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2014 (11) TMI 804 - HC - Income TaxProvisions for network repair and maintenance and credit verification cost, provision of consultancy charges and provision for car hiring charges disallowed Held that:- The assessee follows mercantile system of accountancy - The term "expenditure" donates idea of spending, paying out or away, it is something which is gone irretrievably - In mercantile system the term expenditure is not necessarily confined to money actually paid towards a liability, but would cover a liability accrued or has been incurred in praesenti, although the discharge could be at a future date - a liability accrues or is incurred when it is an ascertained liability and not a contingent liability, i.e. liability which may or may not accrue and is uncertain - A liability, which actually exists and is also not disputed by assessee, but merely not paid, is not a contingent liability when the work or obligation has been actually performed by the third party to whom the payment is due. When the assessee accepts performance of the work or obligation and accepts liability to pay, it partake the character of actual liability in praesenti and is not dependent upon future happening of an event, which would result in creation of liability subsequently. In the former cases, the liability has incurred or accrued, but actual payment remains unpaid and would be made in the next year(s) - a "provision" can be made in respect of amounts which have become due and payable in the relevant previous year and therefore could be debited to the profit and loss account, once they represent ascertained liability in Calcutta Company Ltd. Vs. Commissioner of Income Tax, West Bengal [1959 (5) TMI 3 - SUPREME Court], wherein it was held that if liability has been definitely incurred in form of unconditional contractual liability, it would not become contingent because payment has to be paid in future. These principles were applied to allow deduction of "provision" for gratuity, in case of serving employees and to whom the gratuity was payable only on retirement/termination, subject to condition that the amount so estimated was sufficiently certain to be capable of being valued - Gratuity payable in future was an obligation arising out of the present engagement and the estimated liability was ascertainable - as a present obligation, it could be allowed as a deduction in the profit and loss account Decided against revenue. Brand launch expenses revenue expenses or not Held that:- The Tribunal was rightly of the view that the assessee in this regard has incurred expenditure which are in the nature of brand launch expenses the expenditure incurred upto the pre-operative period has been capitalised and expenditure incurred after the operation has started have been debited to revenue - there is no concept of deferred revenue expenditure in taxation laws - In the matter of taxation, expenditure is either to be capitalized or is revenue in nature - the expenditure involved is revenue in nature and has been incurred wholly and exclusively for the purpose of business - The amount has actually been incurred by the assessee as such the same is allowable in the entirely the same has been held in Commissioner of Income Tax, Delhi-IV versus Industrial Finance Corporation of India Limited [2009 (9) TMI 877 - DELHI HIGH COURT] the order of the Tribunal is upheld Decided against revenue.
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