TaxTMI 
TaxTMI 
2017 (11) TMI 451
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...., heard together and are being disposed of by this consolidated order for the sake of convenience. ITA No. 1431/MUM/2015 (Assessment Year: 2007-08) 3. Brief facts of the case are that the assessee a subsidiary of M/s Zenith Sports Pvt. Limited Company, filed its return of income for the assessment year 2007-08 declaring the total loss of Rs. 1,84,36,23,962/-. The assessee filed revised return subsequently declaring loss of Rs. 1,90,87,35,894/- after taking into consideration the amortization of one time fees as per order u/s 143(3) for the A.Y. 2005-06. The case was selected for scrutiny and notice u/s 143(2) and 142(1) were accordingly issued. In response to the said notices, the authorized representative of the company furnished the information and details called for by the AO. The AO after taking into consideration the submissions made details furnished by the assessee made the following additions:- a) Disallowance of Rs. 18,54,499/- u/s 36 (1) (va). b) Disallowance of Rs. 3,26,47,300/- payments made to Panamset International System Inc. debited under direct cost (technical). c) Disallowance of Rs. 32,41,056/- license fee to Ministry of Informati....
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.... Inc. is revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the impugned expenditure is capital expenditure?" 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs. 5,44,17,143/- being the differential license fees payable to sister concern M/s Nimbus forgone by the assessee ignoring the fact that the assessee has ignored the available credit note of Rs. 24.99 crores and paid only Rs. 19.55 crores only and waived off the differential amount rendering excess payment to the sister concern and clearly attracted the provisions of S 40A(2)(b) of the Act." 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing AO to allow the claim for deduction of payments made to Bangladesh Cricket Control Board u/s 40(a)(i) towards broadcasting rights ignoring the fact that the impugned payments are not disallowed under section 40(a)(ia) in the preceding year but on the ground that payments were made by the assessee to Bangladesh Cricket B....
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....rlier known as Pansmat International System Inc.). The Ld. DR submitted before us the Ld. CIT (A) has wrongly held the payment in question is a revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the same is capital expenditure. The Ld. DR further submitted that the assessee ought to have deducted TDS on the said payment. Having failed to do so, the AO has rightly disallowed the same and added back to the income of the assessee. 9. On the other hand, the Ld. Counsel for the assessee submitted that the assessee paid the amount in question to Intelsat Corporation Inc. (earlier known as Pansmat International System Inc.) as transponder fees. The Ld. CIT (A) has rightly held that tax at source was not required to be deducted in the present case as the charges paid by the assessee is revenue expenditure allowable u/s 37 of the Act. The Ld. counsel further pointed out that the revenue has filed the appeal against the findings of the Ld. CIT (A) that the transponder charges is revenue expenditure, however, the department has not filed appeal on non deduction of TDS.....
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....ges. Therefore, the conclusion drawn by the Ld. AO that expenditure will derive long and enduring benefit was not correct, as the Ld. A.O. has wrongly drawn the inference that buying the satellite spaces is permanent, but the expenditure is for usage (lease) of transponder segment capacity of communication satellite up-linking the channel. The Delhi High Court in the case of Asia Satellite Communications Co. Ltd. vs. DIT (2011) 238 CTR (Del) 233 has discussed the nature of payments and it has been held that the said amount is a 'Business Income' and not 'Royalty' in the hands of the recipient. The said expenditure is thus a revenue expenditure allowable u/s 37(1) of the Act. It is also a matter of record that the appellant had to pay lease charges throughout the year i.e. even in the month when there are no cricket matches being telecasted 'Live' as the channel is on Áir', viewers want continuity and therefore, the said payment has to be made every year against which the appellant is deriving revenue in the form of Subscription Income and Advertisement Sales. Thus the said expenditure is of recurring nature for which no long term benefit is received and requires for the purp....
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....mlapat 73 ITR 702 (SC). The addendum between BCCI and NCL and back to back agreement between NCL and the assessee clearly provide that no compensation for cancelled match will be paid by BCCI to NCL and NCL to the assessee. Therefore, section 40A (2)(b) is not applicable. 14. We have heard the rival submission and perused the record and also gone through the cases relied upon the authorities below. The Ld. CIT (A) has deleted the addition taking into consideration, the entire facts on record and after due application of mind. The concluding para of the order of the Ld. CIT (A) on this issue reads as under: "5.3.3 From the foregoing, it become apparent that the appellant had not given any amount as favour to its sister concern by adjustment of above mentioned license fees in respect of cancelled matches between India and England at Nagpur. Nimbus has transferred all the benefit which it has received from BCCI to the appellant and therefore, the Ld. AO had wrongly held that the payment made to Nimbus is unreasonable and made additions u/s 40A (2b) of the Act, as there is no favour given by the appellant to Nimbus. Except stating in generality, the ld.A O has not brought a....
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....ciates should have been made in respect of "Expenditures". As explained by the Supreme Court in Indian Molasses Co. vs. CIT )1959) 37 ITR 66 (SC), expenditure connotes "spending" in the sense of "paying out or away" and is something which is "gone irretrievably" and there should not be possibility of money forming, on again, a part of the funds of the assessee. Therefore, the additions made by the Ld. AO were on assumptions and surmises without considering all the facts and agreements and cannot be sustained both on facts and in law. The same is accordingly deleted and this ground of appeal is allowed." 15. We notice that the appellant had entered into an agreement with Nimbus Communication Limited in March 2006 and acquired the telecast rights of cricket matches to be played in India from the year 2006-2010. Vide para 15 of the agreement both the parties agreed that there will be no waiver of license fees in case of cancellation of matches. Nimbus Communication had acquired the said rights from BCCI and this clause was also there in the agreement between Nimbus Communication and BCCI. The assessee had to pay license fees for cancelled match. The assessee negotiated with Nimbus ....
