Flipkart gets interim stay from Karnataka HC against Rs 1,100 crore tax demand

The capitalisation of marketing intangibles and non-deduction of ESOP expenses were two issues that were settled in favour of Flipkart in 2021.
Flipkart (File Photo | AP)
Flipkart (File Photo | AP)

BENGALURU:  Ecommerce company Flipkart on Wednesday received an interim stay from the Karnataka high court on a tax demand of over Rs 1,100 crore. The matter pertains to the assessment years 2016-17 and 2018-19. The amount is required to be deposited within four days.  

The court also granted the company protection against coercive measures until the next date of hearing- February 24. Flipkart India had filed writ petitions against demand notices issued by the Commissioner of Income Tax-Appeals (CIT(A)) after uploading addition on account of capitalising discount as marketing intangibles and disallowing ESOP cross charges amounting to about Rs 4,500 crore and `180 crore, respectively for the two assessment years.

The capitalisation of marketing intangibles and non-deduction of ESOP expenses were two issues that were settled in favour of Flipkart in 2021.  “However, the income tax department agitated these issues again for other years and Commissioner Appeals passed an order raising huge tax demand against Flipkart and gave a very limited period of four days to pay it,” said Saurrav Sood, Practice Leader-International Tax and Transfer Pricing at SW India.

It was against this demand that Flipkart filed a writ before Karnataka High Court in which it contended that a reasonable time period was not provided to deposit the demand, while it still has an option to file an appeal before the Tribunal, he explained.

He added that it seems such coercive orders often create negative sentiments with the taxpayers and the tax department should be reasonable towards the taxpayers while issuing certain directions.  

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