M/s. Shri Balaji Communications, CHENNAI V. ACIT, CHENNAI

CO 166/CHNY/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8088 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANTHI KRISHNAN
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1744/MDS/2011 ASSESSMENT YEAR: 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, MEDIA CIRCLE II, CHENNAI - 600 034. (APPELLANT) V. M/S SHRI BALAJI COMMUNICATIONS, NO.18, FLAT NO.8, PERUMAL APARTMENTS, PERIYAR PATHAI, CHOOLAIMEDU, CHENNAI - 600 034 PAN : ABIFS0605A (RESPONDENT) C.O. NO. 166/MDS/2011 (IN I.T.A. NO. 1744/MDS/2011) ASSESSMENT YEAR: 2008-09 M/S SHRI BALAJI COMMUNICATIONS, NO.18, FLAT NO.8, PERUMAL APARTMENTS, PERIYAR PATHAI, CHOOLAIMEDU, CHENNAI - 600 034 (CROSS-OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, MEDIA CIRCLE II, CHENNAI - 600 034. (RESPONDENT) REVENUE BY : SMT. JAYANTHI KRISHNAN, CIT ASSESSEE BY : SHRI PHILIP GEORGE, ADVOCAT E DATE OF HEARING : 04.12.2012 DATE OF PRONOUNCEMENT : 20.12.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS AND CROSS-OBJECTION FILED BY THE REVENUE AND ASSESSEE RESPECTIVELY, DIRECTED AGAINST AN ORDER DA TED 5.7.2011 OF 2 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 COMMISSIONER OF INCOME TAX (APPEALS)-VIII, CHENNAI. GRIEVANCE OF THE REVENUE IS THAT CIT(APPEALS) DELETED THE DISALLOWAN CE OF ` 25,71,19,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN PURC HASE AND SALE OF RIGHTS IN SATELLITE AND MOVIES, HAD FILED ITS RETUR N FOR IMPUGNED ASSESSMENT YEAR, DECLARING AN INCOME OF ` 45,62,850/-. THIS WAS LATER REVISED TO 1,27,12,850/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED IN ITS ACCOUNT A SUM OF ` 25,71,19,000/- FOR PURCHASING SATELLITE RIGHTS OF FILMS AND PROGRAMS. ON VERIFICATION OF RECORDS, THE ASSE SSING OFFICER FOUND THAT SUCH RIGHTS WERE BROUGHT FROM VARIOUS PARTIES AT VARYING COST. ASSESSEE HAD FILED THE AGREEMENTS WITH ALL THE PART IES. THE A.O. WAS OF THE OPINION THAT SUCH AGREEMENTS WERE ONLY FOR ASSI GNMENT OF RIGHTS AND NOT FOR SALE OF RIGHT TO ASSESSEE. AS PER A.O., AS SIGNOR ONLY ASSIGNED HIS RIGHTS TO THE ASSESSEE THROUGH SUCH AGREEMENTS. TH E RIGHTS WERE ONLY FOR 20 TO 25 YEARS AND WERE NOT OF PERMANENT NATURE . THEREFORE, ACCORDING TO HIM, THERE WAS NO SALE OF RIGHTS TO TH E ASSESSEE. FURTHER, AS PER A.O., SECTION 194J WAS APPLICABLE SINCE PAYM ENTS WERE IN THE NATURE OF ROYALTY. 3 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 3. A.O. PUT THE ASSESSEE ON NOTICE AS TO WHY SECTIO N 40(A)(IA) SHOULD NOT BE APPLIED SINCE TAX WAS NOT DEDUCTED AT SOURCE WHEN PAYMENTS WERE EFFECTED. REPLY OF THE ASSESSEE WAS THAT IT W AS ONLY PURCHASING AND SELLING BROADCASTING RIGHTS AND THE OBLIGATION TO DEDUCT TAX AT SOURCE WAS ONLY ON THE ULTIMATE OWNER OF BROADCASTING RIGH TS. