Case Law Details
The expenditure incurred on corporate advertisement on television was in respect of ongoing business and for promotion of a corporate brand, as it facilitated the business of the assessee and resulted in increased sales and profitability. Further, the expenditure for advertisement was in the nature of maintaining the brand and/or corporate image and it was not for creation of a brand, therefore, was to be allowed as revenue expenditure.
Held by Bombay High Court
(a) The Respondent-Assessee incurred expenditure on advertisement on television aggregating to Rs. 29.99 crores. This expenditure related to advertisements published on television relating not only to individual products manufactured by it but also towards corporate advertisement to the extent of Rs. 5.47 crores.
(b) The assessing officer disallowed the expenditure claimed towards corporate advertisement amounting to Rs. 5.47 crores on the ground that the same is on capital account as corporate advertisement helps in building the company’s brand value. The benefit of such build up of brand value would endure over a period of years and therefore fall in the capital field. This view was taken by the assessing officer in his final order after his draft Assessment order taking an identical view was upheld by the D.R.P.
(c) On appeal to the Tribunal, the impugned order allowed the Respondent-Assessee’s appeal by inter alia holding that the expenditure is revenue in nature, even if the same is incurred for promotion of a corporate brand, as it facilitates the business of the assessee and results in increased sales and profitability. The impugned order further holds that the enduring benefit, if any, on account of brand building would not be in the capital field.
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