TaxTMI 
TaxTMI 
2010 (2) TMI 987
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....r under Section 143(3) on 18-3-2004 assessing an income of Rs. 51,40,07,364. While doing so the assessing officer, inter alia, made the following disallowances/additions in respect of the following: (i) Depreciation on integrated receivers and decoders (IRDs) allowed at the rate of 25 per cent., as plant and machinery, instead of at the rate of 60 per cent, as computers. (ii) Expenditure on leasehold premises which was claimed as revenue expenses was disallowed and treated as capital expenditure. (iii) Claim for deduction under Section 80HHF was rejected. (iv) Enhancement of service fees received by the assessee under an arrangement with SET Satellite (Singapore) Pte. Ltd. by invoking provisions of Section 92 of the Act. (v) Added an amount received as gift from SPE Mauritius Holding Ltd. under Section 68 of the Act. (vi) Disallowed the claim of bad debts and advances written off. (vii) Added the amount of accumulated balance in provisions for gratuity and leave encashment account and also disallowing the claim of incremental liability for leave salary, which was computed on the basis of actuarial valuation by the assessee. Aggrieved the assessee carried the matter i....
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....contention of the assessee that it is only in the case of an expenditure being classified as of capital nature, that the provisions of Explanation 1 to Section 32(1)(iii) becomes applicable. Whether an expenditure is of capital or revenue nature has to be determined first, in the light of the ratio of the decisions of the apex court and other courts. It is an undisputed fact that the assessee is only a lessee of the premises, on which the expenditure in question has been incurred. Consequently, the expenditure has resulted in third party assets and more so, since the lease agreement entered into by the assessee stipulated that the assessee was not entitled to remove any of the additions and alterations of permanent nature made to the property leased. In the circumstances, considering plethora of decisions of the apex court, jurisdictional High Court and other courts relied upon by learned Counsel for the assessee, noted above, we have to hold that the expenditure in question is only revenue in nature, and is liable to be allowed as deduction on the computation of income. We, accordingly, accept the grounds of the assessee on this issue and direct the assessing officer accordingly. ....
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....er dated 5-1-1996 the rate of advertisement commission was agreed upon at the rate of 15 per cent, of gross advertising revenues in India. SET, Singapore were to reimburse major marketing costs to the appellant. It is only vide letter dated 16-10-1998, that the advertising sales agency commission has been reduced from 15 per cent, of gross ad revenues to 12.5 per cent, net ad revenues in India. * The subscription revenue and service fee and independent channels of revenue and if both channels do well, the profits of the appellant would go up. * Other companies like Zee TV and Star India Ltd., have reflected advertisement revenues at the rate of 15 per cent, of gross receipts though they are also on the same line. In view of the above, the assessing officer worked out the income accrued to the appellant from the service fee at the rate of 15 per cent, of the gross revenue receipts as under: 15% of gross revenue receipts of Rs. 4,00,72,12,000/- Rs. 60,10,81,812/- Shown by the assessee in the income Rs. 50,09,01,501/- The Difference Rs. 10,01,08,302/-" 11. After considering the contentions of the assessee the Commissioner (Appeals) deleted the addition by following his or....
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....assessing officer. The amount in question has been received by the appellant from one of the principal shareholders. The assessing officer has not proved that the payment of US $ 5,64,909 was in lieu of certain business consideration from the payer to the appellant. The fact that the appellant and SPEM are engaged in different business activities has also not been controverted. The assessing officer has compared the relationship between SPEM and the appellant to that between the parent and child. The factum of gift has not been disputed nor controverted with the help of evidence. The receipt has not been established to be in the nature of income and cannot be considered as casual and non-recurring receipt taxable under Section 10(3) of the Income Tax Act. Therefore, the action of the assessing officer treating the gift as business receipt cannot be sustained. The receipt shall not qualify for inclusion in the business profits nor in the turnover and accordingly shall not be considered for computation of deduction under Section 80HHF of the Income Tax Act. The appellant gets relief of Rs. 2,62,79,566. 15. The facts of the case are that the assessee has received a gift of Rs. 2,62,7....
