TaxTMI 
TaxTMI 
2023 (11) TMI 1192
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....ainment channel undertaking, to the book profits of the Appellant as computed under section 115 JB of the Income tax Act, 1961 ("the Act"). 2 On the facts and circumstances of the case, the Ld CIT (Appeals) was not justified in upholding the order of the Ld. Assessing Officer by confirming the addition of an amount of Rs 1,42,63,197/-.. representing provision for doubtful advances, to the book profits as computed under section 115 JB of the Act. 3. On the facts and circumstances of the case, the Ld. CIT (Appeals) ought to have deleted the additions of Rs. 1,11,950/- made to the book profits of your Appellant an account of disallowance under section 14A of the Act. 4. On the facts and in the circumstances of the cases the Ld. CIT (Appeals) ought to have quantified the brought forward book losses or unabsorbed depreciation, whichever is less, in arriving at the taxable book profits of the Appellant for the concerned Assessment Year. Legal and Professional 5. On the facts and circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the addition made by the Ld. Assessing Officer in not allowing 100% deduction of the am....
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....s. 4,54,18,547/- (representing Rs. 3,90,12,647/ on animated character episodes and Rs. 64,05,900/- on in-house production cost of programmes) and in amortizing the balance 15% over three equal installments in the immediately succeeding years. Disallowance under section 14A 11. On the facts and the circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the addition by the Ld. Assessing Officer of an amount of Rs. 1,11,850/- under section 14A of the read with Rule 8(d) of the Income tax Rules 1962, 03. In ITA No. 7477/Mum/2016, the learned Assessing Officer has raised following grounds of appeal:- "1. Whether on the facts, in the circumstances of the ease and as per law the Ld. CIT(A) has erred in directing to delete the addition made by the Assessing Officer (AO) u/s 68 of the IT Act, 1961 (Act) on account of monies received by way of Share Application from NAR-PE Mauritius, LLC (NSR) without appreciating that there was no justification from the investor for making investment in a loss making company and the investment happened without any due diligence, which is common practice. 2. Whether on the facts, in the circumst....
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....rred in directing to delete the disallowance u/s 40(a)(ia) placing reliance on the decision of Calcutta High Court dated 10.12.2012 in CIT Vs S.K.Tekriwal [2014] without appreciating that the Hon'ble Kerala High Court in its judgment dated 20.07.2015 in the case of CIT-1, Kochi Vs PVS Memorial Hospital Ltd. [2015] 60 taxmann.com 69 (Kerala) has decided the issue in favour of the Department after discussing in detail the judgment in the case of CIT Vs S.K. Tekriwal (supra) 04. ITA number 3606/M/2017 is filed by the assessee for assessment year 2012 - 13 and ITA number 4600/M/2017 is filed by the learned AO for the same assessment year against the appellate order passed by CIT - [A] - 4, Mumbai dated 22/3/2017. The learned assessing officer is aggrieved by the deletion of addition of Rs. 41 crores under section 68 of the income tax act [ The Act] received from NSR Mauritius LLC which is identical to ground number 1 - 3 of the appeal of the AO for assessment year 2011 - 12. The learned AO is further aggrieved with direction of the learned CIT - A to consider 85% of the cost of animated character episode and in-house cost of production of program as revenue expenditure and balan....
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....ee submitted that it is not privy to the return of income as well as annual accounts of that entity and therefore, it is not possible to furnish the same. The learned Assessing Officer made request to Mauritius revenue authority under Double Taxation Avoidance Agreement (DTAA) through competent authority calling for the details of address, name of shareholders partners, directors of the entity, return of income filed with Mauritius authority, complete set of annual accounts, bank statement, sources of investment of Rs.14 crores and relationship of any of the director or partners with the assessee. The information was received on 14th March 2014, wherein it is found that New Silk Root PE, Mauritius LLC has invested Rs.14 crores is having 2 shareholders based in Cayman Island such as New Silk route PE Asia Fund, LL.P. and New Silk route PE Asia Fund-A, L.P. , shareholders of Limited Liability Company (LLC). The assessee was further asked to indicate the source of funds in the hands of the above shareholders and genuineness and nature of the transactions as prescribed under Section 68 of the Income-tax Act, 1961 (the Act). The learned Assessing Officer further noted that the return fi....
