KNIGHT RIDERS SPORTS P. LTD, MUMBAI V. ASST CIT CEN CIR 29, MUMBAI

ITA 1307/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7846 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Wholly owned subsidiary; Corroborative evidences; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 37(1); 37

Judgement Text

P A G E | 1 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, M UMBAI BEFORE SHRI G.S.PANNU , AM AND SHRI RAVISH SOOD, JM ITA NO. 1307 /MUM/201 3 ( / ASSESSMENT YEAR: 2009 - 10 ) M/S KNIGHT RIDERS SPORTS PRIVATE LIMITED, DEEPVAN ANAND VIHAR SOCIETY, 20 TH ROAD, KHAR (W), MUMBAI - 400 052 / VS. ACIT, CENTRAL CIRCLE - 29 , MUMBAI . ./ ./ PAN NO. AADCK3118M ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : MR. J.D. MISTRY , A.R / RESPONDENT BY : MR. RAJESH YADAV , D.R / DATE OF HEARING : 06.10 . 2017 / DATE OF PRONOUNCEMENT : 29 .1 2 .2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE COMPANY IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) - 40 , MUMBAI, DATED 12.11.2012 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 30.12.2011 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : - P A G E | 2 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, KNIGHT RIDERS SPORTS PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE APPELLANT) RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 40 [CIT(A)], MUMBAI DATED 12 NOVEMBER 2012 UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (ACT) ON THE FOLLOWING GROUNDS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) : GENERAL 1. ERRED IN UPHOLDING THE ORDER OF THE LEARNED ASSESSI NG OFFICER (AO), BUY CONFIRMING THE TOTAL INCOME OF THE APPELLANT AT RS/ 22,79,69,796 AS AGAINST LOSS OF RS. 11,19,55,440 CLAIMED AS PER THE RETURN OF INCOME. DEDUCTION OF FRANCHISE CONSIDERATION CAPITAL OF REVENUE EXPENDITURE 2. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THAT ANNUAL CONSIDERATION OF RS. 30,03,60,000 PAID/PAYABLE BY THE APPELLANT TO THE BOARD OF CONTROL FOR CRICKET IN INDIA (BCCI), WHICH IS REVENUE IN NATURE, AS A CAPITAL EXPENDITURE. 3. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THAT THE ANNUAL CONSIDERATION PAID/PAYABLE TO BCCI IS IN THE NATURE OF LICENCE OF FRANCHISE OF ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE (I.E. INTANGIBLE ASSET) AS PER THE PROVISIONS OF SECTION 32(1)(II) OF THE ACT. 4. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN UPHOLDING THE LEARNED AOS ORDER BY CONFIRMING THE COST OF THE INTANGIBLE ASSET TO BE RS. 30,03,60,000 (I.E. THE ANNUAL CONSIDERATION), INSTEAD OF ADJUSTING THE ACTUAL COST OF THE FRANCHISE FOR THE PURPOSE OF COMPUTING THE DEPRECIATION. DEDUCTION OF FRANCHISE CONSIDERATION - MATCHING PRINCIPLE OF ACCOUNTING 5. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF ANNUAL CONSIDERATION AMOUNTING TO RS. 7,50,90,000 ON THE MATCHING PRINCIPLE OF ACCOUNTING AS AGAINST THE ACCRUAL BASIS OF ACCOUNTING REGULARLY AND CONSISTENTLY ADOPTED BY THE APPELLANT. DISALLOWANCE OF EXPENSES PAID TO CRICKET ASSOCIATION OF BENGAL (CAB) 6. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF RS. 75,00,000 PAID/PAYABLE BY THE APPELLANT TO KOLKATA POLICE FAMILY WELFARE CENTRE UNDER THE DIRECTIONS OF CAB AS NOT BEING FOR BUSINESS PURPOSE. DISALLOWANCE OF FEES PAID/PAYAB LE TO MR. JOHN BUCHANAN 7. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS. 1,28,34,490 IN CONNECTION WITH COACHING SERVICES PROVIDED BY MR. JOHN BUCHANAN TO THE APPELLANTS CRICKET TEAM ON THE PR EMISE THAT, NO AGREEMENT EXISTED FOR PERIOD FOR P A G E | 3 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 WHICH THE SERVICES WERE PROVIDED BY MR. JOHN BUCHANAN TO THE APPELLANT, WITHOUT CONSIDERING THAT THE AGREEMENT EXECUTED WITH MR. JOHN BUCHANAN IN FACT COVERS COACHING SERVICES PROVIDE BY MR. JOHN BUCHANAN FOR SEASON 1 OF THE INDIAN PREMIER LEAGUE. 8. ERRED IN HOLDING THAT THE PAYMENT IS MADE TO A BUCHANAN CORPORATE COACHING TRUST AND NOT MR. JOHN BUCHANAN, WITHOUT CONSIDERING THAT THE PAYMENT TO BUCHANAN CORPORATE COACHING TRUST IS MADE AS PER THE DIRECTIONS PROV IDED IN THE EXECUTED AGREEMENT BETWEEN THE APPELLANT AND MR. JOHN BUCHANAN. ADHOC DISALLOWANCE IN RESPECT OF EXPENDITURE IN CONNECTION WITH A) BOARDING AND LODGING AND B) FOOD AND NUTRITION 9. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING T HE ADHOC DISALLOWANCE OF THE EXPENDITURE IN CONNECTION WITH BOARDING AND LODGING AND FOOD AND NUTRITION ON THE PREMISE THAT THE SAID EXPENSES ARE NOT IN THE NATURE OF BUSINESS EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT. 10. WITHOUT PREJUDICE TO THE A BOVE, E RRED IN UPHOLDING THE 100% DISALLOWANCE OF A SUM OF RS. 39,19,880 IN CONNECTION WITH FOOD AND BEVERAGES ARRANGEMENTS PROVIDED TO ITS TEAM MEMBERS, DIRECTORS, INVITED CELEBRITIES AND VIPS ON THE DAY ON WHICH MATCHES WERE HELD AT THE APPELLANTS HOME STADIUM. ERRED IN UPHOLDING THE ARBITRARY ADHOC DISALLOWANCE OF A SUM OF RS. 31,76,705 (IE 33% OF RS. 96,26,375) IN CONNECTION WITH BOARDING AND LODGING OF DIRECTORS, INVITED CELEBRITIES AND VIPS IN ITC LTDM AND RS. 37,37,007 (IE 33% OF RS. 1,13,24,264) T OWARDS BOARDING AND LODGING AND FOOD AND NUTRITION EXPENSES OF OTHER HOTELS. ARBITRARY ADHOC DISALLOWANCE IN CONNECTION WITH AIRFARE EXPENSE, TRAVELLING EXPENSE AND VEHICLE HIRE CHARGES 11. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THAT THE ARBITRARY ADHOC DISALLOWANCE OF THE EXPENDITURE IN CONNECTION WITH AIRFARE EXPENSE, TRAVELLING EXPENSE AND VEHICLE HIRE CHARGES ON THE PREMISE THAT THE SAID EXPENSES ARE NOT IN NATURE O F BUSINESS EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT. 12. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN UPHOLDING THE ARBITRARY ADHOC DISALLOWANCE OF A SUM OF RS. 95,63,132 (IE 25% OF RS. 3,82,52,527) BEING EXPENDITURE IN CONNECTION WITH AIRFARE, TRAVELL ING EXPENSES AND VEHICLE HIRE CHARGES OF ITS INVITED GUESTS (INCLUDING DIRECTORS). 13. WITHOUT PREJUDICE TO THE ABOVE, LEARNED, THE LEARNED CIT(A) ERRED IN STATING THAT THE APPELLANT HAD NOT PRODUCED ANY EVIDENCE E.G. AIR TICKET, DETAILS OF VEHICLES, NAME OF S ERVICE PROVIDER, PERSON UTILIZING THESE SERVICES THE NEXUS WITH BUSINESS ETC, INSPITE OF THE FACT THAT ALL THE SUPPORTING INVOICES WERE FURNISHED BEFORE THE LEARNED CIT(A) DURING THE APPELLANT PROCEEDINGS. EXPENDITURE IN CONNECTION WITH SECURITY CHARGES P A G E | 4 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 14. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF SUM OF RS 1,08,700 BEING EXPENDITURE IN CONNECTION WITH SECURITY CHARGES, ON THE PREMISE THAT SUCH EXPENSES HAS ELEMENTS OF PERSONAL EXPENDITURE AND THEREFORE NOT ALLOWABLE U NDER SECTION 37(1) OF THE ACT. DISALLOWANCE OF EXPENSES IN CONNECTION WITH PARTICIPATION IN FASHION SHOWS 15. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF EXPENDITURE IN CONNECTION WITH PARTICIPATION IN FASHION SHOWS ON T HE PREMISE THAT THE SAID EXPENSES ARE NOT IN THE NATURE OF BUSINESS EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT AND ON THE MATCHING PRINCIPLES OF ACCOUNTING AS AGAINST THE ACCRUAL BASIS OF ACCOUNTING CONSISTENTLY AND REGULARLY ADOPTED BY THE APPEL LANT. EXPENSES IN CONNECTION WITH WEBSITE DESIGN CHARGES 16. ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO, BY CONFIRMING THE DISALLOWANCE OF SUM OF RS 8,49,305 IN CONNECTION WITH WEBSITE DESIGN CHARGES WHICH IS REVENUE IN NATURE, AS A CAPITAL EXPENDITURE. 17. ERRED IN NOT CONSIDERING THE CLAIM FOR THE ENTIRE WEBSITE DESIGN CHARGES FOR A SUM OF RS 16,98,609 AS REVENUE EXPENDITURE. DISALLOWANCE OF BUSINESS RELATED EXPENSES 18. ERRED IN UPHOLDING THAT THE APPELLANT HAS FAILED TO PROVE THAT BUSINESS RELATED EXPENSES WERE FOR THE BUSINESS PURPOSE, INSPITE OF THE FACT THAT ALL THE SUPPORTING EVIDENCE/DOCUMENTS IN SUPPORT OF THE EXPENDITURE WERE PLACED AND EXPLAINED BEFORE THE LEARNED AO AND THE LEARNED CIT(A). THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL, TO DECIDE THE APPEAL ACCORDING TO LAW. 2. BRIEFLY STATED, THE FACTS OF T HE CASE ARE THAT THE ASSESSEE COMPANY WHICH WAS INCORPORATED ON 27.02.2008 AS A 100% SUBSIDIARY OF RED CHILLIES ENTERTAINMENT PVT. L IMITED HAD E - FILED ITS RETURN OF INCOME FOR AY 2009 - 10 ON 30.09.2009, DECLARING LOSS OF RS.11,19,55,440/ - . THE CASE OF THE A SSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. THE ASSESSEE COMPANY HAD ENTERED INTO AN IP L FRANCHISE AGREEMENT WITH BCCI IPL ON 4 TH APRIL, 2008 FOR FRANCHISE RIGHTS OF IPL P A G E | 5 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 TEAM WITH HOME GROUND AT EDEN GARDEN, KOLKATA , WHICH WAS NAMED AS KOLKATA KNIGHT RIDERS (FOR SHORT KKR). THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING THE A.O OBSERVED THAT AS PER THE AGREEMENT DATED 04. 04.2008 BETWEEN THE ASSESSEE COMPANY AND BOARD OF CONTROL OF CRICKET IN INDIA (FOR SHORT B CCI ) , THE ASSESSEE WAS TO PAY FOR THE PERIOD 2008 - 17 (INCLUSIVE) AN ANNU A L FRANCHISE FEE OF RS.30,03,60,000/ - . THE A.O HELD A CONVICTION THAT THE F RANCHISE FEE OF RS.30,03,60,000/ - WAS A PART OF THE CONSIDERATION WHICH WAS PAID BY THE ASSESSEE FOR OWNING THE IPL TEAM AND NOT AS A FEE FOR PLAYING THE IPL MATCHES VESTED AN ENDURING BENEFIT WITH THE ASSESSEE, THEREFORE, THE SAME BEING A CAPITAL EXPENDITURE, WAS HOWEVER WRONGLY CLAIMED AS A REVENUE EXPENDITURE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERA TION. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CALLED UPON THE ASSESSEE TO PUT FORTH AN EXPLANATION AS REGARDS ITS CLAIM OF THE AFORESAID AMOUNT AS A REVENUE EXPENDITURE. THE ASSESSEE IN ORDER TO IMPRESS UPON THE A.O THAT THE FRANCHISEE FEES WAS RIGHTLY CLAIMED AS A REVENUE EXPENDITURE, SUBMITTED AS UNDER: - 1.1 AS YOU ARE AWARE, KRSPL HAS ENTERED INTO A FRANCHISE AGREEMENT ('AGREEMENT') WITH THE BOARD OF CONTROL FOR CRICKET IN INDIA ('BCCI - IPL') IN APRIL 2008. AS PER THE AGREEMENT, KRSPL WILL ESTABLISH AND OPERATE A TEAM IN THE CITY OF KOLKATA AND PARTICIPATE IN IPL TOURNAMENT, OWNED AND OPERATED BY BCCI - IPL. 1.2 REFERENCE IS INVITED TO THE FOLLOWING CLAUSES OF THE AGREEMENT: 1.2.1 OBLIGATION TO PAY: PAYM ENT OF A SUM OF RS 9,01,08,000/ - ON OR BEFORE 1 JANUARY IN EACH SUCH YEAR AS LEAGUE DEPOSIT. THIS LEAGUE DEPOSIT SHALL BE REFUNDABLE WITHOUT INTEREST IN ANY YEAR IF IPL DOES NOT TAKE PLACE AT ALL IN SUCH YEAR; AND - RS.21,02,52,000/ - , WHICH SHALL BE PAID ON THE DATE OF THE FIRST MATCH IN IPL IN EACH SUCH YEAR. 1.3 CLAUSE 2.3 OF THE AGREEMENT STATES AS UNDER: 'BCCI - IPL AGREES TO STAGE THE LEAGUE IN EACH YEAR DURING THE TERM AS CONTEMPLATED BY THE OPERATIONAL RULES UNLESS IN RESPECT OF ANY SUCH YEAR BCCI - IPL REASONABLY BELIEVES THAT STAGING THE LEAGUE IS NOT VIABLE FOR ANY REASON AND IN SUCH CIRCUMSTANCES IF THE LEAGUE IS NOT STAGED AT ALL THEN P A G E | 6 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE OBLIGATION OF THE FRANCHISEE TO PAY THE FRANCHISEE CONSIDERATION AND THOSE OF THE FRANCHISEE'S OBLIGATIONS IN RESPECT OF THE STAGING OF MATCHES SHALL BE SUSPENDED UNTIL SUCH TIME AS THE LEAGUE IS STAGED ONCE MORE (IN W HOLE OR PART) WHEREUPON ALL OF SAID OBLIGATIONS SHALL AUTOMATICALLY AND IN THEIR ENTIRELY BE OF FULL FORCE AND EFFECT. AS YOU WILL INFER FROM THE ABOVE, THE CONSIDERATION IS PAYABLE TO BCCI - IPL ONLY WHEN THE EVENT IS ORGANIZED I.E WHEN THE FIRST MATCH IN IPL IS PLAYED IN THAT YEAR. THIS IS EVIDENT FROM THE FACT THE ADVANCE PAID (IS LEAGUE DEPOSIT) WOULD BE REFUNDED IF IPL DOES NOT TAKE PLACE THAT YEAR. THUS, THE PAYMENT OBLIGATION IS DIRECTLY LINKED WITH THE IPL MATCHES PLAYED IN T HAT YEAR. THERE IS NO FURTHER BENEFIT THAT WILL ARISE IN FUTURE YEARS FROM THE EVENT THAT IS HELD IN THE CURRENT YEAR. IN VIEW OF THE ABOVE, THE PAYMENT OF THE ANNUAL CONSIDERATION FOR THE YEAR ENABLES KRSPL TO BE ELIGIBLE TO PARTICIPATE IN THE TOURNAMENT FOR THE SUBJECT YEAR AND ALSO FOR THE NEXT YEAR. HOWEVER, IT DOES NOT GUARANTEE THAT THE FUTURE PARTICIPATION IS NOT SECURED BY THE PAYMENT IN THE CURRENT YEAR 1.4 HOSTING OF THE EVENT: FURTHER, CLAUSE 2.3 OF THE AGREEMENT STATES AS UNDER: ANY NON - STAGING OF THE LEAGUE BY BCCI - IPL (IN WHOLE OR PART) SHALL NOT CONSTITUTE A BREACH OF THIS AGREEMENT FOR THE PURPOSES OF CLAUSES 11 OR OTHERWISE. KRSPL DOES NOT HAVE THE RIGHT TO COMPEL BCCI - PL TO ORGANIZE THE EVENT IN ANY YEAR. IF IN A PARTICUL AR YEAR THE EVENT IS NOT ORGANIZED BY BCCI THEN KRSPL NEITHER PAYS ANNUAL CONSIDERATION NOR DOES IT EARN ANY REVENUE IN THAT YEAR. THUS THE ANNUAL PAYMENT TO BCCI - IPL IS INTRINSICALLY LINKED TO THE HOSTING OF THE EVENT FOR THAT YEAR. IN FACT, THERE IS NO O BLIGATION UPON BCCI TO HOST THE EVENT FOR THE CURRENT YEAR IN THE SUBSEQUENT YEARS. 1.5 TERMINATION OF THE AGREEMENT: FURTHER, AS PER CLAUSE 11.1 OF THE AGREEMENT, STATES AS UNDER: EITHER PARTY MAY TERMINATE THIS AGREEMENT WITH IMMEDIATE EFFECT BY NOTICE IN WRITING IF THE OTHER PARTY HAS FAILED TO REMEDY ANY REMEDIABLE MATERIAL BREACH OF THIS AGREEMENT WITHIN A PERIOD OF 30 DAYS OF THE RECEIPT OF A NOTICE IN WRITING REQUIRING IT TO DO SO WHICH NOTICE SHALL EXPRESSLY REFER TO THIS CLAUSE 11.1 AND TO THE FACT THAT TERMINATION OF THIS AGREEMENT MAY BE A CONSEQUENCE OF ANY FAILURE TO REMEDY THE BREACH SPECIFIED IN IT. FOR THE AVOIDANCE OF DOUBT A BREACH BY THE FRANCHISEE OF ITS PAYMENT OBLIGATIONS UNDER THIS AGREEMENT OR UNDER CLAUSE 22 SHALL BE DEEMED T O BE A MATERIAL BREACH OF THIS AGREEMENT FOR THE PURPOSES OF THIS CLAUSE. ACCORDINGLY, IF THE ANNUAL CONSIDERATION IS NOT PAID DULY, IT WOULD BE CONSIDERED AS A MATERIAL BREACH OF THE AGREEMENT, WHICH WOULD GIVE .BCCI - I PL THE RIGHT TO TERMINATE AGREEMENT. IN THE EVENT OF TERMINATION, KRSPL GETS NO COMPENSATION AS IT HAD NO RIGHTS TO PARTICIPATE IN THE FUTURE YEARS BY VIRTUE OF PAYMENT OF CONSIDERATION IN THE CURRENT YEAR. 1.6 IN VIEW OF THE ABOVE IT IS SUBMITTED THAT K RSPL IS ONLY GIVEN A RIGHT TO OPERATE THE FRANCHISE AND IT IS OBLIGATED TO PAY THE ANNUAL CONSIDERATION EACH YEAR OF THE AGREEMENT TO ENABLE IT TO PARTICIPATE IN THE TOURNAMENT FOR THE SUBJECT YEAR AND EARN THE REVENUES FROM THAT EVENT. P A G E | 7 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THUS THESE ARE RECURRING ANNUAL PAYMENTS AND DO NOT GIVE ANY BENEFIT OF AN ENDURING NATURE TO KRSPL. 1.7 CONSIDERING THAT PAYMENT TO BCCI - IPL IS AN ANNUAL RECURRING EXPENDITURE AND DOES NOT GIVE ANY ENDURING BENEFIT TO KRSPL, THE ANNUAL PAYMENT IS CONSIDER ED AS REVENUE EXPENDITURE AND CLAIMED AS DEDUCTION UNDER SECTION 37(L) OF THE ACT WHILE COMPUTING THE TAXABLE INCOME OF KRSPL. LEGAL SUBMISSIONS TO SUPPORT THAT THE ANNUAL PAYMENT MADE TO BCCI IS IN THE NATURE OF REVENUE EXPENDITURE . A) REVENUE EXPENDITURE AS PER SECTION 37(1) OF THE ACT 1.8 SECTION 37(2) OF THE ACT INTER ALIA ALLOWS DEDUCTION IN RESPECT OF ANY EXPENDITURE, NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36; PERSONAL EXPENSES OF THE ASSESSEE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION; AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE; THE SUM OF RS.30,03,60,000/ - PAID TO BCCI - IPL IS EXPENDITURE WHICH DOES NOT FALL WITHIN SECTIONS 30 TO 36 OF THE ACT AND SUCH EXPENDITURE DOES NOT CONSTITUTE PERSONAL EXPENSES OF THE ASSESSEE. THEREFORE EXPENDITURE SHOULD BE ALLOWED A S A DEDUCTION UNDER SECTION 37(1) OF THE ACT IF IT IS NOT CAPITAL EXPENDITURE AND IF IT IS LAID OUT OR EXPENDED DURING THE PREVIOUS YEAR, WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. THEREFORE, WE HAVE PROVIDED BELOW OUR SUBMISSIONS IN SUPPORT OF THE REVENUE NATURE OF THE ANNUAL CONSIDERATION PAID TO BCCI. 1.9 THE ACT HAS NOT DEFINED THE TERMS CAPITAL EXPENDITURE AND 'REVENUE EXPENDITURE', ACCORDINGLY BASED ON THE PRINCIPLES LAID DOWN IN THE FOLLOWING JUDICIAL PRECEDENTS A DISTINCTION HAS BE MADE BETWEEN 'CAPITAL EXPENDITURE' AND 'REVENUE EXPENDITURE': SECURING A RIGHT FOR CARRYING ON THE BUSINESS WOULD BE ON REVENUE ACCOUNT AND NOT A CAPITAL ASSET ENDURING BENEFIT: CAPITAL EXPENDITURE PRODUCES BENEFITS FOR SEVERAL PREVIOUS YEARS, WHEREAS REVENUE EXPENDITURE IS CONSUMED WITHIN A PREVIOUS YEAR; IMPROVES THE EARNING CAPACITY AND BUSINESS EXPEDIENCY: CAPITAL EXPENDITURE MAKES IMPROVEMENTS IN THE EARNING CAPACITY OF A BUSINESS. REVENUE EXPENDITURE, ON THE OTHER HAND, MAINTAINS THE PROFIT - MAKIN G CAPACITY OF A BUSINESS. IN THE CASE OF AN ONGOING BUSINESS, EXPENDITURE MADE FOR BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FOR THE ENDURING BENEFIT OF THE TRADE IS CAPITAL EXPENDITURE. WHAT NEEDS TO BE CONSIDERED IN SUCH A CASE IS THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE CONSIDERED AS CAPITAL EXPENDITURE. WHAT IS AN OUTGOING OF CAPITAL AND WHAT IS AN OUTGOING ON ACCOUNT OF REVENUE DEPENDS ON WHAT THE EXP ENDITURE IS CALCULATED TO EFFECT FROM A PRACTICAL AND P A G E | 8 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 BUSINESS POINT OF VIEW RATHER THAN UPON THE JURISTIC CLASSIFICATION OF THE LEGAL RIGHTS, IF ANY, SECURED, EMPLOYED OR EXHAUSTED IN THE PROCESS. THE QUESTION MUST BE VIEWED IN THE LARGER CONTEXT OF BUSIN ESS NECESSITY OR EXPEDIENCY. PERIODICITY OF PAYMENT: USUALLY CAPITAL EXPENDITURE IS A NON - RECURRING OUTLAY, WHEREAS REVENUE EXPENDITURE IS NORMALLY A RECURRING OUTLAY. 1.10 WE HAVE PROVIDED BELOW OUR SUBMISSIONS IN SUPPORT OF THE REVENUE NATURE OF ANNUAL PAYMENT MADE BY KRSPL TO BCCI: SECURING A RIGHT FOR CARRYING ON THE BUSINESS WOULD BE ON REVENUE ACCOUNT: KRSPL PAYS FOR THE RIGHT TO PARTICIPATE IN THE TOURNAMENT FOR THE CURRENT YEAR WITHOUT THE GUARANTEE THAT IN FUTURE YEARS IT WILL ALSO BE ELIGIBLE TO PARTICIPATE IN THE TOURNAMENT. THE EXPENDITURE INCURRED BY KRSPL IN THE COURSE OF CARRYING ON THE BUSINESS. THE EXPENDITURE IS NOT INCURRED TO ACQUIRE THE RIGHTS BUT TO ENSURE THAT THERE IS A STEADY STREAM OF REVENUE. THE ACQUISITION OF RIGHTS, IF ANY, UNDER THE AGREEMENT DOES NOT AMOUNT TO ACQUISITION OF AN ASSET IN THE CAPITAL FIELD. THERE ARE SEVERAL DECISIONS IN WHICH IT HAS BEEN HELD THAT PAYMENTS MADE FOR SECURING THE RIGHT TO SUPPLY OF RAW MATERIALS FOR SEVERAL YEARS WOULD BE ON R EVENUE ACCOUNT - SUPREME COURT DECISION IN CASE OF IN GOTAN LIME SYNDICATE VS. CIT 59 ITR 718 AND M. A. JABBAR VS. CIT 68 ITR 493, AND OF THE ANDHRA PRADESH HIGH COURT IN G. VENKATA BHOOMA REDDY VS. CIT 43 ITR 100. THE COURTS HAVE HELD THAT THERE IS A DIST INCTION BETWEEN PAYMENTS MADE FOR ACQUIRING A CAPITAL ASSET AND THEREFORE CAPITAL EXPENDITURE AND PAYMENT FOR SECURING RAW MATERIAL AND THEREFORE REVENUE EXPENDITURE. ENDURING BENEFIT: AS HIGHLIGHTED ABOVE IN PARA 5.3, KRSPL DOES NOT GET ANY ENDURING BENEFIT BY MAKING THE ANNUAL PAYMENT TO BCCI IPL TO OPERATE THE IPL TEAM IN KOLKATA. THE SETTLED LEGAL POSITION IN RELATION TO THE TEST OF 'ENDURING BENEFIT' IS, WHAT IS MATERIAL IS TO CONSIDER THE NATURE OF THE ADVANTAGE IN A COMMERCIAL S ENSE. THE PAYMENT OF ANNUAL FEE ONLY ENABLES IT TO OPERATE THE TEAM FOR THE YEAR FOR WHICH THE PAYMENT RELATES TO. THE ANNUAL PAYMENT DOES NOT GUARANTEE ANY FUTURE BENEFIT TO KRSPL EITHER IN TERMS OF PARTICIPATING IN THE FUTURE TOURNAMENT OR EARNING FUTURE REVENUE. THE PAYMENT ONLY ASSISTS KRSPL IN PARTICIPATE IN THE EVENT FOR THE CURRENT YEAR AND EARN REVENUES BY VIRTUE OF ITS PARTICIPATION. IF KRSPL WANTS TO PARTICIPATE IN THE TOURNAMENT IN THE FUTURE YEAR THEN IT WOULD HAVE TO PAY THE PAYMENT IN THE NEXT YEAR. ONLY WHEN K RSPL MAKES THE PAYMENT IN THE SUBSEQUENT YEAR THAT IT GETS THE PARTICIPATE IN THE TOURNAMENT AND EARN INCOME FROM IT. SINCE THE BENEFIT OF THE PAYMENT IS RESTRICTED TO THE CURRENT YEAR, THERE IS NO FUTURE BENEFIT THAT ACCRUES TO KRSPL BY MAKING THE ANNUAL FRANCHISE PAYMENT. RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDICIAL PRECEDENTS: THE SUPREME COURT IN THE CASE OF CIT VS. COAL SHIPMENTS PRIVATE LIMITED 82 ITR 902, WHEREIN IT HAS BEEN HELD THAT ALTHOUGH AN ENDURING BENEFIT NEED NOT B E OF AN EVERLASTING NATURE IT SHOULD P A G E | 9 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 NOT ALSO BE SO TRANSITORY AND EPHEMERAL THAT IT CAN COME TO AN END AT ANY TIME. EMPIRE JUTE COMPANY LIMITED VS. CIT (124 ITR 1) (SC) THE HONORABLE SUPREME COURT HAS IN THIS CASE LAID DOWN THE PRINCIPLES TO BE APPLIED IN DETERMINING WHETHER AN EXPENSE IS CAPITAL OR REVENUE IN NATURE. THE BROAD PRINCIPLES AS PER THIS DECISION AND THEIR APPLICABILITY ARE AS FOLLOWS: IF ANY ENDURING ADVANTAGE IS OBTAINED, IT IS NOT NECESSARY THAT IN EVERY CASE THE EXPENDITURE FOR SECURING IT MUST BE TREATED AS A CAPITAL EXPENDITURE. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE BUSINESS TO BE CARRIED ON MORE EFFECTIVELY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, ALTHOUGH THE ADVANTAGE MAY ENDURE FOR INDEFINITE FUTURE. WHERE THE EXPENDITURE IS INCURRED, NOT FOR THE PURPOSE OF BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE, BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO AUGMENT THE PROFITS, IT IS REVENUE EXPENDITURE. CIT V S. INDIAN OXYGEN LTD 218 ITR 337 (SC) WHERE UNDER AN AGREEMENT FOR SUPPLY OF TECHNICAL KNOW - HOW, THE FOREIGN COMPANY HAD NOT SOLD ANY INFORMATION, PROCESS OR INVENTION TO THE ASSESSEE AND NO ADVANTAGE OF ENDURING NATURE HAD BEEN OBTAINED BY THE INDIAN COMPANY, AMOUNT PAID BY THE INDIAN COMPANY UNDER THE COLLABORATION AGREEMENT WAS REVENUE EXPENDITURE. CIT VS. JYOTI ELECTRIC MOTORS LTD 173 CTR 20 (GUJ) THE FEES PAID FOR TECHNICAL KNOW - HOW BY THE ASSESSEE IS DEDUCTIBLE AS REVENUE EXPENDITURE AS THE ASSESSEE COMPANY DID NOT ACQUIRE ANY ENDURING ADVANTAGE IN THE CAPITAL FIELD IN VIEW OF THE TERMS AND CONDITIONS STIPULATED IN THE AGREEMENT. IT WAS MERELY GRANT OF A NON - EXCLUSIVE LICENSE FOR THE USE OF AN ASSET AND UNDER THE AG REEMENT THERE IS NO ACQUISITION OF ANY ASSET WHICH WOULD RENDER THE PAYMENT TO BE CAPITAL IN NATURE. CIT V S. INDIAN VISIT. COM (P.) LTD 176 TAXMAN 164 (DEL) THE ASSESSEE IN TRAVEL BUSINESS SPENT AN AMOUNT OF RS 20,23,317 / - ON DEVELOPMENT OF ITS WEBSITE AND THE QUESTION AROSE WHETHER IT WAS CAPITAL OR REVENUE. ALLOWING IT AS REVENUE, THE DELHI HIGH COURT DRAWING SUPPORT FROM THE APEX COURT DECISION IN ALEMBIC CHEMICAL WORKS CO. LTD VS. CIT 177 ITR 377, MADE THE FOLLOWING W ORTHY OBSERVATIONS/FINDINGS: 7. CONSIDERED IN THE LIGHT OF THESE PRINCIPLES ENUNCIATED BY THE SUPREME COURT, IT IS CLEAR THAT JUST BECAUSE A PARTICULAR EXPENDITURE MAY RESULT IN AN ENDURING BENEFIT WOULD NOT MAKE SUCH AN EXPENDITURE OF A CAPITAL NATURE. WHAT IS TO BE SEEN IS WHAT IS THE REAL INTENT AND PURPOSE OF THE EXPENDITURE AND AS TO WHETHER THERE IS ANY ACCRETION TO THE FIXED CAPITAL OF THE ASSESSEE. IN THE CASE OF EXPENDITURE ON A WEBSITE, THERE IS NO CHANGE IN THE CAPITAL ASSET OF THE ASSE SSEE. ALTHOUGH THE WEBSITE MAY PROVIDE AN ENDURING BENEFIT TO AN ASSESSEE, THE INTENT AND PURPOSE BEHIND THE PURPOSE FOR A WEBSITE IS NOT TO CREATE AN ASSET BUT ONLY TO PROVIDE A MEANS P A G E | 10 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 FOR DISSEMINATING THE INFORMATION ABOUT THE ASSESSEE .THE SAME COULD VE RY WELL HAVE BEEN ACHIEVED AND, INDEED, IN THE PAST, IT WAS ACHIEVED BY PRINTING TRAVEL BROCHURES AND OTHER PUBLISHED MATERIALS AND PAMPHLETS. THE ADVANCE OF TECHNOLOGY AND THE WIDE - SPREAD USE OF THE INTERNET HAS PROVIDED A VERY POWERFUL MEDIUM TO COMPANIES TO PUBLICIZE THEIR ACTIVITIES TO A LARGER SPECTRUM OF PEOPLE AT A MUCH LOWER COST. WEBSITES ENABLE COMPANIES TO DO WHAT THE PRINTED BROCHURES DID BUT, IN A MUCH MORE EFFICIENT MANNER AS WELL AS IN A MUCH SHORTER PERIOD OF TIME AND COVERING A MUCH LARGER SET OF PEOPLE WORLDWIDE. IMPROVES THE EARNING CAPACITY AND BUSINESS NECESSITY: THE PAYMENT DOES NOT ENABLE KRSPL TO IMPROVE ITS EARNING CAPACITY. THE ANNUAL PAYMENT IS ESSENTIAL FOR THE CURRENT YEAR PARTICIPATION AND WITHOUT THE PAYMENT THERE IS NO POSSIBILITY OF EARNING ANY INCOME FROM THAT YEAR PARTICIPATION. THE ANNUAL PAYMENT TO BCCI - IPL MERELY FACILITATES KRSPL'S BUSINESS OF OPERATING THE TEAM AND TO EARN REVENUE FOR THE YEAR UNDER CONSIDERATION. THE EXPENSES INCURRED BY KRSPL ARE IN THE NATURE OF REVENUE EVEN THOUGH THE BENEFITS THAT IT ACQUIRED UNDER THE AGREEMENT ARE EXCLUSIVE TO IT. THE ANNUAL PAYMENT IS A BUSINESS NECESSITY AND WITHOUT PAYMENT OF THE SAME THERE WOULD BE NO RIGHT TO OPERATE/PARTICIPATE IN THAT YEAR. RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDICIA L PRECEDENTS: CIT VS. CIBA OF INDIA LTD 69 ITR 692 (SC) WHERE THE ASSESSEE DID NOT BECOME ENTITLED UNDER THE AGREEMENT EXCLUSIVELY, EVEN FOR THE PERIOD OF THE AGREEMENT, TO THE PATENTS AND TRADEMARKS OF THE COMPANY BUT HAD MERE ACCESS TO THE TECHNICAL KNOWLEDGE/ EXPERIENCE WHICH THE FOREIGN COMPANY COMMANDED, THE PAYMENT TO FOREIGN COMPANY WERE DEDUCTIBLE. IN THIS CASE, THE SUPREME COURT HAS CONSIDERED THE FOLLOWING FACTS WHILE ALLOWING THE PAYMENT FOR TECHNICAL KNOW - HOW AS REVENUE EXPENDITURE: - THE LI CENSE WAS FOR A PERIOD OF FIVE YEARS AND LIABLE TO BE TERMINATED IN CERTAIN EVENTUALITIES EVEN BEFORE THE EXPIRY OF THAT PERIOD; - THE OBJECT OF THE AGREEMENT WAS TO OBTAIN THE BENEFIT OF TECHNICAL ASSISTANCE FOR RUNNING THE BUSINESS; - THE LICENSE WAS GRANTED TO THE ASSESSEE SUBJECT TO RIGHTS ACTUALLY GRANTED OR WHICH MAY BE GRANTED AFTER THE DATE OF THE AGREEMENT TO OTHER PERSONS; - THE ASSESSEE WAS EXPRESSLY PROHIBITED FROM DIVULGING CONFIDENTIAL INFORMATION TO THIRD PARTIES WITHOUT T HE CONSENT OF THE SWISS COMPANY; - THERE WAS NO TRANSFER OF THE FRUITS OF RESEARCH ONCE FOR ALL; AND - THE STIPULATED PAYMENT WAS RECURRENT DEPENDENT UPON THE SALES AND ONLY FOR THE PERIOD OF THE AGREEMENT. ALEMBIC CHEMICAL WORKS CO LTD VS. CIT 177 ITR 377 (SC) THE CIRCUMSTANCE THAT THE AGREEMENT IN SO FAR AS IT PLACED LIMITATIONS ON THE RIGHT OF THE ASSESSEE IN DEALING WITH THE KNOW - HOW AND THE CONDITIONS AS TO NON - PARTIBILITY, CONFIDENTIALITY AND SECRECY OF THE KNOW - HOW INCLINE TOWARDS THE INFERENCE THAT THE RIGHT PERTAINED MORE TO THE USE OF KNOW - HOW P A G E | 11 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THAN TO ITS EXCLUSIVE ACQUISITION AND HENCE THE EXPENDITURE WOULD BE REVENUE IN NATURE. PERIODICITY OF PAYMENT: THE ACQUISITION OF CAPITAL ASSET NECESSARILY INVOLVES AN UPFRONT PAYMENT. IN THE PRESENT CASE, KRSPL MAKES AN ANNUAL PAYMENT AND MORE IMPORTANTLY THE BENEFIT OF THE PAYMENT DOES NOT EXTEND TO SUBSEQUENT YEARS. CIT VS. L. A. E.C. (PUMPS) LTD 232 ITR 316 (SC) WHERE UNDER AN AGREEMENT WITH THE FOREIGN COMPANY, THE ASSESSEE WAS GRANTED EXCLUSIVE LICENCE TO USE PATENTS AND DESIGN FOR 10 YEARS WITH OPTION TO EXTEND OR RENEW AGREEMENT AND ASSESSEE WAS NOT TO DISCLOSE DOCUMENTS TO THIRD PARTIES, PAYMENT MADE BY ASSES SEE TO FOREIGN COMPANY WAS TO BE TREATED AS REVENUE EXPENDITURE. CONCLUSION IN VIEW OF THE FACTS OF THE CASE AND THE ABOVE JUDICIAL PRECEDENTS, KRSPL WISHES TO SUBMIT THAT ; A) THE ANNUAL PAYMENT DOES NOT PROVIDE ANY BENEFIT OF ENDURING NATURE; B) THE ANNUAL PAYMENT DOES NOT IMPROVE THE PROFIT MAKING CAPACITY BUT IS IN FACT NECESSITATED BY BUSINESS EXPEDIENCY; C) THE PAYMENT IS RECURRING IN NATURE. AND THEREFORE THE ANNUAL PAYMENT TO BCCI - IPL SHOULD BE TREATED AS REVENUE EXPENDITURE. ALSO FOR THE PAYMENT TO QUALIFY AS CAPITAL ASSET, IT IS IMPORTANT THAT KRSPL TO PASS THE OWNERSHIP TEST. IN THE PRESENT CASE, PAYMENT OF ANNUAL PAYMENT TO BCCI DOES NOT LEAD TO THE CREATION OR OWNERSHIP OF ANY ASSET AND THEREFORE QUESTION OF RECURRING ANNUAL CONSIDERATION AS A CAPITAL ASSET DOES NOT ARISE. RECOGNIZING ANNUAL CONSIDERATION PAID TO BCCI (WHERE TAXES ARE WITHHELD UNDER SECTION 194J OF THE ACT) AS A CAPITAL ASSET IS UNJUST AND UNWARRANTED AND AGAINST THE LAW. B) POSITION ADOPTED BY REVENUE AUTHORITIES. 1.1 KRSPL HAS WITHHELD TAXES UNDER SECTION 194J OF THE ACT WHILE MAKING PAYMENT TO BCCI - IPL. THE PAYMENT TO BCCI - IPL IS SUBJECT TO WITHHOLDING TAX ONLY IF THE PAYMENT IS IN THE NATURE OF ROYALTY . THE ABOVE POSITION IS ALSO ACCEPTED AND ENDORSED BY THE WITHHOLDING TAX AUTHORITIES. 1.2 A PAYMENT CANNOT BE CLASSIFIED AS ROYALTY IF THE PAYMENT IS VIEWED AS ACQUISITION OF A CAPITAL ASSET. IF KRSPL IS BUYING AN ASSET FROM BCCI - IPL THEN SUCH PAYMENT CANNOT BE VIEWED AS ROYALTY AS DEFINED UNDER SECTION 194J OF THE ACT. 1.3 FURTHER IN CASE THERE IS AN ACQUISITION OF AN ASSET, THEN THE SELLER CANNOT BE DEEMED TO HAVE PROVIDED A SERVICE TO THE BUYER. IT IS SUBMITTED THAT BCCI IS LEVYING SERVICE TAX ON THE ANNUAL PAYMENTS BY KRSPL. A SALE OF THE ASSET CANNOT RESULT IN THE SELLER PROVIDING A SERVICE TO BCCI - IPL. P A G E | 12 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 IN VIEW OF THE ABOVE, WE WISH TO SUBMIT THAT THE PAYMENT OF ANNUAL CONSIDERATION NEITHER RESULTS INTO ACQUISITION OF ANY CAPITAL ASSET NOR FOR ACQUIRING, EXTENDING OR IMPROVEMENT OF ANY FIXED ASSET. IT MERELY FACILITATES KRSPL TO OPERATE ITS BUSINESS. IF THE OUTGOING EXPENDITURE IS SO RELATED TO THE CARRYING ON OR THE CON DUCT OF THE BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT - EARNING PROCESS, THE EXPENDITURE IS TO BE REGARDED AS REVENUE EXPENDITURE. IT IS FURTHER SUBMITTED THAT, THE ANNUAL PAYMENT DOES NOT MAKE ANY IMPROVEMENT IN THE EARNING CAPACITY OF THE BUSINESS OF KRSPL AND ONLY ENSURES PARTICIPATION OF THE IPL EACH YEAR. ACCORDINGLY, THE ANNUAL PAYMENT TO BCCI - IPL SHOULD BE TREATED AS REVENUE EXPENDITURE IN TERMS OF THE PROVISIONS OF SECTION 37(1) OF THE ACT, AND THEREFORE THE EXPENDITURE OUGHT TO BE ALLOWED AS A DEDUCTION IN COMPUTING KRSPLS INCOME IN THE YEAR IN WHICH IT IS INCURRED. 4. THE A.O AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE AFORESAID CONTENTION S OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRI BE TO THE SAME. THE A. O AFTER PERUSING THE IPL FRANCHISE AGREEMENT AND THE VARIOUS RIGHTS AND OBLIGATIONS EMERGING THERE FROM, DELIBERATED ON THE VARIOUS ASPECTS OF THE AGREEMENT , VIZ. (I). THAT BCCI HAD STARTED THE SERIES BY INVITING BIDS TO OWN AND OPERATE 8 TEAMS FOR DIFFERE NT LOCATIONS AND TO BE A PART OF AND TAKE PART IN THE LEAGUE; (II). THAT THE TERM OF THE LE AGUE WAS INDEFINITE AS IT WAS AS LONG AS THE LEAGUE CONTINUED; (III). THAT THE FRANCHISEES WERE ENTITLED TO SELL THEIR FRANCHISE TO A THIRD PARTY OR TO EFFECT A TRANSFER OF A CONTROLLING INTEREST IN THE COMPAN Y WHICH CONTROL LED THE FRANCHISE AFT ER A MINIMUM PERIOD OF 3 YEARS, SUBJECT TO PAYMENT TO IPL A PERCENTAGE OF A VALUE OF THE BUSINESS, VIZ . 10% FOR THE FIRST SUCH SALE OR TRANSFER AND 5% THEREAFTER; AND (IV). THAT BY VIRTUE OF THE RIGHT TO OWN AND OPERATE THE RESPECTIVE FRANCHISEES, EACH FRANCHISEE BECAME ENTITLED TO RECEIVE CERTAIN REVENUE RELATING TO THE LEAGUE AND THEIR RESPECTIVE TEAMS. THUS , IN THE BACKDROP OF THE AFORESAID FACTS THE A.O OBSERVED THAT THE REVENUE ARISING IN THE HANDS OF THE ASSESSEE WAS FROM EXPLOITATION OF CENTRAL RIGHTS, LICENSING & MERCHANDISING RIGHTS AND FRANCHISEE RIGHTS. THE A.O FURTHER OBSERVED THAT EACH RESPECTIVE FRANCHISEE WAS RESPONSIBLE FOR ALL THE COST S RELATING TO THE OPERAT ION OF ITS FRANCHISE , INCLUDING THE FEES AND SALARIES OF ALL PERSONS PROVIDING SERVICES FOR ITS P A G E | 13 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 TEAM, AS WELL AS ALL T HE COSTS INVOLVED IN STAGING MATCHES AT THE HOME GROUNDS , INCLUDING HIRING OF STADIUM & SECURITY AND STAFF COST AT STADIUM. IT WAS FURTHER OBSERVED BY THE A.O THAT FOR A FRANCHISEE TO OPERATE A FRANCHISE AND TO BE A MEMBER OF THE LEAGUE , IT WAS REQUIRED TO PAY TO THE IPL CERTAIN AMOUNTS, VIZ. ( I ) A FEE, DESCRIBED AS THE FRA N CHISEE FEE TO BE PAID IN 10 EQUAL INSTALMENTS; AND ( II ) 20% OF SUM S RECEIVED BY EACH FRANCHISEE FROM THE EXPLOITATION OF THE CENTRAL RIGHTS AND FRANCHISE RIGHTS EVERY YEAR FROM THE 11 TH YEAR ONWARD FOR THE TERM OF THE LEAGUE . 5. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS OBSERVED THAT M/S RED CHILLIES ENTERTAINMENT PVT. LTD. HAD MADE A SUCCESSFUL BID FOR KOLKATA TEAM FOR A CONSIDERATION OF US D 75.09 MILLION , WHICH WAS PAYABLE AS F RANCHISE FEES IN 10 EQUAL INSTALMENTS. THE A.O OBSERVED THAT EACH FRANCHISEE BY PAYING THE F RANCHISE FEES ACQUIRED THE RIGHT TO OPERATE A TEAM AND BE A MEMBER OF THE LEAGUE FOR THE TERM OF THE LEAGUE, AND BY VIRTUE OF THE SAID RIGHT WAS ENTITLED TO RECEIVE CERTAIN REVENUE RELATING TO THE LEAGUE AND THEIR RESPECTIVE TEAM. THE A.O FURTHER OBSERVED THAT BY MAKIN G THE PAYMENT OF THE F RANCHISE FEE THE ASSESSEE HAD ACQUIRED THE AFORESAID RIGHTS AS THAT OF A FRANCHISEE. THE A.O IN ORDER TO FORTIFY HIS VIEW THAT THE FRANCHISE PAYMENT MADE BY THE ASSESSEE WAS CLEARLY IN THE NATURE OF A CAPITAL EXPENDITURE PLACED RELIAN CE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOCKS LTD. VS. CIT (2010) 327 ITR 323 (SC). THE A.O OBSERVED THAT IN THE AFORESAID CASE THE ISSUE BEFORE THE HONBLE APEX COURT WAS AS TO WHETHER THE BSE MEMBERSHIP CARD HELD BY A SHARE BROKER IN THE BOMBAY STOCK EXCHANGE (BSE) WAS A LICENSE OR A BUSINESS O R COMMERCIAL RIGHT OF A SIMILAR NATURE UNDER SEC. 32(1)(II) , AND THEREFORE, AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION UNDER SEC.32(1)(II) , OR NOT . THE A.O OBSERVED THAT THE P A G E | 14 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HONBLE SUPREME COURT HAD CONCLUDED THAT THE RIGHT OF MEMBERSHIP WHICH ENABLED THE ASSESSEE TO TRADE ON THE FLOOR OF THE BSE AND ACCESS THE MARKET, THOUGH WAS A PERSONAL PERMISSION, HOWEVER , THE SAME WAS A BUSINESS OR A COMMERCI AL RIGHT WHICH WAS SIMILAR TO LICENCE OR FRANCHISE OR AKIN TO A LICENCE , WHICH THUS BROUGHT IT WITHIN THE SWEEP OF SEC. 32(1)(II) OF THE ACT. THE A.O BY RELYING ON THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT , OBSERVED , THAT AS I N THE CASE OF THE ASSESSEE ALSO EACH FRANCHISEE GOT A RIGHT WHICH ENABLED IT TO OPERATE A TEAM IN THE IPL FOR PROFIT , THEREFORE, THE RIGHT TO OPERATE A FRANCHISE AND TO BE A MEMBER OF THE LEAGUE WAS A LICENCE OR FRANCHISE OR AKIN TO A LICENCE OR FRANCHISE, AN D THUS A N ITEM OF INTANGIBLE ASSET CONTEMPLATED IN SEC. 32(1)(II) OF THE ACT. THE A.O FURTHER IN ORDER TO FORTIFY HIS AFORESAID CONVICTION THAT THE F RANCHISE FEE PAID BY THE ASSESSEE WAS NOT A REVENUE EXPENDITURE , RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF JONAS WOODHEAD & SONS (INDIA) LTD. VS. CIT (1997) 224 ITR 342 (SC) . THE A.O OBSERVED THAT IN THE CASE BEFORE THE HONBLE SUPREME COURT , THE ASSESSEE HAD STARTED A NEW BUSINESS BY AVAILING THE TECHNICAL KNOW - HOW AND AN EXCLUSIV E RIGHT TO USE THE PATENT OR TRADEMARK OF A FOREIGN COMPANY . THE HONBLE APEX COURT OBSERVED THAT AS PER THE AGREEMENT WITH THE FOREIGN COMPANY WHAT WAS SET UP BY THE ASSESSEE WAS A NEW BUSINESS AND THE FOREIGN COMPANY HAD NOT ONLY FURNISHED INFORMATION AND TECHNICAL KNOW - HOW , BUT HAD ALSO RENDERED VALUABLE SERVICES IN SETTING UP OF THE FACTORY AND PRODUCTION OF GOODS , WITH T HERE BEING NO EMBARGO ON THE ASSESSEE TO CONTINUE TO MANUFACTURE THE PRODUCT IN QUESTION EVEN AF TER THE EXPIRY OF THE AGREEMENT , THEREFORE, THE PAYMENTS MADE BY THE ASSESSE E TO THE FOREIGN COMPANY , WHETHER A DEFINITE ONE OR DEPENDENT UPON CERTAIN CONTINGENCIES, COULD NOT BE HELD AS A REVENUE EXPENDITURE FOR THE REASON THAT THE SAME WAS TO BE MADE ON A CERTAIN PERCENTAGE OF THE GROSS TURNOVER OF THE P A G E | 15 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ASSESSEE . THE A.O DRAWING FORCE FROM THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT OBSERVED THAT THE FACTS OF THE CASE OF THE ASSESSEE BEFORE HIM WERE IN PARITY WITH THOSE INVOLVED IN THE AFOREMENTIONED CASE . THE A.O OBSERVED THAT THE ASSESSEE BY MAKING PAYMENT OF THE FRANCHISE FEE HAD BOUGHT A RIGHT TO SET UP ITS BUSINESS OF OPERATING THE TEAM IN THE LEAGUE, WHICH WAS A COMPLETELY NEW BUSINESS WITH NO RESTRICTION ON THE ASSESSEE TO RUN THE BUSINESS EVEN AFTER THE EXPIRY OF THE PERIOD OF THE LEAGUE. THUS, IN THE BACKDROP OF HIS AFORESAID OBSERVATION S THE A.O CONCLUDED THAT AS THE F RANCHISE FEES PAID BY THE ASSESSEE FOR SETTING UP ITS BUSINESS WAS CLEARLY IN THE NATURE OF A CAPITAL EXPENDITURE, THEREFORE, M ERELY FOR THE REASON THAT THE AMOUNT WAS TO BE PAID IN ANNUAL INSTALMENTS OR AT A CERTAIN PERCENTAGE, THE SAME WOULD IN NO WAY ALTER THE CHARACTER OF THE PAYMENT FROM CAPITAL TO REVENUE. 6. THE A.O FURTHER DELIBERATING ON THE ALLOWABILITY OF DEPRECIATION, OBSERVED , THAT THE HONBLE SUPREME COURT IN THE CASE OF THE CIT VS. ALPS THEATRE (19 6 7) 6 5 ITR 377 (SC) HAD HELD THAT DEPRECIATION WOULD BE ALLOWABLE ONLY ON SUCH CAPITAL ASSET WHOSE VALUE DIMINISH ES. THOUGH , THE A.O BY RELYING ON THE AFORESAID JUDGMENT WAS INITIALLY OF THE VIEW THAT AS THE VALUE OF THE IPL FRANCHISE DID NOT DEPRECIATE , THEREFORE, THE SAME DESPITE BEING AN INTANGIBLE ASSET UNDER SEC. 32(1)(II ) WOULD NOT BE ELIGIBLE FOR DEPRECIATION, BUT THEREAFTER , BY RE LYING ON THE SUBSEQUENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES & STOCK LTD. (SUPRA) , HE CONCLUDED THAT AS THE CONCEPT OF DIMINISHING VALUE APPLIED ONLY TO A TANGIBLE ASSET AND NOT TO AN INTANGIBLE ASSET, THEREFORE, THE ASSESSEE WAS ENTITLED FOR CLAIM OF DEPRECIATION AS REGARDS THE PAYMENT MADE TOWARDS F RANCHISEE FEE . THAT AS REGARDS THE WRITTEN DOWN VALUE (FOR SHORT W . D . V) ON WHICH THE DEPRECIATION WAS TO BE ALLOWED TO THE ASSESSEE, P A G E | 16 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE A.O AFTER DELIBERATING ON THE TERMS OF THE INVITATION TO TENDER (FOR SHORT ITT) WHICH WERE CALLED FOR AT THE TIME OF BIDDING FOR VARIOUS TEAMS , OBSERVED , THAT THE ASSESSEE WAS TO PAY 1/10 TH OF THE F RANCHISE FEE EVERY YEAR FOR THE FIRST 10 YEAR S AND THEREAFTER AN AMOUNT EQUAL TO 20 PERCENT OF THE RIGHTS INCOME RECEIVED W.R.T 11 TH YEAR AND EACH SUBSEQUENT YEAR, TILL THE TERM OF THE LEAGUE. THE A.O OBSERVED THAT THE ASSESSEE WAS TO PAY THE F RANCHISE FEE IN ANNUAL INSTALMENT S OF RS.30,03,60,000/ - FOR THE PERIOD 2008 TO 2017 (INCLUSIVE), WHICH SUM WAS TO BE APPROPRIATED EVERY YEAR TOWARDS F RANCHISE FEE ON THE DATE WHEN THE FIRST MATCH OF THE LEAGUE FOR THAT YEAR WAS PLAYED . THE A.O THUS OBSERVED THAT THE ASSESSEE HAD ACQUIRED THE RIGHT TO FRANCHISE IN THE YEAR 2008 WHEN IT HAD PAID THE FIRST ANNU A L INSTALMENT OF THE F RANCHISEE FEE IN THE SAID YEAR . THE A.O DELIBERATING ON THE AFORESAID FACT S AND TAKING COGNIZANCE OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAHARANA MILLS (F) LTD. VS. ITO (1959) 36 ITR 350 (SC) OBSERVED THAT AN A.O REMAINED UNDER A STATUTORY OBLIGATION TO NOT ONLY WORK OUT THE DEPRECIATION WHILE CONSIDERING THE W . D . V OF THE PREVIOUS YEAR, BUT RATHER , WAS BOUND TO SCALE DOWN THE SAME BY THE ALLOWANCES GRANTED IN THE PAST AND THUS RE - WORK THE W . D . V FOR THE YEAR BEFORE HIM . THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT THE AMOUNT OF FR ANCHISE FEE OF EVERY SUBSEQUENT YEAR WAS TO BE ADDED T O THE W . D . V OF THE BLOCK OF INTANGIBLE ASS ET AT THE BEGINNING OF THE YEAR AND THE DEPRECIATION WAS TO BE ALLOWED ON SUCH ADJUSTED WDV FOR THE SAID YEAR. THUS , THE A.O CONCLUDED THAT AS THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION, VIZ. A .Y 2009 - 10, PAID THE ANNUAL INSTALMENT OF RS.30,03,60,000/ - , THEREFORE, THE DEPRECIATION OF RS.7,50,90,000/ - I.E. AT THE PRESCRIBED RATE OF 25% WAS ALLOWABLE TO THE ASSESSEE. THE A.O HELD THAT THE W . D . V OF THE BLOCK OF INTANGIBLE ASSET FOR A . Y 2009 - 10 AMOUNTING TO RS . 22,52,70,000/ - WOULD FURTHER BE RAISED BY THE AMOUNT OF RS. 30,03,60,000/ - IN THE P A G E | 17 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 SUCCEEDING YEAR, AND AS SUCH IN THE SAID LATTER YEAR THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION @ 25% ON THE WDV OF RS.52,56,30,000/ - . THE A.O ON THE BASIS OF HIS AFORE SAID OBSERVATION S CONCLUDED THAT EVERY SUBSEQUENT YEARS FRANCHISEE PAYMENT WERE TO TREATED AS ADDITIONS TO THE BLOCK OF ASSET AND DEPRECIATION ON SUCH ADJUSTED W . D . V WAS TO BE ALLOWED AT THE PRESCRIBED RATE. 7 . THE A.O ON THE BASIS OF HIS AFORESAID DELIBERATIONS CONCLUDED , VIZ. (I) THAT AS THE F RANCHISE FEE WAS PAID BY THE ASSESSEE FOR CREATING AN INTANGIBLE ASSET , THEREFORE, THE SAME BEING A LICENCE OR FRANCHISE OR AKIN TO LICENCE OR FRANCHISE REFERRED TO IN SEC. 32(1)(II) OF THE ACT, THUS CONSTITUTED A CAPITAL EXPENDITURE; AND (II) THAT AS THE F RANCHISE FEES OF RS. 30,03,60,000/ - WAS CAPITALIZED AS AN INTANGIBLE ASSET, THEREFORE, THE ASSESSEE WAS ENTITLED FOR DEPRECIATION @ 25% AMOUNTING TO RS.7,50,90,000/ - . THE A.O IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS MADE AN ADDITION OF RS.22,52,70,000/ - TO THE TOTAL INCOME OF THE ASSESSEE. 