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TMI Blog2017 (3) TMI 1922X X X X Extracts X X X X X X X X Extracts X X X X ..... nology 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. 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 he 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 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... r parties did not make the payment as of capital nature even though, the Appellant may acquire an enduring benefit, which may none the less be revenue account and the test of enduring benefit breaks down; only where advantage is in capital field, the expenditure would be disallowable. 3. The brief facts relating to the above issue are that the assessee was incorporated as a Company on 26.02.1998. It is a 50:50 joint venture between AC Nielsen Research Services Private Limited (in short "AC Nielsen") and Kantar Media Research Services Limited, part of the WPP Group, UK (in short "Kantar"). Since then, it has been engaged in the business of providing television audience measurement services to its clients. Another company, in the name of AC Nielsen Group being ACNielsen ORG-Marg Pvt. Ltd. (ORG) was also engaged in the same business i.e. providing of television audience measurement services. For the purposes of carrying on the aforesaid business, data is to be collected from the individual homes, where television programs are viewed. This raw data is than systematically compiled into reports which would be useful to the clients, being broadcasters, advertisers and advertising agenci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. But the while framing assessment treated the said expenditure as capital in nature and accordingly such payment has been made because ORG agreed to supply the data exclusively to the assessee. According to AO this would tantamount to warding off competition which in turn would give an enduring benefit to the assessee. Therefore, the said payment has been disallowed treating it as a capital expenditure to ward off competition. Aggrieved, assessee preferred before CIT(A). 4. The CIT(A) also confirmed the action of the AO by observing as under:- "2.4 I have considered the submissions of the appellant and pursued the facts of the case. The appellant entered into an agreement with M/s ORG for exclusive data supply agreement on 05.06.2002. Prior to this agreement, M/s ORG was using PMS meters as well as FMS meters for collecting data about television audience measurement. As per this agreement, M/s ORG will be using only FMS meters and further, M/s ORG will be supplying data exclusively to the appellant company. The appellant will be paying separately to M/s ORG for supplying data. In addition to this, the appellant company has agreed to pay Rs. 3,41,4,848/- which is stated to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ward off damaging competition from potential competitor, resulting in the acquisition by the assessee of a right as well as protection to carry on its business activity. This payment was held to be capital in nature. In the present case, the appellant was able to obtain the data from M/s ORG exclusively and also got the protection because M/s ORG was prohibited from supplying this data to any outside agency. Therefore, the payment of Rs.3,41,42,848/- is capital in nature. The action of the Assessing Officer is upheld. This ground of appeal is not allowed." Aggrieved, now assessee is in second appeal before Tribunal. 5. Before us Ld Counsel for the assessee explained the entire transaction that as per the Exclusive Data Supply Agreement ORG has been supplying data collected by it using FMS technology. Such data is thereafter processed by the assessee along with similar data collected by it so as to generate reports which would be useful to its clients. Therefore. ORG is providing services akin to a jobworker. Since the agreement is for a revenue purpose, the payment of Rs.3,41,42,848/- should also be regarded as a revenue expenditure. He argued that the AO and CIT(A) have trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd CIT(A) have inferred that the payment was to ward off competition but in the present case, there was no other competitor of the assessee in the at that point of time. Further, assuming without admitting, Ld counsel stated that there was a competitor, it would never have acquired the raw data from ORG which was a part of the AC Nielsen Group which in turn was a joint venture partner of the assessee. Ld Counsel distinguished the judgments of Madras High Court in Chelpark Company Ltd. v. CIT 191 ITR 249 and Tamilnadu Diary Development Corporation Ltd. v. CIT 239 ITR 142 relied on by the AO and the CIT(A). He distinguished that bare perusal of those judgments show that, in those cases, the payment was clearly for non-compete. In the present case, the agreement is for exclusive supply of data. Further, as stated above as a matter of fact the exclusivity clause in the agreement would have no effect on the competition. Therefore, the inference of non-compete as drawn by the AO and the CIT(A) from the exclusivity clause has no basis on the present facts as well as in law. In view thereof, the said decisions have no application to the present ease. 7. On the other hand Ld SR DR relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata to TAM, it was stipulated by ORG that 1/3rd VDV of the PMS meters will be borne by ORG and 2/3rd WDV will be borne by INTAM. The cost was decided at the WDV of the PMS meters as on June 2002 and the 2/3rd WDV of these PMS meters came to Rs. 2,89,82,667/-, which was paid by INTAM to ORG as a part of the arrangement for supply of data by ORG to INTAM. Further, since the PMS meters became obsolete, the personnel engaged in the collection of data by PMS also became redundant, the cost of severance of such personnel amounting to Rs. 51,60,181/- was also to be borne by INTAM. The debit notes for the write off of i.e. PMS meters dated 30.09.2002 for Rs.2,89,82,667/- raised by ORG on INTAM is reproduced on Page 5 of the assessment order., This amount of Rs. 2,89,82,667/was paid by INTAM to ORG. Similarly, the debit note dated 31.12.2002 for cost of severance of INTAM Personnel rendered redundant for Rs. 51,60,181/- was raised by ORG on INTAM as per which, the second amount of Rs. 51,60,181/- was paid by INTAM to ORG. 9. In view of the above facts, which are undisputed, we find that both payments have been written off as revenue expenditure in the Profit & Loss Account of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit, the vendor having undertaken not to market the milk in Madras city. The facts in the assessee's case are not similar, as the payment was not made for warding off competition by ORG which agreed to supply the data based on Frequency Matching Technology (FMS) to INTAM resulting in the meters for the Picture Matching Technology (PMS) becoming obsolete and therefore, written off, for which 2/3rd amount was paid by INTAM to ORG and also for the severance of the personnel engaged in collecting data by PMS technology. In fact, ORG continued in the business of collecting data by the other technology namely, FMS which was supplied to INTAM for which the consideration paid as per the volume of data supplied by ORG on periodical basis. If this arrangement resulted in PMS meters becoming obsolete, it was not as a result of agreement by INTAM to insist on ORG writing off the WDV of PMS meters as a part of the arrangement and therefore, cannot be characterized as payment made to "Ward Off Competition" but a consequence of the arrangement to supply data based on FMS technology. In fact, even the meters relating to PMS technology remained with ORG and were not transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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