TaxTMI 
TaxTMI 
2019 (5) TMI 619
X X X X Extracts X X X X
X X X X Extracts X X X X
....A No. 6195/Mum/2017 and ITA No. 6291/Mum/2017 respectively for AY 2012-13, both being directed against the appellate order bearing no. CIT(A)-4/IT-26/ACIT-16(1)/14-15 dated 04.07.2017 passed by learned CIT(A) for AY 2012-13, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 26.12.2014 passed by AO u/s 143(3) of the 1961 Act for AY 2012-13. 1.4 The assessee has filed an appeal in ITA No. 6196/Mum/2017 for AY 2013-14 which is directed against the appellate order bearing no. CIT(A)-4/IT.-22/ACIT-16(1)/16-17 dated 04.07.2017 passed by learned CIT(A) for AY 2013-14, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 02.03.2016 passed by learned AO u/s 143(3) of the 1961 Act for AY 2013-14. 2. First, we shall take up assessee‟s appeal in ITA no. 6194/Mum/2017 for AY 2011-12. There is no appeal filed by Revenue for AY 2011-12. 3. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA No. 6194/Mum/2017 for AY 2011-12, read as under:- "1) On the facts and circumstances of the case and in law the Ld CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew leave & licence agreement the monthly compensation is agreed at Rs. 4,50,000/- for each such premises excluding service tax. It was explained that besides this interest free refundable rent deposit of Rs. 9,00,00,000/- was also deposited with the licensors. The receipts alongwith leave & licence agreement were duly furnished by the assessee before the AO. The assessee submitted before the AO that the said amount of Rs. 9,00,00,000/- as interest free refundable rent deposit was given out of interest free fund available with the assessee company, the details of which are as under:- (Figures in Lacs) AY 2004-05 AY 2008-09 i) Share Capital 1265.29/- 1730.59/- ii)Reserves and Surplus(Net) 3648.00/- 5273.63/- iii) Total Interest free Fund 4913.29/- 7004.22/- iv) Interest free Refundable Deposit 200.00 700.00 The assessee also relied upon the presumption available wherein if interest free funds available are more than interest free refundable rent deposit, then it will be presumed that the assessee has made deposit of interest free rent deposit out of interest free funds available with it. 5.3 The AO rejected the contentions of the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved in the manufacture and sale of the copy. In order to produce and market the audio cassettes under its logo "TIPS'' Assessee Company have to purchase audio rights of various films from various producers of feature films for which advances have to be paid on execution of the written agreement from time to time, as the completion of feature film takes approx. 15 to 24 months. Accordingly the Assessee Company had paid advance of Rs. 65,00,000/ to the said producer in the financial year 2002-2003 for acquisition of Audio Rights of music feature film of Production No. 7. Assessee Company had various meetings and discussions with the above said party to recover an amount of Rs. 65,00,000/-. Finally on March 2004 assessee company had reached an understanding to create an lien Overseas Territory of the Feature Film "DIL CHURAKE CHAL DIYE' produced by M/s. Karishma International and assigned to M/s RAMNORD RESEARCH LABORATORIES PVT LTD. In terms of the said letter of understanding dated 22nd March, 2004 it had been mutually agreed that the assessee company had lien on the OVERSEAS TERRITORY of the above said Feature Film to the extent of the amount of Rs. 65,00,000/- Zero....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me time barred under the law of limitation Act, and therefore the said amount cannot be legally recoverable from the above said party. Though the Assesses Company had various meetings and discussions with the said party for the recovery of the above amount, but the said party has refused to make payment of the balance amount advanced for acquisition of Audio Rights. The Assessee Company has no other recourse but to write off the said amount as business loss. In view of the above facts and considering the fact that the advance paid to the said party is towards securing raw material for the manufacture of its product the same have become irrevocable and accordingly the said amount have been written off in the books of accounts by debiting in profit and loss. It is submitted that the advance towards acquisition Audio Rights is for bona fide purpose of the Assessee business, as such the same be allowed as business loss." 6.2. The AO rejected the contentions of the assessee by holding that the said amount which is given to create an lien on overseas territory of the feature film "Dil Churake Chal Diye" produced by M/s. Krishma International and assigned to M/s. Ramnord Research Labor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hare Capital and Reserves & Surplus and Refundable deposits were given to the wives of Directors whereas the Assessing Officer has demonstrated that deposits have been given out of business related transactions. The Ld. A.R. has not refuted this factual finding of the Assessing Officer. Therefore, the reply and representation of the Appellant is found to be very vague and general in nature. The argument that interest free deposit has been given from interest free fund, is of