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TMI Blog2014 (2) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... as written off the expenditure in its books of account over a period of five years, it must be allowed in its entirety in the year in which it was incurred - if it is revenue expenditure, and if it is wholly and exclusively incurred for the purposes of business - the assessee has correctly claimed the expenditure and it should be allowed in its entirety – Decided in favour of Assessee. - ITA No.124/Hyd/2012 - - - Dated:- 12-2-2014 - Shri D. Manmohan And Shri B. Ramakotaiah,JJ. For the Appellant : Shri S. Ravi For the Respondent : Smt. K. Haritha DR ORDER Per B.Ramakotaiah, Accountant Member: This is an appeal by the assessee against the order of the CIT(A) III, Hyderabad dated 24.11.2011. 2. The assessee has raised fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, and though 1/5th only was charged to the Profit Loss Account, the nature of expenditure being Revenue, entire amount is allowable as deduction under S.37(1). It was further submitted that the principles laid down by the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. (225 ITR 802), it being Revenue expenditure, incurred wholly and exclusively for the purposes of business, must be allowed in its entirety. Further, the assessee also distinguished the decision of the Hon'ble Bombay High Court in the case of CIT V/s. Taparia Tools Ltd. (260 ITR 102), relied upon by the Assessing Officer to claim that the entire expenditure is revenue in nature. The learned CIT(A) did not agree with the contentions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handise in the news paper. The assessee company, being a corporate merchandise provider, advertising about various brands and products being provided by the assessee is a must, in order to attract business. Just because, assessee has claimed the amount as deferred revenue expenditure in the Profit Loss Account, the nature of expenditure does not change. The matching concept invoked by the Assessing Officer does not apply to the facts of this case, as no corresponding asset has been created, nor there is any enduring benefit accruing out of the general advertisement about assessee's business. Similar issue was considered by the coordinate Bench in the case of Amar Raja Batteries Ltd. V/s. ACIT (91 ITD 280), wherein considering similar clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books, over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Issuing debentures is an instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debenture, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure can be reasonably estimated over a period of 2-1/2 years. More over, there was a trade practice in that case and the assessee followed that trade practice and wrote off that expenditure over a period of 2-1/2 years. It is not the case here, as it is not a mandatory expenditure, nor can the period for which the benefit of the expenditure can be derived be estimated with a least reasonable accuracy. The Bombay Bench of the Tribunal distinguished the judgment of its jurisdictional High Court in the case of CIV v. Chowgule Co. (P) Ltd. (214 ITR 523) holding that in that case it was not a case of current repairs and was also not a case which did not bring into existence or obtain a new or different advantage. Therefore, this de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory requirement. There is no such circumstance in this case. The matching concept, which is heavily relied upon in both the above 'cases, fails in this case. The number of years for which the benefit can be said 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. Thee income relatable to that expenditure should arise for a number of years and when a (SIC) can be definitely found between the both income and expenditure, the matching concept comes into play. The ratio of the order of the Mumbai Bench cannot be universally ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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