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TMI Blog2015 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of Rs. 2,22,74,363/- under the head "brand building expenses". The AO questioned the nature of expenditure whether capital or Revenue. The assessee replied vide letter dated 11/12/2009 stating that the expenditure incurred represents the expenditure incurred towards new product launching and it has not resulted in creating any new asset whether tangible or intangible. The AO disagreed with the contention of the assessee and treated the above expenditure as capital expenditure and granted depreciation on it @ 25% worked out at Rs. 55,68,591/- thereby making addition of Rs. 1,67,05,772/- to the returned income of the assessee . Again,the assessee carried the matter before the CIT(A). The CIT(A) was of the opinion that the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Empire Jute Co. Ltd. vs. CIT (124 ITR 1)(SC) and 3) Arvind Mills Ltd. Vs. CIT (197 ITR 432) (SC) 3.1 Thus, he submitted that the expenditure incurred by the assessee which is in relation to brand building and is having impact on assessee's business in the long run and should be treated as capital expenditure and depreciation should be granted as done by the AO. On the other hand the ld. AR relied on the order of CIT(A). 4. We have heard both parties and perused the material available on record. In this case the assessee incurred an amount of Rs. 2,22,74,363/- under the head "brand building expenses" . The same has been claimed by the assessee as revenue expenditure in its return of income. The expenditure is mostly in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness or working it with a view to produce profit it would be revenue expenditure. Usually, while deciding the nature of expenditure one has to see the following points:- i) If the expenditure is with the intention or for acquiring or bringing into existence an asset or advantage of an enduring benefit to the business i.e. being carried on, or for existence of the business i.e. going on, or for a substantial replacement of an existing business asset it would be capital expenditure. ii) If on the other hand, the expenditure, although for the purpose of acquiring an asset or advantage is for running of the business or for working out that asset with a view to produce profit, it would be revenue expenditure. iii) If the outgoing is so relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces of such payment. viii) If the expenditure is recurring and incurred during the course of business or manufacturing it would be revenue expenditure. ix) An asset or advantage of an enduring nature does not mean that it may last for ever. If the capital asset, in its nature, a short lived one, the expenditure incurred over it does not, for that reason, cease to be a capital expenditure. x) It is not the law that if an enduring advantage is obtained the expenditure for securing it must be treated as capital expenditure if advantage acquired is to carry on the business then it would be revenue expenditure. 4.1 On the above proposition, we find that though the expenditure incurred by the assessee got the benefit to the assessee for mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee having admittedly incurred the expenditure on brand building, it cannot be retracted from the same; its books of accounts reflecting its understanding represents its current state of affairs. However, it is to be noted that the assessee has not considered the expenditure in the field of capital account. The assessee has treated it as Revenue expenditure only. As such, there is no force in the argument of the ld. DR that the brand building expenditure shall be always treated as capital expenditure. As the expenditure has not resulted in capital asset, so has to be recorded as expenditure in capital field. It should be noted that the assessee had to incur this kind of expenditure year after year so as to keep the product in marke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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