TRITON COMMUNICATIONS P. LTD, MUMBAI v. ACIT 2(3), MUMBAI

ITA 7205/MUM/2010 | 2005-2006
Pronouncement Date: 31-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 720519914 RSA 2010
Bench Mumbai
Appeal Number ITA 7205/MUM/2010
Duration Of Justice 5 month(s) 10 day(s)
Appellant TRITON COMMUNICATIONS P. LTD, MUMBAI
Respondent ACIT 2(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 31-03-2011
Assessment Year 2005-2006
Appeal Filed On 20-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NOS. 7205 7206 & 8142/MUM/2010 ASSESSMENT YEARS- 2005-06 2006-07 & 2007-08 M/S. TRITON COMMUNICATIONS PVT. LTD. PROSPECT CHAMBERS ANNEXE 4 TH FLOOR DR. D.N. ROAD FORT MUMBAI=-400 001 VS. THE DCIT 2(3) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI BEHARILAL RESPONDENT BY: SHRI MAHUCE SARKAR O R D E R PER ASHA VIJAYARAGHAVAN (JM) THESE THREE APPEALS PREFERRED BY THE ASSESSEE ARE D IRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A)-6 FOR THE ASSES SMENT YEARS 2005-06 2006-07 & 2007-08. AS THESE APPEALS WERE HEARD TOG ETHER AND INVOLVED CONNECTED ISSUES ALL THESE APPEALS ARE BEING DISPO SED OFF BY WAY OF THIS CONSOLIDATED ORDER. ITA NOS. 7205 & 06/M/2010 A.YRS 2005-06 & 2006-07 2. THE FIRST GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: IN DISALLOWING BAD DEBTS OF RS. 21 04 753/- INSPIT E OF THE FACT THAT BAD DEBTS CLAIMED WERE ACTUALLY WRITTEN O FF IN THE BOOKS OF ACCOUNT AND SECONDLY THE AMOUNTS WRITTEN OFF WERE TAKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF EARLIER YEARS . THE PROVISIONS OF SEC. 36(1)(VII) R.W.S. 3(2)(I) HA VE BEEN WRONGLY CONSTRUED. M/S. TRITON COMMUNICATIONS LTD. 2 3. THE ASSESSING OFFICER NOTED IN THE ASSESSMENT OR DER THAT THE ASSESSEE FAILED TO FURNISH THE EVIDENCE IN RESPECT OF EFFORTS MADE TO REALIZE THE DEBTS OR TO JUSTIFY THE INABILITY OF TH E DEBTORS TO PAY. THE AO CONCLUDED THAT THE EVEN AFTER THE AMENDMENT OF SEC . 36(1)IVII) THE PRIMARY CONDITION OF THE DEBT BEING BAD DEBTS STI LL REMAINED. 4. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO FOR BOTH THE ASSESSMENT YEARS 2005-06 & 2006-07. 5. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SHRI BEHARILAL SUBMITTED A COPY OF THE O RDER FOR THE ASSESSMENT YEAR 2004-05 WHEREIN THE FACTS ARE SIMIL AR TO THAT OF PRESENT YEARS UNDER APPEAL. THE TRIBUNAL HAS OBSERVED AT PARA-5 AS FOLLOWS: WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT THIS ISSUE NOW STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF T.R.F. LTD. V. CIT (2010)323 ITR 397(SC) WHEREI N IT HAS BEEN HELD THAT EVERY ASSESSEE PRIOR TO 01.04.1989 WAS REQUIRED TO ESTABL ISH AS A MATTER OF FACT THAT THE DEBT ADVANCED BY HIM HAS IN FACT BECOME IRRECOV ERABLE. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT THIS POSITION HOWEV ER HAS GOT ALTERED BY THE DELETION OF THE WORD ESTABLISH WHICH EARLIER EXI STED IN SECTION 36(1)(VII) OF THE ACT. THE HONBLE APEX COURT HAS HELD THAT IT IS TH EREFORE NOT NECESSARY FOR THE ASSESSEE WITH EFFECT FROM 01.04.1989 TO ESTABLISH T HAT THE DEBT HAS IN FACT BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DE BT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESP ECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LTD. (SUPRA) WE HOLD THAT THE ASSESSEE HAVING ADMITTEDLY WRITTEN OFF THE BAD DEBT IN QUESTION AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION IT IS ENTITLED FOR DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. WE THEREFORE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DE BTS AND ALLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. 6. THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED BY THE TRIBUNAL IN ASSESSM ENT YEAR 2004-05 M/S. TRITON COMMUNICATIONS LTD. 3 RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER FOR EARLI ER ASSESSMENT YEAR WE ALLOW ASSESSEES APPEAL ON THIS ISSUE. 7. SECOND GROUND RELATES TO DISALLOWANCE OF WRITE OFF OF ADVANCES OF RS. 7 35 013/- AND RS. 9 73 098/- FOR THE A.YRS 200 5-06 & 2006-07 RESPECTIVELY. 8. THE AO MADE THE IMPUGNED DISALLOWANCE BECAUSE TH E ASSESSEE FAILED TO EXPLAIN/ESTABLISH THE REASONS FOR ADVANCE BUSINESS DONE WITH THOSE TO WHOM ADVANCES WERE GIVEN AND THE REASONS F OR WRITE OFF. 9. BEFORE THE LD. CIT(A) THE AR SUBMITTED AS FOLLOW S: THE BUSINESS OF THE APPLICANT NECESSITATED THE OUT SOURCING OF SOME OF ITS WORK AS THE APPELLANT HAD NO IN HOUSE F ACILITY AND REQUIREMENT OF THE CLIENT WAS TIME BOUND. THE INST ITUTES WHICH UNDERTOOK OUTSOURCING WORK OF THE APPELLANT W ERE SMALLER UNITS AND REQUIRED MOBILIZATION OF FUNDS TO GIVE TIME BOUND RESULTS. THE APPELLANT THEREFORE IN THE INT EREST OF ITS BUSINESS GAVE ADVANCES TO SUCH INSTITUTES WHO DID WORK FOR THEM. THE AR EXPLAINED THAT THESE ADVANCES WERE PA ID TO CERTAIN PARTIES WHO WERE TO BE ENGAGED FOR DOING TH E BUSINESS OF THE ASSESSEE. THESE PARTIES IT WAS SUBMITTED D ID NOT DO ANY BUSINESS FOR THE APPELLANT. THESE AMOUNTS COUL D NOT BE RECOVERED INSPITE OF SINCERE EFFORTS MADE BY THE AP PELLANT. IN SUCH CIRCUMSTANCES THE APPELLANT WROTE OFF THE AMO UNTS IN ITS BOOKS OF ACCOUNT AS A BUSINESS LOSS INCURRED DURING THE YEAR. THE APPELLANT THEREFORE SUBMITTED THAT THE AMOUNTS WRITTEN OFF FORMED INTEGRAL PART OF THE APPELLANTS BUSINES S AND THE SAME WAS ALLOWABLE AS DEDUCTION. 10. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR BUT DO NOT FIND MERIT IN THEM. THE A R HAS NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF THE IMPUG NED ADVANCES ESPECIALLY WHEN THESE ARE STATED TO HAVE B EEN GIVEN TO PARTIES WHO WERE TO BE ENGAGED FOR DOING THE B USINESS OF THE APPELLANT. IT IS NOT THE CASE OF THE APPELLANT THAT ADVANCES WERE GIVEN AFTER CARRYING OUT DUE DILIGENCE TO THE PARTIES WITH WHOM THE APPELLANT HAD ESTABLISHED BUSINESS CONNECT IONS. IT M/S. TRITON COMMUNICATIONS LTD. 4 IS ALSO ADMITTED BY THE AR THAT THESE PARTIES DID N OT DO ANY BUSINESS FOR THE APPELLANT. HENCE IT IS VERY DIFF ICULT TO HOLD THAT THE SAID ADVANCES WERE GENUINE OR WERE GIVEN W HOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES ESPECIALLY WH EN NO EVIDENCE HAS BEEN LED BY THE AR BEFORE THE AO TO PR OVE THE GENUINENESS OF THE ADVANCES OR TO ESTABLISH THEIR C ONNECTION WITH THE BUSINESS REQUIREMENTS OF THE APPELLANT. I N VIEW OF THE DISCUSSION THE ACTION OF THE AO IN DISALLOWING THESE ADVANCES IS CONFIRMED AND THIS GROUND IS DISMISSED FOR BOTH THE YEARS. 11. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSSES SEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SHRI B IHARILAL TOOK US THROUGH PAGE 27 & 28 OF THE PAPER BOOK WHERE DETAIL S OF ADVANCES WRITTEN OFF HAVE BEEN FURNISHED AND THE NAME OF THE PARTIES HAVE BEEN VERIFIED. IN THESE CIRCUMSTANCES WE REMIT THE ISS UE TO THE FILE OF THE AO TO TAKE NECESSARY STEPS TO ISSUE SUMMONS TO THESE P ARTIES AND VERIFY THE GENUINENESS OF THE ADVANCES AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 12. GROUND NO. 3 RAISED BY THE ASSESSEE READS AS FO LLOWS: THE LD. CIT(A) UNJUSTIFIABLY REJECTED THE CLAIM OF THE APPELLANT RELATING TO (NON-REIMBURSEMENT) EXPENDITU RE INCURRED ON MARKET RESEARCH AND BUSINESS DEVELOPMENT WHICH W ERE WHOLLY AND FULLY INCURRED FOR THE PURPOSE OF APPELL ANTS BUSINESS PARTICULARLY WHEN SUCH EXPENDITURE WAS ATTRIBUTABLE TO VERY EXISTENCE OF THE APPELLANTS B USINESS. 13. THE AO MADE DISALLOWANCE ON THE BASIS THAT ASS ESSEE COULD NOT PRODUCE ANY EVIDENCE THAT THE ENTIRE EXPENDITURE WA S INCURRED FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER NOTED BY THE A O THAT NEITHER ANY COPY OF AGREEMENT WITH SUCH CLIENTS WAS PRODUCED T O WHOM SUCH EXPENDITURE WERE UNDERTAKEN NOR COULD THE ASSESSEE PRODUCE ANY EVIDENCE REGARDING THE REPORT OF SUCH MARKET RESEAR CH OR THE ANALYTICAL DETAILS OF THE EXPENSES INCURRED. M/S. TRITON COMMUNICATIONS LTD. 5 14. BEFORE THE LD. CIT(A) THE AR SUBMITTED AS