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COMMISSIONER OF INCOME TAX Versus AMTREX APPLIANCES LTD

Disallowance of deferred revenue expenditure - expenditure not debited to the profit and loss account - Held that:- The one time payment of interest was however, shown by the assessee in the books as deferred expenditure to be written off over the entire period of debentures. The assessee however, claimed the entire expenditure under section 36(1)(iii) of the Act during the year under consideration upon which the Revenue objected. The Supreme Court held that under section 36(1) (iii) of the Act .....

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ave been paid even if same is not actually paid but incurred on the basis of method of accounting. It was further held and observed that there is no concept of deferred revenue expenditure in the Act except under certain specified sections where amortisation is specifically provided. Normally, the ordinary rule would be that the revenue expenditure incurred in a particular year is to be allowed in that year. If the assessee claims the expenditure in the year when the same was made, the departmen .....

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OURABLE MR.JUSTICE AKIL KURESHI) 1. The Revenue's tax appeal has been admitted for consideration of the following substantial question of law : Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) directing to allow the expenditure claimed by the assessee against the disallowance of ₹ 1,35,86,571/in respect of deferred revenue expenditure, though not debited to the profit and loss account ? 2. Briefly stated, the facts are as under. .....

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nology, sales promotion, purchase of software and market research expenses. Total of such expenditures came to ₹ 1.67 crores (rounded off). The assessee however, debited only a portion thereof of ₹ 32.10 crores (rounded off) in the profit and loss account for the said year and deferred debiting such expenditure to the subsequent years. In the return, however, the assessee had claimed entire expenditure of ₹ 1.67 crores by way of deduction under section 37 of the Income Tax Act, .....

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diture in the books of account was accurate. It was not in conflict with any specific provision of the statute. In that view of the matter, claim of the assessee which was in conflict with its own accounting treatment given to the expenditure, was not allowable. 3. CIT(Appeals) allowed the appeal of the assessee and reversed the decision of Assessing Officer on the issue upon which the Revenue filed appeal before the Tribunal. The Tribunal noted that the prime reason for the Assessing Officer to .....

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s allowable during the year of expenditure and accounting entries would not be decisive of the nature of treatment that this expenditure should receive. The Tribunal also recorded that expenditure not being in the nature of capital expenditure, the same would be treated as Revenue expenditure and cannot be disallowed on the ground that the same would give an enduring benefit to the assessee. Reference was made to the decision of the Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. v. Commis .....

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e assessee had issued non convertible debentures in which option was given to the subscribers to receive interest periodically over a period of debenture or one time lumpsum payment of lower amount payable immediately. The one time payment of interest was however, shown by the assessee in the books as deferred expenditure to be written off over the entire period of debentures. The assessee however, claimed the entire expenditure under section 36(1)(iii) of the Act during the year under considera .....

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