Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 2703 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-08-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2012-2013
Appeal Filed On
26-09-2016
Judgement Text
ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1245/HYD/2016 (ASSESSMENT YEAR: 2012-13) M/S. EENADU TELEVISION PRIVATE LIMITED HYDERABAD PAN: AACCM 7226 P VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 14(1) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1389/HYD/2016 (ASSESSMENT YEAR: 2012-13) DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2), HYDERABAD VS M/S. EENADU TELEVISION PRIVATE LIMITED, HYDERABAD PAN: AACCM 7226 P (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. SIVA KUMAR FOR REVENUE : SMT. SHALINI BHARGAVA KAUSHAL, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.Y 2012-13 AGAINST THE ORDER OF THE CIT (A)-6, DATED 14.07.201 6. ITA NO.1245/HYD/2016 2. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: DATE OF HEARING : 03.08.2017 DATE OF PRONOUNCEMENT : 09.08.2017 ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 2 OF 16 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 6 HYDERABAD DATED 14-07-2016 IS ERRONEOUS, CONTRARY TO LAW AND FACTS OF THE CASE. : 2(A). THE COMMISSIONER OF INCOME TAX (APPEALS) [C.I.T(A)] ERRED IN SUSTAINING THE DISALLOWANCE OF DEPRECIATION OF RS.39,81,32,920/-ON NON-COMPLETE FEE MADE BY THE ASSESSING OFFICER FOLLOWING THE DECISION OF HER PREDECESSOR. 2(B). THE C.I.T (A) IS NOT JUSTIFIED IN CONFIRMING T HE DISALLOWANCE OF RS.39,81,32,920/- EVEN AFTER NOTING THE DECISION OF HON'BLE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.26/HYD/2011 OF USHODAYA ENTERPRISES PVT. LTD (UEPL) FOR THE ASSESSMENT YEAR 2008-09 WHEREIN HON'BLE INCOME TAX APPELLATE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE IN THE LIGHT OF ACQUISITION OF 30% OF EQU ITY SHARES OF UEPL BY EQUITOR TRADING ENTERPRISE PVT. LTD. 2(C). THE C.I.T (A) OUGHT TO HAVE SEEN THAT DEPRECIATION CLAIMED BY THE APPELLANT ON NONCOMPETE FEE IS IN ACCORDANCE WITH LAW AND IS THEREFORE ALLOWABLE AS DEDUCTION WHILE COMPUTING INCOME OF THE APPELLANT. 3(A). THE C.I.T(A) ERRED IN SUSTAINING DISALLOWANCE OF COST OF PRODUCTION OF RS.55,25,94,OOO/ON TV SERIALS AND PROGRAMMES INCURRED BY THE APPELLANT MADE BY THE ASSESSING OFFICER AND ALLOWING ONLY DEPRECIATION AT 25% THEREON. 3(B). THE C.I.T (A) OUGHT TO HAVE SEEN THAT TV SERI ALS AND PROGRAMMES DO NOT HAVE LONG LIFE AND ONCE THEY ARE TELECAST, THERE MAY NOT BE MUCH VALUE FOR SUCH PROGRAMS. 3(C). IT IS FURTHER RELEVANT TO NOTE THAT COST OF PRODUCTION OF TV SERIALS AND PROGRAMMES IS ALLOWED AS DEDUCTION BY THE DEPARTMENT ITSELF TO VARIOUS OTHER PRODUCERS OF TV SERIALS AND ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 3 OF 16 PROGRAMMES AND SINGLING OUT THE APPELLANT ALONE IN DISALLOWING DEDUCTION IS NOT JUSTIFIED. 3(D) HENCE THE C.I.T(A) IS NOT JUSTIFIED IN CONFIRM ING THE ACTION OF THE ASSESSING OFFICER BY TREATING THE COST OF PRODUCTION OF TV SERIALS/PROGRAMMES AS CAPITAL EXPENDITURE AND ALLOWING ONLY DEPRECIATION THEREON AT 25% INSTEAD OF ALLOWING THE ENTIRE AMOUNT AS DEDUCTION. 4. HON'BLE TRIBUNAL IS REQUESTED TO DIRECT THE ASSESSING OFFICER TO GRANT CREDIT FOR FURTHER TDS OF RS.1,62,60,601/-(L,80,28,878 - 17,68,277) WHICH THE ASSESSING OFFICER FAILED TO GRANT. 5. FOR ALL 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 AND SUITABLE DIRECTIONS BE GIVEN TO THE ASSESSING OFFICER TO DELE TE DISALLOWANCES MADE IN THE ASSESSMENT ORDER AND TO GRANT CREDIT FOR TDS AS CLAIMED BY THE APPELLANT IN THE INTEREST OF JUSTICE. 3. HOWEVER, AT THE TIME OF HEARING, THE LEARNED COU NSEL FOR THE ASSESSEE ADMITTED THAT GROUND NO.4 WAS NOT RAISED BEFORE THE AO AND THE CIT (A). THEREFORE, HE HAS NOW RAISE D IT AS AN ADDITIONAL GROUND OF APPEAL AND FILED A PETITION FO R ADMISSION OF ADDITIONAL EVIDENCE IN SUPPORT OF THE SAID GROUND. 