TaxTMI 
TaxTMI 
2018 (1) TMI 786
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.... On the facts and in the circumstances of the case and in law, the learned CIT(A) : General 1. erred in upholding the order of the learned Assessing Officer ('AO'), buy confirming the total income of the Appellant at Rs/ 22,79,69,796 as against loss of Rs. 11,19,55,440 claimed as per the return of income. Deduction of franchise consideration - Capital of revenue expenditure 2. erred in upholding the order of the learned AO, by confirming that annual consideration of Rs. 30,03,60,000 paid/payable by the Appellant to The Board of Control for Cricket in India ('BCCI'), which is revenue in nature, as a capital expenditure. 3. Erred in upholding the order of the learned AO, by confirming that the annual consideration paid/payable to BCCI is in the nature of licence of franchise of any other business or commercial right of similar nature (i.e. intangible asset) as per the provisions of section 32(1)(ii) of the Act. 4. Without prejudice to the above, erred in upholding the learned AO's order by confirming the cost of the intangible asset to be Rs. 30,03,60,000 (i.e. the annual consideration), instead of adjusting the actual cos....
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....llant's home stadium. * erred in upholding the arbitrary adhoc disallowance of a sum of Rs. 31,76,705 (ie 33% of Rs. 96,26,375) in connection with boarding and lodging of directors, invited celebrities and VIPs in ITC Ltdm and Rs. 37,37,007 (ie 33% of Rs. 1,13,24,264) towards boarding and lodging and food and nutrition expenses of other hotels. Arbitrary adhoc disallowance in connection with airfare expense, travelling expense and vehicle hire charges 11. erred in upholding the order of the learned AO, by confirming that the arbitrary adhoc disallowance of the expenditure in connection with airfare expense, travelling expense and vehicle hire charges on the premise that the said expenses are not in nature of business expenditure allowable under section 37(1) of the Act. 12. Without prejudice to the above, erred in upholding the arbitrary adhoc disallowance of a sum of Rs. 95,63,132 (ie 25% of Rs. 3,82,52,527) being expenditure in connection with airfare, travelling expenses and vehicle hire charges of its invited guests (including directors). 13. Without prejudice to the above, learned, the learned CIT(A) erred in stating that the Appell....
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....9-10 on 30.09.2009, declaring loss of Rs. 11,19,55,440/-. The case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. The assessee company had entered into an IPL Franchise Agreement with BCCI-IPL on 4th April, 2008 for Franchise rights of IPL team with home ground at Eden Garden, Kolkata, which was named as Kolkata Knight Riders (for short 'KKR'). That during the course of the assessment proceeding the A.O observed that as per the agreement dated 04.04.2008 between the assessee company and Board of Control of Cricket in India (for short 'BCCI'), the assessee was to pay for the period 2008-17 (inclusive) an annual Franchise fee of Rs. 30,03,60,000/-. The A.O held a conviction that the Franchise fee of Rs. 30,03,60,000/- was a part of the consideration which was paid by the assessee for owning the IPL team and not as a fee for playing the IPL matches vested an enduring benefit with the assessee, therefore, the same being a capital expenditure, was however wrongly claimed as a revenue expenditure by the assessee during the year under consideration. The A.O on the basis of his aforesaid observations called upon the assessee to put forth an explana....
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....s not guarantee that the future participation is not secured by the payment in the current year 1.4 Hosting of the event: Further, Clause 2.3 of the Agreement states as under: "Any non-staging of the League by BCCI-IPL (in whole or part) shall not constitute a breach of this Agreement for the purposes of clauses 11 or otherwise." KRSPL does not have the right to compel BCCI-PL to organize the event in any year. If in a particular year the event is not organized by BCCI then KRSPL neither pays annual consideration nor does it earn any revenue in that year. Thus the annual payment to BCCI-IPL is intrinsically linked to the hosting of the event for that year. In fact, there is no obligation upon BCCI to host the event for the current year in the subsequent years. 1.5 Termination of the Agreement: Further, as per Clause 11.1 of the Agreement, states as under: "Either party may terminate this Agreement with immediate effect by notice in writing if the other party has failed to remedy any remediable material breach of this Agreement within a period of 30 days of the receipt of a notice in writing requiring it to do so which n....
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....xpenditure and if it is laid out or expended during the previous year, wholly and exclusively for the purposes of the business. Therefore, we have provided below our submissions in support of the revenue nature of the annual consideration paid to BCCI. 1.9 The Act has not defined the terms 'capital expenditure' and 'revenue expenditure', accordingly based on the principles laid down in the following judicial precedents a distinction has be made between 'capital expenditure' and 'revenue expenditure': * Securing a right for carrying on the business would be on revenue account and not a capital asset * Enduring benefit: Capital expenditure produces benefits for several previous years, whereas revenue expenditure is consumed within a previous year; * Improves the earning capacity and business expediency: Capital expenditure makes improvements in the earning capacity of a business. Revenue expenditure, on the other hand, maintains the profit-making capacity of a business. In the case of an ongoing business, expenditure made for bringing into existence an asset or an advantage for the enduring benef it of the trade is capital e....
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....l fee only enables it to operate the team for the year for which the payment relates to. The annual payment does not guarantee any future benef it to KRSPL either in terms of participating in the future tournament or earning future revenue. The payment only assists KRSPL in participate in the event for the current year and earn revenues by virtue of its participation. If KRSPL wants to participate in the tournament in the future year then it would have to pay the payment in the next year. Only when KRSPL makes the payment in the subsequent year that it gets the participate in the tournament and earn income from it. Since the benefit of the payment is restricted to the current year, there is no future benefit that accrues to KRSPL by making the annual franchise payment. Reliance is also placed on the following judicial precedents: * The Supreme Court in the case of CIT Vs. Coal Shipments Private Limited 82 ITR 902, wherein it has been held that although an enduring benef it need not be of an everlasting nature it should not also be so transitory and ephemeral that it can come to an end at any time. * Empire Jute Company Limited vs. CIT (124 ITR 1) (SC) ....
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....ticular expenditure may result in an enduring benef it would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. In the case of expenditure on a website, there is no change in the capital asset of the assessee. Although the website may provide an enduring benef it to an assessee, the intent and purpose behind the purpose for a website is not to create an asset but only to provide a means for disseminating the information about the assessee.The same could very well have been achieved and, indeed, in the past, it was achieved by printing travel brochures and other published materials and pamphlets. The advance of technology and the wide-spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much larger set of people worldwide." Ø Improves the earning capacity and busi....
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....cquisition and hence the expenditure would be revenue in nature. * Periodicity of payment: The acquisition of capital asset necessarily involves an upf ront payment. In the present case, KRSPL makes an annual payment and more importantly the benefit of the payment does not extend to subsequent years. * CIT Vs. L.A.E.C. (Pumps) Ltd 232 ITR 316 (SC) Where under an agreement with the foreign company, the assessee was granted exclusive licence to use patents and design for 10 years with option to extend or renew agreement and assessee was not to disclose documents to third parties, payment made by assessee to foreign company was to be treated as revenue expenditure. Conclusion In view of the facts of the case and the above judicial precedents, KRSPL wishes to submit that; a) The annual payment does not provide any benef it of enduring nature; b) The annual payment does not improve the profit making capacity but is in fact necessitated by business expediency; c) The payment is recurring in nature. and therefore the annual payment to BCCI-IPL should be treated as revenue expenditure. Also for the payment to ....
