Thursday 8 February 2018

ITAT : Advances hearing over AO re-characterizing Flipkart's discounts bonanza as monopoly building capital-expense

Bengaluru ITAT directs Flipkart India Pvt Ltd. (‘assessee’) to pay 50% of demand of Rs.109.52 Cr and furnish bank guarantee for balance, relying upon ITAT stay order in Google India approved "in spirit" by HC, directs registry to advance appeal hearing date to April 9, 2018; Notes that AO treated the loss incurred as capital expenditure observing that discounts offered to customers were intended to build up brand value/monopoly or primacy in the online market and determined total income at 408 Cr adopting sales price at which the assessee could have sold the products, based on comparable profit earned by entities engaged in similar line of business; ITAT rejects assessee's contention that AO estimated turnover without rejecting books of accounts and applied TP principles to transactions with unrelated parties, observes that "AO merely adopted the methodology to arrive at the value of realization, had the products would have been sold with profit motive" and thus holds judicial precedents relied on by assessee to be not applicable; Observes that assessee did not advance any argument as to patent error in methodology adopted by tax authorities or rebutting the stand that assessee's loss in the form of discount was nothing but intangibles; Holds that no case was made out about financial hardship and "there is every possibility of availability of liquidity in the company on account of receipt of huge share capital and huge share premium" 

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