2008 (4) TMI 3 - HC - Income Tax

Revenue expenditure shown as deferred revenue expenditure in the audited balance sheet. Tribunal on the basis of additional ground raised by the assessee allowed full deduction even if he failed to claim deduction in the original return (neither he filed revised return) - tribunal decision upheld

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding deferred revenue expenses claimed by the assessee.

Analysis:

1. Background and Assessment: The assessee, engaged in the automobile industry, filed a return declaring a net loss. The assessing officer computed the loss under the normal provisions of the Act by making various additions and disallowances. The assessee claimed reduction of expenditure on customer introduction charges, which was allowed initially.

2. Appeals and Tribunal: The assessee filed an appeal before the Commissioner of Income Tax (Appeals) claiming the entire deferred revenue expenses. The CIT (A) allowed the appeal. The Revenue then appealed before the Tribunal, which restored the matter to the Assessing Officer for re-examination. The Assessing Officer disallowed a portion of the claim as it was not originally made in the return of income.

3. Appeal before CIT (A): The assessee appealed before the CIT (A) against the Assessing Officer's order. The CIT (A) allowed the appeal, stating that the disallowance was incorrect solely based on the absence of the claim in the return of income.

4. Appeal before Tribunal: The Revenue, aggrieved by the CIT (A) order, filed an appeal before the Tribunal. The Tribunal confirmed the order of the CIT (A), leading the Revenue to file the present appeal before the High Court.

5. Principal Question: The main issue in the appeal was whether the Tribunal was correct in allowing relief when the claim was not made in the return of income. The Revenue contended that such relief should not be granted without a specific claim.

6. Legal Precedents and Interpretation: The Court referred to various legal precedents, emphasizing the wide powers of the Tribunal to consider additional grounds raised by parties. It was highlighted that revenue expenditure for business purposes should be allowed in full in the year it is incurred, without spreading it over multiple years.

7. Decision: The Court dismissed the appeal of the Revenue, upholding the Tribunal's decision to allow the relief claimed by the assessee. It was concluded that there was no prohibition on the Tribunal considering additional grounds for a just decision in the case.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the Tribunal's wide powers to consider additional grounds and the requirement to allow business-related expenditure in full in the year of its incurrence.