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....d the same. The assessee submitted that the profit and loss account of the assessee is prepared in accordance with the Companies Act and the above amount is shown "below the line". The amount credited is relating to demerger and is merely an adjustment entered and nowhere related to the business carried out during the year and therefore, it cannot be included in the computation of book profit. The assessee also referred to the order of the Hon'ble Bombay High Court dated 9 September 2010, whereby demerger of 9X channel business undertaking from assessee to ZEE Enterprise Ltd was approved. The assessee therefore stated that the accounting entry passed is in pursuance of the order of the Hon'ble High Court and therefore, it cannot be included in the book profit. The assessee explained how the above profit is credited to the Profit and Loss account. The learned Assessing Officer after considering the explanation of the assessee recorded the fact that assessee has transferred its liabilities amounting to Rs.64.24 crores and transferred the total assets of Rs.50.93 crores to ZEE Entertainment Ltd. and credited the balance sum of Rs.13,13,79,646/- to the Profit and Loss account. ....
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....rther noted that assessee has not deducted tax at source on payment of Rs.3,98,750/- to UK party and Rs.4,45,718/- claim as repairs and maintenance expenditure. However, it is not issue before us. vi. On verification of form no.26AS, the learned Assessing Officer found that there is a difference between the amount received by the assessee as per Form no.26AS and amount shown in the profit and loss account. As the requisite information could not be furnished, such differential amount of Rs.72,28,304/- was added to the total income of the assessee. vii. The learned Assessing Officer further found that against business income the assessee has claimed deduction of content costs of Rs.16,35,728/- which is capital expenditure. Out of the above sum, the learned Assessing Officer found that a sum of Rs.11,80,00,000/- is a license fees paid on period based content and there should be allowed as revenue expenditure. However, Rs.3,80,12,647/- being animation cost on the basis of episode aired during the year and production cost programme of Rs.64,05,900/- is a capital expenditure and therefore, same is an intangible assets. The learned Assessing Officer further found support....
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....ed after obtaining statutory approvals from the Foreign Investment Promotion Board (FIPB) and therefore, the genuineness of the transaction is beyond doubt. He further held that the FT& TR has also given the required information as required by the Assessing Officer to prove the identity and creditworthiness of the investors and genuineness of transaction. He further noted that in A.Y. 2008-09, same entity invested the money and added u/s 68 of the Act by ld AO was deleted by the learned CIT (A) vide order dated 15th July, 2011 and therefore, the assessee has proved identity, creditworthiness and genuineness of the above entity. Accordingly, the addition under Section 68 of the Act was deleted. ii. With respect to the addition of Rs.13,30,79,647/-, being surplus arising and credited to the profit and loss account of the assessee in view of demerger, the learned CIT (A) confirmed the addition. The reason for confirmation of addition was that the gain or profits were arising in the hands of the assessee because of the transfer of the undertaking under demerger of general entertainment business is part and parcel of profit and loss account of the assessee. Thus, there is a pro....
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...., he confirmed the disallowance of Rs.1,11,840/- under Section 14A of the Act, he rejected the contention of the assessee that where there is no exempt income no disallowance under Section 14A of the Act can be made. viii. With respect to the set of brought forward losses, he directed the learned Assessing Officer to quantify the same and if found proper give credit. 010. Accordingly, he partly allowed the appeal of the assessee. Accordingly, both the parties are in appeal before us. 011. At the time of hearing, it was founded that on 9, February 2022 the assessee has raised additional ground of appeal as under:- " on the facts and in the circumstances of the case, the learned CIT (appeals) ought to have quantified the brought forward book losses or unabsorbed depreciation, whichever is less in arriving at the taxable book profits of the appellant for the concerned assessment year" 012. The assessee submitted that the assessee has not been granted this adjustment, which is mandatory adjustment according to the provisions of the law, and therefore this claim is raised. 013. The learned departmental representative vehemently objected to the same and stat....