no avail because no such truth is there as such deposit of Rs. 9 crores has been given from business transactions. It can be seen from the Balance Sheet of F.Y.2007-08 that shareholder's fund including Reserves & Surplus of Rs. 7004.22 lakhs have been utilized for Inventory of Rs. 2331.83 lakhs, Sundry Debtors of Rs. 101.81 and Cash & Bank Balance of Rs. 3535.43. Further, the Gross Block of Assets as on 31.03.2008 is of Rs. 1755.73 lakhs. Thus, it is very evident that Share capital and Reserves & Surplus of Rs. 7004.22 lakhs has been utilized. Thus, for giving advance of Rs. 9 crores, the funds might have been utilized from Secured Loans or from business transactions. Therefore, the contention of the Appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the case. In this case, as observed earlier, the Appellant has not demonstrated in facts of the business expediency hence, amount/loan/fund diverted to related person having element of interest is to be taken into consideration for disallowance. For this propositions reference may be had of S.A. Builders Ltd. vs. CIT 288 ITR 1(SC), Madhav Prasad Jatia vs. CIT 118 ITR 200(SC). It can be seen from the set of facts that in spite of giving good rent of Rs. 4,50,000/- per month to the wives of the Directors, such huge amount of Rs. 9 crores has been given for no business purposes. Thus, fund has been given to the wives of the Directors without charging of interest hence, corresponding interest expenditure is disallowable. For this proposals reliance is placed in the following case laws :- "Highways Construction Co. Pvt Ltd. vs. ClT(Gau) 199ITR 702 CIT vs. India Silk House (Mad.) 152 of the Income-tax Rule, 1962 79 Marolia & Sons Vs. CIT(All) 129 of the Income-tax Rule, 1962 475 Tirupati Trading Co. Vs. CIT(Cal.) 242 ITR 13 CIT Vs. Sujanni Textiles (P) Ltd.(Mad-) 225 ITR 560 CIT Vs. P. Ganu Rao and Sons (Mad.) 185 ITR 324" Thus, in the light of above, factual references....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bove said feature film to the extent of the amount of Rs. 65,00,000/-. Xerox copy of the Letter of Arrangement dated 22.3.2004 has been placed on records at the time of assessment proceedings. Appellant Company only could recover an amount of Rs. 45,00,000/- from the OVERSEAS RIGHTS OF THE FILM "SHADI KARKE PHAS GAYA YAAR" from Redsun Exports Pvt. Ltd., on behalf of M/s. Karishma International. Copy of the letter dated 31st July 2004 is placed on records at the time of assessment proceedings. Thereafter, Appellant company rigorously followed with M/s. Karishma International for the recovery of balance amount of Rs. 20,00,000/- but the said party expressed their inability to make further payments as they suffered heavy losses in their various film productions. In fact the said production house had discontinued the business activities of film production, therefore, the advances become irrecoverable and hence, the appellant company had no other alternative but to claim the said advances as revenue expenditure u/s.37(1) of the I T Act and accordingly has debited the said amount of Rs. 20,00,000/- to the Profit and Loss account under the head "BAD DEBTS". It is humbly submitted that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmitted that the same was not recovered from M/s. Karishma International because of heavy loss suffered by them. M/s. Karishma International has discontinued the business activities of Film Production hence, according to the Assessee, such an amount of Rs. 20 lakhs becomes Bad debt hence, allowable expenditure. This contention of the Appellant is not tenable because under the Income-tax Act, the allowable Bad debt should be one which has already been included in the Income in earlier year. Sec.36(vii) r.w.s.36(2) is very specific over such issue. Since the Assessee has never shown an amount of Rs. 65 lakhs or Rs. 20 lakhs as Income from earlier year, no such advance could be allowable as Bad debt. The contention that it should be allowed u/s.37 can also not be accepted because of the facts of the case. It can be seen from the admission of the Appellant that it had given Rs. 65 lakhs to one M/s. Karishma International for Audio Rights of a Film to be produced. However, the production of film did not materialize, and as mentioned by the Appellant, M/s. Karishma International had discontinued its production business hence, advance was outstanding right from F.Y.2002-03. Subsequently, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res film. The learned counsel for the assessee submitted that the assessee paid Rs. 65,00,000/- to M/s. Karishma International to acquire audio rights for the new film to be produced by Karishma International but the said M/s Karishma International could not produce the film due to losses and closure of business. It was submitted that the assessee in order to secure its business interests got M/s. Karishma International to create lien on the overseas rights of another film‟ Dil Churake Chal Diye‟ which was later renamed as "Shaadi Kar Ke Phas Gaya Yaar‟. It was submitted that M/s. Redsun Exports P. Ltd. was under liability to pay to the assessee to the tune of Rs. 65,00,000/- under this agreement on and behalf of M/s Karishma International and it was submitted that ultimately an amount of Rs. 45,00,000/- could