TaxTMI 
TaxTMI 
2020 (7) TMI 518
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....ng up, managing and operating sports academy, promoting developing and managing sports talent, etc. As a part of business, the assessee entered into Franchisee Agreement with BCCI to operate Kolkata Knight Riders (KKR) of BCCI in Indian Premier League (IPL). The assessee entered into IPL, Franchise Agreement with BCCI - IPL on 04.04.2008. The assessee paid annual Franchisee Fee amounting to Rs. 30,03,60,000/-. The assessee claimed Franchisee Fee as revenue expenditure. In assessment proceedings, the Assessing Officer held that rights acquired by the assessee on payment of Franchisee Fee are akin to 'Licence' or 'Franchise', u/s 32(1)(ii) of the Income Tax Act, 1961 (herein after referred to as 'the Act') and is an intangible asset. The Assessing Officer concluded that payment of Franchisee Fee is capital in nature. The Assessing Officer allowed depreciation @25% on Franchisee Fee. Apart from above addition, the Assessing Officer in assessment proceedings disallowed certain expenses claimed by the assessee viz. Air fare expenses, travelling expenses, boarding and lodging expenditure, etc. Aggrieved against the assessment order dated 28/03/2014 passed under section 143(3) of the A....
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....7(1) of the Act. The assessee had incurred total expenditure of Rs. 1,03,85,544/-. The Assessing Officer disallowed 25% of such expenditure without examining the details. The ld. Counsel of the assessee pointed that similar disallowance in respect of air fare and travelling expenses was made in AYs 2009-10 and 2010-11. The Tribunal restored the issue back to the file of Assessing Officer for denovo adjudication. The Assessing Officer while giving effect to the order of Tribunal for assessment year 2010-11 has made adhoc disallowance of Rs. 5.00 lacs to cover up the discrepancies. The ld. Counsel for the assessee pointed that in the aforesaid assessment years there were allegation of discrepancy and non-furnishing of documents. The assessee is on a better footing in the assessment year under appeal as there is no allegation of discrepancy or non-furnishing of documents. The AO made disallowance in a mechanical manner without examining the details. The ld. Counsel for the assessee prayed for allowing the assessee's claim in full. 5. In respect of ground No.7 and 8 relating to disallowance of expenditure on boarding and lodging and food, the ld. Counsel for the assessee submitted t....
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....ilar reasons the Assessing Officer had disallowed assessee's claim of treating 'Franchisee Fee' as revenue expenditure in the very first year of claim i.e. assessment year 2009-10. The assessee carried the issue in appeal to the Tribunal in ITA No.1307/Mum/2013 (supra). The Co-ordinate Bench after examining the facts of the case and various decisions held that the 'Franchisee Fee' paid by the assessee is in the nature of revenue expenditure. For the sake of completeness relevant extract of the finding of Tribunal on this issue are reproduced herein below:- "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 par....
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....We further find that the issue before us as to whether the Franchise fee paid to BCCI-IPL is a revenue expenditure or a capital expenditure had already been looked into and adjudicated upon by a coordinate bench of Tribunal, viz. ITAT "I" Bench, Mumbai in the case of India Win Sports Pvt. Ltd. Vs. ACIT (ITA No. 5290 & 5291/Mum/2014, dated 22.07.2016, wherein the Tribunal had held as under: "The expenditure of Rs. 44,76,00,000/- incurred by it for making payment of the first 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 ....
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....franchise" in terms of Sec. 32(1)(ii) of the Act, by holding as under: "24. Before concluding, we wish to clarify that our present judgment is strictly confined to the right of membership conferred upon the member under the BSE Membership Card during the relevant assessment years. We hold that the said right of membership is a "business or commercial right" which gives a non-defaulting continuing member a right to access the Exchange and to participate therein and in that sense it is a licence or akin 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 o....
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.... placed on record by the revenue. Thus, respectfully following the decision of Co-ordinate Bench, we hold 'Franchisee Fee' paid by the assessee is revenue in nature. Grounds No. 2 and 3 of the appeal are allowed. 10. In ground No. 4 of the appeal, the assesse has made alternate prayer that if the payment is held to be on capital account, depreciation to be allowed on actual entire Franchise Fee paid. Since, we have accepted primary contention of the assesse and have held payment of Franchise fee as revenue expenditure, the alternate plea of the assess has become infructuous. The ground No. 4 of the appeal is dismissed as such. 11. In grounds No.5 and 6 of the appeal, the assessee has assailed adhoc disallowance of air fare and travelling expenditure. The assessee in the impugned assessment year claimed air fare and travelling expenditure of Rs. 1,03,85,544/-. The Assessing Officer held that the expenditure includes travelling expenditure incurred for VIPs and Celebrities and, hence, not allowable under section 37(1) of the Act. The Assessing Officer made adhoc disallowance of 25% of such expenditure claimed. The contention of the assessee is that the expenditure is necessary ....
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....iz. air tickets, details of vehicles, name of service providers, persons utilizing these services and their nexus with the business etc., therefore, the possibility of the expenditure partly having been for non business purposes could not be ruled out. We further find that the assessee also had averred before us that it was not given an opportunity of being heard by the A.O while making an adhoc disallowance of the aforesaid expenses. We have given a thoughtful consideration to the issue before us, and as observed by us hereinabove, are of the considered view that the observations of the A.O that an adhoc disallowance of airfare expenses, travelling expenses and vehicle hiring expenses was called for in the hands of the assessee for the reason that expenses under the said respective heads must had been incurred by the assessee in respect of actors, celebrities, and VIPs, cannot be sustained. However, keeping in view the fact that as observed by the CIT(A) that the assessee had failed to place before him any evidence e.g air tickets, details of vehicles, name of service providers, details of persons utilizing these services and their nexus with business etc, therefore, as per him th....
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....e of Assessing Officer for de-novo consideration. The relevant extract of the findings of the Tribunal on this issue are reproduced herein under:- "55. .....................................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 the assessee either to meet out a personal o....
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....ame 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, who shall remain at a liberty to furnish mat....
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....ncement of order beyond the period of 90 days from the date of hearing is not under "ordinary" circumstances. The Co-ordinate Bench of the Tribunal in the case of DCIT vs. JSW Ltd., ITA No.6264/Mum/2018 for A.Y 2013-14 decided on 14/05/2020, under identical circumstances, after considering the provisions of Rule 34(5) of the ITAT Rules, 1963, judgements rendered By Hon'ble Apex Court and the Hon'ble Bombay High Court on the issue of time limit for pronouncement of orders by the Tribunal and the circumstances leading to lockdown held:- "10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is req....