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.... 115JB of the act is Rs Nil. Even if all the issues with respect to book profit computation were held against assessee, the Income U/s 115JB would be Nil. Therefore we set-aside the issue back to the file of the learned assessing officer to compute the book profit or loss after verification of the above certificate in form no 29B u/s 115JB of the Act, after giving an opportunity of hearing to the assessee. Thus, the ground number 4 of appeal of assessee is allowed. 016. Now we come to the appeal of the learned assessing officer as per ground number 1 - 3 are against the addition of Rs. 14 crores being share application money received by the assessee. The assessee has received share application money of Rs. 14 crores through bank remittance from NSR PE Mauritius LLC. The learned assessing officer asked the assessee to submit certain details regarding the above investor. The learned assessing officer further got enquiry made from FT & TR division of CBDT whereby certain details from the Mauritius revenue authorities was received. From the information received by AO, he noted that it had only two major shareholders based in Cayman Island namely (1) New silk route PE Asia fund, LP C....
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....stment promotion board and it is pursuant to this agreement that the amount has been received. vi. Annual accounts of investors, sources of funds of investor, details of investors in investors have been furnished and there is no doubt about genuineness of the funds. vii. Same entity has invested in multiple companies in India, It is a private equity investor of wide repute viii. For AY 2008-09 identical addition is deleted by the ld CIT (A) where Rs 141 cr is invested by the same investor. ix. Assessee has cited various judicial precedents wherein it is implied that in any event, the source of source is no required to be proved when the lender has been held as a genuine company and transaction has not been found bogus. Therefore, following the various judicial precedents the learned CIT - A held that the addition is not justified and deleted the same. He was of the view that assessee has established the identity, creditworthiness and genuineness of the investor. 018. Before us the learned departmental representative submitted a note dated 12/11/2022 which reads as under:- 01. During the course of hearing in the above-mentioned case....
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....edit u/s.68 of the I.T Act. 04. The assessee filed appeal before the CIT (A) and the Ld.CIT (A) vide his order dated 28.09.2016, decided this issue in favour of the assessee. The Ld.CIT (A) has given several reasons for deleting the addition at Para 3.16 and 3.17 of his order. These reasons are mentioned in brief in the paragraphs below. a) The amounts were received after necessary statutory approvals from the Foreign Investment Promotion Board, which was required in such a case. Hence, the receipts are legal. b) The AO has made a reference to the Mauritius Revenue Authority under the double tax agreement between India and Mauritius. The details with regard to NSR were called from the Mauritius Revenue Authorities. c) It was also stated that none of the directors of NSR was in any way, related to any of the directors/shareholders of 9X. d) Further, the Mauritius Revenue Authority has confirmed regarding the source of income of the company that NSR-PE is owned by New Silk Route PE Asia Fund LP and New Silk Route PE Asia Fund-A, LP which has collectively raised over $1.38 billion from a range of investors, including blue chip institution i....
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....e CBI and Enforcement Directorate. As per information available in public domain, several newspapers and news agencies have reported that criminal investigation is under progress against people who have been instrumental in giving FDI approval in the case of 9x Media P.Ltd (previously known as INX Media Pvt Ltd). 07. For example a news article published in Indian Express on 01.03.2018 can be found below:- "CBI arrested Karti Chidambaram in connection with the INX Media case. It said Chidambaram had been resisting summons for questioning, and not cooperating with investigations. In the lone questioning session he attended, Karti was evasive and gave incorrect statements in the face of evidence therefore, he had to be arrested, CBI said. However, the grounds for the arrest were probably laid as early as in 2008, even before INX Media secured all clearances from the Foreign Investment Promotion Board (FIPB). In January 2008, the Financial Intelligence Unit (FIU-IND) flagged foreign direct investment of over Rs 305 crore by three Mauritius-based companies in INX Media Pvt Ltd (now called 9X Media Pvt Ltd), formerly owned by Peter and Indrani Mukerjea. ....
