2015 (12) TMI 908

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....hat the respondent assessee had filed the return of income for the assessment year 2004-2005 in which the assessee had claimed deduction of Rs. 1.70 crores (rounded off) towards the expenditure incurred for sales promotion and publicity and setting up of various stores. In the reopened assessment, the Assessing Officer questioned such income of the assessee. The principal objections of the Assessing Officer were that the expenditure was not a revenue expenditure and further that in the books of account itself the assessee had spread the claim over three years. The assessee contended that the expenditure being of revenue nature and it was incurred wholly and exclusively for the purpose of business, must be allowed in its entirety for the yea....

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....ning to one single year in which they are paid. In view of above, expenses to the tune of Rs. 1,70,17,652/- being residual balances of sales promotion & publicity and stores setup expenses claimed in the return of income it disallowable." 3. The assessee carried the matter in appeal. CIT(Appeals) reversed the decision of Assessing Officer and allowed the appeal of the assessee. He was of the opinion that differed revenue expenditure denotes an expenditure for which a payment has been made or a liability has been incurred which is essentially revenue in nature but due to various reasons, it is written off over a period of time. For the purpose of allowing expenditure under the Income Tax Act what is material is the classification between ....

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....s deferred revenue expenditure and hence was capital in nature, cannot be termed to be a correct approach because insofar as the Income Tax Act is concerned, there is no such category of deferred revenue expenditure. Similarly, making of an entry or absence of an entry does not determine the allowability or otherwise of the item of expenditure and the same cannot be considered to be a factor adverse, if the expenditure is otherwise of allowable nature. Every expenditure incurred by a business concern, if incurred for the purposes of business, is bound to result in some benefit, direct or indirect, immediate or after some time, but the benefit to the business cannot be termed capital or revenue only on the basis of the period for which the b....