Computer peripherals entitled to depreciation at 60% and advertisement, ad film and website expenses are revenue in nature

CIT v Bonanza Portfolio Ltd (Delhi High Court )

Decided on: 10 August 2011.

Appeal No. ITA 833/2011

The expenditure was incurred by the assessee on ad films in respect of an ongoing business and there was no enduring benefit on the same. Hence, it was assessable as revenue expenditure, An expenditure incurred on advertisements and websites for sales promotion is revenue in nature. Computer peripherals are entitled to depreciation at 60%.

 In the assessment proceedings carried out by the Assessing   Officer, he disallowed the expenses on advertisement holding the same   was to be amortised over a period of five years and thus made an   addition of Rs.92,13,102/-. The expenditure was incurred on advertisement, ad film and website expenses.  As far as expenditure on advertisement is concerned, such an   expenditure on account of advertisement and sale promotion by this Court   is held to be revenue in nature by answering this question in batch of   appeals with lead case being ITA No.1820 of 2010 entitled The

Commissioner of Income Tax  Vs. Citi Financial Consumer Fin. Ltd.   (decided on 30.03.2011). Likewise, the website is held to be revenue in   nature by another judgment of this Court in Commissioner of Income Tax Vs. Indian Visit. Com (P) Ltd. 219 CTR (Del) 603.

 Expenditure incurred on ad film is to be treated as capital or revenue in   nature.   We may record here that the learned counsel for the appellant has   relied upon the judgment of the Bombay High Court in Commissioner of   Income Tax Vs. Patel International Film Ltd. 102 ITR 219 (Bom) holding   such an expenditure to be capital in nature.  High Court held that expenditure was incurred by the assessee on ad films in respect of an ongoing business and there was no enduring benefit on the same. Hence, it was assessable as revenue expenditure.

Though there is another issue raised which pertains to   depreciation allowed by the Tribunal @ 60% on computer peripherals, we   are of the view that no substantial question of law arises in this behalf   as this Court in Commissioner of Income Tax Vs. Citicorp Maruti Finance   Ltd. (ITA 1712/2010 and 17114/2010 decided on 9th November, 2010) has   taken the view that the computer peripherals are entitled to depreciation   @ 60%.

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