FOLL OWS: THE BUSINESS OF THE APPELLANT WAS THAT OF AN ADVER TISING AGENCY WHICH WAS MAINLY BASED ON CREATING ADVERTISI NG PRODUCTS FOR CLIENTS FOR USAGE IN PRESS TELEVISION SATELLI TE CHANNELS AND OTHER MEDIA. TO SURVIVE IN THE COMPETITIVE MARKET AND TO REMAIN UP TO DATE WAS THE ESSENCE OF BUSINESS. THE APPELLANT MU ST UNDERTAKE MARKET RESEARCH TO ENABLE THE CLIENTS TO HAVE INNOV ATIVE IDEAS AND IT WAS THE BACK BONE OF ENTIRE ACTIVITY. THE EXPENDIT URE WAS IN THE NATURE OF RESEARCH MAKING THE BUSINESS PROFITABLE. IT WAS FURTHER SUBMITTED THAT THE ENTIRE DETAILS CALLED FOR BY THE AO WERE SUBMITTED BEFORE HIM. THE APPELLANT WAS STATED TO BE MAINTAINING THE REGULAR BOOKS OF ACCOUNT WHICH WERE AUDITED. T HE INFORMATION ON THE BASIS OF WHICH THE DISALLOWANCE HAD BEEN MAD E WAS AVAILABLE IN THE BOOKS OF ACCOUNT ALONGWITH ALL THE DOCUMENTS PERTAINING TO SUCH INFORMATION. THE APPELLANTS BU SINESS WAS MAINLY DEPENDENT ON THE MARKET RESEARCH AND SUCH EXPENDITURE/LOSS WAS BEING CLAIMED BY THE APPELLANT EVERY YEAR. THE AR POINTED OUT THAT IN A.Y 2007-08 THE AO DID NOT MAKE SIMILAR DISALLOWANCE. IT WAS THEREFORE PRAYED THAT THE A DDITION MADE BE DELETED. 15. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE SUBMISSIONS MADE BY THE AR BUT DO NOT FIND MERIT IN THEM. THE AR HAS NOT BEEN ABLE TO ADDRESS ANY OF THE OBJE CTIONS OF THE AO INCLUDING THE NON PRODUCTION OF ANY REPORT O F SUCH MARKET RESEARCH OR THE ANALYTICAL DETAILS OF THE E XPENSES INCURRED. THE MARKET RESEARCH ACTIVITY AS THE NA ME SUGGESTS MIGHT BE ADDING TO THE PROFIT MAKING APPARATUS OF I NTANGIBLE ASSET OF CAPACITY BUILDING OR BRAND BUILDING. THUS AT BEST THE SAID EXPENDITURE COULD BE SAID TO BE IN TH E CAPITAL FIELD WHICH COULD NOT BE ALLOWED AS A DEDUCTION AS A REVENUE EXPENDITURE;. THE AVERMENT OF THE AR THAT REGULAR BOOKS WERE KEPT WOULD BE OF NO AVAIL SINCE THE EXPENDITURE/LOS S HAS BEEN HELD TO BE ON CAPITAL ACCOUNT. HENCE THE DISALLOW ANCE MADE BY THE AO IS CONFIRMED. ALL THE THREE GROUNDS ARE DISMISSED. 16. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT AT PAGE 37 OF THE PAPER BOOK T HAT THE DETAILS OF M/S. TRITON COMMUNICATIONS LTD. 6 MARKET RESEARCH EXPENDITURE FOR THE ASSESSMENT YEAR 2005-06. HE ALSO SUBMITTED AN ELABORATE NOTE ON MARKET RESEARCH EXPE NSES AND CHARGES (ADVERTISING RESEARCH) WHICH IS REPRODUCED AS UNDER : ADVERTISING RESEARCH IS A SPECIALIZED FROM OF MARKE TING RESEARCH CONDUCTED TO IMPROVE THE EFFICIENCY OF ADV ERTISING. IT MAY FOCUS ON A SPECIFIC AD OR CAMPAIGN OR MAY BE DIREC TED AT A MORE GENERAL UNDERSTANDING OF HOW ADVERTISING WORKS OR H OW