#revenue expenditure

ITAT Delhi rules that advertisement, marketing, and sales promotion expenses incurred by a subsidiary are revenue in nature, even if they enhance the parent company’s brand. The ruling dismisses the Revenue’s appeal, reinforcing that such expenses cannot be capitalized under transfer pricing norms, offering clarity for multinational corporations on tax treatment of AMP costs.

ITAT Delhi rules that forfeiture of earnest money deposit (EMD) in a joint gas tender, incurred to secure fuel for hotel operations, qualifies as a deductible business expenditure under Section 37 of the Income Tax Act. The ruling clarifies that such losses are revenue in nature, directly linked to business operations, and not capital expenditure.

Madras High Court ruled that expenditure on replacing independent machinery-even if labeled as 'repairs'-constitutes capital expenditure under Section 37 of the Income Tax Act, 1961. The court set aside the ITAT’s order, emphasizing that such replacements enhance asset value and cannot be deducted as revenue expenses. Taxpayers and advisors must now reassess similar claims to avoid disallowance risks.

ITAT Bangalore rules that ESOP cross-charges from a foreign parent to its Indian subsidiary qualify as revenue expenditure under Section 37, overturning the disallowance of ₹721 crore. The decision clarifies that employee compensation costs, even when recharged, are deductible if incurred wholly for business purposes, impacting multinational tax structures.