TaxTMI 
TaxTMI 
2026 (7) TMI 281
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the assessee for balance assessment years by the grounds taken by the assessee for A.Y 2010-11. ITA No. 1114/Mum/2016, A.Y 2010-11 The assessee has raised the following grounds of appeal: GROUND I: 1. On the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) 48, Mumbai ('CIT(A)') erred in confirming the action of the Assistant Commissioner of Income Tax, Central Circle 13, Mumbai ("AO") in disallowing depreciation on intangible asset being Franchise's Rights, 'Rajasthan Royals' amounting to 3769 lacs claimed u/s. 32 of the Act. 2. The Appellant therefore prays that the claim for depreciation be allowed as claimed. WITHOUT PREJUDICE TO GROUND I GROUND II: 1. On the facts and circumstances of the case and in law, the CIT (A) erred in denying the alternate claim of the Appellant that the installments of 2680 lacs Crores paid towards Franchise Rights be allowed as 'revenue expenditure' in terms of section 37(1) of the Act. 2. The Appellant therefore prays the installments of 2680 lacs paid towards Franchise Rights be allowed as 'revenue expend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imbursed. 2. The Appellant therefore prays that the said disallowance of 13.75 lacs be deleted. GROUND VIII: 1. On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO in disallowing an amount of 120.56 lacs reimbursed to M/s. Blenheim Chaolcot for payments made to two players on behalf of the Appellant on the alleged ground that the Appellant has not provided details/ documentary evidence. 2. The Appellant therefore prays that the said disallowance be deleted. GROUND IX: 1. On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO in disallowing security expenses amounting to Rs. 59.09 lacs, paid to third parties for the security of Ms. Shilpa Shetty and Mr. Manoj Badale on the alleged ground that the company was not obligated to incur such an expense as these persons did not hold any position in the company. 2. The Appellant therefore prays that the said disallowance be deleted. GROUND X: 1. On the facts and circumstances of the case and in law, the AO erred in levying interest u/s. 234B/234C of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m allowances. The assessee submitted that the payments were the daily allowances payable under player contracts and were made in cash due to practical difficulties during the tournament. The Assessing Officer observed that the recipients were professional players and support personnel having banking facilities and therefore the payments did not fall within any of the exceptions prescribed under Rule 6DD. The Assessing Officer therefore invoked section 40A(3) of the Act and disallowed the entire amount of Rs.40.28 lakh. 5. Thereafter, the Assessing Officer scrutinized payments made to an entity namely Agilysis IT Services India Pvt. Ltd. under various heads. In respect of business research expenses, Ld. AO noted that although invoices had been furnished, no evidence showing actual rendering of services had been produced. He therefore disallowed Rs.4.84 lakh under section 37(1) of the Act holding that the assessee had failed to establish that the expenditure was incurred wholly and exclusively for business purposes. 6. The Assessing Officer further noticed that the assessee had paid Rs.14.52 lakh to Agilysis towards remuneration of Mr. Ranjit Barthakur, who was a common directo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g security to Mr. Manoj Badale and Ms. Shilpa Shetty. The Assessing Officer observed that neither of them held any position in the assessee company and held that providing security to such persons was not the liability of the assessee. He accordingly disallowed the corresponding expenditure. 11. In appeal, the CIT(Appeals) considered each of the above additions and disallowances in detail. 12. With respect to depreciation on Franchise Rights and Alternate Claim of Revenue Expenditure, the CIT(Appeals) followed the order of his predecessor in the assessee's own case for A.Y. 2009-10 and held that the franchise consideration payable under the agreement was contingent and indeterminate. The CIT(Appeals) agreed with the Assessing Officer that the assessee could not claim depreciation on the entire contractual liability of Rs.268 crore and depreciation was allowable only on the franchise fee actually paid. The CIT(Appeals) also rejected the alternate claim that the annual franchise payment should be allowed as revenue expenditure under section 37(1), observing that the franchise rights had been treated by both parties as a capital asset and there was no basis to treat annual payme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "The appellant is not able to substantiate the claim of expenses. The appellant has merely stated that it had availed services e.g. arranging the flights schedules during the IPL season, generation of email ids of players." "The email correspondences submitted by the appellant have been perused and it was seen that all of them were during the months of January and February, 2010. However the invoices are pertaining to different quarters the last of which is ending December, 2009." "Further, the email correspondences are with 'IndiQuest Services' as against the invoices/payments of 'Agilysis'." "In view of these discrepancies and also huge amount claimed to have been paid only for arranging flight schedules, I confirm the disallowance made by the AO amounting to Rs. 4,84,200 for want of justification. Ground of Appeal No. V is dismissed accordingly." 15. For disallowance of Rs.14.52 lakh relating to Mr. Ranjit Barthakur, the CIT(Appeals) observed that Mr. Ranjit Barthakur was already receiving substantial remuneration directly from the assessee as Vice Chairman. Although the assessee relied upon agreements and debit notes raised by Agilysis, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me time, Ld. CIT(A) was of the view that complete disallowance was excessive and therefore granted partial relief by allowing 75% of the expenditure and sustaining disallowance of only 25%. The CIT(Appeals) made the following observations: "Considering such discrepancy and also considering the fact that heavy expenses have been paid to a related concern, justice at both the ends would meet if 25% of the expenses are disallowed." "Accordingly, the AO is directed to allow 75% of the impugned expenses." 17. With respect to ground relating to reimbursement to Mr. Manoj Badale of Rs.13.75 lakhs, the CIT(Appeals) observed that although the assessee contended that the expenditure related to accommodation of players and support staff during IPL matches in South Africa, the documentary evidence furnished by the assessee was not inadequate. According to Ld. CIT(A), the assessee could not establish that the expenditure had actually been incurred wholly and exclusively for business purposes. Accordingly, CIT(Appeals) agreed with the Assessing Officer and sustained the disallowance. 18. With respect to reimbursement to Blenheim Chalcot of Rs.120.56 lakhs, the CIT(Appeals....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e between the assessee and the Revenue regarding the capital nature of the expenditure incurred for acquisition of such rights. The Special Bench observed as under: "There is, thus, no dispute that the assessee acquired the right to operate a Franchise and to be member of the League at the time of signing of the Franchise Agreement, which constitutes a 'licence' or 'Franchise', being an item of intangible asset described in section 32(1)(ii) of the Income Tax Act, 1961. The franchisee payments, representing the expenditure incurred for acquiring and enjoying such rights, accordingly partake the character of capital expenditure, eligible for depreciation under the aforesaid provision." 23. The Special Bench thereafter examined whether depreciation was allowable on the entire franchise consideration or only on the annual instalments actually paid and rejected the view adopted by the Assessing Officer and the CIT(A). The Tribunal held that the franchise rights were acquired upon execution of the Franchise Agreement and the actual cost could not be restricted merely to the instalments paid during the year. While answering Question No.2 referred to it, the Special Bench held....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aring, the learned counsel for the assessee submitted that under the terms of the player agreements, each player was entitled to a daily allowance of USD 100 per day, which translated into approximately Rs.4,500 per day at the prevailing exchange rate. It was contended that, for administrative convenience, then the cash was initially handed over to the team manager, who thereafter distributed the allowance to individual players. According to the learned counsel, although the amount distributed on a particular date may have exceeded Rs.20,000, such payment merely was the aggregation of daily allowances pertaining to several days and the actual entitlement of each player for any particular day never exceeded the statutory threshold. It was further contended that the genuineness of the expenditure has never been doubted by the Revenue and the payments were made owing to practical business requirements arising during the conduct of the tournament. The counsel placed reliance on various judicial precedents in support of the proposition that where expenditure is genuine and business exigencies necessitate cash payments, no disallowance under section 40A(3) ought to be made. 27. We are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndate and render the provision largely unenforceable, as every assessee could seek shelter under a plea of commercial convenience. 