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TMI Blog2012 (8) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ME-TAX [2010 (2) TMI 211 - SUPREME COURT] it is a well-settled law that after 1st April, 1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of assessee. - ITA No.450/Del./2012 - - - Dated:- 8-8-2012 - I C Sudhir, A N Pahuja, JJ. For Respondent: Shri Neeraj Kumar, DR ORDER Per: A N Pahuja: This appeal filed on 30th January, 2012 by the Revenue against an order dated 08.11.2011 of the ld. CIT(A)-VIII, New Delhi, raises the following grounds of appeal:- 1) Whether ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs.37,03,788/- made by the AO on account of deferred revenue expenses written off. 2) Whether ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs.80,48,309/- made by the AO on account of bad debts written off. 3) The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. . 2. At the outset, none appeared before us on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed by the Id. AO holding that in the IT Act, there is no provision for claiming any expenditure as deferred revenue expenditure except expenses specifically provided for in section 35D of the Act. Therefore, neither the claim of the assessee was allowed as revenue expenses nor the same was allowed to be capitalized. Following the previous/past history of the case during the year under consideration also, the claim of the appellant company has been disallowed. 5.3 In the course of appellate proceedings, the ld. counsel for the appellant has submitted that the issue in question has been examined by the Hon'ble ITAT and also the Hon'ble Jurisdictional High-Court for the AY 2003-04 in the assessee's own case. After due consideration of full facts and position of law the claim of the appellant company has been allowed as revenue expenditure by both the aforesaid courts. It is therefore, requested that the matter being covered by the orders of the Hon'ble ITAT and the Hon'ble High court the disallowance made by the ld. AO may be deleted. 5.4 I have carefully considered the submissions made on behalf of the appellant company and the findings recorded by the Id. AO. On cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned AR in the case of ITO vs. Spice Communications Ltd. (supra) is applicable to the present case. The relevant observations from the said decision of the Tribunal are reproduced below:- "It is not in dispute that the assessee is in the business of providing cellular mobile services under its own self-generated brand "Spice" since 1997. The assessee's business of providing cellular mobile services is undoubtedly a highly competitive business, and assessee has to provide services in a competent environment. This is also not in dispute that the assessee has incurred expenditure towards advertisement and promotion in course of carrying on its business activities. The Assessing Officer has allowed 90 percent of the expenses as revenue expenditure and allocated 10 percent towards capital by observing that 10 percent of expenses have been incurred towards brand building, The Assessing Officer has not been able to justify as to how the 10 percent of the total advertisement and sales promotion expenses can be allocated towards capital expenditure when the assessee has not acquired any brand from any outside party. The expenditure on advertisement and sales promotion constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held it to be revenue expenditure. In Hindustan Coca Cola, this court has already held that such an expenditure would be revenue expenditure. We, therefore, do not find any merit in the appeal. No question of law arises. The appeal is hereby dismissed." 5.5 In view of the aforesaid fact-situation and respectfully following the judgments of the Hon'ble ITAT and the Hon'ble High court, I hold that the AD was not justified in disallowing the claim of deferred revenue expenses of Rs.3703788/-. It is directed that the claim of the appellant company may be allowed as revenue expenditure and consequential relief may be granted." 5 The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR merely supported the order of the AO 6. We have heard the ld. DR and gone through the facts of the case. As is apparent from the aforecited facts, the assessee distributed the advertisement expenses towards brand building over a period of four years viz. FYs 2002-03 to 2005-06 and claimed the same as revenue expenditure. There is nothing to suggest that the expenditure is of capital nature. In ACIT vs. Ashima Syntex Ltd., 310 ITR SP 1 (SB, Ahmedbad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 SOT 572 (Delhi) and Charak Pharmaceuticals v. Jt. CIT [2005] 4 SOT 393 (Mum.) , it has been affirmed that where any expenditure is treated as a deferred revenue expenditure, it presupposes that the concerned expenditure, creating benefit is in the revenue field and is a revenue expenditure, but considering its enduring benefits as well as the fact that it does not result in the creation of any new asset or advantage of enduring nature in the capital field, the same is required to be treated distinctly from capital expenditure. However, where any identifiable capital asset, tangible or intangible comes into existence as a result of the amount expended, the same will have to be treated as a capital expenditure and depreciation allowable thereon as per the prescribed rules and procedures under the Income-tax Act. In the instant case, indisputably, advertisement expenses towards brand building are revenue in nature nor any material has been placed before us by the Revenue, suggesting that any tangible or intangible asset has been created by the assessee. In the light of view taken by the Hon ble jurisdictionl High Court in their decision dated 8.9.2011 in the assessee s own case as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the business of printing and distributing telecom directories and revenue generated on account of advertisements, yellow pages and bold letters etc. is shared between the BSNL and the assessee company. In some cases, the BSNL itself is not in a position to recover the dues from the clients and in such situation both the BSNL and the appellant company incur losses on account of write off of outstanding debtors. Considering the nature of business of the appellant company, possibility of certain amounts being written off cannot be ruled out. Therefore, to disallow the claim on the ground that the factum of debtors actually becoming bad is not established is not justified. I find that this is a recurring issue in the case of the appellant and similar disallowances have been made in previous years also. However, on appeal, the same have been allowed by the ITAT and the Hon'ble High Court. For instance, the disallowance of bad debts was allowed by the Hon'ble ITAT in the assessee's own case for AY 2003-04 in terms of order dated 22.06.2007 as under:- "4. We have heard the arguments of both the sides and also perused the relevant material on record. Before us, the ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lime of hearing before us relying on (the 3rd Member decision of Delhi ITAT In the case of Pashuputi Ncwlcch Ltd. (supra) on the amendment made in section 36(1)(vii) w.e.f. 1-4-89 incorporates only the year of allowability but it does not dispense with the requirement of the assessee to prove that the debt has become: bad debt was also taken on behalf of the Revenue before the Hon'ble Delhi High Court in the case of Automatres Ltd. (Supra). The same however was rejected by their Lordships observing that such an interpretation of the amendment made in section 36(1)(vii) made 1-4-89 would take the situation to what was prevailing prior to 1-4-1989. 6. In the present case, the debts due from Government departments as well as private parties were fully written off by the assessee company as irrecoverable in its books of accounts and this being the undisputed position, we hold, respectfully following the decision of Hon'ble Delhi High Court in the case of M/s. Autometres Ltd. (Supra), that the deduction claimed by the assessee on account of the said debts was fully allowable as per the amended provisions of section 36(1)(vii) read with section 36(2). We, therefore, set aside the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 5. Consequently, we find that there is no cause for interference with the impugned order." 6.4 In view of the aforesaid fact-situation, I do not find any justification in the action of the AO and the disallowance of Rs.8048309/- is being deleted. 9. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while contending that the assessee did not furnish any evidence of writing off the amount in its accounts nor explained as to in which year the amount was shown as income. 10. We have heard the learned DR and gone through the facts of the case. As is apparent from the aforesaid facts, the AO disallowed the claim of bad debts in the absence of any evidence as to when the amount was offered as income and there was nothing to show as to whether this amount had been actually written off in the books of account. On appeal, the ld. CIT(A) admitted the additional evidence in this regard while observing that though the basic information and requisite details regarding bad debts/advances written off were filed before the AO vide letter dated 24.12.2007, further branchwise details of outstanding dues we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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