4. AS REGARDS GROUNDS NO.2 (A) TO 2(C), BRIEF FACTS ARE THAT THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF SA TELLITE TELEVISION BROADCASTING, FILED ITS RETURN OF INCOME ON 29.09.2012 AFTER DECLARING NIL INCOME AFTER SET OFF OF TOTAL PROFIT OF RS.35,50,00,494. BOOK PROFIT U/S 115JB OF THE ACT W AS ALSO ADMITTED AS NIL. DURING THE ASSESSMENT PROCEEDING S THE AO ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 4 OF 16 OBSERVED THAT THE ASSESSEE COMPANY I.E. M/S. EENADU TELEVISION PRIVATE LIMITED WAS FORMED AS A RESULT OF DEMERGER OF M/S. USHODAYA ENTERPRISES PVT LTD INTO THREE COMPANIES I .E (1) EENADU TELEVISION PRIVATE LTD; (2) M/S. PRISM T.V. PRIVATE LIMITED; AND (3) M/S. PANORAMA TELEVISION PRIVATE LIMITED. HE ALSO OBSERVED THAT THE ABOVE SCHEME OF ARRANGEMENT WAS APPROVED BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH W.E.F. 1.4.2010. THE A O OBSERVED THAT IN THE A.Y 2007-08, THE PARENT COMPANY I.E. M/S . USHODAYA ENTERPRISES PVT. LTD ACQUIRED USHA KIRON TELEVISION AND USHA KIRON MOVIES (TV DIVISION) AND DURING THE FINANCIAL YEAR 2007-08, IT ENTERED INTO A NONCOMPETE AGREEMENT WITH M/S. US HA KIRON TELEVISION AND USHA KIRON MOVIES (TV DIVISION) ON 3 0.01.2008 FOR NOT COMPETING IN THE BUSINESS DIRECTLY OR INDIRECTL Y FOR A PERIOD OF FIVE YEARS FROM THE DATE OF AGREEMENT AND THUS, TH E NON-COMPETE FEE WAS DISTRIBUTED AMONGST ALL THE THREE DEMERGED COMPANIES AND THAT THE ASSESSEE HAS ACQUIRED INTANGIBLE ASSET OF NON- COMPETE FEE AT RS.212,33,75,625 AND CLAIMED DEPRECI ATION AT RS.39,81,32,930 DURING THE A.Y 2012-13. THE AO OBSER VED THAT THE NON-COMPETE FEE IS NOT A RIGHT THAT IS ACQUIRED BY THE PAYER, BUT THE RESTRICTION ON THE RECIPIENT AND THEREFORE, DEPRECIATION ON NON-COMPETE FEE IS NOT ALLOWABLE. HE ACCORDINGLY RE JECTED THE CLAIM OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT (A) WHO REJECTED THE ASSESSEES GROU NDS OF APPEAL. THE CIT (A) FOLLOWED THE DECISION OF HIS PREDECESSO R IN ASSESSEES OWN CASE FOR THE A.Y 2011-12 FOR REJECTING THE ASSES SEES CLAIM. FURTHER, THE CIT (A) ALSO CONSIDERED THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF THE PARENT CO MPANY I.E. M/S. USHODAYA ENTERPRISES (P) LTD FOR THE A.Y 2008-0 9 IN ITA NO.26/HYD/2011, DATED 22.10.2014 WHEREIN ITAT HAD S ET ASIDE ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 5 OF 16 THE CLAIM OF THE ASSESSEE AND REMANDED THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE IMPACT OF ACQUIS ITION OF 30% OF THE EQUITY SHARE BY M/S. EQUATOR TRADING ENTERPRISE S (P) LTD AND AFTER EXAMINING THE ISSUE RELATING TO THE GENUINENE SS OF THE COMPETE FEE AND NECESSITY TO PAY SUCH FEE, TO DECID E THE ALLOWABILITY OF THE DEPRECIATION CLAIMED ON SUCH NO N COMPETE FEE WHILE KEEPING IN VIEW THE STATUTORY PROVISIONS AS W ELL AS THE RATIO LAID DOWN IN THE DECISION BROUGHT TO HIS NOTICE. TH E CIT (A) CONSIDERED THAT SIMILAR DECISION HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF ASSESSEES SISTER CONCERN OF M/S. P RISM TELEVISION. INSPITE OF TAKING INTO CONSIDERATION OF THE ABOVE D ECISION, THE CIT (A) CONFIRMED THE ORDER OF THE AO AND AGGRIEVED, TH E ASSESSEE IS IN APPEAL BEFORE US. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE COORDINATE BENCH OF THI S TRIBUNAL HAS CONSIDERED THE ISSUE AT LENGTH IN THE CASE IN ITA NO.466/HYD/2015 IN THE CASE OF PRISM T.V PVT. LTD F OR A.Y 2011- 12 TO WHICH ONE OF US I.E. J.M IS A SIGNATORY AND H AS REMANDED THE ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION AFTER A DECISION IS TAKEN ON THE ALLOWABILITY OF THE NONCOMPETE FEE IN THE CASE OF USHODAYA ENTERPRISES (P) LTD. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS REPRODUCED HEREUNDER FOR THE SAKE O F CLARITY AND READY REFERENCE: 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT ON DEMERGER OF THE PARENT C OMPANY, THE ASSESSEE HAS SUCCEEDED TO THE ISSUE OF THE DEPR ECIATION ON NON-COMPETE FEE AS WELL AND THEREFORE, THE DECISION OF THE TRIBUNAL FOR THE A.Y. 2008-2009 (CITED SUPRA) ON TH E VERY SAME ISSUE WOULD BE CONSEQUENTIAL AND APPLICABLE TO THE FACTS ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 6 OF 16 OF THE CASE BEFORE US. WE FIND THAT THE TRIBUNAL AT PARAS 25 TO 28 OF ITS ORDER HAS HELD AS UNDER : '25. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD AND ALSO GONE THROUGH THE DECIS IONS CITED. A PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY CIT(A) WOULD LEAVE NO ROOM FOR DOUBT THAT ASSESSEE'S CLAIM OF DEPRECIATION ON NON-COMPETE FEE HAS BEEN REJECTED BASICALLY FOR THE FOLLOWING TWO REASO NS: 1. GENUINENESS OF THE PAYMENT MADE AND NECESSITY OF PAYING NON-COMPETE FEE. 2. NON-COMPETE FEE NOT BEING IN THE NATURE OF AN IN TANGIBLE ASSET AS 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 ENTIT LE THE ASSESSEE TO CLAIM DEPRECIATION ON IT, IT IS NECESSA RY, AT THE OUTSET, TO ADDRESS THE ISSUE OF GENUINENESS OF PAYM ENT OF NON-COMPETE FEE AND NECESSITY TO MAKE SUCH PAYMENT. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, AO HAS TREAT ED THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE FOR PAYMENT OF NON-COMPETE FEE AS A SHAM TRANSACTION AS SHRI RAMOJ I RAO IS NOT ONLY THE OWNER OF UKT AND UKM BEING THE KARTA O F HUF TO WHICH THESE CONCERNS BELONG BUT HE ALSO IN H IS 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 BET WEEN 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 NON- COMPETE FEE TO REDUCE ITS TAX BURDEN BY ALLOWING SHRI RAMOJI RAO H UF TO ADJUST THE NON-COMPETE FEE AGAINST THE HUGE BROUGHT FORWARD LOSSES SUFFERED BY IT. AO ALSO RAISED DOUBTS WITH R EGARD TO THE VALUE OF NON-COMPETE FEE AT RS. 670 CRORES. HOW EVER, THE CIT(A) HAS REJECTED ASSESSEE'S CLAIM BY HOLDING THAT AS SHRI RAMOJI RAO, WHO IS THE KARTHA OF HUF, WHICH OW NS UKT AND UKM AND ALSO IN HIS INDIVIDUAL CAPACITY IS THE CHAIRMAN OF THE ASSESSEE COMPANY, THEREFORE, THERE IS NO QUESTION OF PAYING NON-COMPETE FEE AS A PERSON CANN OT COMPETE WITH HIMSELF. OF COURSE THE CIT()A) HAS ALS O HELD THAT AS NON-COMPETE FEE DOES NOT PROVIDE ANY ASSET OF ENDURING NATURE, DEPRECATION CANNOT BE ALLOWED. IN THIS ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 7 OF 16 CONTEXT, IT IS TO BE NOTED THAT ASSESSEE ON 25/01/2 008 HAS ENTERED INTO SUBSCRIPTION AGREEMENT AND SHARE PURCHASE AGREEMENT WITH A DOMESTIC COMPANY, VIZ.; E QUATOR TRADING ENTERPRISES PVT. LTD. AS PER WHICH THE SAID DOMESTIC COMPANY AGREED TO MAKE SUBSTANTIAL INVESTMENT IN PU RCHASE OF EQUITY SHARES OF THE ASSESSEE COMPANY. HOWEVER, AS A PRECONDITION FOR MAKING SUCH INVESTMENT, THE SAID D OMESTIC COMPANY REQUIRED THE ASSESSEE COMPANY TO ENTER INTO A NON- COMPETE AGREEMENT WITH UKT AND UKM. THOUGH, COPIES OF THE SHARE PURCHASE AGREEMENT AND SUBSCRIPTION AGREE MENT ARE NOT AVAILABLE ON RECORD BEFORE US, HOWEVER, ON PERUSAL OF THE CLOSING AGREEMENT DATED 30/01/08 BETWEEN ASSESS EE AND M/S EQUATOR TRADING ENTERPRISES PVT. LTD. A COPY OF WHICH IS AT PAGE 220 OF PAPER BOOK, WE FIND A REFERENCE TO S UCH PRECONDITION IN CLAUSE 2(A). FURTHER, AS IT APPEARS FROM THE FACT ON RECORD AND WHICH REMAINS UNCONTROVERTED IN PURSUANCE TO THE CONDITION IMPOSED BY THE DOMESTIC INVESTOR ASSESSEE HAS ENTERED INTO THE NON COMPETE AGREEMENT WITH UKT AND UKM FOR A PERIOD OF 5 YEARS ON PAYMENT OF N ON- COMPETE FEE OF RS. 670 CRORES, WHICH IS ALSO APPROV ED BY THE DOMESTIC INVESTOR. IT IS THE CONTENTION OF ASSESSEE THAT AS A RESULT OF FULFILLMENT OF SUCH CONDITION OF NON-COMP ETE FEE THEREBY EXCLUDING UKT AND UKM COMPETING WITH ASSESS EE COMPANY IN FUTURE, THE DOMESTIC COMPANY INVESTED SUBSTANTIAL AMOUNT BY ACQUIRING 39% OF SHARE IN THE ASSESSEE COMPANY. 27. FROM THE AFORESAID FACTS IT CANNOT BE DENIED TH AT EQUATOR TRADING ENTERPRISES PVT. LTD IS A MAJOR STAKEHOLDER IN ASSESSEE COMPANY. AS CAN BE SEEN FROM THE ASSESSMEN T ORDER AS WELL AS ORDER PASSED BY THE CIT(A) BEFORE COMING TO THEIR RESPECTIVE CONCLUSION THAT THE TRANSACTION ENTERED INTO BY PARTIES FOR PAYMENT OF NON-COMPETE FEE IS NOT GENUI NE OR THERE IS NO NECESSITY FOR PAYING THE NON-COMPETE FE E AS THE SAME PERSON IS CONTROLLING BOTH THE ASSESSEE COMPAN Y AND THE TWO OTHER COMPANIES ACQUIRED BY THE ASSESSEE, T HE ROLE OF M/S EQUATOR TRADING ENTERPRISES PVT. LTD. IN ANY DE CISION TAKEN BY ASSESSEE COMPANY HAS NOT AT ALL BEEN CONSI DERED. NEITHER THE AO NOR THE CIT(A) HAS EXAMINED THE EFFE CT OF ACQUISITION OF 39% OF EQUITY SHARES BY ANOTHER ENTI TY AND WHETHER AFTER SUCH ACQUISITION OF SHARES, IT CAN ST ILL BE HELD THAT SHRI RAMOJI RAO IS THE CONTROLLING AUTHORITY O F ASSESSEE COMPANY AND IT IS A TRANSACTION BETWEEN RELATED PAR TIES. UNFORTUNATELY, THE ASSESSMENT ORDER AND ORDER OF CI T(A) IS TOTALLY SILENT ON THIS ASPECT. THOUGH IN THE REMAND REPORT, AO HAS EXAMINED THE ISSUE OF INVESTMENT MADE BY THE ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 8 OF 