CONSUMERS USE THE INFORMATION IN ADVERTISING. IT CAN ENTAIL A VARIETY OF RESEARCH APPROACHES INCLUDING PSYCHOLOGICAL SOCIOLOGICAL ECONOMIC AND OTHER PERSPECTIVES. THERE ARE TWO TYPES OF RESEARCH CUSTOMIZED AND SYN DICATED. CUSTOMIZED RESEARCH IS CONDUCTED FOR A SPECIFIC CLI ENT TO ADDRESS THAT CLIENTS NEEDS. ONLY THAT CLIENT HAS ACCESS TO THE RESULTS OF THE RESEARCH. SYNDICATED RESEARCH IS A SINGLE RESEARCH STUDY CONDUCTED BY A RESEARCH COMPANY WITH ITS RESULTS AVAILABLE F OR SALE TO MULTIPLE COMPANIES. PRE-MARKET RESEARCH CAN BE COND UCTED TO OPTIMIZE ADVERTISEMENTS FOR ANY MEDIUM: RADIO TELE VISION PRINT (MAGAZINE NEWSPAPER OR DIRECT MAIL) OUTDOOR BILLB OARD (HIGHWAY BUS OR TRAIN) OR INTERNET. DIFFERENT METHODS WOUL D BE APPLIED TO GATHER THE NECESSARY DATE APPROPRIATELY. POST-TESTI NG IS CONDUCTED AFTER THE ADVERTISING EITHER A SINGLE AD OR AN ENT IRE MULTIMEDIA CAMPAIGN HAS BEEN RUN IN-MARKET. THE FOCUS IS ON WH AT THE ADVERTISING HAS DONE FOR THE BRAND FOR EXAMPLE INC REASING BRAND AWARENESS TRIAL FREQUENCY OF PURCHASING . PRE-TESTING ALSO KNOWN AS COPY TESTING IS A FORM OF CUSTOMIZED RESEARCH THAT PREDICTS IN-MARKET PERFORM ANCE OF AN AD BEFORE IT AIRS BY ANALYZING AUDIENCE LEVELS OF ATT ENTION BRAND LINKAGE MOTIVATION ENTERTAINMENT AND COMMUNICATI ON AS WELL AS BREAKING DOWN THE ADS FLOW OF ATTENTION AND FLOW O F EMOTION. MEASURING ATTENTION IS VERY IMPORTANT IN PRE-TESTIN G. THE DATA TELLS US WHERE CUSTOMERS LOOK AT AND WHICH PARTS OF THE A D THEY IGNORE. ATTENTION CAN BE MEASURED WITH EYE TRACKING OR ATTE NTION TRACKING. PRE-TESTING IS ALSO USED ON ADS STILL IN ROUGH FORM E.G. ANIMATICS OR RIPOMATICS. PRE-TESTING IS ALSO USED TO IDENTIFY WE AK SPOTS WITHIN AN AD TO IMPROVE PERFORMANCE TO MORE EFFECTIVELY EDIT 60S TO 30S TO 15S TO SELECT IMAGES FROM THE SPOT TO USE IN AD T RACKING AND TO IDENTIFY BRANDING MOMENTS. M/S. TRITON COMMUNICATIONS LTD. 7 CAMPAIGN PRE-TESTING A NEW AREA OF PRE-TESTING DRIVEN BY THE REALIZATION THAT WHAT WORKS ON TV DOES NOT NECESSARILY TRANSLATE IN OTHER MEDIA. GREATER BUDGETS ALLOCATED TO DIGITAL MEDIA IN PARTICULAR HA VE DRIVEN THE NEED FOR CAMPAIGN PRE-TESTING. THE FIRST TO MARKET WITH A PRODUCT TO TEST INTEGRATED CAMPAIGNS WAS OTX IN ASSOCIATION WITH SEQUENT PARTNERS WITH THE INTRODUCTION OF MEDIA CEP. THE LA TEST GENERATION OF THIS PRODUCT INCORPORATES ONE OF THE LEADING MEDIA PLANNING TOOLS DEVELOPED BY A MEDIA MODELING AND SOFTWARE COMPANY POINTLOGIC. THE ADDITION OF A MEDIA PLANNING TOOL TO THIS TESTI NG APPROACH ALLOWS ADVERTISERS TO TEST THE WHOLE CAMPAIGN CREATIVE AN D MEDIA AND MEASURES THE SYNERGIES