DCIT Vs Bajaj Finserv Direct Limited (ITAT Pune)
The Pune ITAT dismissed the Revenue’s appeals and upheld the deletion of ₹25.02 crore of sales-promotion expenditure and ₹58.59 lakh paid to UNBXD Software Pvt. Ltd., treating the expenditure as revenue in nature. The sales-promotion expenditure comprised digital advertising, internet advertising space and media management, SMS broadcasting, SEO, campaign-specific content generation, video production and social-media strategy. The Tribunal noted that no capital asset was acquired and the expenditure was recurring in nature. Applying the principle in Empire Jute Co. Ltd. v. CIT, it held that the enduring-benefit test cannot be applied mechanically and that expenditure facilitating business operations without affecting the fixed capital structure may remain revenue expenditure. The Tribunal also upheld deletion of the ₹58.59 lakh payment to UNBXD, as its services facilitated product searches, displayed high-selling products, corrected spelling errors and suggested products to customers, without creating a capital asset or advantage in the capital field. The assessee’s cross-objections were also dismissed as infructuous or general. Both Revenue appeals and both cross-objections were ultimately dismissed.
Recurring expenditure on digital advertising, SEO, media space, SMS campaigns, social-media strategy, marketing videos and search-optimisation services, incurred to facilitate business without creating a capital asset or an advantage in the capital field, is revenue expenditure; the “enduring benefit” test cannot be applied mechanically.
