According to sources the Income Tax Appellate Tribunal (ITAT) has rejected the appeal which was made by Flipkart against an earlier decision by the department to impose a penalty of $17 million (Rs 110 crore). Meanwhile the tax assessing authority has not accepted the practice of treating discounts and marketing spends as revenue expenditure and to show losses in the operations.
Accordingly the department wants these expenses to be reclassified as capital expenditure and amortized over a few years. Meanwhile the plea by the online retailer to stay the operation of the demand due to its financial situation also did not find favor with the IT authorities since they felt such financial hardship, in their opinion, does not exist.
Presently Flipkart has found a supporter in former CEO of Infosys, Mohandas Pai who feels the concept of treating the discounts and marketing outgo as part of the operating costs should be permitted for online retailers. It may be for the government to come out with a notification in this regard.