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....ot persuaded to subscribe to the same. The A.O after perusing the IPL Franchise Agreement and the various rights and obligations emerging there from, deliberated on the various aspects of the agreement, viz. (i). that BCCI had started the series by inviting bids to own and operate 8 teams for different locations and to be a part of and take part in the league; (ii). that the term of the league was indefinite as it was as long as the league continued; (iii). that the franchisees were entitled to sell their franchise to a third party or to effect a transfer of a controlling interest in the company which controlled the franchise after a minimum period of 3 years, subject to payment to IPL a percentage of a value of the business, viz. 10% for the first such sale or transfer and 5% thereafter; and (iv). that by virtue of the right to own and operate the respective franchisees, each franchisee became entitled to receive certain revenue relating to the league and their respective teams. Thus, in the backdrop of the aforesaid facts the A.O observed that the revenue arising in the hands of the assessee was from exploitation of Central Rights, Licensing & Merchandising Rights and Franchisee ....
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....to "licence" or "franchise" or "akin to a licence", which thus brought it within the sweep of Sec. 32(1)(ii) of the Act. The A.O by relying on the aforesaid judgment of the Hon'ble Apex Court, observed, that as in the case of the assessee also each franchisee got a right which enabled it to operate a team in the IPL for profit, therefore, the right to operate a franchise and to be a member of the league was a "licence" or "franchise" or "akin to a licence or franchise", and thus an item of intangible asset contemplated in Sec. 32(1)(ii) of the Act. The A.O further in order to fortify his aforesaid conviction that the Franchise fee paid by the assessee was not a revenue expenditure, relied on the judgment of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. Vs. CIT (1997) 224 ITR 342 (SC). The A.O observed that in the case before the Hon'ble Supreme Court, the assessee had started a new business by availing the technical know-how and an exclusive right to use the patent or trademark of a foreign company. The Hon'ble Apex Court observed that as per the agreement with the foreign company what was set up by the assessee was a new business and the foreign compa....
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.... (for short 'W.D.V') on which the depreciation was to be allowed to the assessee, the A.O after deliberating on the terms of the invitation to tender (for short 'ITT') which were called for at the time of bidding for various teams, observed, that the assessee was to pay 1/10th of the Franchise fee every year for the first 10 years and thereafter an amount equal to 20 percent of the rights income received w.r.t 11th year and each subsequent year, till the term of the league. The A.O observed that the assessee was to pay the Franchise fee in annual instalments of Rs. 30,03,60,000/- for the period 2008 to 2017 (inclusive), which sum was to be appropriated every year towards Franchise fee on the date when the first match of the league for that year was played. The A.O thus observed that the assessee had acquired the right to franchise in the year 2008 when it had paid the first annual instalment of the Franchisee fee in the said year. The A.O deliberating on the aforesaid facts and taking cognizance of the judgment of the Hon'ble Supreme Court in the case of Maharana Mills (F) ltd. Vs. ITO (1959) 36 ITR 350 (SC) observed that an A.O remained under a statutory obligation to not only wor....
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.... tournament, therefore, the same could not be characterised as a capital expenditure. The CIT(A) controverting the aforesaid contention of the assessee observed that since the franchisee was for a longer period, i.e. up to 2017, as evident from Clause 7.1(a),7.1(b),7.2,7.3, 8.1(a) and 8.1(b) of the agreement, therefore, the aforesaid claim of the assessee was factually incorrect. The CIT(A) further observed that from a perusal of the agreement it could safely be gathered that by virtue of making the payment of the Franchise fee as the assessee got a right to be a part of the league and own and operate the franchise, from exploitation of which revenues were generated in its hands, therefore, the claim of the assessee that the payment of the Franchise fee did not lead to any enduring benefit could not be accepted. The CIT(A) was also not impressed by the claim of the assessee that as it had withheld taxes under Sec. 194J that had been accepted by the department, therefore, on the said count also its claim that the franchise fee was a revenue expenditure could not be dislodged. The CIT(A) further observed that as per the terms of the agreement the assessee was duly vested with the rig....
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....ended 31st March, 2009. The assessee further submitted that as a period of 3 months (January, 2009 to March, 2009) pertaining to the IPL Season-2, viz. period 1st January, 2009 to 31st December, 2009 fell within the year under consideration, viz. A.Y 2009-10, therefore, the assessee who was following the mercantile system of accounting, had accordingly debited an amount of Rs. 7,50,90,000/ as an expense during the year under consideration (being 25% of Rs. 30,03,60,000/- for the 3 month period). The assessee in order to drive home its contention that the claim of the Franchise fee for the period January, 2009 to March, 2009 pertaining to IPL Season-2 was well in order, therein submitted before the A.O that as the said payment was made pursuant to a contractual obligation to discharge a liability, therefore, as per the mercantile system of accounting, it was rightly claimed as an expenditure in the year under consideration, viz. AY 2009-10. The A.O after deliberating on the aforesaid explanation of the assessee was however not persuaded to subscribe to the same. The A.O observed that the claim of the assessee that the proportionate fees for the first three months of the IPL Season-2....
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....ly) which shall in each such year be paid on the date of the first match in the League in each such year." The A.O on the basis of his aforesaid observations concluded that as the liability of the assessee to pay the Franchise fee to BCCI crystallised only on the first day of the match of a series, therefore, since no match for IPL Season-2 was played on or before 31st March, 2009, thus no liability in respect of the payment of the Franchise fee for the IPL Season-2 had accrued to the assessee company during the year under consideration, viz. A.Y 2009-10. Thus, the A.O on the basis of his aforesaid conviction disallowed the claim of Rs. 7,50,90,000/- raised by the assessee before him. 9. The assessee assailing the aforesaid disallowance by the A.O, carried the matter in appeal before the CIT(A). The assessee reiterated the submissions made before the A.O and tried to impress upon the CIT(A) that as it was following a mercantile system of accounting, therefore, as the period of three months (January, 2009 to March 2009) relatable to IPL Season-2 fell within the year under consideration, viz. AY 2009-10, the proportionate fee for the aforesaid period of three months was rightly....
