Save Rs 499. Go Ad-Free with CAclubindia Pro for 2 Full Years. Subscribe Now!

Can discounts offered on digital services be classified as revenue or capital expenditure?

ITR Filing 208 views 2 replies

Manju

Self employed

4 Points Posted on 22 March 2019

Hi, my name is Manju.

I am offering digital services like selling courses for competitive exams. I give volume-based discounts and other promotional discounts to the students.

Can these discounts be classified as revenue or capital expenditure?

If yes, then should they be classified as revenue or capital expenditure?

If classified as capital expenditure, then how to calculate the depreciation rate?

Thanks.

Replies (2)

Giridhar S Karandikar

Team Lead

7558 Points Posted on 22 March 2019

it will be classified as revenue expenditure.
you are offering service related to your business and giving discount in order to increase your business so it will be revenue expenses and not capital

Manju

Self employed

4 Points Posted on 23 March 2019

Thank you for the clarification, Giridhar ji.

But why did the Income Tax department ask Flipkart to reclassify discounts as capital expenditure?

"Income Tax department asks Flipkart to reclassify discounts as capital expenditure"

Read more at:https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/income-tax-department-asks-flipkart-to-reclassify-discounts-as-capital-expenditure/articleshow/62597949.cms

Thanks and Reagrds,

Manju