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TMI Blog2004 (11) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... company also does some liaisoning work from which it derives income. During the previous year, the assessee had incurred a sum of Rs. 47,71,118 on marketing of its products. The details of expenditure incurred by the assessee are as follows: Details of deferred revenue expenses Particulars Amount (Rs.) Business promotion 35,671.00 Conference expenses 2,984.00 Design and 3,425.00 Development charges 12,387.00 Advertising expenses 1,14,457.80 Retainership fee 10,457.00 Field allowance 9,10,376.00 Daily allowance 1,39,506.08 Literature expenses 1,92,941.50 Printing & stationary 17,66,687.02 Salary 10,505.00 Bonus 1,64,907.50 Travelling allowance 4,57,867.20 Tour & traveling 31.181.60 Training expenses 31,890.50 Med. Rep's bags samples 8,85,874.40 47,71,118.60 In the P&L a/c the assessee claimed only lIl0th of these expenses as deduction. The assessee had treated these expenses as deferred revenue expenses. According to the assessee, the benefits out of these expenses are likely to be received by the assessee over a period of 10 years and that is the reason why in the books of account these expenses are claimed by spreading over the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee's business more efficiently and profitably leaving the fixed capital untouched. Regarding the observation of the AO about the treatment given by the assessee in its books of account, the CIT(A) held that the entries in the books of account were not determinative of the nature of expenses and one has to look into the real nature of the expenses while considering its allowability. He, therefore, held that the expenditure was fully allowable as claimed by the assessee. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 3. We have heard the rival submissions. We are of the view that the order of the CIT(A) does not call for any interference. A bare perusal of the details of the expenses incurred by assessee clearly show that they were of revenue nature. The fact that these expenses were in relation to the business of the assessee is not in dispute. The test of enduring benefit as rightly held by CIT(A) was not conclusive. The decision of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 is relevant in this regard. As held by the Hon'ble Supreme Court what has to be seen is the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a particular year, but which is carried forward an the presumption that it will benefit aver a subsequent period or periods. The ICMA defined the said term in its publication as an expenditure incurred during an accounting period but not fully charged against income in that period, the balance being carried forward and charged in the next or a subsequent period. From the perusal of these definitions, it is abundantly clear that there is nothing to. indicate that the concerned expenditure has to be of capital nature for the purpose of treating the same as deferred revenue expenditure. On the contrary, although the said expenditure results into, a benefit which accrues to the assessee over a period exceeding the accounting year, such benefit does not accrue to the assessee in the capital field but the same accrues only in the revenue field. As a matter of fact, the very purpose of categorising certain expenditure differently under the head 'deferred revenue expenditure' for the purpose of drawing financial statements appears to be that the said expenditure even though is of revenue nature results into benefit of enduring nature to the assessee and the same, therefore, deser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure results into an advantage of enduring nature to the assessee in the capital field or revenue field so as to decide the exact nature of the said expenditure and allowability of the same under the IT Act. 5. As regards the relevance of accounting method followed by the assessee, we have already observed that the treatment given by the assessee to the impugned expenditure as deferred revenue expenditure cannot be considered, as different from the one followed for the purpose of computing the total income under the IT Act. In any case, as held by the Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd vs. CIT (1971) 82 ITR 363 (SC), the allowability of a particular deduction depends on the provisions of law relating thereto and not on the basis of entries made in the books of account, which are not decisive or conclusive in this regard. The expenditure in question was incurred towards launching of a new product and was revenue in nature. The action of the AO in treating the same as capital expenditure and disallowing the claim for deduction was not proper. 6. The learned Departmental Representative also placed reliance on the judgment of the Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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