16 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 DE PRECIATION ON PAYMENT OF NON-COMPETE FEE. HOWEVER, SUCH INFERE NCE DRAWN BY AO, IN OUR VIEW, IS MORE ON PRESUMPTIONS A ND SURMISES RATHER THAN ON THE BASIS OF STRONG EVIDENC E. WHEN TWO INDEPENDENT PARTIES ENTER INTO AN AGREEMENT ON CERTAIN TERMS AND CONDITIONS, IT CANNOT BE TERMED AS SHAM O R COLLUSIVE WITHOUT BRINGING SUFFICIENT EVIDENCE TO P ROVE SUCH FACT. AO CANNOT TREAT THE TRANSACTION AS A COLOURAB LE DEVICE ADOPTED BY THE PARTIES MERELY ON PRESUMPTIONS AND S URMISES WITHOUT PROVING THE FACT THAT EITHER THE PROMOTERS OF BOTH THE COMPANIES ARE SAME OR M/S EQUATOR TRADING ENTERPRIS ES PVT. LTD. IS A FRONT COMPANY OF EITHER THE ASSESSEE OR T HE RAMOJI RAO GROUP. IN THESE CIRCUMSTANCES, THE INFERENCE DR AWN ON MERE ASSUMPTIONS AND PRESUMPTIONS THAT THE AGREEMEN T IS A COLOURABLE DEVICE TO REDUCE THE TAX BURDEN CANNOT B E ACCEPTED. THEREFORE, WITHOUT EXAMINING THE IMPACT O F INVESTMENT MADE IN EQUITY SHARES TO THE EXTENT OF 3 9% BY THE DOMESTIC INVESTOR AND CONDITION IMPOSED BY IT, THE CONCLUSION DRAWN BY THE CIT(A) THAT THERE IS NO NEC ESSITY OF PAYMENT OF NON-COMPETE FEE AS THE SAME PERSON IS CONTROLLING THE ASSESSEE COMPANY AS WELL AS UKT AND UKM, IN OUR VIEW, IS WITHOUT PROPER APPRECIATION OF FACT S AND EVIDENCES BROUGHT ON RECORD, HENCE, CANNOT BE SUSTA INED. 28. EVEN THOUGH THE AO IN THE ASSESSMENT ORDER HAS ALSO RAISED THE ISSUE OF PAYMENT OF NON-COMPETE FEE FOR THE PURPOSE OF SETTING OFF THE LOSS SUSTAINED BY THE HU F AND ALSO HAS QUESTIONED THE VALUE OF NON- COMPETE FEE BUT TH E LEARNED CIT(A) HAS NOT AT ALL DEALT WITH THESE ISSUES. BE T HAT AS IT MAY, IT NEEDS TO BE OBSERVED THAT SO FAR AS VALUATI ON OF NON- COMPETE FEE IS CONCERNED, IN COURSE OF ASSESSMENT PROCEEDING, ASSESSEE HAS SUBMITTED A VALUATION REPO RT OF A CA FIRM IN SUPPORT OF THE VALUATION MADE BY IT. THE REFORE, IF THE AO HAD ANY DOUBT WITH REGARD TO THE VALUATION M ADE, HE SHOULD HAVE GOT IT VALUED THROUGH AN INDEPENDENT VA LUER INSTEAD OF REJECTING THE VALUATION BY SIMPLY OBSERV ING THAT THE METHOD ADOPTED IS NOT CORRECT OR SCIENTIFIC. IT IS ALSO ALLEGED BY THE AO THAT THE PAYMENT OF NON-COMPETE F EE WAS MADE ON THE ONE HAND TO ENABLE THE ASSESSEE TO REDU CE ITS PROFIT AND AT THE SAME TIME ALLOWING SHRI RAMOJI RA O HUF TO ADJUST IT AGAINST ITS HUGE BROUGHT FORWARD LOSSE S. IN THIS CONTEXT, IT IS TO BE OBSERVED THAT IN COURSE OF HEA RING BEFORE US THE LEARNED AR HAS SUBMITTED CERTAIN DOCUMENTS A S ADDITIONAL EVIDENCE. A PERUSAL OF THE SAID DOCUMENT S REVEAL ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 9 OF 16 THAT SHRI RAMOJI RAO HUF FOR THE ASSESSMENT YEAR 20 08-09 HAS NOT ONLY SHOWN THE NON COMPETE FEE RECEIVED BY IT AS INCOME BUT HAS ALSO ADJUSTED IT AGAINST THE BROUGHT FORWARD LOSSES OF EARLIER YEARS. AO I.E. JCIT, RANGE -16, W HILE COMPLETING ASSESSMENT IN CASE OF SHRI RAMOJI RAO HU F HAS ACCEPTED NOT ONLY THE INCOME BUT ALSO ITS ADJUSTMEN T AGAINST BROUGHT FORWARD LOSSES IN AN ASSESSMENT ORDER PASSE D U/S 143(3) ON 24/12/2010. THEREFORE, WHEN THE NON-COMPE TE FEE PAID BY ASSESSEE HAS BEEN ACCEPTED AT THE HANDS OF SHRI RAMOJI RAO HUF AND ALLOWED TO BE SET OFF AGAINST TH E BROUGHT FORWARD LOSSES, IT NEEDS TO BE EXAMINED WHE THER STILL THE PAYMENT OF NON-COMPETE FEE MADE BY THE ASSESSEE TO SHRI RAMOJI RAO HUF CAN BE HELD TO BE EITHER NON-GE NUINE OR NOT NECESSARY. THEREFORE, CONSIDERING THE TOTALI TY OF THE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT AS THE IMPACT OF ACQUISITION OF 39% OF EQUITY SHARES BY M/S EQUAT OR TRADING ENTERPRISES PVT. LTD. HAS NOT AT ALL BEEN E XAMINED BY AO AT THE TIME OF ASSESSMENT PROCEEDING OR BY TH E 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 NON-COMPETE FEE IS GENUINE AND NECES SARY, WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FIL E OF AO FOR DECIDING AFRESH..' 5.1. THIS APPEAL BEFORE US BEING FOR THE SUBSEQUENT ASSESSMENT YEAR, ALSO NEEDS TO BE REMANDED TO THE F ILE OF THE A.O. TO GIVE CONSEQUENTIAL EFFECT TO THE DECISI ONS TAKEN BY HIM FOR THE A.Y. 2009-2010. THIS GROUND OF APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATIS TICAL PURPOSES. 