be recovered from M/s Karishma International through Redsum Exports Private Limited, while rest of the amount of Rs. 20,00,000/- was written off as Business Loss by the assessee in its books of accounts. Our attention was also drawn to page no. 75 of the paper book filed by the assessee with the tribunal wherein letter from M/s. Karishma International to M/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as bad debt of the assessee company. Thus it was prayed by learned counsel for the assessee that the said loss of Rs. 20 lacs be allowed as deduction from business income either as business loss or bad debts. It was submitted that learned CIT(A) did not allowed the same as bad debt on the ground that the assessee did not showed the said amount as income in earlier years. It was submitted that learned CIT(A) treated this advance written off as capital loss. It was submitted that the said amount was paid by assessee in ordinary course of its business and the other party could not fulfil its business commitment and hence it should be allowed as business loss. The assessee relied on the decision of Hon‟ble Bombay High Court in the case of Harshad J. Choksi v. CIT reported in (2012) 349 ITR 250 (Bom). 8.2 On the second issue, it was submitted by learned counsel for the assessee that Leave & License agreement for taking commercial premises bearing number 501-601, Durga Chambers, 278/E, Linking Road, Khar West, Mumbai 400052 on leave and licence basis was entered into by the assessee with wives of Directors of the assessee company against which interest free refundable rent deposit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tantiate that the interest free funds available with the assessee were higher than interest free refundable rent deposit of Rs. 900 lacs. The Reliance was placed by learned counsel for the assessee on the decision of Hon‟ble Bombay High Court in the case of Reliance Utilities and Power Limited(supra) and contentions were made that presumption will apply that the assessee made the payments out of own interest free funds available with it. It is submitted that similar additions were made in AY 2012-13 and 2013-14 wherein the assessee has filed an appeal before the tribunal which is tagged with this appeal of the assessee for AY 2011-12 and it is claimed that similar contentions as were made for this year shall apply to those two years which are also before the tribunal. It was submitted that audited Balance Sheet, profit and Loss and net worth figures for those years are also filed in paper book which is referred to above by learned counsel for the assessee in his arguments before the tribunal. 9. The Ld. DR on the other hand submitted that additions of Rs. 20,00,000/- was made on the grounds that this loss was a capital loss and cannot be allowed as revenue loss or bad debt. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting the claim of the assessee is that this payment towards acquiring audio rights of the proposed feature film got changed to overseas rights of the feature film "Dil Churake Chal Diye‟, which is capital in nature and loss thereof is capital loss which cannot be allowed as revenue loss while computing income of the assessee. It was held by learned CIT(A) that the business of the assessee is not to deal in the overseas rights of the feature film and non recoverability of money is loss of capital and cannot be allowed as revenue loss as it is a capital loss.It is also averred by Revenue that the said amount of Rs. 65 lacs which was advanced by the assessee or an amount of Rs. 20 lacs which ultimately could not be recovered by the assessee, was not included by the assessee as its income while computing income chargeable to tax in earlier years or even during the impugned assessment year, thus such advance of money cannot be allowed even as bad debt under the provisions of the 1961 Act. 10.2 The tribunal is the last fact finding authority and is obligated to appreciate complete facts on record before arriving at its conclusions. Thus, we are under obligation and heavy duty is c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the ledger account of M/s Karishma International in the books of assessee will reveal that first payment of Rs. 30 lacs was made by the assessee to M/s Karishma International on 09th June 1999 itself i.e. the date of original agreement dated 09.06.1999. b) There arose some disputes and differences between assessee and M/s Karishma International while implementing original agreement dated 09.06.1999 relating to film "Dil Churake Chal Diye" The complaint was also filed by the assessee with M/s Film Combine against said M/s Karishma International. The disputes and differences between the assessee and M/s Karishma International stood resolved vide this agreement of arrangement dated 02.03.2004. c) There were three more parties found mentioned in the said agreement of arrangement dated 02.03.2004 who were having disputes and differences with M/s Karishma International namely Mrs. Renu K Taurani, Mrs. Varsha R. Taurani and Dasmesh International Limited, whose disputes and differences with M/s Karishma International also stood resolved as mentioned in this agreement of arrangement dated 02.03.2004. Incidentally as we have seen with respect to other issue