9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (12) TMI 443 - AT - Income TaxNature of expenses - expenses on advertisement, publicity and business promotion incurred on brand building of E-commerce portal Snapdeal - revenue expenditure or capital expenditure for brand building on e-commerce portal - HELD THAT - Assessee is operating in online marketing business as aggregator which is a highly competent consumer market the assessee had to stay ahead of its competition and thus engage itself in brand promotional activities and has necessarily to incur these expenses. AO having accepted the fact that the assessee could spend amounts for these activities to the extent of 50 % as revenue expenditure the ld AO could not have held that 50 % of such expenses are capital in nature, in absence of any contrary evidence. In view of this, we do not find any infirmity in the order of the ld. CIT (Appeals) in deleting the above disallowance. Further before us no evidence was placed on record to show that assessee has created any intangible asset and even after the details of expenses are placed before the ld. Assessing Officer, he held that ad-hoc percentage of certain expenditure are capital expenditure without pointing out that which nature of expenditure has resulted into creating an intangible asset. Accordingly, we find that the expenditure incurred by the assessee are purely revenue in nature and cannot be considered as capital expenditure. Assessing Officer also did not bring on record any evidence to prove his findings. In view of this, all the grounds raised in appeal by the ld. Assessing Officer are dismissed.
Issues Involved:
1. Classification of advertisement, publicity, and business promotion expenses as revenue or capital expenditure. 2. Deletion of addition of ?29,45,50,223/- by CIT (Appeals). Detailed Analysis: Issue 1: Classification of Advertisement, Publicity, and Business Promotion Expenses as Revenue or Capital Expenditure The primary issue revolves around whether the expenses incurred by the assessee on advertisement, publicity, and business promotion should be classified as revenue expenditure or capital expenditure. The Assessing Officer (AO) argued that these expenses, amounting to ?58,91,00,447/-, were capital in nature as they were incurred for brand building of the E-commerce portal "Snapdeal," providing enduring benefits. Consequently, the AO disallowed 50% of these expenses, treating them as capital expenditure, and added ?29,45,50,223/- to the assessee's income. The CIT (Appeals) reversed this decision, holding that such expenses were necessary for business purposes and should be treated as revenue expenditure. The CIT (Appeals) relied on several judicial precedents, including decisions from the Supreme Court and High Courts, which clarified that advertisement and promotional expenses, even if they provide long-term benefits, are generally considered revenue expenditure if they facilitate business operations without creating fixed capital assets. Issue 2: Deletion of Addition of ?29,45,50,223/- by CIT (Appeals) The CIT (Appeals) deleted the addition made by the AO, emphasizing that the expenditure on advertisement, publicity, and business promotion was essential for the business model of the assessee, which operates in the highly competitive e-commerce space. The CIT (Appeals) referred to the nature of the expenses, noting that they were incurred to maintain and enhance the visibility of the "Snapdeal" brand in a competitive market. The CIT (Appeals) also highlighted that such expenses do not create enduring benefits in the capital field but rather facilitate efficient and profitable business operations. The CIT (Appeals) further supported the decision by citing several High Court judgments, including: - Citi Financial Consumer Finance Ltd. (335 ITR 29): The court held that expenditure on publicity and advertisement should be treated as revenue expenditure unless it creates a fixed capital asset. - Casio India Ltd. (335 ITR 196): The court reiterated that advertisement and sales promotion expenses are revenue in nature. - Spice Distribution Ltd. (374 ITR 30): The court noted that advertisement expenses do not have a long-lasting effect and should be treated as revenue expenditure. - SBI Cards and Payment Services (P) Ltd. (229 Taxman 356): The court emphasized that advertisement expenses should normally be treated as revenue expenditure due to their short-lived impact. The CIT (Appeals) also referred to the jurisdictional High Court's decision in Modi Revlon Pvt. Ltd. (210 Taxman 161), which recognized that brand promotion expenses are necessary for business purposes and should be treated as revenue expenditure. The Tribunal upheld the CIT (Appeals)'s decision, noting that the AO did not provide any evidence to support the classification of 50% of the expenses as capital expenditure. The Tribunal concluded that the expenses incurred by the assessee were purely revenue in nature and necessary for staying competitive in the e-commerce market. The Tribunal dismissed all grounds raised by the AO and found no infirmity in the CIT (Appeals)'s order. Conclusion: The Tribunal affirmed the CIT (Appeals)'s decision to classify the advertisement, publicity, and business promotion expenses as revenue expenditure and deleted the addition of ?29,45,50,223/-. The Tribunal emphasized that such expenses are necessary for business operations and do not create enduring benefits in the capital field. The decision was based on several judicial precedents and the nature of the assessee's business in the competitive e-commerce space.
|