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO HIM, ASSESSEE HAD PAID THE SUM OF ` 25,71,19,000/- WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRED UNDER SECTION 194J, WHICH CALLED FOR APPLI CATION OF SECTION 40(A)(IA) OF THE ACT. HE DISALLOWED THE CLAIM AND COMPLETED THE ASSESSMENT. 4. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT THERE WERE VARIOUS TYPES OF RIGHTS IN A FILM. EXAMPLES WERE DISTRIBUTION RIGHT, DUBBING RIGHT, AUDIO RIGHT, VID EO RIGHT, SATELLITE RIGHT, TELEVISION RIGHT, DTH RIGHT, INTERNET RIGHT, ETC. THE ASSIGNEE HERE HAD TRANSFERRED THE RIGHTS WITH REGARD TO SATELLITE TRA NSMISSION. THE ASSIGNMENT AGREEMENTS WERE NOTHING BUT PURCHASE AGR EEMENTS WHEREBY ASSESSEE PURCHASED SUCH RIGHTS. ACCORDINGL Y, EXCLUSIVE OWNERSHIP OF SATELLITE COPY RIGHT CAME TO THE ASSES SEE. AS PER THE ASSESSEE, WHAT ASSIGNOR WAS DOING WAS SELLING THE R IGHTS. ASSESSEE THOUGH CALLED AN ASSIGNEE, WAS ONLY A PURCHASER. A SSIGNOR HAD RELINQUISHED ITS RIGHT OF OWNERSHIP INSOFAR AS SATE LLITE COPY RIGHT WAS CONCERNED. THOUGH ASSESSEE HAD RECEIVED THE RIGHTS ONLY FOR A CERTAIN 4 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 SPECIFIC PERIOD, IT HAD SOLD SUCH RIGHTS WITH SAME PERIOD LIMITATION. ACCORDING TO ASSESSEE, SECTION 194J WAS NOT APPLICA BLE SINCE, EXPLANATION 5 TO SECTION 9(1)(VI) CLEARLY EXCLUDED FROM THE SCOPE OF ROYALTY, CONSIDERATION RECEIVED FOR SALE OR DISTR IBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILM. RELIANCE WAS PLACED ON THE D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABDULGAFAR A. NADI ADWALA V. ACIT (267 ITR 488) AND THAT OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT V. V.C. KUGANATHAN (293 ITR 15). ACCORDING TO ASSESSEE, GOODS WOULD INCLUDE SUCH RIGHTS ALSO. 5. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE CONTENT IONS OF THE ASSESSEE. ACCORDING TO HIM, ASSESSEE HAD ONLY PURC HASED THE RIGHTS AND SOLD IT TO DIFFERENT PURCHASERS. SATELLITE COP Y RIGHTS, WHICH WERE PURCHASED, WERE SOLD TO VARIOUS TV CHANNELS. ASSES SEE HAD NEVER RETAINED ANY RIGHTS WITH ITSELF AFTER SELLING OF SU CH RIGHTS. THOUGH THE AGREEMENTS WERE NAMED AS ASSIGNMENTS, THESE WERE ONLY PURCHASE AGREEMENTS. COMPLETE OWNERSHIP OF SATELLITE COPYRI GHTS WERE TRANSFERRED. HE THUS HELD THAT ASSESSEE WAS NOT LI ABLE TO DEDUCT ANY TAX AT SOURCE SINCE IT ACQUIRED THE RIGHTS OVER THE MOV IES. THEREFORE, ACCORDING TO HIM, RIGOURS OF SECTION 40(A)(IA) OF T HE ACT WERE NOT ATTRACTED. THE ADDITION MADE WAS DELETED. 