6. THE ASSESSEE BEING A RESULTANT COMPANY OUT OF DE MERGER OF M/S. USHODAYA ENTERPRISES AS IN THE CASE OF PRIS M TV PVT LTD AND THE FACTS AND CIRCUMSTANCES BEING ENACT BY THE SAME, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO ACCORDINGL Y REMANDED TO THE FILE OF THE AO WITH SIMILAR DIRECTION AND IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 10 OF 16 7. AS REGARDS GROUNDS 3(A) TO 3(D), BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED AN AMOUNT OF RS.55,25,94,000 TOWAR DS THE COST OF PRODUCTION OF T.V. SERIALS AND PROGRAMMES. THE AO H ELD IT TO BE IN THE NATURE OF THE CAPITAL EXPENDITURE AND NOT REVEN UE EXPENDITURE AS CLAIMED BY THE ASSESSEE. HE THEREFORE, TREATED I T AS CAPITAL EXPENDITURE AND ALLOWED 25% DEPRECIATION THEREON. ON APPEAL, THE CIT (A) CONFIRMED THE ORDER OF THE AO. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THIS ISSUE HAD ARISEN IN THE CASE OF M/S. PRISM TELEVISI ON (P) LTD ALSO IN THE CASE CITED SUPRA WHEREIN THE COORDINATE BENCH O F THIS TRIBUNAL HAS CONSIDERED THE ISSUE AT LENGTH AND HAS ALLOWED THE ASSESSEES GROUND OF APPEAL. THE RELEVANT PORTION IS REPRODUCE D HEREUNDER FOR THE SAKE OF CLARITY AND READY REFERENCE: 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL 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 I TS ORDER DATED 31.10.2013 HAS HELD AS UNDER : '8. NOW, WE TAKE UP THE COMMON ISSUE INVOLVED IN AL L THE APPEALS. THE ASSESSEE IS IN THE BUSINESS OF RUNNING SATELLITE TE LEVISION CHANNELS. THESE CHANNELS TELECAST FILMS, SERIALS ETC., THROUGH SATE LLITE CHANNELS. THE RIGHTS OVER THESE FILMS ARE PURCHASED FROM THE PRODUCERS O F THE RESPECTIVE FILMS FOR BROADCASTING THROUGH SATELLITE TELEVISION. THESE RI GHTS COME WITH AN EMBARGO THAT THE FILMS SHALL NOT BE BROADCASTED OR AIRED FO R A SPECIFIED PERIOD FROM THE DATE OF RELEASE IN THEATRES DEPENDING UPON THE SUCC ESS AT THE BOX OFFICE AND OTHER FACTORS. TILL THE TIME, SUCH FILMS ARE BROADC ASTED, THEY ARE TO BE TREATED AS STOCK IN TRADE. ONCE THE FILMS ARE BROADCASTED, THE PURCHASE VALUE OF THE FILMS IS WRITTEN-OFF. THE EXPENDITURE ON PURCHASE O F FILMS IS CLAIMED IN THE FIRST YEAR ITSELF. THE ASSESSEE HAS GOT ONLY SATELL ITE TELECASTING RIGHTS AND HAS NO UNIVERSAL RIGHTS FOR AIRING THE FILMS OR SERIALS . ONCE THE FILM OR THE SERIAL IS AIRED, ITS VALUE IS DIMINISHED IN SUBSEQUENT TEL ECASTS. THE ASSESSEE EARNS SUBSTANTIAL REVENUE IN THE FIRST TELECAST ITSELF. I N REPEAT TELECAST, THE ASSESSEE IS ABLE TO GENERATE MARGINAL REVENUE. WHATEVER INCO ME IS EARNED FROM THE SUBSEQUENT TELECASTS IS OFFERED AS INCOME WITHOUT C LAIMING ANY EXPENDITURE. ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 11 OF 16 THE ASSESSEE ALSO GENERATES REVENUE FROM BROADCASTI NG SERIALS THROUGH SATELLITE CHANNELS. THE ASSESSEE GETS REVENUE FROM PRODUCTION AND BROADCASTING SERIALS ON THE LINES OF FEATURE FILMS, THE RIGHTS OF BROADCASTING SUCH SERIALS ARE ALSO TREATED AS STOCK IN TRADE TIL L THE TIME THEY ARE AIRED AND THE EXPENSES ARE DEBITED TO THE PROFIT & LOSS ACCOU NT. THE ASSESSEE TREATS THE FILMS AND THE SERIALS AT PAR AND APPLIED THE PROVIS IONS OF RULE 9A AND 98 OF THE INCOME TAX RULES, AS ARE APPLICABLE IN CASE OF FILMS ON SERIALS AS WELL. ON THE OTHER HAND, THE CONTENTION OF THE REVENUE IS THAT THE FILM AND SERIAL BROADCASTING RIGHTS ACQUIRED BY ASSESSEE ARE PERPET UAL IN NATURE. AFTER FIRST TELECAST, THE ASSESSEE DOES NOT DISCARD THE FILMS B UT CAREFULLY STORE THE SAME IN DIGITAL LIBRARY FOR AIRING THE SAME AGAIN. THERE FORE, 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 CONTEMPLATE D BY THE ASSESSEE. THE RIGHTS ARE INTANGIBLE ASSETS WITHIN THE MEANING OF EXPLANA TION (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 S ERIAL RIGHTS, PROGRAMME PRODUCTION EXPENSES, CONSUMABLE AND MEDIA EXPENSES BY TREATING THEM AS INTANGIBLE ASSETS U/S.32(1)(II) HAS BEEN DEALT IN D ETAIL BY THE CIT (APPEALS) IN HIS ORDER DATED 23-02-2013 RELEVANT TO THE A Y. 200 6-07 AND 2007-08. WE FULLY AGREE WITH THE DETAILED FINDINGS AND THE REAS ONING GIVEN BY THE CIT(APPEALS) IN HIS ORDER ALLOWING THIS GROUND OF A PPEAL OF THE ASSESSEE. FOR THE SAKE OF BREVITY, WE ARE NOT REPRODUCING THE FIN DINGS 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 CAS E OF CIT VS. GLOBAL VANTEDGE (P) LTD., REPORTED AS 354 ITR 21 (DEL). TH E ID. DR HAS NOT BEEN ABLE TO CONTROVERT THE WELL REASONED ORDER OF THE C IT (APPEALS) ON THE ISSUE. ACCORDINGLY, THE FINDINGS OF THE CIT (APPEALS) ON T HE ISSUE ARE AFFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IN RESPECT OF ALL THE AYS IS DISMISSED.' 