Revenue expenditure and higher depreciation principles upheld for business expenses, sales promotion, and computers with peripherals.

Recruitment and training expenses incurred in the ordinary course of business were treated as revenue expenditure because they improved employee efficiency, did not bring into existence any capital asset, and remained deductible despite any enduring advantage. Sales promotion were not disallowed where the record showed no non-business use and no basis for an ad hoc reduction, so the full claim was sustained. Depreciation on computers and their peripherals was allowed at the higher rate applicable to computers under the depreciation schedule, and the lower rate applied by the Assessing Officer was rejected. The appellate relief was thus sustained on all three issues.

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Issues: (i) Whether recruitment and training expenses were allowable as revenue expenditure; (ii) Whether sales promotion expenses could be disallowed on the footing of enduring benefit; (iii) Whether depreciation on computers and their peripherals was allowable at 60%.

Issue (i): Whether recruitment and training expenses were allowable as revenue expenditure.

Analysis: The expenditure was incurred in the ordinary course of business to improve employee efficiency and facilitate business operations. No capital asset was brought into existence, and the mere fact that the expenditure may yield an advantage beyond one year did not convert it into capital expenditure. The issue was also covered by the earlier year's decision following the settled principle that revenue expenditure remains deductible in full.

Conclusion: The disallowance of recruitment and training expenses was rightly deleted and the finding is in favour of the assessee.

Issue (ii): Whether sales promotion expenses could be disallowed on the footing of enduring benefit.

Analysis: The record did not show that any part of the sales promotion expenditure was not incurred for business purposes. In the absence of a specific finding of non-business use, and there being no prior disallowance on the same item in earlier years, the adhoc disallowance was unsustainable.

Conclusion: The deletion of the addition on account of sales promotion expenses is upheld in favour of the assessee.

Issue (iii): Whether depreciation on computers and their peripherals was allowable at 60%.

Analysis: The issue was covered by the assessee's own case for the preceding year. Computers and their peripherals fall within the special depreciation rate applicable to computers under the relevant depreciation schedule, and the lower rate applied by the Assessing Officer was not justified.

Conclusion: Depreciation at 60% on computers and their peripherals was correctly allowed and the issue is in favour of the assessee.

Final Conclusion: The Revenue failed on all three grounds, and the assessment relief granted by the appellate authority was sustained in full.

Ratio Decidendi: Expenditure incurred wholly and exclusively for business, which does not bring into existence a capital asset, remains deductible as revenue expenditure despite any enduring advantage, and computers and their peripherals are eligible for the special higher depreciation rate applicable to computers.

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