TaxTMI 
TaxTMI 
2026 (7) TMI 295
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....sst year 2017-18, 2018-19 and 2020-21, the revenue has preferred appeal before the Hon'ble ITAT vide ITA Nos. 654/Hyd/2023 Α.Υ. 2017-18, ITA No. 665/Hyd/2023 A.Y. 2018-19 and ITA No.648/Hyd/2024 (Α.Υ. 2020-21) which are pending adjudication. 3. The Learned CIT(A) erred in giving directions to follow the order of the Hon'ble ITAT in the assessee's own for earlier years in respect of allowing the claim of cost of production of TV serials and programmes as revenue expenditure as against depreciation granted by AO treating it as Capital expenditure? 4. The Learned CIT(A) erred in following the directions of the ITAT in allowing the claim of cost of production of TV serials and programmes as revenue expenditure when incurring of such expenditure resulted in creation of asset with enduring benefit because of its repeat telecast value? 5. The Learned CIT(A) erred in following the directions of the ITAT in allowing the claim of the assessee in which the subject matter was 'news content' which does not have repeat telecast value as against expenses incurred towards TV serials and programmes and film rights having repeat ....
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.... as an intangible asset as it is not a business or commercial right of similar nature of know how, patents, trademark, license or franchise as contemplated under section 32(1)(ii) of the Income Tax Act [in short "the Act"], 1961. It represents merely a restrictive covenant, not an asset capable of ownership transferred or realization. Thus, the learned DR has submitted that the claim of depreciation on payment of non-compete to the related party is not allowable. He has further submitted that the ld. CIT(A) had no power to set aside the matter to the Assessing Officer as per the existing provisions of section 251 of the Act. He has further submitted that the earlier decision of this Tribunal has been challenged before the Hon'ble High Court by the department and the matters are pending adjudication before the Hon'ble High Court. 5. On the other hand, the learned Authorised Representative of the Assessee has submitted that the issue of allowability of depreciation on non-compete fee was considered in the hands of UEPL and allowed by this Tribunal. The assessee along with other group entities have received the said asset already part of the balance sheet on demerger. Therefore, on....
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....defined in section 32(1)(ii), depreciation is not allowable. 26. Before examining whether non-compete fee can be considered to be an intangible asset so as to entitle the assessee to claim depreciation on it, it is necessary, at the outset, to address the issue of genuineness of payment of non-compete fee and necessity to make such payment. As can be seen from the assessment order, AO has treated the agreement entered into between assessee for payment of non-compete fee as a sham transaction as Shri Ramoji Rao is not only the owner of UKT and UKM being the karta of HUF to which these concerns belong but he also in his individual capacity is the Chairman of the assessee company. As such, assessee cannot be considered to be competing with himself. As it is an arrangement between related parties, there is no necessity for payment of non-compete fee. AO further observed that the assessee has entered into agreement for payment of noncompete fee to reduce its tax burden by allowing Shri Ramoji Rao HUF to adjust the non-compete fee against the huge brought forward losses suffered by it. AO also raised doubts with regard to the value of non-compete fee at Rs. 670 crores. However, ....
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....he assessee, the role of M/s Equator Trading Enterprises Pvt. Ltd. in any decision taken by assessee company has not at all been considered. Neither the AO nor the CIT(A) has examined the effect of acquisition of 39% of equity shares by another entity and whether after such acquisition of shares, it can still be held that Shri Ramoji Rao is the controlling authority of assessee company and it is a transaction between related parties. Unfortunately, the assessment order and order of CIT(A) is totally silent on this aspect. Though in the remand report, AO has examined the issue of investment made by the domestic investor and has alleged that it as a sham transaction and a collusive agreement entered into between the parties to reduce the tax burden by claiming depreciation on payment of noncompete fee. However, such inference drawn by AO, in our view, is more on presumptions and surmises rather than on the basis of strong evidence. When two independent parties enter into an agreement on certain terms and conditions, it cannot be termed as sham or collusive without bringing sufficient evidence to prove such fact. AO cannot treat the transaction as a colourable device adopted by the pa....