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....em of accounting, income and expenditure are recorded on accrual basis. Accordingly, where three months of season 2 fall in FY 2008-09 (January 2009 to March 2009), the franchisee fee pertaining to those three months was due in FY 2008-09. Accordingly, an amount of Rs. 7,50,90,000/- was debited as an expense for (being 25% of Rs. 30,03,60,000/- for the 3 month period). 2.6 In view of the above, the Appel lant has debi ted a sum of Rs. 37,54,50,000/- (i.e Rs. 30,03,60,000/- plus Rs. 7,50,90,000/-) in the profit and loss account and the same was claimed as deduction for tax purposes as well. We also have provided below the reasons backed by judicial precedents on the al lowabi l i ty of the f ranchise fees of Rs. 37,54,50,000 i.e Rs. 30,03,60, 000/- plus Rs. 7,50,90, 000/-) in A Y 2009-10: 2.7 Contractual obligation to discharge a liability The Appellant has paid the franchise fee for the calendar year 2008 (including period from 1 January 2008 to 31 March 2008), post the execution of the Agreement (is April 2008) and debited the entire sum during the financial year ended 31 March 2009. It is a well established principle that expenditure i....
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....e price was settled, loss did not accrue or arise to the company. The loss was suffered in the account year 1949-50 and could be allowed against the income of that year under section 24(1), the assumption that the loss was suffered in the previous year, i.e. 1948-49, was, in our-judgment, not warranted. * CIT v. Soorajmull Nagarmull (129 ITR 169) (Cal) In this case, it has been held that where the liabil ity to pay damages is under dispute, such liability would accrue only when the settlement of the dispute is made, even if the assessee is following the mercantile system of accounting. In view of the above, the liability to pay the franchise fees was determined in pursuance of the Agreement between BCCI-IPL and the Appellant in FY 2008-2009, and therefore such expense will be eligible as deduction in FY 2008-09. 2.8 Expenses debited as per the mercantile basis of accounting. Further, the Appellant had to pay annual consideration of Rs. 30,03,60, 000/- for season -2 i.e for the period 1 January 2009 to 31 December 2009 by 2 January 2009. As mentioned above, the Appellant follows the mercantile system of accounting. As per mercantile syste....
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....ting period 2004-05 and accordingly the addition on this account should be deleted. Similarly, expenses booked on accrual basis should be allowed as deduction in the period in which they have been incurred and pertain to, irrespective of the fact whether they have been paid out or not. * Further, in the case of CIT vs. Panacea Biotech Ltd (324 ITR 311) (Del), the Delhi High Court has held that in mercantile method of accounting, incurring of expenditure is not based on payment but on liability to pay. In view of the above, the Appellant prays before your Honour that the amount debited to profit and loss account by the Appellant amounting to Rs. 37,54,50,000/- (i.e Rs. 30,03,60,000/- plus Rs. 7,50,90,000/-) is an expense for the year ended 31 March 2009 and should be eligible as deduction for tax purposes as well for the AY 2009-10." 10. The CIT(A) after deliberating on the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The CIT(A) observed that the aforesaid claim of the assessee did not satisfy the matching principle of accounting, as per which the expenditure can be claimed against the income of the financial....
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.... justified for the reason, viz. (i) the amount was directly paid to Kolkata Police Welfare Fund which was not a Government Authority; (ii) that since the services of police was utilized during the IPL Matches, therefore, either the amount should have been paid to the State government or the assessee should have provided refreshment to police personnel on its own instead of giving the amount to a welfare fund; and (iii). that there was no cogent reason for the assessee to have paid the amount to Kolkata Police Family Welfare Centre, therefore, the same could not be treated as a bonafide expenditure. The A.O further concluded that the fact that the assessee had made TDS on the entire amount of Rs. 3,50,00,000/- would not make the payment of Rs. 75,00,000/- made to Kolkata Police Family Welfare Centre for refreshment for police force an allowable expenditure. The A.O on the basis of his aforesaid observations disallowed the aforesaid claim of expenditure of Rs. 75,00,000/- on the ground that the same was not allowable as a deduction under Sec. 37(1) of the Act. 12. The assessee being aggrieved with the aforesaid disallowance of Rs. 75,00,000/- by the A.O assailed the same in appeal....
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....flect this amount as refreshment for police force. your Honor would appreciate that incase of cricket match in a stadium there is always a need to utilize the services of police to ensure security of the players, attendants and spectators. Under the CAB arrangement with Appellant, it was the responsibility of CAB to arrange for security in the stadium for which a fee of Rs. 75,00,000/- was required to be paid by CAB to Kolkata Police. The Appellant utilized the services of police during the 7 matches scheduled in LPL 1 and the amount agreed by CAB with Police Department was then paid by the Appellant directly to Kolkata Police, at the direction of CAB. 3.5 In support of the above contention, the Appellant wish to bring your attention to the relevant extract of the audited Income and Expenditure accounts of CAB which clearly reflects the stadium rent of Rs. 3,50,00,000/- (which includes Rs. 75,00,000/-) on the income side of the audited Income and Expenditure accounts. Also, it is relevant to note that CAB has also recognized its obligation to pay to Police Department on the debit side of audited Income and Expenditure accounts. Even the Annual Report of C....
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....13. The CIT(A) after deliberating on the contentions of the assessee, observed that the contentions advanced by the assessee before the A.O were found to be self contradictory, viz. (i) that on the one hand it was claimed by the assessee that the amount was paid to Kolkata Police Family Welfare Centre at the instruction of Cricket Association of Bengal, and; (ii) that on the other hand in the Income and Expenditure account of the Cricket Association of Bengal the amount was reflected as an expenditure for refreshment for police force. The CIT(A) observed that though the assessee had averred before him that the aforesaid amount was paid for facilitating providing of police services, but if that would had been so, then the said amount would had been paid to the State Government of West Bengal and not to the Police Family Welfare Fund. Thus, the CIT(A) finding himself as being in agreement with the view taken by the A.O that the assessee had failed to prove that the amount of Rs. 75,00,000/- paid to Kolkata Police Family Welfare Centre was for the purpose of its business and thus allowable as a deduction under Sec. 37(1) of the Act, therefore, upheld the aforesaid disallowance/additio....
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....- incurred by the Appellant towards services provided by John Buchanan for coaching the KKR team on the premise that agreement was executed on 07.01.2009 and not pertaining to IPL 1 (i.e Season 1). 4.4 At the outset, the Appellant with to bring to your notice that though the stamp paper is dated 07.01.2009, the agreement was executed documenting the commercial understanding agreed between the Appellant and John for a period of 3 years starting from IPL 1 to JPL 3 (i.e for Season 1 to Season 3). It is also a known fact that John Buchanan was the coach of KKR team for Season 1 of the IPL and then removed post dismal performance of KKR Team. 4.5 Separately, the Appel lant wish to draw your at tent ion to the relevant extracts of the Agreement to support the Appellant 's claim that the expenses has been incurred in connection wi th coaching services provided by John Buchanan to the KKR Team for IPL Season 1: * Definition of 'Term' on Page 3 of the Agreement "shall have the meaning in Clause 2" * Clause 2 reads as under: Duration "This Agreement shall be for the three seasons i.e. 2008-09, 2009-10 and 2010-11 and shall be effectiv....
