9911796707
TMI Blog2022 (9) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal of assessment year 2013-14. 2. The grounds of appeal read as under :- "1. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of learned Assessing officer in re-characterizing the business expenses amounting to Rs. 21,02,30,236/- as capital expenditure allegedly on the ground that the assessee is engaged in brand building and does not presented any revenue model before the learned AO and the learned CIT(A). 2. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of learned Assessing officer and not appreciating the fact that the Income Tax law does not provide for any type of selfgenerated brand as asset under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and activation cost, management consultancy charges, huge salary expenses to the Professionals, these expenses cannot be termed as pure revenue expense to be allowable u/s 30 to 37 when there is no income chargeable to tax u/s 28 of the Act. No material facts has been brought on record by the Ld.AR substantiate its claim as revenue nature of expenses. The nature and characteristics of these expenses have the element of giving benefit to the appellant for a longer period and of enduring nature. The view of the AO that the assessee has no income which is chargeable under the head 'Profits and gains of business or profession' is upheld. Further, as has also been pointed out by the AO, once there is no income which is chargeable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long gestation period for such enterprises. He further submitted that the Revenue authorities' view that earning of income is a precondition for allowing the expenditure is without any basis. He further pleaded that the nature of these expenses is totally revenue. He further submitted that Revenue authorities have not understood the business model of the assessee wherein revenue can be earned at any time during the course of business. He submitted that assessee has already built a messenger app namely 'hike' which was used by public in same manner as Whatsapp. He submitted that the presumption that the assessee has not made any effort to earn is misplaced. He further submitted that the case laws relied upon by the Ld. CIT(A) are not at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture" is not a sustainable proposition. In the present two assessment years, the AO had disallowed the same holding them to be a brand-building exercise. Ld. CIT(A) has also upheld the view. In the background of the ITAT order in assessee's own case, such views are not sustainable. Assessee's business was duly set up in AY 2012-13 and expenditure for that year was allowed. Assessee's nature of business is arising out of Information Technology for developing, marketing and distribution of instant messaging application for mobile user in India. The contention of the assessee that there is long gestation period for tech start-up is duly supported by contemporaneous data. It is not necessary to earn income for allowance of expenditure has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bang.) In the above matter, the assessee sold its product at less than cost price and claimed the difference as expense. However, the learned AO added back the said expense contending that it is brand building expense and hence capitalized the said expense. On appeal, Hon'ble ITAT carefully examined the matter and deleted the addition made by ld. AO in this respect and allowed the said expense claimed by the assessee company on the ground that no capital asset in the form of any brand has come into existence. This case law is duly applicable on the facts of the assessee's case here. 9. Furthermore, we note that ld. Counsel of the assessee further placed reliance on the following case laws where Revenue has tried to treat the advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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