TMI Blog2011 (9) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2003-04 [out of which ITA 57/2011 arises] and in other years it is spill over of that very issue and, therefore, we would like to take note of the facts appearing of ITA 57/2011. We may also clarify that the facts pertaining to the aforesaid issue only are recapitulated by us. 2. The appellant is a public limited company which was incorporated under the Companies Act in the year 1991. The appellant is engaged in producing sugar, molasses and bagasse. For the instant assessment year 2003-04, the appellant company filed its return of income declaring total loss of Rs. 9,58,51,076/-. The return of income was processed on 3rd February, 2004 under Section 143(1)(a) of the Act at the returned loss. Thereafter, the case was selected for scrutiny and notice under Section 143(2) of the Act was issued. The Assessing Officer framed an assessment under Section 143(3) of the Act determining the loss at Rs. 6,81,51,750/-. The Assessing Officer, inter alia made the following disallowance:- (i) disallowance of claim of deferred revenue expenditure of Rs. 1,08,43,872/-. We may point out in this behalf that the assessee had taken loans towards working capital as well as te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd loss account in this very year and the calculations submitted in this behalf has submitted by the assessee were as under:- Details of Deferred Revenue Expenditure for the A.Y. 2003-04: Particulars Gross Amount Amortised (1/5th) ( a ) Opening balance Rs. 4,42,000 Rs. 3,56,000 ( b ) Interest including Interest on term loan and working capital of current F.Y. Rs. 5,16,99,700 Rs 1,03,30,940 ( c ) Foreign travel of Directors Rs. 7,39,660 Rs. 1,47,932 Total amount amortized and debited to P L A/c as deferred revenue expenditure -She. 'L' Rs. 1,08,43,872. Balance was taken to the capital account and on that amount the assessee claimed depreciation. 4. The assessee further submitted that the aforesaid amount was treated as deferred revenue expenditure and written off over a period of five years i.e. 1/5th in each year on the basis of decision of the company which have been approved by the Directors as it was an act of business prudence, in order to avail credit facility from the banks. According to the assessee, thus, it was done for the commercial of the business. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee cannot be allowed deduction under Section 37 in respect of expenditure, which was incurred in earlier years on the principal of deferred revenue expenditure, as claimed by the assessee. The income of the assessee has to be determined on the basis of the facts of each year. If the contention of the assessee is accepted that expenditure should be allowed on the basis of decision taken by the assessee, it will open flood gates for litigations under which the assessee can defer any expenditure the way they like and claim the same in the year in which its becomes more convenient and beneficial to them. Therefore, we do not approve the contention of the assessee that revenue expenditure which has been incurred in a particular year should be deferred to subsequent years. Therefore, no deduction out of deferred revenue expenditure, which has come from earlier years, can be allowed as deduction in the years under consideration as the same will constitute the prior period expenditure. The decision relied upon by the Ld. CIT (Appeals) in the case of Madras Industrial Investment Corporation (supra) is not applicable to the facts as pointed out by the Ld. Sr. DR. Accordingly, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cases of debentures. This Court categorically observed that the general principle stated even in Madras Industrial Investment Corporation Ltd. (supra) was that ordinarily revenue incurred wholly or exclusively for the purpose of business can be allowed in the year in which it is incurred. There may be some exceptional cases justifying spreading the expenditure and claiming it over a certain number of years, that too, when the assessee chose to do so. The discussion was summed up in the following manner:- "Thus, the first thing which is to be noticed is that though the entire expenditure was incurred in that year, it was the assessee who wanted the spread over. The Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the Court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period. What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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