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....uld be allowable in terms of the provisions of Sec. 37(1) of the Act." 16. The CIT(A) after giving a thoughtful consideration to the contentions raised by the assessee before him in the backdrop of the facts available on the record, however, did not find favour with the same. The CIT(A) observed that as the agreement between the assessee and Buchanan Corporate Coaching Trust for Buchanan Discretionary Trust was dated 07.01.2009, therefore, the same was entered after the IPL Season-1 matches were held during the month of April/May, 2008. The CIT(A) further observed that a perusal of Clause 2 (defining "duration") of the agreement revealed that the same was to be effective "from the date of signature until 30th June, 2011". Thus, in the backdrop of the aforesaid observations the CIT(A) concluded that as the agreement was signed on 07.01.2009, therefore, the same could not have been effective for the period prior to that. The CIT(A) was also not impressed by the press clippings which were relied upon by the assessee to prove that Mr. John Buchanan was providing the services before signing of the agreement, by observing that no such factual position did emerge from the material plac....
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.... 6. Vivek Oberai 29,379/- 7. Seema Khan 12,622/- 8. Neelam Kothari 15,571/- 9. Pradeep Dhoot 31,483/- 10. Ritesh Deshmuch 9,135/- 11. Karan Johar 11,942/- The A.O on the basis of his aforesaid observations disallowed 33% of the balance expenditure of Rs. 1,13,24,264/- (i.e. excluding expenditure incurred at ITC, Sonar, Kolkata) and made a further addition of Rs. 37,37,007/-. Thus, on the basis of his aforesaid observations the A.O carried out an aggregate disallowance of Rs. 1,08,33,592/- out of the food and nutrition and boarding and lodging expenses claimed by the assessee. 18. The assessee being aggrieved with the disallowance of Rs. 1,08,33,592/- out of the expenses which were claimed to have been incurred on food and nutrition and boarding and lodging, thus challenged the same before the CIT(A). The assessee in order to drive home its entitlement towards the aforesaid expenses, averred before the CIT(A) that as the said expenditure towards boarding and lodging and food and nutrition was incurred for the members of the team (including visiting teams), support staff, directors and the invited guests (being celebrit....
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....he celebrities for the event attracted more eyeballs/increased sales, the sponsors too would come forth with higher sponsorships for the events. The assessee submitted that under the IPL format while for all the event rights were exploited by BCCI, however, the ticketing rights and team sponsorship rights remained with the assessee. Thus, in the backdrop of the aforesaid facts it was submitted by the assessee that in order to increase its ticketing sales and sponsorships revenues, it had invited celebrities to attend their home matches and also arranged for their boarding and lodging. It was further the contention of the assessee that though the aforesaid expenditure duly satisfied all the conditions contemplated under Sec. 37(1) of the Act, however, the A.O without any valid and cogent reason had disallowed 33% of the total expenditure of Rs. 96,26,375/- and made an adhoc disallowance of Rs. 31,76,705/-. The assessee further adverting to the adhoc disallowance of Rs. 37,37,007/- made by the A.O (out of the balance expenditure on food and nutrition and boarding and lodging of Rs. 1,13,24,264/-), submitted that the expenditure incurred in respect of boarding and lodging and food and....
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....6,375/- out of which the A.O had disallowed 33%, viz. Rs. 31,76,705/-, observed that the same could safely be held to have been incurred by the assessee for VIP's, relatives of directors, and celebrities, viz. Shah Rukh Khan, Jaya Mehta, Mohomed Morani, Farhan Aktar, Malika Khan, Vivek Oberoi, Seema Khan, Neelam Khotari, Pradeep Dhoot, Ritesh Deshmukh and Karan Johar. The CIT(A) further observed that though the assessee had claimed that the entire expenditure was for business purposes, but however, on a perusal of a copy of letter dated 02.04.2008 written by Shri Arun Ashok of ITC-Welcome group to Mr. I.S. Bhandari Chief operations, Red Chillies Entertainment Pvt. Ltd.(wherein by way of an over writing the name of the assessee, viz. "Knight Riders Sports Pvt. Ltd." was mentioned), it emerged that the terms and conditions of booking of rooms etc. were signed by Mrs. Gauri Khan on behalf of Red Chillies Entertainment Pvt. Ltd. The CIT(A) on the basis of his aforesaid observations agreed with the view taken by the A.O that the aforesaid expenses of Rs. 96,26,375/- were not incurred wholly for the business of the assessee and the element of expenditure being personal in nature could no....
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....32/- 6.4 The Learned A.O has not given any explanation or reasoning for arriving at the rate of 25% for ad hoc disallowance. 6.5 It is reiterated that for any Event to be a success, it is customary for the Organiser to invite celebrities to the Event for increasing the ticket sales and gaining momentum on TV viewership. History has shown that Event gained prominence and attract sponsorship only when celebrities attend the Event. Also sponsors are willing to pay higher sponsorship fee to the Organiser to attract more eyeballs. 6.6 Under the IPL format, while all the Event rights are exploited by BCCI, ticketing rights arid Team sponsorship rights only rest with the Appellant. Hence to increase its ticketing revenues and sponsorship revenues, the Appellant invited celebrities to attend their home matches and also organized for their lodging and boarding. 6.7 The Learned AO without providing any valid and cogent reason and without providing an opportunity of being heard disallowed the 25 percent of total expenditure of Rs. 3,82,52,527/- on an ad hoc basis by stating that such lodging and boarding expenditure cannot be treated as ....
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....ld to have been incurred for the purpose of the business of the assessee, thus, disallowed the claim of Rs. 1,08,700/- raised by the assessee. 25. The assessee being aggrieved with the aforesaid disallowance of the security expenses of Rs. 1,08,700/- incurred for VIPs and celebrities, carried the matter in appeal before the CIT(A). The assessee submitted before the CIT(A) that the aforesaid expenses incurred for providing security and protection to the celebrities and VIP's who attended the events at Eden Gardens were incurred in the course of the business of the assessee and had wrongly been disallowed by the A.O. The assessee in order to drive home its aforesaid contention that the security expenses were allowable in its hands under Sec. 37(1), submitted before the CIT(A), as under:- "7.1 During the IPL-1 matches, which took place in the months of April and May 2008, the Appellant had incurred expenditure towards security arrangement and police for the members of the team and its invited guests (being VIPs and celebrities). 7.2 Copies of the ledger along with copies of the invoices in connection with security charges incurred by the Appellant were submitted b....
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....at the police was taking care of the security arrangements in the stadium, since it was the responsibility of the state government, therefore, any expenditure made for any particular person could not be held to have been incurred for the purpose of the business and was clearly a personal expenditure. The CIT(A) on the basis of his aforesaid observations upheld the disallowance of Rs. 1,08,700/- made by the A.O. 27. The A.O further during the course of the assessment proceedings noted that the assessee had claimed expenditure of Rs. 8,85,600/- on account of payment made to Mr. Manish Malhotra in March, 2009. The assessee on being called upon by the A.O submitted that the payment was made for designing the outfits of KKR teams which were exhibited at the Lakme Fashion Week and Wills Lifestyle India Fashion Week. The A.O observed that the assessee had offered its income with respect to the revenue earned from the IPL Season-1, which took place in the month of April and May, 2008, but however, against this income the aforesaid expenses which were incurred after lapse of a substantial period were claimed by the assessee. Thus, the A.O being of the view that as no income was offered b....
