Flipkart received a tax relief of Rs 1,700 crore after the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) allowed an appeal by the ecommerce company to permit tax deductions on its expenses related to employee stock option (Esop) and marketing expenses, according to sources aware of the matter.
The ITAT followed a ruling by the Karnataka High Court with regard to a similar case involving pharmaceutical company Biocon as well as a ruling in a case involving Novo Nodisk, these people said.
The ruling from ITAT comes more than a month after the Karnataka High Court granted interim relief to Flipkart regarding the same case.
The Income Tax department had capitalised discounts as marketing intangibles and disallowed Esops, amounting to about Rs 4,500 crore and Rs 180 crore, respectively for the two assessment years 2016-17 and 2018-19.
Flipkart had argued that the matter was already decided in its favour by the Bengaluru bench of ITAT on the issue earlier during the assessment year of 2015-16.
A spokesperson for Flipkart declined to comment.
The ruling was delivered by the division bench of Bangalore ITAT comprising George George K, judicial member and Padmavathy S, accountant manager.
Recently, Flipkart’s parent Walmart paid $1 billion in taxes to the government following the fintech company PhonePe’s relocation to India from Singapore.
The PhonePe separation had an impact on Walmart’s recent quarterly earnings, which contributed to an operating cost increase of 2.6%. In a recent investor call, Walmart CFO John David Rainey said that this year India would likely cross China as the company’s biggest international market.
The tax relief comes at a time when Flipkart has been cutting costs amid a tough funding environment. ET reported on February 23 that the top 30% of employees at the company, which include the senior leadership, won’t receive any increments this year.
While Flipkart is being cautious about its monthly spending on business, ET reported on November 29 that it will facilitate a $700 million employee stock buyback as part of digital payments platform PhonePe’s ongoing financing round.
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