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TMI Blog2021 (11) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 16,50,40,070/- made on account of deferred brokerage expenditure without appreciating the fact that the corresponding income also has not been recoginized as income. Thus, the claim of assessee is 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. 16,50,40,070/- made on account of deferred brokerage expenditure relying on Hon‟ble Apex Court decision in Taparia Tools Ltd. Vs. JCIT reported Court 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 yea itself; and hence, the facts are distinguishable. 4. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the AO be restored. 5. The appellant craves leave to amend or alter any ground or to submit additional new ground, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year. The only dispute in this case is whether the entire amount of expenses is allowable during this year under ccms1&Atkonor only a proportionate of such expenditure relatable to the year under' consideration is allowable. However, the AO disallowed Rs. 16,50,40,070 shown in the books of account based on the stand taken by the AO in the immediate preceding assessment years 201243 and 2013-14. 3.3 The appellant has stated that following the accepted accounting principle, it has amortized the upfront brokerage expenses paid in its books of account over the Life of the Mutual Fund Schemes. It is so because the entire brokerage becomes due and the liability to pay arises at the moment investor invests in Mutual Fund schemes. lithe appellant does not pay the brokerage expenses to the broker then, the broker can sue the appellant to recover the amount due. Therefore, for the purpose of accounting treatments, out of the total brokerage expenses incurred during the year, it has debited is.3,78,44,145 to the P & L Account and balance amounting to Rs. 16,50,40,07O is deferred in its books of account over the life of the schemes. The appellant, however, in the return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under.:- "6. Against the above order revenue is in appeal before us. We have heard both the parties and perused the records. 7. Ld. DR relied upon the order of AO and also on ITAT Delhi decision of Citi Financial Consumer Finance vs ACIT in ITA No.4305/Del/2005, dated 18/12/2009. 8. Per contra Ld. Senior Counsel of assessee Shri Percy Pardiwala relied upon order of Ld.CIT(A). He relied upon Hon‟ble Supreme Court decision of Taparia Tools Axis Asset Management Co.Ltd. 5 Ltd.(supra). He further submitted that the said decision of ITAT 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the entire period and, therefore, the liability was to be spread over the period of debentures. 11. We note that the aforesaid decision had a distinguishing feature that it was the assessee who sought to spread the expenditure. Thus, What follows from the decision is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Income Tax department cannot deny the same. However, in those cases where the assessee himself wants to 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 isalso not sustainable. It will also be apt to refer to the decision of the Hon‟ble Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which it is incurred, and the expenditure fulfils the test laid down under section 37, it has to be allowed. In the assessment year 2001-02, the assessee-company claimed an expenditure of Rs. 3.93 crores on account of advertisement and publicity expenditure as revenue expenditure and the same had been debited to the profit and loss account. The Assessing Officer was of the view that this expenditure could not be termed as an expenditure relevant exclusively for the period of 12 months under consideration during the said assessment year; such advertisement and publicity expenses had a bearing on 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f stamping duty as well as commission paid to the direct 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. It held that 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. Held that the Tribunal was right in holding that the expenditure was incurred once and for all in the form of stamping duty as well as commission paid to the direct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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