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....ho was following the mercantile system of accounting had booked the said expenditure during the year under consideration. The assessee further submitted before the CIT(A) that as all the requisite conditions contemplated in Sec.37(1) were satisfied, therefore, the A.O had gravely erred in not allowing the said claim of expense incurred by the assessee in the course of its business. 29. The CIT(A) after giving a thoughtful consideration to the contentions of the assessee, however, did not find himself as being in agreement with the same. The CIT(A) observed that the assessee in contradiction of its claim before the A.O that the expenditure of Rs. 8,85,600/- was incurred for designing and exhibition of player outfits, however, averred before him that the same was an expenditure incurred towards advertisement of the KKR team. The CIT(A) thus concluded that as neither the nature of the expenditure was clearly brought out by the assessee, nor the fact as to how the expenditure incurred in March, 2009 for advertisement/publicity was going to contribute to the revenue of the assessee for events which had already been held in April/May, 2008 could be explained by the assessee. The CIT(A....
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....hat the tax payer may had failed to claim the same in its return of income. It was submitted by the assessee that the A.O without according any valid and cogent reason had disallowed Rs. 8,49,305/- that was claimed by the assessee towards website design charges, by holding that the same was in the nature of a capital expenditure. The assessee relying on the judgments of the Hon'ble High Court of Delhi in the case of CIT Vs. Indian Visit Com. Pvt. Ltd. 176 Taxman 164 (Del), as well as the order of a coordinate bench of the ITAT, Mumbai in the case of Radial Marketing Pvt. Ltd. Vs. ITO [ITA No. 3868/Mum/2008] therein averred that the website design charges had been held in the aforesaid judicial pronouncements as a revenue expenditure. 32. The CIT(A) after deliberating on the aforesaid contentions of the assessee observed that the CBDT Circular No. 14 (surpa) as was relied upon by the assessee only provided that the revenue authorities were to give guidance to the assesses, as and when the same was needed by them. The CIT(A) held that there was nothing available on record which would reveal that the assessee had approached the A.O for any such guidance. The CIT(A) further observed....
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....ld. A.R took us through the relevant pages of the Franchise agreement between the assessee company and BCCI49 IPL, wherein different terms used in the agreement were defined, viz. (i) "Franchise" (Page 53) of his paper book (for short 'APB'); (ii) "Central Rights" (Page 53 of 'APB'); (iii) "Franchisee Rights" (Page 54 of 'APB'); (iv) "Territory" (Page 57 of 'APB'); and (v) "Year" (Page 57 of 'APB'). The ld. A.R drew our attention to the fact that the year under consideration which was the 'first year' was to comprise of the period falling between the signing of the agreement till 31st December, 2008. The ld. A.R in order to fortify his contention that by making the payment of Franchise fee no enduring benefit got vested with the assessee, submitted that the same could be gathered from the very fact that in case of non staging of the league by BCCI-IPL (in whole or part), the same would not constitute a breach of the agreement and no recourse to any legal action could be taken by the assessee against the other party, viz. BCCI. The ld. A.R further to impress upon us that the payment of the Franchise fee did not lead to vesting of any absolute rights with the assessee, which thus cou....
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.... franchise agreement, which provided that as the rights granted to the franchisee were personal to the franchisee, therefore, it had no right to either assign the agreement or to sub-contract or otherwise delegate the franchisees obligations under it without the BCCI-IPL's written consent. The ld. A.R further took us through Page 18-34 of the CIT(A) order, wherein the submissions of the assessee and the view of the CIT(A) as regards the issue as to whether the payment of the Franchise fee by the assessee was in the nature of a revenue expenditure (as claimed by the assessee), or a capital expenditure (as held by the A.O) were recorded. The ld. A.R further submitted that the assessee had paid service tax on the Franchise fee, which thus fortified its claim that the same was in the nature of a revenue expenditure. The ld. A.R in order to buttress his contention that no enduring benefit/right got vested with the assessee on payment of the Franchise fee, submitted that the same could be gathered from the fact that in case no matches were played during the year, the assessee neither had any right to force BCCI for playing of the matches, nor could take any legal action against it. The l....
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....nder the head "Franchisee fee'' in its Profit and loss account for the year under consideration. The ld. A.R took us through the observations of the CIT(A) recorded at Page 45- Para 5.4, as well as the submissions raised by the assessee before him at Page 36-39 of the CIT(A) order. The ld. A.R submitted that keeping in view the fact that the assessee was following the mercantile system of accounting, the claim of the aforesaid amount of Rs. 7,50,90,000/-by the assessee as a Franchise fee for the year under consideration was well in order, placed reliance on the judgment of the Hon'ble Supreme Court in the case of Taparia Tools Ltd. Vs. CIT (2015) 372 ITR 605 (SC). 35. The ld. A.R in respect of its entitlement of an amount of Rs. 75,00,000/- that was paid directly to Kolkata Police department for the security services to be provided at the stadium, took us through the "Income and expenditure account for the Indian Premier League played at Eden Garden on 20th April to 25th May, 2008" of the "Cricket Association of Bengal" (for short 'CAB') for the financial year 2008-09 (Page 109 of APB). The "Income and expenditure account" of CAB revealed that while for an amount of Rs. 3,50,00,....
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....from where it could be gathered that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in IPL Season-1 (Page 127 - 129 of 'APB'). The ld. A.R took us through the observations of the CIT(A) in context of the issue under consideration at Page 53 - Para 7.4. The ld. A.R submitted that the lower authorities had failed to appreciate the facts pertaining to the issue under consideration in the right perspective, as a result whereof the addition/disallowance on the aforesaid count was wrongly sustained by the CIT(A). The ld. A.R in support of his contention that as the payment made to Mr. John Buchanan was prompted by commercial expediency in the course of the business of the assessee, therefore, the same was allowable as an expenditure, relied on the judgment of the Hon'ble High Court of Madras in the case of CIT Vs. Associated Electrical Agencies and Anr (2004) 266 ITR 63 (Mad) and the Judgment of Hon'ble High Court of Bombay in the case of CIT Vs. Maina Ore Transport (2008) 324 ITR 100 (Bom). 37. The ld. A.R further adverting to the adhoc disallowance of an expenditure of Rs. 1,08,33,592/- by the A.O, which thereafter had been sustaine....