EXPECTED WITH AN INTEGRATED CAMPAIGN. POST TESTING POST TESTING/TRACKING STUDIES PROVIDE EITHER PERIOD IC OR CONTINUOUS IN-MARKET RESEARCH MONITORING A BRANDS PERFORMANCE INCLUDING BRAND AWARENESS BRAND PREFERENCE PRODUC T USAGE AND ATTITUDES. SOME POST-TESTING APPROACHES SIMPLY TRAC K CHANGES OVER TIME WHILE OTHERS USE VARIOUS METHODS TO QUANTIFY THE SPECIFIC CHANGES PRODUCED BY ADVERTISING EITHER THE CAMPAI GN AS A WHOLE OR BY THE DIFFERENT MEDIA UTILIZED. OVERALL ADVERTISERS USE POST-TESTING TO PLAN FUTUR E ADVERTISING CAMPAIGNS SO THE APPROACHES THAT PROVIDE THE MOST DETAILED INFORMATION ON THE ACCOMPLISHMENTS OF THE CAMPAIGN ARE MOST VALUED. THE TWO TYPES OF CAMPAIGN POST-TESTING THAT HAVE ACHIEVED THE GREATEST USE AMONG MAJOR ADVERTISERS INCLUDE CO NTINUOUS TRACKING IN WHICH CHANGES IN ADVERTISING SPENDING ARE CORRELATED WITH CHANGES IN BRAND AWARENESS AND LONGITUDINAL S TUDIES IN WHICH THE SAME GROUP OF RESPONDENTS ARE TRACKED OVE R TIME. WITH THE LONGITUDINAL APPROACH IT IS POSSIBLE TO GO BEY OND BRAND AWARENESS AND TO ISOLATE THE CAMPAIGNS IMPACT ON S PECIFIC BEHAVIORAL AND PERCEPTUAL DIMENSIONS AND TO ISOLAT E CAMPAIGN IMPACT BY MEDIUM. IN CASE THE MARKET RESEARCH IS CONDUCTED AT THE RE QUIREMENT OF THE CLIENT WHICH IS ESTIMATED AND BILLED TO THE CLIENT IT IS CREDITED TO MARKET RESEARCH COMMISSION AND THIRD PARTY LIABILITY THERE AGAINST IS DEBITED TO MARKET RESEARCH CHARGES IN CASE THE MARKET RESEARCH IS CONDUCTED BY THE AG ENCY WITHOUT THE APPROVAL OF CLIENT FOR SOLISITATING THE BUSINESS IT IS OUR EXPENSES AND IS DEBITED TO MARKET REESARCH EXPENSES . M/S. TRITON COMMUNICATIONS LTD. 8 17. WE HEARD BOTH THE PARTIES. WE FIND THAT DISALL OWANCE OF MARKET RESEARCH EXPENSES IS AT RS. 17 06 676/- AND DISALLO WANCE OF LOSS OF MARKET RESEARCH IS RS. 20 58 364/- FOR THE ASSESSME NT YEAR 2005-06 AND DISALLOWANCE OF MARKET RESEARCH EXPENSES IS RS. 33 63 811/- FOR THE A.Y. 2006-07. WE ARE OF THE OPINION THAT THE BUSINESS O F THE ASSESSEE IS THAT OF ADVERTISING AGENCY WHICH IS MAINLY BASED ON CREA TING ADVERTISING PRODUCTS FOR CLIENTS FOR USAGE IN PRESS TELEVISION SATELLITE CHANNEL AND OTHER MEDIAS. TO SURVIVE IN THE COMPETITIVE MARKET AND TO REMAIN UPTO DATE IS THE ESSENCE OF BUSINESS. THE ASSESSEE MUS T UNDERTAKE MARKET RESEARCH TO ENABLE THE CLIENTS TO HAVE INNOVATIVE I DEAS AND IT IS THE BACK BONE OF ENTIRE ACTIVITY. THE EXPENDITURE IS IN THE NATURE OF RESEARCH MAKING THE BUSINESS PROFITABLE AND WHOLLY AND FULLY EXPENDED FOR THE PURPOSE OF BUSINESS THEREFORE THE SAME IS TO BE ALL OWED. 18. FURTHER IT WAS SUBMITTED THAT T+HE ASSESSEE MAN Y A TIMES CALLED UPON BY ITS CLIENTS TO CARRY OUT RESEARCH IN RESPEC T OF THE PRODUCT MANUFACTURED BY SUCH CLIENT OR A NEW PRODUCT IS LAU NCHED. FURTHER THE ASSESSEE IN PROSPECT OF GETTING NEW BUSINESS CARRI ES OUT EXTENSIVE RESEARCH AND SPENDS MONEY. THE CLIENT PARTLY REIMB URSES IF THE DATA OF RESEARCH IS NOT USED AS PER MARKET PRACTICE. IF THE RESEARCH IS APPROVED THE REIMBURSEMENT IN FULL IS MADE. 19. IN VIEW OF THIS LOSS IN MARKET RESEARCH ACCOUN T IS ONLY THE DIFFERENCE BETWEEN THE EXPENDITURE INCURRED AS REDU CED BY REIMBURSEMENT. THE EXPENDITURE IS FOR THE PURPOSE OF BUSINESS AND THEREFORE ALLOWABLE. 20. WE ARE OF THE OPINION THAT SINCE THE ASSESSEE I NCURS MARKET RESEARCH EXPENSES EVERY YEAR THE ASSESSEE HAS TO REVIEW THE POSITION OF M/S. TRITON COMMUNICATIONS LTD. 9 THE MARKET EVERY YEAR FOR LAUNCHING OF THE NEW PRO DUCT AND HENCE BASED ON THE UNDERSTANDING OF THE CONTINUOUSLY CHANGING C ONCEPTS. THEREFORE THERE IS NO ENDURING BENEFIT BY THIS MARKET RESEARC H FOR THE ASSESSEE AND HENCE COULD NOT BE IN THE CAPITAL FIELD. THER EFORE WE ALLOW THE SAME AS REVENUE EXPENDITURE SINCE THERE IS DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. 21. THE 4 TH GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: THE LD. CIT(A) WITHOUT ASSIGNING ANY VALID REASON CONFIRMED DISALLOWANCE OF EXPENDITURE ON PHOTOGRAPHY GENUINE LY AND RIGHTFULLY EXPENDITURE BY THE APPELLANT FOR THE PUR POSE OF BUSINESS. 22. THE AO NOTED THAT GENERALLY THE ASSESSEE WAS G ETTING REIMBURSEMENT IN RESPECT OF EXPENSES UNDER THE HEAD WHICH IT INCURRED ON BEHALF OF ITS CLIENTS. 23. THE LD. CIT(A) HELD AS FOLLOWS: THE AO NOTED THAT THE LOSS INCURRED UNDER THIS HEA D WAS FOUND TO BE WITH REFERENCE TO MARKET RESEARCH EXPEN SES. SINCE IT HAS ALREADY BEEN HELD ELSEWHERE IN THIS ORDER THE EXPENDITURE INCURRED ON MARKET RESEARCH IS NOT ALLAOWABLE AS A REVENUE EXPENSES AS A NATURAL COROLLARY THE EXPENSE/LOSS UNDER THIS HEAD OF RS. 83 801/- HAVING BEEN INCURRED WITH REFERENCE TO MARKET RESEARCH CAN ALSO NOT BE ALLOWED AS A DEDUCTION. T HIS GROUND IS DISMISSED. 24. IT WAS ARGUED BEFORE US THAT THE EXPENDITURE IN CURRED UNDER THE HEAD IS FOR BUSINESS PURPOSE ONLY SINCE THE GENUIN ENESS OF THE EXPENDITURE HAS BEEN ACCEPTED AND NO DISALLOWANCE CAN BE MADE WITHOUT GIVING ANY REASON FOR TREATING THE SAME AS NON BUSINESS EXPENDITURE. M/S. TRITON COMMUNICATIONS LTD. 10 25. THE LD. COUNSEL POINTED OUT AT PAGE 117 OF THE PAPER BOOK AND ALSO AT PAGE 118 WHERE THE ASSESSEE HAD BEEN REIMBU RSED TO THE EXTENT OF RS. 3 47 939/-. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LOWER AUTHORITIES ARE NOT JUS TIFIED IN PARTIAL DISALLOWANCE OF THE EXPENSES AMOUNTING TO RS. 83 80 1/-. HENCE WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. 26. THE 5 TH GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: THE LD. CIT(A) ERRONEOUSLY HELD THAT THE CHARGES P AID BY THE APPELLANT WERE IN THE NATURE OF INTEREST CONSEQUENT LY UPHELD APPLICATION OF PROVISIONS OF SEC. 40(A)(IA). 27. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT BE FORE THE BENCH THAT AT PAGE 32 AND 33 OF THE PAPER BOOK IT IS OBVIOUS T HAT THE ASSESSEE HAD ENTERED INTO A LOAN TRANSACTION FOR WHICH INTEREST HAS BEEN PAID WITH KOTAK MAHINDRA AND THEREFORE IT IS CLEARLY A CASE O F PAYMENT OF INTEREST AND THE PROVISIONS OF TDS WOULD APPLY AS HELD BY TH E AO. THE LD. COUNSEL CONCEDED ON THE ISSUE. HENCE THIS GROUND O F APPEAL IS DISMISSED. 28. THE ASSESSEE HAS NOT PRESSED GROUND NO. 6. THE REFORE IT IS DISMISSED AS NOT PRESSED. ITA NO. 8142/M/2010 A.Y. 2007-08 29. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUES WITH RESPECT TO BAD DEBTS FOR ASSESSMENT YEAR 2007-08 WE RE SIMILAR TO THOSE OF A.Y. 2005-06 AND 2006-07. 30. THE SECOND ISSUE RELATES TO EXPENDITURE INCURRE D OF RS. 5 04 524/- ON BUSINESS DEVELOPMENT. THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED BEFORE US AS FOLLOWS: M/S. TRITON COMMUNICATIONS LTD. 11 BUSINESS DEVELOPMENT EXPENSES : EXPENSES HAVE BEEN INCURRED FOR NEW BUSINESS PRESE NTATION AND EXISTING CLIENT NEW PRODUCT PRESENTATION. THIS EXPENDITURE HAS BEEN INCURRED MAINLY ON CONVEYANCE TRAVELING COLO UR PRINTS STORY BOARD HOTEL STAY MARKET SURVEY TRANSLATION CHARG ES ETC. FURTHER SOME EXPENDITURE IS INCURRED FOR PURPOSE OF GIFTS A ND FLOWERS FOR CLIENTS ENTERTAINMENT WITH CLIENTS PURCHASE OF GR EETING CARDS LUNCH DINNER SNACKS WITH CLIENTS. INCURRING SUCH EXPENDI TURE IS ABSOLUTELY NECESSARY FOR THE COMPANY. THIS IS A REGULAR EXPEND ITURE BEING INCURRED BY THE COMPANY FOR GETTING AND RETAINING T HE BUSINESS FROM ITS CLIENTS. 31. ON GOING THROUGH THE PAPER BOOK AT PAGE 121 WE FIND THAT ALL THE EXPENSES ARE IN THE NATURE OF REVENUE EXPENDITURE F OR THE PURPOSE OF PROMOTING THE BUSINESS OF THE ASSESSEE. THEREFORE WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. 32. IN THE RESULT THE APPEALS FILED BY THE ASSESSE E IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 31 ST MARCH 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI M/S. TRITON COMMUNICATIONS LTD. 12 DATE INITIALS 1 DRAFT DICTATED ON: 2 5 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 8 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______