DCIT CEN CIR 37, MUMBAI v. MIRC ELECTRONICS LTD, MUMBAI

ITA 1652/MUM/2010 | 2006-2007
Pronouncement Date: 23-03-2011 | Result: Dismissed

Appeal Details

RSA Number 165219914 RSA 2010
Assessee PAN AAACM8055A
Bench Mumbai
Appeal Number ITA 1652/MUM/2010
Duration Of Justice 1 year(s) 22 day(s)
Appellant DCIT CEN CIR 37, MUMBAI
Respondent MIRC ELECTRONICS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 23-03-2011
Assessment Year 2006-2007
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1652/MUM/2010 (ASSESSMENT YEAR: 2006-07) DCIT CENTRAL CIRCLE - 37 M/S. MIRC ELECTRONICS LTD . ROOM NO. 11 AAYAKAR BHAVAN ONIDA HOUSE G-1 MIDC M.K. ROAD MUMBAI 400020 VS. MAHAKALI CAVES ROAD ANDHERI (E) MUMBAI 400093 PAN - AAACM 8055 A APPELLANT RESPONDENT APPELLANT BY: SHRI NARESH KUMAR BALODIA RESPONDENT BY: SHRI APURV GANDHI O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) - 41 MUMBAI DATED 04.12.2009. 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE DI SALLOWANCE MADE ON ACCOUNT OF MARKET RESEARCH EXPENDITURE OF RS.52 29 633/- BY TREATING THE SAID EXPENDITURE AS BUSINESS EXPENDITURE AND NOT CAPITAL EXPENDITURE IGNORING TH E FACT THAT THE VALUE ARISING THERE FROM IS OF ENDURING NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) FAILED TO CONSIDER THAT THE SAID EXPENDI TURE SHALL BENEFIT THE MANUFACTURER IN CAPTURING THE NEW MARKE T. 3. THERE IS A CROSS APPEAL BY THE ASSESSEE FOR THE VER Y SAME YEAR ON CIT(A)S ORDER BUT AS SEEN FROM ASSESSEES APPEAL T HE ISSUES ARE ENTIRELY DIFFERENT. BOTH THE LEARNED COUNSEL AND THE LEARNED D.R. HAVE AGREED THAT THE ISSUES IN THIS APPEAL HAVE NO BEARING ON THE OT HER APPEAL PENDING. ACCORDINGLY THE CASE IS TAKEN UP FOR HEARING AND DE CIDED AFTER HEARING THE LEARNED COUNSEL AND THE LEARNED D.R. ITA NO. 1652/MUM/2010 M/S. MIRC ELECTRONICS LTD. 2 4. THE ISSUE IN THE PRESENT APPEAL IS WITH REFERENCE T O THE CLAIM OF EXPENDITURE OF ` 52 29 663/- CLAIMED AS MARKET RESEARCH EXPENDITURE UNDER THE HEAD MISCELLANEOUS EXPENSES BY THE ASSESS EE DURING THE YEAR. THE A.O. WAS OF THE VIEW THAT THE MARKET RESEARCH E XPENSE WAS CAPITAL IN NATURE AND HAVING AN ENDURING BENEFIT. ACCORDINGLY HE PROPOSED TO DISALLOW THE EXPENDITURE AS CAPITAL EXPENDITURE. IT WAS SUBMITTED THAT ASSESSEE GIVES PROJECTS ON FEE BASIS TO LEADING MAR KET RESEARCH AGENCIES LIKE THIRD EYE RESEARCH ORG GFK NFO MBL. THE NATU RE OF SERVICES PROVIDED BY THESE AGENCIES INCLUDE DRAFTING RESEARC H QUESTIONNAIRE ORGANISING FIELD WORK RECRUITING NECESSARY MAN POW ER ADMINISTERING RESEARCH COLLATING AND ANALYSING DATA AND PRESENTI NG THE FINAL FINDINGS TO FACILITATE MARKETING DECISIONS. IT WAS FURTHER SUBM ITTED THAT ASSESSEE IS A LEADING MANUFACTURER OF TV SETS UNDER THE BRAND NAM E ONIDA AND MANUFACTURES VCRS AUDIO-VIDEO CASSETTES AND CD PLA YERS. IT WAS FURTHER SUBMITTED THAT THIS EXPENDITURE WAS INCURRED ON YEA R TO YEAR BASIS IN THE COURSE OF ASSESSEES BUSINESS FOR GETTING NECESSARY MARKET INFORMATION WHICH IS NECESSARY TO MAINTAIN ITS POSITION IN THE HIGHLY COMPETITIVE MARKET. THE A.O. HOWEVER CONSIDERED THAT THE MARK ET RESEARCH EXPENSES IN A WAY HELPED THE MANUFACTURER TO FORMULATE MARKE TING STRATEGIES IN THE PREVAILING MARKET AS WELL TO CAPTURE NEW MARKET AND ALL THESE LEADING TO LONG TERM WORK PLANNING AND SUSTAIN INCREASE IN THE BUSINESS TURNOVER OF THE ASSESSEE AND ACCORDINGLY THE SAME HAS TO BE CON SIDERED AS CAPITAL EXPENDITURE. 5. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSION S DECIDED THE ISSUE AS UNDER: - 4.6 I HAVE CAREFULLY CONSIDERED THE REPLY GIVEN BY THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. THE APPELLANT HAS DEBITED RS.52 29 663/- UNDER THE HEAD MISCELLANEOUS EXPENSE S. THE ASSESSING OFFICER HAS TREATED THIS AS CAPITAL EXPEN DITURE IN NATURE BECAUSE OF ITS ENDURING VALUES AND LONG TERM BENEFI TS TRANSCENDING BEYOND THE RELEVANT F.Y. 2005-06. THE ASSESSING OFF ICER HAS POINTED OUT THAT THE MARKET RESEARCH EXPENDITURE IS LONG TE RM THEREFORE BENEFIT OF THIS EXPENDITURE WILL HELP THE MANUFACTU RER TO CAPTURE NEW MARKET. THE APPELLANT ON THE OTHER HAND HAS TREATED THIS ITA NO. 1652/MUM/2010 M/S. MIRC ELECTRONICS LTD. 3 EXPENDITURE AS REVENUE EXPENDITURE. THIS IS AN UPDA TING EXPENDITURE CLAIMED BY THE APPELLANT YEAR TO YEAR A ND IN THE YEAR 2004-05 & 2005-06 THE SIMILAR EXPENDITURE WAS ALLO WED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT HOW THIS EXPENDITURE INSPITE OF ENDURING NATURE HAS BEEN DESIGNED BY THE APPELLANT BY CONDUCTING MARKET RESEARCH FOR UP GRADATION OF THE QUALITY OF THE PRODUCT AND MARKETABILITY OF THE PRODUCE. THE APPELLANT HAS INVITED MY ATTENTION IN THE CASE OF B OMBAY HIGH COURT IN THE CASE OF CIT VS. GEOFFERY MANNERS & CO. LTD. REPORTED IN 09- 02-2009 ITA NO. 789 OF 2008 IN WHICH IS HELD THAT CORRECT BASIS TO FIND THE NATURE OF AN EXPENDITURE IS THAT IF IT IS FOR ONGOING BUSINESS AS THERE IS NO ENDURING BENEFIT WHICH CAN BE HELD A S REVENUE EXPENDITURE AND IF IT IS FOR THE BUSINESS WHICH IS YET TO FINANCED THE SAME CAN BE TREATED AS EXPENDITURE OF CAPITAL IN NA TURE FOR A PRODUCT WHICH IS YET O BE MARKETED. IN VIEW OF THE ABOVE FACTS SINCE THE EXPENDITURE OF THE APPELLANT IS ON ACCOUNT OF U P GOING BUSINESS THEREFORE THE MARKET RESEARCH EXPENDITURE ARE ALLO WABLE AS BUSINESS EXPENDITURE. THE ASSESSING OFFICER IS DIRE CTED TO DELETE THE ADDITION OF RS.52 29 663/- 6. THE LEARNED D.R. REITERATED THE FACTS AS STATED BY THE A.O. WHEREAS THE LEARNED COUNSEL SUBMITTED THAT THIS IS A REVENUE EX PENDITURE INCURRED ON YEAR TO YEAR BASIS AND THERE IS NO NEW BUSINESS DEV ELOPMENT OR EXPANSION OF THE BUSINESS AND THIS EXPENDITURE IS ROUTINELY SPEN T FOR THE PURPOSE OF ANALYSIS OF MARKET AND VARIOUS AGENCIES WERE INVOLV ED IN THIS WORK. HE RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE ISSUE. AS RIGHTLY DECIDED BY THE CIT(A) THE EXPENDITURE IS IN THE NATURE OF REVENUE EXPENDITURE AS THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING WITH BRAND NAME ONIDA A ND ASSESSEE IS NATURALLY SPENDING MONEY FOR ANALYSIS OF MARKET AND TRENDS IN THE MARKET FOR THE PURPOSE OF BUSINESS. THE CASE LAW RELIED UP ON ALSO HELP ASSESSEES CASE AS THE EXPENDITURE IS BASICALLY IN THE NATURE OF REVENUE EXPENDITURE PAID ON YEAR TO YEAR BASIS REGULARLY IN EARLIER YEA RS ALSO. EVEN THOUGH PART OF THE BENEFIT MAY GO BEYOND THE RELEVANT ASSESSMENT Y EAR BASICALLY THE EXPENDITURE IS REVENUE IN NATURE. EVEN THE A.O. ADM ITS THAT THE EXPENDITURE IS ONLY FOR FORMULATING MARKET STRATEGIES IN THE PR EVAILING MARKET WHICH INDICATES THAT THE EXPENDITURE IS FOR THE ON-GOING BUSINESS FOR INCREASING THE SALES OF THE EXISTING PRODUCTS. ACCORDINGLY WE ARE OF THE VIEW THAT THE ORDER ITA NO. 1652/MUM/2010 M/S. MIRC ELECTRONICS LTD. 4 OF THE CIT(A) IS CORRECT BOTH ON FACTS AND ON LAW A ND ACCORDINGLY THE SAME UPHELD. GROUNDS ARE REJECTED. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 23 RD MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 41 MUMBAI 4. THE CIT CENTRAL III MUMBAI CITY 5. THE DR B BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.