5 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 6. NOW BEFORE US, STRONGLY ASSAILING THE ORDER OF C IT(APPEALS), LEARNED D.R. SUBMITTED THAT ROYALTY WOULD INCLUDE T RANSFER OF ANY RIGHT INCLUDING COPYRIGHT. AS PER LEARNED D.R., THE ARGU MENT THAT THE ASSESSEE HAD ACQUIRED THE RIGHTS ONLY FOR A PARTICU LAR PERIOD, CLEARLY SHOWED THAT IT WAS NOT A PERPETUAL RIGHT RECEIVED B Y THE ASSESSEE. IT WAS OF VARYING TERMS FROM 20 TO 25 YEARS. THEREFORE , WHAT THE ASSESSEE WAS DOING WAS NOT PURCHASING THE RIGHTS. IT WAS ON LY A TEMPORARY TRANSFER OF RIGHTS TO IT. ACCORDING TO HER, ASSESS EE COULD NOT SAY THAT IT HAD PURCHASED RIGHTS ALTOGETHER. EXPLANATION 2 UND ER SECTION 9(1)(VI) OF THE ACT, CLEARLY BROUGHT SUCH TYPE OF PAYMENTS WITH IN THE PURVIEW OF ROYALTY. ASSESSEE HAVING NOT DEDUCTED TAX AT SOURC E AS REQUIRED UNDER SECTION 194J OF THE ACT, ASSESSING OFFICER HAD RIGH TLY INVOKED SECTION 40(A)(IA) OF THE ACT. 7. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT THE AGREEMENTS CLEARLY SHOWED THE RIGHTS TO HAVE BEEN PURCHASED BY THE ASSESSEE. SUCH RIGHT S WHICH ASSESSEE HAD ACQUIRED FOR A PERIOD OF 99 YEARS WERE PERPETUA L IN NATURE. THERE WERE NO RESIDUARY VALUE IN A FILM AFTER 25 TO 100 Y EARS OF ITS RELEASE. IN SUCH A SITUATION, IT COULD NOT BE CONSIDERED THAT T HE PAYMENTS EFFECTED WERE ROYALTY. THE PAYMENTS WERE ONLY CONSIDERATION FOR PURCHASE. ACCORDING TO HIM, THEREFORE, CIT(APPEALS) WAS JUSTI FIED IN DELETING THE DISALLOWANCE. 6 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. SECTION 194J OF THE ACT CLEARLY MENTIONS THAT IT IS INCUMBENT ON A PERSON MAKING PAYMENTS FOR PROFESSIONAL SERVICE, TECHNICAL SERVICE AND ROYALTY, TO DEDUCT TAX AT SOURCE. EXPLANATION (BA) TO THE S AID SECTION ALSO STATES THAT TERM ROYALTY WILL HAVE THE SAME MEANING AS G IVEN IN EXPLANATION 2 TO CLAUSE (VI) OF SECTION 9(1) OF THE ACT. THE SAI D EXPLANATION IS REPRODUCED HEREUNDER FOR BREVITY:- EXPLANATION 2. FOR THE PURPOSES OF THIS CLAUSE, ROYALTY MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECI PIENT CHARGEABLE UNDER THE HEAD CAPITAL GAINS) FOR ( I ) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, S ECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; ( II ) THE IMPARTING OF ANY INFORMATION CONCERNING THE W ORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; ( III ) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; ( IV ) THE IMPARTING OF ANY INFORMATION CONCERNING TECHN ICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SK ILL ; [( IVA ) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIA L OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB ;] ( V ) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTIO N WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING , BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS ; OR ( VI ) THE RENDERING OF ANY SERVICES IN CONNECTION WITH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES ( I ) TO [( IV ), ( IVA ) AND] ( V ). 