In a major relief to M/s. Infosys Ltd, the Income Tax Appellate Tribunal ( ITAT ), Bangalore deleted disallowance on brand building expenditure.
During the relevant previous year, the assessee, M/s Infosys Ltd had incurred brand building expenses of Rs.81 crores. The brand building expenditure were in the nature of subscription to research reports by research agencies and advisory services, participation or sponsorship in seminars, exhibitions, marketing etc, retainership amounts paid towards public relations agencies etc, expenditure incurred for setting up of Booth for exhibition or display of Infosys nameetc.
Brand building expenses are included and shown under ‘Selling and Marketing expenses’ in the financial statements and claimed as revenue expenditure.In the draft assessment order, the AO treated the brand building expenses, as deferred revenue expenditure, and allowed 20% of the said expenditure amounting and held that the balance sum constituting 80% of the expenditure will be amortized over the next 4 years.
The Counsel for the assessee contended that in the Coordinate Bench of the Tribunal in assessee’s own case it was held that, the brand building expenses is in the course of and for the purpose of assessee’s business and cannot be said that the said expenditure has resulted in the acquisition of any ‘asset’, which finding is not borne out by the facts on record.
The Counsel further contended that the nature of expenses incurred by appellant and its subsidiary towards brand building expenses are identical.
A Bench comprising Chandra Poojari Accountant Member and Beena Pillai, Judicial Member observed that “We note that Coordinate Bench in case of the sister concerns of assessee, considered identical issue on similar facts. Nothing has been brought on record by the revenue to the expenses incurred by the assessee is towards any capital asset. Respectfully following the same, we direct the disallowance to be deleted.”
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