COMMISSIONER OF INCOME TAX Vs. CASIO INDIA LTD

JUDGEMENT

(1.) THE respondent assessee filed the return for the Assessment Year 1998-99 declaring loss at Rs. 70.21 lacs. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had incurred expenditure of Rs. 4,18,04,467.00 on advertisement and sales promotion which included a sum of Rs. 90,522.00 and of Rs. 2,06,29,188.00 towards distribution of musical instrument and digital diaries as sales promotion. The AO observed that in this very year, the assessee had spent exceptionally high amount which was basically to buildup "Casio" brand in India. Since in the preceding year, amount of Rs. 2.70 Crores was allowed to the assessee, in the present year also the AO allowed the same and disallowed balance amount of Rs. 1,48,04,467.00 to be allowed in subsequent three years as deferred revenue expenditure holding that the same had brought enduring advantage to the assessee in view of judgment of Supreme Court in 225 ITR 502.

(2.) THE CIT (A) allowed the entire expenditure to the assessee holding that the AO had not doubted the veracity of the expenditure, he had artificially divided the same into two parts, out of which Rs. 2.70 Cores were allowed during the year and Rs. 1.48 Crores was disallowed classifying the same as deferred revenue expenditure. Since there is no concept of Deferred Revenue Expenditure (DRE) in the Income Tax Act (hereinafter referred to as 'the Act') in respect of such expenses, in the opinion of the CIT (A), the entire expenditure deserved to be allowed as revenue expenditure.

(3.) CHALLENGING this order, the instant appeal is preferred by the Revenue under Section 260A of the Act. Having regard to the facts narrated above, we are of the opinion that no question of law arises in this case. According to the Revenue, the expenditure on account of advertisement and sale promotion is capital and not revenue in nature. 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 v. Citi Financial Consumer Fin. Ltd. (decided on 30.03.2011). It was held that the expenditure on advertisement and sale promotion is to be treated as business expenditure allowable under Section 37 of the Act. The position, in the case was summed up as under :