2013 (11) TMI 129 - AT - Income Tax

Disallowance on account of advertisement expenses Held that - There is no concept of deferred revenue expenditure in the Income-tax Act. The expenditure is either revenue or capital in nature. If the expenditure is of revenue nature and is incurred wholly or exclusively for the purpose of business and has been incurred during the year, the same is allowable expenses - the advertisement expenses was allowable as revenue expenditure. Disallowance of depreciation on printers and scanners Held that - Following CIT v. BSES Yamuna Power Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT - Computer accessories and peripherals such as, printers, scanners and server, etc., form an integral part of the computer system as they cannot be used without the computer. Hence, the same are part of the computer system and entitled to depreciation at the higher rate of 60 percent Decided against Revenue.

Summary

Issues:
1. Disallowance of advertisement expenses.
2. Disallowance of depreciation on printers and scanner.

Disallowance of Advertisement Expenses:
The Revenue appealed against the deletion of Rs. 8,76,435 disallowance made by the Assessing Officer on account of advertisement expenses. The Assessing Officer considered the advertisement and marketing expenses claimed by the assessee as revenue expenditure, incurred for brand building. The Assessing Officer spread the benefit over five years, allowing only one-fifth in the current year. However, the learned Commissioner of Income-tax (Appeals) noted that advertisement expenses are revenue expenditure if wholly and exclusively for business purposes, with no concept of deferred revenue expenditure under the Income-tax Act. The ITAT Delhi concurred, citing that expenditure is either capital or revenue in nature, and allowed the claimed amount as revenue expenditure, dismissing the Revenue's appeal.

Disallowance of Depreciation on Printers and Scanner:
Regarding the disallowance of Rs. 1,57,665 depreciation on bar-code scanners and printers, the Assessing Officer allowed only 15 percent depreciation, contrary to the claimed 60 percent. The learned Commissioner of Income-tax (Appeals) referred to precedents and held that printers, UPS, and scanners are integral parts of a computer system, entitled to depreciation at 60 percent. The ITAT Delhi upheld this decision, citing the judgment in CIT v. BSES Yamuna Power Ltd., where computer accessories like printers and scanners were deemed part of the computer system, justifying the higher depreciation rate. Consequently, the appeal filed by the Revenue was dismissed, affirming the Commissioner's order.

In conclusion, the ITAT Delhi upheld the decisions of the Commissioner of Income-tax (Appeals) in both issues, allowing the advertisement expenses as revenue expenditure and confirming the higher depreciation rate on printers and scanners as part of the computer system.