TaxTMI 
TaxTMI 
2015 (8) TMI 1197
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The assessee, Proprietor of M/s. Ashwini Recording Company, is engaged in the business of manufacturing and distributing of Audio CDs and Cassettes. For Assessment Year 2006-07, the assessee filed his return of income on 30.10.2006 declaring total income of Rs. 18,05,821. Proceedings u/s.147 of the Income Tax Act, 1961 (herein after referred to as 'the Act') were initiated by the Assessing Officer as she was of the view that income of the assessee exigible to tax had escaped assessment since the amount of Rs. 51,59,100 claimed as revenue expenses by the assessee towards purchase of audio rights was disallowable, as it was capital in nature. Notice under Section148 of the Act was then issued to the assessee on 11.10.2010. The assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is held that capital expenditure with business activities which resulted in efficiently carrying on day to day business. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above." 4. The Grounds raised at S.Nos.1, 3 & 4 by Revenue are general in nature and therefore no adjudication is called for thereon. 5. Ground No.2 : Expenditure on purchase of Audio Rights - Rs. 51,59,100. 5.1 In this ground, revenue assails the order of the learned CIT(A) as being errone....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that the audio rights purchased by him is only an item in the nature of new material to be used for production and not an equipment to produce; as his business is to produce and market the audio rights from producers to Motion Pictures. The assessee also submitted that the marketability of the music produced out of the audio rights in short lived, as music loses currency with the passage of time and new music items replace the old ones. According to the assessee, in view of the above, the expenditure incurred on acquisition of audio rights does not in any enduring benefit to the assessee, and it is therefore allowable as revenue expenditure. 5.2.2 The Assessing Officer rejected the explanation put forth by the assessee on the follow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1992) 42 ITD 676 (Mad) iii) Gramaphone Co. Of India Ltd. V DCIT (1994) 48 ITD 145 (Cal) iv) Tips Cassettes & Record Co. V ACIT (2002) 82 ITD 641 (Mum) v) ITO V Five Star Audio (ITA No.1921/Mds/2012). 5.2.4 From an appreciation the details on record, the orders of the authorities below and the judicial decisions cited and placed reliance on (supra), it is clear that the assessee's is in the business of reproduction of audio sound and music from the original track record of the songs provided by the film producers, commonly known as audio rights (i.e. the master plate). With the help of the master plate, which is similar to a formula or mould, the assessee manufacturers the required number of copies of the audio cassettes, which are u....