Revenue expenditure principle applied to advertisement, recruitment and training costs; partial capitalisation was rejected.

Expenditure incurred in the ordinary course of retail business for advertisement, customer incentives, recruitment and training was held to be revenue in nature because it did not create any enduring capital asset. The Tribunal followed the assessee's own earlier year and jurisdictional precedents to reject partial capitalisation of advertisement and marketing , holding that no estimated 25% disallowance was sustainable. On the same reasoning, recruitment and training expenses were also allowed in full as revenue expenditure, and the alternative claim for depreciation did not arise.

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Issues: (i) Whether 25% of advertisement and marketing expenses was to be treated as capital expenditure or allowed as revenue expenditure in full. (ii) Whether recruitment and training expenditure was capital in nature or allowable as revenue expenditure in full.

Issue (i): Whether 25% of advertisement and marketing expenses was to be treated as capital expenditure or allowed as revenue expenditure in full.

Analysis: The expenditure was incurred in the course of the assessee's retail business for customer incentives and display through carry bags. The Tribunal followed the view taken in the assessee's own case for the earlier year and the jurisdictional precedents relied upon, holding that such expenditure did not bring into existence any enduring asset and could not be split by treating a portion as capital merely because some indirect or temporary business advantage may have resulted.

Conclusion: The entire advertisement and marketing expenditure was held to be revenue expenditure and no disallowance of 25% was sustainable, in favour of the assessee.

Issue (ii): Whether recruitment and training expenditure was capital in nature or allowable as revenue expenditure in full.

Analysis: The Tribunal applied the same reasoning as in the assessee's own earlier year and held that recruitment and training expenses were incurred for day-to-day business operations and did not create an enduring capital asset. The claim for treatment as capital expenditure, and the alternative plea for depreciation, therefore did not survive.

Conclusion: The recruitment and training expenditure was held to be revenue expenditure in full, in favour of the assessee.

Final Conclusion: The Revenue's appeal failed on both issues, and the assessee's cross-objection was rendered infructuous.

Ratio Decidendi: Expenditure incurred in the ordinary course of business for advertisement, customer incentives, recruitment, and training is revenue in nature where it does not result in the creation of an enduring capital asset; a partial capitalisation of such expenditure merely on an estimated basis is not justified.

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