AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 161
X X X X Extracts X X X X
X X X X Extracts X X X X
....b) of the Income Tax Act, without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer. ii) The Learned CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 96,00,000/- made under section 40A(2)(b) of the Income Tax Act, ignoring the fact that under the provisions of Section 40A(2)(b) of the Act, if the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of goods, services for which payment is made, so much of the expenditure as is so considered by him to be excessive or unreasonable shall be disallowed." 5. Briefly stated, the relevant material facts are like this. The assessee before us is a company engaged in the business of running a television channel, meant specially for children, by the name of 'Hangama'. During the course of the assessment proceedings, the Assessing Officer noted that the assessee has paid an amount of Rs. 1,92,00,000 to Walt Disney Company (India) Limited [Walt Disney India, in short] towards 'central support fees', and that the said company is a specified person under section 40A(2) of the Act. He also noted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....siness or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member 58a[or any other company carrying on business or profession in which the first mentioned company has substantial interest]; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person. Explanation For the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 records that not a single share in the assessee is held by SWCL. The CIT (A) further records a finding of fact that, on a perusal of list of shareholders, it is clear that even the employees of SWCL did (sic-not) have ownership of a controlling share holding interest in the assessee. CIT(A) records that six (6) individuals held ten (10) shares each in the assessee while, one gentleman by the name of Mr. Suraj P. Gupta held 8,61,610 shares who was neither an employee of the assessee and nor was any payment made to Mr. Suraj P. Gupta or his relative or to a company of which he was a director. The CIT(A) went on to hold that, in the instant case, payments had not been made to persons specified under s. 40A(2)(b) and therefore, the provisions of s. 40A(2) were not applicable. Both CIT(A) as well as the Tribunal have also accepted the explanation given by the assessee with regard to difference in payment of bottling charges vis-à-vis Balbir Industries Ltd. and the assessee. The reference to which we have already made hereinabove. We find no perversity in the findings of the Tribunal and those recorded by CIT(A) in asst. yr. 1998-99. 24. Therefore, for the foregoing reasons, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich held that the payments for transponder hire did not lead to any taxability in the hands of the recipients of such income, deleted the disallowance. The Assessing Officer is aggrieved and is in appeal before us. 13. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal positon 14. We have noted that in the ground of appeal, the Assessing Officer has not even disputed that the amounts paid by the assessee resulted in a taxable income in the hands of the recipient, but he has justified the disallowance on the ground that earlier the assessee was deducting tax at source from such payments and that the assessee did not obtain certificate under section 195(2). As for tax deductions at past, it is wholly irrelevant in examining legal obligations of the assessee. What is material is whether the assessee had the obligation to deduct tax at source or not, and unless the assessee had the obligations to do so, his actions as a measure of abundant caution in the past would not put him under obligation to do so in future as well. There is no estoppel against the statute. As for the question of approach....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovided by the respective vendors. The auditors have reported misstatement of invoices by improperly characterising the service provided. However, it was fact on record that invoices were received by the appellant from the vendor's. It was only misstatement or improper categorisation of the invoices in the improper heads. However, misstatement of invoices or not categorising the invoices in proper head does not make them liable for disallowance and does not lead to a conclusion that the expenses were not incurred wholly and exclusively for the purpose of business. In its exhaustive submissions the appellant has satisfactorily explained the nature of services received and the mistakes committed by its employees improperly categorising the invoices. Since, the expenses were incurred wholly and exclusively for the purpose of business, the AO is directed to allow deduction of same. The disallowance made by AO is therefore, deleted." 18. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 19. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e upto September 2007. Further, the assessee had not obtained any certificate from the Income-tax Department under section 195(2} of the Income-tax Act." 26. Learned representatives fairly agree that whatever we decide on these issues for the assessment year 2008-09 will be equally applicable for this assessment year as well. Vide our discussions above, we have rejected materially similar grounds for the assessment year 2008-09. Respectfully following our above decision, we dismiss all the three above grounds of appeal as well. The order of the CIT(A) stands confirmed on these issues. 27. The appeal filed by the Assessing Officer for the assessment year 2009-10 is also, therefore, dismissed. 28. As regards the appeal filed by the assessee, learned representatives fairly agree that there are only two grounds of appeal, namely second and third grounds of appeal, which are required to be adjudicated by us. These grounds of appeal are as follows: "2. The learned CIT(A) has erred in upholding the addition of Rs. 4,689,670 on account of non-reconciliation of ITS details. 3. The learned CIT(A) has erred in not allowing in entirety, the dubbing cost of Rs. 13,794,885, incurred by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l that there is no concept of deferred revenue expenditure, and, as such, once an expenditure is revenue expenditure, it should be allowed in the year in which the expense is incurred, does indeed seem very attractive at the first blush, it may not hold good in the present case. It is a case in which entire useful period, during which the assessee will reap the fruits for investment in the dubbing costs, is known at the point of time when expenses are incurred. The period for which the assessee holds the licence to use the program is known with precision. The benefit of dubbing the program will be available at least for this period. It is in this background that we may refer to the following observations of Hon'ble Supreme Court in the case of Madras High Court in Madras Industrial Investment Corpn. Ltd. vs. CIT [(1997)) 225 ITR 802 (SC)]: "...Sec. 37(1) further requires that the expenditure should not be of a capital nature. The question whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must ....