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....2008, when FIPB sought clarification from INX Media after the IT Department began its probe, the media firm engaged Karti Chidambaram, promoter director of Chess Management Service (P) Ltd, to "amicably" resolve the issue by "influencing the public servants of the FIPB unit of Ministry of Finance by virtue of his relationship with the then Finance Minister, P Chidambaram". Based on clarifications suggested by Chess Management, INX Media through its letter dated June 26, 2008, tried to justify its action on two counts: On the downstream investment issue, the company claimed that it was in accordance with the approval granted to it; on the excess foreign inflow, it said that was justified as premium received against shares issued. However, CBI has alleged that Karti exercised influence over certain FIPB officials, and the department, instead of investigating the case, extended undue favours to the media firm by asking INX News to apply for fresh FIPB approval on the downstream investment already received by it. At the same time, ED investigations have found, Advantage Strategic Consulting Pvt Ltd, a company that CBI has claimed is "indirectly controlled" by....
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.... anything about the nature of transactions and it is to be noted that Sec.68 speaks of both nature and source of transaction. In this case, it has been confirmed from the report of the Mauritius Revenue Authorities that during the relevant year, M/s. New Silk Route-PE Mauritius had shown a loss of 40106 US$ and in the immediately preceding year also, the company has shown loss .Further, it has been verified form the report of the Mauritius Revenue Authorities that M/s. New Silk Route-PE Mauritius has merely passed on the fund which it received from its shareholders i.e, M/s. New Silk Route-PE Asia Fund, L.P Cayman Islands and M/s. New Silk Route-PE Asia Fund, A.L.P Cayman Islands. Thus, the beneficial owners of the shares of the appellant company would be Cayman Island based companies and not Mauritius based company. This is clearly a tax avoidance scheme because as per Article 13(4) of the Double Taxation Avoidance Agreement of India with Mauritius, any capital gain arising of out sale of shares of an Indian company will not be taxed in India. Thus, a Mauritius based company has merely been interposed to make investment in Indian company so that when the shares are sold; there wil....
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....apital gain in India as and when the shares held by NSR-PE is sold. This is borne out from the fact that M/s. NSR-PE on its own did not have wherewithal to make any investment. Similarly, the appellant company has been facing heavy losses since its incorporation. In this situation, it did not stand to reason that the appellant company will attract such investment in the form of share application money. It has been mentioned in para 4 above, that the process and act of FIPB approval has been questioned in this case and criminal investigation has been launched against persons who have been instrumental in giving FIPB approval. It is interesting to note here that even the share holding companies of NSR i.e. M/s. New Silk Route-PE Asia Fund, L.P Cayman Islands and M/s. New Silk Route-PE Asia Fund, A.L.P Cayman Islands have been found to violate guidelines for investment. As per information available on internet the Securities and Exchange Commission (SEC) of the USA has vide its order dated 14.12.2016, censured these companies and has imposed a fine of 2,75,000 US $ for violation of investment guidelines. Thus, the nature of credit appearing in the books of the appellant becomes doubtf....
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.... of the shares in India, at the time of disposal of the shares to a third party, solely with a view to avoid tax without any commercial substance." In the present case, it prima-facie appears that M/s. NSR-PE Mauritius has been established solely with a view to avoid tax without any commercial substance. Round Tripping: Para 105 of the order: In this para, Hon'ble SC has made the following observation which is worth quoting: "India is considered to be the most attractive investment destinations and, it is known, has received $37.763 billion in FDI and $29.048 billion in Fll investment in the year to March 31, 2010. FDI inflows it is reported were of $ 22.958 billion between April 2010 and January 2011 and FII investment were $ 31.031 billions. Reports are afloat that millions of rupees go out of the country only to be returned as FDI or FII. Round Tripping can take many formats like under-invoicing and over- invoicing of exports and imports. Round Tripping involves getting the money out of India, say Mauritius, and then come to India like FDI or FII. Art. 4 of the Indo-Mauritius DTAA defines a 'resident' to mean any person, who under the laws of the contracting....