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....n favour of the assessee holding that payment of license fees to BCCB is not in the nature of royalty hence not chargeable to tax in India hence no withholding tax is payable in India. The Department challenged the impugned order before the ITAT. The ITAT dismissed the appeal filed by the department. The Ld. counsel for the assessee further submitted that as per the Indian contract Act, even oral contract is valid and enforceable under law. Hence, the AO has wrongly held that the subsequent agreement entered between the assessee and BCCB will not apply to the retrospective transaction and the addition made by the AO was unwarranted. 19. We have heard the rival submissions and perused the orders of the authorities below in the light of the rival contentions. The learned CIT (A) has deleted the addition in question holding as under: "6.3.2 It is a matter of record that the appellant had entered into agreement with BCCB on 27-11-2007 for period February/March 2007 to October/November 2010 for telecasting of matches of various series to be played in Bangladesh in 'Neo Cricket Channel' for the agreement period. The appellant has entered into terms of agreement with BCCB befo....
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....ing of Section 9(1)(vi) of the Act and therefore, no withholding tax is payable in India thereby confirming the CIT appeal order. In view of the foregoing, the observations of the Ld. AO made in context of payment to BCCB are out of context and not supported by the findings of ITAT and deserve to be ignored. This ground of appeal is thus allowed." 20. We noticed that the AO has not doubted the existence of mutual understanding between the assessee and BCCB which gave the assessee the right to telecast live matches. AO has not doubted the existence of agreement between the assessee and BCCB for live telecast of matches during the year 2006 to 2009. The AO has not made any addition for non-direction of TDS under section 40 (a) of the Act, but, held that the expenses in question are not allowable because the same have been made in the absence of any expressed agreement between the parties. In our considered view, the Ld. CIT(A) has rightly allowed the appeal of the assessee. We do not find any reason to interfere with the findings of the Ld. CIT(A). Hence, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. ITA No. 1430/MUM/2015 (Asse....
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....wn case for the assessment year 2007-08 discussed above. Since, we have upheld the findings of the Ld, CIT(A) and dismissed the identical ground of revenue's appeal in assessee's own case for the assessment year 2007-08, we dismiss this ground of appeal of the revenue for the same reasons and direct the AO to delete the additions in terms of the order of the Ld. CIT(A). 3. Second ground pertains to disallowance of transponder charges u/s 40(a) of the Act. The Ld. DR submitted that the Ld. CIT (A) has erred in deleting the disallowance u/s 40(a) for non deduction of TDS in respect of payment made towards satellite space fees/transponder charges to Panasmat International System Inc. by relying on the decision of the Delhi High Court in the case of Asia Satellite Telecommunication 238 CTR (Del) 233 ignoring that the department has not accepted the aforesaid decision and challenged the same before the Hon'ble Supreme Court by filing SLP. The Ld. DR further submitted that since the finding of the Ld. CIT (A) are erroneous, the same is liable to be set aside. 4. On the other hand, the Ld. counsel for the assessee submitted that since the Ld. CIT (A) has allowed this ground of appea....
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....disallowance. The Ld. counsel further submitted that the findings of the Ld. CIT (A) is in accordance with the principles of law laid down by the Hon'ble Bombay High Court rendered in CIT vs. Asian Paints (2016) 243 Taxman 348 (Bom). In the light of the said decision, the expenses incurred on advertisement are allowable u/s 37 of the Act. 9. We have heard the rival submissions and perused the material on record including the cases relied upon by the assessee. We notice that the Ld. CIT (A) has allowed this ground of appeal of the assessee relying upon the various judgments of the High Courts including the decision of Hon'ble Bombay High Court rendered in CIT vs. Asian Paints (India) Ltd. (2016) 243 Taxman 348 (Bom). The relevant portion of the order of the Ld. CIT (A) reads as under:- "5.3.3 In the case of CIT vs. Geoffrey Manners & Co. Ltd (2011) 238 CTR (Bom) 49 while relying on CIT vs. Liberty Group Marketing Division (2008) 8 DTR (P&H) 28, the Hon'ble Bombay High Court has held that expenditure incurred by assessee on production of films by way of advertisement for promoting of products manufactured by it being in respect of ongoing business of assessee is allowable....
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....spaces for broadcasting its channels and therefore, the impugned expenditure is capital expenditure?" 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of depreciation of Rs. 3,40,818/- in contravention of Rule 46A ignoring that the assessee has not produced purchase bills and other evidences during the assessment proceedings? 3. The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the A.O. be restored." 2. The first ground of the present appeal is identical to the second ground of the appeal in assessee's own case for the assessment year 2007-08 discussed above. Since we have upheld the findings of the Ld. CIT(A) and dismissed the identical ground of revenue's appeal in assessee's own case for the assessment year 2007-08, we dismiss this ground of appeal of the revenue for the same reasons and direct the AO to delete the additions in terms of the order of the Ld. CIT(A). 3. Ground No. 2 of the appeal pertains to disallowance of depreciation of Rs. 3,40,818/- claimed by the assessee The Ld. DR submitted before us that the Ld. CIT (A) has erred ....