fbt on advertisement

This query is : Resolved

Suraj (Querist)
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18 June 2009 Dear Sir,

We have purchased some diary & pen (printed my com name on it) is it liable for fbt & some other printed material which has been distributed to customers & suppliers.

Regards,
Suraj

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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18 June 2009 you are giving gift to your customers for advertisement so in my opinion it is gift & liable fbt

chetan soni

chetan soni (Expert)
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18 June 2009 To bring any expenses under FBT it has to satisfy following main conditions, namely

1. There must be employer employee relationship
2. Expenditure incurred was paid over & above the salary to the employee

As in your case the expenses incurred is for sales promotion for customers & suppliers. As the first condition itself is not satisfied.

Hence bringing this expenses under FBT does not arise.

Ankur Garg

Ankur Garg (Expert)
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19 June 2009 Agree with chetan.

taxindiaconnect

taxindiaconnect (Expert)
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19 June 2009 The expenditure on calendars, panchangs and diaries which give details and publicity of the company and its product is for the purpose of publicity and advertisement and for sales promotion. [CIT Vs. Dabur (Dr. S.K. Burman) (P.) Ltd. 2001] 119 Taxman 381/250 ITR 301 (Cal.). This judgment was delivered when the sub-section (3A) of section 37 read as “advertisement, publicity and sales promotion”. Therefore, the court was not required to distinguish between the three terms. In the case of ICICI Bank Vs. Municipal Corporation of Greater Bombay [2005] 6 SCC 404, the Supreme Court outlined the meaning of ‘advertisement’ in its natural, ordinary and popular sense and this would clearly be an ‘advertisement’.

This would fall under “Such other medium of advertisement” in clause (v) of the proviso to Section 115WB(2)(D) and hence not liable to FBT.