The Tax Publishers2020 TaxPub(DT) 1791 (MP-HC) INCOME TAX ACT, 1961
Section 37(1)
Expenses on advertisement, publicity and sales promotion in relation to the business are in the nature of deferred revenue expenditure and although the benefit of such expenses would be availed by the assessee over a number of years but it was to be allowed for the relevant assessment year for which assessee claims exemption.
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Business expenditure - Allowability - Expenditure on advertisement, promotion etc. - Whether to be allowed all at once even though benefit of expenses would be availed for coming years
Revenue challenged order of Tribunal deleting addition of Rs. 5,32,75,978 made by AO on account of deferred Revenue expenditure. Held: In instant case, expenditure on advertisement and sales promotion was claimed for deduction as revenue expenditure. Advertisement and sales promotion is the necessity of the business and thus, an integral part of business activity. Therefore, expenses incurred on advertisement etc. are not for acquisition of an asset or right of a permanent character, therefore, cannot be said to be a capital expenditure. It is but a revenue expenditure. Whether expenses on account of advertisement, publicity and sales promotion in relation to the business are in the nature of deferred revenue expenditure and although the benefit of such expenses would be availed by the assessee over a number of years but should it be allowed for the relevant assessment year for which assessee claims exemption, also came up for consideration before a Punjab and Haryana High Court in CIT v. Glen Appliances (P) Ltd. [ITA No. 858/2010, decided on 2-5-2011]. Accepting plea of assessee, it was held that expenses incurred by assessee on the aforesaid activities were revenue in nature and the entire amount was admissible in the year in which it was incurred.
Followed:CIT (Central), Ludhiana v. Glen Appliances (P) Ltd. [ITA No. 858/2010, decided on 2-5-2011]
REFERRED : Madras Industrial Investment Corporation Limited v. CIT (1997) 91 Taxman 340 (SC) : 1997 TaxPub(DT) 1209 (SC); CIT, West Bengal I v. India Discount Company Limited (1970) 75 ITR 191 (SC) : 1970 TaxPub(DT) 0164 (SC); CIT v. Brilliant Tutorials (P) Ltd. 2007 TaxPub(DT) 0951 (Mad-HC); Amar Raja Batteries Ltd. v. Asstt. CIT 2004 TaxPub(DT) 1615 (Hyd-Trib)
FAVOUR : In assessee's favour
A.Y. :
IN THE MADHYA PRADESH HIGH COURT
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