in this appeal with respect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 45 lacs each to Mrs. Renu K. Taurani and to Mrs. Varsha K. Taurani, aggregating to Rs. 90 lacs, out of the aforesaid advance of Rs. 100 lacs agreed by assessee to be paid to M/s Karishma International as refundable advance vide this agreement of arrangement dated 02.03.2004, at the time of effecting of delivery to assessee by Karishma International of Master Tapes/Original Recording Tracks(Dats.) containing all songs, dialogues and musical works of the said picture "Dil Churake Chal Diye‟. The said M/s Karishma International agreed to deliver to assessee aforesaid master tapes/original recording tracks etc on signing of this agreement of arrangement dated 02.03.2004. The said M/s Karishma International agreed and assured assessee vide this agreement of arrangement dated 02.03.2004 to release the film "Dil Churake Chal Diye‟ in the month of July 2004. The authorities below had not seen whether the assessee had paid this additional advance of Rs. 100 lacs out of which Rs. 90 lacs were disbursed to wives of the Directors of the assessee company by assessee for and on behalf of Karishma International to settle and resolve their inter-se dispute with Karishma Internation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The said advance was secured by refund cheques of Rs. 100 lacs issued by M/s Karishma International in favour of the assessee and whether these cheques stood cleared from bank also has not been verified by the authorities below. The balance of Rs. 10 lacs advance out of fresh advance of Rs. 100 lacs granted by assessee to M/s Karsihma International was adjusted against Rs. 75 lacs now recoverable owing to excess advance keeping in view reduced consideration of Rs. 55 lacs for acquisition of audio rights of the feature film "Dil Churake Chal Diye‟, vide agreement of arrangement dated 02.03.2004, instead of original agreed consideration of Rs. 280 lacs vide original agreement dated 09.06.1999. This left the balance recoverable of Rs. 65 lacs by assessee from M/s Karishma International. The assessee vide entry in its books of accounts passed on 25.09.2004 has debited Rs. 155 lacs towards audio rights expenses for the film "Dil Churake Chal Diye‟ (later renamed as "Shaadi Kar Ke Phas Gaye Yaar‟ ) as is emanating from ledger account filed by the assessee. However, the reduced cost of acquisition of audio rights was Rs. 55 lacs while Rs. 100 lacs was refundable advance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional advance of Rs. 100 lacs. k) The agreement of arrangement dated 02.03.2004 also provides that M/s Karishma International acknowledged that it is liable to pay to assessee Rs. 65 lacs as well fresh additional advance received Rs. 100 lacs received by it from assessee, wherein M/s Karishma International agreed that it will pay Rs. 65,00,000/- to the assessee before effecting delivery of any prints of the said picture for any of the territories of the world including the Overseas territories. M/s Karishma International agreed that it will not release, distribute, exhibit or exploit the said picture "Dil Chuarke Chal Diye‟ in any of the territories of the world directly or indirectly until this amount of Rs. 65 lacs is first paid to the assessee. M/s Karishma International also agreed to secure this payment of Rs. 65 lacs by obtaining in favour of the assesseee, simultaneously a letter of confirmation from the laboratories where the negatives of the said picture "Dil Churake Chal Diye‟ are lying, to the effect that the said laboratory shall not effect delivery of any prints of the said picture for any territory of the world until the said sum of Rs. 65 lacs is first....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge 76. o) On page 77 of the paper book is a letter written by Redsun Exports Private Limited to M/s Karishma International with copy to the assessee acknowledging that Rs. 65 lacs shall be paid on behalf and on account of M/s Karishma International to the assessee, which is in accordance with the understanding vide inter-se agreement Karishma International had with Redsun Exports Private Limited, dated 20.08.1999 for overseas circuit. p) Then there was further change in understanding between M/s Karishma International with assessee, vide fresh agreement of arrangement dated 18.03.2005, which is placed at page 78 of paper book. In this revised agreement of arrangement dated 18.03.2005, it is recorded that release of film "Dil Churake Chal Diye‟ now titled "Shaadi Karke Phas Gaya Yaar‟ got delayed from proposed date of release in June 2004 to now revised date of release in May 2005. It is agreed by the assessee with M/s Karishma International that it will accept Rs. 45 lacs as against Rs. 65 lacs as originally agreed vide agreement of arrangement dated 22.03.2004. The said Karishma International agreed that movie will be released in May 2005 or otherwise this letter w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a) The original agreement between assessee and M/s Karishma International dated 09.06.1999 is required to be placed on record by the assessee. b) The commercial expediency and prudence in further advancing Rs. 100 lacs by the assessee to said M/s Karishma International vide agreement of