2021 (9) TMI 1256

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....enditure of Rs. 93,02,208/- and pre-operative expenses of Rs. 29,16,418/- made by the AO. 2. The assessee is engaged in the business of selling home furniture products. It had opened branches in Mumbai and Gurgaon in the earlier years. The expenditure incurred on opening and publicity of branches was treated as deferred revenue expenditure and pre-operative expenses in books of accounts. Accordingly, they were amortised over a period of time in the books. In the income tax computation also, the assessee claimed proportionate amount of expenditure, every year. According to Ld. A.R., the claim so made was allowed in the past four years. However, he fairly admitted that the assessments of past years have been completed u/s. 143(1) of the Ac....

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.... assessment order. A perusal of the same would show that they are in the nature of electricity charges, housekeeping & maintenance, security charges, salaries, advertisement, business development expenses, rent expenses, travelling expenses etc. The Ld. D.R. further submitted that the concept of 'deferred revenue expenses' is not there under Income tax Act. Further the above said expenses are not capital expenditure eligible for depreciation, but they are in the nature of revenue expenses only. He submitted that it is an admitted fact that these expenses have been incurred by the assessee in an earlier year and not during the year under consideration. Hence these expenses do not pertain to the year under consideration and accordingl....

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....in conclusion:- "14. To conclude, the position emerging from the above discussion can be summed up as follows:-- - the nature of the expenditure treated as a "deferred revenue expenditure" in the books needs to be properly analysed before taking a view on its allowability or otherwise under the provisions of the Act; - where such expenditure results in the creation of any capital asset (tangible or intangible), a case can be made out to treat the same as a capital expenditure with corresponding allowability of depreciation in accordance with law; - in cases where the nature of the revenue expenditure is such that the same can be clearly and unambiguously identified over specified future time periods (e.g.....