7 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 THUS, THE CONSIDERATION FOR TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF ANY COPYRIGHT, INCLUDING COPYRIGHT FOR FILMS AND VIDEO TAPES, USED IN CONNECTION WITH TELEVISION OR TAPES, WOULD FALL WIT HIN THE DEFINITION OF ROYALTY. WHAT IS EXCLUDED ARE CONSIDERATION FOR SALE, DISTRIBUTION AND EXHIBITION OF CINEMATOGRAPHIC FILMS. WHAT THE ASSE SSEE PAID HERE WAS NOT CONSIDERATION FOR SALE, DISTRIBUTION OR EXHIBIT ION OF CINEMATOGRAPHIC FILMS. ASSESSEE DID NOT PURCHASE THE CINEMATOGRAPH IC FILMS AS SUCH THROUGH THE TRANSACTIONS. ASSESSEE HAD ONLY RECEIV ED RIGHT FOR SATELLITE BROADCASTING. THE DEFINITION ALSO DOES NOT SAY THA T IT WOULD APPLY ONLY IF THE RIGHTS ARE CONSIDERED ONLY FOR A DEFINITE PERIO D. EVEN IF THE TRANSFER OF RIGHTS IS PERPETUAL OR EVEN IF THE TRANSFER IS O NLY A PART OF THE RIGHTS, AS LONG AS TRANSFER IS OF ANY RIGHT RELATABLE TO A COP YRIGHT OF A FILM OR VIDEO TAPE, WHICH IS TO BE USED IN CONNECTION WITH TELEVI SION OR TAPES, THE CONSIDERATION PAID WOULD BE ROYALTY ONLY. THUS, TH E IMPUGNED TRANSACTION, IN OUR OPINION, WOULD FALL WITHIN THE DEFINITION OF ROYALTY. ONE OF THE TYPICAL AGREEMENTS PLACED AT PAPER-BOOK PAGE 22 IS REPRODUCED AS UNDER:- NOW THIS AGREEMENT WITHNESSETH AS FOLLOWS: 1) THE ASSIGNOR IRREVOCABLY ASSIGNS TO THE ASSIGNEE TH E SAID PICTURE SOLE AND EXCLUSIVE COPYRIGHTS FOR BROADCASTING THE ABOVE SAID FILM THROUGH ANY SATELLITE SYSTEM, SATELLITE BROADCASTING RIGHTS, SATELLITE TELEVISION BROADCASTING RIGHTS, SATELLITE RADIO BROADCASTING, PU BLIC SERVICE BROADCASTING, PRIVATE COMMUNICATION / BROADCAST, TERR ESTRIAL BROADCASTING SERVICE (EXCLUDING DOORDARSHAN RIGHTS), TERRESTRIAL DIGITAL 8 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 AIRBORNE RIGHTS, SEABORNE / RAILBORNE RIGHTS, PAY T V RIGHTS, BROADBAND, TELEPHONY, LOCAL DELIVERY SERVICE, VIDEO ON DEMAND, MOD (MOVIE ON DEMAND), MMDS, CABLE TV RIGHTS, WEB BASED TECHNOLOGY RIGHTS, DTH, CABLE, WIRE, WIRELESS AND ALL OTHER ELECTRIC AND EL ECTRONIC MEDIA NOW IN EXISTENCE AND THAT MAY COME INTO USE IN FUTURE, IN A NY FORMS OF COMMUNICATION LIKE SIGNS, SIGNALS, WRITING, PICTURE S, IMAGES AND SOUNDS OF ALL KINDS BY TRANSMISSION OF ELECTRO-MAGNETIC WAVES THROUGH SPACE OR THROUGH CABLES INTENDED TO BE RECEIVED BY THE GENER AL PUBLIC EITHER DIRECTLY OR INDIRECTLY THROUGH THE MEDIUM OF RELAY STATIONS AND ALL ITS GRAMMATICAL VARIATIONS AND COGNATE EXPRESSIONS SHAL L BE CONSTRUED ACCORDINGLY OR ANY OTHER SYSTEMS WITHOUT RESTRICTIO N OF GEOGRAPHICAL AREA. 2) THE ASSIGNEE DOES NOT HAVE ANY RIGHTS IN RESPECT OF (A) DOORDARSHAN KENDRA RIGHTS, DOORDARSHAN SATELLITE TELECASTING BY GOVERNMENT OF INDIA AND ITS AUTONOMOUS BODIES AND QUASI GOVERNMENT BO DIES ETC., (B) ENTER OVERSEAS SATELLITE RIGHTS