8 . THAT ON APPEAL THE CIT(A) UPHELD THE VIEW OF THE A.O THAT THE F RANCHIS E FEE OF RS.30,03,60,000/ - WAS A CAPITAL EXPENDITURE ON WHICH THE ASSESSEE WAS ENTITLED FOR CLAIM OF DEPRECIATION. THE CIT(A) DID NOT FIND FAVOUR WITH THE CONTENTION OF THE ASSESSEE THAT AS THE F RANCHISE FEE WAS PAID FOR THE RIGHT TO PARTICIPATE IN THE TOUR NAMENT , WITHOUT ANY GUARANTEE THAT IN THE FUTURE YEAR IT WILL ELIGIBLE TO PARTICIPATE IN THE TOURNAMENT, THEREFORE, THE SAME COULD NOT BE CHARACTERISED AS A CAPITAL EXPENDITURE. THE CIT(A) CONTROVERTING THE AFORESAID CONTENTION OF THE ASSESSEE OBSERVED THA T SINCE THE FRANCHISEE WAS FOR A LONGER PERIOD, I.E. UP TO 2017, AS EVIDENT FROM C LAUSE 7.1(A) , 7.1(B) , 7.2 , 7.3 , 8.1(A) AND 8.1(B) OF THE AGREEMENT, THEREFORE, THE AFORESAID CLAIM OF THE ASSESSEE WAS FACTUALLY INCORRECT. THE CIT(A) FURTHER OBSERVED THAT FROM A PERUSAL OF THE AGREEMENT IT COULD SAFELY P A G E | 18 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 BE GATHERED THAT BY VIRTUE OF MAKING THE PAYMENT OF THE F RANCHISE FEE AS THE ASSESSEE GOT A RIGHT TO BE A PART OF THE LEAGUE AND OWN AND OPERATE THE FRANCHISE , FROM EXPLOITATION OF WHICH REVENUES WERE GENERATED I N ITS HANDS, THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE PAYMENT OF THE F RANCHISE FEE DID NOT LEAD TO ANY ENDURING BENEFIT COULD NOT BE ACCEPTED. THE CIT(A) WAS ALSO NOT IMPRESSED BY THE CLAIM OF THE ASSESSEE THAT AS IT HAD WITHHELD TAXES UNDER SEC. 194J THAT HAD BEEN ACCEPTED BY THE DEPARTMENT, THEREFORE, ON THE SAID COUNT ALSO ITS CLAIM THAT THE F RANCHISE FEE W AS A REVENUE EXPENDITURE COULD NOT BE DISLODGED. THE CIT(A) FURTHER OBSERVED THAT AS PER THE TERMS OF THE AGREEMENT THE ASSESSEE WAS DULY VESTED WITH THE RIGHT TO SELL THE FRANCHISE TO A THIRD PARTY OR TRANSFER THE CONTROLLING INTEREST IN THE COMPANY WHICH CONTROLS THE FRANCHISE AFTER A MINIMUM PERIOD OF 3 YEARS, WHICH PROVED THE FACT THAT A CAPITAL ASSET WAS CREATED. THE CIT(A) HELD A STRONG CONV ICTION THAT AS THE PAYMENT OF FRANCHISE FEE OF US $ 75.09 MILLION BY M/S RED CHILLIES ENTERTAINMENT PVT. LTD. BY THE ASSESSEE IN 10 EQUAL INSTALMENTS WAS WITH A PURPOSE TO ACQUIRE THE RIGHT TO OPERATE THE TEAM AND BECOME A MEMBER OF LEAGUE FOR THE ENTIRE T ERM OF LEAGUE, AS A RESULT WHEREOF IT BECAME ENTITLED TO RECEIVE CERTAIN REVENUES RELATING TO THE KOLKATA TEAM , THEREFORE, THE SAME WAS CLEARLY IN THE NATURE OF A CAPITAL EXPENDITURE . THE CIT(A) IN THE BACKDROP OF THE AFORESAID FACTS OBSERVED THAT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOCK LTD. VS. CIT 327 ITR 323 (SC), IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD ACQUIRED A BUSINESS OR COMMERCIAL RIGHT SIMILAR TO LICENCE OR FRANCHISE OR AKIN TO LICENCE OR FRANCHISE FA LLING UNDER SEC. 32(1)(II), WHICH WAS AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION. THUS, THE CIT(A) ON THE BASIS OF HIS AFORESAID DELIBERATIONS CONCLUDED THAT THE A.O HAD RIGHTLY OBSERVED THAT THE FRANCHISE FEE OF RS.30,03,60,000/ - WAS A CAPITAL EXPENDIT URE. THE CIT(A) FURTHER RELYING ON THE JUDGMENT OF THE HONBLE P A G E | 19 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 SUPREME COURT IN THE CASE OF MAHARANA MILLS (SUPRA) CONCLUDED THAT THE WORKING BY THE A.O OF THE ENTITLEMENT OF THE ASSESSEE TOWARDS CLAIM OF DEPRECIATION WAS ALSO FOUND TO BE IN ORDER. THE CIT (A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS UPHELD THE ADDITION OF RS. 22,52,70,000/ - MADE BY THE A.O. 9 . THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDING S OBSERVED THAT THOUGH THE ASSESSEE COMPANY AS PER THE AGREEMENT DATED 04.04.2008 WITH BCCI REMAINED UNDER AN OBLIGATION TO PAY AN ANNUAL FRANCHISEE FEES OF RS.30,03,60,000/ - , HOWEVER , IT HAD CLAIMED AN AMOUNT OF RS.37,54,50,000/ - A GAINST THE HEAD FRANCHISEE FEE IN ITS P ROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE ON BE ING CALLED UPON BY THE A.O TO EXPLAIN ITS AFORESAID CLAIM, SUBMITTED THAT IN LIEU OF THE AGREEMENT WITH BCCI WHICH WAS ENTERED ON 04.04.2008 , THE ENTIRE FRANCHISE FEE OF RS. 30,03 , 60,000/ - FOR IPL S EASON - 1 FOR T HE YEAR 31 DECEMBER, 2008 WHICH WAS DUE FOR P AYMENT IN THE FINANCIAL YEAR 2008 - 09 WAS CLAIMED AS AN EXPENDITURE IN THE BOOKS OF ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2009. THE ASSESSEE FURTHER SUBMITTED THAT AS A PERIOD OF 3 MONTHS (JANUARY, 2009 TO MARCH, 2009) PERTAINING TO THE IPL S EASON - 2, VIZ. PERIOD 1 ST JANUARY, 2009 TO 31 ST DECEMBER, 2009 FELL WITHIN THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10, THEREFORE , THE ASSESSEE WHO WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING , HAD ACCORDINGLY DEBITED AN AMOUNT OF RS.7,50,90,000/ AS AN EXPENSE DU RING THE YEAR UNDER CONSIDERATION (BEING 25% OF RS.30,03,60,000/ - FOR THE 3 MONTH PERIOD). THE ASSESSEE IN ORDER TO DRIVE HOME ITS CONTENTION THAT THE CLAIM OF THE F RANCHISE FEE FOR THE PERIOD JANUARY, 2009 TO MARCH, 2009 PERTAINING TO IPL SEASON - 2 WAS WE LL IN ORDER, THEREIN SUBMITTED BEFORE THE A.O THAT AS THE SAID PAYMENT WAS MADE PURSUANT TO A CONTRACTUAL OBLIGATION TO DISCHARGE A LIABILITY, THEREFORE, AS PER THE P A G E | 20 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 MERCANTILE SYSTEM OF ACCOUNTING, IT WAS RIGHTLY CLAIMED AS AN EXPENDITURE IN THE YEAR UNDE R CONSIDERATION, VIZ. AY 2009 - 10. THE A.O AFTER DELIBERATING ON THE AFORESAID EXPLANATION OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME . THE A.O OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT THE PROPORTIONATE FEES FOR THE FIRST THREE MONTHS OF THE IPL S EASON - 2 PERTAINED TO THE YEAR UNDER CONSIDERATION, AS THE LIABILITY FOR THE SAID THREE MONTHS PERIOD (I.E JANUARY, 2009 TO MARCH, 2009) FOR THE IPL SEASON - 2 WAS RELATABLE TO THE YEAR UNDER CONSIDERA TION, VIZ. A.Y. 2009 - 10, DID NOT SATISFY THE MATCHING PRINCIPLE OF ACCOUNTING , WHICH WAS ONE OF THE BASIC PRINCIPLE OF ACCOUNTING. THE A.O IN ORDER TO FORTIFY HIS AFORESAID VIEW, OBSERVED THAT THE ASSESSEE COMPANY HAD DURING THE YEAR UNDER CONSIDERATION NOT OFFERED ANY INCOME CORRESPONDING TO ITS AFORESAID CLAIM OF EXPENSE. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT THE AMOUNT OF RS.7,50,90,000/ - WAS WRONGLY CLAIMED BY THE ASSESSEE BY RELATING THE SAME TO THE YEAR UNDER CONSIDERATI ON. THE A.O IN ORDER TO FORTIFY HIS AFORESAID CONVICTION RELIED ON CLAUSE 7 OF THE FRANCHISEE AGREEMENT, WHICH PROVIDED AS REGARDS THE FRANCHISEE FEE AS UNDER: - 7.1. AS CONSIDERATION FOR THE RIGHT TO OPERATE THE FRANCHISE AND TO BE A MEMBER OF THE LEAGUE AND IN ADDITION TO THE OBLIGATIONS REFERRED TO IN CLAUSE 6 THE FRANCHISEE SHALL PAY TO BCCI - IPL FRANCHISE CONSIDERATION IN THE FOLLOWING SUM AND MANNER - : (A) IN RESPECT OF THE PERIOD 2008 - 17 (INCLUSIVE): (I) THE SUM OF USD 2,252,700/ - EQUIVA LENT TO INR. 9,01,08,000/ - (RUPEES NINE CRORES, ONE LAKH, EIGHT THOUSAND ONLY) CALCULATED AT THE EXCHANGE RATE OF INR 40/=1USD (THE 'LEAGUE DEPOSIT') ON OR BEFORE 2 JANUARY IN EACH SUCH YEAR. THIS LEAGUE DEPOSIT SHALL BE APPROPRIATED TOWARDS THE ANNUAL FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE YEAR IN WHICH THE LEAGUE DEPOSIT IS PAID. THE AMOUNT OF WHAT IS REFERRED TO IN THE TENDER DOCUMENT AS THE 'PERFORMANCE DEPOSIT' WHICH HAS BEEN PAID BY THE FRANCHISEE UPON SUBMISSION OF ITS BID FOR A FRANCHISE SHALL, IN RESPECT OF 2008, BE CREDITED TOWARDS THE LEAGUE DEPOSIT IN RESPECT OF 2008 AND IF THE AMOUNT OF THE PERFORMANCE DEPOSIT IS LESS THAN THE SUM REFERRED TO ABOVE IN THI S PARAGRAPH (1) THEN THE P A G E | 21 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 FRANCHISEE SHALL WITHIN 10 DAYS OF SIGNATURE OF THIS AGREEMENT PAY THE REMAINDER OF THE LEAGUE DEPOSIT IN RESPECT OF 2008. THE LEA . GUE DEPOSIT SHALL ONLY BE REFUNDABLE IN ANY YEAR IF THE LEAGUE DOES NOT TAKE PLACE AT ALL IN SUCH GE AR IN ALL IN SUCH CIRCUMSTANCES SHALL BE RE FUNDED WITHOUT INTEREST; AND (II) THE SUM OF USD 5,256,300/ - EQUIVALENT TO INR 21,02,52,000/ - (RUPEES TWENTY ONE CRORES, TWO LAKHS FIFTY TWO THOUSAND ONLY) WHICH SHALL IN EACH SUCH YEAR BE PAID ON THE DATE OF THE FIRST MATCH I N THE LEAGUE IN EACH SUCH YEAR. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUD ED THAT AS THE LIABILITY OF THE ASSESSEE TO PAY THE F RANCHISE FEE TO BCCI CRYSTALLISED ONLY ON THE FIRST DAY OF THE MATCH OF A SERIES, THEREFORE, SINCE NO MATCH FOR IPL S EASON - 2 WAS PLAYED ON OR BEFORE 3 1 ST M ARCH, 2009, THUS NO LIABILITY IN RESPECT OF THE PAYMENT OF THE F RANCHISE FEE FOR THE IPL S EASON - 2 HAD ACCRUED TO THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2009 - 10. THUS, T HE A.O ON THE BASIS OF HIS AFORESAID CONVICTION DISALLOWED THE CLAIM OF RS.7,50,90,000/ - RAISED BY THE ASSESSEE BEFORE HIM . 9. THE ASSESSEE ASSAILING THE AFORESAID DISALLOWANCE BY THE A.O , CARR IED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O AND TRIED TO IMPRESS UPON THE CIT(A) THAT AS IT WAS FOLLOWING A MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, AS THE PERIOD OF THREE MONTHS (JANUARY, 2009 TO MARCH 2009) RELATABLE TO IPL S EASON - 2 FELL WITHIN THE YEAR UNDER CONSIDERATION, VIZ. AY 2009 - 10, THE PROPORTIONATE FEE FOR THE AFORESAID PERIOD OF THREE MONTHS WAS RIGHTLY CLAIMED AS AN EXPENDITURE FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE IN ORDER TO DRIVE HOME ITS AFORESAID CONTENTION, SUBMITTED BEFORE THE CIT(A), AS UNDER: - 2.1 THE APPELLANT HAD ENTERED INTO THE AGREEMENT WITH BCCI - IPL TO PARTICIPATE IN THE IPL TOU RNAMENT ON 4 APRIL 2008. AS PER THE AGREEMENT, THE APPELLANT WAS REQUIRED TO PAY ANNUAL CONSIDERATION ANNUALLY AMOUNTING TO RS 30,03,60, 000/ - FOR A YEAR FOR EACH SEASON OF IPL. P A G E | 22 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 2.2 THE TERM YEAR HAS BEEN DEFINED AS PER THE AGREEMENT TO MEAN AS UNDER: EACH 12 MONTH PERIOD (OR PART THEREOF) FROM 1 JANUARY - 31 DECEMBER DURING THE TERM SAVE THAT THE FIRST YEAR SHALL BE FROM SIGNATURE OF THIS AGREEMENT UNTIL 2008. THUS, A SEASON IS DEFINED AS A CALENDAR YEAR I.E. FOR THE PERIOD 1 JANUARY TO 31 DECEMBER AND FOR THE FIRST YEAR BEGINNING FROM THE DATE OF SIGNING THE AGREEMENT TILL 31 DECEMBER. THEREFORE, TAKING INTO CONSIDERATION THE ABOVE EXPLANATION THE FIRST YEAR FOR THE APPELLANT SHALL BEGIN FROM 10 APRIL 2008 (LATER OF THE TWO DATES OF S IGNATURE OF THE AGREEMENT BY BOTH THE PARTIES) TILL 31 DECEMBER 2008. 2.3 FURTHER, AS MENTIONED ABOVE, A FRANCHISEE IS REQUIRED TO PAY RS. 30,03,60,000/ - FOR A YEAR FOR EACH SEASON. OUT OF THE TOTAL AMOUNT OF FRANCHISE FEE (I.E RS.30,03,60,000 / - ), RS.9,01,08, 000/ - IS DUE FOR PAYMENT ON 2 JANUARY EACH YEAR. HOWEVER, IN THE FIRST SEASON SUCH AMOUNT IS DUE FOR PAYMENT WITHIN 10 DAYS OF SIGNATURE OF THE AGREEMENT. THE BALANCE IS REQUIRED TO BE PAID ON THE DATE OF FIRST MATCH IN THE LEAGUE IN EACH YEAR. ACCORDINGLY, FOR THE FIRST SEASON THE FIRST INSTALLMENT WAS DUE FOR PAYMENT) WITHIN 10 DAYS OF SIGNING THE AGREEMENT AND THE BALANCE PAYMENT WAS DUE ON THE DATE OF FIRST MATCH IN THE LEAGUE. 2.4 IN VIEW OF THE ABOVE, THE ENTIRE FRANCHISEE FEE FOR IPL - SEASON 1 ENDING 31 DECEMBER 2008 (I. E RS.30,03,60, 000 / - ) WAS DUE FOR PAYMENT IN THE FY 2008 - 09 AND ALSO CLAIMED AS AN EXPENDITURE IN THE BOOKS OF ACCOUNT FOR THE YEAR ENDED 31 MARCH 2009. 2.5 FU RTHER, IN THE SEASON - 2, OUT OF THE TOTAL FRANCHISEE FEE OF RS 30,03,60,000 (FOR THE PERIOD JANUARY 2009 TO 31 DECEMBER 2009, THE APPELLANT HAD TO PAY FIRST INSTALLMENT OF FR ANCHISE FEE OF RS 9,01,08,000 BY 2 JANUARY 2009 AND THE BALANCE ON THE DATE OF FIRST MATCH OF THE LEAGUE. THE APPELLANT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. AS PER MERCANTILE SYSTEM OF ACCOUNTING, INCOME AND EXPENDITURE ARE RECORDED ON ACCRUAL BASIS. ACCORDINGLY, WHERE THREE MONTH S OF SEASON 2 FALL IN FY 2008 - 09 (JANUARY 2009 TO MARCH 2009), THE FRANCHISEE FEE PERTAINING TO THOSE THREE MONTHS WAS DUE IN FY 2008 - 09. ACCORDINGLY, AN AMOUNT OF RS. 7,50,90,000/ - WAS DEBITED AS AN EXPENSE FOR (BEING 25% OF RS 30,03,60,000/ - FOR THE 3 MONTH PERIOD). 2.6 IN VIEW OF THE ABOVE, THE APPELLANT HAS DEBITED A SUM OF RS. 37,54,50,000/ - (I.E RS 30,03,60,000/ - PLUS RS 7,50,90,000/ - ) IN THE PROFIT AND L OSS ACCOUNT AND THE SAME WAS CLAIMED AS DEDUCTION FOR TAX PURPOSES AS WELL. WE ALSO HAVE PROVIDE D BELOW THE REASONS BACKED BY JUDICIAL PRECEDENTS ON THE ALLOWABILITY OF THE FRANCHISE FEES OF RS 37,54,50,000 I.E RS. 30,03,60, 000/ - PLUS RS.7,50,90, 000/ - ) IN A Y 2009 - 10: 2.7 CONTRACTUAL OBLIGATION TO DISCHARGE A LIABILITY THE APPELLANT HAS PAID THE FRANCHISE FEE FOR THE CALENDAR YEAR 2008 (INCLUDING PERIOD FROM 1 JANUARY 2008 TO 31 MARCH 2008), POST THE P A G E | 23 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXECUTION OF THE AGREEMENT (IS APRIL 2008) AND DEBITED THE ENTIRE SUM DURING THE FINANCIAL YEAR ENDED 31 MARCH 2009. IT I S A WELL ESTABLISHED PRINCIPLE THAT EXPENDITURE IS INCURRED ONLY AFTER LIABILITY TO PAYMENT ARISES AND ONLY AFTER SUCH LIABILITY CRYSTALLIZES THAT THE SAME CAN BE CLAIMED AS DEDUCTION FOR COMPUTING TAXABLE PROFITS UNDER THE HEAD, 'PROFITS AND GAINS OF BUSI NESS OR PROFESSION'. IN THE PRESENT CASE, THE LIABILITY FOR PAYMENT OF FRANCHISE FEE FOR IPL - SEASON 1 ARISES ONLY AFTER THE EXECUTION OF THE AGREEMENT BETWEEN BCCI - IPL AND THE APPELLANT. SINCE THE AGREEMENT WAS SIGNED IN THE MONTH OF APRIL 2008, THE LIABILITY FOR PAYMENT OF FRANCHISE FEE ARISES IN THE MONTH OF APRIL 2008 AND IS THEREFORE THE SAME IS CLAIMED AS DEDUCTION WHILE COMPUTING THE TAXABLE INCOME FOR THE YEAR ENDING ON 31 MARCH 2009. IN THIS REGARD RELIANCE HAS BEEN PLACED ON THE PRINCIPLES LAID DOWN IN THE FOLLOWING CASES: SWADESHI ' C OTTON MILL CO. LTD. VS. CIT KANPUR (125 ITR 33) (ALL) THE ALLAHABAD HC HELD 'IN OUR OPINION, THERE IS MUCH SUBSTANCE IN THE SUBMISSION MADE BEFORE US ON BEHALF OF THE ASSESSEE AND WE AGREE THAT IN THE CASE OF A STATUTORY LIABILITY THE QUANTIFICATION OR ASCERTAINMENT CANNOT POSTPONE ITS ACCRUAL, BUT IF THE LIABILITY IS BASED ON SOME CONTRACTUAL OBLIGATION, IT ARISES ONLY WHEN IT IS ASCERTAINED.HENCE, THE PAYMENT WAS ALLOWED AS DEDUCTION DURING THE PREVIOUS YEAR 1959 - 60. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD VS. CIT (213 ITR 523) (GUJ.) IN THIS CASE IT HAS BEEN HELD THAT IF ANY LIABILITY, THOUGH RELATING TO THE EARLIER YEAR, DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIMED AND PAID IN THE LATER PREVIOUS YEARS, IT CANNOT BE DISALLOWED AS DEDUCTION MERELY ON THE BASIS THAT THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTION OF THE EARLIER YEAR. KARAM CHAND THAPAR AND BROS. P. LTD. US. CIT (CENTRAL) CALCUTTA (74 ITR 26) (SC) IN THE FACTS OF THIS CASE, THE ASSESSEE SOLD ITS FACTORY ON 1 OCTOBER 1948, BUT THE PRICE WAS FINALLY SETTLED IN DECEMBER 1949, PURSUANT TO WHICH A LOS S WAS DETERMINED. THIS LOSS WAS CLAIMED BY THE ASSESSEE AS A DEDUCTION IN A SUBSEQUENT ASSESSMENT YEAR (AY) 1950 - 51. THE TAX AUTHORITIES HELD THAT THE BUSINESS OF THE FACTORY WAS NOT CARRIED OUT DURING THE PREVIOUS YEAR IN WHICH THE LOSS WAS CLAIMED AND DISALLOWED IT. THE SUPREME COURT HELD THAT '.THE PRICE FOR WHICH THE BUSINESS WAS SOLD WAS SETTLED IN DECEMBER 1949. UNTIL THE PRICE WAS SETTLED, LOSS DID NOT ACCRUE OR ARISE TO THE COMPANY. THE LOSS WAS SUFFERED IN THE ACCOUNT YEAR 1949 - 50 AN D COULD BE ALLOWED AGAINST THE INCOME OF THAT YEAR UNDER SECTION 24(1), THE ASSUMPTION THAT THE LOSS WAS SUFFERED IN THE PREVIOUS YEAR, I.E. 1948 - 49, WAS, IN OUR - JUDGMENT, NOT WARRANTED. CIT V. SOORAJMULL NAGARMULL (129 ITR 169) (CAL) P A G E | 24 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 IN THIS CASE, IT HA S BEEN HELD THAT WHERE THE LIABILITY TO PAY DAMAGES IS UNDER DISPUTE, SUCH LIABILITY WOULD ACCRUE ONLY WHEN THE SETTLEMENT OF THE DISPUTE IS MADE, EVEN IF THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. IN VIEW OF THE ABOVE, THE LIABILITY T O PAY THE FRANCHISE FEES WAS DETERMINED IN PURSUANCE OF THE AGREEMENT BETWEEN BCCI - IPL AND THE APPELLANT IN FY 2008 - 2009, AND THEREFORE SUCH EXPENSE WILL BE ELIGIBLE AS DEDUCTION IN FY 2008 - 09. 2.8 EXPENSES DEBITED AS PER THE MERCANTILE BASIS OF ACCOUNTING . FURTHER, THE APPELLANT HAD TO PAY ANNUAL CONSIDERATION OF RS 30,03,60, 000/ - FOR SEASON - 2 I.E FOR THE PERIOD 1 JANUARY 2009 TO 31 DECEMBER 2009 BY 2 JANUARY 2009. AS MENTIONED ABOVE, THE APPELLANT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. AS PER MERCANTILE SYSTEM OF ACCOUNTING, INCOME AND EXPENDITURE ARE RECORDED AT THE TIME OF THEIR OCCURRENCE DURING THE PREVIOUS YEAR. ACCORDINGLY, EXPENDITURE IS RECORDED IF IT BECOMES DUE DURING THE PREVIOUS YEAR. SINCE THE THREE MONTHS OF SEASON 2 FALL IN FY 2008 - 09 (JANUARY 2009 TO MARCH 2009), THE FRANCHISEE FEE PERTAINING TO THOSE THREE MONTHS WAS DUE IN FY 2008 - 09. ACCORDINGLY, BASED ON THE MERCANTILE SYSTEM OF ACCOUNTING AN AMOUNT OF RS.7,50,90,000/ - WAS DEBIT ED AS AN EXPENSE FOR (BEING 25% OF RS.30,03,60, 000 FOR THE 3 MONTH PERIOD) EVEN THOUGH THE ACTUAL SUM PAID DURING THE FY 2008 - 09 WAS RS 9,01,08,000/ - . IT IS ALSO SUBMITTED THAT THE EVEN THE AUDITORS REPORT FOR THE FINANCIAL YEAR 2008 - 09 HAS RECOGNIZED THE FRANCHISEE CONSIDERATION OF RS.7,50,90,000/ - AS CURRENT YEAR EXPENDITURE. RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS TO SUPPORT THE ABOVE MENTIONED VIEW: METAL BOX CO. OF INDIA LTD. V. THEIR WORKMEN (73 ITR 53 (SC) IN THIS CASE IT HAS BEEN HELD THAT IN THE CASE OF AN ASSESSEE MAINTAINING HIS ACCOUNTS ON MERCANTILE SYSTEM, A LIABILITY ALREADY ACCRUED, THOUGH TO BE DISCHARGED AT A FUTURE DATE, WOULD BE A PROPER DEDUCTION WHILE WORKING OUT THE PROFITS AND GAINS OF HIS B USINESS, REGARD BEING HAD TO THE ACCEPTED PRINCIPLES OF COMMERCIAL PRACTICE AND ACCOUNTANCY. IT IS NOT AS IF SUCH DEDUCTION IS PERMISSIBLE ONLY IN CASE OF AMOUNTS ACTUALLY EXPENDED OR PAID. JUST AS ACTUAL RECEIPTS AS WELL AS THOSE ACCRUED DUE ARE BROUGHT IN FOR INCOME - TAX ASSESSMENT, SO ALSO LIABILITIES ACCRUED DUE WOULD BE TAKEN INTO ACCOUNT WHILE WORKING OUT THE PROFITS AND GAINS OF THE BUSINESS. THE MUMBAI TRIBUNAL IN THE CASE OF POLARIS SHIPP ING PUT LTD VS. ACIT ( ITA NO. 1792/MUM/2009), WHEREIN THE ISSUE INVOLVED WAS REGARDING ADDITION OF A BILL RAISED IN FY 2003 - 04 BY THE ASSESSING OFFICER PERTAINING TO SERVICES RENDERED IN FY 2004 - 05. IN THIS REGARD, THE MUMBAI TRIBUNAL HELD THAT ACCRUAL O F INCOME IN CASE BILL WAS RAISED ON LAST DATE OF ACCOUNTING YEAR AND AMOUNT RECEIVED IN ADVANCE IN THAT YEAR ITSELF BUT SERVICES RENDERED IN NEXT ACCOUNTING YEAR IS TAXABLE IN NEXT ACCOUNTING YEAR IN WHICH THE SERVICES ARE RENDERED. ACCORDINGLY, REVENUE IS RECOGNIZED WHEN ALL THE ACTS P A G E | 25 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HAVE BEEN COMPLETED. THE ADDITION OF A BILL ISSUED BY THE ASSESSEE IN FY 2003 - 04 BUT RELATING TO SERVICES BEING RENDERED IN FY 2004 - 05 SHOULD BE TAKEN AS RECEIPT IN THE ACCOUNTING PERIOD 2004 - 05 AND ACCORDINGLY THE ADDITION ON THIS ACCOUNT SHOULD BE DELETED. SIMILARLY, EXPENSES BOOKED ON ACCRUAL BASIS SHOULD BE ALLOWED AS DEDUCTION IN THE PERIOD IN WHICH THEY HAVE BEEN INCURRED AND PERTAIN TO, IRRESPECTIVE OF THE FACT WHETHER THEY HAVE BEEN PAID OUT OR NOT. FURTHER, IN THE CA SE OF CIT VS. PANACEA BIOTECH LTD (324 ITR 311) (DEL), THE DELHI HIGH COURT HAS HELD THAT IN MERCANTILE METHOD OF ACCOUNTING, INCURRING OF EXPENDITURE IS NOT BASED ON PAYMENT BUT ON LIABILITY TO PAY. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS BEFORE YOUR H ONOUR THAT THE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT BY THE APPELLANT AMOUNTING TO RS.37,54,50,000/ - (I.E RS.30,03,60,000/ - PLUS RS.7,50,90,000/ - ) IS AN EXPENSE FOR THE YEAR ENDED 31 MARCH 2009 AND SHOULD BE ELIGIBLE AS DEDUCTION FOR TAX PURPOSES AS WELL FOR THE AY 2009 - 10. 10 . THE CIT(A) AFTER DELIBERATING ON THE AFORESAID CONTENTION S OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME. THE CIT( A) OBSERVED THAT THE AFORESAID CLAIM OF THE ASSESSEE DID NOT SATISFY THE MATCHING PRINCIPLE OF ACCOUNTING, AS PER WHICH THE EXPENDITURE CAN BE CLAIM ED AGAINST THE INCOME OF THE FINANCIAL YEAR. THE CIT(A) FURTHER OBSERVED THAT AS PER PARA 4.3 OF THE FRANCHI SE AGREEMENT , THE LIABILITY TO PAY THE F RANCHISE FEE ACCRUED ON THE FIRST DAY OF THE MATCH O F THE SERIES, THEREFORE, NOW WHEN NO SUCH MATCH OF IPL SEASON - 2 WAS PLAYED BEFORE 31.03.2009, THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE AS REGARDS THE SAME HAD ACCRUED DURING THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10 COULD NOT BE ACCEPTED . THE CIT(A) THUS APPROVED THE OBSERVATIONS OF THE A.O IN RESPECT OF THE ISSUE UNDER CONSIDERATION AND UPHELD THE DISALLOWANCE OF RS.7,50,90,000/ - . 11 . THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDING OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED AN AMOUNT OF RS.3,50,00,000/ - ON ACCOUNT OF PAYMENT TO CRICKET ASSOCIATION OF BENGAL (FOR SHORT CAB) FOR U SE OF EDEN GARDEN , CALCUTTA . THE A.O OBSERVED THAT NO WRITTEN AGREEMENT WAS EXECUTED BETWEEN BCCI AND P A G E | 26 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CAB WITH REGARD TO THE USE OF EDEN GARDEN FOR IPL MATCHES. THE A.O ON PERUSING THE DETAILS OF THE EXPENSES OBSERVED THAT THE SAME INCLUDED AN AMOUNT OF RS.75,00,000/ - PAID TO KOLKATA POLICE FAMILY WELFARE CENTRE. TH E ASSESSEE IN ORDER TO BUTTRESS ITS ENTITLEMENT TOWARDS THE AFORESAID EXPENSES , SUBMITTED BEFORE THE A.O THAT AS IT HAD DEDUCTED TDS O N THE ENTIRE AMOUNT OF RS.3,50,00,000/ - , THEREFORE, THE WHOLE AMOUNT WAS ALLOWABLE AS AN EXPENSE. THE ASSESSEE FURTHER IN ORDER TO SUBSTANTIATE ITS AFORESAID CLAIM OF EXPENDITURE FURNISHED WITH THE A.O THE I NCOME AND E XPENDITURE ACCOUNT OF CAB FOR IPL SEASON - 1 MATCHES PLAYED AT EDEN GARDEN . THE A.O OBSERVED THAT THE INCOME AND EXPENDITURE ACCOUNT OF CAB REVEALED THAT AN INCOME OF RS.3,50,00,000/ - WAS CREDITED ON ACCOUNT OF STADIUM USE CHARGES, WHILE FOR AN AMOUNT OF RS.75,00,000/ - WAS DEBITED ON ACCOUNT OF REFRESHMENT FOR POLICE FORCE. THE A.O OBSERVED THAT WHILE FOR ON THE ONE HAND THE ASSESSEE HAD CLAIMED THAT IT HAD P AID AN AMOUNT OF RS.75,00,000/ - TO KOLKATA POLICE FAMILY WELFARE CENTRE AT THE INSTRUCTIONS OF CAB, HOWEVER , A PERUSAL OF THE I NCOME AND E XPENDITURE STATEMENT OF CAB REVEALED THAT THE SAID AMOUNT WAS SHOWN AS REFRESH MENT FOR POLICE FORCE. THE A.O CONCLUDED THAT AS NO WRITTEN AGREEMENT WAS EXECUTED FOR THE USE OF EDEN GARDEN DURING THE IPL MATCHES , THEREFORE, THE GENUINENESS OF THE PAYMENT OF RS.75,00,000/ - PAID TO KOLKATA POLICE FAMILY WELFARE CENTRE WAS NOT PROVED. THE A.O FURTHER OBSERVED THAT THE CLAIM OF THE ASSESSEE WAS ALSO NOT JUSTIFIED FOR THE REASON, VIZ. (I) THE AMOUNT WAS DIRECTLY PAID TO KOLKATA POLICE WELFARE FUND WHICH WAS NOT A GOVERNMENT AUTHORITY; (II) THAT SINCE THE SERVICES OF POLICE WAS UTILIZED DURING THE IPL MATCHES, THEREFORE, EITHER TH E AMOUNT SHOULD HAVE BEEN PAID TO THE S TATE GOVERNMENT OR THE ASSESSEE SHOULD HAVE PROVIDED REFRESHMENT TO POLICE PERSONNEL ON ITS OWN INSTEAD OF GIVING THE AMOUNT TO A WELFARE FUND; AND (III). THAT THERE WAS NO COGENT REASON FOR THE ASSESSEE TO P A G E | 27 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HAVE PAID THE AMOUNT TO KOLKATA POLICE FAMILY WELFARE CENTRE, THEREFORE, THE SAME COULD NOT BE TREATED AS A BONAFIDE EXPENDITURE. THE A.O FURTHER CONCLUDED THAT THE FACT THAT THE ASSESSEE HAD MADE TDS ON THE ENTIRE AMOUNT OF RS.3 ,50,00,000/ - WOULD NOT MAKE THE PAYME NT OF RS.75,00,000/ - MADE TO KOLKATA POLICE FAMILY WELFARE CENTRE F OR REFRESHMENT FOR POLICE FORCE AN ALLOWABLE EXPENDITURE. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS DISALLOWED THE AFORESAID CLAIM OF EXPENDITURE OF RS. 75,00,000/ - ON THE GROUND T HAT THE SAME WAS NOT ALLOWABLE AS A DEDUCTION UNDER SEC. 37(1) OF THE ACT. 12 . THE ASSESSEE BEING AGGRIEVED WITH THE AFORESAID DISALLOWANCE OF RS.75,00,000/ - BY THE A.O ASSAILED THE SAME IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT( A) THAT AS THE AFORESAID PAYMENT BEING IN THE NATURE OF SECURITY EXPENSE WAS INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THEREFORE, THE SAME WAS ALLOWABLE IN TERMS OF THE PROVISION OF SEC. 37(1) OF THE ACT. THE ASSESSEE IN SUPPORT OF ITS AFORESAID CLAIM OF EXPENSE, SUBMITTED BEFORE THE CIT(A) , AS UNDER : 3.1 'DURING THE FY 2008 - . 09, THE APPELLANT HAD INCURRED EXPENDITURE OF RS.3 ) 50,00,000/ - TOWARDS STADIUM RENT OF ITS HOME STADIUM (I.E EDEN GARDENS, CALCUTTA) AND HAD DED UCTED APPROPRIATE TAXES WHILE MAKING PAYMENT TO CAB. 3.2 AS PER THE ARRANGEMENT BETWEEN THE APPELLANT AND CAB, THE APPELLANT WAS REQUIRED TO PAY AN AMOUNT OF RS.50,00,000/ - PER MATCH TO BE PLAYED DURING IPL - 1 AT EDEN GARDENS. IN IPL - 1, THERE WERE SEVEN MATCHES PLAYED AT EDEN GARDENS, TRANSLATING THE TOTAL EXPENDITURE INCURRED BY THE APPELLANT TO RS.3,50,00,000/ - (RS. 50 , 00 , 000/ - ) . OUT OF THIS TOTAL EXPENDITURE, AT THE DIRECTION OF CAB, THE APPELLANT HAD MADE PAYMENT OF RS.75 ,00,000/ - DIRECTLY TO KOLKATA POLICE DEPARTMENT FOR SECURITY SERVICES TO BE PROVIDED AT THE STADIUM. 3.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN SUPPORT OF THE EXPENSE DEDUCTION OF RS. 75,00,000/ - , THE APPELLANT HAD SUBMITTED BEFORE THE LEARNED AO THE FOLLOWING DETAILS/ DOCUMENTATION VIDE SUBMISSION DATED 23 JUNE 2011 (COPIES ENCLOSED AS ANNEXURE 7): EXTRACT OF THE LEDGER ACCOUNT OF CAB IN THE BOOKS OF THE APPELLANT EVIDENCING THE PAYMENT OF RS 75,00,000; P A G E | 28 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXTRACT OF THE ANNUAL REPORT OF CAB WHICH RECOGNIZES SATISFACTION OF PAYMENT OBLIGATION OF THE APPELLANT TOWARDS CAB; RELEVANT EXTRACT OF THE AUDITED INCOME AND EXPENDITURE ACCOUNTS OF CAB. IT IS RELEVANT TO NOTE THAT CAB HAD RECORDED THE ENTIRE STADIUM RENT OF RS 3,50,00,000 / - RECEIVED FROM THE APPELLANT ON THE INCOME SIDE OF THE AUDITED ACCOUNTS. 3.4 HOWEVER, THE LEARNED A.O HAS DISALLOWED THE EXPENDITURE BASED ON THE FOLLOWING REASONS. RS 75,00,000/ - HAS BEEN PAID DIRECTLY TO THE KOLKATA POLICE FAMILY WELFARE CENTRE ON T HE INSTRUCTIONS OF CAB AND HENCE SINCE THE PAYMENT HAS NOT BEEN MADE TO THE GOVERNMENT AUTHORITY FOR AVAILING THE SERVICES OF THE POLICE, THE SAME IS NOT A GENUINE EXPENSE INCURRED FOR THE PURPOSE OF BUSINESS . THE INCOME AND EXPENDITURE ACCOUNTS OF CAB REFLECT THIS AMOUNT AS REFRESHMENT FOR POLICE FORCE. YOUR HONOR WOULD APPRECIATE THAT INCASE OF CRICKET MATCH IN A STADIUM THERE IS ALWAYS A NEED TO UTILIZE THE SERVICES OF POLICE TO ENSURE SECURITY OF THE PLAYERS, ATTENDANTS AND SPECTATORS. UNDER THE CAB ARRANGEMENT WITH APPELLANT, IT WAS THE RESPONSIBILITY OF CAB TO ARRANGE FOR SECURITY IN THE STADIUM FOR WHICH A FEE OF RS.75,00,000/ - WAS REQUIRED TO BE PAID BY CAB TO KOLKATA POLICE. THE APPELLANT UTILIZED THE SERVICES OF POLICE DURING THE 7 MATCHES SCHEDULED IN LPL 1 AND THE AMOUNT AGREED BY CAB WITH POLICE DEPARTMENT WAS THEN PAID BY THE APPELLANT DIRECTLY TO KOLKATA POLICE, AT THE DIRECTION OF CAB. ` 3.5 IN SUPPORT OF THE ABOVE CONTENTION, THE APPELLANT WISH TO BRING YOUR ATTENTION TO THE RELEVANT EXTRACT OF THE AUDITED INCOME AND EXPENDITURE ACCOUNTS OF CAB WHICH CLEARLY REFLECTS THE STADIUM RENT OF RS 3,50,00,000/ - (WHICH INCLUDES RS 75,00,000/ - ) ON THE INCOME SIDE OF THE AUDITED INCOME AND EXPENDITURE ACCOUNTS. ALSO, IT IS RELEVANT TO NO TE THAT CAB HAS ALSO RECOGNIZED ITS OBLIGATION TO PAY TO POLICE DEPARTMENT ON THE DEBIT SIDE OF AUDITED INCOME AND EXPENDITURE ACCOUNTS. EVEN THE ANNUAL REPORT OF CAB RECOGNIZES THAT PAYMENT OF RS 3,50,00,000/ - (WHICH INCLUDES RS. 75,00,000/ - ) REPRESENT FILL SATISFACTION OF THE PAYMENT OBLIGATION OF THE APPELLANT TOWARDS CAB. 3.6 IN LIGHT OF THE ABOVE, THE APPELLANT WISH TO SUBMIT THAT SECURITY EXPENSES INCURRED BY THE APPELLANT IS CLEARLY A BUSINESS EXPENDITURE AND HENCE ALLOWABLE AS A DEDUCTIBLE EXPENDITURE. ALSO, IT IS EVIDENT FROM THE REASONS PROVIDED IN THE ASSESSMENT ORDER THAT SUCH EXPENDITURE IS DISALLOWED BY THE LEARNED AO WITHOUT ANY VALID AND COGENT REASONS. 3.7 IN THIS REGARD, THE APPELLANT WISH TO DRAW YOUR ATTENTION TO THE TRIVIAL REASONS MENTIONED IN HIS ASSESSMENT ORDER FOR DISALLOWANCE OF CLAIM OF EXPENDITURE: THE PAYMENT IS NOT MADE TO THE GOVERNMENT AUTHORITY. P A G E | 29 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE INCOME AND EXPENDITURE ACCOUNTS OF CAB RE FLECT THIS AMOUNT AS REFRESHMENT FOR POLICE FORCE. 3.8 IN THIS REGARD, THE APPELLANT WISH TO SUBMIT THAT FOR ANY EXPENDITURE TO BE ALLOWABLE AS A BUSINESS DEDUCTION, THE TAX LAW DOES NOT SPECIFY THAT IT NEED TO BE PAID TO A GOVERNMENT AUTHORITY. SO LONG THE EXPENDITURE IS INCURRED FOR BUSINESS PURPOSES; IT SHOULD BE ALLOWABLE AS A BUSINESS DEDUCTION. 3.9 WITHOUT PREJUDICE TO THE ABOVE, THROUGH PUBLICLY AVAILABLE INFORMATION, IT IS UNDERSTOOD THAT TO E NSURE WELFARE OF POLICE PERSONNEL, WELFARE FUNDS ARE TYPICALLY INSTITUTED BY STATE GOVERNMENT FOR MATTERS RELATING TO HEALTH CARE, RETIREMENT BENEFITS AND OTHER WELFARE SCHEMES SUCH AS EDUCATION AND CAREER CONSULTING FOR DEPENDENT OF PERSONNEL AND GRANTS A RE COLLECTED FROM REGISTERED SPORTS ORGANIZATION CONDUCTING GAMES AND OTHER SOCIAL CULTURAL ORGANIZATION CONDUCTING SOCIAL AND CULTURAL PROGRAMMES IN THE STATE TO BE EXPENDED FOR THE AFORESAID PURPOSES. IN VIEW OF THE ABOVE, THE APPELLANT WISHES TO SUBMIT THAT THE CONTENTION OF THE LEARNED AO FOR DISALLOWING SECURITY EXPENDITURE IS NOT JUSTIFIED AND DEVOID OF ANY VALID BASIS. THUS, THE PAYMENT MADE TO POLICE DEPARTMENT ON BEHALF OF CAB FOR AVAILING SECURI TY SERVICES IS A BUSINESS EXPENDITURE OF THE APPELLANT AND SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT. ACCORDINGLY, THE APPELLANT PRAYS BEFORE YOUR HONOUR TO HOLD THAT THAT SECURITY EXPENSES INCURRED BY APPELLANT ARE WHOLLY AND EXCLUSIVELY FOR THE/ PURPOSE OF ITS BUSINESS AND SHOULD BE ALLOWABLE IN TERMS OF THE PROVISIONS OF SECTION 37(1) OF THE ACT. 13 . THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE , OBS ERVED THAT THE CONTENTIONS ADVANCED BY THE ASSESSEE BEFORE THE A.O WERE FOUND TO BE SELF CONTRADICTORY , VIZ. (I) THAT ON THE ONE HAND IT WAS CLAIMED BY THE ASSESSEE THAT THE AMOUNT WAS PAID TO KOLKATA POLICE FAMILY WELFARE CENTRE AT THE INSTRUCTION OF CRIC KET ASSOCIATION OF BENGAL, AND ; (II) THAT ON THE OTHER HAND IN THE I NCOME AND E XPENDITURE ACCOUNT OF THE CRICKET ASSOCIATION OF BENGAL THE AMOUNT WAS REFLECTED AS AN EXPENDITURE FOR REFRESHMENT FOR POLICE FORCE. THE CIT(A) OBSERVED THAT THOUGH THE ASSESSEE HAD AVERRED BEFORE HIM THAT THE AFORESAID AMOUNT WAS PAID FOR FACILITATING PROVIDING OF POLICE SERVICES, BUT IF THAT WOULD HAD BEEN SO, TH E N THE SAID AMOUNT WOULD HAD BEEN PAID TO THE STATE GOVERNMENT OF WEST BENGAL AND NOT TO THE POLICE FAMILY WELFARE FUND. THUS, THE CIT(A) FINDING HIMSELF AS BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE A.O THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE P A G E | 30 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 AMOUNT OF RS.75,00,000/ - PAID TO KOLKATA POLICE FAMILY WELFARE CENTRE WAS FOR T HE PURPOSE OF ITS BUSINESS AND THUS ALLOWABLE AS A DEDUCTION UNDER SEC. 37(1) OF THE ACT, THEREFORE, UPHELD THE AFORESAID DISALLOWANCE/ADDITION IN THE HANDS OF THE ASSESSEE. 14 . THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDING S FURTHER OBSERVED THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.1,28,34,490/ - ON ACCOUNT OF PAYMENT TO BUCHANAN CORPORATE CO ACHING TRUST FOR BUCHANAN DISCRETIONARY TRUST. THE A.O ON PERUSING THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH MR. JOHN BUCHANAN, OBSERVED THAT T HE SAME WAS EXECUTED ON 07.01.2009, I.E MUCH SUBSEQUENT TO THE PERIOD IN WHICH THE IPL SEASON - 1 MATCHES WERE PLAYED. THE A.O OBSERVED THAT THE IPL SEASON - 1 MATCHES WERE PLAYED IN THE MONTH APRIL AND MAY, 2008. THE A.O FURTHER OBSERVED THAT AS PER THE ITT B ID DOCUMENT AND FRANCHISE AGREEMENT IT WAS MANDATORY TO ENTER INTO AGREEMENT FOR AVAILING CO A CHIN G SERVICES, HOWEVER, NO SUCH AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH MR. JOHN BUCHANAN, AS A RESULT WHEREOF IT COULD SAFELY BE CONCLUDED THAT THE AMOUN T OF PAYMENT MADE BY THE ASSESSEE COULD NOT BE ALLOWED AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE A.O FURTHER HELD A CONVICTION THAT WHILE FOR THE SERVICES OF M R . JOHN BUCHANAN WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN UTILIZED DURING THE IPL SEASON - 1, HOWEVER, AS THE PAYMENT WAS MADE TO A DISCRETIONARY TRUST, THEREFORE, THE EXPENDITURE WAS ALSO LIABLE TO BE DISALLOWED ON THE SAID GROUND. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVAT IONS DISALLOWED THE EXPENDITURE OF RS.1,28,34,490/ - CLAIMED BY THE ASSESSEE. 15 . THE ASSESSEE ASSAILING THE AFORESAID DISALLOWANCE OF EXPENDITURE OF RS.1,28,34,490/ - MADE TO BUCHANAN CORPORATE CO A CHIN G TRUST FOR BUCHANAN DISCRETIONARY TRUST, CARRIED THE M ATTER IN APPEAL BEFORE THE P A G E | 31 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CIT(A). THE ASSESSEE SUPPORTING ITS ENTITLEMENT TOWARDS THE CLAIM OF THE AFORESAID EXPENDITURE SUBMITTED BEFORE THE CIT(A) , AS UNDER: - 4.1 DURING THE FY 2008 - 09, THE APPELLANT HAD INCURRED AN EXPENDITURE AMOUNTING TO RS.1,28,3 4,490/ - IN RESPECT OF THE COACHING SERVICES PROVIDED BY JOHN BUCHANAN TO THE APPELLANT 'S CRICKET TEAM. 4.2 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, A COPY OF THE SERVICE AGREEMENT ('AGREEMENT') (ENCLOSED AS ANNEXURE 8) WITH JOHN BUCHANAN WAS FILED VIDE SUBMISSION DATED 13 DECEMBER 2011. THE TERM OF THE SERVICE AGREEMENT IS FOR 3 YEARS I.E FY 2008 - 09, 2009 - 10 AND 2010 - 2011. 4.3 HOWEVER, THE LEARNED A.O DISALLOWED THE SUM OF RS. 1,28,34,490/ - INCURRED BY THE APPELLANT TOWARDS SERVIC ES PROVIDED BY JOHN BUCHANAN FOR COACHING THE KKR TEAM ON THE PREMISE THAT AGREEMENT WAS EXECUTED ON 07.01.2009 AND NOT PERTAINING TO IPL 1 (I.E SEASON 1). 4.4 AT THE OUTSET, THE APPELLANT WITH TO BRING TO YOUR NOTICE THAT THOUGH THE STAMP PAPER IS DATED 07.01.2009, THE AGREEMENT WAS EXECUTED DOCUMENTING THE COMMERCIAL UNDERSTANDING AGREED BETWEEN THE APPELLANT AND JOHN FOR A PERIOD OF 3 YEARS STARTING FROM IPL 1 TO JPL 3 (I.E FOR SEASON 1 TO SEASON 3). IT IS ALSO A KNOWN FACT THAT JOHN BUCHANAN WAS THE COACH OF KKR TEAM FOR SEASON 1 OF THE IPL AND THEN REMOVED POST DISMAL PERFORMANCE OF KKR TEAM. 4.5 SEPARATELY, THE APPELLANT WISH TO DRAW YOUR ATTENTION TO THE RELEVANT EXTRACTS OF THE AGREEMENT TO SUPPORT THE APPELLANT 'S CLAIM THAT THE EXPENSES HAS BEEN INCURRED IN CONNECTION WITH COACHING SERVICES PROVIDED BY JOHN BUCHANAN TO THE KKR TEAM FOR IPL SEASON 1: DEFINITION OF 'TERM' ON PAGE 3 OF THE AGREEMENT SHA LL HAVE THE MEANING IN CLAUSE 2 CLAUSE 2 READS AS UNDER: DURATION THIS AGREEMENT SHALL BE FOR THE THREE SEASONS I.E. 2008 - 09, 2009 - 10 AND 2010 - 11 AND SHALL BE EFFECTIVE FROM THE DATE OF SIGNATURE UNTIL 30 TH JUNE, 2011 UNLESS TERMINATED OR EXTENDED AS PROVIDED IN THIS AGREEMENT. CLAUSE 3 READS AS UNDER: 3.2 THE DIRECTOR: CRICKET OPERATIONS IS COMMITTED TO BE AVAILABLE FOR THE FRANCHISEE FOR AT LEAST 26 WEEKS IN SEASON 1 (2009) AND 36 WEEKS EACH IN SEASON II AND III (I.E. 2010 AND 2011), OUT OF WHICH HE SHALL BE FRILLY AND EXCLUSIVELY AVAILABLE FOR 14 WEEKS DURING THE JPL AND/ OR CHAMPIONS TROPHY LEAGUE AND/OR TRAINING CAMPS IN INDIA AS REQUIRED BY THE FRANCHISE......................... ...... P A G E | 32 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CLAUSE 4 OF THE AGREEMENT READS AS UNDER; IN CONSIDERATION OF THE PROVISION OF THE SERVICES ............USD 255000 ......................DURING SEASON 1 (2009) WHICH SHALL BECOME DUE AND PAYABLE IN THE FOLLOWING MANNER: 25% ON SIGNING OF THIS CONTRACT (BUT BEFORE 30 TH NOVEMBER, 2008) 50% ON 1 ST APRIL, 2009 25% ON 1 ST JUNE 2009 IN CONSIDERATION OF THE PROVISION OF THE SERVICES ............USD 350000 .......................DURING SEASON 2 (2010) AND SEASON 3 (2011) WHICH SHALL BECOME DUE AND PAYABLE IN THE FOLLOWING MANNER: 25% ON SIGNING OF THIS CONTRACT (BUT BEFORE 30 TH NOVEMBER, 2008) 50% ON 1 ST APRIL, 2009 25% ON 1 ST JUNE, 2009 25% ON 1 ST DECEMBER 2009 4.6 A PERUSAL OF THE ABOVE CLAUSES OF THE AGREEMENT CLEARLY REFLECTS THAT SERVICES OF JOHN BUCHANAN WERE UTILIZED BY THE APPELLANT FOR SEASON 1 AND THE PAYMENT WERE DUE TO JOHN FOR SEASON 1 OF THE IPL WHICH WAS HELD IN APRIL AND MAY 2008. 4.7 WITHOUT PREJUDICE TO THE ABOVE, AS DISCUSSED ABOVE, IT IS A KNOWN FACT AND ALSO THE INFORMATION IS AVAILABLE IN PUBLIC DOMAIN THAT JOHN BUCHANAN WAS THE COACH OF KKR TEAM FOR THE SEASON I OF THE IPL AND THEN REMOVED POST DISMAL PERFORMANCES OF KKR TEAM. CO PY OF THE PRESS CLIPPING IS ENCLOSED AS ANNEXURE 9. IN VIEW OF THE ABOVE, THE APPELLANT WISHE S TO SUBMIT THAT THE CONTENTION OF THE LEARNED AO FOR DISALLOWING COACHING EXPENSES IS NOT JUSTIFIED AND DEVOID OF ANY VALID AND COGENT REASON. THUS, THE PAYMENT MADE TO JOHN BUCHANAN IS A BUSINESS EXPENDITURE OF THE APPELLANT AND SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 37(L) OF THE ACT ACCORDINGLY, THE APPELLANT PRAYS BEFORE YOUR HONOUR TO HOLD THAT THAT COACHING EXPENSES INCURRED BY APPELLANT ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND SHOULD BE ALLOWABLE IN TERMS OF THE PROVISIONS OF SEC. 37(1) OF THE ACT. 1 6 . THE CIT(A) AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE HIM IN THE BACKDROP OF THE FACTS AVAILABLE ON THE RECORD, HOWEVER, DID NOT FIND FAVOUR WITH THE SAME . THE CIT(A) OBSERVED THAT AS THE AGREEMENT BETWEEN THE ASSESSEE AND BUCHANAN CORPORATE COACHING TRUST FOR BUCHANAN DISCRETION ARY TRUST WAS DATED 07.01.2009, THEREFORE, THE SAME WAS ENTERED AFTER THE IPL SEASON - 1 MATCHES WERE HELD DURING THE MONTH OF P A G E | 33 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 APRIL/MAY, 2008. THE CIT(A) FURTHER OBSERVED THAT A PERUSAL OF CLAUSE 2 (DEFINING DURATION) OF THE AGREEMENT REVEALED THAT THE SA ME WAS TO BE EFFECTIVE FROM THE DATE OF SIGNATURE UNTIL 30 TH JUNE, 2011. THUS , IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE CIT(A) CONCLUDED THAT AS THE AGREEMENT WAS SIGNED ON 07.01.2009, THEREFORE, THE SAME COULD NOT HAVE BEEN EFFECTIVE FOR THE PE RIOD PRIOR TO THAT. THE CIT(A) WAS ALSO NOT IMPRESSED BY THE PRESS CLIPPINGS WHICH WERE RELIED UPON BY THE ASSESSEE TO PROVE THAT MR. JOHN BUCHANAN WAS PROVIDING THE SERVICES BEFORE SIGNING OF THE AGREEMENT, BY OBSERVING THAT NO SUCH FACTUAL POSITION DID E MERGE FROM THE MATERIAL PLACED ON RECORD BY THE ASSESSEE . THE CIT(A) FURTHER OBSERVED THAT THE MATERIAL PLACED ON RECORD BY THE ASSESSEE RATHER PROVED THAT MR. JOHN BUCHANAN HAD A CONTRACT FROM 07.01.2009 TO JUNE, 2009 , WHEN HE WAS SACKED BY THE ASSESSEE FOR THE POOR PERFORMANCE OF THE TEAM. THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT THE A.O HAD RIGHTLY DISALLOWED THE CLAIM OF EXPENDITURE OF RS.1,28,34,490/ - RAISED BY THE ASSESSEE. 17 . THE A.O F URTHER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD IN ITS PROFIT AND LOSS ACCOUNT CLAIMED CERTAIN EXPENSES, VIZ. (I) FOOD AND NUTRITION EXPENSES: RS.58,53,575/ - ; AND (II) BOARDING AND LODGING EXPENSES OF RS.1,90,16,944/ - . THE A.O OBSERVED THAT IN COURSE OF SURVEY PROCEEDINGS WHICH WERE CONDUCTED UNDER SEC. 133A ON 21.04.2010 AT THE OFFICE PREMISE OF THE ASSESSEE AT EDEN GARDEN, CALCUTTA, IT EMERGED THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.1,35,46,255/ - ( R OOM BILLING : RS. 96,25,375/ - AND P ARTYING BILL : RS.39,19,880/ - ) AT ITC, SONAR, KOLKATA. THE A.O OBSERVED THAT AS PARTYING EXPENDITURE WAS NOT INCURRED FOR THE BUSINESS OF CRICKETING OF THE ASSESSEE, THEREFORE, IT WAS NOT ALLOWABLE AS A BUSINESS EXPENDITURE . THE A.O O BSERVING THAT THE PARTIES HOSTED BY THE P A G E | 34 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ASSESSEE WERE ATTENDED BY VARIOUS RELATIVES OF DIRECTORS, VIPS AND CELEBRITIES , THEREFORE, DISALLOWED THE ENTIRE PARTYING EXPENDITURE OF RS.39,19,880/ - . THE A.O FURTHER OBSERVED THAT OUT O F ROOM BILL ING OF RS.96,2 6,375/ - APPROXIMATELY 33% OF THE EXPENSE COULD FAIRLY BE HELD TO HAVE BEEN INCURRED FOR CELEBRITIES, VIPS, RELATIVES OF DIRECTORS ETC. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS , BEING OF THE VIEW THAT AS THE BOARDING AND LODGING EXPENDITURE COULD NOT BE HELD TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THEREFORE, DISALLOWED 33% OF THE ROOM BILL EXPENDITURE AND MADE AN ADDITION OF RS.31,76,705/ - . THE A.O FURTHER PERUSING THE DETAILS OF THE FOOD AND NU TRITION EXPENSES AND BOARDING AND LODGING EXPENSES INCURRED AT ITC SONAR, OBSERVED THAT THE ROOMS WERE ALSO USED BY CELEBRITIES ALONG WITH THE DIRECTORS OF THE ASSESSEE COMPANY, AS UNDER: - S. NO. NAME OF THE PERSON AMOUNT (IN RS.) 1. SHAH RUKH KHAN 5 ,18,389/ - 2. JAY MEHTA 8,90,596/ - 3. MOHOMED MORANI 4,86,692/ - 4. FARHAN AKTAR 12,242/ - 5. MALIKA KHAN 16,906/ - 6. VIVEK OBERAI 29,379/ - 7. SEEMA KHAN 12,622/ - 8. NEELAM KOTHARI 15,571/ - 9. PRADEEP DHOOT 31,483/ - 10. RITESH DESHMUCH 9,135/ - 11. KARAN JOHAR 11,942/ - T HE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS DISALLOWED 33% OF THE BALANCE EXPENDITURE OF RS.1,13,24,264/ - (I.E. EXCLUDING EXPENDITURE INCURRED AT ITC, SONAR, KOLKATA) AND MADE A FURTHER ADDITION OF RS.37,37,007/ - . THUS, ON THE BASIS OF HIS AFORESAID P A G E | 35 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 OBSERVATIONS THE A.O CARRIED OUT AN AGGREGATE DISALLOW ANCE OF RS.1,08,33,592/ - OUT OF THE FOOD AND NUTRITION AND BOARDING AND LODGING EXPENSES CLAIMED BY THE ASSESSEE. 18 . THE ASSESSEE BEING AGGRIEVED WITH THE DISALLOWANCE OF RS.1,08,33,592/ - OUT OF THE EXPENSES WHICH WERE CLAIMED TO HAVE BEEN INCURRED ON FOOD AND NUTRITION AND BOARDING AND LODGING, TH US CHALLENGED THE SAME BEFORE THE CIT(A). THE ASSESSEE IN ORDER TO DRIVE HOME ITS ENTITLEMENT TOWARDS THE AFORESAID EXPENSES, AVERRED BEFORE THE CIT(A) THAT AS THE SAID EXPENDITURE TOWARDS BOARDING AND LODGING AND FOOD AND NUTRITION WAS INCURRED FOR THE MEMBERS OF THE TEAM (INCLUDING VISITING TEAMS) , SUPPORT STAFF, DIRECTORS AN D THE INVITED GUESTS (BEING CELEBRITIES AND VIPS ) DURING THE MATCHES, THEREFORE, THE SAME WAS ALLOWABLE AS PER THE PROVISION S OF SEC. 37 (1) OF THE ACT. THE ASSESSEE IN ORDER TO FORTIFY THE GENUINENESS AND VERACITY OF THE EXPENSES , WHICH WERE CLAIMED TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THEREIN PLACED ON RECORD EXHAUSTIVE SUBMISSIONS BEFORE THE CIT(A). IT WAS SUBMITTED BY THE ASSESSEE THAT THE OBSERVATIONS OF THE A.O THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON P ARTYING WAS COMPLETELY UNTRUE AND WITHOUT ANY VALID BASIS. IT WAS SUBMITTED BY THE ASSESSEE THAT THE INVOICES PLACED ON RECORD PROVED THAT THE DINNER EXPENSES WERE INCURRED ONLY ON THE DAY S WHEN THE MATCHES WERE PLAYED AT THE HOME STADIUM. THE ASSESSEE FU RTHER SUBMITTED THAT THE EXPENDITURE INCURRED FOR ORGANIZING DINNER S FOR THE ASSESSEE S OWN TEAM, VISITING TEAMS, SUPPORT STAFF, DIRECTORS AND INVITED GUESTS WAS ALLOWABLE AS A DEDUCT ION UNDER SEC. 37 (1) OF THE ACT, AS THE SAME SATISFIED ALL THE REQUISITE CONDITIONS CONTEMPLATED THEREIN, VIZ. (I) THE EXPENSES WERE NOT OF THE NATURE DEFINED IN SEC. 32 TO 36 OF THE ACT; (II) THE EXPENSES WERE NOT IN THE NATURE OF A CAPITAL EXPENDITURE ; (III) THE EXPENSES WERE P A G E | 36 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 NOT THE PERSONAL EXPENSES OF THE ASSESSEE; AND (I V) THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT AS SEC. 37(2) WHICH EARLIER PLACE D A RESTRICTION ON CLAIMING ENTERTAINMENT EXPENSES AS AN EXPENDITURE WAS NO MORE AVA ILABLE ON THE STATUTE WITH EFFECT FROM 01.04.1998, THEREFORE, DESPITE THE FACT THAT THE ASSESSEE SATISFIED ALL THE CONDITIONS CONTEMPLATED UNDER SEC. 37(1), THE A.O HAD ERRONEOUSLY DISALLOW ED THE SAID EXPENSES WHILE FRAMING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE FURTHER ADVERTING TO THE ADHOC DISALLOWANCE OF RS.31,76,705/ - MADE BY THE A.O AS REGARDS THE BOARDING AND LODGING EXPENSES , FOR THE REASON THAT THE SAME WERE INCURRED IN RESPECT OF CELEBRITIES, VIPS, RELATIVE S OF DIRECTORS, SUBMITTED THAT IT WAS CUSTOMARY FOR THE ORGANIZER TO INVITE CELEBRITIES TO THE EVENT FOR INCREASING THE TICKET SALES AND GAINING MOMENTUM ON T.V VIEWERSHIP. IT WAS RATHER AVERRED BY THE ASSESSEE THAT HISTORY WAS A WITNESS THAT THE EVENT S HA D GAINED PROMINENCE AND ATTRACTED SPONSORSHIPS ONLY WHEN CELEBRITIES ATTENDED THE EVENTS. RATHER, IT WAS THE CLAIM OF THE ASSESSEE THAT AS INVITING THE CELEBRITIES FOR THE EVENT ATTRACTED MORE EYEBALLS/INCREASED SALES, THE SPONSORS TOO WOULD COME FORTH WIT H HIGHER SPONSORSHIP S FOR THE EVENTS. THE ASSESSEE SUBMITTED THAT UNDER THE IPL FORMAT WHILE FOR ALL THE EVENT RIGHTS WERE EXPLOITED BY BCCI, HOWEVER, THE TICKETING RIGHTS AND TEAM SPONSORSHIP RIGHTS REMAINED WITH THE ASSESSEE. THUS, IN THE BACKDROP OF THE AFORESAID FACT S IT WAS SUBMITTED BY THE ASSESSEE THAT IN ORDER TO INCREASE ITS TICKETING SALES AND SPONSORSHIPS REVENUES, IT HAD INVITED CELEBRITIES TO ATTEND THEIR HOME MATCHES AND ALSO ARRANGED FOR THEIR BOARDING AND LODGING. IT WAS FURTHER THE CONTENTI ON OF THE ASSESSEE THAT THOUGH THE AFORESAID EXPENDITURE DULY SATISFIED ALL THE CONDITIONS CONTEMPLATED UNDER SEC. 37(1) OF THE ACT , HOWEVER, THE A.O WITHOUT ANY VALID AND COGENT REASON HAD DISALLOWED 33% OF THE TOTAL P A G E | 37 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXPENDITURE OF RS.96,26,375/ - AND MADE AN ADHOC DISALLOWANCE OF RS.31,76,705/ - . THE ASSESSEE FURTHER ADVERTING TO THE ADHOC DISALLOWANCE OF RS.37,37,007/ - MADE BY THE A.O (OUT OF THE BALANCE EXPENDITURE ON FOOD AND NUTRITION AND BOARDING AND LODGING OF RS.1,13,24,264/ - ) , SUBMITTED THAT THE EXPENDITURE INCURRED IN RESPECT OF BOARDING AND LODGING AND FOOD AND NUTRITION EXPENSES OF CELEBRITIES WHO WOULD ATTEND THE EVENT, BEING PROMPTED BY BUSINESS PRUDENCE TO INCREASE THE REVENUE FROM SALE OF TICKETS AND HIGHER SPONSORSHIP FEES , WAS THUS ALLOWABLE IN THE HANDS OF THE ASSESSEE. 19 . THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE , OBSERVED THAT ON VERIFICATION OF THE BILLS FOR FOOD AND NUTRITION EXPENSES , IT EMERGED THAT THERE WAS A BILL OF RS.3,44,410/ - FOR 300 SNACK S, 300 SOFT BEVERAGES AND TRANSPORT CHARGES , HOWEVER N OTHING COULD BE GATHERED FROM PERUSING THE SAME ABOUT THE PURPOSE AND PERSONS ATTENDING THE PARTY. THE CIT(A) FURTHER OBSERVED THAT A BILL OF RS.5,31,573/ - , DATED 30.04.2008 WAS THOUGH RAISED IN FAVOUR OF IPL ODC FOR DINNER OF 400 PERSONS, HOWEVER , AS TO HOW THE SAME WAS PAYABLE BY THE ASSESSEE HAD REMAINED UN EXPLAINED . THE CIT(A) FURTHER REFERRING TO CERTAIN OTHER BILLS, VIZ. BILL OF RS.5,31,893/ - FOR 08.05.2008 ; BILL OF RS.5,31,893/ - FOR 13.05. 2008 ; A ND BILL OF RS.5,31,894/ - FOR 20.05.2008, THEREIN OBSERVED THAT THE SAME INCLUDED DINNER, EQUIPMENT RENTAL, TOBACCO ETC . , BUT THEY TOO DID NOT INDICATE THE PURPOSE AND THE PERSONS ATTENDING THE SAID OCCASION. THE CIT(A) FURTHER REFERRING TO A BILL OF RS.4,5 1,900/ - WHICH WAS FOR 400 SNACKS, SOFT DRINK S , TRANSPORTATION, EQUIPMENT RENTAL , THEREIN OBSERVED THAT THE SAME DID BEAR A DISCREPANCY , WHEREIN AS AGAINST THE SAID DATE THE AMOUNT MENTIONED IN THE SUBMISSIONS BY THE ASSESSEE WAS RS.6,83,071/ - WHICH COULD N OT BE RECONCILED. SIMILARLY , ANOTHER BILL OF RS.5,31,893/ - FOR 25.05.2008 WAS ALSO STATED TO BE OF P A G E | 38 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 RS.6,69,698/ - IN THE SUBMISSIONS AND COULD NOT BE RECONCILED BY THE ASSESSEE . THE CIT(A) FURTHER UPHOLDING THE VIEW OF THE A.O OBSERVED THAT AS FROM A PERUSA L OF THE BILLS PLACED ON RECORD BY THE ASSESSEE NOTHING COULD BE GATHERED , EXCEPT FOR THE FACT THAT THE SAME WERE PAID FOR A PARTY, THEREFORE, A CLEAR NEXUS OF THE EXPENDITURE INCURRED AND THE PURPOSE OF THE BUSINESS DID NOT EMERGE FROM THE SAME. THE CIT(A ) CONCLUDED THAT THE ASSESSEE HAD FAILED TO JUSTIFY THAT THE ENTIRE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND WAS ALLOWABLE AS PER THE PROVIS I ONS OF SEC. 37(1) OF THE ACT. THUS, THE CIT(A) ON THE BASIS OF HIS AFORESAID DELIBERATIONS UPHELD THE 100% DISALLOWANCE OF THE EXPENSES AGGREGATING TO RS.39,19,880/ - CLAIMED BY THE ASSESSE E . 20 . THE CIT(A) FURTHER TAKING COGNIZANCE OF THE ROOM BILLS OF RS.96,26,375/ - OUT OF WHICH THE A.O HAD DISALLOWED 33%, VIZ. RS.31,76,705/ - , OBSERVED THAT THE SAME C OULD SAFELY BE HELD TO HAVE BEEN INCURRED BY THE ASSESSEE FOR VIPS, RELATIVES OF DIRECTORS, AND CELEBRITIES, VIZ. SHAH RUKH KHAN, JAYA MEHTA, MOHOMED MORANI, FARHAN AKTAR, MALIKA KHAN, VIVEK OBEROI, SEEMA KHAN, NEELAM KHOTARI, PRADEEP DHOOT, RITESH DESHMU KH AND KARAN JOHAR. THE CIT(A) FURTHER OBSERVED THAT THOUGH THE ASSESSEE HAD CLAIMED THAT THE ENTIRE EXPENDITURE WAS FOR BUSINESS PURPOSES, BUT HOWEVER, ON A PERUSAL OF A COPY OF LETTER DATED 02.04.20 08 WRITTEN BY SHRI ARUN ASHOK OF ITC - WELCOME GROUP TO MR . I.S. BHANDARI CHIEF OPERATIONS, RED CHILLIES ENTERTAINMENT P VT. LTD. (WHEREIN BY WAY OF AN OVER WRITING THE NAME OF THE ASSESSEE, VIZ. KNIGHT RIDERS SP ORTS PVT. LTD. WAS MENTIONED ) , IT EMERGED THAT THE TERMS AND CONDITIONS OF BOOKING OF ROOM S ETC . WERE SIGNED BY MRS. GAURI KHAN ON BEHALF OF RED CHILLIES ENTERTAINMENT PVT. LTD. THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS AGREED WITH THE VIEW TAKEN BY THE A.O THAT THE AFORESAID P A G E | 39 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXPENSES OF RS.96,26,375/ - WERE NOT INCURRED WHOLLY FOR THE BUSINESS OF THE ASSESSEE AND THE ELEMENT OF EXPENDITURE BEING PERSONAL IN NATURE COULD NOT BE RULED OUT . THUS , IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS THE CIT(A) UPHELD THE DISALLOWANCE OF 33% OF THE EXPENSES, VIZ. RS.31,76,705/ - MADE BY THE A.O. THAT ON THE BASIS OF THE SIMILAR REASONING FOR SUSTAINING THE AFORESAID DISALLOWANCE, THE CIT(A) FURTHER UPHELD THE DISALLOWANCE OF RS.37,37,007/ - (I.E 33% OF THE BALANCE EXPENSES OF RS.1,13,24,264/ - ) MADE BY THE A.O . 21 . THE A.O WHILE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSESSEE HAD CLAIMED AIR FARE EXPENSES OF RS. 3,28,96,505/ - , TRAVELLING EXPENSES OF RS.12,66,462/ - AND VEHICLE HIRE CHARGES OF RS.40,89,560/ - . THE A. O HELD A CONVICTION THAT AS THE ASSESSEE HAD INCURRED EXPENSES ON FOOD AND STAY OF VIPS AND CELEBRITIES, THEREFORE, THE AFORESAID AIR FARE EXPENSES, TRAVELLING EXPENSES AND VEHICLE HIRE EXPENSES MUST ALSO BE INCLUDING EXPENSES INCURRED ON SUCH VIPS AND CEL EBRITIES. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS DISALLOWED 25% OF THE EXPENSES, VIZ. RS.82,25,126/ - OUT OF AIR FARE EXPENSES,RS.3,16,616/ - OUT OF TRAVELLING EXPENSES AND RS.10,22,390/ - OUT OF VEHICLE HIRE CHARGES, AS A RESULT WHEREOF A TOTAL D ISALLOWANCE OF RS.95,63,132/ - WAS MADE BY HIM. 22 . THE ASSESSEE ASSAILED THE AFORESAID DISALLOWANCE OF EXPENSES OF RS.95,63,132/ - BEFORE THE CIT(A). THE ASSESSEE IN SUPPORT OF ITS CLAIM THAT NO PART OF THE AIR FARE EXPENSE, TRAVELLING EXPENSE AND VEHICLE HIRE CHARGES WERE LIABLE TO BE DISALLOWED, THEREIN SUBMITTED BEFORE THE CIT(A) , AS UNDER : - 6.1 FURTHER, DURING THE SUBJECT YEAR, THE APPELLANT HAD INCURRED EXPENDITURE TOWARDS AIRFARE EXPENSES OF RS.3,28,96,505/ - , TRAVELLING EXPENSES OF RS.12,66,462/ - AND VEHICLE HIRE CHARGES OF RS.40,89,560/ - , FOR THE MEMBERS OF THE TEAM AND SUPPORT STAFF AND OTHER DIGNATORIES. P A G E | 40 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 6.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD SUBMITTED VIDE SUBMISSION DATED 10 MAY 2011 COPI ES OF SUPPORTING EVIDENCES. 6.3 HOWEVER, THE LEARNED AO WITHOUT ANY VALID AND COGENT REASON MADE AN A DHOC DISALLOWANCE OF RS.95,63,132/ - AS FOLLOWS : SR. NO. PARTICULARS AMOUNT (RS.) PERCENTAGE OF DISALLOWANCE (RS.) AMOUNT OF DISALLOWANCE (RS.) 1. AIRFARE EXPENSES 3,28,96,505/ - 25% 82,24,126/ - 2. TRAVELLING EXPENSES 12,66,462/ - 25% 3,16,616/ - 3. VEHICLE HIRE CHARGES 40,89,560/ - 25% 10,22,390/ - TOTAL 3,82,52,527/ - 95,63,132/ - 6.4 THE LEARNED A.O HAS NOT GIVEN ANY EXPLANATION OR REASONING FOR ARRIVING AT THE RATE OF 25% FOR AD HOC DISALLOWANCE. 6.5 IT IS REITERATED THAT FOR ANY EVENT TO BE A SUCCESS, IT IS CUSTOMARY FOR THE ORGANISER TO INVITE CELEBRITIES TO THE EVENT FOR INCREASING THE TICKET SALES AND GAINING MOMENTUM ON TV VIEWERSHIP. HISTORY HAS SHOWN THAT EVENT GAINED PROMINENCE AND ATTRACT SPONSORSHIP ONLY WHEN CELEBRITIES ATTEND THE EVENT. ALSO SPONSORS ARE WILLING TO PAY HIGHER SPONSORSHIP FEE TO THE ORGANISER TO ATTRACT MORE EYEBALLS. 6.6 UNDER THE IPL FORMAT, WHILE ALL THE EVENT RIGHTS ARE EXPLOITED BY BCCI, TICKETING RIGHTS ARID TEAM SPONSORSHIP RIGHTS ONLY REST WITH THE APPELLANT. HENCE TO INCREASE ITS TICKETI NG REVENUES AND SPONSORSHIP REVENUES, THE APPELLANT INVITED CELEBRITIES TO ATTEND THEIR HOME MATCHES AND ALSO ORGANIZED FOR THEIR LODGING AND BOARDING. 6.7 THE LEARNED AO WITHOUT PROVIDING ANY VALID AND COGENT REASON AND WITHOUT PROVIDING AN OPPORTUNITY OF BEING HEARD DISALLOWED THE 25 PERCENT OF TOTAL EXPENDITURE OF RS.3,82,52,527/ - ON AN AD HOC BASIS BY STATING THAT SUCH LODGING AND BOARDING EXPENDITURE CANNOT BE TREATED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINES S PURPOSE. 6.8 THE ABOVE EXPENDITURE OF RS.95,63,132/ - ARE GENUINE BUSINESS EXPENDITURE INCURRED FOR THE AIRFARE, TRAVELLING EXPENSES AND VEHICLE HIRE CHARGES OF THE APPELLANT 'S OWN TEAM, VISITING TEAMS, SUPPORT STAFF, DIRECTORS AND INVITED GUESTS (BEING CELEBRITIES AND VIPS) AND SHOULD BE ALLOWED AS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT AS IT SATISFIES THE FOLLOWING CONDITIONS: THE EXPENSES ARE NOT OF THE NATURE DEFINED IN SECTION 30 TO 36 OF THE ACT; THE EXPENSES ARE NOT CAPITAL IN NATURE; THE EXPENSES ARE NOT THE PERSONAL EXPENSES OF APPELLANT; AND P A G E | 41 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF APPELLANT. IN LIGHT OF THE ABOVE, THE APPELLANT PRAYS BEFORE YOUR HONOUR TO HOLD THAT A IRFARE, TRAVELLING EXPENSES AND VEHICLE HIRE CHARGES INCURRED BY THE APPELLANT OF RS. 95,63,132 / - ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS B USINESS AND SHOULD BE ALLOWABLE IN TERMS OF THE PROVISIONS OF SECTION 37(1 ) OF THE ACT. 23 . THE CIT(A) AFTER DELIBERATING ON THE AFORESAID CONTENTION S OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME. THE CIT(A) OBSERVED THAT AS THE ASSESSEE HA D FAILED TO PRODUCE BEFORE HIM ANY EVIDENCE, VIZ. AIR TICKETS, DETAILS OF VEHICLES, NAME OF SERVICE PROVIDER, PERSONS UTILIZING THE SERVICES AND THEIR NEXUS WITH THE BUSINESS OF THE ASSESSEE ETC . , THEREFORE, THE POSSIBILITY OF THE EXPENDITURE HAVING BEEN IN CURRED FOR NON - BUSINESS PURPOSES COULD NOT BE RULED OUT. THUS, T HE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS UPHELD THE PART DISALLOWANCE OF RS.95,63,132/ - MADE BY THE A.O. 24 . THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD CLAIMED SECURITY CHARGES EXPENDITURE OF RS.60,700/ - PAID TO SCORPIONS AND RS.48,000/ - PAID TO ACE SECURITY FOR SECURITY CHARGES INCURRED FOR VIPS AND CELEBRITIES. THE A.O AFTER PERUSING THE VOUCHERS FOR THE AFORESAID EXPENSES OBSERVED THA T THE SAME WERE CLEARLY MARKED AS CELEBRITY SECURITY AT EDEN GARDEN, SECURITY EXECUTIVES PROVIDED TO MR. SHAH RUKH KHAN, ETC. THE A.O BEING OF THE VIEW THAT THE EXPENSES WHICH WERE INCURRED FOR THE SECURITY GIVEN TO MR. SHAH RUKH KHAN AND VIPS, CELEBRI TIES ETC . AT EDEN GARDEN WAS NOTHING BUT A PERSONAL EXPENDITURE WHICH COULD NOT BE HELD TO HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE , THUS , DISALLOWED THE CLAIM OF RS. 1,08,700/ - RAISED BY THE ASSESSEE. P A G E | 42 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 25 . THE ASSESSEE BEING AGGR IEVED WITH THE AFORESAID DISALLOWANCE OF THE SECURITY EXPENSES OF RS.1,08,700/ - INCURRED FOR VIPS AND CELEBRITIES, CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE AFORESAID EXPENSES INCURRED FOR PROVIDING S ECURITY AND PROTECTION TO THE CELEBRITIES AN D VIP S WHO ATTENDED THE EVENTS AT EDEN GARDENS WERE INCURRED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE AND HAD WRONGLY BEEN DISALLOWED BY THE A.O. THE ASSESSEE IN ORDER TO DRIVE HOME ITS AFORESAID CONTENTION THAT THE SECURITY EXPENSES WERE ALLOWABLE IN ITS HANDS UNDER SEC. 37(1) , SUBMITTED BEFORE THE CIT(A) , AS UNDER: - 7.1 DURING THE IPL - 1 MATCHES, WHICH TOOK PLACE IN THE MONTHS OF APRIL AND MAY 2 008, THE APPELLANT HAD INCURRED EXPENDITURE TOWARDS SECURITY ARRANGEMENT AND POLICE FOR THE MEMBERS OF THE TEAM AND ITS INVITED GUESTS (BEING VIPS AND CELEBRITIES). 7.2 COPIES OF THE LEDGER ALONG WITH COPIES OF THE INVOICES IN CONNECTION WITH SECURITY CHA RGES INCURRED BY THE APPELLANT WERE SUBMITTED BEFORE THE LEARNED AO VIDE SUBMISSION DATED 15 JUNE 2011 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 7.3 THE APPELLANT WITH A VIEW TO ATTRACT THE PUBLIC TO WATCH THE CRICKET MATCHES INVITED HIS GUEST, VIPS AND CELEBRITIES FOR THE CRICKET MATCHES HELD IN HOME STADIUM. YOUR HONOUR WILL APPRECIATE THAT INVITING VIP GUESTS, CELEBRITIES ETC DURING THE MATCHES RESULTS IN INCREASE OF THE ATTENDANCE OF THE PUBLIC FOR THE MATCHES WHICH IN TURN INCREASES THE TICKET SALES AND REVENUES OF THE APPELLANT. FURTHER, IT INCREASES IN PREMIUM FROM THE SPONSORS, AS THE SPONSORS WOULD WANT TO BE ASSOCIATED WITH THE TEAM WHICH CAN IMPROVE THEIR MARKETABILITY BY INCREASING PUBLIC VIEWERSHIP. ACCORDINGLY, WHERE THE INVITED GUESTS, VIP GUESTS AND CELEBRITIES ARE INVITED BY THE APPELLANT FOR THE BENEFIT OF ITS BUSINESS, THEIR SECURITY AND PROTECTION IS ALSO RESPONSIBILITY OF THE APPELLANT. ACCORDINGLY, THE APPELLANT HAD INCURRED EXPENDITURE ON SE CURITY CHARGES OF THE INVITED GUEST, VIP'S AND CELEBRITIES DURING THE CAPTIONED AY. 7.4 HOWEVER, THE LEARNED AO DISALLOWED RS.1,08,700/ - INCURRED BY THE APPELLANT DURING THE MATCHES TOWARDS SECURITY CHARGES FOR THE MEMBERS OF THE KKR TEAM AND THE VIP GUESTS OF THE APPELLANT ON THE PREMISE THAT THESE ARE PERSONAL EXPENSES. 7.5 IT IS SUBMITTED BEFORE YOUR HONOUR THAT THE ABOVE EXPENDITURE OF RS. 1,08,700/ - ARE GENUINE BUSINESS EXPENDITURE INCURRED FOR THE SECURITY CHARGES OF THE APPELLANT 'S OWN TEAM, VISITING TEAMS, SUPPORT STAFF, DIRECTORS AND INVITED GUESTS (BEING CELEBRITIES AND VIPS) AND SHOULD BE ALLOWED AS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37(L) OF THE ACT AS IT SATISFIES ALL THE FOLLOWING CONDITIONS: P A G E | 43 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 T HE EXPENSES ARE NOT OF THE NATURE DEFINED IN SECTION 30 TO 36 OF THE ACT; THE EXPENSES ARE NOT CAPITAL IN NATURE; THE EXPENSES ARE NOT THE PERSONAL EXPENSES OF APPELLANT; AND THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF APPELLANT. IT IS SUBMITTED THAT, SINCE THE EXPENSES INCURRED BY APPELLANT SATISFY THE ABOVEMENTIONED CONDITIONS, THE SECURITY EXPENSES SHOULD BE ALLOWED AS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 26 . THE CIT(A) AFTER GIV ING A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS OF THE ASSESSEE DECLINED TO ACCEPT THE SAME. THE CIT(A) OBSERVED THAT AS AVERRED BY THE ASSESSEE THAT THE POLICE WAS TAKING CARE OF THE SECURITY ARRANGEMENTS IN THE STADIUM, SINCE IT WAS THE RESPONSIBILITY OF THE STATE GOVERNMENT, THEREFORE, ANY EXPENDITURE MADE FOR ANY PARTICULAR PERSON COULD NOT BE HELD TO HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS AND WAS CLEARLY A PERSONAL EXPENDITURE. THE CIT( A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS UPHELD THE DISALLOWANCE OF RS.1,08,700/ - MADE BY THE A.O. 27 . THE A.O FURTHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 8,85,600/ - ON ACCOUNT OF PAY MENT MADE TO MR. MANISH MALHOTRA IN MARCH, 2009. THE ASSESSEE ON BEING CALLED UPON BY THE A.O SUBMITTED THAT THE PAYMENT WAS MADE FOR DESIGNING THE OUTFITS OF KKR TEAMS WHICH WERE EXHIBITED AT THE LAKME FASHION WEEK AND WILLS LIFESTYLE INDIA FASHION WEEK. THE A.O OBSERVED THAT THE ASSESSEE HAD OFFERED ITS INCOME WITH RESPECT TO THE REVENUE EARNED FROM THE IPL SEASON - 1 , WHICH TO OK PLACE IN THE MONTH OF APRIL AND MAY, 2008, BUT HOWEVER, AGAINST THIS INCOME THE AFORESAID EXPENSES WHICH WERE INCURRED AFTER LAPS E OF A SUBSTANTIAL PERIOD WERE CLAIMED BY THE ASSESSEE . THUS, THE A.O BEING OF THE VIEW THAT AS NO INCOME WAS OFFERED BY THE ASSESSEE IN RESPECT OF THE AFORESAID AMOUNT OF EXPENDITURE, THEREFORE, THE CLAIM OF THE AFORESAID EXPENSES BY THE ASSESSEE WAS NOT IN CONFORMITY WITH THE P A G E | 44 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 MATCHING PRINCIPLE OF ACCOUNTANCY. THE A.O OBSERVED THAT THE DATE OF THE FASHION WEEK DID NOT CORRELATE WITH THE TERM OF IPL SEASON - 1 MATCHES . IT WAS FURTHER OBSERVED BY THE A.O THAT THE EXPENDITURE FOR DESIGNING AND EXHIBITION OF PL AYER OUTFITS FOR THE KKR TEAMS WAS EVEN OTHERWISE NOT ALLOWABLE , FOR THE REASON THAT THE SAID OUTFITS HAD ALREADY BEEN DESIGNED AND DISPLAYED BY THE TEAM DURING THE IPL SEASON - 1 MATCHES WHICH WERE HELD DURING THE MONTH OF APRIL AND MAY, 2008. THE A.O ON TH E BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT AS THE CLAIM OF THE AFORESAID EXPENSES SO RAISED BY THE ASSESSEE WAS HAUNTED BY SERIOUS DOUBTS, THEREFORE, THE EXPENSES OF RS.8,85,600/ - COULD NOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. 