9.1. IN THE CASE OF ZEE MEDIA CORPORATION LTD., (FO RMERLY KNOWN ZEE NEWS LIMITED), MUMBAI VS. DCIT, CIRCLE-7(3), MUMBAI, THE 'G' BENCH OF TRIBUNAL AT MUMBAI IN ITA.NO.1590/MUM/2015 BY ORDER DATED 12 .08.2015 HAS HELD AS UNDER : '25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED PRECEDENTS AND PAP ER BOOK FILED BEFORE US. THE CASE OF THE ASSESSEE ON THE MERITS IS THAT THE ASSESSEE HAS A METHOD OF VALUATION OF THE NEWS ITEMS/NON FICTIONAL IN NATURE , TV PROGRAMS AND THE FILM RIGHTS. THE DETAILS ARE GIVEN IN THE AFOREMENT IONED 'NOTE NO 7' TO THE FINANCIAL STATEMENTS. ACCORDING TO THE SAME, WHILE THE NEWS ITEMS PURCHASED ARE DEBITED TO THE P AND L ACCOUNT AS THEY DO NOT H AVE THE REPEAT TELECAST VALUE, OTHER ITEMS LIKE THE TV PROGRAM AND THE FILM RIGHTS CONSTITUTES ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 12 OF 16 'CURRENT ASSETS', WHICH ARE AMORTISED OVER THE YEAR S AND THE PERIOD OF SUCH AMORTIZATION IS GIVEN IN THE SAID NOTE. PER CONTRA, THE CASE OF THE REVENUE ON THESE ISSUES IS THAT THESE ITEMS CONSTITUTE 'INTANG IBLE DEPRECIABLE CAPITAL ASSETS' AND PROVISIONS OF SECTION 32 OF THE ACT APP LY. CONSIDERING THE SAME, WE SHALL NOW UNDERTAKE TO DISCUSS THE ITEM WISE ADJ UDICATION AS FOLLOWS. A. ON THE DEBITS RELATING TO THE PURCHASES OF THE N EWS ITEMS: REGARDING THE NATURE OF THE NEWS ITEMS PURCHASED BY THE ASSESSEE AND DEBITED TO THE P AND L ACCOUNT, WE FIND IT IS IN THE COMMON KNOWLEDGE OF EVERY CITIZEN THAT THE NEWS ITEMS DO NOT HAVE ENDURING BENEFIT. NORMALLY, THE NEWS ITEMS/NON FICTIONAL ITEMS PURCHASED BY THE ASSESSEE LOSE ITS VALUE ONCE THEY ARE TELECAST. THEREFORE, SUCH ITEMS DO NOT HAVE REPEAT TELECAST V ALUE IN TERMS OF THE REVENUE GENERATION BY WAY OF ADVERTISEMENT FROM THE SPONSORS. AS SUCH, IT IS A SETTLED ISSUE AT THE LEVEL OF HON'BLE DELHI HIGH COURT IN THE CASE OF TELEVISION EIGHTEEN INDIA LTD (SUPRA) THAT THE CLAI MS OF THE ASSESSEE RELATING TO NEWS/NON-FICTIONAL ITEMS ARE ALLOWABLE. EVEN OTH ERWISE, EVEN IF SOME INCOME GENERATED, THAT IS NOT CRITERION FOR DESCRIB ING THE ITEMS AS 'INTANGIBLE ASSETS' FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 32(II) OF THE ACT. WE RELY ON THE ABOVE REFERRED DELHI HIGH COURT'S JU DGMENT IN THE CASE OF TELEVISION EIGHTEEN INDIA LTD (SUPRA). FURTHER, WE FIND THAT THE ASSESSEE HAS A DECLARED METHOD OF ACCOUNTING RELATING TO ACCOUNT ING OF THESE TRANSACTIONS. HE HAS BEEN CONSISTENTLY FOLLOWING THE SAME WITHOUT ANY CHANGE. IN FACT, THE REVENUE HAS CONSISTENTLY ALLOWED THE CLAIM IN THE P AST. THIS IS FOR THE FIRST TIME, AO DISTURBED THE CLAIM OF THE ASSESSEE AND IN VOKED THE PROVISIONS OF SECTION 32 (II) OF THE ACT, WITHOUT ANY SUSTAINABLE REASONING . THEREFORE, CONSIDERING ALL THE POINTS MENTIONED ABOVE, WE ARE OF THE FIRM OPINION THAT THE DECISION OF THE AO/CIT(A) IS UNSUSTAINABLE LEGA LLY. HENCE, THE ASSESSEE IS ENTITLED TO CLAIM THE PURCHASES OF NEWS ITEMS/NO N-FICTIONAL ITEMS AS AN ALLOWABLE EXPENDITURE. ACCORDINGLY, WE DIRECT THE A O TO DELETE THE RELEVANT ADDITION. B. ON THE DEBITS RELATING TO THE PURCHASES OF THE T V PROGRAMS/FILM RIGHTS: ASSESSEE AMORTISED THE 'INVENTORIES' AS PER THE MET HOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY HIM OVER THE YEARS. IN FAC T, THE REVENUE HAS CONSISTENTLY ALLOWED THE CLAIM IN THE PAST. THIS IS FOR THE FIRST TIME, AO DISTURBED THE CLAIM OF THE ASSESSEE AND INVOKED THE PROVISIONS OF SECTION 32 (II) OF THE ACT WITHOUT ANY SUSTAINABLE REASONING. WE HAVE PERUSED HE JUDGMENT OF HONBLE HIGH COURT OF DELHI AND THE ORDE R OF THE TRIBUNAL OF CHENNAI BENCH IN THE CASE OF M/S SUN TV NETWORKS LT D (SUPRA). WE HAVE ALSO EXTRACTED THE RELEVANT PARAGRAPHS AND ALREADY PLACED IN THIS ORDER ABOVE. WE FIND SIMILAR ISSUE OF AMORTIZATION OF THE TV PRO GRAMS/FILM RIGHTS CAME UP BEFORE THE CHENNAI BENCH OF THE TRIBUNAL WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND REJECTED THE AD'S PRO POSAL TO INVOKE THE PROVISIONS OF SECTION 32(II) OF THE ACT IN RESPECT OF THE