Mahindra & Mahindra Ltd Vs DCIT (ITAT Mumbai)
Advertisement & Promotion is Revenue Spend: ITAT Mumbai Deletes ₹2.44 Cr Addition – No Asset Creation, No Capitalisation: Tribunal Allows Mahindra’s ₹3.26 Cr Sales Promotion Claim- Brand Promotion is Revenue, Even if Benefits Endure
Mahindra & Mahindra Ltd., as successor to Mahindra Two Wheelers Ltd. & Mahindra Trucks & Buses Ltd., filed appeal before Tribunal against CIT(A) order confirming disallowance of ₹3.26 Cr advertisement & sales promotion expenses incurred towards “Mahindra Parts Plazas”. AO treated the expenditure as capital in nature, allowed depreciation @25% & added balance ₹2.44 Cr. CIT(A) upheld AO’s view.
Before Tribunal, Assessee contended that the plazas were owned/operated by distributors & not by the company; expenses like staff salaries, rent, branding & standardisation were merely reimbursements, incurred wholly for business promotion. No asset or enduring benefit was created in Assessee’s hands, hence expenditure was revenue in nature deductible u/s 37(1). Reliance was placed on Empire Jute (SC), Alembic Chemical Works (SC), Amway India (Delhi HC), MRF Ltd. (Madras HC), Fine Jewellery (ITAT Mumbai) & other precedents holding advertisement/brand promotion as revenue expenditure.
Tribunal observed that although some items like furniture & branding appeared capital, they were not owned by Assessee & pertained to distributor premises. Since expenses were incurred in ordinary course of business to promote existing Mahindra brand, they were revenue in nature. Accordingly, disallowance of ₹2.44 Cr was deleted.
