TaxTMI 
TaxTMI 
2011 (8) TMI 303
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....lared subscribers. The assessee pays subscription to pay TV channels to redistribute their channels to the network subscribers wherever the bulk deals are arrived at. 3. The assessee-company filed its return of income on 31-10-2004, declaring total loss of Rs. 83,73,94,340. The Assessing Officer, in his order dated 22-12-2006, passed under section 143(3) of the Income-tax Act, 1961 (for short "the Act"), determined the income at Rs. 283,47,34,869, inter alia, making addition on account of estimated subscription income, disallowance of loans and advances written-off, disallowance of incentives written-off, disallowance of bandwidth charges under section 40(a)(i) of the Act. 4. The assessee, being aggrieved by the stand so taken by the Assessing Officer, carried the matter in first appeal, wherein the Commissioner (Appeals) upheld the order of the Assessing Officer on the issue of disallowance of claim being write-off of advances given to management companies and disallowance made under section 40(a)(i). Still aggrieved, the assessee is in further appeal before the Tribunal raising the very same issue. 5. The Commissioner (Appeals) allowed the claim of the assessee by deleti....
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....e of loans and advances. 7. On ground No. 2, the learned Counsel submits that the payment was made for bandwidth and in such circumstances, no deduction of tax need to be made under section 194J and, hence, there cannot be any disallowance under section 40(a)(i). In support of his arguments, he relied on the judgment of Hon'ble Delhi High Court in CIT v. Estel Communications (P.) Ltd. [I.T. Appeal No. 527 of 2007, dated 7-3-2008]. Special Leave Petition filed against the said judgment, was dismissed by the Hon'ble Supreme Court, vide judgment dated 9-1-2009. He also relied on the following case laws:- l Pacific Internet (India) (P.) Ltd. v. ITO [2009] 27 SOT 523 (Mum.) l Infosys Technologies Ltd. v. Dy. CIT [2011] 10 taxmann.com 1 (Bang. - ITAT) 8. On ground No. 2(ii), learned Counsel submits that this ground is academic in nature. 9. Learned Departmental Representative, Mrs. Malathi Sridharan, on the other hand, submits that there is no proof given to the assessee that loans and advances in question is a trade debt. She points out that this was never taken into account and, hence, the conditions of section 36(2), are not satisfi....
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....nd submits that the Commissioner (Appeals) should have examined the High Court order before allowing the claim of the assessee instead of finding fault with the Assessing Officer for not verifying the High Court order on the issue. She submits that stocks are valued at cost or net realisable value at the end of the year and re-valuation loss cannot be allowed in the middle of the year. She points out that the entire purpose of re-valuation, was to reduce the share premium account. She contends that this issue was never before the High Court and that the High Court was merely considering restructuring of business as proposed by the assessee. 13. In reply, learned Counsel for the assessee submits that on ground No. 1, the Commissioner (Appeals) had merely followed the orders of his predecessor-in-office in the earlier assessment year which were upheld by the Tribunal. He filed a copy of the Hon'ble Jurisdictional High Court judgment rendered in CIT v. Siti Cable Network Ltd. [IT Appeal Nos. 936 of 2007 & 320 of 2004], etc., judgment dated 11-1-2011 and submits that the order of the Tribunal has been upheld by the High Court. 14. Coming to ground No. 2, learned Counsel for the a....
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....tion and in accordance with law. 16. Coming to ground No. 2, the Hon'ble Delhi High Court in Estel Communications (P.) Ltd. (supra), has held as follows:- "Held - Tribunal considered the agreement that had been entered into by the assessee with T and come to the conclusion that there was no privity of contract between the customers of the assessee and T. In fact, the assessee was merely paying for an internet bandwidth to T and then selling it to its customers. The use of internet facility may require sophisticated equipment but that does not mean that technical services were rendered by T to the assessee. It was a simple case of purchase of internet bandwidth by the assessee from T. Under the circumstances, the Tribunal came to the conclusion that there were no technical services provided by T to the assessee. It was as simple case of payment for the provision of a bandwidth. No technical services were rendered by the assessee. On a consideration of the material on record, no substantial question arises in the matter." 17. In our considered opinion, the agreement in question has to be examined before coming to a conclusion that the fee in question has not been paid only f....