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TMI Blog2012 (6) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... g it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. glow signs boards have a short life, they decay with the effect of weather, and require frequent replacement. These observations may not be entirely correct having regard to the literature qua neo sign board produced by the learned counsel for the Revenue. However, this fact would not alter the ultimate decision as it is still obvious that no asset of permanent nature is brought into existence. by putting the neon signs and glow signs, no asset of permanent nature is created. Simply because self-life of such neon signs is more, may not be of any significance once we keep in mind the important aspect on which the expenditure is incurred i.e. on advertising and marketing. no question of law arises and these appeals are accordingly dismissed - I T Appeal Nos. 319, 1185, 1448, 1822 & 2091 of 2010 - - - Dated:- 30-3-2011 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as an expenditure of revenue nature, but putting up of glow signs and neon signs gives an advantage to enduring nature in the field of advertisement and promotion of the business of the assessee and, therefore, it could not be termed as expenditure of revenue nature. In this behalf, the Tribunal observed as under: "The material used for neon signs and glow signs by the assessee is a capital asset to be used for the purpose of advertisement of the business that the assessee was carrying. Even if such expenditure is said to be in assessed wholly and exclusively for the purpose of business of the assessee, it was capital expenditure and not revenue expenditure. This view also finds support from the judgment of the Bombay High Court in the case of CIT v. Patel Intl. Films Ltd. 102 ITR 219. In that case the assessee company purchased a film for the purpose of advertisement in order to attract customers for its business of doing colour processing work at the film centre laboratory. The Court, while regarding it as capital expenditure observed as under: "In our view, it cannot be disputed that even for advertisement purpose assets can be acquired by incurring expenditure in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the Revenue are as under:- (1) Similar expenditure incurred by the assessee on glow signs and neon signs in the assessment years 1996-07 and 1997-08 had been allowed by the AO himself in the assessment year under Section 143 (3) of the Act. Though for the assessment year 1998-99, the Assessing Officer had disallowed the expenditure, this disallowance was deleted by the CIT (A) and against the order of the CIT (A) no appeal was preferred by the Department. Going by this past history, the Tribunal allowed the expenditure as revenue holding that undoubtedly, this was a recurring expenditure which the assessee had necessary to incur to carry out its business activity. (2) As per the ratio of decision of Amritsar Bench of the Tribunal in the case of Jt. CIT v. Deva Singh Sham Singh , [2005] 95 ITD 235 (ASR), the Himachal Pradesh High Court in the case of Mohan Meakin Breweries Ltd. v. CIT , [1979] 118 ITR 101/2 Taxman 150 (HP), the advertisement expenditure was capital in nature and that deductibility or otherwise and the expenditure depends upon the provisions of the Act. 3. Spearheading a scathing attack on the aforesaid approach of the Tribunal, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, the average 100 watt light bulb has a rated life of 750-1,000 hours. This long lifetime has created a practical market for neon use for interior architectural cove lighting in a wide variety of uses including homes, where the tube can be bent to any shape, fitted in a small space, and can do so without requiring tube replacement for a decade or more." 4. He further argued that relying upon the judgment of Himachal Pradesh High Court in the case of Mohan Meakin Breweries Ltd. ( supra ) was totally misplaced as that was a decision of the year 1979. The technology over a period of time has totally changed and the manner in which the neon signs and glow signs were manufactured due to advancement of technology now give much longer life. 5. The aforesaid argument of learned counsel for the Revenue may be attractive in first blush. However, it loses its sheen when we examine it with some deeper insight. In the first place, we may point out that no such distinction between glow sign and neon signs have been made by the AO whereas learned counsel has conceded that expenditure on glow signs may be revenue in nature because of their span of life and has confined his argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed spreading over, the Court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period." 7. This Court thus explained in no uncertain terms that the normal rule accepted by the Supreme Court in the said judgment was that the expenditure is to be allowed in the year in which it was incurred. Only at the instance of the assessee who wanted to spread over, the court had agreed to allow the assessee the benefit after finding that there was a continuing benefit to the company over the entire period. The ratio of this judgment was thus summaried in the following manner:- "What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Income Tax department cannot deny the same. However, in those cases where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of matching concept is satisfied, which upto now has been restricted to the cases of debentures. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other connected matters] and all the relevant judgment including noted above are discussed in detail and position summed up is as under:- "Applying the aforesaid principle to the facts of this case, it clearly emerges that the expenditure on publicity and advertisement is to be treated as revenue in nature allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee's trading operations. No fixed capital was created by this expenditure. We may also add here that in the Income-Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the deduction for whole amount of such expenditure, even the year in which it is incurred, and the expenditure fulfills the test laid down under Section 37 of the Act, it has to be allowed. Only in exceptional cases, the nature mentioned in Madras Industrial Corporation ( supra ), the expenditure can be allowed to be spread over, that too, when the assessee chooses to be so." 10. The submission of learned counsel for the Revenue qua judgment of Himachal Pradesh High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession."' For claiming deduction under this section, one of the conditions is that the expenditure should not be in the nature of capital expenditure. The question whether a particular expenditure incurred by the assessee is of capital or revenue nature is always a complex and intricate issue. Such a question has to be considered and answered in the facts and circumstances of each case. In Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 (SC) , it was held that if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for bringing into existence an asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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