Brand creation expenses are revenue expenditure

PrintPDF

ITAT MUMBAI BENCH ‘F’

Fine Jewellery (India) Ltd.

v.

Assistant Commissioner of Income-tax

IT APPEAL NO. 3124 of 2011

[ASSESSMENT YEAR 2006-07]

Date of Pronouncement: 31.07.2012

 

Expenditure incurred by the assessee is not creating any enduring benefit of an asset but is rather helping the assessee in augmenting its sales and resultantly its profit. Even if it is presumed that the building of brand image of Nirvana is giving advantage of enduring benefit to the assessee, still it would be on revenue account as there is no creation of a tangible or intangible asset of enduring nature to the assessee. The hon’ble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 , has held that no tests for distinguishing between capital and revenue expenditure is paramount or conclusive. There is no all-embracing formula which can provide a ready solution to the problem, whether it is a capital expenditure or revenue expenditure. Their Lordships have held that even tests of enduring benefit at times gets failed as not each and every advantage of enduring nature can be of capital field.

Further such a payment has also to be seen from the context of business necessity or expediency also. If the outgoing expenditure is so intricately related to carrying on or the conduct of the business that it may be regarded as integral part of the profit-earning process and not for an acquisition of an asset or a right of the permanent character, the possession of which is condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure.