• Beatrice
  • 2018-04-26 16:48:42

Relief for Flipkart! ITAT rejects govt\'s Rs 110 crore additional tax demand

Flipkart can heave a sigh of relief as the Income Tax Appellate Tribunal (ITAT) has rejected the government’s argument to reclassify the discounts given by the online retailing platform two years ago as capital expenditure, a move that would have prevented its eligibility to claim tax deductions, according to a report in Mint.

The tax department had sought Rs 110 crore additional tax from the e-commerce giant for the year ended 31 March 2016 after reclassification of its discounts and spending on marketing as capital expenditure. In the argument supporting its move, the department said such spending should be treated as capital expenditure because it created brand value and marketing intangibles for Flipkart and that it was not deductible and had to be capitalized.

In response to this, Flipkart argued that the expenses were needed to sell its products and retain its market share. Hence, the entire amount is tax-deductible.

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In the judgment on Wednesday, the Bengaluru bench of the tribunal accepted the argument of the online retail platform. In the order given on the day, ITAT rejected tax department’s contention with regard to its tax assessment on the company that would have put additional tax burden on it.

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The tax department has the option of challenging the order in a higher court, said industry experts.