Spread over of expenditure and admissibility

In Asstt. CIT v. Delhi Dermatology Group (2009) 24 DTR (Del) (Trib) 383 the assessee incurred in an earlier which was claimed by spreading over to various years. It was akin to deferred revenue expenditure claim. The AO disallowed the same by contending that there is no provision in the IT Act for allowing deferred revenue expenditure. The CIT (Appeals) allowed the claim of the assessee.

The tribunal held that the expenditure was related to professional activities of the assessee firm and it was incurred in an earlier year which was spread over to the year under appeal. The tribunal held that the practice consistently followed in the past should continue in the subsequent years also unless there is material change in the facts of the case. In this case, the expenditure was related to the business of the assessee. It was not a capital expenditure or expenditure of personal nature. The fact that the spread over was allowed in the earlier years fortifies the stand of the assessee for claim of allowance and the principle of res judicata could not be invoked to dismiss the claim. Accordingly, the decision was rendered in favour of the assessee.

Similar decision could be found in Hindustan Aluminium Corpn Ltd v. CIT (1983) 144 ITR 474 (Cal.) for approving the spread over of expenditure to more than one accounting year.