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TMI Blog2010 (12) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.16,19,87,818 and Rs.2,91,32,638 relating to deferred revenue expenditure on account of promotion of new products/brands for the asst. yrs. 2003-04 and 2004-05. As the common issue is involved in both the appeals, they are heard together and are disposed of by this common order for the sake of convenience. 2. The relevant material facts for the asst. yr. 2003-04 are like this. During the course of scrutiny assessment proceedings, the AO noted that the assessee has claimed deferred revenue expenditure amounting to Rs.16,19,87,818 but reduced the same from total income in computation of income. The AO further noted that by way of note in the computation of income, the assessee has clarified that during the year, the assessee has incurred expenses on promotion of new products and brands amounting to Rs.13,27,81,649 (KL) and Rs.2,92,06,169 (KPL), which had been treated as deferred revenue expenditure in the books of account and amortized for a period of six years but while computing the taxable income, these expenses are claimed as deduction as these expenses are revenue expenditure in nature. On these facts, the AO required the assessee to show cause as to why the deferred re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) 86 ITR 549 (SC), wherein, it is held that the expenditure of revenue nature is allowable in full in the computation of the profits in the year in which liability has crystallized. On the basis of this reasoning and after elaborate analysis of the facts of the case, the CIT(A) deleted the disallowance made by the AO and held that the entire expenses even though these are shown as deferred revenue expenditure constitute admissible deduction. The AO is not satisfied and is in appeal before us. 4. Having heard the rival contentions and having perused the material on record, we are of the considered view that the conclusions arrived by the CIT(A) do not call for any interference. A Co-ordinate Bench of this Tribunal (which had one of us, i.e., the learned Vice President, in its coram) in the case of Amar Raja Batteries Ltd. vs. Asstt. CIT (2004) 85 TTJ (Hyd) 20: (2004) 91 ITD 280 (Hyd) after an elaborate analysis of the relevant legal principles, inter alia, concluded as follows: "10. We have carefully considered the rival submissions. The undisputed fact is that the expenditure is in the revenue field. The only issue to be considered is whether the assessee can claim the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court observed that in certain cases, the facts may justify the assessee to spread over and claim the expenditure over a period of ensuing years.' 11. In this case, the assessee had launched a new product and incurred heavy advertisement expenditure. The period for which the assessee can be said to have secured benefit by incurring this expenditure cannot be reasonably estimated. The undisputed fact is that the new product launched may fail to take off in the year of launch itself may have a long life as a product. There is no way in which it can definitely be estimated that the benefit of the expenditure would last for a particular period of time, and on this count, we agree with the arguments of the learned counsel for the assessee. Reliance placed by the Revenue in the case of Shreyas Shipping Ltd. (supra) does not come to its rescue, for in that case, dry dock and special survey expenses were incurred by the assessee and these expenses have to be incurred statutorily twice over a period of five years. That dry docking in the case of ships is mandatory. The benefit of the expenditure can be reasonably estimated over a period of 2-1/2 years. Moreover, there was a trade prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been derived cannot be estimated in this case. Deferment is based on the 'matching concept', that is matching costs with revenue. The assessee is required to claim expenses year-wise to the extent of income, which can be said to have arisen from such expenses. The income relatable to that expenditure should arise for a number of years and when a nexus can be definitely found between both income and expenditure, the matching concept comes into play. The ratio of the order of the Mumbai Bench cannot be universally applied and as held by the Hon'ble Supreme Court, has to be restricted to the particular facts of that case. The decisions relied (upon) by Revenue have limited application and can be invoked when expenditure is incurred in lump sum, essentially to get rid of future annual expenditure which is necessarily to be incurred to carry on the business. This is not a case where annual future mandatory expenditure is done away with by a lump sum up front expenditure. 12. As far as the entries in the books of account are concerned, it is well-settled that they do not clinch the issue either way, and they do not determine the allowability or otherwise of the expenditure. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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