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TMI Blog2013 (4) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's appeal in ITA No. 1505/Hyd/2011 for assessment year 2006-07. The assessee raised the following grounds of appeal: (a) The order of the learned CIT(A) in erroneous to the extent it is prejudicial to the interest of the appellant herein. (b) The learned CIT(A) erred in holding that there is any nexus between the borrowed funds on which the interest was paid and the mutual funds purchased by the appellant. (c) The learned CIT(A) erred in holding that any part of interest paid on the borrowings is disallowable by applying the provisions of sec. 14A of the IT Act. The learned CIT(A) ought to have seen that there is no nexus between the borrowed funds and the investment made and that therefore, the provisions of sec. 14A have no application in respect of interest debited to the Profit and Loss A/c. 3. Brief facts of the issue are that the Assessing Officer noticed that the assessee received Rs. 2.19 crores as interest in the financial year on the investment made of Rs. 200 crores in mutual funds of ICICI Prudential Mutual Fund. The assessee stated before the Assessing Officer that it has made investment of Rs. 200 crores and redeemed total investment during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 52 1,709,589 11.01.2006 HR H/05-06/001254 Being Amount received from PRU ICICI from 1159395/41 now Cr by Bank on dt. 9.1.2006 as per statement 150,000,000 107 2,638,356 23.01.2006 BR H/05-06/001307 Being amount received from Prudential ICICI from: 1159395/41 now Cr by Bank on dt. 23.1.2006 150,000,000 119 2,934,247 7,282,192 13.10.2005 BP H/05-06/004541 Paid towards investment in mutual fund 500,000,000 07.02.2006 BR H/05-06/001376 Being amount received from Pru- ICICI Liquid Plan vide chq No. 1159395/41 Cr by Bank on 6.2.2006 350,000,000 117 6,731,507 09.03.2006 BR H/05-06/001525 Being amount received from Prudential ICICI Liquid Plan vide chq No. 1132250/93 Cr by Bank on 9.3.2006 150,000,000 147 3,624,658 10,356,164 13.10.2005 BP H/05-06/004552 Paid towards investment in mutual fund 500,000,000 14.03.2006 BR H/05-06/001544 on 14.3.2006 Being amount received from Prudential ICICI Liquid Plan for No. 1159395/41 Cr by Bank 150,635,811 152 3,763,832 14.03.2006 BR H/05-06/001544 Being amount received from Prudential ICICI Liquid Plan for No. 113 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses represent the amounts allowable in accordance with the provisions of Sec. 35D and are eligible for deduction under the said section." 10. Brief facts of the issue are that the assessee company debited Rs. 90,80,000/- during the year under as expenditure towards acquisition of Asian Age brand right expenses and Editorial content under the head Miscellaneous expenditure. The assessee company explained the claim as under "Asian Age Holdings Ltd. are the printers and publishers of the English. Daily Newspaper "Asian Age" which is published from Delhi, Mumbai, Kolkata, Bangalore and London from the year 1994 onwards. The company acquired the Brand "Asian Age" and Property rights on the past editorial content for Rs. 908 lakhs in the last year. The acquisition cost was treated as " deferred revenue expenditure' keeping in view the utility of such brand right and editorial content, the company adopted an accounting policy to write off the expenditure over a period of 10 years i.e., 120 months @ Rs. 90,80,000 per year" 11. The claim was made for the second time during the A.Y. 2007-08 amounting to Rs. 90,80,000 as a period consists of one year. The Assessing Officer rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the assessee's claim u/s. 35D was in the A.Y. 2006-07. In the A.Y. 2006-07 the CIT(A) allowed the claim of the assessee by observing as follows: "5.2 I have carefully considered the facts and evidence. The appellant has not shown this asset in the balance sheet. Therefore, it cannot claim depreciation on the same. The appellant has insisted that the expenditure is classified as deferred revenue expenditure, in view of the fact that it cannot be classified as an intangible asset under section 35A and the benefits of this expense are available over a period of many years. 5.2.1 In order to understand whether the accounting treatment given by the appellant is correct or not, one has to understand what exactly is the meaning of deferred revenue expenditure. 5.2.2 Deferred Revenue Expenditure is essentially an accounting concept denoting expenditure, for which a payment has been made or a liability incurred, which is essentially revenue in nature but which for various reasons (quantum, period of expected future benefit, considerations of impact on the bottom line etc) and also on the "presumption" that the same will result in benefits over a subsequent period or periods is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 'Revenue' a judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must need to be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an enduring nature' was evolved to emphasise the element of a sufficient degree of durability appropriate to the context. Thus while, for the purpose of the issue under consideration, the test of the enduring benefit fails at the initial stage itself, and even if the said test were to be explicitly applied it cannot be said that the said expenditure is of a capital nature. Further, no capital assets come into being as a result of the same and consequently the same cannot be classified as a capital expenditure. The expenditure is essentially revenue in nature and the decision to treat the same as deferred revenue only represents a management decision taken in view of the magnitude of the expenditure involved. For the purpose of allowability of any expenditure under the Income-tax Act 1961, what is material is the classification between the capital and revenue and the same does not recognise of any concept of deferred revenue expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expense will accrue to the company over a period of 12 years. The Assessing Officer does not have any contrary information to indicate a shorter or longer period. 5.3.1 In view of the above facts and circumstances, I hold that the expense in question is to be treated as deferred revenue expenditure and allowed as claimed by the appellant. This issue is decided in favour of the appellant." 15. Being so, for the assessment year 2006-07 the issue was decided by the CIT(A) in favour of the assessee. Nothing is brought to our notice that the Department has filed any appeal against the above finding of the CIT(A). Being so, for the A.Y. 2008-09, the Department cannot agitate the same issue if it was accepted in the earlier A.Y. 2006-07. In these circumstances, it is appropriate to remit the issue to the file of the CIT(A) to decide the same by CIT(A) after taking note of the decision of the CIT(A) for A.Y. 2006-07. Accordingly, the issue is remitted back to the file of the CIT(A) for fresh consideration. In the result, ITA No. 1844/Hyd/2011 is allowed for statistical purposes. ITA No. 1847/Hyd/2011 (A.Y. 2007-08) (By Revenue) ITA No. 1845/Hyd/2011 (A.Y. 2008-09) (By Revenue) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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