2010 (8) TMI 1148 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) regarding deletion of product registration expenses and disallowed expenses for club memberships.

Product Registration Expenses:
The revenue appealed against the deletion of Rs. 26,44,983 out of Rs. 33,56,229 claimed as product registration expenses for assessment year 2005-06. The Assessing Officer allowed 1/5th of the expenditure as the benefit accrues over 5 years, disallowing the rest. The CIT(A) based findings on the appellant's business nature and the concept of Deferred Revenue Expenditure. The appellant's counsel argued for full deduction citing past appellate decisions. The Tribunal held that the rule of consistency does not apply universally and assessed the nature of the expenditure. Relying on the decision in CIT Vs. Finlay Mills Ltd., the Tribunal upheld the CIT(A)'s decision to allow the entire expenditure, dismissing the revenue's appeal.

Club Membership Expenses:
Regarding the expenditure of Rs. 2,55,800 incurred at various clubs, the Assessing Officer disallowed it as it was in individuals' names, not the company's. The CIT(A) noted that club access was beneficial for business and estimated a disallowance of Rs. 50,000, allowing the balance. The Tribunal found the CIT(A)'s decision consistent with legal precedents and business needs, including holding board meetings at club facilities. Consequently, the Tribunal dismissed the revenue's appeal against the CIT(A)'s order on club membership expenses.

Conclusion:
The Tribunal dismissed the revenue's appeal against the CIT(A)'s order, upholding the deletion of product registration expenses and the partial allowance of club membership expenses. The decision was based on the nature of the expenses, business benefits, and legal precedents cited in support of the CIT(A)'s findings.