arrangement dated 02.03.2004 needs to be explained, more so when the amount already advanced was Rs. 130 lacs which was in excess of reduced consideration of Rs. 55 lacs for acquiring audio rights of feature film "Dil Churake Chal Diye‟ and the said additional advance of Rs. 100 lacs is disbursed by assessee for and on behalf of Karishma International to the tune of Rs. 90 lacs to wives of Directors of the assessee company which was in resolving inter-se disputes and differences of wives of the Directors of the assessee with M/s Karishma International. The commercial expediency and prudence in releasing additional advance to M/s Karishma International needs to be looked into more-so out of this Rs. 90 lacs were disbursed by assessee on behalf of M/s Karishma International to wives of the Director of the assessee to settle and resolve their inter-se disputes and differences. c) Fate/c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s dated 06.08.2018 in assessee‟s own case in ITA no. 1894/Mum/2017 for AY 2010-11 has held that expenditure incurred for purchase of audio video rights is revenue in nature. This ground of appeal being ground no. 1 filed by the assessee in memo of appeal with tribunal is allowed for statistical purposes. We order accordingly. 11. Coming to the second issue, we have observed that the assessee has taken on leave & licence basis commercial premises bearing numbers 501-601, Durga Chambers, 278/E, Linking Road, Khar West, Mumbai 400052 from Mrs. Renu K Taurani and Mrs Varsha R. Taurani, wives of the Director of the assessee company for a period of three years w.e.f. 01.04.2010 to 31.03.2013 vide leave and license agreement dated 01st April 2010. The said agreement dated 01.04.2010 was entered into by the assesse as the earlier agreement dated 01.01.2007 had expired and licensors have vide letter dated 29.01.2008 asked for increase in compensation and interest refundable rent deposit. In terms of leave and license agreement, the monthly compensation being license fee is fixed at Rs. 4,50,000/- for each premises excluding service tax component. The assessee had also given interest ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... held to be excessive or exorbitant. The assessee has placed all leave and license agreements on record in paper book filed with tribunal at page 23-42. 11.2. We have gone through audited financial statements of the assessee for financial year 2003-04 and also from financial year 2007-08 to financial year 2012-13, which are all placed in paper book filed with the tribunal at page 6-18. The perusal of these financial statements clearly shows that the assessee has its own interest free funds available with it which are more than the interest free refundable rent deposit released by the assessee in favour of licensors of the aforesaid commercial premises.The net worth statement of the assessee company for the financial year 2003-04 to 2013-14 are also placed in paper book at page 5. The details of the interest free refundable rent deposit granted by the assessee was Rs. 2 crores in financial year 2003-04 while Rs. 7 crores stood disbursed in financial year 2006-07 and 2007-08 ( Rs. 1 crore in financial year 2006-07 while Rs. 6 crores stood disbursed in financial year 2007-08 ) -Refer paper book/page 1-4. The perusal of audited financial statements placed on record clearly reveals tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....195 to 6196/Mum/2017 for AY 2012-13 and 2013-14 respectively. The appeals of the assesee‟s in ITA No. 6195 and 6196/Mum/2017 for AY 2012-13 and 2013-14 respectively are allowed. We order accordingly. 14. Now we will take up appeal of the revenue in ITA no. 6291/Mum/2017 for AY 2012-13. 14.2. The grounds of appeal raised by the revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:- "1. "Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of audio right expenses amounting to Rs. 3,10,99,925/- holing the same as revenue expenses without appreciating that the Expenses Incurred are of enduring nature and categorically falls under the head of "capital expenses" 2. "Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the directing the addition of audio right expenses amounting to Rs. 3,10,99,925/- without appreciating that the audio rights acquired by the assessee gives it a perpetual right to exploit the same and as such the expenses incurred are of cap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....settes. Since Audio rights is itself an item to be used for production and not an equipment to help the production, expenses incurred on this items directly vary with the turnover of the goods produced and sold as evident from the enclosed statement of purchases of audio rights and sales for past three years. As such, the said expenses is rightly claimed as manufacturing expenses and debited to trading account (to the extent of cassettes released during the year) and claimed as expenses for amount paid to producers or during the year purchase of audio u/s. 37(1) of the IT. Act, 1961 and on the same basis cost of Audio rights is also included while valuing the closing stock of the finished cassettes included in the closing stock shown in the trading Account. Considering the above the facts you will appreciate that amount spent for