TMI Blog2016 (4) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal relating to sales promotion expenses raised by Revenue in the appeals relating to assessment years 2002-03, 2003-04 and 2004-05 before us.- Decided in favour of assessee Disallowance for power and fuel expenses - Held that:- On one hand, the residential colony comprises first the residential accommodation provided to the employees and it is the case of assessee before us that in case any expenditure is incurred vis-à-vis residential quarters of the employees, the same is recovered from them. Even in case the same is not recovered from them, does not merit the disallowance made in the hands of assessee. Further, part of power and fuel expenses were incurred on providing lights to the residential colony and also to the common facilities provided by the assessee to its employees, which was the obligation of the assessee company and hence, expenditure incurred 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred revenue expenditure over a period of five years. However, in the computation of income, the assessee had claimed the deduction on account of entire expenditure. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain as to why the same should not be treated as deferred revenue expenditure. In reply, the assessee pointed out that the said expenses were incurred on sales promotion of new / re-launched products comprising of physician samples, advertisement, salary and other related expenses. The assessee company had treated the said expenses as Deferred Revenue Expenditure as it was following the said practice of accounting for the last many years. However, the assessee claimed that much of these expenses were of revenue nature and keeping in view the large amount of expenditure involved, the practice of charging expenses over a period of 5 to 10 years was considered as appropriate by the management. This practice was followed keeping in view the large losses incurred by the assessee for the last several years. It was the plea of the assessee before the Assessing Officer that no capital nature of expenses were involved in the above said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, though in the books of account, the same were treated as Deferred Revenue Expenditure. The learned Authorized Representative for the assessee drew our attention to the Notes of Accounts under the head Deferred Revenue Expenses and the expenses on sales promotion in this regard. 9. We have heard the rival contentions and perused the record. The assessee was a government company engaged in the manufacture of different life saving antibiotics in the form of tablets, capsules, injectables, etc. However, the assessee company had over a period of years shown huge losses and has gone into liquidation. The case of the assessee is before the BIFR for resolution. The perusal of the assessment order itself reflects that the gross total income of the assessee at ₹ 13.74 crores has been adjusted against brought forward losses of assessment years 1997-98 and 1998-99. Further, business losses of assessment year 1998-99 pending adjustment to the tune of ₹ 5.49 crores and depreciation losses totaling ₹ 103.40 crores. The issue arising before us is in respect of sales promotion expenses of ₹ 1,40,19,000/-. In the first instance, the allowability or disallowability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred Revenue Expenses being recognized by the Income Tax Act, we find no merit in the orders passed by the authorities below. The expenses if revenue in nature is to be allowed as deduction under section 37(1) of the Act. The nature of expenditure itself reflects that it is for sales promotion and advertisement, and is duly allowable in the hands of assessee as business expenditure under section 37(1) of the Act. In this regard, we find support from the ratios laid down by the Hon ble Delhi High Court in CIT Vs. Citi Financial Consumer Fin. Ltd. (2011) 335 ITR 29 (Del) and in CIT Vs. Salora International Ltd. (2009) 308 ITR 199 (Del) i.e. the cases relied upon by the learned Authorized Representative for the assessee. 10. It is not the case of Assessing Officer that the expenditure in question is capital in nature and hence not allowable. The Assessing Officer had disallowed the claim of assessee in view of the entries made in the books of account. The assessee though had made the entries in the books of account, but said entries are not conclusive in order to decide the merits of claim of the assessee. The Assessing Officer himself has allowed part of the expenditure and had di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be ground for disallowance of expenditure in the hands of the company. In case the amount had not been taxed in the hands of employees of the company as perquisite, necessary action had to be taken for bringing the same in tax net. However, no disallowance could be made in the case of assessee company simply because the perquisite value had not been taxed in the hands of employees. The CIT(A) allowed the claim of assessee as the said expenditure was in the form of subsidy to the employees and hence, was allowable in the hands of assessee. 14. The Revenue is in appeal against the order of CIT(A) in this regard. 15. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 16. The learned Authorized Representative for the assessee on the other hand, pointed out that there is no merit in the order of Assessing Officer since whatever was being paid to the employees, the same was being recovered from the employees. He further pointed out that part of expenditure was spent on providing lighting to the residential colony and also to the common facilities to the employees of the assessee company in the said colony, which expenditur ..... 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