ACIT 4(2)(1), MUMBAI vs. NIRMAL BANG SECURITIES P.LTD, MUMBAI

1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to allow the entire Advertisement Expenses of Rs. 2,22,05,987/- as revenue expenditure in the year under consideration even though the assessee had debited only Rs. 74,01,996/- in the Profit & Loss Account and considered Rs. 1,48,03,992/- as deferred revenue expenditure and shown under the head Miscellaneous Expenses in the Balance Sheet as on 31.03.2011.” 2. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) further erred in not taking into account the comments of the Assessing Officer before allowing the claim of the assessee. ”

Brief facts of the case are that the assessee company is engaged in Broking and Capital Market Activities. The assessee filed its return of income for relevant Assessment Year on 29.09.2011 declaring loss of Rs. 2,39,54,017/-. The assessment was completed on 3rd March 2014 under section 143(3). The assessing officer while passing assessment order besides the other additions and disallowance disallowed advertisement expenses of Rs. 1,48,03,991/-. On appeal before Commissioner (Appeals) the disallowance on account of advertising expenses were deleted. Thus, aggrieved by the order of ld. Commissioner (Appeals) the revenue has filed present appeal before us.

We have heard the ld. Departmental Representative (DR) for the Revenue and Ld. Authorized Representative (AR) of the assessee and perused the material available on record. The Ld. DR of the Revenue submits that the learned Commissioner (Appeals) erred in deleting the entire disallowance on account of advertisement expenses, when the assessee has debited only Rs. 74,01,996/- in the profit and loss account and remaining amount of Rs. 1,48,03992/- was treated as deferred revenue expenditure. The assessee has not filed the income tax return for subsequent assessment year showing that the similar amount was not claimed in subsequent assessment year. On the other hand the learned AR of the assessee supported the order of Commissioner (Appeals). The learned AR further submits that assessee is in the business of share broking and share trading activities. For the year under consideration assessee incurred expenditure on account of advertisement to increase the business activities. All 2 M/s Narmal Bang Securities Pvt. Ltd. expenses incurred by the assessee on advertisement expenses are revenue in nature and is allowable in the year it was incurred. In support of his submission the learned AR of the assessee relied upon the decision of coordinate bench of the Tribunal in case of Reliance Wellness Ltd Versus DCIT in 4273/M/2013 dated 9 September 2015. 4. We have considered the rival submission of the parties and have gone through the orders of authorities below. The assessing officer during the assessment proceeding noted that the assessee has claimed advertisement expenses of Rs.74,01,996/- in its profit and loss account. The assessee considered Rs.1,48,03,992/- as deferred revenue expenditure. Thereby the assessee claimed expenditure of Rs. 2,22,05,987/- on account of advertisement expenditure in its computation of total income. The assessee was asked to substantiate its contention. The assessee filed its reply dated 15 February 2014. In the reply the assessee contended that the assessee has incurred Rs. 2,22,05,988/- as advertisement expenses and claim the same while computing the total income. The assessee further explained that for accounting purpose they have deferred the said expense in three parts out of which two-third expenses was debited in subsequent year. As these expenses will not allowable in subsequent assessment year because it was treated as previous year expenses, thus, fully allowable in the year under consideration. The submission of the assessee was not accepted by assessing officer holding that the assessee has debited only Rs.74,01,996/- in its profit and loss account for the year under 3 M/s Narmal Bang Securities Pvt. Ltd. consideration, hence, the assessee was allowed the amount of expenses to that extend only. The remaining amount of Rs. 1,48,03,991/-was disallowed. On appeal before ld Commissioner (Appeals) the assessee urged during the under consideration the assessee incurred various type of advertisement in print media, television, display & bard on street and banners etc. In in order to determine allowability of expenditure under the Income tax Act, mandates the nature of expenses whether it is capital or revenue in nature. The assessee further explained that assessee is in the business of share broking and trading activities, the assessee incurred expenses to increase revenue of the assessee.

We have noted that the coordinate bench of Tribunal in Reliance Wellness Ltd (supra) while considering the ground of appeal