TMI Blog2014 (3) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... developing new varieties of films were not capital in nature since these did dnot pertain to extension of its business nor there was any ;change in the installed capacity. Also, the expenses were donot subject to section 35D of the Act as they were allowable u/s 37(1) of the Act even if the assessee had amortised these expenses in its books of accounts - claim of the appellant for allowability of impugned expenditure as revenue expenditure is justified - Decided in favour of assessee. - ITA no. 3605/Del/2010 - - - Dated:- 31-3-2014 - SHRI U.B.S. BEDI, JM AND SHRI J.SUDHAKAR REDDY, A.M. Appellant by:- Shri Salil Aggarwal, Adv. And Sh.Shailesh Gupta Respondent by:- Ms.Meenakshi Vohra, Sr.D.R. ORDER PER J.SUDHAKAR REDDY, AM This is an appeal filed by the Revenue directed against the order of the Ld.CIT(A)-XVI, New Delhi dated 17.05.2010 pertaining to the Assessment Year 2007-08. 2. Facts in brief:- The assessee company is engaged in manufacturing and export of ready made fashion garments outside India to countries like USA, Canada, etc. During the year the assessee company has done both export sales as well as domestic sales. 3. The A.O. in his orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal in ITA 3864/Del/09 vide order dt. 22.10.2010 has upheld the decision of the Ld.CIT(A) for the AY 2006-07. Thus, we find no infirmity in the order of the Ld.CIT(A). The Ld. DR relied on certain Tribunal decisions, but could not controvert the factual findings of the Ld. CIT(A) which was upheld by the I.T.A.T. in the earlier Assessment Year. The assessee had disallowed an amount of ₹ 4,06,203/- u/s.14A of the Act. The AO has not given any reasons as to why this amount of Rs,4,06,230/- cannot be accepted as a reasonable disallowance u/s.14A. Hence, in view of the above discussion we uphold the order of the Ld.CIT(A) and dismiss this ground of the revenue. 7. Ground no 2 pertains to disallowance of product development expenses on the ground that the same is deferred revenue expenditure. 7.1. The Hon`ble Delhi High Court in the case of CIT vs. Citi Financial Consumer Fin.Ltd. (2011) reported in 335 ITR 29 (Delhi) at page 38 and 39 held as follows:- This Court, thus, explain in no uncertain terms that the normal rule accepted by the Supreme Court in the said judgement was that the expenditure is to be allowed in the year in which it was incurred. Only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. Applying the aforesaid principle to the facts of this case, it clearly emerges that the expenditure on publicity and advertisement is to be treated as revenue in nature allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee s trading operations. No fixed capital was created by this expenditure. We may also add here that in the income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany dealing with the wide range of buyers for apparels, home furnishings and other accessories. It has a separate dedicated product team, working to create new designs in style. Prototype designs are developed and sent to different buyers. The expenses in question are debited under the following heads:- a. Cost of sample fabric b. Cost of test report c. Interest account of employees d. Staff welfare expenses e. Provision for pending SR The genuineness of this expenditure is not doubted by the AO. The only ground of disallowance is that the assessee has got an enduring benefit for a period of 3 years. He is of the opinion that the expenditure would be allowed over a period of 3 years. The First Appellate Authority on the other hand held as follows. 3.3. I have considered the submissions made by the Ld.A.R. of the appellant company. There is no doubt that the appellant company is into the business of manufacturing the ready made garments and exporting them outside the country. It is an established trade practice that before the start of the season or even during the season itself, the manufacturers are supposed to develop samples and send to the prospective buy ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
