TaxTMI 
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2024 (5) TMI 843
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.... case." 3. The appeal is late by 242 days. The Revenue has sought condonation of the delay vide application bearing F. No. ACIT/ Cir 22(2)/ Condonation/ 2022-23/ 1293 dated 10.02.2023. After hearing the Ld. Representative of the parties, we hereby condone the delay and proceed to decide the appeal of the Revenue. 4. Briefly stated, the assessee company is engaged in the business of working on market place model wherein the company owns and operates an online market place website namely, www.snapdeal.com ("website") which brings together vendors (primarily for electronics, apparel, personal care and various other categories) and customers who want to avail these services or purchase these products. For AY 2017-18, it e-filed its return on 31.11.2017 declaring loss of Rs. 2108,61,07,616/-. Its case was selected for scrutiny under CASS. Statutory notice(s) were issued/served upon the assessee, in response to which assessee filed replies electronically from time to time. 5. During the course of assessment proceedings, the Ld. Assessing Officer ("AO") found that the assessee claimed expenses of Rs. 644,79,00,204/- (on account of advertisement and publicity- Rs. 430,54,54,059/- and bu....
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....sale of trademarked products may be due as much to the unique characteristics of the product or its high quality as to the success of advertising and other promotional expenditures. 4.3 The assessee spends money on advertisement and marketing Therefore, it is the efforts of assessee which has built a formidable marketing network in India. It has an assured Quality Control mechanism in place to ensure strict adherence to its laid down norms on products quality. This in brief itself, indicates the kind of efforts involved in creating Marketing Intangible without which the Company would not have been a market competitor in the segment. 3.5. The expenses incurred by the assessee are of Rs. 430,54,54,059/- (on account of advertisement marketing and business promotion expenses). However, there is no denial to the fact that these expenses have substantially benefited the "Snapdeal" brand and have enhanced the image of this brand in the market. Thus, these expenses have given the enduring nature benefit to the assessee. Thus, these expenses cannot be said to have incurred on "revenue account". 3.6 This is a fact that the Advertisement, Marketing and Business Promotion Expenses to the t....
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....e claimed as capital in nature. This resulted in disallowance of Rs. 322,39,50,102/-. The total loss was thus determined at Rs. 1786,21,57,510/- vide order dated 30.12.2019 under section 143(3) of the Income Tax Act, 1961 (the "Act"). 9. On appeal filed by the assessee, the Ld. CIT(A) deleted the impugned disallowance, after appreciating the submissions made by the assessee before the Ld. AO and recording his observation and finding in para 5.1.2 as under:- "5.1.2 In this regard, out of entire submission of the appellant reproduced in para no. 4 supra of this order, following points being relevant for adjudication of addition of Rs. 322,39,50,102 [as 50% of Total claim of Rs. 644,79,00,204] on account of disallowance of 50% of total claim of Business Promotion expenses (of Rs. 214,24,46,145) and 50% of disallowance of expenses related to advertisement and publicity (of Rs. 430,54,54,059) are enumerated as under:- 1. That, expenses on advertisement do not create any intangible asset; do not provide any enduring benefit; 2. That, similar issues were already covered by decision of another Ld. Commissioner of Income Tax (Appeals) in Appellant's own case for AY 2012-13 and AY....
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....tising, marketing and business promotion expenses increases the awareness, popularity and visibility of "Snapdeal" brand and therefore, increased profit and revenues for the assessee. His only objection is that this benefit will flow to the assessee in long run and thus gave an enduring benefit. We do not agree. The nature of assessee's business involves operation in a highly competitive market. There is no likelihood of the advantages being enduring in nature. We are aware of the distinction between the emerging online market industry business and traditional businesses. In our humble opinion, no useful purpose will be served in setting aside the matter to the file of the Ld. AO as suggested by the Ld. CIT DR. 15. We have gone through the order of the Tribunal rendered on 10.11.2021 in Addl. CIT Special Range: 5 New Delhi vs. M/s. Jasper Infotech Pvt. Ltd. (now Snapdeal Ltd., New Delhi) in ITA No. 2605/Del/2017 for AY 2012-13 wherein the Tribunal recorded the finding that the impugned expenses claimed by the assessee are purely revenue in nature and disallowance of 50% thereof holding it to be of capital in nature is not justified. We reproduce the observation and findings of the....
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....entirely necessary on the part of the appellant company to incur expenditure on promoting the business model and even the brands to be able to not only retain customers but also to attract more customers and expand its outreach. It is understood that the appellant has also hired Sh. Aamir Khan as its brand ambassador in the year 2015. In the past, Aamir Khan has been associated with brands like Coca Cola, Samsung, Godrej, Tata Sky and Titan watches. 3.4.4 Having discussed the nature of expenses, it is also necessary to now examine whether these expenses could be said to provide an enduring benefit to the appellant or whether these expenses create an intangible asset. The concept of enduring benefit was explained many years ago by Hon'ble Supreme Court in Empire Jute Co. Ltd. (125 ITR 1). The court held that expenditure even if incurred for obtaining a benefit for an indefinite future may still be on revenue account and the test of enduring benefit may not work in aii situations. According to the Supreme Court, what is material to consider in such situation, is the nature of the advantage in the commercial sense and if the advantage in the capital field, the same would be disallow....
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....e expenditure can be allowed to be spread over, that too, when the assessee chooses to do so." (ii) Casio India Ltd. (335 ITR 196) "4. Challenging this order, the instant appeal is preferred by the, Revenue under section 260A of the Act. Having regard to the facts narrated above, we are of the opinion that no question of law arises in this case. According to the Revenue, the expenditure on account of advertisement and sales promotion is capital and not revenue in nature. Such an expenditure on account of advertisement and sales promotion is held by this court to be revenue in nature by answering this question in a batch of appeals with the lead case being I. T. A. No. 1820 of 2010 entitled CIT v. Citi Financial Consumer Fin. Ltd. [2011] 335 ITR 29 (Delhi) (decided on March 30, 2011). It was held that the expenditure on advertisement and sales promotion is to be treated as business expenditure allowable under section 37 of the Act. " (iii) Spice Distribution Ltd. (374 ITR 30) "4. The Tribunal has rightly noticed and referred to the decision of the Delhi High Court in CIT v. PepsiCo India Cold Drink Ltd. [2012] 207 Taxman 5/21 taxmann.com 165 wherein, the judgment of the Supr....
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....ace is taken over by others with benefit and advantage to the detriment of the first. Reference can be made to CIT i/. Salora International Ltd. [2009] 308 ITR 199 (Delhi) and the subsequent decision in ITA No.597/2014 titled CIT v. Spice Distribution Ltd. decided on 19th September, 2014." 3.4.6 As discussed in para 3.4.4 it may also be noted that the presumption drawn by the AO regarding the building of a brand image has also not been approved by the courts, which have held that in a competitive environment, it would be difficult to assess the period of benefit derived from such advertisement and to ascertain whether any 'brand name' was created. I may in this regard cite the decisions of the Punjab and Haryana High Court in the case of Liberty group marketing division (315 ITR 125), the Bombay High Court in the case of Geoffrey Manner and Co, Ltd. (315--ITR 13d), the ITAT Mumbai decision in the- case of Kaya Ltd. (ITA no. 3175/Mum/2013), Asian Paints Ltd. vs. Addl. CIT (ITA 78Q1/MUM/2010), Fine Jewellery (I) Ltd. (19 ITR 746), Warner Lambert India Ltd. (ITA 954 & 3063/Mu m/2006), Delhi ITAT decisions in Spice Communications Ltd. (35 SOT 78) and CIT v. Modi Revlon Pvt. L....