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TMI Blog2016 (6) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... ched on termination of the contract , it does not suggest in any manner that assessee has acquired any benefit which is of enduing nature except the services. We do not find any support on reading of that definition that market support services and customer support services creates any right in favour of the assessee. Further, in assessee’s own case for AY 2003-04 as well as in AY 2005-06 and AY 2006-07 the similar expenditure are allowed as deduction. To prove this ld AR submitted that copies of the Assessment orders passed u/s 143(3) of the Act where no such disallowance have been made. These facts are not controverted by revenue. Though the provisions of res judicata does not apply to income tax proceedings, however, rule of consistency provides that unless there is change in facts and circumstances of the case there has to be consistency in approach of the revenue as well as assessee. Hon’ble Supreme Court in case of Excel Industries Vs. CIT [2013 (10) TMI 324 - SUPREME COURT] has once again reiterated the above principles, therefore even on that principal the disallowance of market development expenditure of customer relation management services cannot survive. In view of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'intangible asset' u/s.32(l)(ii) of the Income-tax Act. 4) On the facts and in the circumstances of the case, it may be held that the services provided by CRM International LLC, Cyber Strategies Ltd. (UK), ASA Co. and Shri Sampath are wholly and exclusively for the purpose of business; and as such are allowable as a legitimate revenue expense u/s.37 of the Income-tax Act. 5) On the facts and in the circumstances of the case, the net disallowance of ₹ 1,39,15,286/- sustained by the learned CIT(A) may be deleted. 4. The brief facts of the case are assessee is a company who filed its return of income on 31.10.2004 declaring NIL income. The assessment u/s 143(3) was framed on 20.12.2006 at a loss of ₹ 26920660/-. Subsequently, ld CIT (A) passed an order u/s 263 of the Income Tax Act setting aside an issue to the file of Assessing Officer to determine allowability of deduction of ₹ 18553715/- on account of market development expenses and ₹ 9089925/- of franchise expenses as revenue expenditure. In pursuant to that order the ld Assessing Officer passed an order u/s 143(3) read with section 263 of the Act on 06.11.2009 disallowing the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmine Retail Centre, Art Works and Designs, i.e., Advertising Expenses to the Mindmine business and outdoor expenses of the said advertisement expenses, inserts in news paper, etc., outdoor promotional activities including roadshows etc., News Paper advertising relating to current business of Mindmine, Co-Sponsorship charges for ACMA Summit held at New Delhi, Promotional Material related to advertising and Service Charges paid to service providers in Insurance business. As per the undisputed details filed by the assessee before the AO vide letter dated 21.10.09 (supra), an amount of Rs. 32,26,356/- was incurred on Trade Fair expenses at Hannover Fair in Germany against which expenditure, an amount of Rs. 60,00,000/- had been received by the assessee Company from its group Companies. The said amount of Rs. 60,00,000/- was included in the figure of Rs. 6,40,54,924/-, which appeared in Schedule 9 of the Accounts, under sub-head Strategic Advisory Services under the head 15 ITA 5179 5180(Del)2011 Revenue . Then, there were franchisee expenses of Rs. 2,69,24,903/-. There against, the assessee company had shown receipts from franchisee centres in Schedule 9 to the Accounts, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case. In view of this respectfully following the order of coordinate bench in assessee s own case we hold that franchise fees debited under the head Market Development Expenses amounting to ₹ 9089925/- is a revenue expenditure in nature. In view of this, we confirm the finding of the ld CIT(A) in deleting the above disallowance. Therefore, ground No.1 of the appeal of the revenue is dismissed. 8. In the result ITA No.2050/Del/2013 filed by revenue is dismissed. 9. Now we come to the appeal of the assessee in ITA No.1472/Del/2013. 10. The Ground No. 1 to 5 of the appeal are against confirmation of disallowance of market development expenses of ₹ 18553715/- as capital expenditure and allowing depreciation thereon @25%. 11. Ld AR submitted that assessee has incurred the market development expenses of ₹ 18553715/- being payment made to M/s. CRM International USA and Cyber Strategies Ltd. UK and other entities. He stated that this expenditure are incurred by the assessee since AY 2003-04 and it is allowed to the assessee on examination u/s 143(3) of the Act. He submitted that according to the agreement the CRM was to render no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later on 40000$ per month to CRMI. Over the above this certain fixed percentage of commission was also to be paid by the appellant. The contract of provision of these services can be terminated by either party by giving a notice of not less than 60 days, however, after one year of the execution of the agreement the assessee may terminate this agreement without assigning any reason by giving a three months notice. Even in case of termination certain clauses of the agreement which safeguards both the parties survive and one of them exclusive arrangement and non compete as per article XVI of the agreement. According to the article XVI the CRMI shall have exclusive arrangement with Hero wherein CRMI shall not provide similar services to other parties. However, the assessee shall be free to avail such services from any party other than CRMI. On this agreement and precisely on this clause the ld Assessing Officer and ld CIT(A) have held that assessee has obtained benefit of enduring nature. The nature of services are precisely described as per schedule 1 of the agreement which are as under:- 1. CRMI shall market and promote in the territory, the business, including IT enabled servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein. Further looking to the tenure of the contract, right of termination with the parties and conditions attached on termination of the contract , it does not suggest in any manner that assessee has acquired any benefit which is of enduing nature except the services. Hon Supreme court in case of Empire Jute Co Ltd V CIT 124 ITR 21 has held that what is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating 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 certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. However, even if this test were applied in the present case, it does not yi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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