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....re, travelling expenses and vehicle hire charges for its own team, visiting teams, support staff, directors and invitee guests (being celebrities and VIPs), therefore, the same were to be allowed as a deductible expenditure under Sec.37(1) of the Act. The ld. A.R once again averred that inviting VIP guests, celebrities etc, during the matches resulted in increase of ticket sales and viewership of the matches during IPL, which thus increased the revenue of the assessee. The ld. A.R further submitted that even otherwise no opportunity of being heard was given to the assessee by the A.O while making the aforesaid adhoc disallowance. 39. That as regards the disallowance of an amount of Rs. 1,08,000/- paid for security charges of Mr. Shah Rukh khan, it was submitted by the ld. A.R that he was a director of M/s Red Chillies Entertainment Pvt. Ltd, i.e the holding company of the assessee company. The ld. A.R further submitted that the attendance of Mr. Shah Rukh Khan in the cricket matches held at the home stadium had led to tremendous increase in ticket sales and sponsorship receipts by the assessee. It was submitted by the ld. A.R that it was no hidden a fact that when a celebrity or....
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....a, the ld. Departmental Representative (for short 'D.R') at the very outset submitted that as the term of the league of the assessee was for an indefinite period, which thus vested a benefit of enduring nature, therefore, the Franchise fee paid by the assessee for acquiring the said rights and claimed as a revenue expenditure was rightly disallowed by the lower authorities by concluding that the same was in the nature of a capital expenditure. The ld. D.R in order to support his aforesaid contention drew our attention to the relevant pages of the assessment order, viz. Page 6 - Para 5 and Page 13 - Para 5.2 of the assessment order. The ld. D.R taking us through the observations of the A.O recorded at Page 19 - Para 16 submitted that the latter had rightly observed as regards the determination of the W.D.V of the intangible rights generated on the making of the aforesaid payment by the assessee for acquiring the franchise rights. 43. That as regards the disallowance of an amount of Rs. 7,50,90,000/- which was sustained by the CIT(A), the ld. D.R relied on the order of the CIT(A). That as regards the disallowance of an amount of Rs. 75,00,000/- paid by the assessee to Kolkata Poli....
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....atisfy the matching principle of accounting, thus could not be allowed as an expenditure in the year under consideration, viz. A.Y 2009-10; (iii) that as to whether the disallowance of Rs. 75,00,000/- paid/payable by the assessee to Kolkata Police Family Welfare Centre was rightly made by the lower authorities; (iv) that as to whether the disallowance of fees of Rs. 1,28,34,490/- claimed by the assessee to have been paid to Mr. John Buchanan for IPL season-1 was in order; (v) that as to whether the adhoc disallowance of expenditure incurred by the assessee in connection with a). boarding and lodging and b). food and nutrition expenses was rightly made by the A.O; (vi) that as to whether the adhoc disallowance of expenditure incurred by the assessee in connection with air fare expense, travelling expense and vehicle hire charges was rightly made by the A.O; (vii) that as to whether the disallowance of the security charges expenditure of Rs. 1,08,700/- was rightly made by the A.O; (viii) that as to whether the disallowance of expenses in connection with participation in fashion shows was in order; and (ix) that as to whether the website design charges were rightly claimed by the asse....
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....reement, provides that the same shall mean all rights in respect of the team, including those rights set out in Clause 4.3, viz. (i) the shirts sponsorship rights in respect of the team; (ii) official suppliership rights in respect of the team; (iii) corporate entertainment/premium seating rights at the stadium during home league matches; (iv) right to conduct franchisee licensing; (v) right to retain all of the gate receipts in respect of the franchisee home league matches; (vi) the right to sell merchandise at the stadium on the day of its home league matches; and (vii). such other rights in relation to the team which may be identified in the commercial guidelines provided by BCCI-IPL. However, the assessee was not vested with any right in respect of the Central Rights and all rights in respect of the licensing of replica uniforms for any team in the league. 46. We have perused the various clauses of the franchise agreement, as per which the franchise rights had been vested with the assessee. We have given a thoughtful consideration to the nature of the rights, and find that the payment of the Franchise fee by the assessee for a year, therein vested with him a right to partici....
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....se delegate the franchisees obligations under it without the BCCI-IPL written consent. 47. We have deliberated at length as regards the nature of the rights as got vested with the assessee on the payment of the Franchise fee of Rs. 30,03,60,000/- to BCCI. We have given a thoughtful consideration to the issue before us and are of the considered view that the payment of the Franchise fee by the assessee to BCCI-IPL only facilitated participation in the league and operating the team for the year for which the payment pertained, with no vested right to participate in the events for the subsequent year/years. We are of the considered view that as the aforesaid payment of Franchise fee which facilitated the participation in the league and operating the team was restricted only to the year to which the payment pertained, therefore, it can safely be concluded that by making such payment there was neither a creation of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We find that a conjoint reading of Clause 7 of the agreement contemplating the payment of the Franchise fee and Clause 1 defining the term "year", clearly reveals beyond any scope of do....
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....irst instalment to the BCCI-IPL in terms of Clause 7 of the agreement was not for the purpose of acquisition of any asset but for an annual right to manage the franchise. The purpose of the expenditure to be incurred under the agreement by the assessee has been stated in Clause 6 of the agreement as consideration for the right to operate the Franchise and to be a member of the league. The total expenditure of Rs. 44,76,00,000/- payable in yearly instalments of Rs. 44,76,00,000/- for ten years was clearly for the purpose of securing franchise right from BCCI. Thus payments made by the assessee were for the annual benefits only not extending beyond one year. Its right to operate and manage the team is subject to prior payment of annual franchise fee; if the assessee fails to make the payment, then it would not be allowed to participate in IPL. Thus, the assessee has made the annual payments to earn the annual income. The nature of transaction/payment clearly demonstrates that the assessee is neither obtaining any enduring benefit by making payment of annual instalment these payments are giving rise to any assets. These payments are mere annual payments to BCCI-IPL to give a right to ....
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.... to licence in terms of s. 32(1)(ii) of the 1961 Act. That, such a right vests in the Exchange only on default/demise in terms of the rules and bye-laws of BSE, as they stood at the relevant time. Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of s. 32(1)(ii) of the 1961 Act. " Similarly, in the case of Jonas Woodhead And Sons (India) Ltd. (supra) the Hon'ble Apex Court in the backdrop of the facts involved in the case before it, observed, that as the foreign company pursuant to an agreement with the assessee had provided technical know how and services for setting up of the plant and manufacturing of products, with no embargo on the assessee to continue with the manufacturing of the products even after the expiry of the agreement, therefore, an enduring benefit got vested with the assessee, and thus the payment made by the assessee for the same was a capital expenditure. We are of the considered view that unlike the facts involved in the aforesaid case laws relied upon by the A.O, in the case before us, as no enduring benefit by making the payment of the Franchise fee got vested with t....
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....case and find that a perusal of Clause 7.1(a) reveals that while for the League deposit of Rs. 9,01,08,000/- paid by the franchisee on or before 2nd January in each such year was to be appropriated towards the annual franchise consideration on the date of the first match of the league in which the League deposit was paid, while for the balance Franchise fee of Rs. 21,02,52,000/- was to be paid by the franchise on the date of the first match in the league in such year. Thus, a perusal of the aforesaid facts reveals beyond any scope of doubt that while for the liability to pay the Franchise fee of Rs. 21,02,52,000/- was to crystallise on the date on which the first match in the league was played, while for on a similar footing, the League deposit of Rs. 9,01,08,000/-which the assessee remained liable to pay as per the terms of the franchise agreement on or before 2nd January of each year was to be appropriated against the annual franchise consideration on the date of the first match of the league in the year in which the League deposit was paid. Thus, it can safely and rather inescapably be concluded that the payment of the Franchise fee was clearly related to the date on which the f....
