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TMI Blog2021 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... against the basic principal of matching of revenue with expenditure. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 1 1,26,94,520/- made on account of deferred brokerage expenditure relying on Hon'ble Apex Court decision in Taparia Tools Ltd vs. JCIT reported in 372 ITR 605 (SC) without appreciating the fact that In the instant case, income is offered by the assessee for more than one year and hence, as per revenue matching principle, expenditure has to be claimed for more than one year and not in the first year itself; and hence, the facts are distinguishable.. 4. The Appellant prays that the order of the CIT (Appeals) on the above grounds be set aside and that of the AO be restored 3. Brief facts of the case are that the assessee company engaged in the business of investment management services & Portfolio management services. The assessee claimed deduction towards brokerage expenses of Rs. 11,26,94,520 in the statement of computation on the plea that it was not debited to the profit and loss account. It was explained to the AO that though the assessee incurred an expenditure of Rs. 14,82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting principle, it has amortized the upfront brokerage expenses paid in its books of account over the life of the Mutual Fund Schemes. That it is so because the entire brokerage becomes due and the liability to pay arises at the moment investor invests in Mutual Fund schemes. That if the appellant does not pay the brokerage expenses to the broker then, the broker can sue the appellant to recover the amount due. That therefore, for the purpose of accounting treatments, out of the total brokerage expenses incurred during the year, it has debited Rs. 3,55,94,300 to the P&L Account and balance amounting to Rs. 11,26,94,520 is deferred in its books of account over the life of the schemes. That the appellant, however, in the return of income, has claimed deduction of the entire brokerage expenses of Rs. 14,82,88,820. That the appellant placed reliance on the decision of the Hon'ble Supreme Court in the case of Taparia Tools Ltd. vs. JCIT 372 ITR 605 in support of its contention. 5. Considering the above, Ld.CIT(A) decided the issue in favour of the assessee by relying upon the decision of Hon'ble Supreme Court in Taparia Tools Ltd. by holding as under:- 3.4 In the case of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Delhi was considered and explained by ITAT in ITA No.4305/Del/2005 & others vide order dated 18.12.2009 in the same assessee's case of subsequent period also and the issue was decided in favour of assessee. In this ITAT order one of us in the present Bench was the author sitting along with then President of ITAT Shri Vimal Gandhi. Ld. Senior Counsel Shri Percy Pardiwala pointed out that this order of ITAT was upheld by Hon'ble Delhi High Court in CIT vs City Financial Consumer Fin. Ltd. 20 taxmann.com 452. Shri Pardiwala submitted that this decision also duly supports the allowance of expenditure entirely as revenue expenditure for the year. 9. Upon careful consideration, we note that issue in present case is the treatment of brokerage expenditure, which though already incurred in current period has been treated as deferred revenue expenditure in account of the assessee. In the computation of income the assessee has claimed said expenditure as adjustment from income for the current year. Hence, the question before us, whether the said claim can be allowed u/s 37 of the Act. 10. We note that there is no dispute that the expenditure has been incurred in the relevant assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spread the expenditure over a period of ensuing years, it can be allowed only if the principle of matching concept is satisfied, which up to now has been restricted to the cases of debentures. 12. Hence, we are of the opinion that AO cannot force the assessee to spread the expenditure over a number of year on the plea of matching principal, when the expenditure has already been duly incurred. In this regard, it is also noted that the implied view of the AO that the expenditure results in a benefits of enduring nature is also not sustainable. It will also be apt to refer to the decision of the Hon'ble Apex Court in the case of the Empire Jute Co. Ltd. Vs. CIT 124 ITR 1 wherein it was observed that "there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the period which spread over a period of five years and, therefore, the assessee could not claim the benefit in the year in which the expenditure was incurred. Thus, opining that the benefit was of an enduring nature, he was of the view that it was to be spread over a period of five years and, thus, allowed 1/5th of the aforesaid amount in the year in question. The Tribunal, however, allowed the assessee's claim. Held that the expenditure in question was incurred by the assessee in the relevant assessment years in which the assessee was claiming deduction thereof under section 37. Thus, there was no dispute that the expenditure was, in fact, incurred, it was also not in dispute that the expenditure in question was business expenditure incurred wholly for the purpose of the business of the assessee. The expenditure incurred in the nature of advertisement and publicity was incurred forever and in no manner any portion thereof reverted back to the assessee. There was no advantage which had accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee's trading operations. No fixed capital was created by this expenditure. Only in ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selling agents for procuring the loan assignments and it was not dependent upon the working out of the agreements ultimately entered into between the assessee and the customers. Since the commission was paid to the direct selling agents, for their services in sourcing hires in the year in which the loan was disbursed, it was to be allowed as business expenditure. Thus, the expenditure was required to be allowed as revenue/business expenditure incurred in the year in which the transactions were entered into. 14. Thus to recapitulate in the instant case before us, we find that assessee has incurred expenditure on brokerage expenditure paid for obtaining investments in mutual funds. The investment made in the funds yields income over a period of years, however the said amount of brokerage expenditure incurred is not refundable to the assessee in any circumstances. Undisputedly, the expenditure is wholly and exclusively for the purpose of business. The concept of deferred revenue expenditure is not there in I.T.Act, which is duly supported by the decision of Hon'ble Supreme Court in Taporia Tools (supra). The expenditure cannot also not be categorized in the capital filed on the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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