9911796707
TMI Blog2017 (3) TMI 1922X X X X Extracts X X X X X X X X Extracts X X X X ..... g grounds: - "1. (i) The learned commissioner of Income Tax (appeals) IX erred in upholding the disallowance as capital expenditure the payment of Rs.3,41,42,848/- to A.C. Nielsen ORG Marg Pvt. Ltd. For compensation Rs.2,89,82,667/- for compensating the 2/3rd cost at WDV in the books of ORG of the PMS Meters becoming obsolete and Rs.51,60,181/-, being the cost of severance of personnel of ORG becoming redundant consequent to PMS Technology becoming obsolete. (ii) The CIT (A) failed to appreciate that- (a) Out of two types of technologies for collection of data the appellant used frequency matching technology (FMS) and picture matching technology (PMS) got obsolete. (b) As a condition for supply of data, the ORG stipulated that 1/3rd cost of PMS meters will be borne by ORG and 2/3rd cost by Appellant, being Rs.2,89,82,667/-. (c) The personnel engaged in data collection by PMS became redundant and the costs of severance of such personnel of Rs.51,60,181/-0 was also to be borne by the Appellant as per the Agreement. (d) The Appellant has not acquired any assets by payment of aforesaid amounts to ORG and the PMS meters remained with ORG and not acquired by the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using two types of technologies for collection of data viz., Frequency Matching Technology (FMS) and Picture Matching Technology (PMS), whereas the assessee was only using the FMS technology. The raw data as collected by ORG using PMS technology was of no use as it could not have been integrated with the assessee's business. It was further claimed by the assessee that since, the assets and the personnel relating to PMS technology used by ORG became redundant, as the data collected using the said technology was of no use, it was decided that 2/3 of the WDV of assets relating to the PMS technology in the hands of ORG as well as cost of severance of personnel of ORG engaged in collection of data using such technology would be borne by the assessee. The assessee provided the details of total value of assets relating to PMS technology at Rs. 4,34,72,796/- and 2/3 thereof being the assessee's share came to Rs.2,89,92,667/-. It was further claimed by the assessee that the cost of severance of the personnel came to Rs.51,60,181/-. (The details are given at pages 79 to 93 of the assessee's Paper Book). Therefore, the aggregate payment made by assessee to ORG was Rs.3,41,42,848/-. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected by using FMS meters to other parties. Had the appellant not entered into this exclusive Data Supply Agreement, dated 5.6.200,. M/s ORG would have freely supplied this data to outside parties. Therefore, the payment made by the appellant to M/s ORG is payment made to ward off competition. Accordingly, the nature of the expenditure incurred by the appellant is capital in nature and cannot be allowed as deduction in the hands of the appellant. By entering into this agreement, the appellant has obtained benefit of enduring in nature and the benefit is in the capital field. As a result of this agreement, the entire capital structure of M/s ORG is working for the appellant company. Therefore it is not correct to say that the appellant company has not acquired any benefit in the capital field. Therefore, as held by Supreme Court in the case of Empire Jute Company. (Supra) nature of expenditure is capital. It may be mentioned here that the appellant is paying separately for obtaining the data of television audience measurement on monthly basis. The decision of the Madras High Court in the case of Tamil Nadu Dairy Development 239 ITR 142 is applicable to the case of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. In view thereof, the assessee claimed that exclusivity clause in the Exclusive Data Supply Agreement would not convert the compensation of Rs. 3,41,42,848/- paid by the assessee to ORG towards redundancy of PMS technology as for non- compete and hence capital in nature. 6. Ld. Counsel further explained that in the present case ORG has been supplying the data to the assessee at its cost and without any mark-up. This information is filed by the assessee at page 94 of the Paper-book. Therefore, benefit, if any arising on account of the upfront payment of Rs.3,41.42.848/- is in the revenue field as the raw data would be available to the assessee at cost i.e., at the reduced price. Ld Counsel relied on the case law of Hon'ble Supreme Court in CIT v. Madras Auto Service (P) Ltd. 233 ITR 468, wherein it is held that an upfront payment which gives the benefit of reduced cost over a period of time is to be regarded as revenue expenditure. In the case before the court, assessee as a tenant had incurred substantial expenditure on construction of a building on tenanted land, which was held to be revenue in nature because the advantage was reduced rent to be paid for the premises over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the capital field. 8. We have heard rival contentions and gone through facts and circumstances of the case. We find from the facts of the case that it is engaged in business of providing television audience measurement services and during the year it has paid an amount of Rs.3,41,42.8481/- on account of payment to AC Nielsen ORG Marg Pvt. Ltd, under the head Compensation paid to ORG-Marg as per the terms and conditions set out in the Exclusive Data Supply Agreement dated 05.06.2002. Out of this payment a sum of Rs. 2,89,82,6671/- was paid compensating the 2/3rd of WDV in the books of ORG of the PMS meters owned by ORG which became obsolete. The balance Rs.51,60,181/- was paid by the assessee to the said ORG for the cost of severance of personnel of ORG who were earlier engaged in collection of data by PMS technology and now became redundant as a consequence to the PMS technology becoming obsolete. Both these payments have been written off as revenue expenditure in the Profit & Loss Account of the assessee company. We find that INTAM is another division of ORG which was engaged in the business of television audience measurement. INTAM was using two types of technologies for coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he compensation paid to ORG for the severance of the personnel engaged in collecting data by PMS technology was also of revenue in nature, as no asset was acquired by the assessee on payment of such amount. If the expenditure did not result in the acquisition of any asset or advantage of enduring benefit, such expenditure cannot be considered as capital in nature and the same is necessarily of revenue in nature. 10. We also find that The AO has cited two judgments of the Hon'ble Madras High Court in the case of Chelpark Co. Ltd. Vs CIT (1991) 191 ITR 249 where the question related to the expenditure incurred by the assessee to "Ward Off Competition' from a powerful competitor was considered as of capital in nature, as it resulted in the acquisition of benefit of enduring nature. It was held that the payment made by the assessee had resulted in acquisition of an enduring right or advantage to carry on business free from potential and positively detrimental competition from the partnership so long as the assessee carried on the business of manufacture and sale of ink. The other judgment cited by AO is of Hon'ble Madras High Court in the case of Tamil Nadu Dairy Development Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is. therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. This issue of the assessee's appeal is allowed. 11. The alternative submissions of the assessee was that if the Tribunal is of the opinion that such payment is to be regarded as capital in nature, then, depreciation may be allowed on the same as an intangible asset, being a license for exclusive supply of data or as any other business or commercial rights of similar nature, as per section 32(1)(ii) of the Income-tax Act. 12. Since we have allowed the main issue in favour of the assessee, we need not go into alternative plea. Hence, other grounds raised by the assessee have become academic. 13. In the result, the appeal of the assessee is allowed. Order pronounced in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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