2008 (4) TMI 3 - HC - Income Tax

Revenue appeal dismissed; deferred revenue expenses of Rs 15,58,500 allowed after Rs 3,89,625 already admitted

Commissioner of Income Tax Versus M/s. Jai Parabolic Springs Ltd.

Delhi HC dismissed the Revenue's appeal challenging the Tribunal's allowance of deferred revenue expenses (Rs.15,58,500). The HC noted that ordinarily ... Expenditure incurred on account of customer introduction charges which were debited as 'Deferred Revenue Expenses' - Opportunity of being heard - Whether the Tribunal was right in law in allowing relief of Rs. 15,58,500/- in the assessment year under consideration when no such claim was made by the assessee in the return of income - HELD THAT:- As per the relevant statutory provisions no such claim can be allowed which has not been claimed in return of income. Further, particulars for the purpose of assessment have to be submitted before the completion of assessment proceedings and if the information is supplied subsequent to the completion of the assessment, it would mean that the Assessment order will have to be reopened and the Act does not contemplate such reopening of assessment. Furthermore, in the absence of any direction given by the Tribunal in the first round of proceedings to allow the entire claim, the Tribunal failed to appreciate that out of the entire Deferred Revenue Expenses an amount of Rs.3,89,625/- has already been allowed by the Assessing Officer and the remaining expenditure was treated by the Assessing Officer in consonance with the proper manner laid down under the law. No dispute that customer introduction charges did not represent revenue expenditure. The principal ground taken by the Revenue in this appeal is that if no claim for deduction of the amount was made in the return of income then deduction would not be allowed. From the record, it is very clear that there is no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arises in the matter and for the just decision of the case. Therefore, there is no infirmity in the order of the Tribunal. Accordingly, the appeal of the Revenue is hereby dismissed. Issues:Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding deferred revenue expenses claimed by the assessee.Analysis:1. Background and Assessment: The assessee, engaged in the automobile industry, filed a return declaring a net loss. The assessing officer computed the loss under the normal provisions of the Act by making various additions and disallowances. The assessee claimed reduction of expenditure on customer introduction charges, which was allowed initially.2. Appeals and Tribunal: The assessee filed an appeal before the Commissioner of Income Tax (Appeals) claiming the entire deferred revenue expenses. The CIT (A) allowed the appeal. The Revenue then appealed before the Tribunal, which restored the matter to the Assessing Officer for re-examination. The Assessing Officer disallowed a portion of the claim as it was not originally made in the return of income.3. Appeal before CIT (A): The assessee appealed before the CIT (A) against the Assessing Officer's order. The CIT (A) allowed the appeal, stating that the disallowance was incorrect solely based on the absence of the claim in the return of income.4. Appeal before Tribunal: The Revenue, aggrieved by the CIT (A) order, filed an appeal before the Tribunal. The Tribunal confirmed the order of the CIT (A), leading the Revenue to file the present appeal before the High Court.5. Principal Question: The main issue in the appeal was whether the Tribunal was correct in allowing relief when the claim was not made in the return of income. The Revenue contended that such relief should not be granted without a specific claim.6. Legal Precedents and Interpretation: The Court referred to various legal precedents, emphasizing the wide powers of the Tribunal to consider additional grounds raised by parties. It was highlighted that revenue expenditure for business purposes should be allowed in full in the year it is incurred, without spreading it over multiple years.7. Decision: The Court dismissed the appeal of the Revenue, upholding the Tribunal's decision to allow the relief claimed by the assessee. It was concluded that there was no prohibition on the Tribunal considering additional grounds for a just decision in the case.In conclusion, the High Court upheld the Tribunal's decision, emphasizing the Tribunal's wide powers to consider additional grounds and the requirement to allow business-related expenditure in full in the year of its incurrence.