TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 608
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..... For the assessment year 2008- 09, assessee filed return of income showing income of Rs.43,422 under normal provisions and Rs.80,65,546 under the MAT provisions, inter alia claiming various expenditure out of which there was a claim of advertisement expenditure to the tune of Rs.1,05,76,570. The assessee in the books of account has claimed an amount of Rs.21,15,314 and the balance of Rs.84,61,256 were shown in the Balance Sheet to be claimed over a period of balance four years. In the computation of income, assessee has claimed full amount of Rs.1,05,76,570 as revenue expenditure. The Assessing Officer on perusal of the agreement with M/s.Bennet Coleman and Co. Ltd. was of the view that the assessee entered into an agreement for giving adv....
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....is no enduring nature of benefit out of this expenditure. 6. At our instance, learned counsel placed on record, Annual Report, broucher of the assessee, company profile and news paper advertisements given to justify that expenditure is routine advertisement in the news papers justifying the business activity. 7. The Learned Departmental Representative, however, relied on the findings of the Assessing Officer that the terms of agreement referred to a period beyond one year, and therefore, the expenditure has to be treated as deferred revenue expenditure, and the Assessing Officer was correct in allowing only 1/5th of expenditure on matching concept. 8. In reply, learned counsel submitted that the principles relied on by the Assessing Offi....
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....ure in this year itself, even though it had written off this expenditure in the books over a period of five years. The Hon'ble Supreme Court in the case of Madras High Court in Madras Industrial Investment Corporation v. CIT (225 ITR 802 & 803) held as follows- "..Section 37(1) further requires that the expenditure should not be of a capital nature. The question whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on, or co....
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....ety in the year in which it was incurred, if it is revenue expenditure, and if it is wholly and exclusively incurred for the purposes of business. The Hon'ble Supreme Court observed that in certain cases, the facts may justify the assessee to spread over and claim the expenditure over a period of ensuing years. 11. In this case, the assessee had launched a new product and incurred heavy advertisement expenditure. The period for which the assessee can be said to have secured benefit by incurring this expenditure cannot be reasonably estimated. The undisputed fact is that the new product launched may fail to take off in the year of launch itself or may have a long life as a product. There is no way in which it can definitely be estimated tha....
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....e the assessee had paid upfront discount for the debentures issued. The lump sum payment of discount which is an upfront, one time payment, secured benefit to that assessee over a number of years. In fact the upfront payment is calculated by discounting the future instalments of interest payable and it is like prepaid interest. The period for which the assessee secured benefit is specified. That assessee by making one time payment had avoided paying interest on debentures in each of the next five years. The annual compulsorily incurable expenditure on interest has been discounted and paid upfront as a one time payment. In fact the entire expenditure of upfront payment in that case does not pertain to one year. Interest is a yearly commitmen....
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....t rid of future annual expenditure which is necessarily to be incurred to carry on the business. This is not a case where annual future mandatory expenditure is done away with by a lump sum upfront expenditure. 12. As for the entries in the books of account are concerned, it is well settled that they do not clinch the issue either way, and they do not determine the allowability or otherwise of the expenditure. The decisions of the Hon'ble Supreme Court in the case of Kedarnath Jute Mills (83 ITR 363) and in the case of India Discounts Ltd. (75 ITR 191, are clear on the issue. If the argument of the learned Departmental Representative that the entries in the books of account are sacroscent and have to be accepted is to be valid, then in the....