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.... Supt of police[ Eo-II/CBI/New Delhi ) which is addressed to the Chief financial officer of the assessee. It stated that that letter dated 5/2/2018 in the addressed to the signatory of the letter wherein clarification was sought on the scope of ongoing investigation relating to the FIPB approval accorded to the assessee company. The information conveyed by the above letter dated 15/2/2018 states that that ongoing CBI investigation into the affairs of assessee concerning the FIPB approval accorded to the company in May 2007 and subsequent approval accorded in November 2008. FIPB approval accorded to the company in 2011 and therefore is not subject matter of investigation for the present. The letter also states that it is confirmed that the Central bureau of investigation has not put any embargo to reserve bank of India on issuing any acknowledgement concerning the FCGPR filed by the company. He further stated that a communication is also placed on record wherein The Additional Commissioner Of Income Tax Range 6 (1) Mumbai was intimated by Director Of Income Tax Intelligence New Delhi that there is a communication received dated 30th number 2010 from The Additional Director Of Enforc....
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....stor are the nominee directors of the company. He further referred to paragraph number three of that letter wherein the assessee has submitted the foreign inward remittance certificates, share subscription, shareholders agreement, and approval of the Ministry of Finance. With respect to the copy of the return of income filed by the investor with Mauritius tax authorities, annual accounts of the investors and the bank account statement of the investor, it was stated that assessee is not privy to that information. Accordingly, the learned assessing officer made request to the Mauritius revenue authority under the Double Taxation Avoidance Agreement through the office of the competent authority in India to get the requisite details with regard to the investor. He referred to paragraph number 3.4 of the order of the learned CIT - A wherein the information is received by the learned assessing officer which assessee could not furnish. He further referred to paragraph number 3.16 of the appellate order wherein the AO was made available the information with respect to the details of the PE investor, return of income filed with Mauritius tax authorities, complete set of accounts of the inve....
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....2014 submitted the FIPB approval dated 14/10/2011, FIPB approval letter dated 28/10/2011 and various correspondences with the bank. The learned assessing officer on enquiry through the office of the competent authority with Mauritius revenue authority under the provisions of the Double Taxation Avoidance Agreement also got the details of the investor with respect to the address, name of shareholders with the complete address, tax returns for respective financial years and earlier two financial years filed with tax authorities in Mauritius, set of the Annual accounts such as balance sheet, profit and loss account with all annexure, schedules, notes on accounts of the investor for the impugned assessment year and further for the earlier 2 financial years, bank account of the investor from which the amount of Rs. 14 crores is transferred to the assessee and the bank account of investor for the last six years, the source of investment made by investor in the company etc. From this, it is apparent that such information was received through the office of the competent authority on 14/3/2014. It is also apparent that the amount of Rs. 14 crores invested in India in the assessee company th....
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....e form of share application money. Therefore, the learned CIT - A has considered only the source of funds whereas as per provisions of section 68 both the nature and source of credit is required to be explained to the satisfaction of the assessing officer. The assessee has produced the communication dated 15/2/2018 from central bureau of investigation and the letter dated 30 November 2010 of Directorate of Enforcement wherein it has been categorically stated that there is no enquiry now pending against the assessee for the time being. We have also raised certain query, which has been replied to on 27 April 2023. On careful perusal of a share subscription agreement dated 26 February 2007 between several entities where NSR PE Mauritius LLC is one of the parties for investment in Assessee Company along with several others. It provides that the investment would be in four trenches as per clause three, four, five and six of the agreement. It also contains the initial business plan at schedule [1] of the agreement stating estimation of operating income statement, balance sheet and cash flow statement of the assessee. A shareholders agreement dated 26 February 2007 was also called by us a....
