ADDL CIT 8(3), MUMBAI V. SEVEN STAR DOT COM P. LTD, MUMBAI

ITA 1260/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93042 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Cost of acquisition
• Section: 37(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1260/MUM/2011 ASSESSMENT YEAR: 2007-08 THE DY. COMMISSIONER OF INCOME TAX-8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400020 / VS. SEVEN STAR DOT COM PRIVATE LIMITED. 3, MINI JEWEL, J.P. ROAD, SEVEN BUNGALOWS, VERSOVA ROAD, MUMBAI-400061 ( ' / REVENUE) ( #$% & /ASSESSEE) P.A. NO .AAECS1371B ' / REVENUE BY SHRI JEETENDRA KUMAR- DR #$% & / ASSESSEE BY SHRI VIJAY MEHTA ' '( ) & * / DATE OF HEARING : 09/07/2015 ) & * / DATE OF ORDER: 06/08/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 24/11/2010 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED BY THE REVENUE PERTAINS TO A LLOWING DEDUCTION OF RS.2,98,76,827/- U/S 37(1) OF THE ACT ON ACCOUNT OF SET UP BOXES WITHOUT CONSIDERING THE FAC T THAT THE SEVEN STAR DOT COM PRIVATE LTD. ITA NO.1260/MUM/2011 2 EXPENDITURE ON SET UP BOXES HAS BEEN CAPITALIZED AS ASSET OF THE CABLE DIVISION OF THE COMPANY. 2. DURING HEARING OF THIS APPEAL, SHRI JEETENDRA KUMAR, LD. DR, ADVANCED HIS ARGUMENTS WHICH ARE IDE NTICAL TO THE GROUND RAISED BY CONTENDING THAT THE IMPUGNE D AMOUNT IS PART OF CABLE DIVISION FOR WHICH OUR ATTE NTION WAS INVITED TO PAGE-2, PARA 3.2 OF THE ASSESSMENT ORDER . ON THE OTHER HAND, SHRI VIJAY MEHTA, LD. COUNSEL FOR THE A SSESSEE, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF PROVIDI NG INTERNET SERVICES AND CABLE T.V. SERVICES, SOLD INTERNET DIV ISION TO VSNL FOR A CONSIDERATION OF RS.17 CRORES VIDE AGREE MENT DATED 30/12/2005. AS PER THE AGREEMENT, THE CONSIDE RATION OF THIS AMOUNT WAS TO BE PAID TO THE ASSESSEE BY VS NL AS PER THE TERMS AND CONDITION AS REPRODUCED IN PARA 3.1 ( PAGES 2 & 3 OF THE IMPUGNED ORDER). AS PER THE ANNUAL ACCOUNT , THE SALE CONSIDERATION WAS OFFERED TO TAX YEAR WISE AS UNDER :- ASSESSMENT YEAR AMOUNT 2006-07 NIL 2007-08 12,96,25,000 2008-09 2,95,00,000 2009-10 39,85,473 2010-11 NIL AMOUNT YET TO BE RECEIVED 68,89,527 TOTAL 17,00,00,000 SEVEN STAR DOT COM PRIVATE LTD. ITA NO.1260/MUM/2011 3 NOW THE QUESTION IS WHETHER IT IS ALLOWABLE AS A DEDUCTION. THE ASSESSEE WAS ASKED TO JUSTIFY THE CL AIM MADE BY THE ASSESSEE IN ITS RETURN. THE ASSESSEE SUBMITT ED THE COMPUTATION AS UNDER:- NET VALUE OF CONSIDERATION SHOWN BY THE AUDITOR RS.12,96,25,000/- LESS: NET WORTH OF THE UNDERTAKING COST OF ACQUISITION & COST OF IMPROVEMENT RS.2,18,10,300/- EXPENDITURE INCURRED WHOLLY & EXCLUSIVELY IN CONNECTION WITH THE SLUMP SALE-PROFESSIONAL FEES PAID RS.8,00,000/- PAYMENTS MADE TO FRANCHISE & SUB- AGENTS UNDER TRIPARTITE AGREEMENT RS.94,24,554/- WDV OF SET UP BOXES DISTRIBUTED UNDER SLUMP SALE AGREEMENT RS.2,98,76,827/- CAPITAL GAINS RS.6,77,15,319/- 2.2. WE NOTE THAT THE ASSESSEE COMPANY HAS TAKEN O NLY WDV OF FIXED ASSET FOR COMPUTING THE NET WORTH, WH EREAS, THE CLAIM OF THE ASSESSEE IS THAT VSNL HAS TAKEN OVER T HE FIXED ASSET OF THE INTERNET DIVISION. IT SEEMS THAT THE OTHER ASSET AND LIABILITIES HAVE NOT BEEN CONSIDERED FOR COMPUT ING THE NET WORTH. EVEN OTHERWISE, WHETHER, THESE ARE BUSINESS EXPENSES ARE NOT HAVE NOT EXAMINED BY THE ASSESSING OFFICER, THEREFORE, IN THE ABSENCE OF CLEAR FACTS AND ALSO NO GRIEVANCE IS CAUSED TO EITHER SIDE, WE REMAND THIS ISSUE TO THE FILE OF TH E LD. ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AFRESH AND THEN DECIDE IN ACCORDANCE WITH LAW. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO NOTE INDICATED ON THIS ISSUE, THEREFORE, IT IS APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. SEVEN STAR DOT COM PRIVATE LTD. ITA NO.1260/MUM/2011 4 FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR S TATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 09/07/2015. SD/- SD/- ( B.R.BASKARAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ' ( MUMBAI; + DATED : 06/08/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ' 2& ( ,- ) / THE CIT, MUMBAI. 4. ' 2& / CIT(A)- , MUMBAI 5. 4'5 0&# , ,-* ,# 6 , ' ( / DR, ITAT, MUMBAI 6. 7$ 8( / GUARD FILE. / BY ORDER, 14-& 0& //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI