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2021 (11) TMI 493 - AT - Income TaxDeferred brokerage expenditure - Addition made as assessee has not debited such expenditure in its P L Act. - as per revenue as corresponding income also has not been recoginized as income, thus, the claim of assessee is against the basic principal of matching of revenue with expenditure - CIT-A deleted the addition - HELD THAT - As decided in own case 2021 (7) TMI 577 - ITAT MUMBAI assessee has incurred expenditure on brokerage expenditure paid for obtaining investments in mutual funds. The investment made in the funds yields income over a period of years, however the said amount of brokerage expenditure incurred is not refundable to the assessee in any circumstances. Undisputedly, the expenditure is wholly and exclusively for the purpose of business. The concept of deferred revenue expenditure is not there in I.T. Act, which is duly supported by the decision of Hon‟ble Supreme Court in Taporia Tools 2015 (3) TMI 853 - SUPREME COURT . The expenditure cannot also not be categorized in the capital filed on the plea of enduring benefit, as per the ratio of Hon‟ble Supreme Court in Empire Jute Mills 1980 (5) TMI 1 - SUPREME COURT . Hence, we have no hesitation to hold that in these circumstances and examining the present issue on the anvil of Hon‟ble Supreme Court decisions as above, the expenditure incurred on brokerage is to be allowed in full in the impugned assessment year, as deferral of the same over a number of years for income tax purposes is not sustainable - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of deferred brokerage expenditure. Issue-Wise Detailed Analysis: 1. Deletion of Addition on Account of Deferred Brokerage Expenditure: The revenue contested the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete the addition of ?16,50,40,070/- made on account of deferred brokerage expenditure. The Assessing Officer (AO) had disallowed this expenditure, arguing that it should be spread over multiple years to match the revenue principle, as the corresponding income was not recognized in the same year. The CIT(A), however, allowed the assessee's claim, leading to the revenue's appeal. Revenue's Argument: The revenue argued that the CIT(A) erred in directing the AO to delete the addition without appreciating that the corresponding income was not recognized. They contended that the CIT(A) wrongly relied on the Supreme Court decision in Taparia Tools Ltd. Vs. JCIT, which they claimed was distinguishable because the income in the present case was spread over multiple years. Assessee's Argument: The assessee argued that the CIT(A) correctly allowed the expenditure based on the Supreme Court's ruling in Taparia Tools Ltd. They also pointed out that the Income Tax Appellate Tribunal (ITAT) had previously decided a similar issue in their favor for the assessment year 2013-14. CIT(A)'s Findings: The CIT(A) found that the entire brokerage expenditure was revenue in nature and incurred during the relevant year. Citing the Supreme Court's decision in Taparia Tools Ltd., the CIT(A) held that there is no concept of deferred revenue expenditure in the Income Tax Act, except where specifically provided. The CIT(A) emphasized that if a business liability arises in the accounting year, the deduction should be allowed even if it is quantified and discharged later. The CIT(A) concluded that the assessee's claim for the entire brokerage expenditure was justified. ITAT's Findings: The ITAT upheld the CIT(A)'s decision, reiterating that the expenditure was incurred wholly and exclusively for business purposes and was not refundable. They emphasized that the concept of deferred revenue expenditure does not exist in the Income Tax Act, supported by the Supreme Court's ruling in Taparia Tools Ltd. The ITAT also referenced the Supreme Court decision in Empire Jute Co. Ltd. Vs. CIT, which stated that not every advantage of enduring nature constitutes capital expenditure. The ITAT concluded that the expenditure should be allowed in full in the year it was incurred and dismissed the revenue's appeal. Conclusion: The ITAT affirmed the CIT(A)'s decision to allow the entire brokerage expenditure in the relevant assessment year, rejecting the revenue's argument for spreading the expenditure over multiple years. The appeals filed by the revenue were dismissed.
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