TaxTMI 
TaxTMI 
2015 (12) TMI 633
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....id the ITAT fall into error in its opinion with respect to depreciation on broadcasting rights for the centres where the assets were not put to use, in the facts and circumstances of the case?" Background facts 3. The facts leading to the filing of the present appeal are that the Respondent-Assessee is engaged in the business of FM radio broadcasting. The Respondent was granted permission on 8th December 2006 for operating FM Radio Broadcasting channels at Delhi, Kolkatta, Mumbai, Jodhpur, Patiala, Amritsar and Shimla against payment of prescribed one Time Entry Fees. Out of 7 stations, the Assessee went on air in AY 2008-09 from three radio stations, i.e., Delhi, Kolkata and Mumbai. The three stations at Jodhpur, Patiala and Amritsar were made ready to go on air by 8th December 2007 but due to unfavourable market conditions, the marketing team of the Assessee decided against going on air for the said stations in AY 2008-09. However, on the advice of the marketing team, the Assessee started taking trial runs by running radio programs within the office premises at Jodhpur, Patiala and Amritsar in AY 2008-09. 4. The Assessee filed its return of income on 28th September 2008 ....
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.... the term of the permission has been fixed for 10 year commencing from the date of operationalisation of Channel or upon expiry of one year from the date of grant of the permission, whichever occurs first. The company was granted permission for seven stations on 8th December 2006. One against payment of prescribed One Time Entry Fee ('OTEF'). As at the end of the year, three Channels (Delhi, Kolkata, Mumbai) were made operational while other three Jodhpur, Patiala and Amritsar) were made operational subsequent to year end and seventh channel SIMLA could not be made operational because of MIB's inability to provide basic infrastructure. Accordingly, the amount of OTEF for six channels upon getting operational or upon expiry of one year from the date of GOPA has now been considered as License Fee paid for the Licencing Period and has suitably been capitalized as an Intangible Asset in accordance with the Accounting Standard AS-26. The amount of Licence Fee capitalized as Intangible Asset would be written off over the period of the permission/licence i.e. 10 year, in accordance with the Accounting Standard AS-26. The OTEF for the seventh Channel, however, has been considered as an....
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....eciation "only on the licence fee but not on the other tangible asset. If the claim of the Appellant is valid then the Appellant's claim should not have been restricted to claim of depreciation only on licence fee." Further since the Assessee had had not claimed that the programmes were actually aired but had clarified that the airing was postponed, its claim for depreciation on the licence fee could not be permitted. Order of the ITAT 11. The Assessee then appealed to the ITAT by filing ITA No. 2186/Del/ 2012. In the impugned order allowing the Assessee's appeal, the ITAT relied on the decision of the Supreme Court in CIT v. Oracle Software India Limited (2010) 320 ITR 546 (SC) and held that "the radio programmes consist of editorial and specific stanza of the songs and the same is first recorded then edited and then broadcasted." Further, "guest/callers etc. would have their questions and answers/interviews/suggestions etc. recorded at an earlier date and the same would subsequently be aired." It was further held that the Assessee "thus uses the plant and machinery in the production of this pre-recorded radio programmes." It was concluded that "in all these processes, s....
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....16. Mr. Sahni referred to the definition of 'thing, article and manufacture' in the Black's Law Dictionary. He is submitted that 'manufacture' implies a change, but every change is not manufacture "and yet every change in an article is the result of treatment, labour and manipulation." Reliance was placed on the decision in Empire Industries Limited v. Union of India (1985) 3 SCC 314 to urge that there must be a transformation and that a new and different article must emerge, having a distinctive name, character or use. Further in Union of India v. J.G. Glass Industries Limited (1998) 2 SCC 32 a two-fold test was laid down. It was held that printing on bottles did not amount to manufacture. Reliance was also placed on the decision in Gramophone Co. of India v. Collector of Customs (2000) 1 SCC 549 in which it was held that processing would not qualify as 'manufacture'. The word 'manufacture' had to be interpreted "in the context of the object and the language used in the section." Reliance was also placed on the decisions in Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works (1991) 4 SCC 473, Collector of Central Excise v. Technoweld Industrie....
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....kept ready and has been used for undertaking trial. Reliance was placed on the decisions in CIT v. Refrigeration & Allied Industries Ltd (supra), Capital Bus Service Pvt. Ltd. v. CIT (Del) 123 ITR 404 and Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. 251 ITR 133 (Guj). Question No. 1: Additional Depreciation 21. The first question concerns the claim of the Assessee to additional depreciation under Section 32 (1) (iia) of the Act. The said provision reads as under: 32. Depreciation (1) In respect of depreciation of - (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April 1998 owned, wholly or partly, by the Assessee and used for the purposes of the business or profession, the following deductions shall be allowed - (i) ....... (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the busin....
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....siness of manufacture or production'. The Revenue's case is that the Assessee was not using the new machinery acquired and installed by it for producing an 'article or thing'. 25. As part of its 'broadcasting' activity, the Assessee might be engaged in several incidental and distinct activities. Therefore, in a given case it may be possible that some part of the plant and machinery acquired and installed by the Assessee after 31st March 2005 might be used for production of programmes and some others for broadcasting. It is not necessary, therefore, that all of the machinery is used for production of radio programmes. Another aspect might be that an Assessee might be only 'broadcasting' the programmes produced by others in which case it would be arguable whether in the first place it could be said that the Assessee is "engaged in the business of manufacture or production of any article or thing". However, as far as the present appeal is concerned these questions do not arise. In any event, no factual details on the above alternative scenarios are available in the present case. As already noted, the case projected by the Revenue is in a much narrower co....
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....ing having a different name, character and use. (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. 30. Although this definition was introduced with effect from 1st April 2009 it must be understood as being clarificatory in nature given the common parlance understanding of the term 'manufacture'. The definition is in consonance with the law explained in the decisions cited by Mr. Sahni. 31. In Gramophone Co. India Ltd v. Collector of Customs (supra) was observed that "manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character and use." In Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works (supra) it was emphasized that it is the cumulative effect of the various processes to which the raw material is subjected to, that a manufactured product emerges. Therefore, "each step towards such production would be a process in relation to th....