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.... gift deed was specifically offered for disallowance in the assessment year 2002-03. * even if the appellant has reflected the said gift as revenue receipt and credited the same to profit and loss account, the treatment adopted by the appellant in the books of account would not change the character of the gift into a revenue receipt and shall not govern the taxability of the receipt. * The appellant relied on the following decisions: Kedarnath Jute Mfg. Co. Ltd. v. CIT (1971) 82 ITR 363 (SC). Tuticorin Alkali Chemicals and Fertilisers (1997) 227 ITR 172 (SC). CIT v. Stewarts and Lloyds of India Ltd. (1987) 165 ITR 416 (Cal). * Without prejudice if the gift was held to be the revenue receipt, the same may be included in the computation of profits of business and deduction under Section 80HHF must be allowed. 16. Accepting these contentions the Commissioner (Appeals) granted relief. Aggrieved the revenue is in appeal. 17. The learned senior departmental representative, Mr. Rana submitted that the contention of the assessee that this receipt of money from its majority shareholder SPEM was not a revenue receipt but only a capital receipt is contradicted by the entries pas....
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....ase law cited above, we hold that the undisputed fact is that there is no consideration paid by the assessee to SEPM. There are no business transactions whatsoever between these two entities. The declaration of gift, which is registered states that the same is given voluntarily and without consideration, to SET India Ltd. and SPE Mauritius Holding Ltd. The certificate of foreign inward remittance states that the purpose of remittance is gift to SET India from SPE Mauritius Holding Ltd. There is no material, whatsoever that the revenue to come to a conclusion that there might be possibly some consideration or quid pro quo arrangement for this remittance of fund. The view of the assessing officer that the amount may have been received to complete some statutory/administrative requirements in India is nothing but a pure surmise and conjectures. On these facts we now see the legal proposition. The Hon'ble Supreme Court in the case of Groz-Beckert Saboo Ltd. (1979) 116 ITR 125 (SC) was considering a case where the assessee received free of cost certain raw material and semi finished needles from its collaborator which had sent some machinery to the assessee. The question was whether....
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....hod and manner of the payment and determination of the quantum to be paid would not affect the character of the receipt. There is nothing to bar consultation and discussion between a donor and a donee. The fact that the amount received from the U.K. company had been shown in the profit and loss account of the assessee for the relevant assessment year under the head "Income from other sources" would also not be decisive in the determination of the character of the receipt. The sum of Rs. 22.5 lakhs receivable by the assessee from the U.K. company with reference to the Baroda Refinery Project was not of the character of income. Held also, that the Tribunal was right in holding that, in any event, no right to receive the amount paid by the U.K. company accrued to the assessee during the relevant accounting year. 22. The jurisdictional High Court in the case of Mehboob Productions P. Ltd. v. CIT reported at (1977) 106 ITR 758 (Bom) laid down that all receipts by the assessee would not necessarily be deemed to be income of the assessee for the purpose of income-tax and the question whether any particular receipt is income or not will depend on the nature of the receipt and true scope....
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....he consideration which is the subject-matter of the gift. Love, affection, spiritual benefit and many other factors may enter in the intention of the donor to make a gift but these filial considerations cannot be called or held to be legal considerations as understood by law. It is manifest, therefore that the passing of monetary consideration is completely foreign to the concept of a gift having regard to the nature of character and the circumstances under which such a transfer takes place. 24. In the above judgment relied upon by the learned departmental representative it is clearly laid down that a gift is a receipt of money where no consideration of money or moneys worth is involved. It is a voluntary act and does not contain any element of consideration in any shape or form. Money received from a holding company with whom the assessee does not have any trading or business transaction cannot be considered as trading receipt. When there is no contractual agreement or a right to receive, the amount is not taxable as income. Applying these principles to the facts of the case, we have no hesitation in upholding the finding of the Commissioner (Appeals) that the gift in question ca....