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.... assessee to them. However, it so happened that the said upfront payment of interest on debentures were shown by the assessee as deferred revenue expenditure in its accounts to be written off over a period of five years. Notwithstanding the accounting treatment given to the payment qua interest, the assessee in its returns filed for the assessment years 1996-97 and 1997-98 claimed the entire upfront interest payment of Rs. 2,72,25,000/- and Rs. 55,00,000/-, respectively, as fully deductible expenditure. The A.O while framing the assessment declined to allow the assesse's claim for deduction of upfront interest payment. Instead, the AO chose to spread it over a period of five years, thereby allowing deduction only to the extent of 1/5th in each of the five respective assessment years. The CIT(Appeals) dismissed the appeals and sustained the order passed by the AO. The assessee approached the Income Tax Appellate Tribunal and thereafter the High Court, but was unsuccessful as the appeals preferred by him before the two fora were dismissed. When the matter came up before the Hon'ble Supreme Court, it observed that the moment second option was exercised by the debenture holder to r....
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....50,90,000/- cannot be held as a revenue expenditure in the hands of the assessee during the year under consideration, therefore, uphold the order of the CIT(A) to the said extent and dismiss the Ground of appeal no. 5 raised by the assessee before us. 50. We now advert to the disallowance of an amount of Rs. 75,00,000/-forming part of the amount of Rs. 3,50,00,000/- paid by the assessee to Cricket Association of Bengal (for short 'CAB') for use of Eden Garden. We find that the assessee as per its arrangement with CAB was required to pay 50 lac per match played at Eden Garden Stadium. That as 7 matches were played at Eden Garden during IPL Season-1, therefore, the assessee was liable to pay a consideration of Rs. 3,50,00.000/- to CAB. We find that in lieu of the aforesaid arrangement it was the responsibility of CAB to arrange for security at the stadium when the matches were staged by the assessee, therefore, as per the directions of CAB the assessee made a payment of Rs. 75,00,000/- on its behalf, directly to Kolkata Police department for the Security services to be provided at the stadium. We find that the assessee in order to substantiate its aforesaid claim of expenditure ha....
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....,00,000/- directly to the Kolkata Police department for the security services to be provided at the stadium on its behalf, the veracity of the said claim of the assessee cannot be dislodged for the reason that CAB had debited the said expenditure under the head "refreshment for police force". We are of the considered view that the booking of the aforesaid expenditure by CAB using a different nomenclature would by no means negate the genuineness of the aforesaid claim of expenditure in the hands of the assessee. We find that the assessee instead of making payment of Rs. 3,50,00,000/- to CAB, had rather, as per the latters direction discharged part of its obligation by making payment of part of the amount, viz. Rs. 75,00,000/- to Kolkata Police Welfare Centre. We are also not impressed by the observations of the lower authorities that as no written agreement was executed between the assessee and CAB for the use of Eden Garden during the IPL Matches, therefore, the genuineness of the payment of Rs. 75,00,000/- paid to Kolkata Police Family Welfare Centre was to be held as not proved. We are of the considered view that to the extent the assessee before us is concerned, the fact that th....
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....ssessee as an expense, incurred for coaching services provided to its team by Mr. John Buchanan, for multiple reasons, viz. (i) that the A.O on perusing the agreement entered into by the assessee with Mr. John Buchanan observed that the same was executed on 07.01.2009, which was much subsequent to the period in which the IPL Season-1 matches were played i.e April and May, 2008; (ii) that as per the ITT bid document and franchise agreement, though it was mandatory to enter into an agreement for availing coaching services, however, no such agreement was entered into by the assessee with Mr. John Buchanan, as a result whereof it could safely concluded that the payment made by the assessee could not be allowed as an expenditure incurred for the purpose of the business of the assessee for the year under consideration; and (iii) that the services of Mr. John Buchanan were claimed by the assessee to have been utilized during the IPL Season-1, however, as the payment was found to have been made to a Discretionary Trust, therefore, the expenditure was also liable to be disallowed on the said ground. 53. We have deliberated on the facts pertaining to the issue under consideration and furt....
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....t (but before 30th November, 2008); (ii) 50% on 1st April, 2009 and 25% on 1st June, 2009. We further find that Clause 12 of the agreement clearly provided that the terms of this agreement was to supersede any previous agreement (including agreement dated 17th February, 2008) or arrangement between the parties. We have deliberated on the various relevant clauses of the aforesaid "Service agreement" and are of the considered view that the same clearly laid down the terms and conditions in respect of the duration, availability of the coach and the fees structure for the IPL Season-1. We find that the aforesaid agreement which was in supersession of any previous agreement (including agreement dated 17th February, 2008) or arrangement between the parties, duly contemplated the terms and conditions as per which Mr. John Buchanan was to render his services to the assessee as regards the IPL Season-1 league. We have further deliberated on the relevant newspaper extracts of "Times of India" as well as the downloaded extracts from Wikipedia, the free encyclopaedia. We though are not oblivious of the fact that extracts of news paper etc. cannot on their own establish or disprove a fact, but ....
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.... not be held as a business expenditure. The A.O further holding a conviction that the room booking charges of Rs. 96,26,375/- incurred by the assessee for rooms taken on hire at ITC, sonar, Kolkata were also to some extent incurred by the assessee for the stay of relatives of directors, VIPs and celebrities, therefore, on the said count had on an estimate basis disallowed 33% of such expenses and made an addition of Rs. 31,76,705/-. That as regards the balance expenditure of Rs. 1,13,24,264/- (i.e. excluding expenditure incurred at ITC, sonar, Kolkata), the A.O had on a similar analogy carried out an estimated disallowance of 33% of the said expenses and made a further addition of Rs. 37,37,007/-. We thus find that on the basis of his aforesaid observations the A.O had carried out an aggregate disallowance of Rs. 1,08,33,592/- out of the food and nutrition and boarding and lodging expenses claimed by the assessee. 55. We have deliberated on the observations of the lower authorities, and find that the primary reason which had weighed in the mind of the A.O while making the disallowance of expenses booked by the assessee under the head food and nutrition expenses and boarding and ....
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....are of the considered view that the visits of the actors, celebrities, VIP's etc. at the matches staged is strategically planned by the franchisees, which carries with it the obligation and responsibility of providing boarding, lodging, food etc. to the level of their standard. We are further of the view that the marking of presence by the actors, celebrities, VIPs etc. at the matches is strategically planned and is guided by the business prudence of the franchisee, knowing well that the same would both boost the sales of tickets as more of viewers would be attracted for such matches, as well as give a substantial push to the sponsorship receipts from the business houses. We would not hesitate to observe that keeping in view the commercialization of the game of cricket, it would not be wrong to conclude that even if the assessee would have arranged paid visits of the actors, celebrities, VIPs for the matches, being well conversant with the fact that the same would substantially give a boost to his revenue collections from staging of matches, even the said payments would safely fall within the sweep of an expenditure incurred wholly and exclusively for the purpose of the business. B....
