2011 (3) TMI 1560 - AT - Income Tax

Summary

Issues:
Disallowance of expenditure on advertisements for popularizing yellow page directories by the assessee for assessment year 2003-04.

Analysis:
The appeal was filed against the order of the CIT (A) dated 22nd November, 2010. The main issue was the disallowance of an expenditure of &8377; 37,03,787 incurred on advertisements for popularizing yellow page directories by the appellant. The Assessing Officer and CIT (A) treated this expenditure as capital in nature, providing enduring benefit to the assessee, and disallowed it. The appellant contended that the expenditure was for popularizing the usage of Yellow Page Directories and not for acquiring any fixed capital asset. The appellant argued that the expenditure should be treated as revenue expenditure. The Assessing Officer relied on the decision of the Supreme Court and Accounting Standards to support the disallowance. The CIT (A) upheld the addition, considering the expenditure as brand building resulting in enduring benefit. The appellant's AR cited precedents and submitted that the expenditure should be allowed as revenue expenditure, not capital.

The Tribunal analyzed the nature of the expenditure and found that it was akin to advertisement expenses, not capital in nature. The Tribunal referred to a similar case where brand building expenses were considered revenue expenditure. The Tribunal concluded that the expenditure did not provide enduring benefit to the assessee and was allowable as revenue expenditure. Therefore, the addition of the amount to the assessee's income was deleted, and the appeal was allowed. The Tribunal did not delve into the alternative ground of depreciation on the expenditure since it held that the expenditure did not give enduring benefit to the assessee.

In summary, the Tribunal ruled in favor of the assessee, allowing the appeal and deleting the addition of the expenditure incurred on advertisements for popularizing yellow page directories. The Tribunal held that the expenditure was revenue in nature, akin to advertisement expenses, and did not provide enduring benefit to the assessee. The decision was based on the nature of the expenditure and previous precedents where similar expenses were treated as revenue expenditure.