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....ngapore, recognised when the advertisement is transmitted as received from the principal. Services are rendered in respect of co-ordination with various ad agencies and collection service is also provided. Advertising sales agency agreement has been entered into between SET India and SET Singapore, wherein SET India agrees to provide SET Singapore sales agency services including sale of ad time and various related services. In turn SET Singapore pays service fees as agreed between both the parties. Payment from advertisers are received in a separate bank account from where SET India gets its share of commission and then the balance is remitted to SET Singapore. Subscription income: SET India distributes various satellite channels like Sony, Set Max, CNBC and HBO in India. For this it has entered into an agreement with various cable operators/distributors/MSOs. The subscription revenue is collected from such cable operators/distributors and 100 per cent, of the said revenues are retained by SET India as per the agreement between SET India and SET Singapore. Service income: SET India has fixed episode cost to be paid to production house and the same is recovered with mark up ....
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....2 SOT 444 (Mum-Trib) has decided the issue in favour of the assessee. Thus, respectfully following the same we uphold the order of the Commissioner (Appeals) and dismiss the revenues ground. 30. Coming to ground No. 6.2 of the assessees contention is that if certain incomes as such miscellaneous income, consultancy charge, gift, interest income and foreign exchange gain are to be reduced from the profit of business, then these amounts should be reduced from total turnover for the purpose of computation of deduction under Section 80HHF. For this proposition the decision of the hon'ble Bombay High Court in the case of CIT v. Kantilal Chhotalal (2000) 246 ITR 439 (Bom) is placed on record. 31. After hearing the rival contentions we find that the hon'ble Bombay High Court in the case of CIT v. Kantilal Chhotalal (2000) 246 ITR 439 (Bom) has held that the income which has no nexus with export activity has to be eliminated from the profits of business. It is further held that such receipts which do not form part of export turnover cannot be included in the total turnover for the purpose of computation of relief under Section 80HHC. Applying the ratio of this decision to the fac....
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....T India are corrected by SET India in their own post production facility. Since production houses did not supply program as per the standards given by the SET India, certain amount is recovered from production houses. This recovery is shown as DVNR charges. (Sample invoice of FY 01-02 is attached.) Amount Recovered towards Marketing and other general & administration expenses 1,21,79,554/- Marketing expenses incurred for promotion of CNBC channel recovered from the party, TV 18 Mauritius (Voucher and agreement attached.) Cost of fillers 4,25,000/- Amount represents cost of advice/preparation rendered for production of promos/fillers/ quotes (Sample voucher attached) Amount written off earlier now recovered 2,80,000/- Advance amount given to Crest communication for serial Pehla Pyaar was written off in the earlier year now recovered in the AY 01-02. Others 906/- Total 1,56,28,960/- 37. The assessee has filed certain debit notes, to demonstrate its point that the income in question is operational income. Regarding recovery of expenditure with CNBC the following note is filed by the assessee which is at page 5 of the assessees paper book, which is ....
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....be reduced from the profits of business, then only 90 per cent, of the net receipt should be reduced. Reliance is placed on the decision of the hon'ble Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 and other decisions. We apply this proposition laid down by the hon'ble Delhi High Court on this issue of netting to the facts of the case and direct the assessing officer to reduce only 90 per cent, of the net receipts, wherever it has been decided that particular income should be eliminated from the profits of business for the purpose of computation of relief under Section 80HHF. 40. The next issue is on the deduction under Section 80HHF of consultancy fees. After hearing the rival contentions we are of the considered opinion that consultancy fees can be considered as income which is on its own and has to be eliminated from the profits of business for the purpose of computation of relief under Section 80HHF . In any event as in earlier case, we apply the decision of the Hon'ble Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Del) and the judgment of the Special Bench of the Tribunal in the case of....