2 8 . THE ASSESSEE BEING AGGRIEVED WITH THE DISALLOWANCE OF THE AFORESAID EXPENDITURE OF RS.8,85,600/ - ASSAILED THE SAME IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT IT HAD DURING THE YEAR UNDER CONSIDERATION MADE PAYMENTS AMOUNTING TO RS.8,85,600/ TO MR. MANISH MALHOTRA IN CONNECTION WITH PARTICIPATION IN THE LAKME FASHION WEEK AND WILLS LIFESTYLE INDIA FASHION WEEK, BOTH OF WHICH EVENTS WERE HELD IN MARCH, 2009. THE ASSESSEE EXPLAINING THE GENESIS OF THE AFORESAID PAYMENT S SUBMITTE D BEFORE THE CIT(A) THAT MR. MANISH MALHOTRA HAD ALREADY PAID THE AMOUNT OF RS.8,85,600/ - FOR PARTICIPATING IN BOTH OF THE AFORESAID EVENTS, WHICH THEREAFTER WAS REIMBURSE D TO HIM BY THE ASSESSEE IN MARCH, 2009. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THA T THE UNDERLYING PURPOSE OF PARTICIPATI NG IN THE FASHION SHOW S WAS TO ADVERTISE AND PROMOTE THE KKR TEAM. THUS, IT WAS THE CONTENTION OF THE ASSESSEE THAT AS BOTH THE FASHION SHOW S WERE O RGANISED IN MARCH, 2009, THEREFORE, THEY WERE RECOGNIZED AS AN EXPENS E FOR THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10. THE ASSESSEE DISLODGING THE OBSERVATION S OF THE A.O ON THE P A G E | 45 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 BASIS OF WHICH HE HAD DISALLOWED THE AFORESAID EXPENSE S, THEREIN CLARIFIED THAT THE SAME WERE NOT INCURRED FOR DESIGNING OF THE PLAYER OUTFITS OF THE KKR TEAM AS INFERRED BY THE A.O, BUT RATHER, WERE INCURRED TO ADVERTISE AND PROMOTE THE KKR TEAM. IT WAS SUBMITTED THAT AS BOTH THE AFORESAID EVENTS HAD TAKEN PLACE IN MARCH, 2009, THEREFORE, THE ASSESSEE WHO WAS FOLLOWING THE MERCANTILE SYSTEM OF A CCOUNTING HAD BOOKED THE SAID EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT AS ALL THE REQUISITE CONDITION S CONTEMPLATED IN SEC.37(1) WERE SATISFIED , THEREFORE, THE A.O HAD GRAVELY ERRED IN NOT ALLOW ING THE SAID CLAIM OF EXPENSE INCURRED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS. 29 . THE CIT(A) AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS OF THE ASSESSEE, HOWEVER, DID NOT FIND HIMSELF AS BEING IN AGREEMENT WITH THE SAME. THE CIT(A) OBSERVED THAT THE ASSESSEE IN CONTRADICTION OF ITS CLAIM BEFORE THE A.O THAT THE EXPENDITURE OF RS. 8,85,600/ - WAS INCURRED FOR DESIGNING AND EXHIBITION OF PLAYER OUTFITS , HOWEVER , AVERRED BEFORE HIM THAT THE SAME WAS AN EXPENDITURE INCURRED TOWARDS ADVERTI SEMENT OF THE KKR TEAM. THE CIT(A) THUS CONCLUDED THAT AS NEITHER THE NATURE OF THE EXPENDITURE WAS CLEARLY BROUGHT OUT BY THE ASSESSEE , NOR THE FACT AS TO HOW THE EXPENDITURE INCURRED IN MARCH, 2009 FOR ADVERTISEMENT/PUBLICITY WAS GOING TO CONTRIBUTE TO THE REVENUE OF THE ASSESSEE FOR EVENTS WHICH HAD ALREADY BEEN HELD IN APRIL/MAY, 2008 COULD BE EXPLAINED BY THE ASSESSEE . THE CIT(A) ON THE B ASIS OF HIS OBSERVATIONS , NOT FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, THEREFORE, REJECTED THE SAME AND UPHELD T H E DISALLOWANCE OF RS.8,85,600/ - . 30 . THE A.O WHILE FRAMING THE ASSESSMENT NOTED THAT THE ASSESSEE WHO THOUGH HAD INCURRED WEBSITE DESIGN CHARGES OF RS.16,98,609/ - , P A G E | 46 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HAD HOWEVER CLAIMED ONLY 50% OF THE TOTAL EXPENDITURE I.E. RS.8,49,305/ - . THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS REQUESTED THE A.O TO ALLOW THE ENTIRE EXPENDITURE OF RS.16,98,609/ - .HOWEVER, THE A.O B EING OF THE VIEW THAT THE EXPENDITURE INCURRED ON WEBSITE DESIGNING WAS IN THE NATURE OF CAPITAL EXPENDITURE AND THE INTANGIBLE ASSET GENERATED THEREIN WAS NOT SUBJECT TO ANY WEAR AND TEAR, THEREFORE, THE ASSESSEE WAS NOT EVEN ENTITLE D FOR DEPRECIATION UND ER SEC.32 OF THE ACT ON THE AMOUNT OF THE CAPITALIZED EXPENDITURE. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS DISALLOWED THE CLAIM OF EXPENDITURE OF RS.8,49,305/ - R AISED BY THE ASSESSEE IN ITS RETURN OF INCOME. 31 . AGGRIEVED, THE ASSESSEE ASSAILE D THE DISALLOWANCE OF THE WEBSITE DESIGN CHARGES EXPENSES BY THE A.O, BEFORE THE CIT(A) . IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE WEBSITE DESI GN CHARGES OF RS.16,98,609/ - WERE INCURRED IN CONNECTION WITH DESIGNING OF THE WEBSITE WHOSE BENEFIT WAS AVAILABLE OVER A PERIOD OF TWO YEARS, THEREFORE, THE ASSESSEE HAD ERRONEOUSLY RECOGNIZED ONLY 50% OF THE SAID EXPENSES, VIZ. RS.8,49,305/ - DURING THE YEAR UNDER CONSIDERATION. IT WAS S UBMITTED BY THE ASSESSEE THAT AS THE CONCEPT OF DEFERRED REVENUE EXPENDITURE WAS NOT RECOGNIZED UNDER THE INCOME TAX PROVISIONS, THEREFORE, THE AFORESAID WEBSITE DESIGN EXPENSES WHICH WERE INCURRED BY THE ASSESSEE NOT FOR THE PURPOSE OF IMPROVISATION OF A FIX ED ASSET, BUT WERE INCURRED TO FACILITATE ITS BUSINESS OPERATION , WAS THUS ALLOWABLE IN TOTO DURING THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2009 - 10 . THE ASSESSEE IN THE BACKDROP OF HIS AFORESAID CONTENTIONS REQUESTED THE CIT(A) TO GRANT THE ADDITIONAL DE DUCTION OF THE BALANCE 50% OF THE DEFERRED WEBSITE EXPENSES ALSO DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE TO SUPPORT ITS AFORESAID CLAIM AS REGARDS THE ADDITIONAL DEDUCTION OF THE BALANCE 50% OF THE DEFERRED WEBSITE P A G E | 47 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXPENSES, RELIED ON THE CBDT CI RCULAR NO. 14(XL - 35), DATED 11.04.1955, AS PER WHICH IT WAS OBLIGATORY ON THE PART OF THE TAX OFFICIALS TO SUO MOT T O ALLOW AN EXPENDITURE , DESPITE THE FACT THAT THE TAX PAYER MAY HAD FAILED TO CLAIM THE SAME IN ITS RETURN OF INCOME . IT WAS SUBMITTED BY THE ASSESSEE THAT THE A.O WITHOUT ACCORDING ANY VALID AND COGENT REASON HAD DISALLOWED RS.8,49,305/ - THAT WAS CLAIMED BY THE ASSESSEE TOWARDS WEBSITE DESIGN CHARGES , BY HOLDING THAT THE SAME WAS IN THE NATURE OF A CAPITAL EXPENDITURE. THE ASSESSEE RELYING ON THE JUDGMENTS OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. INDIAN VISIT COM. PVT. LTD. 176 TAXMAN 164 (DEL) , AS WELL AS THE ORDER OF A COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF RADIAL MARKETING PVT. LTD. VS. ITO [ITA NO. 3868/MUM/200 8] THEREIN AVERRED THAT THE WEBSITE DESIGN CHARGES HAD BEEN HELD IN THE AFORESAID JUDICIAL PRONOUNCEMENTS AS A REVENUE EXPENDITURE. 32 . THE CIT(A) AFTER DELIBERATING ON THE AFORESAID CONTENTIONS OF THE ASSESSEE OBSERVED THAT THE CBDT CIRCULAR NO. 14 (SURP A) AS WAS RELIED UPON BY THE ASSESSEE ONLY PROVIDED THAT THE REVENUE AUTHORITIES WERE TO GIVE GUIDANCE TO THE ASSESSE S , AS AND WHEN THE SAME WAS NEEDED BY THEM. THE CIT(A) HELD THAT THERE WAS NOTHING AVAILABLE ON RECORD WHICH WOULD REVEAL THAT THE ASSESSEE HAD APPROACH ED THE A.O FOR ANY SUCH GUIDANCE. THE CIT(A) FURTHER OBSERVED THAT AS THE ASSESSEE WAS ASSISTED BY A PROFESSIONAL CHARTERED ACCOUNTANT AND A BATTERY OF LEGAL EXPERT S , THEREFORE, IT WAS BEYOND COMPREHENSION THAT THE ASSESSEE HAD REMAINED IGNORA NT AS REGARDS ITS CLAIM OF DEDUCTION OF WEBSITE DESIGN CHARGES. THE CIT(A) FURTHER DELIBERATING ON THE NATURE OF THE EXPENSES , OBSERVED THAT AS THE WEBSITE WAS DESIGN ED FOR THE FIRST TIME, THEREFORE , THE EXPENDITURE INCURRED BY THE ASSESSEE CLEARLY REVEALE D PROVIDING OF AN ENDURING BENEFIT TO HIM. TH US , IN THE BACKDROP OF THE AFORESAID OBSERVATIONS , IT WAS CONCLUDED BY THE CIT(A) THAT THE EXPENDITURE P A G E | 48 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 INCURRED BY THE ASSESSEE ON WEBSITE DESIGNING WAS ON THE CAPITAL SIDE, SINCE IN THE SUBSEQUENT YEARS THE ASS ESSEE WOULD ONLY BE REQUIRED TO UPDATE THE WEBSITE WHICH WAS DESIGNED BY HIM DURING THE YEAR. THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT THE AFORESAID EXPENDITURE WAS RIGHTLY DISALLOWED BY THE A.O BY TREATING IT AS CAPITAL IN NATU RE. 3 3 . THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SHRI J.D. MISTRY, SENIOR COUNSEL , AT THE VERY OUTSET TOOK US THROUGH THE FACTS OF THE CASE AND SUBMITTED THAT THE ASSESSEE COMPANY HAD ENTERED INTO AN IPL FRANCHISE AGREEMENT WITH BCCI - IPL ON 04.04.2008 FOR FRANCHISE RIGHT S OF IPL TEAM WITH HOME GROUND AT EDEN GARDEN, KOLKATA, WHICH WAS NAMED AS KOLKATA KNIGHT RIDERS ( FOR SHORT KKR ). THE LD. A.R SUBMITTED THAT TH OUGH THE ASSESSEE HAD CLAIMED THE FRANCHISE FEE PAID FOR PARTICI PAT ING IN THE TOURNAMENT FOR THE SUBJECT YEAR AS A REVENUE EXPENDITURE, HOWEVER , THE A.O BY CHARACTERISING THE SAME AS A CAPITAL EXPENDITURE, HAD RESTRICTED THE CLAIM OF THE ASSESSEE ONLY TO THE EXTENT OF THE DEPRECIATION RELATABLE TO THE SAME. THE LD. A.R IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION SUBMITTED THAT THE FRANCHISE FE E PAID BY THE ASSESSEE WAS IN THE NATURE OF A RECURRING ANNUAL PAYMENT WHICH WAS PAID FOR PARTICIPATING IN THE LEAGUE AND OPERATING THE TEAM FOR THE YEAR FOR WHICH THE PAYMENT WAS MADE. THE LD. A.R SUBMITTED THAT AS THE PAYMENT OF FRANCHISE FEE NEITHER VES TED ANY RIGHT OF PARTICIPATION IN THE MATCHES FOR THE SUBSEQUENT YEARS, NOR DID LEAD TO CREATION/OWNERSHIP OF AN ASSET OR GENERATION OF A BENEFIT OF AN ENDURING NATURE, THEREFORE, IT WAS RIGHTLY CLAIMED AS A REVENUE EXPENDITURE BY THE ASSESSEE , WHICH HOWEV ER WAS WRONGLY DISALLOWED BY THE A.O BY HOLDING THE SAME AS A CAPITAL EXPENDITURE. THE LD. A.R TOOK US THROUGH THE RELEVANT PAGES OF THE FRANCHISE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND BCCI - P A G E | 49 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 IPL , WHEREIN DIFFERENT TERMS USED IN THE AGREEMENT WERE DEFIN ED, VIZ. (I) FRANCHISE ( PAGE 53 ) OF HIS PAPER BOOK (FOR SHORT APB); (II) CENTRAL RIGHTS ( PAGE 53 OF APB); (III) FRANCHISEE RIGHTS ( PAGE 54 OF APB); (IV) TERRITORY ( PAGE 57 OF APB); AND (V) YEAR ( PAGE 57 OF APB). THE LD. A.R DREW OUR ATT ENTION TO THE FACT THAT THE YEAR UNDER CONSIDERATION WHICH WAS THE FIRST YEAR WAS TO COMPRISE OF THE PERIOD FALLING BETWEEN THE SIGNING OF THE AGREEMENT TILL 31 ST DECEMBER, 2008. THE LD. A.R IN ORDER TO FORTIFY HIS CONTENTION THAT BY MAKING THE PAYMENT OF FRANCHISE FEE NO ENDURING BENEFIT GOT VESTED WITH THE ASSESSEE , SUBMITTED THAT THE SAME COULD BE GATHERED FROM THE VERY FACT THAT IN CASE OF NON STAGING OF THE LEAGUE BY BCCI - IPL (IN WHOLE OR PART), THE SAME WOULD NOT CONS TITUTE A BREACH OF THE AGREEMENT AND NO RECOURSE TO ANY LEGAL ACTION COULD BE TAKEN BY THE ASSESSEE AGAINST THE OTHER PARTY, VIZ. BCCI. THE LD. A.R FURTHER TO IMPRESS UPON US THAT THE PAYMENT OF THE FRANCHISE FEE DID NOT LEAD TO VESTING OF ANY ABSOLUTE RIGHTS WITH THE ASSESSEE , WHICH THUS CO ULD BE CONSTRUED AS A CREATION/ OWNERSHIP RIGHTS OF A CAPITAL ASSET, THEREIN SUBMITTED THAT ALL THE RIGHTS TO TELECAST THE MATCHES REMAIN ED WITH THE BCCI, WHILE FOR THE ASSESSEE WAS VESTED ONLY WITH THE RIGHTS AS THAT OF A FRANCH ISEE. THE LD. A.R TAKING US THROUGH THE LIMITED RIGHTS AS GOT VESTED WITH THE ASSESSEE PURSUANT TO THE PAYMENT OF THE FRANCHISE FEE, THEREIN DREW OUR ATTENTION TO THE DETAILS OF THE CENTRAL LICENSING/FRANCHISEE LICENSING FORMING PART OF THE FRANCHISEE AGR EEMENT ( PAGE 60 OF APB) . THE LD. A.R TAKING US THROUGH THE OBLIGATIONS AS WERE CAST UPON THE FRANCHISE E IN RESPECT OF THE PAYMENT OF THE FRANCHISE CONSIDERATION TO BCCI - IPL, TOOK US THROUGH CLAUSE 7 OF THE FRANCHISE AGREEMENT ( PAGE 62 OF APB), WHICH THEREIN PROVIDED THAT IN RESPECT OF THE PERIOD 2008 - 17 (INCLUSIVE ) THE ASSESSEE WAS TO MAKE A PAYMENT OF USD 22,52,700 EQUIVALENT TO INR 9,01,08,000/ - TOWARDS LEAGUE DEPOSIT ON OR BEFORE 2 ND JANUARY IN EACH SUCH YEAR, WHICH THEREAFTER WAS TO BE P A G E | 50 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 APPROPRIATED TOWARDS THE ANNUAL FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE YEAR IN WHICH THE LEAGUE DEPOSIT WAS PAID . THAT STILL FURTHER AN AMOUNT OF USD 52,56,300/ - EQUIVALENT TO INR 21,02,52,000/ - WAS TO BE PAID BY THE ASSESSEE IN EACH SUCH YEAR ON THE DATE OF FIRST MATCH IN THE LEAGUE IN EACH SUCH YEAR. THE LD. A.R IN ORDER TO SUPPORT HIS CLAIM THAT THE PAYMENT OF THE FRANCHISE FEE DID NOT LEAD TO VESTING OF ANY ENDURING BENEFIT WITH THE ASSESSEE, AND AS SUCH CO ULD NOT BE HELD TO BE IN THE NATURE OF A CAPITAL EXPENDITURE , DREW OUR ATTENTION TO CLAUSE 10 OF THE F RANCHISE AGREEMENT ( PAGE 65 OF APB) , WHICH PROVIDED THAT THE FRANCHISEE HAD NO RIGHT TO ASSIGN OR DELEGATE THE PERFORMANCE OF ANY RIGHT OR OBLIGATION UN DER THE AGREEMENT. THE LD. A.R FURTHER IN ORDER TO BUTTRESS HIS CONTENTION THAT NO ABSOLUTE RIGHT OF AN ENDURING NATURE GOT VESTED WITH THE ASSESSEE ON THE PAYMENT OF THE FRANCHISE FEE, FURTHER TOOK US THROUGH CLAUSE 11 OF THE FRANCHISE AGREEMENT , WHICH PROVIDED THAT IN CASE OF A BREACH BY THE FRANCHISEE OF ITS PAYMENT OBLIGATION UNDER THE AGREEMENT OR UNDER CLAUSE 22 , THE SAME WAS TO BE TAKEN AS A MATERIAL BREACH OF THE AGREEMENT. THE LD. A.R FURTHER TO IMPRESS UPON US THAT ITS CLAIM OF THE FRANCH ISE FEE AS A REVENUE EXPENDITURE WAS WELL IN ORDER AND NO RIGHT OF ENDURING BENEFIT GOT VESTED WITH THE ASSESSEE, THEREIN TOOK US THROUGH CLAUSE 16 OF THE FRANCHISE AGREEMENT , WHICH PROVIDED THAT AS THE RIGHTS GRANTED TO THE FRANCHISE E WERE PERSONAL TO THE FRANCHISEE, THEREFORE, IT HAD NO RIGHT TO EITHER ASSIGN THE AGREEMENT OR TO SUB - CONTRACT OR OTHERWISE DELEGATE THE FRANCHISEES OBLIGATIONS UNDER IT WITHOUT THE BCCI - IPLS WRITTEN CONSENT. THE LD. A.R FURTHER TOOK US THROUGH PAGE 18 - 34 OF THE CIT(A) ORDER , WHEREIN THE SUBMISSIONS OF THE ASSESSEE AND THE VIEW OF THE CIT(A) AS REGARDS THE ISSUE AS TO WHETHER THE PAYMENT OF THE F RANCHISE FEE BY THE ASSESSEE WAS IN THE NATURE OF A REVENUE EXPENDITURE (AS CLAIMED BY THE ASSESSEE) , OR A CAPITAL EXPENDITURE (AS P A G E | 51 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 H ELD BY THE A.O) WERE RECORDED . THE LD. A.R FURTHER SUBMITTED THAT THE ASSESSEE HAD PAID SERVICE TAX ON THE FRANCHISE FEE, WHICH THUS FORTIFIED ITS CLAIM THAT THE SAME WAS IN THE NATURE OF A REVENUE EXPENDITURE. THE LD. A.R IN ORDER TO BUTTRESS HIS CONTENTION THAT NO ENDURING BENEFIT/RIGHT GOT VESTED WITH THE ASSESSEE ON PAYMENT OF THE FRANCHISE FEE , SUBMITTED THAT THE SAME COULD BE GATHERED FROM THE FACT THAT IN CASE NO MATCHES WERE PLAYED DURING THE YEAR, THE ASSESSEE NEITHER HAD ANY RIGHT TO FORC E BCCI FOR PLAYING OF THE MATCHES, NOR COULD TAKE ANY LEGAL ACTION AGAINST IT. THE LD. A.R. IN ORDER TO SUPPORT ITS AFORESAID CONTENTION RELIED ON THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT I BENCH, MUMBAI IN THE CASE OF INDIA WIN SPORTS PVT. LTD. VS. ACIT (ITA NO. 5290 & 5291/MUM/2014, DATED 22.07.2016 . THE LD. A.R TAKING US THROUGH PARA 5 - 10 OF THE ORDER , SUBMITTED THAT THE T RIBUNAL HAD IN THE AFORESAID CASE CONCLUDED THAT THE FRANCHISE FEE PAID BY THE F RANCHISEE TO BCCI - IPL WAS WITH THE PURPOSE OF ALLOWING PARTICIPATION OF THE TEAM IN IPL, AND AS THE SAME DID NOT VEST WITH THE ASSESSEE ANY ENDURING BENEFIT, THEREFORE, THE SAME WAS ALLOWABLE AS A REVENUE EXPENDITURE. THE LD. A.R SUBMITTED THAT ALL THE AFORESAID AGREEMENTS WERE EXECUTED BY BCCI - IPL ON THE SAME DATE, VIZ. 10.04.2008. THE LD. A.R FURTHER RELIED ON A SIMILAR VIEW TAKEN BY ANOTHER COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT HYDERABAD BENCH B, HYDERABAD IN THE CASE OF DCIT VS. M/S DECCAN CHARGERS SPORTING VENTURES LTD. (ITA NO. 1043/HYD/2013, DATED 28.10.2015. THE LD. A.R IN SUPPORT OF THE PROPOSITION UNDER CONSIDERATION ALSO RELIED ON THE ORDER OF ITAT C BENCH, CHENNAI IN THE CASE OF ACIT VS. M/S THE INDIA CEMENT LTD. (ITA NO. 1342/MDS/2010, DATED 01.01.2016 ) . 34 . THE LD. A.R FURTHER ADVERT ED TO HIS CLAIM OF AN AMOUNT OF RS.7,50,90,000/ - PERTAINING TO IPL SEASON - 2 AS AN EXPENDITURE FOR THE P A G E | 52 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 YEAR UNDER CONSIDERATION . THE LD. A.R SUBMITTED THAT THE AMOUNT OF RS. 7,50,90,000/ - W AS CLAIMED BY THE ASSESSEE AS AN EXPENDITURE FOR THE YEAR , AS THE PERIOD OF FIRST THREE MONTHS (JANUARY, 2009 TO MARCH, 2009) FELL WITHIN THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10, HOWEVER , THE SAME WAS DISALLOWED BY THE A.O FOR THE REASON THAT THE SAID CLAIM OF THE ASSESSEE MILITATED AGAINST THE MATCHING PRINCIPLE OF ACCOUNTING AND DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. THE LD. A.R. ONCE AGAIN DREW OUR ATTENTION TO THE DEFINITION OF THE TE RM YEAR , WHICH PROVIDED THAT THE SAME WAS TO BE TAKEN AS THE 12 MONTH PERIOD ( OR PART THEREOF) FROM 1 JANUARY TO 31 DECEMBER DURING THE TERM, WITH THE EXCEPTION FOR THE FIRST YEAR , WHERE THE SAME WAS TO BE TAKEN FROM THE DATE OF SIGNING OF THE AGREEMENT TILL 31 DECEMBER, 2008. THE LD. A.R TAKING US THROUGH CLAUSE 7.1 (A) OF THE FRANCHISE AGREEMENT ( PAGE 62 OF APB) , THEREIN AVERRED THAT IN TERMS OF THE CONTRACTUAL OBLIGATION AS EMERGED THEREFROM, THE ASSESSEE HAD RIGHTLY CLAIMED AN AMOUNT OF RS.37,54,50,0 00/ - AS AN EXPENDITURE UNDER THE HEAD FRANCHISEE FEE IN ITS P ROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE LD. A.R TOOK US THROUGH THE OBSERVATIONS OF THE CIT(A) RECORDED AT PAGE 45 - PARA 5.4 , AS WELL AS THE SUBMISSIONS RAISED BY THE ASSESSEE BEFORE HIM AT PAGE 36 - 39 OF THE CIT(A) ORDER. THE LD. A.R SUBMITTED THAT KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE CLAIM OF THE AFORESAID AMOUNT OF RS.7,50,90,000/ - BY THE ASSESSEE AS A F RANCHISE FEE FOR THE YEAR UNDER CONSIDERATION WAS WELL IN ORDER, PLACE D RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. CIT (2015) 372 ITR 605 (SC) . 3 5 . TH E LD. A.R IN RESPECT OF ITS ENTITLEMENT OF AN AMOUNT OF RS.75,00,000/ - THAT WAS PAID DIRECTLY TO KOLKATA POLICE DEPARTMENT FOR THE SECURITY SERVICES TO BE PROVIDED AT THE STADIUM, TOOK US THROUGH P A G E | 53 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE I NCOME AND EXPENDITURE ACCOUNT FOR THE INDIAN PREMIER LEAG UE PLAYED AT EDEN GARDEN ON 20 TH APRIL TO 25 TH MA Y, 2008 OF THE CRICKET ASSOCIATION OF BENGAL (FOR SHORT CAB) FOR THE FINANCIAL YEAR 2008 - 09 ( PAGE 109 OF APB) . THE INCOME AND EXPENDITURE ACCOUNT OF CAB REVEALED THAT WHILE FOR AN AMOUNT OF RS.3,50,00,000/ - PAID BY THE ASSESSEE STOOD CREDITED UNDER THE HEAD STADIUM USAGE CHARGES , WHILE FOR AN AMOUNT OF RS.75,00,000/ - WAS DEBITED UNDER THE HEAD R EFRESHMENT FOR POLICE FORCE . THAT IN THE BACKDROP OF THE AFORESAID FACT S, THE LD. A.R TOOK US THROUGH THE OBSERVATIONS OF THE CIT(A) IN CONTEXT OF THE ISS UE UNDER CONSIDERATION RECORDED AT PAGE 49 PARA 6.4 OF HIS ORDER. THE LD. A.R SUBMITTED THAT AS PER THE ARRANGEME NT BETWEEN THE ASSESSEE AND CAB , THE ASSESSEE WAS REQUIRED TO PAY RS.50,00,000/ - PER MATCH PLAYED AT EDEN GARDEN STADIUM. IT WAS THUS SUBMITT ED BY THE LD. A.R THAT AS 7 MATCHES WERE PLAYED AT EDEN GARDEN DURING IPL SEASON - 1, THEREFORE , THE ASSESSEE WAS LIABLE TO PAY A CONSIDERATION OF RS.3,50,00,000/ - . IN THE BACKDROP OF THE AFORESAID FACT S IT WAS SUBMITTED BY THE ASSESSEE THAT AS IT WAS THE RESPONSIBILITY OF CAB TO ARRANGE FOR SECURITY AT THE STADIUM, THEREFORE, AT THE DIRECTION OF CAB THE ASSESSEE HAD MADE A PAYMENT OF RS.75,00,000/ - DIRECTLY TO KOLKATA POLICE DEPARTMENT FOR SECURITY SERVICES TO BE PROVIDED AT THE STADIUM. IT WAS THUS SUBMITTED BY THE LD. AR THAT AS THE AFORESAID EXPENDITURE WAS INCURRED IN THE NORMAL COURSE OF THE BUSINESS OF THE ASSESSEE, THEREFORE, THE SAME WAS ALLOWABLE AS AN EXPENDITURE IN THE HANDS OF THE ASSESSEE. 