Case Law Details

Case Name : ACIT Vs M/s Citi Financial Consumer Finance India Ltd. (ITAT Delhi)
Appeal Number : ITA No. 2848/Del/2012 & ITA No. 6305/Del/2012
Date of Judgement/Order : 17/08/2015
Related Assessment Year : 2007-08 , 2008-09
Courts : All ITAT (1731) ITAT Delhi (428)

Brief of the Case

ITAT Delhi held In the case of ACIT vs. M/s Citi Financial Consumer Finance India Ltd. that this issue is squarely covered by assessee’s own case in ITA No. 4776/Del/2010 vide order dated 20.02.2015, for the assessment year 2006-07 passed by this Bench of the Tribunal in which it was held 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. The expenditure was incurred to facilitate the assessee’s trading operations. No fixed capital was created by this expenditure. Also in the Income Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the deduction for whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfills the test laid down u/s 37, it has to be allowed. Only in exceptional cases, the expenditure can be allowed to be spread over, that too, when the assessee chooses to do so. Hence, total expenses are allowed in the same year.

Facts of the Case

The assessee company is engaged in the business of providing finance for auto loans, sales finance, mortgage (comprising of home loans and home equity) and personal loans. The assessee filed the return of income on 31.10.2007, declaring an income of Rs. 2,84,93,10,390/-. The said return of income was processed u/s 143(1). Later on, the case was selected for scrutiny. The AO proceeded to pass the draft assessment order dated 23.12.2010 u/s 144C. The assessee thereafter chose to file an appeal before the CIT(A) instead of filing objections against the proposed additions before the DRP and communicated the same to the AO. Thereafter the AO completed the assessment u/s 143(3) r.w.s. 144C and assessed the income at Rs. 4,98,17,52,701/- vide order dated 22.02.2011 by making various additions/disallowances including disallowance on account of advertisement and publicity, treating them as deferred revenue expenditure over a period of 5 years.

Contention of the Assessee

The ld counsel of the assessee submitted that the only dispute between the assessee and Department is that the liquor was sold at a lesser price than it was mentioned in the menu car or tariff card. According to the Ld. counsel, liquor business is a competitive one. The assessee has to give various discounts to attract the customers. Therefore, even though the sale price was mentioned in the tariff card and menu card, the assessee was forced to give discount at 50% to 10%. He explained that the assessee in fact was giving discount to corporate guests, walk in customers and happy hours discount, etc. Therefore, estimating the sale on the basis of the price mentioned in the tariff card and menu card is not justified. He submitted that in fact there was no suppression of sales. Therefore, the CIT (A) ought to have deleted the entire addition made by the Assessing Officer.

Held by CIT (A)

CIT (A) deleted the addition of Rs. 24,40,36,690/- made by the AO on account of advertisement and publicity by following the decision of his predecessor in disposing of the appeal for the assessment years 2003-04 to 2005-06 wherein the order dated 18.12.2009 by the ITAT followed the earlier decision in assessee’s own case for the assessment years 2001-02 and 2002-03 which had been upheld by the Hon’ble Jurisdictional High Court vide order dated 30.03.2011.

Held by ITAT

ITAT held that since the CIT (A) deleted the addition made by the AO by following the judgment of the Hon’ble Delhi High Court and moreover, this issue is also squarely covered vide order dated 20.02.2015 in assessee’s own case in ITA No. 4776/Del/2010 for the assessment year 2006-07 passed by this Bench of the Tribunal in which it was held 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 Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the deduction for whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfills the test laid down u/s 37, it has to be allowed. Only in exceptional cases, the expenditure can be allowed to be spread over, that too, when the assessee chooses to do so. In view of the above, we do not see any merit in the departmental appeal on this issue.

Accordingly appeal disposed of.

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