Accounting entries do not control revenue expenditure deductibility where the expense is incurred in the year and otherwise allowable.

Expenditure on advertisement, sales promotion and store setup was treated as revenue expenditure for tax purposes despite being deferred in the books. The key principle applied is that accounting treatment does not determine deductibility under the Income-tax Act; if the outlay is revenue in nature and incurred in the relevant year, it is allowable in that year unless the statute provides otherwise. Deferred recognition in the accounts, by itself, does not justify disallowance. On that basis, the deduction for the full expenditure claimed in the year of incurrence was allowed.

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Issues: Whether the expenditure on advertisement, sales promotion and store setup, shown as deferred in the books, was allowable as revenue expenditure in the assessment year notwithstanding the Revenue's objection based on enduring benefit and accounting treatment.

Analysis: The expenditure was incurred for brand building, sales promotion and store setup in the assessee's retail business. The mere fact that the books spread the cost over later years did not determine allowability under the Income-tax Act. The relevant return claimed the entire amount as expenditure, and judicial precedent was relied upon to hold that entries in the books are not conclusive and that revenue expenditure is to be allowed in the year in which it is incurred, unless the statute provides otherwise. The Revenue's reliance on the deferred treatment in the accounts was therefore not accepted.

Conclusion: The expenditure was held allowable as revenue expenditure in the relevant assessment year, and the disallowance was deleted in favour of the assessee.

Final Conclusion: The Revenue's challenge failed, and the assessee retained the deduction for the full expenditure claimed in the year of incurrence.

Ratio Decidendi: Accounting treatment in the books does not govern tax allowability where the Act permits deduction of revenue expenditure in the year of incurrence, and deferred booking in accounts cannot by itself justify disallowance.

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