. Associates (387801 x 2), Coimbatore 7,75,602 2. Service charges on Tamil Nadu Supplies (TASMAC) at the rate of Rs. 13 per dozen paid to Golden Enterprises (174784 x 13), Madras 22,72,192 3. Corporate management charges at the rate of Rs. 4 per dozen paid to U.B. Ltd. (on 521450 x 4), Bangalore 20,85,800 4. Trade scheme expenditure on Maharashtra Supplies (HPPL, Western India Beverages and Vitari Distributors) 8,52,050 __________ Total 59,85,644 __________

(3.) Assessee had stated in the letter dt. 27th Dec., 1991, that in view of the extreme competition in all markets, additional expenditure had to be incurred to keep up its share in the market in the State of Kerala and Tamil Nadu. Further, they had tapped Maharashtra market for which also marketing expenditure had to be incurred. Assessee had clarified before the assessing authority that R.J. Associates was responsible for securing orders from the Kerala State Beverages (M&M) Corporation Ltd. on a monthly regular basis for company's brands. Further, it is also stated that the assessee had entered into agreement dt. 8th April, 1999, for various liaisoning work to be rendered by the concern R.J. Associates which would help the company to get permit application. The main services to be rendered by the concern M/s R.J. Enterprises are as follows :