Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 774 - AT - Income TaxNature of expenditure - salaries and training cost of employees - capitalized in the assessee’s books of accounts as “intangible assets” - AS-26 relating to the accounting treatment of intangible asset - revenue or capital expenditure - HELD THAT:- in the Notes on Accounts, it has been mentioned that the unamortized amount on account of intellectual property in the form of employee knowledge enhancement developed through various programmes and supported by employees agreements, are to be amortized equally over in the next three years as the utilization of resources in the current year is nominal. Therefore, it is stated clearly that the “intangible assets” has arisen only out of employee cost and training and that there is an enduring benefit out of the same, which is being spread over three years. It is also seen that for such types of training costs, whose benefit can be enduring and spread over a few years, AS-26 will apply, as mentioned in para 3 of AS-26. This supports the contention of the assessee that it was constrained to capitalize the expenses due to application of Accounting Standards (AS) and amortize it over a period of time, even though the nature of those expenses is Revenue in nature. Further, as was held in Kedarnath Jute Manufacturing Co. Ltd., Vs. CIT [1971 (8) TMI 10 - SUPREME COURT], relied upon by the CIT(A), the entitlement of the assessee to a particular deduction will depend upon the provisions of the Income Tax Act, 1961 and not on the entries in the Books of Account. The expenditure in question, is incurred in the form of salaries / training of employees and IRSE assessment cost, which are purely in the Revenue field. There is also no dispute that the said expenditure has been expended wholly and exclusively for the purposes of the assessee’s business. There is nothing on record to controvert the contention that these expenses are incurred for imparting skill to employees to enhance their knowledge. The findings rendered by the CIT(A) in this regard have not been controverted before us. The only contention raised by Revenue in the grounds of appeal is that the assessee itself has capitalized these expenses; which, in our view, cannot be the reason for denial of deduction.- Decided in favour of assessee.
|