TaxTMI 
TaxTMI 
2015 (1) TMI 737
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....nt of channel placement income and expenditure, addition related to disallowance of PF, ESI expenses, addition on account of provision of expenses but the CIT(A) partly disallowed the appeal of the assessee in regard to disallowance of Rs. 20,08,375/- on account of pay channel expenses. Now, the assessee as well as the revenue is before this Tribunal in these appeals. ITA No. 401/Del/2013 - Assessee's appeal 3. The assessee has raised following grounds in its appeal:- "1. That the impugned order dated 29.11.2012 passed by the learned Commissioner of Income-tax (Appeals) XIII, New Delhi is bad in law and wrong on facts. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax(Appeals)-XIII,New Delhi erred in law in upholding the order of the Assessing Officer in making the addition/disallowance of Rs. 20,08,375/- on account of pay channel expenses. 2.1 That on the facts of the appellants case, the learned Commissioner of Income-tax (Appeals) XIII, New Delhi, erred in confirming the addition of Rs. 20,08,375/- without appreciating the submissions made." 4. Apropos aforementione....
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....of August cannot be allowed in the hands of the appellant as income pertaining to this period was shown in the hands of Regent Communications. Therefore, the expenses for the month of August cannot be allowed in the hands of the appellant. Accordingly, disallowance of l/5th expenses which comes to Rs. 20,08,375/- out of Rs. 1,00,41,877/- was justified and same is confirmed." 7. On careful consideration of above rival submissions and perusal of the relevant part of the impugned order on the issue, we observe that as per explanation and submissions made by the assessee, the assessee had sold his business to Shri Navneet Sethi, the owner of Regent Communication for a consideration of Rs. 3.5 crore we.f. 1.8.2007 for which an agreement was executed on 31.3.2008, this fact has also not been disputed by the Revenue that the assessee sold his business as per agreement dated 31.3.2008 w.e.f. 1.8.2007. The ld. AR placing reliance on the decision of Hon'ble Supreme Court in the case of CIT vs Excel Industries Ltd. & Others (2013) 358 ITR 295 (SC) submitted that as a businessman the assessee is the best decision maker inasmuch as in the situation of slump sale of business which expenditu....
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....the case and in law was justified in deleting the addition of Rs. 24,68,372 on account of Channel placement income? iii) Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 17,00,000/- made by the AO on account of disallowance of provision for expenses? " Ground No.1 10. Apropos ground no.1, we have heard arguments of both the sides and carefully perused the record. Ld. DR submitted that the AO noted that if average of opening and closing loans and advances due from DLF Ltd. is taken, then the average comes to Rs. 3,22,03,535 and the AO also noticed that DLF Ltd. has charged interest of 10% to 13% per annum upto 27.07.2007 and thereafter @6.5% per annum, therefore, the AO in order to have a reasonableness in the chargeable rate of interest allowed 8% per annum on the average of loans and advances which came to Rs. 25,76,282/- and accordingly the same was added to the income of the assessee which has not been charged by the assessee company from M/s DLF Limited. The DR supported the impugned order on the issue. 11. Replying to the above, ld. AR supported the impugned order and submitted that....
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....d. vs CIT (Central) (1971) 82 ITR 835 (SC) the Hon'ble Apex Court held thus:- "Applying the three tests laid down by various decisions of this court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic." 14. In the extant case, the Revenue has not brought out any fact or adverse material or evidence that the balance debit amount due to DLF Ltd. was actually a loan which was granted on interest or interest had actually been collected but the same was not recorded or reflected in the accounts of the asse....
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....ing subscription and advertisement income for the period 1.4.2007 to 31.7.2007 and also claiming expenses of pay channel expenses amounting to Rs. 1,00,41,877/- for the period of 1.4.2007 to 31.7.2007, then it cannot be presumed that the assessee company had not received any income on account of channel placement services. Supporting the action of the AO, ld. DR vehemently contended that the CIT(A) deleted the addition without any basis, therefore, impugned order may be set aside by restoring the addition made by the AO. 19. On careful consideration of above submissions, we are of the considered view that undisputedly, the assessee received subscription income of Rs. 1,01,93,537 and advertising income of Rs. 9,96,701 for the period of 1.4.2007 to 31.7.2007 and at the same time, it is also not in dispute that the assessee had claimed expenditure of Rs. 1,00,41,877 on pay channel expenses for the period 1.4.2007 to 31.7.2007. At the same time, it is also not in dispute that the assessee has not shown any income from channel placement which was Rs. 74,05,117/- during the immediately preceding year and which was also shown by the assessee in the statement of accounts filed along with ....
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....d that income tax cannot be levied on hypothetical income. As per taxation jurisprudence, income accrues when it becomes due but also be supported by a corresponding liability of the other party (s) to pay the amount, only then for the purpose of taxability it can be said that income is not hypothetical and it has really accrued to the assessee. In the present case, the revenue authorities below miserably failed to substantiate this fact that the assessee actually earned income from channel placement and the same was accrued to the assessee company during financial year under consideration. Accordingly, we are inclined to hold that the AO made addition without any basis which was rightly deleted by the CIT(A). We are unable to see any valid reason to interfere with the impugned order on this issue. Therefore, ground no. 2 of the revenue is dismissed. Ground No.3 22. Apropos ground no. 3 of the revenue, ld. DR submitted that the AO rightly observed and concluded that the provision of Rs. 17 lakh towards provision for expenses of March 2008 was not an ascertained liability and assessee had not given any justification for allowing this expenditure as revenue expenditure, therefore, ....