32. We further find that the assessee's case does not fall within any of the exceptions prescribed under Rule 6DD of the Income-tax Rules, 1962. The payments in question were made to professional cricketers and support staff pursuant to contractual arrangements entered into by the assessee. Further, it is not the assessee's case that banking facilities were unavailable at the place where the payments were made or that the recipients did not maintain bank accounts. In fact, as noted by the CIT(Appeals), the players and support staff were otherwise receiving payments through normal banking channels, clearly shows the availability of banking facilities. The mere fact that cash payments were considered administratively convenient during the tournament cannot bring the case within the scope of Rule 6DD. The exceptions contained in Rule 6DD are specific and exhaustive in nature and must be strictly construed. Since the assessee has failed to establish that the impugned payments satisfy any of the conditions prescribed under Rule 6DD, the benefit of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices during the IPL season. It was contended that invoices and email correspondences were furnished before the tax authorities and, therefore, the expenditure ought to have been allowed. 37. We are unable to accept the aforesaid contention. We find that both the Assessing Officer as well as the CIT(Appeals) have observed that the assessee failed to establish the exact nature of services rendered by Agilysis and failed to substantiate how the impugned expenditure was incurred wholly and exclusively for the purposes of business. The burden to establish the allowability of expenditure under section 37(1) of the Act squarely was on the assessee. The assessee is unable to demonstrate the nature of services actually rendered and the commercial justification for such payment. 38. The CIT(Appeals) recorded the following findings: "The onus lies upon the assessee who claims a permissible deduction to prove that a particular item of expenditure is wholly and exclusively laid out for the purpose of its business." "In Assam Pesticides &Agro Chemicals vs. CIT (1998) 145 CTR (Gau) 213, it was held that mere payment by itself would not entitle the assessee to deduction u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 44. The assessee has merely relied upon the work order executed with Agilysis and the debit notes raised by the said concern. In our considered view, these documents, by themselves, do not establish the actual rendering of services. No correspondence, reports, presentations, minutes of meetings or any other material showing the nature and extent of services rendered by Mr. Barthakur through Agilysis have been brought on record. Even before us, the assessee has given a general explanation which in our view does justify or warranted separate compensation. 45. We find force in the observations of the CIT(Appeals) that the work order and debit notes are essentially self-serving documents and the assessee has furnished only broad and general explanations regarding strategic support and infrastructure sharing. Mere existence of an agreement does not automatically entitle an assessee to deduction. The assessee must establish not only the factum of payment but also the actual rendition of services and the business necessity thereof. A general contention that no separate evidence of services can exist is wholly unacceptable, particularly where substantial remuneration was already being....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Assessing Officer is not fettered by technical rules of evidence, he is not entitled to make an assessment based on pure guess without reference to any evidence or material. Similar principles would equally govern appellate proceedings. 51. In State of Orissa v. Maharaja Shri B.P. Singh Deo (1970) 76 ITR 690 (SC), the Hon'ble Supreme Court held that though some amount of estimation is inherent in tax proceedings, the estimate must be based on relevant material and cannot be arbitrary. In Principal Commissioner of Income-tax vs. Remfry and Sagar [2025] 179 taxmann.com 623 (Delhi)/[2025] 307 Taxman 490 (Delhi)[15-10-2025], the Hon'ble High Court held that where assessee's claim for travelling and entertainment expenses was subjected to ad hoc disallowance of 5 per cent by Assessing Officer without pointing out discrepancies in books or producing evidence of personal element, such disallowance was to be deleted. 52. In the present case, the CIT(Appeals) has not given any finding as to why only 25% of the expenditure deserved to be disallowed. The observation that "justice at both ends would meet" is not a substitute for judicial reasoning. Tax liability must be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tours (Pty) Ltd., the details of the hotel accommodation at Vineyard Hotel and Spa, Cape Town, the identity of the players, support staff and management personnel who stayed therein, and the nexus between the payment initially made by Mr. Manoj Badale and the subsequent payments made through Giltedge Tours (Pty) Ltd. If upon such verification the Assessing Officer finds that the two limbs viz initial payment by Mr. Badale and subsequent payment by Giltedge Tours are inter liked and the stay of professionals at hotel premises is established, then the same shall be allowed in accordance with law after affording adequate opportunity of hearing to the assessee. 57. Accordingly, Ground No. VII is allowed for statistical purposes. 58. Ground No. VIII relates to the disallowance of Rs.1,20,56,463/- towards reimbursement made by the assessee to Blenheim Chalcot Management Ltd. ("BCML"). The facts are that during the relevant previous year IPL Season 2 was shifted to South Africa and the assessee, which owns the Rajasthan Royals franchise, availed various marketing, promotional and media-related services in connection with the conduct of the tournament and brand building activities. B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re made to a UK entity only by way of reimbursement and there was no profit element embedded therein, no tax was deductible at source and consequently no disallowance could have been made as evident from findings of CIT(Appeals) while sustaining the disallowance. The Counsel for the assessee placed reliance on the principle that reimbursement of actual expenses devoid of any income component does not give rise to any chargeable income in the hands of the recipient especially since India-UK Tax Treaty was involved. 62. We find that both the Assessing Officer and the CIT(Appeals) have proceeded to disallow the expenditure primarily on the ground that the actual rendering of services had not been established. At the same time, we find that the assessee has submitted that BCML had merely acted as an intermediary and the payments were reimbursements made on cost-to-cost basis. We further find that the assessment record contains references to invoices, debit notes and bank advices, and it is the contention of the assessee that the promotional DVD itself had been furnished before the authorities below. In our considered view, the nature of the transactions and the underlying services r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee company, the responsibility of providing security to such persons could not be regarded as that of the assessee. The Assessing Officer accordingly held that the expenditure was not incurred wholly and exclusively for the purposes of business. The CIT(Appeals) affirmed the disallowance by observing that the assessee had failed to establish the nexus between the expenditure and its business requirements. 67. Having heard the rival submissions and perused the material on record, we are unable to subscribe to the approach adopted by the Tax authorities. At the outset, we find that the genuineness of the expenditure itself has never been doubted. The expenditure has been incurred pursuant to invoices raised by the security agencies and there is no allegation that the payments were bogus or that the services were not actually rendered. It is further seen that the security expenses were incurred under consolidated arrangements and not under separate contracts for Mr. Manoj Badale and Ms. Shilpa Shetty. 68. We further find that it is an undisputed fact that Ms. Shilpa Shetty was the brand ambassador of Rajasthan Royals. Therefore, expenditure incurred for ensuring adequate sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....permissible in law. 71. Accordingly, we find no justification for the disallowance sustained by the CIT(Appeals). The same is directed to be deleted and Ground No. IX raised by the assessee is allowed. 72. The balance grounds raised by the assessee are either general or consequential in nature and, therefore, do not call for any separate adjudication. 