ABOVE PROGRAMS/RIGHTS. AS SUCH, THE LD DR'S ARGUMENT ON T HE APPLICABILITY OF THE AS-26 TO THE TV PROGRAMS AND FILM RIGHTS IS NOT SUP PORTED BY ANY PRECEDENTS AND THEREFORE, THE ARGUMENTS RAISED BY T HE REVENUE ARE NOT ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 13 OF 16 ALLOWED. THUS, CONSIDERING THE COVERED NATURE OF TH E ISSUE AS WELL AS THE CONSISTENT METHOD OF ACCOUNTING FOLLOWED BY THE ASS ESSEE IN THIS REGARD AND ALSO IN THE ABSENCE OF ANY CONTRARY MATERIAL TO SUP PORT THE ARGUMENTS OF THE REVENUE AGAINST THE ASSESSEE'S CLAIM, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IN THE IMPUGNED ORDER IS REQUI RED TO BE REVERSED. ACCORDINGLY, GROUND NOS. 2 AND 3 RAISED BY THE ASSE SSEE ARE ALLOWED. 9.2. IN COMING TO THIS CONCLUSION, THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. TELEVISION EIGHTEEN INDIA LIMITED REPORTED IN (2014) 364 ITR 597 (DEL.). THE RELEVAN T PORTION OF THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IS REP RODUCED AS UNDER : 'THE REVENUE HAS PREFERRED THIS APPEAL CLAIMING TO BE AGGRIEVED BY AN ORDER OF THE INCOME TAX APPELLANT TRIBUNAL (ITAT) DATED 1 7.03.2006. THE QUESTION OF LAW FRAMED IN THIS CASE IS:- (I) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS R IGHT IN HOLDING THAT THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE ON PROD UCTION OF PROGRAMMES WHICH BECAME PART OF NEWS ARCHIVES SHOULD BE ALLOWE D AS A REVENUE EXPENSE UNDER SECTION 37 OF THE INCOME TAX ACT, 1961 AND SHOULD NOT BE TRE ATED AS INCURRED FOR CREATING A CAPITAL ASSET? THE ASSESSEE, AT THE RELEVANT TIME, WAS IN THE BUSI NESS OF TELEVISION PROGRAMME PRODUCTION. THE ASSESSEE REFLECTED RS.88, 83,128/- BEING 10% OF THE TOTAL EXPENDITURE INCURRED BY IT AS VALUE OF 'N EWS ARCHIVES' UNDER THE HEAD OF FIXED ASSETS. IN THE RETURN FILED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 1997, THE SAID AMOUNT WAS CLAIMED AS REVENUE E XPENDITURE. ACCORDING TO THE ASSESSEE THIS EXPENDITURE WAS ALLOCATED FOR THE CREATION OF 'NEWS ACHIEVES', WHICH COMPRISED OF ITS PUBLISHED OR TELE CASTED PROGRAMMES. THE AO CAPITALISED THIS AMOUNT HOLDING THAT THE EXPENDI TURE LED TO CREATION OF AN ASSET OF ENDURING ADVANTAGE. THE CIT (APPEALS) ON A PPEAL, HOWEVER, REVERSED THE FINDINGS OF THE AO. IT WAS NOTICED THA T THE NEWS ARCHIVES WERE NOT IN THE NATURE OF PLANT OR INCOME GENERATING APP ARATUS BUT PART OF THE PRODUCT. IT WAS ALSO HELD THAT THE UNAVAILABILITY O F ANY OBJECTIVE BASIS, TO QUANTIFY WITH ANY DECREE OF ACCURACY FUTURE REVENUE THAT WERE LIKELY TO BE GENERATED AND THE PROPORTIONATE COST OF PRODUCTION THAT COULD BE DEFERRED, LED TO THE CONCLUSION THAT THE 10% OF THE TOTAL EXPENDI TURE EARMARKED FOR CREATION OF 'NEWS ARCHIVES' COULD NOT BE TREATED AS A CAPITAL EXPENDITURE. ON THE REVENUE'S APPEAL, THE ITAT HELD AS FOLLOWS:- '12. IT IS ADMITTED THAT NO SEPARATE ACCOUNT WAS MA INTAINED WHEREIN ANY EXPENDITURE WAS DEBITED WHICH COULD BE EARMARKED TO WARDS CREATION OF NEWS ARCHIVES LIBRARY. THE ASSESSEE FELT A PART OF FOOTAGE OF THE NEWS BASED ON PROGRAMMES PRODUCED HAS REPEAT VALUE WHICH COULD BE USED FOR THE PRODUCTION OF PROGRAMME IN FUTURE. THE ASSESSEE, TH EREFORE, ESTIMATED 10% EXPENDITURE INCURRED AS REASONABLE TO BE ATTRIBUTAB LE TO THE NEWS ARCHIVES ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 14 OF 16 LIBRARY. THE ASSESSEE HAS BEEN ENGAGED IN THE PRODU CTION OF SUCH PROGRAMMES SINCE ASSESSMENT YEAR 1994-95 AND ALL AL ONG THE COST OF PRODUCTION OF SUCH EXPENDITURE HAS BEEN TREATED AS REVENUE EXPENDITURE AND ALSO ALLOWED BY THE DEPARTMENT. LEARNED A.R. HAS RE FERRED TO JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS LTD. VS. CIT 177 ITR 377 WHICH LAID DOWN THAT WHAT IS CAPITAL E XPENDITURE AND WHAT IS REVENUE ARE NOT ETERNAL VERITIES BUT MUST NEEDS TO BE FLEXIBLE SO AS TO RESPOND TO THE CHANGING ECONOMIC REALITIES OF BUSIN ESS. VIEWED IN THAT PERSPECTIVE, WE ARE OF THE OPINION THAT THE ESTIMAT ED VALUE ASSIGNED TO THE NEWS ARCHIVES CANNOT BE TREATED TO BE AN EXPENDITUR E INCURRED IN THE CAPITAL FIELD. WE, THEREFORE, UPHOLD THE ORDER OF CIT (A) O N THIS GROUND. IN THIS CASE, THERE IS NO DISPUTE THAT THE DATA BAS E OF THE PROGRAMMES WHICH ARE UTILISED FOR THE CREATION OF 'NEWS ARCHIVES' BE LONGED TO THE ASSESSEE. THE FUTURE LIKELIHOOD OF THESE RESOURCES BEING A POSSIB LE SOURCE OF REVENUE, CANNOT IN THE OPINION OF THIS COURT JUSTIFY ITS INC LUSION IN THE CAPITAL STREAM. FURTHERMORE, THIS COURT NOTICES THAT THE EXPENDITUR E I.E. 10% RS.88,83,128/- IS A PART OF THE ENTIRE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS CONCEDEDLY TREATED AS REVENUE, EVEN OTHERWISE. IN VIEW OF THE ABOVE DISCUSSIONS, THIS COURT IS OF THE OPINION THAT THE QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS DISMISSED.' 