2011 (2) TMI 359 - HC - Income Tax

Disallowance - Capital or revenue expenditure - Scrutiny - The issue is no longer res integra This Court in Commissioner of Income Tax vs. Liberty Group Marketing Division (2008 -TMI - 31190 - PUNJAB AND HARYANA HIGH COURT) considered the similar question and held that glow sign board is not an asset of permanent nature but requires frequent replacement - Hence the expenditure is treated as revenue expenditure - Decided in the favour of the assessee

Summary

Issues: Nature of expenses incurred on glow sign boards - whether capital or revenue expenditure.

The judgment by the Punjab and Haryana High Court, delivered by Mr. Justice Adarsh Kumar Goel and Mr. Justice Ajay Kumar Mittal, pertained to an appeal under Section 260A of the Income-Tax Act, 1961. The appeal was filed by the Revenue against an order passed by the Income Tax Appellate Tribunal Delhi Bench 'D' related to the assessment year 1997-98. The substantial question of law for determination was whether the expenses of Rs. 1,28,280 incurred on glow signs were of revenue nature. The respondent-assessee, a manufacturer of leather and non-leather shoes, had filed a return declaring income for the assessment year in question. The assessing officer treated the investment on Neon Sign Boards as expenditure of capital nature. The Commissioner of Income-tax (Appeals) allowed the deductions claimed by the assessee, and the Tribunal upheld this decision, leading to the Revenue's appeal before the High Court.

The primary issue in the appeal was the nature of the expenses incurred by the assessee on the glow sign boards. The Revenue contended that the expenses were capital in nature, while the assessee argued they were revenue expenditure. The Court referred to a previous judgment in Commissioner of Income Tax vs. Liberty Group Marketing Division, where it was held that glow sign boards are not assets of permanent nature and require frequent replacement. It was further established that the expenditure on glow sign boards is to facilitate business operations and is allowable as revenue expenditure. Therefore, based on this precedent, the Court determined that the expenses in question were revenue expenditure.

In conclusion, the High Court dismissed the appeal by the Revenue, as the substantial question of law was answered against them. The Court found no merit in the appeal, as the nature of the expenses incurred on glow sign boards was established as revenue expenditure based on the precedent set in a previous judgment.