AND OVERSEAS TV RIGHTS. THE ABOVE MENTIONED RIGHTS ARE RETAINED BY THE ASSIGNOR EXCLUSIVELY. HO WEVER THE ASSIGNEE WILL BE ENTITLED TO EXPLOIT THE EXCLUSIVE OVERSEAS SATELLITE RIGHTS THROUGH THEIR CHANNELS WITHOUT AFFECTING THE ASSIGNORS RIGH TS. 3) THE ASSIGNOR IRREVOCABLY ASSIGNS TO THE ASSIGNEE TH E SOLE AND EXCLUSIVE RIGHTS FOR BROADCASTING THE SAID FILM THRO UGH SATELLITE SYSTEM, DIRECT TO HOME SERVICE, COMPACT VIDEO, DIGITAL VIDE O, LOCAL DELIVERY SERVICE, MMDS, CABLE, WIRE, WIRELESS OR ANY OTHER S YSTEM WITHOUT ANY RESTRICTION OF GEOGRAPHICAL AREA. 4) THE ASSIGNOR ASSIGNS TO THE ASSIGNEE THE SOLE AND E XCLUSIVE RIGHT FOR THE ENTIRE WORLD AS SPECIFIED IN CLAUSE 1,2,3 & FOR A PER PETUAL PERIOD AS PER THE ENCLOSED SCHEDULE. 5) IN CONSIDERATION THEREOF THE ASSIGNEE HAVE AGREED T O MAKE PAYMENT FOR THE SAID FILMS OF ` 3,00,000/- (RUPEES THREE LAKHS ONLY) TO THE ASSIGNOR. THE ASSIGNEE PAID TO THE ASSIGNOR ` 3,00,000/- (RUPEES THREE LAKHS ONLY) BY WAY OF AS FULL AND FINAL SETTLEMENT AND TH E ASSIGNOR AGREES AND ACKNOWLEDGES THE SAME. ABOVE WILL CLEARLY SHOW THAT THE PAYMENTS MADE WOUL D FALL WITHIN THE DEFINITION OF ROYALTY. IN SUCH A SITUATION, WE A RE OF THE OPINION THAT ASSESSEE WAS DUTY BOUND UNDER SECTION 194J TO DEDUC T TAX AT SOURCE ON THE PAYMENTS EFFECTED. SUCH DEDUCTION HAVING NOT B EEN MADE, RIGOURS OF SECTION 40(A)(IA) STOOD ATTRACTED. INSOFAR AS R ELIANCE PLACED BY THE 9 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 LEARNED A.R. ON THE DECISION OF THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF ABDULGAFAR A. NADIADWALA (SUPR A) AND THAT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF V. C. KUGANATHAN (SUPRA), THESE WERE NOT CONCERNED WITH ELIGIBILITY TO CLAIM EXEMPTION OF SECTION 194J, BUT WERE ALL CONCERNED WITH CLAIM OF DEDUCTIO N CLAIMED BY THE ASSESSEE UNDER CHAPTER VIA OF THE ACT. SUCH CASES WILL NOT HELP THE ASSESSEE IN ANY MANNER ON AN ISSUE OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, WHERE TAX AS REQUIRED UNDER S ECTION 194J HAS NOT BEEN DEDUCTED. 9. NOW COMING TO THE CROSS-OBJECTIONS OF THE ASSESS EE, ONE OF ITS CONTENTIONS IS THAT THE PAYMENTS WERE IN THE NATURE OF DIRECT COST AND SECTION 40(A)(IA) COULD NOT BE APPLIED. LEARNED A. R., IN SUPPORT OF SUCH CROSS-OBJECTION, SUBMITTED THAT HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF TEJA CONSTRUCTIONS V ACIT (2010) 36 DTR 220 , HAD HELD THAT RIGOURS OF SECTION 40(A)(IA) COULD BE APPLIED ONLY WITH REGARD TO CLAIM FOR DEDUCTION UNDER SECTIONS 30 TO 38 OF THE ACT. AN A DDITIONAL GROUND HAS ALSO BEEN TAKEN IN THE CROSS-OBJECTION BY WHICH IT IS STATED THAT SECTION 40(A)(IA) WOULD APPLY ONLY ON AMOUNTS STANDING PAYA BLE AT THE END OF RELEVANT PREVIOUS YEAR AND NOT ON THE AMOUNTS PAID DURING