High Court: Ad expenses are revenue, not deferred; Appeal dismissed -06

The High Court held that the advertisement and publicity expenditure incurred by the assessee should be treated as revenue expenditure and fully allowable for Assessment Year 2005-06. The Court rejected the concept of deferred revenue expenditure and referred to previous decisions to support its conclusion. The Court found no substantial question of law in the appeal and dismissed it, affirming the decision of the Tribunal and CIT(A).

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Issues involved: Assessment of advertisement and publicity expenditure for Assessment Year 2005-06 as revenue or deferred expenditure.

Summary:

The assessee incurred an expenditure of &8377; 6,38,01,509 on advertisement and publicity for its brand 'swatch' in the medium and high-end luxury watch segments in India. The Assessing Officer amortized the expenses over three years, allowing deduction of 1/3rd for the year in question and deferring 2/3rd for the next two years. The assessee appealed to the CIT(A), who treated the entire expenditure as revenue in nature, rejecting the concept of deferred revenue expenditure. The Tribunal upheld the CIT(A)'s decision, citing the case of ACIT v Ashima Synthetic Ltd and various other judgments.

The High Court, after considering the nature of the expenditure and previous decisions, concluded that the advertisement expenses should be treated as revenue in nature and fully allowable. The Court referred to its detailed consideration of a similar issue in The CIT-V vs. M/s Pepsico India Holdings Pvt. Ltd. The Court found no substantial question of law in the appeal and dismissed it accordingly.

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