36 . THE LD. A.R FURTHER TAKING US THROUGH TH E DISALLOWANCE OF THE FEE OF RS.1,28,34,490/ - PAID/PAYABLE TO MR. JOHN BUCHANAN , THEREIN TOOK US THROUGH THE SERVICES AGREEMENT - DIRECTOR: CRICKET OPERATION ( PAGE 113 OF APB). THE LD. A.R TOOK US THROUGH THE RELEVANT PAGES OF THE AGREEMENT , IN OR DER TO IMPRESS UPON US THAT MR. JOHN BUCHANAN P A G E | 54 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HAD PROVIDED COACHING SERVICES TO THE ASSESSEE TEAM IN 2008 FOR THE IPL SEASON - 1 . THE LD. A.R SUBMITTED THAT THE SERVICE AGREEMENT BETWEEN THE ASSESSEE AND MR. JOHN BUCHANAN WAS FOR THREE SEASONS, I.E. 2008 - 09, 2009 - 10 AND 2010 - 11, IN TERMS OF WHICH THE ASSESSEE AS PER THE DIRECTIONS OF MR. JOHN BUCHANAN WAS TO MAKE PAYMENTS FOR THE SAID SERVICES TO BUCHANAN CORPORATE COACHING TRUST. THE LD. A.R IN ORDER TO REMOVE ANY SCOPE OF DOUBT AS REGARDS THE FACT THAT MR. JOHN B UCHANAN HAD PROVIDED COACHING SERVICES TO THE ASSESSEE TEAM, VIZ. KOLKATA KNIGHT RIDERS IN THE IPL SEASON - 1, THEREIN TOOK US THROUGH THE DOWNLOADED EXTRACT FROM WIKIPEDIA, THE FREE ENCYCLOPAEDIA . THE LD. A.R FURTHER TOOK US THROUGH THE RELEVANT EXTRACT O F T HE T IMES OF INDIA, MUMBAI, DATED APRIL 18, 2008, FROM WHERE IT COULD BE GATHERED THAT MR. JOHN BUCHANAN HAD PROVIDED COACHING SERVICES TO THE ASSESSEE TEAM, VIZ. KOLKATA KNIGHT RIDERS IN IPL SEASON - 1 ( PAGE 127 129 OF APB). THE LD. A.R TOOK US THROUGH THE OBSERVATIONS OF THE CIT(A) IN CONTEXT OF THE ISSUE UNDER CONSIDERATION AT PAGE 53 PARA 7.4. THE LD. A.R SUBMITTED THAT THE LOWER AUTHORITIES HAD FAILED TO APPRECIATE THE FACTS PERTAINING TO THE ISSUE UNDER CONS IDERATION IN THE RIGHT PERSPECTIVE, AS A RESULT WHEREOF THE ADDITION/DISALLOWANCE ON THE AFORESAID COUNT WAS WRONGLY SUSTAINED BY THE CIT(A) . THE LD. A.R IN SUPPORT OF HIS CONTENTION THAT AS THE PAYMENT MADE TO MR. JOHN BUCHANAN WAS PROMPTED BY COMMERCIAL EXPEDIENCY IN THE COURSE OF THE BUSINESS OF THE ASSESSEE, THE REFORE, THE SAME WAS ALLOWABLE AS A N EXPENDITURE, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. ASSOCIATED ELECTRICAL AGENCIES AND ANR ( 2004) 266 ITR 63 (MAD) AND THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. MAINA ORE TRANSPORT ( 2008) 324 ITR 100 (BOM). P A G E | 55 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 37 . THE LD. A.R FURTHER ADVERTING TO THE ADHOC DISALLOWANCE OF AN EXPENDITURE OF RS.1,08,33,592/ - BY THE A.O, WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A), VIZ. (I) BOARDING AND LODGING EXPENSES; AND (II) FOOD AND NUTRITION EXPENSES, THEREIN AVERRED THAT THE A.O HAD CARRIED OUT CERTAIN DISALLOWAN CES UNDER THE AFORESAID HEAD, VIZ. (I) DISALLOW ANCE OF AN AMOUNT OF RS.39,19,880/ - PAID BY THE ASSESSEE TO ITC LTD., KOLKATA ; (II) DISALLOWANCE OF RS.31,76,705/ - OUT OF THE ROOM BILL EXPENSES PAID BY THE ASSESSEE TO ITC L TD . , KOLKATA (I.E 33% OF THE TOTAL ROOM BILL OF RS.96,26,375/ - ); AND (III) DISALLOWANCE OF RS.37, 37,007/ - IN RESPECT OF EXPENSES OF OTHER HOTELS (I.E 33% OF THE BALANCE EXPENSES OF RS.1,13,24,264/ - ). IT WAS SUBMITTED BY THE LD. A.R THAT THE AFORESAID EXPENSES WERE INCURRED BY THE ASSESSEE IN THE COURSE OF OPERATING ITS TEAMS, AND THIS WAS THE WAY IN WHICH THE TEAMS WERE BEING OPERATED BY THE ASSESSEE. THE LD. A.R SUBMITTED THAT IT REMAINS AS A MATTER OF FACT THAT THE VISITING TEAMS ALONG WITH PEOPLE FROM THE SHOW BUSINESS, ACTORS, CELEBRITI ES, VIPS ETC . , WERE INVITED FOR THE MATCHES WITH THE PURPOSE OF PUSHING THE SALE OF TICKETS AND GENERATION OF HIGHER AMOUNT OF SPONSORSHIP FEES. THE LD. A.R SUBMITTED THAT THE A.O HAD ERRED IN DISALLOWING THE AFORESAID EXPENSES FOR THE REASON THAT THE SAME WERE NOT RELATED TO THE BUSINESS OF THE ASSESSEE. THE LD. A.R TOOK US THROUGH THE OBSERVATIONS OF THE CIT(A) RECORDED AT PAGE 54 - PARA 8.2 OF HIS ORDER. THE LD. A.R SUBMITTED THAT AS SEC. 37(2) WHICH EARLIER PROVIDED A RESTRICTION ON CLAIM OF ENTERTAINMENT EXPENDITURE WHILE COMPUTING THE INCOME WAS STRUCK DOWN F ROM THE STATUTE W.E.F 01.04.1998 , THEREFORE, THE INCURRING OF THE AFORESAID EXPENS E WHICH SATISFIE D ALL THE REQUISITE CONDITIONS CONTEMPLATED UNDER SEC. 37(1) WAS THOUGH ALLOWABLE IN THE HANDS OF THE ASSESSEE , WAS HOWEVER WRONGLY DISALLOWED BY THE A.O . THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE ORDER OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. H IR A LAL & P A G E | 56 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 SONS (2000) 242 ITR 407 (DEL) AND THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT MUMBAI IN THE CASE OF ACIT VS. CREDIT LYONNAIS (139 ITD 681) (MUM). 38 . THE LD. A.R ADVERT ED TO THE DISAL LOWANCE OF 25% OF THE AIR FARE AND TRAVELLING EXPENSES BY THE A.O , FOR THE REASON THAT THE SAID EXPENSES MUST HAVE BEEN INCURRED ON THE VIPS, CELEBRIT IES, RELATIVES OF DIRECTORS ETC. THE LD. A.R SUBMITTED T HAT AS THE SAID EXPENSES WERE GENUINE EXPENSES WHI CH WERE INCURRED BY THE ASSESSEE FOR THE AIR FARE , TRAVE LLING EXPENSES AND VEHICLE HI R E CHARGES FOR ITS OWN TEAM, VISITING TEAMS, SUPPORT STAFF, DIRECTORS AND INVITE E GUESTS (BEING CELEBRITIES AN D VIPS) , THEREFORE , THE SAME WERE TO BE ALLOWED AS A DEDUCTIBLE EXPENDITURE UNDER SEC.37(1) OF THE ACT. THE LD. A.R ONCE AGAIN AVERRED THAT I NVITING VIP GUEST S , CELEBRITIES ETC, DURING THE MATCHES RESULTED IN INCREASE OF TICKET SALES AND VIEWERSHIP OF THE MATCHES DURING IPL , WHICH THUS IN CREASE D THE REVENUE OF THE ASSESSEE. THE LD. A.R FURTHER SUBMITTED THAT EVEN OTHERWISE NO OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE ASSESSEE BY THE A.O WHILE MAKING THE AFORESAID ADHOC DISALLOWANCE. 3 9 . THAT AS REGARDS THE DISALLOWANCE OF AN AMOUNT OF RS .1,08,000/ - PAID FOR S ECURITY CHARGES OF MR. SHAH RUKH KHAN, IT WAS SUBMITTED BY THE LD. A.R THAT HE WAS A DIRECTOR OF M/S RED CHILLIES ENTERTAINMENT PVT. LTD, I.E THE HOLDING COMPANY OF THE ASSESSEE COMPANY . THE LD. A.R FURTHER SUBMITTED THAT THE ATTENDANCE OF MR. SHAH RUKH KHAN IN THE CRICKET MATCHES HELD AT THE HOME STADIUM HAD LED TO TREMENDOUS INCREASE IN TICKET SALES AND SPONSORSHIP RECEIPTS BY THE ASSESSEE. IT WAS SUBMITTED BY THE LD. A.R THAT IT WAS NO HIDDEN A FACT THAT WHEN A CELEBRITY OR A VIP WAS INVITED BY THE ASSESSEE FOR THE BENEFIT OF ITS BUSINESS, THE LATTER S SECURITY REMAIN ED ITS ABSOLUTE RESPONSIBILITY . P A G E | 57 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THUS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE AFORESAID EXPENSES HAVING BEEN INCURRED WHOLLY FOR THE BUSINES S OF THE ASSESSEE, THEREFORE, THE SAME WERE ALLOWABLE AS AN EXPENDITURE UNDER SEC.37(1) OF THE ACT . 40 . THE LD. A.R ADVERTING TO THE DISALLOWANCE OF THE AMOUNT OF RS.8,85,600/ - PAID BY THE ASSESSEE TO MR. MANISH MALHOTRA , S UBMITTED THAT THE SAID PAYMENT W AS FOR THE PURPOSE OF DESIGN AND OUTFITS OF KKR TEAMS FOR THE IPL SEASON - 2 HELD IN APRIL - MAY 2009 AND NOT FOR IPL SEASON - 1 HELD IN APRIL - MAY, 2008. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE WAS FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING , THE REFORE , THE EXPENSE WAS RECOGNIZED AND CLAIMED AS A DEDUCTION IN F . Y: 2008 - 09. IT WAS THE CONTENTION OF THE LD. AR THAT FOR ALLOWABILITY OF AN EXPENDITURE IN A PARTICULAR YEAR IT WAS NOT NECESSARY THAT THE SAME MUST BE ONE REQUIRED FOR THE PURPOSES OF CARR YING ON THE BUSINESS OR EARNING OF PROFITS OF THAT YEAR. THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MYSORE SPINNING AND MANUFACTURING CO. LTD. VS. CIT ( 1966) 61 ITR 572 (BOM ) ( PARA 38 OF THE ORDER ) . 41 . THE LD. A.R LASTLY IN CONTEXT OF THE DISALLOWANCE BY THE A.O OF THE WEBSITE DESIGNING E XPENSES OF RS.8,49,305/ - WHICH HAD BEEN SUSTAINED BY THE CIT(A), THEREIN SUBMITTED THAT AS THE SAID EXPENSE WAS NOT INCURRED IN CONNECTION WITH IMPROVISATION OF A FIX ED ASSET, BUT WITH AN OBJECT TO FACILITATE THE BUSINESS OPERATION, THEREFORE, THE SAME WAS TO BE ALLOWED AS A REVENUE EXPENDITURE. THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF DCIT VS. EDELWEISS CAPTIAL LTD. (MUM) (ITA NO. 3971/MUM/ 2009) AND RADIAL MARKETING PVT. LTD. VS. ITO (ITA NO. P A G E | 58 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 3868/MUM/2008 ) , AND THE ORDER OF THE ITAT DELHI IN THE CASE OF CIT VS. INDIA VISIT . COM. PVT. LTD. (2008) 2 1 9 CTR 603 (DEL) . THE LD. A.R IN ORDER TO FORTIFY HIS AFORESAID CLAIM, THEREIN AVERRED THAT THE AFORESAID WEB DESIGNING CHARGES HAD BEEN ACCEPTED AS A REVENUE EXPENDITURE BY THE CIT(A) IN THE ASSESSES OWN CASE FOR THE SUBSEQUENT YEARS, VIZ. A.YS 2010 - 11 TO 2012 - 13. IT WAS T HUS SUBMITTED BY THE LD. A.R THAT THE AFORESAID WEB DESIGN CHARGES HAD WRONGLY BEEN DISALLOWED BY THE A.O. 42 . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R ) AT THE VERY OUTSET SUBMITTED THAT AS THE TERM OF THE LEAGUE OF THE ASSESSEE W AS FOR AN IND EFINITE PERIOD, WHICH THUS VESTED A BENEFIT OF ENDURING NATURE, THEREFORE, THE FR ANCHISE FEE PAID BY THE ASSESSEE FOR ACQUIRING THE SAID RIGHTS AND CLAIMED AS A REVENUE EXPENDITURE WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES BY CONCLUDING THAT THE SAME WAS IN THE NATURE OF A CAPITAL EXPENDITURE. THE LD. D.R IN ORDER TO SUPPORT HIS AFORESAID CONTENTION DREW OUR ATTENTION TO THE RELEVANT PAGES OF THE ASSESSMENT ORDER, VIZ. PAGE 6 PARA 5 AND PAGE 13 - PARA 5.2 OF THE ASSESSMENT ORDER. THE LD. D.R TAKING US THROUGH THE OBSERVATIONS OF THE A.O RECORDED AT PAGE 19 PARA 16 SUBMITTED THAT THE LATTER HAD RIGHTLY OBSERVED AS REGARDS THE DETERMINATION OF THE W . D . V OF THE INTANGIBLE RIGHTS GENERATED ON THE MAKING OF THE AFORESAID PAYMENT BY TH E ASSESSEE FOR ACQUIRING THE FRANCHISE RIGHTS. 43 . THAT AS REGARDS THE DISALLOWANCE OF AN AMOUNT OF RS. 7,50,90,000/ - WHICH WAS SUSTAINED BY THE CIT(A), THE LD. D.R RELIED ON THE ORDER OF THE CIT(A). THAT AS REGARDS THE DISALLOWANCE OF AN AMOUNT OF RS.75, 00,000/ - PAID BY THE ASSESSEE TO KOLKA TA POLICE FAMILY WELFARE CENTRE WHICH WAS UPHELD IN APPEAL BY THE CIT(A), THE LD. D.R SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO PLACE ON RECORD ANY EVIDENCE TO SUBSTANTIATE ITS AFORESAID CLAIM, THEREFORE, THE AMOUNT P A G E | 59 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 WAS RIGHTLY DISALLOWED AS AN EXPENSE BY THE LOWER AUTHORITIES. THAT AS REGARDS THE DISALLOWANCE OF THE FEES OF RS.1,28,34,490/ - CLAIMED BY THE ASSESSEE AS AMOUNT PAID TO MR. JOHN BUCHANAN FOR IPL SEASON - 1 , THE LD. D.R RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO ESTABLISH THAT ANY SUCH COACHING SERVICES WERE PROVIDED BY MR. JOHN BUCHANAN IN THE IPL SEASON - 1, THEREFORE, THE SAME WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES. THAT AS REGARDS THE ADHOC DISALL OWANCE OF BOARDING AND LODGING AND FOOD AND NUTRITION EXPENSES OF RS.1,08,33,592/ - , THE LD. D.R RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. THAT AS REGARDS THE ADHOC DISALLOWANCE OF 25% OF AIR FARE EXPENSES, TRAVELLING EXPENSES AND VEHICLE HIRE CHARGES OF RS.95,63,132/ - THE LD. D.R AGAIN TOOK SUPPORT OF THE ORDER S OF THE LOWER AUTHORITIES. THAT AS REGARDS THE DISALLOWANCE OF THE SEC URITY CHARGES OF RS. 1,08,700/ - THE LD. D.R RELIED O N THE ORDER OF THE CIT(A). THAT IN RESPECT OF THE DISALLOWANCE OF EXPENS ES OF RS. 8,85,600/ - INCURRED BY THE ASSESSEE ON PARTICIPATION IN FASHION SHOWS , THE LD. D.R SUBMITTED THAT AS OBSERVED BY THE LOWER AUTHORITIES , AS THE SAID EXPENSES WERE NOT INCURRED FOR THE BUSINESS OF THE ASSESSEE, THEREFORE , THE SAME HAD RIGHTLY BEEN DISALLOWED. THUS , ON THE BASIS OF THE AFORESAID SUBMISSIONS , IT WAS AVERRED BY THE LD. D.R THAT AS THE APPEAL OF THE ASSESSEE WAS DEVOID OF ANY MERIT , THEREFORE, THE SAME MAY BE DISMISSED. 44 . WE HAVE HEARD THE AUTHORIZED REPRE SENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT OUR INDULGENCE IN THE PRESENT CASE IS SOUGHT FOR ADJUDICATING MULTIPLE ISSUES EMERGING FROM THE ORDER OF THE CIT(A) , VIZ. (I) TH AT AS TO WHETHER THE FRANCHISE FEE PAID BY THE ASSESSEE TO BCCI - IPL IS A REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE OR IN THE NATURE OF A CAPITAL EXPENDITURE AS HELD BY THE LOWER P A G E | 60 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 AUTHORITIES; (II) THAT AS TO WHETHER THE LOWER AUTHORITIES HAD RIGHTLY CO NCLUDED THAT AS THE AMOUNT OF RS.7,50,90,000/ - PAID BY THE ASSESSEE TOWARDS FRANCHISE FEE FOR IPL SEASON - 2 PERTAINING TO THE 3 MONTHS (JANUARY, 2009 TO MARCH, 2009) DID NOT SATISFY THE MATCHING PRINCIPLE OF ACCOUNTING, THUS COULD NOT BE ALLOWED AS AN EXPEN DITURE IN THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10; (III) THAT AS TO WHETHER THE DISALLOWANCE OF RS.75,00,000/ - PAID/PAYABLE BY THE ASSESSEE TO KOLKATA POLICE FAMILY WELFARE CENTRE WAS RIGHTLY MADE BY THE LOWER AUTHORITIES; (IV) THAT AS TO WHETHER T HE DISALLOWANCE OF FEES OF RS.1,28,34,490/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID TO MR. JOHN BUCHANAN FOR IPL SEASON - 1 WAS IN ORDER; (V) THAT AS TO WHETHER THE ADHOC DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH A) . BOARDING AND LODGING AND B) . FOOD AND NUTRITION EXPENSES WAS RIGHTLY MADE BY THE A.O; (VI) THAT AS TO WHETHER THE ADHOC DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH AIR FARE EXPENSE, TRAVELLING EXPENSE AND VEHICLE HIRE CHARGES WAS RIGHTLY MADE BY THE A.O; (VII) THAT AS TO WHETHER THE DISALLOWANCE OF THE SECURITY CHARGES EXPENDITURE OF RS.1,08,700/ - WAS RIGHTLY MADE BY THE A.O; (VIII) THAT AS TO WHETHER THE DISALLOWANCE OF EXPENSES IN CONNECTION WITH PARTICIPATION IN FASHION SHO WS WAS IN ORDER; AND (IX) THAT AS TO WHETHER THE WEBSITE DESIGN CHARGES WERE RIGHTLY CLAIMED BY THE ASSESSEE AS A REVENUE EXPENDITURE . 45 . WE SHALL FIRST TAKE UP THE CORE ISSUE INVOLVED IN THE PRESENT APPEAL AS TO WHETHER THE FRANCHISE FEE PAID BY THE AS SESSEE TO BCCI - IPL WAS RIGHTLY CLAIMED BY IT AS A REVENUE EXPENDITURE, OR THE SAME BEING IN THE NATURE OF A CAPITAL EXPENDITURE WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE HAD ENTERED INTO A FRANCHISE AGREEMENT WITH BCCI - IP L IN APRIL, 2008. THAT PURSUANT TO THE AFORESAID AGREEMENT THE ASSESSEE WAS VESTED WITH THE RIGHT TO P A G E | 61 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 OPERATE THE FRANCHISE AND TO BE A MEMBER OF THE LEAGUE AND OPERATE A TEAM IN THE CITY OF KOLKATA AND PARTICIPATE IN THE IPL TOURNAMENT, WHICH WAS OWNED AND OPERATED BY BCCI - IPL. THE ASSESSEE IN TERMS OF CLAUSE 7 OF THE FRANCHISE AGREEMENT REMAINED UNDER AN OBLIGATION TO PAY TO BCCI - IPL THE ANNUAL FRANCHISE FEE OF THE FOLLOWING AMOUNT : (A). IN RESPECT OF THE PERIOD 2008 - 17 (INCLUSIVE) , AS UNDER: - (I) A SUM OF USD 22,52,700/ - EQUIVALENT TO INR 9,01,08,000/ - TOWARDS LEAGUE DEPOSIT ON OR BEFORE 2 ND JANUARY IN EACH SUCH YEAR, WHICH THEREAFTER WAS TO BE APPROPRIATED TOWARDS THE ANNUAL FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE YEAR IN WH ICH THE LEAGUE DEPOSIT WAS PAID . THE LEAGUE DEPOSIT WAS REFUNDABLE IN ANY YEAR IF THE LEAGUE DID NOT TAKE PLACE AT ALL IN SUCH YEAR , UNDER WHICH CIRCUMSTANCE THE AMOUNT WAS TO BE REFUNDED WITHOUT INTEREST; AND (II) A SUM OF US D 52,56,300/ - EQUIVALENT TO INR 21,02,52,000/ - WAS TO BE PAID BY THE ASSESSEE EVERY YEAR ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN EACH SUCH YEAR . (B). THAT FROM AN D INCLUDING THE YEAR 2018 ONWARDS , THE FRANCHISEE REMAINED UNDER AN OBLIGATION TO PAY AN AMOUNT EQUAL TO 20% OF THE FRANCHISEE INCOME RECEIVE D IN RESPECT OF SUCH YEAR, WHICH SUM WAS TO BE PAID IN FOUR INSTALMENT S, I.E WITHIN 60 DAYS OF 31 ST MARCH, 30 TH JUNE, 3 0 TH SEPTEMBER AND 31 ST DECEMBER IN 2018 AND EACH SUBSEQUENT YEAR OF THE TERM. WE FURTHER FIND THAT THE TERM Y EAR AS DEFINED IN CLAUSE 1 WAS TO BE CONSTRUED AS EACH 12 MONTH PERIOD (OR PART THEREOF) FROM 1 ST JANUARY TO 31 ST DECEMBER DURING THE TERM, EXCEPT FOR THE YEAR UNDER CONSIDERATION, WHICH BEING THE FIRST YEAR OF THE LEAGUE WAS TO BE P A G E | 62 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 RECKONED FROM THE DATE OF SIGNING OF THE AGREEMENT TILL 31 DECEMBER, 2008. WE FURTHER FIND THAT THE FRANCHISEE RIGHTS WHICH AGAIN IS DEFINED IN CLAUSE 1 OF THE FRANCHISE AGREEMENT, PROVIDES THAT THE SAME SHALL MEAN ALL RIGHTS IN RESPECT OF THE TEAM , INCLUDING THOSE RIGHTS SET OUT IN CLAUSE 4.3 , VIZ. (I ) THE SHIRTS SPONSORSHIP RIGHTS IN RESPECT OF THE TEAM; (II) OFFICIAL SUPPLIERSHIP RIGHTS IN RESPECT OF THE TEAM; (III) CORPORATE ENTERTAINMENT/PREMIUM SEATING RIGHTS AT THE STADIUM DURING HOME LEAGUE MATCHES; (IV) RIGHT TO CONDUCT FRANCHISEE LICENSING; (V ) RIGHT TO RETAIN ALL OF THE GATE RECEIPTS IN RESPECT OF THE FRANCHISEE HOME LEAGUE MATCHES; (VI) THE RIGHT TO SELL MERCHANDISE AT THE STADIUM ON THE DAY OF ITS HOME LEAGUE MATCHES; AND (VII). SUCH OTHER RIGHTS IN RELATION TO THE TEAM WHICH MAY BE IDENTIFI ED IN THE COMMERCIAL GUIDELINES PROVIDED BY BCCI - IPL. HOWEVER, THE ASSESSEE WAS NOT VESTED WITH ANY RIGHT IN RESPECT OF THE C ENTRAL R IGHTS AND ALL RIGHTS IN RESPECT OF THE LICENSING OF REPLICA UNIFORMS FOR ANY TEAM IN THE LEAGUE. 4 6 . WE HAVE PERUSED THE V ARIOUS CLAUSES OF THE FRANCHISE AGREEMENT , AS PER WHICH THE FRANCHISE RIGHTS HAD BEEN VESTED WITH THE ASSESSEE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE NATURE OF THE RIGHTS, AND FIND THAT THE PAYMENT OF THE FRANCHISE FEE BY THE ASSESSEE FOR A YEAR , THEREIN VESTED WITH HIM A RIGHT TO PARTICIPATE IN THE TOURNAMENT FOR THE SAID YEAR WITHOUT GUARANTEE THAT IN THE FUTURE YEAR S IT WOULD BE ELIGIBLE TO PARTICIPATE IN THE TOURNAMENT . WE FIND THAT THE PAYMENT OF THE FRANCHISE FEE BY THE ASSESSEE AS PER THE TERMS CONTEMPLATED IN THE FRANCHISE AGREEMENT ENABLED IT TO PARTICIPATE IN THE TOURNAMENT FOR THE SUBJECT YEAR AND EARN REVENUE FROM THE SAME. WE FURTHER FIND THAT THE PAYMENT OF THE FRANCHISE FEE BY THE ASSESSEE WAS IN THE NATURE OF RECURRING ANNUAL PAYMENT WHICH WAS PAID TO FACILITATE PARTICIPATION IN THE LEAGUE AND OPERATING THE TEAM ONLY FOR THE YEAR FOR WHICH THE PAYMENT PERTAINED, WITH NEI THER VESTING OF ANY RIGHT OF PARTICIPATION IN P A G E | 63 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE SUBSEQUENT YEARS, NOR LEADING TO CREATION/OWNERSHIP OF AN ASSET OR GENERATION OF A BENEFIT OF AN ENDURING NATURE IN THE HANDS OF THE ASSESSEE. WE FURTHER FIND THAT THE YEAR UNDER CONSIDERATION WAS THE FIRS T YEAR, AND AS SUCH WAS TO BE CONSTRUED FROM THE DATE OF SIGNING OF THE AGREEMENT TILL 31 ST DECEMBER, 2008. WE HAVE DELIBERATED AT LENGTH ON THE RIGHTS AND OBLIGATIONS CONTEMPLATED IN THE FRANCHISE AGREEMENT. WE FIND THAT IN CASE OF NON - STAGING OF THE LEA GUE BY BCCI - IPL (IN WHOLE OR PART) THE SAME WAS NOT TO CONSTITUTE A BREACH OF THE AGREEMENT, A ND THE ASSESSEE WAS DIVESTED OF HIS RIGHT TO TAKE ANY LEGAL ACTION AGAINST THE OTHER PARTY, VIZ. BCCI OR ENFORCE THE PLAYING OF THE MATCHES. WE FURTHER FIND THAT AS CAN FAIRLY BE GATHERED FROM PERUSING THE DETAILS OF THE CENTRAL LICENSING/FRANCHISEE LICENSING AS DEFINED IN THE FRANCHISEE AGREEMENT PER THE TERMS OF THE AGREEMENT , ALL THE BROADCASTING RIGHTS AS REGARDS THE TELECAST OF THE MATCHES REMAINED WITH THE BC CI, WHILE FOR THE ASSESSEE WAS ONLY VESTED WITH THE RIGHTS AS THAT OF A FRANCHISEE . WE FURTHER FIND THAT THE ASSESSEE AS GATHERED FROM CLAUSE 10 OF THE FRANCHISE AGREEMENT WAS NOT VESTED WITH ANY RIGHT TO ASSIGN OR DELEGATE THE PERFORMANCE OF ANY RIGHT OR OBLIGATION UNDER THE AGREEMENT. THAT STILL FURTHER AS PER CLAUSE 22 OF THE AGREEMENT , IN CASE OF BREACH BY THE FRANCHISEE OF THE TERMS CONTEMPLATING THE PAYMENT OBLIGATION TO BCCI, THE SAME WAS TO BE CONSTRUED AS A MATERIAL BREACH OF THE AGREEMENT. WE FURTHER WHILE DELIBERATING ON THE TERMS OF THE FRANCHISE AGREEMENT HAD OBSERVED THAT AS PER CLAUSE 16 OF THE AGREEMENT , THE RIGHTS GRANTED TO THE FRANCHISEE WERE PERSONAL TO THE FRANCHISEE AND HAD NO RIGHT TO ASSIGN THE AGREEMENT OR TO SUB - CONTRACT OR O THERWISE DELEGATE THE FRANCHISEES OBLIGATIONS UNDER IT WITHOUT THE BCCI - IPL WRITTEN CONSENT. 47 . WE HAVE DELIBERATED AT LENGTH AS REGARDS THE NATURE OF THE RIGHTS AS GOT VESTED WITH THE ASSESSEE ON THE PAYMENT OF THE FRANCHISE FEE OF P A G E | 64 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 RS.30,03,60,000/ - TO BCCI. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF THE FRANCHISE FEE BY THE ASSESSEE TO BCCI - IPL ONLY FACILITATED PARTICIPATION IN THE LEAGUE AND OPERATING THE TEAM FOR THE YEAR FOR WHI CH THE PAYMENT PERTAINED, WITH NO VESTED RIGHT TO PARTICIPATE IN THE EVENTS FOR THE SUBSEQUENT YEAR /YEARS . WE ARE OF THE CONSIDERED VIEW THAT AS THE AFORESAID PAYMENT OF FRANCHISE FEE WHICH FACILITATED THE PARTICIPATION IN THE LEAGUE AND OPERATING THE TEAM WAS RESTRICTED ONLY TO THE YEAR TO WHICH THE PAYMENT PERTAINED, THEREFORE, IT CAN SAFELY BE CONCLUDED THAT BY MAKING SUCH PAYMENT THERE WAS NEITHER A CREATION OF AN ASSET OR GENERATION OF A BENEFIT OF AN ENDURING NATURE IN THE HANDS OF THE ASSESSEE. WE FI ND THAT A CONJOINT READING OF CLAUSE 7 OF THE AGREEMENT CONTEMPLATING THE PAYMENT OF THE FRANCHISE FEE AND CLAUSE 1 DEFINING THE TERM YEAR, CLEARLY REVEALS BEYOND ANY SCOPE OF DOUBT THAT THE PAYMENT OF THE FRANCHISE FEE OF RS. 30,03,60,000/ - BY THE ASSESS EE FOR IPL SEASON - 1 WAS ONLY FOR THE PERIOD 10.04.2008 (I.E THE DATE OF THE SIGNING OF THE AGREEMENT) TILL 31.12.2008. THAT AS STANDS GATHERED FROM THE FRANCHISE AGREEMENT, THE MAKI NG OF THE AFORESAID PAYMENT OF F RANCHISE FEE BY THE ASSESSEE TO BCCI - IPL FOR IPL SEASON - 1 ONLY ENABLED THE ASSESSEE TO PARTICIPATE IN THE LEAGUE TOURNAMENTS FOR IPL SEASON - 1 AND OPERATE ITS TEAM FOR THE AFORESAID PERIOD FOR WHICH THE PAYMENT WAS MADE. