Business expenditure : Deduction u/s. 37(1) of I. T. Act, 1961 : A. Ys. 1996-97 and 2001-02 : Expenditure on production of films for advertisement of products manufactured by assessee : Is business expenditure allowable u/s. 37(1) ?

[CIT vs. Geoffrey Manners & Co. Ltd. (Bom); ITA No.
789 of 2008: Dated 09.02.2009].

The assessee incurred expenditure on production of films
for the purpose of advertisement for marketing the products manufactured by
it. The Assessing Officer disallowed the claim for deduction of the
expenditure, holding that it is capital in nature. The Tribunal allowed the
claim.

On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :

“i) A similar issue had come up for consideration before
the Punjab & Haryana High Court in CIT vs. Liberty Group Marketing
Division, 2008 (8) DTR Judgments 28. In that case the assessee had
claimed expenditure incurred on glow signboards, as also T. V. Films. The
expendi-ture was held to be revenue in nature.

ii) In our opinion the correct test to be applied in such
a case would be that if the expenditure is in respect of an ongoing business
of the assessee and there is no enduring benefit, it can be treated as
revenue expenditure. However, if it is in respect of business which is yet
to commence, then the same cannot be treated as revenue expenditure, as
expenditure is on a product yet to be marketed.

iii) The Tribunal on the facts of this case was clearly
within its jurisdiction in holding that the expenditure was by way of
revenue expenditure, as it was in respect of promoting ongoing products of
the assessee herein.”