CIT Vs. IMPERIAL FASTNERS P. LTD.

JUDGEMENT

(1.) REVENUE in this appeal under Section 260A of the Income Tax Act, 1961 (Act) impugns the order dated 17th June, 2011 passed by the Income Tax Appellate Tribunal (tribunal) in the case of Imperial Fasteners Pvt. Ltd., the respondent -assessee. The appeal pertains to the assessment year 2006 -07. Having heard learned counsel for the parties, we frame the following substantial question of law: -

(2.) AS we have heard learned counsel for the parties, we proceed to dictate our decision.

(3.) THE respondent -assessee is a company and for the assessment year in question it had filed its return of income on 8th December, 2006 declaring loss of Rs. 19,84,799/ - under the normal provisions and book profit of Rs. 7,36,458/ - under Section 115JB of the Act. The Assessing Officer in the assessment order has recorded that the assessee had debited a sum of Rs. 31,54,844/ - in the computation of income as deferred revenue expense and 10% of the said amount was debited to the profit and loss account as deferred revenue expenditure. The assessee was accordingly asked to justify why for the taxation purpose the assessee had treated the entire amount as revenue expenditure. The assessee gave their explanation, which was not accepted by the Assessing Officer, who held that the expenditure incurred had given enduring benefit to the assessee for a period of 10 years i.e. the period of lease. Accordingly, the Assessing Officer disallowed the claim by treating the entire expense as incurred on capital account. Even depreciation was not allowed.