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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 ..... ipated . Just because an expenditure is debited in books towards brand building, which it purportedly is, and statutory recognition has since been accorded to such an intangible asset, as a “brand” would not by itself imply that an advantage in the capital field, or of enduring value to the business has, arisen to the assessee upon incurring the expenditure. Rather, the business being competitive and prudence and conservatism being fundamental accounting assumptions, capitalization of such expenses or ascribing lasting abiding value to such expenses, could only be done on sound footing and cogent basis.( Alembic Chemical Works vs. CIT (1989 (3) TMI 5 - SUPREME Court). In our opinion the expenditure cannot be attributed to capital expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the expenditure was in the nature of sales promotion, staff welfare, discount allowed, telephone charges, travelling expenses, salary, product launching, meeting expenses, advertisement and other expenses in the relevant field. This according to CIT(A) are routine operational expenses inevitable for launching of any product and have nothing to do with brand building, though the assessee used the word expenditure on brand building . Further he observed that the expenditure on launching of a new product in an existing business is fully deductible even the assessee has treated it as deferred Revenue expenditure. Accordingly he observed that the expenditure is to be allowed in its entirety and allowed the claim of the assessee. Against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure is mostly in the nature of sales promotion, staff welfare, discount allowed to the distributor, product launch, towards consultancy and legal expenses, advertisement, vehicle head charges, telephone, postal charges, carpenter and customer meeting expenses, travelling expenses, free sample expenses, salary and conveyance and material expenses etc. The AO was of the opinion that expenditure resulted in enduring benefit. Thus, he disallowed the claim of the assessee by treating it as capital expenditure and depreciation was granted on it. According to ld. AR the expenditure incurred has not resulted in acquiring any tangible or intangible property or acquiring any asset of enduring benefit so as to treat it as capital expenditure. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure. iii) If the outgoing is so related to the carrying on or the conduct of the business that may be regarded as an integral part of the profit earning process or operations and not for acquisition of asset of a permanent nature the condition of which is the precedent for the running of the business then it would be expenditure of a revenue nature. iv) Special knowledge or technical knowledge, or patent or a trade mark, is an asset if it is acquired for payment for use and exploitation for a limited period and what is acquired is not an asset or advantage of an enduring nature and at the end of the agreed period that advantage or asset reverts back to the giver of that special knowledge or owner or patent or trade mark it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee got the benefit to the assessee for more than one year that expenditure itself cannot be called/treated as capital expenditure on the simple reason that it does not bring into existence any new asset in the field of capital or in other words no new brand was developed by incurring that expenditure and the accounting treatment given by the assessee cannot be conclusive to treat expenditure as capital. In this case most of the expenditure in the field of advertisement presumably was to create public awareness and consciousness of the assessee product so as to increase the sales of the assessee. It appears that from the incurring of the expenditure for promotion, consultancy and legal expenditure the firm has hired consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure year after year so as to keep the product in market otherwise when the advertisement was not followed up subsequently even the advantage secured from earlier advertising would get dissipated . Just because an expenditure is debited in books towards brand building, which it purportedly is, and statutory recognition has since been accorded to such an intangible asset, as a brand would not by itself imply that an advantage in the capital field, or of enduring value to the business has, arisen to the assessee upon incurring the expenditure. Rather, the business being competitive and prudence and conservatism being fundamental accounting assumptions, capitalization of such expenses or ascribing lasting abiding value to such expenses, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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