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2005 (7) TMI 538 - AT - Income TaxRevision - Challenged the Order passed by CIT u/s 263 - Claim u/s 37(1) - deferred revenue expenditure - method of accounting - HELD THAT:- It is not the case of the revenue that method of accounting adopted by the assessee is not permissible under the law. If the assessee is permitted under Companies Act to maintain its accounts and to claim the entire expenses as deferred revenue expenses and part of it is debited to the P & L account, the revenue cannot disallow the claim of the assessee that he has treated it to be deferred revenue expenses of the P & L Account if the expenses allowable u/s 37(1) of the Income-tax Act. For the purpose of Income-tax Act, we have to examine the nature of the expenses. If the nature of the expenses are allowable as incurred for business purposes, it should be allowed in toto irrespective of the fact that it was claimed to be deferred revenue expenditure for the purpose of the Companies Act or to show higher book profit to its shareholders. Since the Assessing Officer has applied his mind while dealing with the issues and duly considered the explanations of the assessee, we do not agree with the findings of the CIT that the assessment order is erroneous and prejudicial to the interests of the revenue. We, therefore, hold that CIT acceded his jurisdiction u/s 263 of the Income-tax Act. We, therefore, quash his order. In result, appeal of the assessee is allowed.
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