Question

A firm paid Rs. 22250 for advertisement in cash . compute the inadmissible expenses.
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Answer 1

Answer:

Explanation:

Advertisement expenditure was incurred in terms of the license agreement granting the distribution rights to the assessee by the associated enterprise, Discovery Asia Inc. Under this agreement, the respondent­ assessee had procured right to distribute the signals of Discovery Channel and Animal Planet Channel and right to collect revenue arising or generated from distribution. Accordingly, the assessee had received subscription revenue of Rs 23.46 crores, Rs. 37.49 crores and Rs. 39.89 crores from the cable operators in the three assessment years. The agreement mandated and required that the assessee to develop and expand viewership of the Discovery Channel and Animal Planet Channel, which had started with a status of a “free to air channel” and made transition to a “pay channel”. Increased viewership obviously meant increased subscription revenue and earnings. It was manifest and self-evident that the assessee would have undertaken publicity, advertisement and incurred expenditure on increasing awareness and greater market retention, penetration and expansion. Thus, the finding of the appellate authorities was that advertisement expenditure was related to and had direct nexus with the licence agreement for distributorship and subscription fee collection.