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....ssessment order passed u/s 143(3) on 24/12/2010. Therefore, when the non-compete fee paid by assessee has been accepted at the hands of Shri Ramoji Rao HUF and allowed to be set off against the brought forward losses, it needs to be examined whether still the payment of non-compete fee made by the assessee to Shri Ramoji Rao HUF can be held to be either non-genuine or not necessary. Therefore, considering the totality of the facts and circumstances we are of the view that as the impact of acquisition of 39% of equity shares by M/s Equator Trading Enterprises Pvt. Ltd. has not at all been examined by AO at the time of assessment proceeding or by the learned CIT(A) while disposing of assessee's appeal and further as the additional evidences produced before us were not examined either by the AO or by CIT(A), which certainly have a crucial bearing on the issue as to whether the payment of noncompete fee is genuine and necessary, we are inclined to remit the matter back to the file of AO for deciding afresh ........................... " 2.1. This appeal before us being for the subsequent assessment year, also needs to be remanded to the file of the A.O. to give consequential ef....
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....owed. It is claimed by the appellant that in its own case for AY 2011-12, Hon'ble ITAT, in ITA No.760/Hyd/2015 dated 13-05-2016, based on its own decision on similar issue for the AY. 2009-10 in the case of sister concern M/s Prism TV Limited, in ITA No. 466/Hyd/2015 dt. 24-03-2016 & ITA No. 1249/Hyd/2015 (for AY 2012-13), remitted back the above issue to the file of the Assessing Officer for reconsideration. The issue of depreciation of non-compete fees emanates from AY 2010-11 in the appellant's own case. The Hon'ble ITAT has directed the AO to verify this issue in light of its directions. The decision of the AO with regards to remanded proceedings has direct bearing on the subsequent years as the issue of depreciation has a consequential effect. Thus, considering the directions issued by Hon'ble ITAT for earlier years and the issue being similar for this year as well, the Assessing Officer is directed to verify this issue for this year also and accordingly give the consequential effect. These grounds are therefore allowed accordingly for statistical purposes." 6.2. Thus, the ld. CIT(A) has found that an identical issue has been considered by this Tribunal in a....
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....as capital expenditure and allowed the depreciation thereon. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the order of the A.O. and the assessee is in second appeal before us. 7. The Ld. Counsel for the assessee, while reiterating the submissions made by the assessee before the authorities below, has relied upon the decision of the Coordinate Bench of this Tribunal at Chennai and Mumbai and also the decision of Hon'ble High Court at Delhi in support of his contention that the expenditure incurred on production of television programmes should be allowed as revenue expenditure under section 37 of the I.T. Act. Copies of the said decisions are also filed before us. 8. The Ld. D.R. on the other hand, supported the orders of the authorities below. 9. Having regard to the rival contentions and the material on record, we find that the 'A' Bench of this Tribunal at Chennai in the case of ACIT, Media Circle-II, Chennai vs. M/s. Sun TV Network Ltd., Chennai in ITA.Nos.1515 to 1520/Mds/2013 by its order dated 31.10.2013 has held as under : "8. Now, we take up the common issue involved in all the appeals. The assessee is in....
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....of cost of movie and serial rights, programme production expenses, consumable and media expenses by treating them as intangible assets u/s.32(1)(ii) has been dealt in detail by the CIT (Appeals) in his order dated 23-02-2013 relevant to the A Y. 2006-07 and 2007-08. We fully agree with the detailed findings and the reasoning given by the CIT(Appeals) in his order allowing this ground of appeal of the assessee. For the sake of brevity, we are not reproducing the findings of CIT (Appeals) in accordance with the judgment of the Hon'ble Supreme Court of India in the case of CIT Vs. K. Y. Pillah & Sons reported as 63 ITR 411 subsequently followed by the Hon'ble Delhi High Court in the case of CIT Vs. Global Vantedge (P) Ltd., reported as 354 ITR 21 (Del). The Id. DR has not been able to controvert the well reasoned order of the CIT (Appeals) on the issue. Accordingly, the findings of the CIT (Appeals) on the issue are affirmed and this ground of appeal of the Revenue in respect of all the AYs is dismissed." 8.1. Respectfully following the same, the alternate ground No.3 of the assessee is treated as allowed." 6.5. The learned DR has submitted that the cost of product....