THE RELEVANT YEAR. LEARNED D.R. DID NOT RAISE ANY OBJECTION TO THE ADDITIONAL GROUND. SUCH ADDITIONAL GROUND IS ADMITTED BEING A PURE QUE STION OF LAW. 10 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 10. WE HAVE CONSIDERED BOTH THE AVERMENTS OF THE AS SESSEE. INSOFAR AS RELIANCE PLACED ON THE DECISION OF TEJA CONSTRUC TIONS (SUPRA) IS CONCERNED, THERE THE BOOKS OF ACCOUNTS OF THE ASSES SEE WERE REJECTED AND ESTIMATION OF INCOME WAS DONE ON PERCENTAGE BAS IS. THE MAIN REASON WHY THE TRIBUNAL HELD INVOCATION OF SECTION 40(A)(IA) WAS NOT CALLED FOR, WAS THAT IT WOULD RESULT IN DOUBLE JEOP ARDY. AS PER THE TRIBUNAL, ONCE THE BOOKS WERE REJECTED, THERE WAS N O QUESTION OF FURTHER INVOCATION OF SECTION 40(A)(IA) OF THE ACT. IT WAS , IN SUCH CIRCUMSTANCES, TRIBUNAL HELD THAT EXPENDITURE COVERED UNDER SECTIO NS 30 TO 38 OF THE ACT ALONE WERE SUBJECT TO SECTION 40 OF THE ACT. S UCH OBSERVATION OF THE TRIBUNAL CANNOT BE SEEN DIVORCED FROM THE FACTS OF THAT CASE. HERE, BOOKS OF THE ASSESSEE WERE NOT REJECTED. THEREFORE , IN OUR OPINION, THE SAID CASE WOULD NOT HELP THE ASSESSEE IN ANY MANNER . THOUGH SECTION 40 STARTS WITH NON-OBSTANTE CLAUSE NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38.., IN OUR OPINION, THIS WOULD NOT MEAN THAT SAID SECTION IS NOT APPLICABLE ON A DEDUCTION CLAIMED UNDER SECTION 28. WE CANNOT SAY COMPUTATION OF BUSINESS INCOME W ILL NOT BE SUSCEPTIBLE TO THE RESTRICTION MENTIONED UNDER SECT ION 40 OF THE ACT, JUST BECAUSE CERTAIN ALLOWANCES CLAIMED WERE OUTSIDE SEC TIONS 30 TO 38, ESPECIALLY WHEN BOOKS WERE NOT REJECTED. HOWEVER, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE THAT THE RIGOURS OF S ECTION 40(A)(IA) ARE ATTRACTED ONLY ON AMOUNTS STANDING PAYABLE AT THE E ND OF THE RELEVANT 11 I.T.A. NO. 1744/MDS/11 C.O. NO. 166/MDS/11 PREVIOUS YEAR, IS JUSTIFIED IN VIEW OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT V. ACIT (2012) 16 ITR (TRIB.) 1 (SB). 11. IN THE RESULT, WE ALLOW APPEAL OF THE REVENUE, BUT AT THE SAME TIME, REMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR APPLYING SECTION 40(A)(IA) OF THE ACT AS PER LAW. IN THE VIEW OF SP ECIAL BENCH IN MERILYN SHIPPING AND TRANSPORTS CASE (SUPRA), RIGOURS OF S ECTION 40(A)(I) WILL NOT BE ATTRACTED ON AMOUNTS PAID IN THE RELEVANT PREVIO US YEAR. HOWEVER, THE A.O. SHALL BE FREE TO CONSIDER DECISIONS OF HIG HER AUTHORITIES, IF AVAILABLE TO HIM, WHEN THE ISSUE IS TAKEN UP AFRESH . ORDERED ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED , WHEREAS, CROSS- OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 20 TH OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH DECEMBER, 2012. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-VIII, C HENNAI/ CIT, CHENNAI-VI, CHENNAI/D.R./GUARD FILE