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2021 (3) TMI 219 - AT - Income TaxNature of expenditure - deduction claimed by the assessee towards prepaid expenses disallowed - expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are in the nature of revenue expenditure, which does not give any enduring benefit to the assessee - AO made addition of expenditure only on the sole basis of method of accounting followed by assessee in the books of account - assessee has changed its method of accounting - HELD THAT:- The assessee is entitled to change its method of accounting as long as said change in method of accounting is bonafide. Section 145 of the Act, nowhere provides if assessee follows one method of accounting for many years, it cannot change the same in subsequent year. The assessee can very well change method of accounting to give better treatment to various income and expenses in books of account to give true and correct income, but such change should be disclosed in notes to account and effects on taxable income for the year on account of change of method of accounting. In this case, the assessee has changed its method of accounting to give better treatment to prepaid expenses shown in the financial statement upto assessment year 2015-16 and such change is supported by the decision of the Hon'ble Supreme Court in TAPARIA TOOLS LIMITED [2015 (3) TMI 853 - SUPREME COURT] where it was categorically held that once an expenditure is incurred and made payment and claim of the assessee is in accordance with the provisions of the Act, the same needs to be allowed to the assessee, irrespective of treatment given in books of account . The Hon'ble Supreme Court in the case of M/s.Kedarnath Jute Manufacturing Co.Ltd. [1971 (8) TMI 10 - SUPREME COURT] held that entries in books of account are not determinative and or conclusive and the matter is to be examined on the touchstone of provisions contained in the Income Tax Act. In the present case, entire expenditure has been incurred at the beginning of the sanctioning of term loan and also qualifies to be revenue expenditure. Therefore, in our considered view the decision of TAPARIA TOOLS LIMITED [2015 (3) TMI 853 - SUPREME COURT] is squarely applicable to the facts of present case and hence, we are of the considered view that learned CIT(A) was right on allowing deduction towards various expenses as revenue expenditure. Whether expenditure incurred by the assessee like stamp charges, loan processing fee on term loan, marketing fees, sourcing expenses, share issue expenses etc. are revenue expenditure or capital expenditure, which gives enduring benefit to the assessee? - n this case, if you see nature of expenditure incurred by the assessee there is no doubt of whatsoever that said expenditure are purely revenue expenditure, which does not give any enduring benefit or resulting in creation of asset either tangible or intangible . Therefore, these expenses are essentially revenue expenses and needs to be allowed when such expenditure has been incurred, but only requirement is whether said expenditure is incurred for the purpose of business or not. In this case, it is not a case of Assessing Officer that those expenditure are not revenue in nature and further, those expenditure are not incurred for the purpose of business of the assessee. Therefore, we are of the considered view that once Assessing Officer come to the conclusion that expenditure incurred by assessee are revenue in nature and further the same are incurred wholly and exclusively for the purpose of business, then the same needs to be allowed in the year of incurrence, irrespective of length of period for which finance is sanctioned. The learned CIT(A) after considering relevant facts has rightly held that expenditure incurred by the assessee are revenue in nature which does not give any enduring benefit to the assessee or resulting in creation of asset as tangible or intangible which needs to be allowed as deduction, when such expenditure has been incurred. - Decided against revenue.
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