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TMI Blog2016 (2) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... re to be written off over the entire period of debentures. The assessee however, claimed the entire expenditure under section 36(1)(iii) of the Act during the year under consideration upon which the Revenue objected. The Supreme Court held that under section 36(1) (iii) of the Act any amount paid on account of interest becomes an admissible deduction if the same was paid on the capital borrowed by the assessee and the borrowing was for the purpose of business or profession. While examining the allowability of such deduction, the Assessing Officer is to consider the genuineness of the business borrowing and that the borrowing was for the purpose of business and not an illusionary and colourable transaction. It was further held that the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law and on facts in confirming the order passed by the CIT (A) directing to allow the expenditure claimed by the assessee against the disallowance of ₹ 1,35,86,571/in respect of deferred revenue expenditure, though not debited to the profit and loss account ? 2. Briefly stated, the facts are as under. The respondent assessee is a company registered under the Companies Act and is engaged in the business of manufacturing Air conditioner. For the assessment year 19961997, the assessee's return was taken in scrutiny by the Assessing Officer. One of the issues which came up during such scrutiny assessment was with respect to various expenditures incurred by the assessee during the accounting period relevant to the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal noted that the prime reason for the Assessing Officer to disallow the claim was the accounting treatment that the assessee had given to such expenditure. The same being in consonance with the accounting principles and the method of accounting rightly employed by the assessee, the claim of expenditure contrary to such accounting entires was not valid. The Tribunal in this respect recorded that it was not the case of the Revenue that expenditure was in the nature of capital expenditure. Thus being an expenditure in the nature of revenue expenditure, was allowable during the year of expenditure and accounting entries would not be decisive of the nature of treatment that this expenditure should receive. The Tribunal also recorded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same was paid on the capital borrowed by the assessee and the borrowing was for the purpose of business or profession. While examining the allowability of such deduction, the Assessing Officer is to consider the genuineness of the business borrowing and that the borrowing was for the purpose of business and not an illusionary and colourable transaction. It was further held that the amount would be said to have been paid even if same is not actually paid but incurred on the basis of method of accounting. It was further held and observed that there is no concept of deferred revenue expenditure in the Act except under certain specified sections where amortisation is specifically provided. Normally, the ordinary rule would be that the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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