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....IT [A] deleted the same. This issue reached before the coordinate bench in ITA number 7477/M/2016 and 6345/M/2011 for assessment year 2008 - 09 wherein the deletion of addition made by the learned CIT - A was upheld. The revenue, it was stated, has not filed any appeal before honourable High Court. The reference made by the learned AO to the Mauritius tax authorities to competent authority has received all the investment information with respect to the investor. For this year, the ultimate source of the money from companies located in Cayman Island is also provided. Now on our asking, the assessee has also produced the resolution of the board of directors of NSR PE Mauritius LLC wherein the resolution for investment of Rs. 14 crores for the issue of 0.001% compulsorily convertible preference shares of Rs. 10 each in the company was stated which is placed at page number 4 of submission dated 28/4/2023. Further the resolution of the assessee company for share subscription is also shown by which the investor in the company are NSR PE Mauritius LLC, India growth fund A unit scheme of Kotak Seaf fund, Kotak Mahindra capital company, INX media employee trust and promoters of the company.....
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....hare capital with premium, we find, a sum of Rs. ..... is brought in through Mauritius route. Basic facts are that the assessee raised share application money, equity shares with premium and preferential shares with premium totalling to Rs. 263. 28 Crs. The companies who invested are Maritius based New Silk Route PE M. LLC, New Version P Eg Ltd and Ducan Investment (M) PTE Ltd. In the assessment u/s 143(3) of the Act, AO made addition of the said amount u/s 68 of the Act. AO claims that the assessee failed to furnish the details relating to identity, creditworthiness and genuineness of transactions. AO is content with the documents furnished by the assessee. The documents are share subscription agreement, Board Resolution allotting shares, Registers, FIPB approvals, correspondence with Bank intimating the receipt of funds, Bank statements of the assessee etc. Assessee relied on various judgments to support the correctness of the claim of the assessee. Assessee claims that invoking of the provisions of section 68 of the Act is uncalled for and claimed that assessee discharged the onus completely. Assessee submitted detailed written submissions dated 14.1.2016 (supra). Accordingly, i....
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....t into share application money, equity share capital and preferential share capital with premium and wanted a speaking report on this issue. AO did not comply with the said directions till date. Actually, almost an year is passed the Revenue is non-serious and non-committed to the demand of the Bench of the Tribunal. Tribunal has even awarded the cost on the AO for his inaction and nonresponse. The Income Tax Act confers the AO with powers to collect the data and producing the people before him for the said purposes. It is not clear why the Department is dragging the fact backwards from conducting the investigation proactively. On the last date of hearing in February, 2017, AO filed a letter dated 13.2.2017 and relevant parts are already extracted in the preceding paragraphs of this order. The casual nature of the AO is evident from the following lines that reads as under: "3.5...........,.Outcome of the same is still awaited and the same will be forwarded as an when it is received." 38. The above portion indicates that the "surmises and the roaring enquiries" are the force behind the addition of Rs. 263.28 Crs (rounded of). In fact, a specific remand report was c....
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....ady been sought by the Revenue for compliance. But, we noted that the said directions have not been complied with. Even in the present application, no plausible reasons have been mentioned for seeking adjournment. However, considering the interest of justice, we adjourn the matter to 17.02.2017 and impose Rs. 2000/- as cost upon the Revenue for delaying to submit the said report and not complying with the directions of the Tribunal. It is made expressly clear that no further adjournment would be granted. The said cost be remitted to the Prime Minister"s relief fund on or before 17.02.2017 and submit a copy of the challan to the Registry, ITAT for filing on record. Registry is directed to inform both the parties through notice the next date of hearing as per the procedure." 40. In response to the above, the Revenue filed the above stated letter dated 13/15.02.2017 giving no commitment or remand report of any kind. Therefore, there is no incriminating material so far gathered by the AO / investigation wing of the Department against the claim of the assessee. As on date, the CBDT has not come out with any incriminating material against the assessee. Therefore, we are of the v....
