TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 653
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....3 with the following observations. "1) You have claimed deduction of Rs. 1,99,13,832/- being Branch Building Expenses which are shown under Deferred Revenue Expenses and have been written off in full. The Brand Building Expenditure is capital in nature and the Assessing Officer has allowed the expenditure wrongly. 2) In the Statement of Income, you have deducted an amount of Rs. 34,63,022/- towards Preliminary Expenses u/s.35D of the IT Act. However, in the assessment order dated 23.12.2010 for the AY.2008-09, the Preliminaryt Expenses were restricted to Rs. 16,09,408/- whereas you have claimed deduction of Rs. 34,63,022/-. The Assessing Officer has wrongly allowed excess deduction in Rs. 18,53,614/-. In view of the above discussion, the assessment order dated 28.12.2011 passed by the Assessing Officer for the AY.2009-10 is erroneous and prejudicial to the interest of revenue. Please state why the Brand Building Expenses of Rs. 1,19,13,382/- may not be disallowed being capital expenditure. Also state why the excess deduction claim to the extent of Rs. 18,53,614/- made u/s.35D of the IT Act may not be disallowed". In reply to show cause notice, the assessee filed written submis....
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.... ITR 43. The ld.DR further contended that the assessee had incurred expenditure towards brand building. The Hon'ble Madras High Court in the case of CIT Vs. South India Shipping Corporation Ltd., reported as 233 ITR 546 (Mad) has held expenditure on brand building as capital expenditure. 5. We have heard the submissions made by the representatives of both the sides. We have also examined the orders of the authorities below and the decisions on which both sides have placed reliance. The reasons for invoking revisional jurisdiction u/s.263 has already been re-produced herein above. The contention of assessee is that revisional jurisdiction has been invoked merely on the basis of audit objection. The Commissioner of Income Tax has not independently analysed the issue and has merely reproduced the audit objections. The AR of the assessee has placed on record objection raised by Audit Officer. The relevant extract of the audit objection raised by the auditors are reproduced as under: "The assessee filed the return of income for the AY.2009-10 on 30/09/09 admitting an income of Rs. 95,55,830. Subsequently, the case was selected for scrutiny and assessment was completed on 28/12/11 ....
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....sement expenditure as 'Revenue Expenditure'. The Assessing Officer after applying his mind, allowed the advertisement expenditure as claimed by the assessee. 7. In the detailed reply filed on 27.12.2011, in paragraph 6, the assessee has explained the characteristics of the advertisement expenditure amounting to Rs. 1,99,13,832/-. In fact, the entire expenditure has been incurred by the assessee towards promoting its business; as such, it is not possible for sure to hold that the said expenditure was in the nature of a brand building expenditure. The advertisement expenditure being much in volume and also incurred in the initial years of business, the assessee on the prudent principles of accountancy, opted to treat the said expenditure as deferred revenue expenditure and to write off the said amount in equal instalments for five assessment years. In that way, in its regular accounts, the assessee has written off a sum of Rs. 39,82,776/-. This has been done for the purpose of true and fair view of the statement of accounts of the assessee company. The Companies Act permits a company to treat its expenditure, if so required, as deferred revenue expenditure. But contrary to t....
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....e possible views taken by the Assessing Officer in allowing the expenditure claimed by the assessee. 9. The ld.DR in order to support his submissions that the audit objection is no bar for invoking provisions of section 263, has placed reliance on the decision of Hon'ble Gauhati High Court in the case of CIT Vs. B&A Plantation and Industries Ltd., (supra). In the said case, the Hon'ble High Court has upheld the revisional jurisdiction exercised by the Commissioner of Income Tax for the reason, the Assessing Officer had failed to take into account the fact that the assessee has already availed the same deductions in earlier AY which was not disputed by the assessee. It was not a case where the revisional authority had substituted its opinion for that of the Assessing Officer. The Assessing Officer had made assessment on wrong assumption of facts and without application of mind. It was under these circumstances the Hon'ble Court had observed that mere fact that the audit party had also raised some objection do not affect the jurisdiction of the revisional authority. The facts of the case on which the DR has placed reliance are entirely different from the facts of the cas....