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....he cost of production of TV serials and programmes as capital expenditure, brief facts are that the assessee company debited an amount of Rs. 123,63,94,000 towards cost of production of TV serials and programmes for the year under consideration. Instead of claiming depreciation, the entire expenditure was claimed as revenue expenditure and debited to the P & L account. The A.O. observed that the cost of production of TV serials and programmes is not covered under Rule 9A or 9B of I.T. Rules. As these Rules are applicable only to production of feature films. The A.O. treated the entire expenditure as capital expenditure and allowed the depreciation thereon. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the order of the A.O. and the assessee is in second appeal before us. 7. The Ld. Counsel for the assessee, while reiterating the submissions made by the assessee before the authorities below, has relied upon the decision of the Coordinate Bench of this Tribunal at Chennai and Mumbai and also the decision of Hon'ble High Court at Delhi in support of his contention that the expenditure incurred on production of television programmes should ....
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....broadcasting rights acquired by assessee are perpetual in nature. After first telecast, the assessee does not discard the films but carefully store the same in digital library for airing the same again. Therefore, the assessee gets enduring benefit from the rights acquired in films and serials and they do not expire on the date of first telecast as contemplated by the assessee. The rights are intangible assets within the meaning of Explanation (iii) to Section 32 and do not fall within the purview of Section 37(1). The assessee is entitled to claim depreciation on same. 9. The issue of amortization of cost of movie and serial rights, programme production expenses, consumable and media expenses by treating them as intangible assets u/s.32(1)(ii) has been dealt in detail by the CIT (Appeals) in his order dated 23-02-2013 relevant to the A Y. 2006-07 and 2007-08. We fully agree with the detailed findings and the reasoning given by the CIT(Appeals) in his order allowing this ground of appeal of the assessee. For the sake of brevity, we are not reproducing the findings of CIT (Appeals) in accordance with the judgment of the Hon'ble Supreme Court of India in the case of CIT ....
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....perators(i.e., DTH operators, MSO's etc.,) for the month of March 2022. Difference of Rs.32,78,982/- in revenue between the subscription revenue in financials and actual subscription revenue was adjusted in computing the total income at the time of filing return of income for the assessment year 2022-23. Hence the Commissioner of Income Tax (Appeals) is not justified in confirming the action of Assessing Officer in making addition of Rs.32,78,982 towards subscription revenue. 3. For all of the above and such other grounds as may be urged at the time of hearing it is most respectfully prayed that this Hon'ble Tribunal may be pleased to allow the appeal." 9. The solitary issue raised by the assessee in this appeal is regarding the addition made by the Assessing Officer on account of subscription revenue of Rs.32,78,982/- 10. The learned Authorised Representative of the Assessee has assessee in the books of accounts, the assessee has shown the subscription revenue for the month of March at Rs.36,41,13,778/- whereas while filing the return of income the assessee has shown the subscription revenue for the month of March 2022 at Rs.36,08,34,796/- which is lower tha....
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....as a difference of Rs.32,78,982/- which was deducted by the assessee while computing the total income and disclosed in the return of income. He has referred to Item no.33 in ITR and submitted that in the Schedule BP the assessee has clearly shown this amount as allowable deduction. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has made this addition without verifying the record and to ascertain the actual subscription revenue for the month of March 2022. Therefore, the addition is made on the basis of wrong presumption of fact that the assessee has offered the income based on actual receipts instead of accrual of income. The learned Authorised Representative of the Assessee has submitted that there is no difference in the accrual and actual receipt, but it is a matter of actual revenue based on the customer subscription for the month of March 2022. The information about the actual subscription income for the month of March 2022 was received only in the month of April 2022 therefore, the assessee made the necessary adjustment while filing the return of income. The learned Authorised Representative of the Assessee has further submitted....
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....: It is submitted that this practice is followed uniformly for each financial year since the introduction of New Tariff Order by TRAI in February 2019 and it is followed by all broadcasters in the Cable industry. But this contention of the assessee is not acceptable as in mercantile basis of accounting being followed by the assessee transaction are recorded when they arise and the income is recorded in the books of account when it is accrued irrespective of the facts when it is received. Therefore, the above contention of the assessee is not acceptable and hence rejected. In view of the above discussion and rebuttal, the income of the assessee is hereby enhanced by an amount of Rs.32,78,982/- by disallowing the assessee's claim of adjustment to subscription revenue relating to DPO by that amount." 12.1. The Assessing Officer has applied the principle of mercantile basis of accounting being followed by the assessee and consequently, assumed that the assessee has claimed the said deduction of Rs.32,78,982/- on the basis of the actual receipts treating the same as cash basis accounting. It is pertinent to note that on similar point for the assessment year 2020....