2019 (8) TMI 295 - AT - Income Tax

Characterization of expenses - Expenditure incurred on designing of logo - revenue or capital expenditure - HELD THAT - From a perusal of the bill, it is evident that the break up includes normal / routine business expenditure in the form of office stationeries, name boards, T-Shirt design, power point presentation, etc. - we do not find that these expenses incurred by the assessee have resulted in the creation of an asset or augmentation of any profit making asset of enduring nature / benefit. The aforesaid expenditure has also to be seen from the context of business necessity or business expediency also. In our view, in the light of the facts and circumstances of the case on hand, as discussed above, since the aforesaid expenditure may be regarded as an integral part of the profit earning process and not for an acquisition of new asset or right of permanent character, the possession of which is a condition for carrying on business, the said expenditure is to be regarded as revenue expenditure. Consequently, grounds 3 to 5 of assessee s appeal are allowed. Charging of interest under section 234D - HELD THAT - Assessee denies himself liable to be charged interest u/s 234D of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum H. Ghaswala 2001 (10) TMI 4 - Supreme Court and we, therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234D of the Act. The AO is, however, directed to recompute the interest chargeable u/s 234D of the Act, if any, while giving effect of this order.

Summary

Issues:
1. Condonation of delay in filing the appeal for Assessment Year 2008-09 before ITAT.
2. Dispute regarding the nature of expenditure incurred on designing of logo.
3. Charging of interest under section 234D of the Act.

Condonation of Delay:
The assessee filed a petition seeking condonation of a 16-day delay in filing the appeal for Assessment Year 2008-09 before the Tribunal. Citing legal precedents, the Tribunal decided to condone the delay and admitted the appeal for consideration and adjudication.

Expenditure on Designing of Logo:
The main issue was whether the expenditure incurred on designing the logo was a revenue or capital expenditure. The AO and CIT(A) considered it capital expenditure due to enduring benefit. The assessee argued that the logo facilitated daily business activities and did not create an enduring asset. The Tribunal examined the bill for the expenditure and found it included routine business expenses, concluding that the expenditure did not result in an asset of enduring nature. Relying on case law, the Tribunal allowed the appeal on this ground.

Charging of Interest under Section 234D:
The assessee contested the charging of interest under section 234D of the Act. The Tribunal upheld the AO's action, citing legal precedent that the charging of interest is mandatory and the AO has no discretion. The AO was directed to recompute the interest chargeable under section 234D if necessary.

In conclusion, the Tribunal allowed the assessee's appeal for Assessment Year 2008-09, condoning the delay in filing the appeal, determining the expenditure on designing of logo as revenue expenditure, and upholding the charging of interest under section 234D of the Act.