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2014 (10) TMI 699 - AT - Income TaxDeferred revenue expenditure - assessee submitted that since the amount was of deferred revenue nature, being partly relatable to current year and partly to subsequent year, therefore, for preparation of balance sheet, it was claimed as deferred revenue expenditure in the balance sheet but for Income tax purposes the entire amount was claimed as deduction in the computation of income u/s 37 – Held that:- There is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific provisions like section 35D - unless statutory provision is there to defer the revenue expenditure over a period, the entire amount is to be allowed in the year in which it is incurred for running the business as per section 37 of the Income Tax Act – following the decision in COMMISSIONER OF INCOME TAX Versus SALORA INTERNATIONAL LIMITED [2008 (8) TMI 138 - DELHI HIGH COURT] - the entries in the books of account cannot be the basis whether a receipt is taxable or not or whether expenses are allowable as a deduction or not - Courts are compelled to go by the true nature of receipts and not to go by the entries made in the books of account – Decided partly in favour of assessee. Credit investigation expenses – expenses on application capture – Held that:- The reasoning given by AO in regard to amount is akin to treating the amount as deferred revenue expenditure inasmuch as the AO himself has observed that there was necessity of this expenditure and while so holding, the AO himself has allowed 25% of this expenditure impliedly 1/4th of the amount has been considered as expenditure relating to current AY and the balance being allowable in subsequent three years - this treatment is not permissible in law and the entire amount had to be allowed u/s 37 of the Income Tax Act being incurred wholly and necessarily for the purpose of business - the nature of application capture expenditure, reasons for making disallowance by AO and the reasons for allowing this expenditure by ld. CIT(A) are identical to the issue relating to credit investigation expenses – thus, the order of the CIT(A) is upheld. Partial disallowance of creation of brand and advertisement expenses – Held that:- AO had allowed 25% of the expenses treating the same being relating to current year under consideration and balance has been disallowed - he has primarily treated this amount as deferred revenue expenditure - the entire amount was rightly allowed by CIT(A) particularly because 79% of the expenditure was in the nature of commission paid to marketing agent for procuring new cardholders - It cannot be denied that this expenditure though classified under the head “advertising expenditure” was essential for running of assessee’s business – Decided against revenue.
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