Malayalam Communications Ltd, Trivandrum V. DCIT, Trivandrum

ITA 106/COCH/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81401 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: MOHAN PULICKAL
• Keywords: Capital asset; Business income; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

ITA NO. 106/COCH/2011. 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S. GANESAN, JM & CHANDRA POOJARI, AM ITA NO.106/COCH/2011 (ASST YEAR 2007-08 ) MALAYALAM COMMUNICATIONS LTD 61 CHANDRAGIRI KURAVANKONAM KOWDIAR PO THIRUVANANTHAPURA THE DY COMMR OF INCOME TAX CIRCLE 1 (1), TRIVANDRUM ( APPELLANT) VS (RESPONDENT) PAN NO. AACCM0065G ASSESSEE BY SRI MOHAN PULICKAL REVENUE BY SHRI K K JOHN, SR DR DATE OF HEARING 13 TH OCT 2014 DATE OF PRONOUNCEMENT 21 ST NOV 2014 ORDER PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 16.11.2010 OF THE CIT(A)-I, TRIVANDRUM AND ITS RELATES TO THE AY 2007-08. 2 THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF RS. 10 LAKHS INCURRED BY THE ASSESSEE TOWARDS UP-LINKING C HARGES FOR 3 RD CHANNEL. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT ON GO ING THROUGH TH E LED GE R ACCO UNT OF T A XES AND F E ES, THE AO FOUND TH A T T HE ASSESSEE HAS P A ID AN AMOUNT O F RS.10 , LA K H S ON OC TO B E R , 12 , 2006 AS ' R EGISTR A TIO N FEES FOR UP-LINKING CHARG E S FOR 3 RD ITA NO. 106/COCH/2011. 2 CH A NNEL . IT WAS SUBMITTED BEFORE THE AO THAT TH E SA I D PAYMENT WAS A ONETI M E PAYM E NT AND TH A T TH E SA ME WAS NOT R E CURRING IN N A TURE . ACCORDING TO THE AO, THE AMO UNT PAID FOR UP-LINKING TH E NEW CHANNEL AMOUNTING TO RS . 10 L AK HS WAS NOT A R E V E NUE EXPENDITURE ALLOWABLE U/S . 37 OF THE I . T . ACT IN V I EW O F TH E FA CT TH A T THE B E NEFITS ARISING OUT OF THE SA I D PAYMENT ACCRUED OVER A PE RI OD OF TIM E. AC CORDINGLY, THE AO DISALLOWED THE EXPENDITURE NOT BEING R E VE NU E E XPENDITURE ALLOWABLE U/S . 37 OF THE I . T . ACT . IN R ESPO NSE, THE ASSESSEE FILED A WRITTEN SUBMISSION DAT E D 7 . 1 2 . 2 00 9 WHERE I N I T I S STA T E D THAT THE SAID PAYM E NT HAS BEEN INCURRED F O R DOWN-L I NK I NG A NEW TELEVISION CHANNEL AS PER THE POL I CY GUIDELINE OF THE GOVT . OF I NDIA DATED 11 .1 1 . 2 005 . HOWEVER , IT WAS ADMITTED I N THE SA I D SUBMISSION THAT TH E PAYMENT DOES NOT CONSTITUTE A LICENSE FEE RELATED T O ANY TIME PERIOD . IT WAS FURTHER CONTENDED THAT THE AMOUNT EXPENDED WA S N O T I N THE N ATURE OF CAPITAL EXPENDITURE AND HENCE FULLY ALLOWA BLE AS REVENUE EXPENDITURE FOR THE A . Y . 2007-08 . THE EXPLANATION OFFERED BY THE ASSESSEE WAS REJECTED BY THE AO AS THE AMOUNT PAID WAS FOR UP-LINKING THE N EW TELEVISION CHANNEL AS PER THE POLICY GUIDELINES OF GOVT . OF INDIA, WHICH WAS NOT A REVENUE EXPENDITURE SOLELY PERTAINING TO THE F . Y . 2006-07 . ACCORDING TO THE AO, T HE PAYMENT WAS A ONETIME PAYMENT AND WAS NOT RECURRING IN NATURE . HENCE THE SAME IS NOT AN ALLOWABLE EXPENDITURE U/S . 37 OF THE I . T. ACT . ACCORDINGLY, T HE AMOUNT OF RS . 10 LAKHS WAS ADDED BACK TO THE TOTAL I NCOME. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). ITA NO. 106/COCH/2011. 3 2.2 BEFORE THE CIT(A), THE LD AR OF THE ASSESSEE S UBMITTED THAT THE PAYMENT OF RS . 10 LAKHS PAID ON 1 2 . 10 . 200 6 TO THE GOVERNM E NT OF INDIA FOR DOWN LINKING OF TELEVISION CHANNELS HAS BEEN MADE AS PER THE RE VI SED PO L ICY FOR DO W N LINKING OF T ELE V ISION CHANNELS MADE BY GOVERNMENT OF INDIA. IT WAS SUBMITTED THAT THE UP LINKING AND DOWN LINKING P E RMISSION WAS GIVEN TO THE ASSESSEE BY GOVT. OF INDI A FOR OPERATING OF TWO TELEVISION CHANNELS NAMELY ' KAIRALI & PEOPLE ' AND THE P ERMISSIONS WERE GIVEN TO THE ASSESSEE ON 1 . 1 . 2002 AND 8 . 9 . 2004. SUBSEQUENTLY ON 11 . 1 . 2005 , GOVT . OF INDIA PRONOUNCED A REVISED POLICY FOR DOWN LINKI NG OF TELEVISION CHANNELS UNDER WHICH , FOR EXISTING CHANNELS, THOUGH NO NEW PERM I SSION WAS REQUIRED TO CONTINUE OPERATIONS , THERE WAS A PROCESS OF PAYMENT OF REG I S T RA T ION CHARGES AMOUNT I NG TO RS . 5 LAKHS PER C H ANNEL . IT WAS FURTHER SUBMITTED THAT T H I S PAYMEN T DOES N ' T C O N F ER A NY AD D I TI O N A L B EN EFI T OF ENDURING N A T URE N OR DO E S IT CONSTITUTE A LICENSE FEE RELATED TO ANY T I ME PERIOD . IT WAS SUBMITTED THAT IT WAS ALSO NOT IN THE NATURE OF CAPITAL EXPENDITURE SINCE NO ASSET , TANGIBLE OR INTANGIBLE IS CREATED . IT WAS FURTHER SUBMITTED THAT E VEN THOUGH THE AMOUNT WAS PAID AS PER THE DEMAND RAI SE D BY THE MINISTRY , IF THE ASSESSEE DID NOT PAY THE MONTHLY UP-LINKING CH A RG E S F O R TH E U SAGE OF F AC ILITI E S FOR RUNNING THE CHANNE L , T HE PERM I SSION FOR D O WN LINKING G IV E N W I L L BE WITHDRAW N . ACCORDINGLY, IT WAS SUBMITTED THAT THE F E E P A ID BY THE ASSESSEE D O ES NOT CONFE R A N Y ADDITIONAL ENDUR I NG BENEFIT OR ACQUIRING OR BR I NG IN TO E X IST E NCE OF AN ASSE T . ITA NO. 106/COCH/2011. 4 2.3 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED T H E ASSESSEE HAS P A I D T H E A M O U N T F O R R EG I S T R A T I O N F EE S F O R U P LIN K I NG C H A R GES F O R 3 R D CH A NN E L . EV I DEN T L Y THE AMOUNT WAS PA I D F O R U P L I NK I NG OF A NEW CHANNE L W HI C H I S CL EA RLY IN TH E N A TUR E O F C A P I TA L E XPENDITURE AND CONF E RS ADD I TIONAL BENEF I TS OF E N D URI NG N A TU R E IN THE F O RM OF T I M E P E R I OD . THE CIT(A) ALSO OBSERVED THAT IT WAS A ONE TIME P A YM E NT AND T H E P A Y M E N T WA S N O T R E V E N U E I N N A T U R E A S P E R TH E T E RMS OF POLICY GUIDELINES O F T HE GO V E RN M E N T O F IN D I A . ACCORDINGLY, HE CONFIRMED THE ORDER OF THE AO . AGAINST THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 3 BEFORE US, THE LD AR REITERATED THE SUBMISSIONS A S MADE BEFORE THE CIT(A). ACCORDING TO HIM, THE EXPENDITURE INCURRED IS FOR T HE PURPOSE OF UP-LINKING THE NEW TV CHANNEL AS PER THE POLICY GUIDELINES OF THE GOVERNMENT OF INDIA DATED 11.11.2005 AND IT IS AN EXPENDITURE ALLOWABLE U/S 3 7 OF THE I T ACT. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF BIKANER GYPSUMS LTD. V. COMMISSIONER OF INCOME-TAX REPORTED IN 187 ITR 39 WHERE IN IT HAS BEEN HELD THAT; REVERSING THE DECISION OF THE HIGH COURT, THAT THE AMOUNT WAS SPENT ON THE REMOVAL OF A RESTRICTION WHICH OBSTRUCTED THE C ARRYING ON OF THE BUSINESS OF MINING WITHIN A PARTICULAR AREA IN RESP ECT OF WHICH THE APPELLANT HAD ALREADY ACQUIRED MINING RIGHTS. THE P AYMENT OF RS. 3 LAKHS WAS NOT MADE FOR INITIATING THE BUSINESS OF MINING OPERATIONS OR FOR ACQUIRING ANY RIGHT; THE PAYMENT WAS MADE FOR SHIFT ING THE RAILWAY STATION, TRACK, ETC., I.E., TO REMOVE AN OBSTRUCTION TO FACI LITATE THE BUSINESS OF MINING, AND IT DID NOT BRING INTO EXISTENCE ANY ADV ANTAGE OF AN ENDURING NATURE. THE EXPENDITURE WAS ON REVENUE ACCOUNT. ITA NO. 106/COCH/2011. 5 WHERE THE ASSESSEE HAS AN EXISTING RIGHT TO CARRY O N A BUSINESS, ANY EXPENDITURE MADE BY IT DURING THE COURSE OF BUSINES S FOR THE PURPOSE OF REMOVAL OF ANY RESTRICTION OR OBSTRUCTION OR DISABI LITY WOULD BE ON REVENUE ACCOUNT, PROVIDED THE EXPENDITURE DOES NOT ACQUIRE ANY CAPITAL ASSET. PAYMENTS MADE FOR REMOVAL OF RESTRICTION, OBSTRUCTI ON OR DISABILITY MAY RESULT IN ACQUIRING BENEFITS TO THE BUSINESS, BUT T HAT BY ITSELF WOULD NOT ACQUIRE ANY CAPITAL ASSET. HE ALSO RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF JOY ALUKKAS INDIA P LTD VS ACIT. 3.1 ON THE OTHER HAND, THE LD DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 4 WE HAVE HEARD THE PARTIES AND PERUSED THE RELEVAN T MATERIAL ON RECORD. IN THIS CASE THE EVIDENCE BROUGHT ON RECORD SUGGEST S THAT THE ASSESSEE HAS PAID THE AMOUNT TOWARDS REGISTRATION FEE FOR UP-LINKING CHARGES FOR 3 RD CHANNEL, WHICH IS A NEW CHANNEL. BEING SO, THE EXPENDITURE INCURR ED FOR THE COMMENCEMENT OF A NEW CHANNEL, WHICH IS A CAPITAL EXPENDITURE AS TH E ASSESSEE HAS DERIVED ENDURING BENEFITS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE, WHICH IS CONFIRMED. ACCORDING LY, THE GROUND TAKEN BY THE ASSESSEE IS REJECTED. 5 NEXT ISSUE RELATES TO THE TREATMENT OF RS 2 LACS . 5.1 THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF BROADCASTING OF T ELE VISION PR O GRAMM E S AND IT HAD L E T OUT THE OPEN ITA NO. 106/COCH/2011. 6 BROADCASTING ( OB VAN) FOR A SMALL PROGRAMME O F A D E LHI B A SE D E NGLI S H NE WS CHANN E L IN K ERALA . D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFF I CE R NOTICED THAT THE I NCOMES RECEIVED BY THE ASSESSEE BY WAY OF HI R E C H A RG E S ON L E TTING OUT OF O B VAN , INTEREST ON IT REFUND AND INTEREST I NCOME RECEIVED CONSTITUTE I NCOME FROM OTHER SOURCES AND HENCE T HE AMOUNT OF RS . 79 , 69 , 5 9 3/- WAS NOT EL I G I BLE FO R SETT I N G OFF AGA IN S T BRO U GHT F O RW A R D B U S I NESS LOS S ES OF THE PRE C ED I NG Y EARS . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE R EN T RECE I VED FRO M HIRIN G OF OB VAN AMO UNT I N G T O RS . 2 , 00 , 0 00/- ARE PURELY BUS IN ESS IN COME AND N O T IN COME FROM OTH E R SO URCE . IT WAS SUBMITTED THAT T HE ASSESSEE HAD LET OUT THE OPEN BROADCAS TI NG VAN FOR U SE IN K ERALA TO A DELH I BASED ENGL I SH NE W S CHAN N EL FOR A SMAL L PROGRAMM E I N KER ALA . FOR TH AT PURP OSE TH E Y H A D GIV E N O N R E NT WHICH W AS DI S CL OSE D UNDE R B U SIN E SS I NCOME A S RE NT FROM OB VAN . THE AO CONSIDERED THE SAME AS IN COM E F R O M OTH E R SOURCE . IN SUPPORT OF ITS CONTENTION, THE ASSESSEE RELIE D ON VARIOUS DECISION DECISIONS OF THE SUPREME COURT THAT IT I S PURE L Y BU S IN ES S INCOM E . 5.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND OTHER RELEVANT MATERIAL, THE CIT(A) OBSERVED THAT THE IN COME WAS R ECEIVED F R O M HIRI NG O F OB V A N . IT WAS FURTHER OBSERVED THAT THE ASSESSEE WAS D EA LIN G IN P R ESE N T IN G O F VARIOUS P R OG R A MM ES A ND NOT IN HIRIN G O F OPE N B R OAD C AST I NG V A N . ACCORDING TO THE CIT(A), TH I S I N CO M E WAS NOT IN TH E N A TUR E OF INC O M E F R O M B U S I N ESS ; BUT IT IS ON L Y AN IN COME FRO M O TH E R SOURC E S A ND S H O ULD N O T B E INCLUD E D IN TH E P R O FIT AND ITA NO. 106/COCH/2011. 7 GA I N OF B U S I N ESS OR PROFESS I ON FO R THE P UR POSE O F SETT I NG OFF AGA I NS T BROUG HT FORW A RD BUS I NESS L OSS O F T HE PRECED I NG Y EA R S . S IMIL A RLY , TH E A M OUN T OF RS . 1 ,11, 062 / - AS IN TE R ES T O N IN CO M E T A X R EFU N D A ND R S . 76 , 5 8 , 53 1/- BE I NG INTEREST RECEIVED ALSO DOES NOT CONSTITUTE BUSINESS INCOME F OR THE PURPOSE OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF THE PRECEDING YEAR S. ACCORDINGLY, THE CIT(A) CONFIRMED THE ORDER OF THE AO ON THIS ISSUE. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE DER IVED INCOME FROM LETTING OUT OF OB VAN FOR HIRING OF OPEN BROADCASTING, WHICH IS NO T IN THE NATURE OF INCOME FROM BUSINESS AND LETTING OUT OF VAN IS INCOME FROM OTHER SOURCES ONLY. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LOWER AUTHORITIES AND THE SAME IS CONFIRMED. ACCORDINGLY, THE GROUND TAKEN BY TH E ASSESSEE IS REJECTED. 7 NEXT ISSUE RELATES TO TREATMENT OF INTEREST INCO ME AS INCOME FROM OTHER SOURCES. 8 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND OTHER RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS COVED BY THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. DR. V. P. GOPINATHAN ITA NO. 106/COCH/2011. 8 REPORTED IN 248 ITR 449 (SC) WHEREIN IT HAS BEEN H ELD THAT; THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE B ANK ON THE FIXED DEPOSIT WAS INCOME IN HIS HANDS AND IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISION IN LAW PERMITTING SUCH DIMINU TION. THERE WAS NO SUCH PROVISION OF LAW AND THE INTEREST ON THE LOAN TAKEN FROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTEREST ON THE FIXED D EPOSIT. 9 ACCORDINGLY, IN LIGHT OF THE DECISION OF THE HON BLE SUPREME COURT CITED ABOVE, WE REJECT THE GROUND TAKEN BY THE ASSESSEE O N THIS ISSUE. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21ST DA Y OF NOV 2014. SD/- SD/- (N.R.S. GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 21 ST NOV 2014 RAJ* ITA NO. 106/COCH/2011. 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT, 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN 1 DATE OF DICTATION 29.10.2014 2 DT ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.10.2014 3 DT ON WHICH THE APPROVED DRAFT COMES TO THE SR P S/PS 4 DT ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER 5 DICTATION PAID PLACED IN THE ORIGINAL FILE (NO.OF PAGES) 6 DT OF PRONOUNCEMENT 7 DT ON WHICH THE FILE GOES TO THE BENCH CLERK 8 DT ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DT ON WHICH THE FILE GOES TO AR 10 DT OF DISPATCH OF THE ORDER