ITAT Upholds Reliefs for Reliance Retail, AJIO Marketing Expense Allowed as Revenue [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai has upheld key reliefs granted to Reliance Retail Limited in its cross appeals for Assessment Year 2019‑20, ruling that promotional expenditure incurred on the AJIO e‑commerce platform qualifies as revenue expenditure.

The cross appeals arose from an assessment order dated 27 September 2022, where the Assessing Officer (AO) made multiple additions and disallowances, including CSR donations, employment‑linked deductions, exempt income disallowance, AJIO marketing expenditure, and creditors written back.

The assessee, Reliance Retail, challenged the disallowance of deduction under Section 80G amounting to ₹10.53 crore, arguing that donations made to entities registered under Section 80G to meet Corporate Social Responsibility obligations were eligible for deduction.

Govt Revises Public Shareholding Rules: New Rules for CompaniesUnder Securities Contracts (Regulation) Amendment, 2026 [Read Order]

The assessee also contested the denial of additional foreign tax credit (FTC) of ₹78.67 lakh, which was rejected by the Commissioner (Appeals) on the ground that Form 67 was not filed before the due date of return. They also stated that this was a mere procedural lapse, as it had otherwise complied with Rule 128 of the Income Tax Rules, 1962, and was substantively eligible for the credit.

The Department argued that the deduction under Section 80JJAA was wrongly allowed, as the assessee had enhanced its claim in the revised return without revising the statutory audit report in Form 10DA. Also on the issue of disallowance under Section 14A, the Revenue submitted that the CIT(A) erred in deleting the addition of ₹80.97 lakh made under Rule 8D.

The Revenue also challenged the CIT(A)’s finding that AJIO marketing expenditure of over ₹105 crore was revenue in nature. It maintained that the expenditure resulted in the creation of an intangible asset with enduring benefit, and therefore, the Assessing Officer was correct in treating it as capital expenditure and allowing only depreciation.

TDS Limitation Must Be Computed Quarter-Wise From Filing of TDSStatements, Not Annually: Bombay HC in Vodafone case [Read Order]

After hearing all the submissions, the tribunal observed that once the statutory conditions under Section 80JJAA are satisfied in the year of employment, deduction at 30% of additional employee cost is allowable for three consecutive years, and therefore upheld the CIT(A)’s relief on this issue.

Similarly, the Tribunal agreed with the CIT(A) that AJIO marketing expenditure was revenue in nature, as promotional spend does not create a capital asset, and confirmed deletion of the addition relating to creditors written back.

The bench includes ShriSaktijit Dey (Vice President) and Shri Makarand Vasant Mahadeokar (Accountant Member), noted that Reliance Retail had raised legal grounds challenging the validity of the assessment order, but since relief had already been granted on substantive issues, adjudicating those legal grounds would be purely academic.

Accordingly, the Revenue’s appeal was dismissed, while the assessee’s appeal was partly allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates