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TMI Blog2016 (4) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issue in ITA No. 751/PN/2008 to adjudicate the issue. 3. The Revenue in ITA No. 751/PN/2008 has raised the following grounds of appeal:- 1. On the facts and circumstances of the case, and in law the CIT(A) erred in treating the 'Sales Promotion Expenses' as revenue expenditure though these expenses are related to launching of a new product of the company which is expected to give enduring benefit to the assessee's business and therefore capital in nature. 2. The order of the CIT(A) may be vacated and that of the AO be restored. 3. The appellant craves leave to add, amend or alter any of the above grounds of appeal. 4. Briefly, in the facts of the present case, the assessee was engaged in the manufacture of different life saving antibiotics in the form of tablets, capsules, injectables, etc. The assessee was a government company. During the year under consideration, the assessee had claimed sales promotion expenses of Rs. 1,40,19,000/-. In the Notes to the Accounts, the assessee declared that it had claimed these expenses as deferred revenue expenditure over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative for the Revenue pointed out that the appeal of the Revenue relating to assessment year 2001-02 was dismissed by the Tribunal because of lack of COD approval. It was further pointed out by the learned Departmental Representative for the Revenue that though the Miscellaneous Application was moved against the order of Tribunal, but the same was also dismissed because of it being time barred. However, the allowance of expenditure in the present year was challenged by the learned Departmental Representative for the Revenue. During the course of hearing of the appeal, it was put to the learned Departmental Representative for the Revenue as to what was the status of the assessee company. It was pointed out by the learned Departmental Representative for the Revenue that the assessee company was before BIFR and had huge losses. The perusal of the assessment order itself reflects the carried forward losses to the tune of Rs. 108.90 crores. 8. The learned Authorized Representative for the assessee on the other hand, pointed out that the nature of said expenses itself reflects that the same was allowable under section 37(1) of the Act, though in the books of account, the same wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account i.e. treating the said expenses as Deferred Revenue Expenses, the Assessing Officer was of the view that only 1/5th of the expenditure was allowable in the hands of assessee and the balance had to be allowed in the succeeding years. On the other hand, the claim of the assessee was irrespective of the accounting treatment of the entries in the books of account, the said expenditure was allowable as revenue expenditure in entirety because of the nature of expenditure under the Income Tax Act, since there is no concept of Deferred Revenue Expenditure. The Act only talks about the expenditure being capital in nature or revenue in nature. Once expenditure is held to be allowable in the hands of assessee though to the extent of 1/5th of the total expenditure, it is no doubt that the said expenditure is revenue in nature. Once the concept of expenditure being allowable as revenue, is accepted by the Assessing Officer though to the extent of 1/5th of the expenditure, we find no merit in the orders of authorities below in restricting the allowance to 1/5th of the expenditure. In the absence of the concept of Deferred Revenue Expenses being recognized by the Income Tax Act, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as under:- "2. On the facts and circumstances of the case, and in law the CIT(A) erred in deleting the disallowance for power and fuel expenses made by the AO for being nonrelated to business by holding that no disallowance can be made in the case of the assessee-company simply because the perquisite value has not been taxed in the hands of the employees." 12. Briefly, the facts relating to the issue are that the assessee had claimed sum of Rs. 28.41 crores towards power expenses. The Assessing Officer noted that the said amount was inclusive of expenditure pertaining to the residential colony of Rs. 73.29 lakhs. The Assessing Officer was of the view that the said expenditure incurred by the assessee was not directly related to the business activity and since there was no evidence to suggest that the said facility was being taxed in the hands of beneficiaries in the form of perks, etc., therefore the said expenditure was disallowed and added to the total income of assessee. 13. The CIT(A) was of the view that non-inclusion of the value of perquisites in the income of the employees would not be ground for disallowance of expenditure in the hands of the company. In case the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d towards discharge of said obligation is business expenditure of the assessee company and is duly allowable in the hands of assessee. Further, the expenditure relatable to residential quarters is no doubt to be recovered from the employees or is to be included as perk in the hands of employees of the assessee company, but merely because no such exercise was carried on, does not merit the disallowance of expenditure in the hands of assessee. Accordingly, we uphold the order of CIT(A) in this regard and dismiss the ground of appeal relating to power and fuel expenses raised by the Revenue. 18. The Revenue in ITA No.753/PN/2008 relating to assessment year 2004 -05 has raised two issues i.e. against the allowance of sales promotion expenses and power & fuel expenses. In line with our decision in the paras hereinabove, the facts being identical, we dismiss both the grounds of appeal. 19. In ITA No. 367/PN/2009, relating to assessment year 2005-06 and ITA No.2433/PN/2012, relating to assessment year 2007-08, the issue raised is only against the allowance of power and fuel expenses relatable to residential colony. The issue raised is identical to the issue raised in ITA No.752 & 753/PN ..... X X X X Extracts X X X X X X X X Extracts X X X X
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