ITAT affirms CIT(A)'s decisions on production costs and depreciation rates.

The ITAT upheld the CIT(A)'s decisions on both issues. The cost of production of TV serials and programs was treated as revenue expenditure, following precedents and legal interpretations. Depreciation on the Film Software Library was allowed at 25%, treating it as an intangible asset, consistent with previous rulings. The ITAT dismissed the revenue's appeal, affirming the lower authorities' decisions.

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Issues Involved:
1. Deletion of disallowance of cost of production of TV serials and programs claimed as revenue expenditure.
2. Allowance of depreciation on Film Software Library at 25% by treating it as an intangible asset.

Detailed Analysis:

1. Deletion of disallowance of cost of production of TV serials and programs claimed as revenue expenditure:

The Assessing Officer (AO) observed that the assessee debited an amount of Rs. 66,70,79,577 towards the cost of production of TV serials and programs, claiming it as revenue expenditure instead of depreciation. The AO considered these programs as intangible assets and allowed depreciation at 25% on the said expenditure. The CIT(A) allowed the assessee's ground by following the decision of ITAT in the assessee's own case for AY 2011-12. The ITAT, in the assessee's own case for AY 2012-13, upheld the CIT(A)'s decision, referencing the case of M/s. Prism Television (P) Ltd and the Chennai Tribunal's decision in ACIT vs. M/s. Sun TV Network Ltd., which treated the expenditure on TV programs and films as revenue expenditure. The Tribunal noted that the rights over films and serials are treated as stock in trade until they are aired, and the expenditure is debited to the Profit & Loss account. The Tribunal also referenced the Hon'ble Delhi High Court's decision in CIT vs. Television Eighteen India Limited, which held that the expenditure on production of programs should be allowed as revenue expense under Section 37 of the Income Tax Act, 1961. Following these precedents, the ITAT upheld the CIT(A)'s decision and dismissed the revenue's grounds on this issue.

2. Allowance of depreciation on Film Software Library at 25% by treating it as an intangible asset:

The assessee claimed depreciation of Rs. 19,52,90,820 on the opening WDV of Film Software Library at 25%, treating it as an intangible asset. The AO allowed depreciation at 15%, considering the Film Software Library as 'Plant & Machinery.' The CIT(A) allowed the depreciation claim at 25%, following the ITAT's decision in the assessee's own case for AY 2011-12. The ITAT, in AY 2012-13, upheld the CIT(A)'s decision, referencing the case of M/s. Ushodaya Enterprises (P) Ltd, where the Tribunal remanded the issue to the AO to examine the valuation of the asset and allow depreciation at 25% treating the software library as an intangible asset. The ITAT found no reason to interfere with the CIT(A)'s order, as it followed the ITAT's direction. Consequently, the ITAT upheld the CIT(A)'s decision and dismissed the revenue's grounds on this issue.

Conclusion:

The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decisions on both issues. The cost of production of TV serials and programs was treated as revenue expenditure, and depreciation on the Film Software Library was allowed at 25%, treating it as an intangible asset. The judgments referenced in the decisions were consistent with previous rulings in similar cases, reinforcing the treatment of these expenditures and depreciations as per established legal precedents.

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