9.3. THUS, IT IS SEEN THAT THE ISSUE IS FAIRLY COVE RED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION AND THE A.O. IS DIRE CTED TO TREAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON COST OF PRO DUCTION OF TV PROGRAMMES AS REVENUE EXPENDITURE. THIS GROUND OF A PPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 9. RESPECTFULLY FOLLOWING THE SAME, THESE GROUNDS O F APPEAL ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS GROUND OF APPEAL NO.6, NOW FILED AS ADDITIONAL GROUND OF APPEAL, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT IN THE RETURN OF INCOME, THE ASSESSE E HAD CLAIMED THE TDS CREDIT FOR A SUM OF RS.1,61,82,155 BUT THE AO HAS ALLOWED THE CREDIT OF ONLY RS.17,68,277. HE SUBMITTED THAT THOUGH THE ASSESSEE HAS NOT CHALLENGED THE SAME BEFORE THE CIT (A), THE ASSESSEE HAS FILED AN APPLICATION U/S 154 OF THE AC T BEFORE THE AO ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 15 OF 16 VIDE LETTER DATED 25.5.2015 AND THAT THE SAME IS PE NDING CONSIDERATION AND AS AN ABUNDANT CAUTION, THE ASSES SEE HAS RAISED THIS GROUND OF APPEAL BEFORE THE ITAT . HE THEREFOR E, PRAYED THAT THE ADDITIONAL GROUND OF APPEAL BE ADMITTED AND THE AO BE DIRECTED TO CONSIDER THE DOCUMENTS AS ADDITIONAL EVIDENCE I.E. ITR ACKNOWLEDGEMENT IN THE CASE OF THE ASSESSEE FOR THE A.Y 2012-13 SHOWING CREDIT OF TDS TO THE ASSESSEE AND ALSO THE ASSESSEES PETITION FOR MODIFICATION OF THE ASSESSMENT ORDER B Y GIVING CREDIT FOR TDS WHICH WAS NOT GIVEN IN THE ASSESSMENT. 11. THE LEARNED DR HOWEVER, OPPOSED THE ADMISSION O F ADDITIONAL GROUND OF APPEAL. 12. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS NOT ARISING O UT OF THE ORDER OF THE CIT (A) AND ALSO THAT THE ASSESSEE HAS ALREADY FILED AN APPLICATION BEFORE THE AO FOR MODIFICATION OF THE A SSESSMENT ORDER. EVEN IF THIS TRIBUNAL WERE TO ADMIT THE ADDITIONAL GROUND OF APPEAL, IT WOULD HAVE TO REFER THE ISSUE TO THE FILE OF THE AO FOR CONSIDERATION AFTER VERIFICATION OF THE ASSESSEES CLAIM. THE ASS ESSEES CLAIM IS ALREADY PENDING CONSIDERATION BEFORE THE AO AND THE REFORE, IT WOULD SUFFICE TO DIRECT THE AO TO CONSIDER THE APPLICATIO N EXPEDITIOUSLY. 13. IN THE RESULT, ADDITIONAL GROUND OF APPEAL RAIS ED BY THE ASSESSEE IS NOT ADMITTED. ITA NO.1389/HYD/2016 14. COMING TO THE REVENUES APPEAL, THE ONLY GROUND RAISED BY THE REVENUE IS AGAINST THE DIRECTION OF THE CIT (A) IN ALLOWING ITA NOS 1245 AND 1389 OF 2016 EENADU TEL EVISION P LTD HYDERABAD PAGE 16 OF 16 DEPRECIATION ON THE FILM SOFTWARE LIBRARY AT 25% TRE ATING IT AS AN INTANGIBLE ASSET. WE FIND THAT THIS ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN THE CASE OF M/S. USHODAYA ENTERPRISES (P) LTD IN ITA NO.760/HYD/2015 WHEREIN THE TRIBUNAL HAS REMANDED THE ISSUE TO THE FILE OF THE AO TO EXA MINE THE ISSUE OF VALUATION OF THE ASSET AND THEREAFTER TO ALLOW DEPR ECIATION @ 25% TREATING THE SOFTWARE LIBRARY AS AN INTANGIBLE ASSE T. WE FIND THAT THE CIT (A) HAS ONLY FOLLOWED THE DIRECTION OF THE ITAT IN HOLDING THAT, SUBJECT TO THE REVALUATION OF THE ASSET, THE DEPREC IATION IS TO BE ALLOWED AT 25% AS CLAIMED BY THE ASSESSEE. THEREFORE , WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) O N THIS ISSUE. 15. IN THE RESULT, REVENUES APPEAL IS DISMISSED AN D ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 9 TH AUGUST, 2017. VINODAN/SPS COPY TO: 1 M/S. EENADU TELEVISION PRIVATE LIMITED, 1-10-76, FAIR FIELD, BEGUMPET, HYDERABAD 500016 2 DY. COMMISSIONER OF INCOME TAX, CIRCLE 14(1), HYD ERABAD 3 DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2), HYD ERABAD 4 CIT (A)-6 HYDERABAD 5 PR. CIT 6 HYDERABAD 6 THE DR, ITAT HYDERABAD 7 GUARD FILE BY ORDER
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