No concept of deferred revenue expenditure under the Income Tax Act and integral part of the computer entitled to depreciation at 60%

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “G”, NEW DELHI

BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 3319/Del/2012

A.Y.: 2008-09

Asstt. Commissioner of Income Tax,

Circle-12(1),

New Delhi

(Appellant)

Vs.

M/s Global Healthline Pvt. Ltd.,

5, Community Centre,

Zamrudpur, Kailash Colony Extn.,

New Delhi

(PAN/GIR NO.: AABCG8091R)

 (Respondent)

Assessee by: Sh. P.N. Mehta, FCA

Department by: D r. Prabha Kant, Sr. D.R.

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XV, New Delhi dated 04.4.2012 pertaining to assessment year 2008-09.

2. The grounds raised read as under:-

“1. Whether the Ld. Commissioner of Income Tax (A) was correct on facts and circumstances of the case and in law in deleting the disallowance of ` 8,76,435/- made by the Assessing Officer on

account of advertisement expenses.

2. Whether Ld. Commissioner of Income Tax (A) was correct on facts and circumstances of the case and in law in deleting the disallowance of ` 1,57,665/- made by the Assessing Officer on account of depreciation on printers and scanner.

3. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the

time of hearing.”

3. Apropos deletion of ` 8,76,435/-

In this case it was observed by the Assessing Officer that the assessee has claimed an amount of ` 10,95,543/- being advertisement and marketing expenses as revenue expenditure. The Assessing Officer opined that assessee has incurred this huge expenditure for launching its brand by advertising it in a large manner. Therefore, he held that assessee has incurred expenditure for building up of the brand, which will be of enduring in nature. The Assessing Officer held that the benefit from this expenditure by the assessee will be accruing to the assessee over the years. Assessing Officer concluded that the expenditure on advertisement by the assessee will be spread over, over a period of 5 years. Therefore, 1/5th of the advertising expenses of ` 10,95,543/- amounting to ` 2,19,109/- was allowed in the current year and the balance of ` 876435/- was held that it can be amortized in the next four years.

4. Assessee submitted elaborate submission before the Ld. Commissioner of Income Tax (A). Considering the submissions of the assessee in this regard, Ld. Commissioner of Income Tax (A) observed that it is undisputed fact that advertisement expenses per se falls in the category of revenue expenditure provided the said expenditure is wholly and exclusively for the purpose of business. Ld. Commissioner of Income Tax (A) held that there is no concept of deferred revenue

expenditure under the Income Tax Act. The expenditure is either capital or in nature or revenue. Accordingly, the Ld. Commissioner of Income Tax (A) held that the addition in this regard made by the Assessing Officer was deleted.

5. Against the above order the Revenue is in appeal before us.

6. We have heard the rival contentions and perused the records. We find that the case law relied upon by the Assessing Officer in the case of Madras Industrial Corporation Ltd. vs. C.I.T. 225 ITR 802 is not applicable on the facts of the present case. In the aforesaid case the said Corporation issued debentures in December, 1966 at a discount. The total discount on the issue of 1.5 crores amounted to ` 3,00,000/- for the assessment year 1968-69. The company wrote off ` 12,500/- out of the total discount of ` 3,00,000/- being the proportionate amount of discount for the period of six months ending 30.6.1967 taking into account the period of 12 years which was a period of redemption and discount for ` 3,00,000/- over the period of 12 years.

In these circumstances, the expenditure was held to be deferred revenue expenditure. Hence, we agree with the Ld. Commissioner of Income Tax (A) that the Hon’be Apex Court’s decision in the case of Madras Industrial Corporation Ltd. vs. C.I.T. (Supra) does not help the case of the Revenue. In our considered opinion, there is no concept of ‘deferred revenue expenditure’ in the Income Tax Act. The expenditure is either ‘revenue’ in nature or ‘capital’. If the expenditure is of revenue nature and is incurred wholly or exclusively for the purpose of business and has been incurred during the year, the same is allowable expenses subject to condition laid down in Section 30 to Section 37 of the Act. Accordingly, we hold that the impugned expenditure was allowable as Revenue expenditure and hence, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we uphold the same.

7. Apropos deletion of disallowance of ` 1,57,665/- On this issue Assessing Officer held that on perusal of the Schedule of fixed assets reveals that the assessee has claimed depreciation @60% on Bard Code Scanners and Printers whereas the depreciation is admissible @ 15% only. Assessing Officer allowed only 15% of depreciation.

8. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) held that in view of the decision of the Hon’ble Delhi High Court in the case of C.I.T. vs. BSES Yamuna Power Ltd., 2010 TMI 78240 and ITAT decision in the case of Expeditors Intermations India (P) Ltd. vs. C.I.T. (Delhi ITAT) in I.T.A. No. 3731/Del/2005, Printers, UPS and Scanner are part of the computer and hence, assessee was allowed depreciation @ 60%.

9. Against the above order the Revenue is in appeal before us.

10. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the issue involved is covered in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court in the case of C.I.T. vs. BSES Yamuna Power Ltd. in ITA No. 1267 of 2010 wherein it was held that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system as they cannot be used without the computer. Hence, same are the part of the computer system and entitled to depreciation at the higher rate of 60%. Accordingly, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (A), and hence, we affirm the same.

11. In the result, the appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 07/9/2012.

                                                            Sd/-               Sd/-

                                          [I.C. SUDHIR] [SHAMIM YAHYA]

                                   JUDICIAL MEMBER ACCOUNTANT MEMBER

Date 07/9/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches