Advertisement expenses are indirectly benefiting consumers, so it can be added to cost.

For ex: if cost of product is 1000 and 20 units are sold,S.p wud b 50.(ignoring profits).now consider adv exp of 10 incurred .nw no of units sold will increase to 50 and cost being1100(1000+100)..S.p will become 22.since this benefit arises to customer through economies of scale and thus it is right to charge it from customer.other benefits of advrtisemnts r it creates customer convinience,elimination of middleman cost,controlling price fluctuations and overcharging,better quality..etc.

if adv becomes part of retained earnings,then co will find it difficult to price their products and they will show higher profits then actual and pay more tax which would agn be chrgd bck frm customer indirectly as motive of business is not to pay taxes bt increase profits. and as i said earlier,no co vill incurr adv widout gving serious thot as outflow of funds matters more than who will be paying taxes on it (wich wud be peanuts agnst huge exp). and it is not alwys necesry dat sch huge expnse vill generate returns..all that matters is product.

Sharma Sir,

I do get ur point, but I fail to understand that if u have considered the nature of an expense like Advertisement expense and Commission. Unlike all other expenses, these hav a direct consequence of dis-proportionately increasing the Revenue. Most companies in a growing economy does. So in reality, companies get to benefit out of the current system in two ways. 1: Being, The company indirectly charging customers for the expenses incurred on Ads, by inflating costs belonging to other heads(be it under trading/ P&L a/c). Isn't there a possibility, that this inflated cost be deducted from the company's income and also an equivalent amount being deducted under Advertisement under 'Ad Expenditures' Head.?  If so, then the company is twice reducing the same amount spend on ADs, and paying tax on the balance. 2: being, the company anyhow increases its revenue, probably upwards of five times it has spent on Ads, and retains the benefit of it( yes they do pay tax on the increase in revenue, even then)),,,, unlike the customer who indirectly takes up the cost.

Where is the question of considering the deduction of other costs like transportation, Bank interest etc  as its not like Ad expense or commissions... all other costs doesn't have a reflection on revenue.... so what other reason stands against treating Ad expenses and commissions differently?

Another point u raised is that, regardless of measures taken by authorities to curb this problem, companies would anyhow would be finding different ways to spent allocated funds- Business promotion expenditure. Yes, but whats the guarantee tat this is not happening right now??? Suppose if ad expenses are paid out from retained earnings then the investors and analyst will carefully scrutnise such ethically incorrect allocation of expenditures, from the details provided under disclosur. They wud inturn be more careful on such spending, be it under different heads too... they become more accountable, right?

How DTC and GST provisions help curbing such problems is to be seen.

@ Jose

our tax system is based on calculations by mercantile system and belive that it represents true picture, now what u have to say that a sleeping director visited frequent to overseas on company cost on the name of procurement of R&D? as there is no such provision for limiting the expenses of luxary by self made plans, similer way is the advertisements.

the commission is paid to showroom/ dealers for promoting sales of their goods, so how it can be reduced? either company has to ask the customer to visit their factory outlet and stand in queue for booking and delivery of car.......................or any alternate way is there except the dealers?

india is alike a sub continent in size and population, where we dont get everything handy in our news, so if we dont get the updates through advertisements, we shall be in dark before selecting the product................

an example : 

there are numbers of companies who are producing battery operated bikes, which run on battery recharge, but how many people know that which one to choose? coz it may be that the best one is still not able to advertise their model .................coz the big corporates has taken lions share of market mere by advertisement, by paying dealer commission , and the best one could be still in mid way of struggle to enter the market ............

another example 

search your own database for a user friendly CYCLE which could be affordable by a villager by cost and utility both. or for  kerosene based economic lanturn which is used most in indian villages,

advertisement expenses are made most on luxary items, coz ppl love to pay more for that .....................thats the basic point.

under GST, the indirect taxation to goods would be limited and multi taxation would be  reduced to ONE.

under DTC, it is expected that expenditure tax will be imposed , in place of income, so the car would cost more for buyer, coz he will have to pay luxary tax also . :)