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Issues Involved:
1. Whether the payment of Rs. 18 crores to Shri Amitabh Bachchan and Smt. Jaya Bachchan is capital expenditure or revenue expenditure. 2. Whether the revenue expenditure, if allowed, should be spread over ten years or allowed in its entirety in the assessment year 1995-96. Detailed Analysis: 1. Nature of Expenditure: Capital vs. Revenue - The assessee claimed that the payment of Rs. 18 crores to Shri Amitabh Bachchan and Smt. Jaya Bachchan was revenue expenditure incurred for the right to use their brand equity and services for ten years. The Assessing Officer treated this as capital expenditure, arguing that it was for acquiring a new asset, i.e., the brand/copyright, which is a source of income. - The CIT(A) allowed the claim of the assessee as revenue expenditure, noting that the payment facilitated the assessee's trading operations without affecting the fixed capital. The CIT(A) distinguished this case from others, emphasizing that the expenditure was for the user of brand equity, not for acquiring a capital asset. - The Tribunal agreed with the CIT(A), holding that the payment was for the right to use the artists' services and brand equity, which is a revenue expenditure. The Tribunal noted that the performance of artists cannot be equated with the use of capital assets and that the payment was for facilitating business operations. 2. Spreading Over vs. Full Deduction in Assessment Year 1995-96 - The CIT(A) directed the spreading of the Rs. 18 crores over ten years, relying on the decision of the Hon'ble Supreme Court in Madras Industrial Investment Corpn. Ltd. v. CIT, which allowed spreading expenditure over the period of benefit. - The assessee argued that the entire amount should be allowed in the assessment year 1995-96, as the payment was incurred wholly and exclusively for business purposes in that year. The assessee contended that the decision in Madras Industrial Investment Corpn. Ltd. was misapplied, as it dealt with discount on debentures, which is different from the current case involving uncertain benefits from artists' services. - The Tribunal agreed with the assessee, emphasizing that ordinarily, revenue expenditure incurred for business purposes must be allowed in its entirety in the year it is incurred. The Tribunal found no evidence of intention to distort profits and held that the expenditure should be allowed in the year of payment itself. Conclusion: - The payment of Rs. 18 crores to Shri Amitabh Bachchan and Smt. Jaya Bachchan is revenue expenditure, not capital expenditure. - The entire amount of Rs. 18 crores should be allowed as a deduction in the assessment year 1995-96 and should not be spread over ten years. Result: - The appeal of the assessee is allowed, and the cross-objection of the revenue is dismissed.
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