Case Law Details
Flipkart India Private Limited Vs ACIT (ITAT Bangalore)
Conclusion: The profit margin forgone by assessee could not be held to be expenditure in creating intangible or goodwill as there was no expenditure incurred by assessee except those that were set out in the profit and loss account and disallowing such expenditure by AO and consequently arriving at a positive total income chargeable to tax was without any basis and not in accordance with law.
Held: AO noticed that during the year under consideration, assessee has made a sale of Rs.15,264.42 crores to the retailers and against this, the cost of goods was Rs.15,425.35 crores and accordingly a cash loss of Rs.160.93 crores. AO considered this as a basis for marketing intangibles and accordingly made an addition towards the same. CIT(A) deleted the addition by relying on the decision of the coordinate Bench in assessee’s own case for AY 2015-16 [2018] 92 com 387 (Bang. Trib) where the Tribunal had held that the profit margin forgone by the assessee could not be held to be expenditure in creating intangible or goodwill. Aggrieved, the revenue was in appeal before the Tribunal. It was held that there was no expenditure incurred by assessee except those that were set out in the profit and loss account. The question of incurring expenditure on creating intangibles did not arise for consideration at all. The action of the AO in disregarding the books results could not be sustained and the further conclusion that the action of the AO in presuming that assessee had incurred expenditure for creating intangible assets/brand or goodwill was without any basis. It was also not necessary for us to go into the question of estimation of quantum of expenditure on creating intangibles. For the reasons given above, the loss as declared by assessee in the return of income should be accepted by the AO and his action in disallowing expenses and arriving at a positive total income by assuming that there was an expenditure of a capital nature incurred by the Assessee in arriving at a loss as declared in the return of income and further disallowing such expenditure and consequently arriving at a positive total income chargeable to tax was without any basis and not in accordance with law and the said manner of determination of total income was hereby deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These cross appeals by the assessee and revenue are against the order of the CIT(A)-11, Bangalore dated 19.10.2022 for the assessment year 2017-18.
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