PCIT Vs Marico Limited (Bombay High Court)
Summary: The Bombay High Court dismissed the Revenue’s Income Tax Appeal concerning Assessment Year 2008-09, holding that the market research expenses incurred by Marico Limited were revenue in nature. The Revenue had challenged the Income Tax Appellate Tribunal’s order dated 1 March 2019 deleting the disallowance of Rs.7.36 crore made by the Assessing Officer.
Marico had originally filed its return of income on 25 September 2008 declaring income of Rs.10,88,06,290 under the normal provisions of the Income Tax Act, 1961 and subsequently filed a revised return on 30 March 2010 declaring total income of Rs.10,83,97,300. The return was processed under Section 143(1), following which the case was selected for scrutiny under Section 143(2). A reference was also made to the Transfer Pricing Officer concerning certain transactions with Associated Enterprises. In relation to the market research expenditure, the Assessing Officer treated the expenditure claimed as revenue expenditure by the assessee as capital expenditure.
The Assessing Officer considered that the market research expenditure helped Marico assess changing elements of the marketing mix, including product, price, distribution and promotion, and considered that marketing research generally contributed to brand building, increased brand awareness and identification of strategies for specific target audiences. On this basis, the Assessing Officer concluded that the expenditure provided an enduring benefit and was capital in nature. The assessee did not pursue the DRP route against the Draft Assessment Order, and the final Assessment Order was passed on 3 February 2012.