73. We also note that the present order has been rendered after an appreciation of the peculiar facts and circumstances in the assessee's case and the findings recorded herein are based upon such factual background. Accordingly, the issues have been decided in the light of the judicial precedents which, in our considered view, are directly applicable to the facts of the present case. As regards the various decisions cited by the learned counsel for the assessee having only general application, we have not separately dealt with or distinguished each of them, since those decisions do not bear directly upon the factual controversies arising in the present appeal. It is well settled that a judicial precedents is applicable only for the issue it actually decides and its applicability depends upon the facts of each case. Theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant therefore prays that the said disallowance be deleted GROUND V: 1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing an amount of 24.44 lacs paid to director, Mr. RanjitBarthakur (through M/s. Agilysis IT Services) on the alleged ground that the assessee has already paid him. 20 lacs for services rendered by him and the assessee company has failed to distinguish between the two payments of 20 lacs and 24.44 lacs paid to the same person. 2. The Appellant therefore prays that the said disallowance of 24.44 lacs be deleted. GROUND VI: 1. On the facts and circumstances of the case and in law, the CIT (A) erred in disallowing ad- hoc 25% of the expenses incurred towards web support activities and thereby confirming the action of the AO to that extent on the alleged ground that the proof of services provided by Agilysis IT Services is not submitted. 2. The Appellant therefore prays that the said disallowance of Rs.. 2.43 lacs be deleted. GROUND VII: 1. On the facts and circumstances of the case and in law, the AO erred in levying interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the AO in disallowing an amount of 21.96 lacs paid to director, Mr. RanjitBarthakur (through M/s. Agilisys IT Services) on the alleged ground that the assessee has already paid him 75 lacs for services rendered by him and the assessee company has failed to distinguish between the two payments of 21.96 lacs and Rs.75 lacs paid to the same person. 5.2. The Appellant prays that the said disallowance of Rs.21.96 lacs be deleted. 6.1. On the facts and circumstances of the case and in law, the CIT (A) erred in disallowing 6.40 lacs being 25% of the expenses of 25.61 lacs incurred towards marketing and web support activities on ad-hoc basis and thereby confirming the action of the AO to that extent on the alleged ground that heavy expenses have been paid to related party. 6.2. The Appellant prays that the said disallowance of Rs. 6.40 lacs be deleted. 7.1. On the facts and circumstances of the case and in law, the AO erred in short granting interest u/s. 244A of the Act. 7.2. The Appellant prays that AO be directed to re-compute the interest u/s. 244A of the Act. 8.1. On the facts and circumstances of the case and in law, the CIT (A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing an amount of 21.96 lacs paid to director, Mr. RanjitBarthakur (through M/s. Agilisys IT Services) on the alleged ground that the assessee has already paid him Rs. 50 lacs (inadvertently mentioned asRs.74.67 lacs) for services rendered by him and the assessee company has failed to distinguish between the two payments of 21.96 lacs and 50 lacs (inadvertently mentioned as Rs. 74.67 lacs) paid to the same person. 4.2.The Appellant therefore prays that the said disallowance of 21.96 lacs be deleted. 5.1.On the facts and circumstances of the case and in law, the AO erred in short granting interest u/s. 244A of the Act. 5.2.The Appellant prays that AO be directed to re-compute the interest u/s. 244A of the Act. 6.1.On the facts and circumstances of the case and in law, the CIT (A) erred in not allowing set-off of the brought forward losses of assessment years 2009-10 to 2011-12 against the income of A.Υ. 2013-14. 6.2.He failed to appreciate and ought to have held that; the assessee's appeals for A.Y. 2009-10 to 2011-12 are pendi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inality. 4.1.On the facts and circumstances of the case and in law, the AO erred in levying interest u/s. 244A of the Act. 4.2.The Appellant prays that interest u/s. 244A of the Act be deleted / recomputed. General The Appellant craves leave to add to, amend and/ or alter all or any of the above grounds of appeal. 75. We note that all the grounds raised by the assessee in appeals filed for A.Ys 2011-12, 2012-13, 2013-14 & 2014-15 have been dealt while adjudicating on grounds raised by the assessee for A.Y 2010-11. However, there are two additional grounds which have been raised by the assessee for subsequent assessment years viz. ground relating to short grant of interest u/s 244A of the Act, relevant to A.Y 2012-13 and 2013-14 and ground relating to non-allowability of set off of brought forward losses (relevant to A.Ys 2012-13, 2013-14 & 2014-15). 76. With regard to the ground relating to short grant of TDS credit and consequential interest under section 244A of the Act for assessment year 2012- 13 and 13-14, the learned counsel for the assessee submitted that credit of taxes deducted at source has not been granted by the Assessing Office....