2011 (11) TMI 826 - HC - Income Tax

Summary

Issues involved: Justification of advertisement and sale promotion expenses as business expenditure u/s Income Tax Act for AY 2003-2004.

Comprehensive details:

1. The main issue in this appeal was whether the Income Tax Appellate Tribunal was justified in allowing the advertisement and sale promotion expenses incurred by the assessee as business expenditure. The assessee had entered into a Sales Agency Agreement with MTV Asia and Nickelodeon Asia, Singapore, to promote the MTV brand in India for which the assessee was paid a commission at 15%. The assessee claimed advertisement and sales promotion expenses for the assessment year 2003-2004, which were initially disallowed by the tax authorities.

2. The Income Tax Appellate Tribunal, relying on its decision in the case of Star India Private Limited, held that the assessee was in the business of acting as an advertising sales agent in India. As the assessee was entitled to a percentage of advertising revenue received in India as commission, it was deemed in the business interests of the assessee to incur advertisement and sales promotion expenditure. This would lead to increased advertisement revenue, thereby entitling the assessee to receive higher commission. The Tribunal allowed the expenditure claimed by the assessee as legitimate business expenditure.

3. The High Court noted that the appeal filed by the Revenue against the decision of the Income Tax Appellate Tribunal in the case of Star India Private Limited had been dismissed earlier. Given this precedent and the reasoning provided by the Tribunal in the current case, the High Court found no reason to entertain the appeal and dismissed it with no order as to costs.

This summary highlights the key issues and details of the judgment regarding the justification of advertisement and sale promotion expenses as business expenditure under the Income Tax Act for the assessment year 2003-2004.