2012 (11) TMI 541 - AT - Income Tax

Deferred revenue expenditure - Disallowance of expenditure on advertisement - AO found that expense was shown as a deferred revenue expenditure in the asset side of the Balance Sheet And claim whole sum revenue expenditure in computing taxable income - Whether the benefit accrues in the same year itself or in the subsequent years, as long as the expenditure was incurred in the course of business and was expended in the current year, the same ought to be allowed in the current year Held that - As far as corporate advertisement expenses, exhibition expenses, public relation expenses, cultural programme expenses, quota expenses and sales promotion expenses were concerned, since said expenses did not result in creation of any tangible or intangible asset and, moreover, there was no evidence regarding accrual of any specific revenue in years under consideration or subsequently over a defined period with incurring of said expenditure, those expenses could be allowed entirely in year in which they were incurred. In the present case it is not the case of the Revenue that the assessee has not incurred the expenditure as followed in the case of Ashima Syntex Ltd. (2000 (8) TMI 22 - GUJARAT HIGH COURT). In favour of assessee

Summary

Issues:
1. Disallowance of expenditure on advertisement.

Analysis:
The appeal by the Revenue and cross objection by the assessee were initially heard, but certain grounds were not disposed of, leading to a subsequent hearing. The first ground regarding disallowance under section 14A and Rule 8D had already been decided in a prior order. The next ground of appeal focused on the disallowance of expenditure on advertisement. The assessee had claimed an amount as revenue expenditure related to product launch, which was deferred for write-off over a two-year period. The Assessing Officer (AO) disallowed the entire expenditure, stating that the benefit spread over two years should not be claimed as revenue expenditure in the year of incurring. The CIT(A) allowed the claim based on various case laws, emphasizing that any expenditure for business purposes should be allowed if not capital or personal expenses. The Revenue appealed to the Tribunal, but the Tribunal upheld the CIT(A)'s decision, citing the Special Bench decision in a similar case.

The issue in question was whether the expenditure should be allowed in the assessment year 2007-08 or spread over 2008-09 and 2009-10. The AO held that the benefit should be spread over two years, while the CIT(A) allowed the claim based on relevant case laws. The Tribunal, following the Special Bench decision and jurisdictional High Court rulings, dismissed the Revenue's appeal, affirming the allowance of the expenditure in the year it was incurred. As for the Cross Objection by the assessee, it was deemed infructuous and dismissed, as it supported the CIT(A)'s decision. The appeal by the Revenue was partly allowed for statistical purposes, with the issue regarding section 14A remitted back to the Assessing Officer, while the cross objection was dismissed as infructuous.