We discuss here the taxability of some of the expenditure:

Leave Travel Concession:

The value of any travel concession or assistance received by an employee normally fall within the meaning of salary as defined in clause (1) of section 17 of the Income-tax Act. These benefits are taxable under the head Salaries subject to the exemption under clause (5) of section 10 of the Income-tax Act. Accordingly, it would not be liable to FBT. However, if the leave travel concession/assistance is not included in salary, as defined in section 17, then it will be classified as an expense for the purposes referred to clause (F) of sub-section (2) of section 115WB and will accordingly be liable to FBT. (FAQ 44)

Entertainment

The meaning of the word entertainment in clause (A) of sub-section (2) of section 115WB is of wide import. It includes all expenditure in connection with exhibition, performance, amusement, game or sport, for affording some sort of amusement and gratification. (FAQ 49)

Expenditure for conference, purpose of conference not relevant

In terms of the provisions of clause (C) of sub-section (2) of section 115WB, any expenditure incurred for the purposes of conference is liable to FBT irrespective of whether the conference is of agents or dealers or development advisors or any other persons. (FAQ 56)

Ummeed se dugna, is that so? The taxability of expenses on 'brand ambassador' or for 'celebrity promotions'

All expenditure incurred for the purposes of sales promotion and publicity would fall within the scope of clause (D) of sub-section (2) of section 115WB, other than any expenditure on advertisement referred to in clauses (i) to (vi) of the proviso to the said clause. Since the expenditure on brand or brand ambassador or celebrity endorsement does not fall within the scope of the proviso to clause (D) of sub-section (2) of section 115WB, such expenditure is liable to FBT. (FAQ 57)

Brokerage and commission

Brokerage and selling commission paid for selling goods have been held by Courts to be in the nature of ordinary selling expenses. Therefore, the expenditure on brokerage and selling commission is not expenditure for the purposes of sales promotion, including publicity within the meaning of clause (D) of sub-section (2) of section 115WB.

Accordingly, FBT is not payable on brokerage and selling commission paid for selling goods. (FAQ 58)

Salesmen appointed by distributors

If the salesmen are the employees of the distributors, reimbursement (by whatever means) of expenses relating to such salesman, is a component of commission/ brokerage/ service charges/ margin to distributors and therefore in the nature of ordinary selling expenses. Such selling expenses do not fall within the meaning of sales promotion, including publicity referred to in clause (D) of sub-section (2) of section 115WB and therefore, not liable to FBT. (FAQ 59)

Call centre expenses for cold calls

Any expenditure in the nature of call centre charges for canvassing sales (cold calls) and carrying out post-sale activities is in the nature of selling cost and therefore, outside the scope of the provisions of clause (D) of sub-section (2) of section 115WB relating to sales promotion. Accordingly, such expenditure is not liable to FBT.

Expenditure on Ad films

An ad-film is a medium for advertisement and therefore falls within the scope of clause (i) of the proviso to clause (D) of sub-section (2) of section 115WB. Therefore, any expenditure on making an ad-film is not liable to FBT. (FAQ 65)

Free samples:

The term sales promotion and publicity has not been defined in the Income-tax Act and hence, it should be given its natural meaning. The term is of wide import.

Following Honourble Supreme Courts decision in the case of Eskayef Ltd. Etc. (245 ITR 116), any expenditure on free medical samples distributed to doctors is in the nature of sales promotion. Therefore, it would be liable to FBT. Similarly, any expenditure on free samples of other products distributed to trade or consumers would also be liable to FBT. (FAQ64). Similarly, Any expenditure (including expenditure on artwork and royalty charges) on free offers (with products) such as freebies like tattoos, cricket cards or similar products, to trade or consumers (excluding employees) is for the purposes of sales promotion and publicity and accordingly, liable to FBT. (FAQ 66)