purchase of Audio rights during the year is rightly claimed as Manufacturing expenses which through purchased and held in perpetuity is of the revenue nature hence the same be allowed u/s 37(1) of the act. Reasons as to why Audio rights of Rs. 3,10,99,925/- should be considered as revenue and not capital expenses. Assessee's business is that re-produ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of is nature of the item that is acquired. Since the plate, is a basic material to facilitate the copying of, the payment made for it, is nothing more than the revenue. We once again reiterate that unlike the tangible and visible products that have raw material that is either visible, tangible the present product is reproduction of sound music etc. embedded into magnetic tapes or gramophone records. The payment of audio rights is relatable to the magnetic tapes or the gramophone records or compact discs fitted with the same sound, music dialogues etc. the production of filled tapes etc is nothing more than duplication of the original. The original master plate is primarily a raw material and incidentally happen to be the substratum of the business of the assessee. The only point of difference is that the substratum part is entirely incidental to the main activity of reproduction of the original plate which reproduction of the original is impossible without the original since the making of the master plate has cost the producer certain sum of money he gets re-imbursement from the assessee in the shape of fixed sum. The selling price of tapes of the audio cassettes consists of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t order dated 26.12.2014 passed u/s 143(3) of the 1961 Act, decided the issue against the assessee by holding as under:- "5.3 The issue as to whether audio expenses of Rs. 3,10,99,925/- debited to the P&L account are capital or revenue in nature has been deliberated in detail in the earlier assessment years right from A.Y.1990-91. In this regard, the stand of the Revenue is that these expenses are of enduring nature and therefore, should be treated as capital expenses. Although the issue has been decided in favor of the assessee by the CIT(A) and the ITAT, the Revenue has not accepted the said decision and filed appeal before the Hon'ble Bombay High Court. Hence, following the stand of the Revenue in the earlier years, the assessee's claim of expenditure on acquiring audio rights as revenue expenditure is not accepted. Accordingly, expenditure on acquiring audio rights claimed as revenue expenditure amounting to Rs. 3,10,99,925/- is hereby disallowed and the same is treated as capital expenditure. However, depreciation @ 25% of the said expenditure is allowed u/s.32. The same works out to Rs. 77,74,981/-. Accordingly, net disallowance of Rs. 2,33,24,944/- is made and added to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e laws. We have observed that the assessee has paid Rs. 3,10,99,925/- for purchase of audio rights which was claimed as Revenue expenses. The assessee is engaged in the business of manufacturing and sale of audio Cassettes & CDs, Production and distribution of features films. 17.2 We have observed that the tribunal in assessee‟s own case in earlier years has held that these expenses incurred for purchase of audio rights are revenue expenses. We have also observed that the tribunal has consistently held that the expenses incurred for acquisition of audio rights to be revenue in nature and was allowed as business expenses by holding the issue in favour of the assessee. The details of tribunal orders for earlier years are placed in para 16 above. 17.3 We have also observed that the tribunal in recent decision in ITA no. 1894/Mum/2017 for AY 2010-11 in assessee‟s own case vide appellate orders dated 06.08.2018 has observed that expenditure incurred for purchase of audio video rights by the assessee is revenue in nature, by holding as under;- " 4. We have heard both the parties and perused the materials available on record. The issue of expenditure incurred for purchase ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment has not accepted the decision of the Tribunal. In view of the above discussion, we respectfully apply the decision of the coordinate bench of the Tribunal in the assessee's own case for earlier years and dismiss the ground taken by the revenue. In view of the same, ground of appeal No. 1 is rejected," 5. As no distinguishing facts have been brought on record by the Ld. Departmental Representative, we have no hesitation in following the decision of the Tribunal (supra). Accordingly, the revenue's appeal is dismissed." 5. Thus, respectfully following the judicial precedence of the earlier years, we do not find any merits on the ground raised by the Revenue and the same is dismissed." 5. In this view of the matter and consistent with the view taken by the co-ordinate bench, we are of the considered view that expenditure incurred for purchase of audio video rights is revenue in nature. The CIT(A), after considering relevant facts, has rightly deleted addition made by the AO. We do not find any error in the order of the Ld.CIT(A) and hence, we are inclined to uphold the findings of Ld.CIT(A) and dismiss the appeal filed by the revenue." 17.4 Even before us, no disti....