Expenditure incurred on Promotion for Brand ‘Snapdeal’ is purely Revenue in Nature: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the expenditure incurred on promotion for brand ‘Snapdeal’ is purely revenue in nature.

The assessee, M/s. Jasper Infotech Pvt. Ltd. is a company engaged in the business of marketing services under the brand name of ‘Snapdeal’ in India. It filed its return of income declaring a loss. This return was picked up for scrutiny.

During the course of assessment proceedings the Assessing Officer noted that assessee has claimed an expenditure on account of advertisement, publicity and business promotion. Assessee claimed it as revenue expenditure. The ld. Assessing Officer was of the view that same are not s revenue expenditure, but are incurred for acquisition of intangible assets being capital expenditure as those are incurred in the formative years of the business of the assessee and such expenditure have enduring benefit.

The Assessing Officer held that it is the efforts of the assessee which has built a marketing net-work in India and it indicates the kind of efforts involved in creating marketing intangibles without which the assessee company would not have been a market competitor in that segment. He held that by incurring this expenditure assessee substantially benefited in creating ‘Snapdeal’ brand and, thus, this expenditure has given enduring benefit to the assessee. Accordingly, he treated 50% of the above expenditure as capital expenditure and disallowed a sum. The assessment order under Section 143(3) of the Income Tax Act, 1961 was passed determining total loss of the assessee.

The coram of Judicial Member, Suchitra Kamble and Accountant Member, Prashant Maharishi held that the expenditure incurred by the assessee are purely revenue in nature and cannot be considered as capital expenditure. The 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 Officers are dismissed.

To Read the full text of the Order CLICK HERE

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