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....it has been established by the revenue that either the expenses claimed by the assessee in respect of the aforesaid persons is found to be bogus, or the said expenditure so incurred on them were not in context of the business of the assessee. We are of the considered view that the aforesaid expenditure incurred by the assessee by hosting dinners on the days on which the matches were played at the home ground, which amongst others were attended by the aforesaid actors, celebrities etc, and arranging for their stay at the hotels of repute, can safely be held as an expenditure incurred by the assessee wholly and exclusively for the purpose of its business. We thus being of the considered view that as the expenditure incurred by the assessee on food and nutrition and boarding and lodging for the members of the team (including visiting teams), support staff, directors and the invited guests, which amongst others included actors, celebrities, VIPs, being in the nature of expenditure incurred by the assessee in the very interest of its business, therefore, in the absence of any irrefutable documentary evidence which could had established beyond any doubt that the same had been incurred by....
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....or which the same had been incurred, or the same suffered from certain discrepancies as regards the amounts mentioned therein in comparison to those stated by the assessee during the course of the proceedings and had not been reconciled, therefore, in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills, viz. (i). bill of Rs. 5,31,573/-, dated 30.04.2008; (ii) bill of Rs. 5,31,893/-, dated 08.05,2008; (iii). bill of Rs. 5,31,893/-, dated 13.05.2008; (iv). bill of Rs. 5,31,894/-, dated 20,05.2008; (v). bill of Rs. 4,51,900/-;and (vi) and bill of Rs. 5,31,893/-, dated 25.05.2008 pertained to expenses incurred by the assessee in the course of its business, or not. We may however clarify that the A.O shall while re-adjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications in respect of the limited issue for which the matter had been restored to his file. Needless to say, the A.O shall while re-adjudicating the aforesaid issue afford sufficient opportunity of being heard to the assessee,....
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....tly for non business purposes could not be ruled out. Thus the CIT(A) on the aforesaid reasoning had upheld the disallowance of the aforesaid expenditure made by the A.O. We have given a thoughtful consideration to the issue before us and are of the considered view that as observed by us hereinabove, the expenses incurred by the assessee on the actors, celebrities and VIPs in order to facilitate marking their presence at the matches, which substantially contributed towards generation of higher revenue in the hands of the assessee by way of pushing ticketing sales and higher sponsorship receipts, can safely be held to have been incurred wholly and exclusively for the purpose of the business of the assessee. We thus are of the view that expenses incurred towards airfare expenses, travelling expense and vehicle hire charges by the assessee in respect of the such persons cannot be divorced from the business of the assessee, and has to be held as an expenditure incurred by the assessee in the course of his business of cricketing. We are unable to persuade ourselves to subscribe to the observations of the A.O who had carried out an adhoc disallowance of 25% of the expenses, for the reaso....
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.... evidence as regards the entitlement of the assessee towards the claim of the aforesaid expenses. We herein direct that the A.O shall in the backdrop of our aforesaid observations make necessary verifications as regards the aforesaid claim of expense of the assessee booked under the said respective heads, viz. airfare expenses, travelling expenses and vehicle hiring charges. Needles to say, the A.O shall during the course of the set aside proceedings afford sufficient opportunity of being of heard to the assessee, who shall remain at a liberty to substantiate its claim by placing on record fresh documentary evidence. However, we may herein clarify that in case the A.O in the course of the set aside proceedings is not satisfied with the documentary evidence and submissions of the assessee in support of its claim of the aforesaid expenses, then he though would be at a liberty to disallow the same, but however, the said disallowance shall not exceed that made by him towards the respective expenses while passing the original assessment order. The Ground of appeal No. 11 to 13 are allowed for statistical purposes in terms of our aforesaid observations. 62. We now advert to the disall....
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....tadium, therefore, it was the responsibility of the State of government to have provided the necessary security arrangements to the aforesaid persons. We are unable to persuade ourselves to subscribe to the aforesaid observations of the CIT(A). We are of the considered view that now when it stands established that the visits of the actors, celebrities and VIPs to the matches staged by the assessee was a part of the business strategy of the assessee to generate more revenues, therefore, what quality of security cover was required to be provided to the aforesaid persons remained within the exclusive realm of the wisdom of the assessee and the A.O could not guide him as to the nature of the security cover that should have been provided. We thus being of the considered view that the claim of the assessee of Rs. 1,08,700/-incurred for security for VIPs and celebrities who attended the matches at Eden Garden was well in order, therefore, set aside the order of the CIT(A) sustaining the aforesaid disallowance. The Ground of appeal no. 14 is allowed. 63. We now take up the claim of the assessee as regards the disallowance of expense of Rs. 8,85,600/-. We find that the assessee had made ....
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....oses of carrying on the business or earning of profits of that year. The ld. A.R in order to drive home his aforesaid contention had relied on the judgment of the Hon'ble High Court of Bombay in the case of Mysore Spinning and Manufacturing Co. Ltd. Vs. CIT (1966) 61 ITR 572 (Bom). 65. We have given a thoughtful consideration to the issue before us and find that the genuineness and veracity of the payment of Rs. 8,85,600/- by the assessee to Mr. Manish Malhotra had not been doubted by the lower authorities. We find that the claim of the assessee was primarily rejected by the lower authorities for the reason that as the payment was made in the month of March, 2009, therefore, it was beyond comprehension as to how the same was relatable and would go to contribute to the revenue of the assessee for events of IPL Season-1, which had already concluded in April/May, 2008. We find that there remains no occasion to go into the intricacies of the issue as to whether the aforesaid expense was in context of the outfit of the players for IPL Season-1 or IPL Season-2, as the ld. A.R had fairly conceded before us that the said payment was made for the purpose of design and outfits of KKR team....
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....s of carrying on the business of that year. There would be ample authority to show that an expenditure incurred to meet any liability of the business accruing in that year is an expenditure wholly and exclusively laid out for the purposes of the business and therefore allowable under s. 10(2)(xv)". We thus being of the considered view that as the expenditure under consideration was incurred by the assessee to meet the aforesaid liability of the business which had accrued during the year, therefore, the amount of Rs. 8,85,600/- was rightly claimed as an expenditure while computing the income of the assessee for the year under consideration. We thus set aside the order of the CIT(A and delete the addition/disallowance of Rs. 8,85,600/-. The Ground of appeal No.15 is allowed. 66. We now advert to the disallowance of sum of Rs. 8,49,305/- claimed by the assessee in connection with website design charges during the year under consideration. We find that the assessee who had incurred website design charges of Rs. 16,98,609/-, had in its return of income claimed 50% of the total expenditure i.e Rs. 8,49,305/-. However, the assessee had averred before the lower authorities that as th....