2017 (12) TMI 181

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....claring an income of Rs. 1,36,55,545/-. The case was subsequently selected for scrutiny and the assessment was completed u/s 143 (3) of the Income Tax Act, 1961 (herein after called 'the Act') at a total income of Rs. 1,75,10,422/- after making a disallowance of Rs. 37,96,092/- u/s 37 of the Act and further disallowance of Rs. 58,785/- u/s 14A of the Act. During the course of assessment proceedings the AO observed that assessee had incurred Rs. 53,30,738/- on advertisement and publicity expenses. It was further observed that Rs. 47,45,116/- had been incurred on promotion of 'OSIM' brand and Rs. 5,85,622/- had been incurred on advertisement and publicity material. The AO was of the opinion that the amount of Rs. 47,45,116/- was incurred on p....

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....empt income. Accordingly, the AO was correct in resorting to invocation of rule 8D(2) of the Act and making a disallowance. 4. In response, the Ld. Authorised representative relied on the findings of the Ld. CIT (A) and submitted that both the issues had been analysed and discussed at length in the impugned order and it was prayed that the impugned order should be upheld. 5. We have heard the rival submissions and have also perused the material on record. As far as the issue of disallowance of Rs. 37,96,092/- in respect of advertisement and publicity expenses is concerned, it has been submitted that the expenditure on advertisement and publicity comprised of expenditure on press advertisement, film screening in various theatres, SMS c....

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....g lasting effect on the general public. The Hon'ble Delhi High Court has also held that under the Income Tax Act there is only a reference to capital or revenue expenditure and there is no reference to deferred revenue expenditure. It has also been held that advertisement expenditure in the present day context should primarily be treated as revenue expenditure unless there are special circumstances and reasons to hold that the expenditure was capital in nature. It has also been held that where expenditure was incurred to popularise a product, it was for business promotion. 5.1 In the facts of the present case, it is evident that the AO has not demonstrated with cogent evidence, any special circumstances or reasons to hold that the impugn....