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....cision of ITAT, how the revenue would be able to assess the income of the assessee then. Therefore, the facts for that year and the investigation of the revenue for this year are different. Admittedly, the letter dated 15/2/2018 of Central bureau of investigation and letter dated 30 November 2010 of Enforcement Directorate are non-categorical and are for the year prior to those newspaper reports. Claim of revenue is that investigation is continuing, this is not denied by assessee. Therefore, those letters are of little help. However, irrespective of the newspaper reports, irrespective of violation of FEMA , unless it affects the issue under The Income tax Act, addition under section 68 of the income tax act is required to be tested based on identity and creditworthiness of the investor as well as the genuineness of the transaction. Before us, the revenue authorities are only aggrieved with the genuineness of the transaction. Despite our query, we have not received any communication such as due diligence made by the PE investor, which is the main price negotiation therefore it is clear that such an investor does not make investments without appropriate due diligence. Further corresp....
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.... that following decision of ITAT in case of Zee media, the AO was directed to consider cost already telecast from the total cost as there is no justification for not allowing the content which is already telecast in the current year. Based on the above order it is clear that a sum of Rs. 39,012,647 representing the spending on animated character episodes needs to be allowed fully in the current year. These episodes are produced by third party at a fixed cost per episode and provided to the company monthly for telecasting on the channels. Thus, it is clear that that animated character episodes are telecast on the channel in the same month of delivery. Therefore to that extent the learned assessing officer is directed to follow the order of the coordinate bench for assessment year 2008- 2009 [ITA No.7216/M/2011, ITA No.6345/M/2011 dated 26/04/2017] and allow the cost which has been telecast in the same year. It was held as under :- "11. Considering the same, we are of the view that the claim of assessee is not in tune with the accounting policy in open market on this issue of amortization of TV programme/ Film Rights. No special reasons are demonstrated before us the reasons justifyi....
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....eriod of ensuing years. Accordingly, ground number 4 of the appeal of the learned AO as well as ground number 10 of the appeal of the assessee with respect to the content cost is restored back to the file of the learned assessing officer to decide the issue afresh keeping in view the above findings. 025. Identical grounds have been raised by the assessee in assessment year 2012 - 13 by ground number 2 and 3 of the appeal and by the learned assessing officer for that assessment year as per ground number 4 - 5 of the appeal, therefore, as there is no change in the facts and circumstances of the case for assessment year 2012 - 13 compared to the facts and circumstances of the case for assessment year 2011 - 12, we restore all these grounds of appeal as well as the appeal of the learned assessing officer to the file of the learned assessing officer with similar direction. 026. The ground number 5 - 7 are with respect to the order of the learned CIT - A in directing to delete the disallowance under section 40 (a) (ia ) read with section 194J in respect of carriage fees and channel placement fees. The claim of the revenue is that those payments are made for use/right to use of proc....
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....de for channel placement as a fee, is not royalty in terms of Explanation 2 to Sec.9(1)(vi), no disallowance of expenditure can be made u/s 40(a)(ia). No infirmity can be found in the order of the ld CIT [A]. Accordingly, ground number 5 - 7 of the appeal of the learned assessing officer is dismissed. 028. Identical grounds have been raised by the assessee for assessment year 2012 - 13 in ground number 5 - 8 of the appeal. Both the parties confirmed that there is no change in the facts and circumstances of the case. For similar reasons given by us in deciding those grounds for assessment year 2011 - 12, we dismiss these grounds of appeal of the learned AO. 029. Accordingly appeals of the learned assessing officer for both these assessment years are partly allowed for statistical purposes. 030. Coming to the appeal of the assessee wherein ground number 1 is with respect to the addition of Rs. 133,079,646/- being the surplus on demerger of entertainment channel undertaking to the book profit computed under section 115JB of the act. Fact shows that during the year assessee had demerged its entertainment channel business undertaking to Zee entertainment Enterprises private limite....
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....ofit on transfer of general entertainment channel business, which is arising in terms of the order of the honourable Bombay High Court dated 9 September 2010. So accounting entries are as per direction of Honourable High court. ii. assessee has accounted for below the line by adjusting the balance brought forward of profit and loss account from earlier years which is nothing but the balance of the profit and loss account in the balance sheet. iii. Accounting standard - 14 of Accounting For Amalgamation issued by the Institute of chartered accountants of India stating that the surplus on demerger are capital profits iv. Provisions of section 41(1) has not been applied by the learned assessing officer and it has not been treated as profit chargeable to tax under the normal provisions of the act by the learned assessing officer. v. business reorganization has been made tax neutral as per The Finance Bill 1999 and therefore if the profit on demerger is to be subjected to book profit under section 115JB of the act, tax neutrality would not be achieved. vi. real income theory this amount would not be income of the assessee and therefore the bo....
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....nder section 115JB of the act. The assessee before us stated that it has been credited to the profit and loss appropriation account and therefore the amount of book profit cannot be increased by the same. For this proposition, he furnished before us the extract of page number 944 of the accountancy by WILLIAM PICKLES (third edition) (1960) to support his argument. On careful consideration we find that the same book states that the appropriation account is the final section of the profit and loss account which is carried the balance from the main profit and loss account, representing the profit and loss for the current year. Therefore, the above commentary itself says that the appropriation account is the part of profit and loss account. If the same amount is credited to the profit and loss account, why it is not considered for the purpose of provisions of section 115JB of the act is not comprehensible. Undisputedly the assessee has sold its general entertainment channel business and has earned a profit, which is credited to the profit and loss account whether below the line or above the line does not make any difference. Further, there is no direction of the honourable High Court a....
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....there is a provision of diminution in the value of such book assets. Accordingly we do not find any infirmity in the order of the learned CIT - A and ground number 2 of the appeal is dismissed. 036. Ground number 3 is with respect to the addition made by the learned assessing officer of Rs. 111,950/- to the book profit on account of disallowance under section 14 A of the act. This is also connected with ground number 11 of the appeal of the assessee where the learned CIT - A has upheld the disallowance under section 14 A of the act of Rs. 111,850/-. It is the claim of the assessee that there is no exempt income earned during the year. If there is no exempt income earned during the year, there cannot be any disallowance under section 14 A of the act for the impugned assessment year. Therefore, naturally, there is no adjustment required to the book profit as such. Accordingly, ground number 3 and 10 of the appeal of the assessee is allowed. 037. Identical ground in ground number 4 of the appeal is raised by the assessee wherein the learned CIT - A has confirmed the disallowance under section 14 A of the income tax act of Rs. 442,969/- without there being any exempt income. Ther....
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....penditure for each of the five successive previous years beginning with the previous year in which demerger takes place. Accordingly, the lower authorities are correct in applying the provisions of section 35DD of the act. However, the assessee should be allowed balance 4/5th of such expenditure in successive previous years. Accordingly, ground number 5 of the appeal is dismissed and ground number 6 of the appeal is allowed. 041. Ground number 7, 8 and 9 are with respect to the disallowances made by the learned assessing officer as there is a mismatch between the books of the assessee as well as in information contained in form number 26AS. During the course of assessment proceedings, it was found that there is a mismatch of income In form number 26AS and as shown by the assessee in its books of accounts. The assessee filed the reconciliation statement but could not reconcile the discrepancy of Rs. 7,228,304/-. The learned assessing Officer further issued notices under section 133 (6) of the act to the above parties but some of the letters returned and some parties did not respond. Therefore, assessee was further asked to reconcile the discrepancy but the assessee did not do so.....