2018 (3) TMI 464 - AT - Income Tax

Disallowance of advertisement expenditure incurred on the project known as Atlantis - Held that -It is also not in dispute that the assessee developed several projects. One among them is known as Atlantis . When the assessee made advertisements, as claimed by the assessee in its written submission, it displayed the name of the concern, name of the projects, brand name, etc. Such advertisements will definitely promote not only the projects developed by the assessee but also the image and goodwill of the assessee-company among the general public. Therefore, the cost of expenditure cannot be related to a particular project which is undertaken by the assessee in a particular year. At the best, it can be relatable to the year in which the advertisement was made. Merely because the assessee segregated the cost of expenditure in relation to a particular project and later stage claimed as general advertisement expenditure that may not alter the character of the advertisement expenditure incurred by the assessee. As long as the expenditure on the advertisement made during the year under consideration is not in dispute, it cannot be disallowed by the Assessing Officer on the ground that no income was disclosed in respect of a particular project known as Atlantis . Hence, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee - Decided against revenue

Summary

Issues: Disallowance of advertisement expenditure

Analysis:
- The appeal pertains to the disallowance of advertisement expenditure amounting to ?86,71,507 incurred on the project "Atlantis" for the assessment year 2013-14.
- The Departmental Representative argued that since no income was offered from the project "Atlantis", the expenditure should be capitalized and not treated as revenue expenditure under Section 37 of the Income Tax Act.
- The Departmental Representative contended that the CIT(Appeals) erred in allowing the claim of the assessee, as only revenue expenditure can be claimed as an allowable deduction, and since income was not offered in relation to the project, the expenditure should be claimed in subsequent years.
- The assessee, a real estate promoter, defended the expenditure as revenue expenditure, emphasizing that advertisement costs are essential for promoting projects and maintaining goodwill in the real estate business.
- The Tribunal observed that the advertisement expenditure incurred by the assessee was not in dispute and should not be disallowed solely because no income was disclosed for the specific project "Atlantis".
- The Tribunal concluded that the advertisement costs were general in nature, promoting various projects and the company's image, and therefore, should be allowed as revenue expenditure for the year in which the advertisements were made.
- Consequently, the Tribunal upheld the decision of the CIT(Appeals) and dismissed the appeal filed by the Revenue, confirming the allowance of the advertisement expenditure claimed by the assessee.

This detailed analysis highlights the arguments presented by both parties regarding the treatment of advertisement expenditure and the Tribunal's rationale for upholding the allowance of the expenditure as revenue expenditure despite no income being offered from the specific project "Atlantis."