TaxTMI 
TaxTMI 
2006 (12) TMI 175
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.... programming, systems analysis and machine services for solving and aiding commercial. industrial, scientific and research problems, and for all other related business. During the year, the assessee incurred an expenditure of Rs. 55,64,715/- on advertisement and publicity, trade shows and other miscellaneous sales promotion items. The AO held that as done in the preceding year, the expenses are in the nature of deferred revenue expenditure. The expenses impart an enduring benefit to the assessee. Since the benefit would accrue for a long period of time, the expenditure should be allowed in a deferred manner. Though the amount has been allowed by learned CIT(A) for asst. yr. 1997-98, since the Revenue has filed further appeal to the Tribunal, only 1/5^th of the total claim is allowable as allowed in the earlier year. 2.1 The learned CIT(A) held that the expenses are allowable as revenue expenditure as allowed by him in earlier years. The allowability will depend upon the genuineness of the claim. He accordingly asked the assessee to furnish the details of such expenses. Learned CIT(A) noticed that following expenses are pertaining to earlier years: Rs. 30-9-1997 ....
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.... decision of Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. vs. CIT (1994) 122 CTR (Guj) 329: (1995) 213 ITR 523 (Guj), wherein it was held that if any liability though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years, (it) cannot be disallowed as a deduction merely on the basis that the accounts are maintained on mercantile basis. He accordingly pleaded that the amount of Rs. 10,83,605/- and the sum of Rs. 3,38,840/- be deleted from disallowance. AB regards sum of Rs. 44,569/-, learned CIT(A) did not confront the assessee before disallowing such expenses. As regards the sum of Rs. 50,635/-, the counsel for assessee submitted that the amount is payable to Hotel Oberoi in respect of conference organized for 20 persons. A bill has been raised by Hotel Oberoi. Though it is mentioned that the same is to be charged to the client account, the same was not charged. At first instance, the liability was that of the assessee. Since the same has been paid by the assessee, it is allowable as business expenditure. If ultimately the charge....
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....s no question of any disallowance of such expenditure. We accordingly delete the disallowance of Rs. 10,83,605/-. 2.5 As regards allowability of a sum of Rs. 3,33,840/-, it was always contended before learned CIT(A) that the expenditures were disputed and since the liability crystallized during the year, the same were claimed. In our opinion, the claim of assessee could not have been dismissed holding the same as prior period expenditure. Any liability though relating to earlier year depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the year, cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it related to a transaction of the previous year, The expenses are contractual in nature and not statutory payments. Thus, the same will be allowed as liability in the year in which such liability crystallizes. Thus, the expenditures which were earlier in dispute and in view of the fact that the dispute is settled during the year under consideration, the same are allowable in such year. We accordingly delete the disallowance of Rs. 3,33,840/-. 2.6 As reg....
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....h loss can be allowed only when the assessee actually repays these loans. Till that time it is a hypothetical loss. 3.1 Learned counsel for assessee submitted that identical issue arose before the Tribunal in assessee's case for asst. yr. 2001-02. The Tribunal, following the decision of Special Bench in the case of Oil & Natural Gas Corpn. Ltd. vs. Dy. CIT (2002) 7 TTJ (Del)(SB) 387: (2002) 83 ITD 151 (Del)(SB) and the decision of Tribunal in Dy. CIT vs. Maruti Udyog Ltd. (2006) 101 TTJ (Del) 760 : (2006) 99 ITD 666 (Del), held that such loss is allowable as business revenue loss. 3.2 The learned Departmental Representative, on the other hand, submitted that the loss is contingent in nature and unless paid for, merely making provision for the same will not entitle the assessee to claim the same as allowable loss. 3.3 We have considered rival submissions. The Hon'ble Supreme Court in the case of Sutlej Cotton Mills Ltd. vs. CIT 1978 CTR (SC) 155 : (1979) 116 ITR 1 (SC) held that where profit or loss arises to assessee on account of appreciation or depreciation in the value of foreign currency held by him, on conversion into another currency, such profit or loss woul....
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.... that since the excise duty paid on closing stock inventory was not payable during the year, i.e., the liability to pay customs duty did not arise during the year, the same cannot be allowed under s. 43B merely because the payment had been made. The learned CIT(A) held that similar claims for earlier years i.e. 1996-97, 199798 and 1998-99 were decided in favour of assessee following the decision of the Special Bench in the case of Indian Communication Network (P) Ltd. 4.2 The learned Departmental Representative submitted that the amount though paid during the year can be allowed provided the same is payable during the year. Since there was no liability to pay customs duty during the year, the question of allowability thereof did not arise. 4.3 The learned counsel for assessee, on the other hand, submitted that the customs duty is payable on importing the same unlike the customs (sic-excise) duty which is payable on production of goods. Thus, the liability for payment of customs duty arose as soon as the goods were imported. The issue is now squarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of Berger Paints India Ltd. vs. CIT (....