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW OF THE LOWER AUT HORITIES THAT ANY BENEFIT OF ENDURING NATURE WAS GENERATED IN THE HANDS OF THE ASSESSEE BY MAKING THE PAYMENT OF THE FRANCHISE FEE OF RS.30,03,60,000/ - , WHICH AS OBSERVED BY US WAS ONLY FOR FACILITATING THE ASSESSEE TO PARTICIPATE IN THE LEAGUE TOURNAMENTS FOR IPL SEASON - 1. WE HAVE DELIBER ATED ON THE NATURE OF RIGHTS OF THE ASSESSEE FRANCHISEE ON PAYMENT OF THE FRANCHISE FEE AND FIND THAT WHILE FOR THE CENTRAL RIGHTS WERE RETAINED BY BCCI, THE F RANCHISEE RIGHTS REMAINED WITH P A G E | 65 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE ASSESSEE. WE FURTHER FIN D THAT THOUGH BY MAKING THE PAYMENT OF THE FRANCHISE FEE THE ASSESSEE GOT A RIGHT TO PARTICIPATE IN THE LEAGUE AND OPERATE ITS HOME TEAM FOR THE YEAR FOR WHICH THE PAYMENT WAS MADE, BUT HOWEVER, THE NON - STAGING OF THE LEAGUE BY BCCI - IPL (IN WHOLE OR PART) WOULD NOT CONSTITUTE A BREACH OF THE AGREEMENT , AND THE ASSESSEE WAS NEITHER VESTED WITH ANY RIGHT TO ENFORCE THE PLAYING OF SUCH MATCHES BY BCCI NOR HAD ANY RIGHT TO TAKE ANY LEGAL ACTION FOR THE SAID FAILURE ON THE PART OF THE BCCI TO STAGE THE MATCHES. WE HAVE FURTHER OBSERVED THAT THE AFORESAID FRANCHISE RIGHTS AS PER CLAUSE 1 6 OF THE FRANCHISE AGREEMENT WERE PERSONAL TO THE FRANCHISEE AND IT HAD NO RIGHT TO EITHER ASSIGN THE AGREEMENT OR TO SUB - CONTRACT OR OTHERWISE DELEGATE THE FRANCHISEES OBLIGATIONS UNDER IT WITHOUT THE BCCI - IPLS WRITTEN CONSENT. WE FURTHER FIND THAT THE IS SUE BEFORE US AS TO WHETHER THE FRANCHISE FEE PAID TO BCCI - IPL IS A REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE HAD ALREADY BEEN LOOKED INTO AND ADJUDICATED UPON BY A COORDINATE BENCH OF TRIBUNAL, VIZ. ITAT I BENCH, MUMBAI IN THE CASE OF INDIA WIN SPORT S PVT. LTD. VS. ACIT (ITA NO. 5290 & 5291/MUM/2014, DATED 22.07.2016 , WHEREIN THE TRIBUNAL HAD HELD AS UNDER: THE EXPENDITURE OF RS.44,76,00,000/ - INCURRED BY IT FOR MAKING PAYMENT OF THE FIRST INSTALMENT TO THE BCCI - IPL IN TERMS OF CLAUSE 7 OF THE AGRE EMENT WAS NOT FOR THE PURPOSE OF ACQUISITION OF ANY ASSET BUT FOR AN ANNUAL RIGHT TO MANAGE THE FRANCHISE. THE PURPOSE OF THE EXPENDITURE TO BE INCURRED UNDER THE AGREEMENT BY THE ASSESSEE HAS BEEN STATED IN CLAUSE 6 OF THE AGREEMENT AS CONSIDERATION FOR T HE RIGHT TO OPERATE THE FRANCHISE AND TO BE A MEMBER OF THE LEAGUE. THE TOTAL EXPENDITURE OF RS.44,76,00,000/ - PAYABLE IN YEARLY INSTALMENTS OF RS.44,76,00,000/ - FOR TEN YEARS WAS CLEARLY FOR THE PURPOSE OF SECURING FRANCHISE RIGHT FROM BCCI. THUS PAYMENTS MADE BY THE ASSESSEE WERE FOR THE ANNUAL BENEFITS ONLY NOT EXTENDING BEYOND ONE YEAR. ITS RIGHT TO OPERATE AND MANAGE THE TEAM IS SUBJECT TO PRIOR PAYMENT OF ANNUAL FRANCHISE FEE; IF THE ASSESSEE FAILS TO MAKE THE PAYMENT, THEN IT WOULD NOT BE ALLOWED TO PARTICIPATE IN IPL. THUS, THE ASSESSEE HAS MADE THE ANNUAL PAYMENTS TO EARN THE ANNUAL INCOME. THE NATURE OF TRANSACTION/PAYMENT CLEARLY DEMONSTRATES THAT THE ASSESSEE IS NEITHER OBTAINING ANY ENDURING BENEFIT BY MAKING PAYMENT OF ANNUAL INSTALMENT THESE P AYMENTS ARE GIVING RISE TO ANY ASSETS. THESE PAYMENTS ARE MERE ANNUAL PAYMENTS TO BCCI - IPL TO GIVE A RIGHT TO THE P A G E | 66 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ASSESSEE TO PARTICIPATE IN THE MATCHES WITH ITS TEAM. THEREFORE, THE ANNUAL FRANCHISE PAYMENT WAS A REVENUE EXPENDITURE. WE FURTHER FIND THAT A SIMILAR VIEW WAS ALSO TAKEN BY THE ITAT, HYDERABAD B, HYDERABAD IN THE CASE OF DCIT VS. M/S DECCAN CHARGERS SPORTING VENTURES LTD. (ITA NO. 1043/HYD/2013, DATED 28.10.2015, WHEREIN T O O THE TRIBUNAL HAD CONCLUDED THAT THE FRANCHISE FEE PAID BY THE FRANCHISEE ASSESSEE TO BCCI - IPL WAS IN THE NATURE OF A REVENUE EXPENDITURE. WE FIND THAT THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES & STOCKS LTD. & ORS. VS. COMMISSIONER OF INCOME TAX (2010) 327 ITR 323( SC) AND JONAS WOODHEAD AND SONS (INDIA) LTD. VS. COMMISSIONER OF INCOME - TAX (1997) 224 ITR 342 (SC) RELIED UPON BY THE A.O ARE DISTINGUISHABLE ON FACTS. WE FIND THAT IN THE CASE OF TECHNO SHARES & STOCKS LTD. & ORS (SUPRA) THE ISSUE BEFORE THE HONBLE APEX COURT WAS AS TO WHETHER THE RIGHT OF MEMBERSHIP CONFERRED UPON THE MEMBERS UNDER THE BSE MEMBERSHIP CARD IS A BUSINESS OR COMMERCIAL RIGHT WHICH GIVES A NON - DEFAULTING CONTINUING MEMBER A RIGHT TO ACCESS THE EXCHANGE AND TO PARTICIPATE THEREIN , AND IN THAT SENSE A LICENSE OR AKIN TO LICENCE IN TERMS OF SEC. 32(1)(II) OF THE ACT. WE FIND THAT AS THE AFORESAID RIGHT OF MEMBERSHIP CONFERRED UPON THE MEMBERS UNDER THE BSE MEMBERSHIP CARD AN ENDURING BENEFIT , WHICH WOULD VEST WITH THE STOCK EXCHANGE ONLY ON THE DEFAULT/DEMISE IN TERMS OF RULES AND BYE - LAWS OF BSE, THEREFORE, IT WAS IN THE BACKDROP OF THE AFORESAID MATERIAL FACTS THAT THE HONBLE APEX COURT HAD CONCLUDED THAT THE SAME WAS AN INTANGIBLE RIGHT WHICH WAS ENTITLED FOR CLAIM OF DEPRECIATION. WE MAY HEREIN OBSERVE THAT THE HONBLE APEX COURT IN THE AFORESAID CASE HAD AS A WORD OF CAUTION OBSERVED THAT THE SAID JUDGMENT MAY NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A LICENCE OR A FRANCHISE IN TERMS OF S EC. 32(1)(II) OF THE ACT, BY HOLDING AS UNDER: P A G E | 67 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 24. BEFORE CONCLUDING, WE WISH TO CLARIFY THAT OUR PRESENT JUDGMENT IS STRICTLY CONFINED TO THE RIGHT OF MEMBERSHIP CONFERRED UPON THE MEMBER UNDER THE BSE MEMBERSHIP CARD DURING THE RELEVANT ASSESSMENT YEAR S. WE HOLD THAT THE SAID RIGHT OF MEMBERSHIP IS A 'BUSINESS OR COMMERCIAL RIGHT' WHICH GIVES A NON - DEFAULTING CONTINUING MEMBER A RIGHT TO ACCESS THE EXCHANGE AND TO PARTICIPATE THEREIN AND IN THAT SENSE IT IS A LICENCE OR AKIN TO LICENCE IN TERMS OF S. 32 (1)(II) OF THE 1961 ACT. THAT, SUCH A RIGHT VESTS IN THE EXCHANGE ONLY ON DEFAULT/DEMISE IN TERMS OF THE RULES AND BYE - LAWS OF BSE, AS THEY STOOD AT THE RELEVANT TIME. OUR JUDGMENT SHOULD NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WO ULD CONSTITUTE A 'LICENCE' OR A 'FRANCHISE' IN TERMS OF S. 32(1)(II) OF THE 1961 ACT. SIMILARLY, IN THE CASE OF JONAS WOODHEAD AND SONS (INDIA) LTD. (SUPRA) THE HONBLE APEX COURT IN THE BACKDROP OF THE FACTS INVOLVED IN THE CASE BEFORE IT, OBSERVED , THAT AS THE FOREIGN COMPANY PURSUANT TO AN AGREEMENT WITH THE ASSESSEE HAD PROVIDED TECHNICAL KNOW HOW AND SERVICES FOR SETTING UP OF THE PLANT AND MANUFACTURING OF PRODUCTS, WITH NO EMBARGO ON THE ASSESSEE TO CONTINUE WITH THE MANUFACTURING OF THE PRODUC TS EVEN AFTER THE EXPIRY OF THE AGREEMENT, THEREFORE, AN ENDURING BENEFIT GOT VESTED WITH THE ASSESSEE , AND THUS THE PAYMENT MADE BY THE ASSESSEE FOR THE SAME WAS A CAPITAL EXPENDITURE. WE ARE OF THE CONSIDERED VIEW THAT UNLIKE THE FACTS INVOLVED IN THE AF ORESAID CASE LAWS RELIED UPON BY THE A.O, IN THE CASE BEFORE US , AS NO ENDURING BENEFIT BY MAKING THE PAYMENT OF THE FRANCHISE FEE GOT VESTED WITH THE ASSESSEE, THEREFORE , THE SAID JUDICIAL PRONOUNCEMENTS BEING DISTINGUISHABLE ON FACTS WOULD NOT ASSIST THE CASE OF THE REVENUE. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATION S AND FINDING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE COORDINATE BENCHES OF THE TRIBUNAL, THEREFORE, ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF THE FRANCHISE FEE FOR IPL SEASON - 1 OF RS.30,03,60,000/ - BY THE ASSESSEE CAN SAFELY BE HELD TO BE IN THE NATURE OF A REVENUE EXPENDITURE , WHICH WAS RIGHTLY CLAIMED BY THE ASSESSEE AS SUCH WHILE COMPUTING ITS INCOME FOR THE YEAR UNDER CONSIDERATION. WE THUS SET ASIDE THE ORDE R OF THE CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS.30,03,60,000/ - . WE MAY HEREIN P A G E | 68 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 OBSERVE THAT AS WE HAVE HELD THAT THE FRANCHISE FEE OF RS.30,03,60,000/ - PAID BY THE ASSESSEE TO BCCI IS A REVENUE EXPENDITURE, THEREFORE, THE CONTENTIONS OF THE ASSESSEE AS REGARDS QUANTIFICATION OF THE W . D . V FOR COMPUTING THE DEPRECIATION IN RESPECT OF THE FRAN CHISE RIGHTS IS RENDERED AS REDUNDANT AND IS NOT BEING ADJUDICATED BY US . THE GROUND OF APPEAL NO. 2 TO 4 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 48 . WE SHALL NOW TAKE UP THE VALIDITY OF THE DISALLOWANCE OF AN AMOUNT OF RS.7,50,90,000/ - CLAIM ED BY THE ASSESSEE AS AN EXPENDITURE UNDER THE HEAD FRANCHISE FEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10. WE FIND THAT AS A PERIOD OF THE FIRST THREE MONTHS (JANUARY, 2009 TO MARCH, 2009) PERTAINING TO IPL SEAOSN - 2 FELL WITHIN THE SWEEP OF TH E YEAR UNDER CONSIDERATION, VIZ. A . Y 2009 - 10, THEREFORE, THE ASSESSEE WHO WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, BEING OF THE VIEW THAT THE PROPORTIONATE FEE FOR A PERIOD OF 3 MONTHS OF IPL SEASON - 2 WAS RELATABLE TO THE YEAR UNDER CONSIDERATION, HAD THUS BOOKED THE SAME AS AN EXPENDITURE IN A . Y 2009 - 10. WE FIND THAT THE ASSESSEE HAD ASSAILED THE DISALLOWANCE OF THE AFORESAID AMOUNT BEFORE THE CIT(A) ON THE GROUND THAT AS PER CLAUSE 7.1 (A) OF THE FRANCHISE AGREEMENT THE LIABILITY TO MAKE THE PAYMEN T FOR THE AFORESAID 3 MONTHS OF IPL SEASON - 2 (JANUARY, 2009 TO MARCH, 2009) , PURSUANT TO A CONTRACTUAL OBLIGATION HAD ACCRUED AND CRYSTALLIZED DURING THE YEAR, THEREFORE, THE SAME WAS RIGHTLY BOOKED AS AN EXPENDITURE DURING THE PERIOD RELEVANT TO A . Y 2009 - 10. 49 . WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID CLAIM OF THE ASSESSEE. WE HAVE DELIBERATED ON THE FACTS OF THE CASE AND FIND THAT A PERUSAL OF CLAUSE 7.1(A) REVEALS THAT WHILE FOR THE LEAGUE DEPOSIT OF RS. 9,01,08,000/ - PAI D BY THE FRANCHISEE ON OR BEFORE 2 ND JANUARY IN EACH SUCH YEAR WAS TO BE APPROPRIATED TOWARDS P A G E | 69 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE ANNUAL FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN WHICH THE LEAGUE DEPOSIT WAS PAID, WHILE FOR THE BALANCE FRANCHISE FEE OF RS.21 ,02,52,000/ - WAS TO BE PAID BY THE FRANCHISE ON THE DATE OF THE FIRST MATCH IN THE LEAGUE IN SUCH YEAR. THUS , A PERUSAL OF THE AFORESAID FACT S REVEALS BEYOND ANY SCOPE OF DOUBT THAT WHILE FOR THE LIABILITY TO PAY THE FRANCHISE FEE OF RS.21,02,52,000/ - WAS TO CRYSTALLISE ON THE DATE ON WHICH THE FIRST MATCH IN THE LEAGUE WAS PLAYED, WHILE FOR ON A SIMILAR FOOTING , THE LEAGUE DEPOSIT OF RS.9,01,08,000/ - WHICH THE ASSESSEE REMAINED LIABLE TO PAY AS PER THE TERMS OF THE FRANCHISE AGREEMENT ON OR BEFORE 2 ND JANUARY OF EACH YEAR WAS TO BE APPROPRIATED AGAINST THE ANNUAL FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE YEAR IN WHICH THE LEAGUE DEPOSIT WAS PAID . THUS, IT CAN SAFELY AN D RATHER INESCAPABLY BE CONCLUDED THAT THE PAYMENT OF THE FRANCHISE FEE WAS CLEARLY RELATED TO THE DATE ON WHICH THE FIRST MATCH OF THE LEAGUE WAS PLAYED AND WAS TO CRYSTALLIZE INTO AN EXPENDITURE ONLY ON THE SAID DATE. WE ARE OF THE CONSIDERED VIEW THAT AS NO MATCH OF IPL SEASON - 2 WAS PLAYED BEFORE 31.03. 2009, THEREFORE, NO PART OF THE FRANCHISE FEE FOR IPL SEASON - 2 COULD BE RELATED TO AND CHARACTERISED AS A N EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF THE SAID EVENT DURING THE YEAR UNDER CONSIDERATION. WE THUS ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE FACT THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, AS NO PART OF THE FRANCHISE FEE EXPENDITURE FOR IPL SEASON - 2 HAD ACCRUED OR CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, VIZ. AY 2009 - 10, THEREFORE, NO PART OF THE SAME COULD HAVE BEEN CLAIMED AS AN EXPENDITURE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. BEFOR E PARTING , WE MAY HEREIN CLARIFY THAT TO THE EXTENT THE LEAGUE DEPOSIT OF RS.9,01,08,000/ - WHICH THE ASSESSEE HAD PAID AS A DEPOSIT AS PER CLAUSE 7.1(A)(I) OF THE FRANCHISE AGREEMENT, THE SAME TILL THE DATE OF ITS APPROPRIATION AS AGAINST THE ANNUAL P A G E | 70 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 FRANCHISE CONSIDERATION ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE Y EAR IN WHICH THE LEAGUE DEPOSIT WAS PAID, COULD ONLY BE CHARACTERIZED AS AN ADVANCE/DEPOSIT, I.E AN A MOUNT DEPOSITED BY THE ASSESSEE ON ACCOUNT OF A CONTRACTUAL OBLIGATION. WE FIND THAT THE RELIANCE PLACED BY THE LD. A.R ON THE JUDGMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF TAPARIA TOOLS LIMITED VS. JOINT COMMISSIONER OF INCOME - TAX (2015) 372 ITR 605 (SC) IS DISTINGUISHABLE ON FACTS. THE FACTS IN THE CASE BEFORE THE HONBLE APEX COURT WERE THAT THE ASSESSEE HAD ISSUED DEBENTURES WITH TWO OPTIONS AS REGARDS PAYMENT OF INTEREST, VIZ. (I). THE DEBENTURE HOLDERS COULD EITHER RECEIVE INTEREST PERIODICALLY, THAT IS EVERY HALF YEARLY @ 18% PER ANNUM OVER A PERIOD OF FIVE YEARS ; OR (II). THE DEBENTURE HOLDERS COULD OPT FOR ONE TIME UPFRONT PAYMENT OF RS.55 PER DEBENTURE. THAT AS PER THE SECOND ALTERNATIVE AN AMOUNT OF RS.55 PER DEBENTURE WAS TO BE IMMEDIATELY PAID AS UPFRONT ON ACCOUNT OF INTEREST , AND AT THE END OF FIVE YEARS PERIOD , THE DEBENTURES WERE TO BE REDEEMED AT THE FACE VALUE OF RS.100. TWO OF THE DEBENTURE HOLDERS, VIZ. , M/S. MALIRAM MAKHARIA STOCK BROKERS PVT. LTD. AND M/S. SHARP KNIFE COMPANY PVT. LTD. OPTED FOR UPFRONT PAYMENT OF INTEREST AND THUS INTEREST OF RS.2,72,25 ,000/ - AND RS.55,00,000/ - , RESPECTIVELY, WAS PAID BY THE ASSESSEE TO THE M . HOWEVER, IT SO HAPPENED THAT THE SAID UPFRONT PAYMENT OF INTEREST ON DEBENTURES WERE SHOWN BY THE ASSESSEE AS DEFERRED REVENUE EXPENDITURE IN ITS ACCOUNTS TO BE WRITTEN OFF OVER A P ERIOD OF FIVE YEARS. NOTWITHSTANDING TH E ACCOUNTING TREATMENT GIVEN TO THE PAYMENT QUA INTEREST, THE ASSESSEE IN ITS RETURNS FILED FOR THE ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 CLAIMED THE ENTIRE UPFRONT INTEREST PAYMENT OF RS.2,72,25,000 / - AND RS.55,00,00 0 / - , RESPECTIVELY , AS FULLY DEDUCTIBLE EXPENDITURE. THE A.O WHILE FRAMING THE ASSESSMENT DECLINED TO ALLOW THE ASSESSE'S CLAIM FOR DEDUCTION OF UPFRONT INTEREST PAYMENT. INSTEAD, THE AO CHOSE TO SPREAD IT OVER A PERIOD OF FIVE YEARS, THEREBY ALLOWING P A G E | 71 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 DED UCTION ONLY TO THE EXTENT OF 1/5 TH IN E ACH OF THE FIVE RESPECTIVE ASSESSMENT YEARS. THE CIT(APPEALS) DISMISSED THE APPEALS AND SUSTAIN ED THE ORDER PASSED BY THE AO. THE ASSES S EE APPROACHED THE INCOME TAX APPELLATE TRIBUNAL AND THEREAFTER THE HIGH COURT , BU T WAS UNSUCCESSFUL AS THE APPEALS PREFERRED BY HIM BEFORE THE TWO FORA WERE DISMISSED . WHEN THE MATTER CAME UP BEFORE THE HONBLE SUPREME COURT, IT OBSERVED THAT THE MOMENT SECOND OPTION WAS EXERCISED BY THE DEBENTURE HOLDER TO RECEIVE THE PAYMENT UPFRONT, LIABILITY OF THE ASSESSEE TO MAKE THE PAYMENT IN THAT VERY YEAR, ON EXERCISING OF THIS OPTION HA D ARISEN AND THIS LIABILITY WAS TO PAY THE INTEREST @ RS.55 PER DEBENTURE . THE HONBLE SUPREME COURT OBSERVED THAT AS THE INTEREST EXPENDITURE BECAME PAYABLE T O THE DEBENTURE HOLDER S IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE NON - CONVERTIBLE DEBENTURE ISSUE FLOATED BY THE ASSESSEE, ON THE EXERCISE OF OPTION BY THE AFORESAID DEBENTURE HOLDERS, WHICH OCCURRED IN THE RESPECTIVE ASSESSMENT YEARS IN WHICH DED UCTION OF THIS EXPENDITURE WAS CLAIMED , THEREFORE, THE CLAIM OF THE ASSESSEE IN MAKING THE PAYMENT OF INTEREST LIABILITY WHICH HAD CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION , WAS WELL IN ORDER. THE HONBLE APEX COURT OBSERVED AS UNDER: 15) WHAT IS TO BE BORNE IN MIND IS THAT THE MOMENT SECOND OPTION WAS EXERCISED BY THE DEBENTURE HOLDER TO RECEIVE THE PAYMENT UPFRONT, LIABILITY OF THE ASSESSEE TO MAKE THE PAYMENT IN THAT VERY YEAR, ON EXERCISING OF THIS OPTION, HAS ARISEN AND THIS LIABILITY WAS TO P AY THE INTEREST @ RS.55 PER DEBENTURE. IN BHARAT EARTH MOVERS V. COMMISSIONER OF INCOME TAX (2000) 6 SCC 645, THIS COURT HAD CATEGORICALLY HELD THAT IF A BUSINESS LIABILITY HAS ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED EVEN IF SUCH A L IABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE JUDGMENT OF THE HONBLE SUPREME COURT AND FIND THAT THE OBSERVATIONS OF THE C OURT THAT AS THE PAYMENT OF INTEREST WAS MADE BY THE ASSESSEE IN LIEU OF A N EXPENDITURE THAT HAD ACCRUED AND CRYSTALLISED DURING THE YEAR ITSELF, THEREFORE, THE SAME WAS ALLOWABLE IN ITS HANDS , RATHER FORTIFIES THE VIEW P A G E | 72 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 TAKEN BY US IN THE PRESENT CASE. WE FIND THAT IN THE PRESENT CASE BEFORE US, AS THE LIABILITY AS R EGARDS THE FRANCHISE FEE AS PER CLAUSE 7.1 (A) WAS TO ARISE AND ASSUME THE CHARACTER OF AN EXPENDITURE ON THE DATE OF THE FIRST MATCH OF THE LEAGUE IN THE YEAR IN WHICH THE LEAGUE DEPOSIT WAS PAID, THEREFORE, AS OBSERVED BY US HEREINABOVE, NOW WHEN NO MATCH OF IPL SEASON - 2 WAS PLAYED TILL 31.03.2009, THUS NO EXPENDITURE IN RESPECT OF THE FRANCHISE FEE ACCRUE D AT ALL DURING THE YEAR UNDER CONSIDERATION . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS , FINDING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE AMOUNT OF RS.7,50,90,000/ - CANNOT BE HELD AS A REVENUE EXPENDITUR E IN THE HANDS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION , THEREFORE, UPHOLD THE ORDER OF THE CIT(A) TO THE SAID EXTENT AND DISMISS THE GROUND OF APPEAL NO. 5 RAISED BY THE ASSESSEE BEFORE US. 50 . WE NOW ADVERT TO THE DISALLOWANCE OF AN AMOUNT OF RS.75,00,000/ - FORMING PART OF THE AMOUNT OF RS.3,50,00,000/ - PAID BY THE ASSESSEE TO CRICKET ASSOCIATION OF BENGAL (FOR SHORT CAB) FOR USE OF EDEN GARDEN. WE FIND THAT THE ASSESSEE AS PER ITS ARRANGEMENT WITH CAB WAS REQUIRED TO PAY 50 LAC PER MATCH PLAYED AT EDEN GARDEN STADIUM. THAT AS 7 MATCHES WERE PLAYED AT EDEN GARDEN DURING IPL SEASON - 1, THEREFORE, THE ASSESSEE WAS LIABLE TO PAY A CONSIDERATION OF RS.3,50,00.000/ - TO CAB. WE FIND THAT IN LIEU OF THE AFORESAID ARRANGEMENT IT WAS THE R ESPONSIBILITY OF CAB TO ARRANGE FOR SECURITY AT THE STADIUM WHEN THE MATCHES WERE STAGED BY THE ASSESSEE , THEREFORE, AS PER THE DIRECTION S OF CAB THE ASSESSEE MADE A PAYMENT OF RS.75,00,000/ - ON ITS BEHALF, DIRECTLY TO KOLKATA POLI CE DEPARTMENT FOR THE SEC URITY S ERVICES TO BE PROVIDED AT THE STADIUM. WE FIND THAT THE ASSESSEE IN ORDER TO SUBSTANTIATE ITS AFORESAID CLAIM OF EXPENDITURE HAD FURNISHED WITH THE A.O THE I NCOME AND EXPENDITURE ACCOUNT OF P A G E | 73 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CAB FOR IPL SEASON - 1 MATCHES PLAYED AT EDEN GARDENS , WHICH R EVEALED THAT AN INCOME OF RS.3,50,00,000/ - WAS CREDITED ON ACCOUNT OF STADIUM USE CHARGES, WHILE FOR AN AMOUNT OF RS.75,00,000/ - WAS DEBITED ON ACCOUNT OF REFRESHMENT FOR POLICE FORCE. WE HAVE DELIBERATED ON THE FACTS AND FIND THAT THE LOWER AUTHORITIES H AD RAISED DOUBTS AS REGARDS THE ALLOWABILITY OF THE AFORESAID AMOUNT OF RS.75,00,000/ - AS AN EXPENDITURE IN THE HANDS OF THE ASSESSEE FOR MULTIPLE REASONS, VIZ. (I) THAT WHILE FOR ON THE ONE HAND THE ASSESSEE HAD CLAIMED THAT IT HAD PAID AN AMOUNT OF RS.75 ,00,000/ - TO KOLKATA POLICE FAMILY WELFARE CENTRE AT THE INSTRUCTIONS OF CAB, HOWEVER, A PERUSAL OF THE INCOME AND EXPENDITURE STATEMENT OF CAB REVEALED THAT THE AMOUNT WAS SHOWN AS REFRESH MENT FOR POLICE FORCE; (II) THAT AS NO WRITTEN AGREEMENT WAS EXECUT ED FOR THE USE OF EDEN GARDEN DURING THE IPL MATCHES, THEREFORE, THE GENUINENESS OF THE PAYMENT OF RS.75,00,000/ - PAID TO KOLKATA POLICE FAMILY WELFARE CENTRE WAS NOT PRO VED; (III) THE CLAIM OF THE ASSESSEE WAS ALSO NOT JUSTIFIED FOR THE REASON THAT THE AMOUNT WAS DIRECTLY PAID TO KOLKATA POLICE WELFARE FUND WHICH WAS NOT A GOVERNMENT AUTHORITY, AND SINCE THE SERVICES OF POLICE WERE UTILIZED DURING THE IPL MATCHES, THEREFORE, EITHER THE AMOUNT SHOULD HAVE BEEN PAID TO THE STATE GOVERNMENT OR THE ASSESSEE SHOULD HAVE PROVIDED REFRESHMENT TO POLICE PERSONNEL ON ITS OWN, INSTE AD OF GIVING THE AMOUNT TO A WELFARE FUND; AND (IV) THAT THERE WAS NO COGENT REASON FOR THE ASSESSEE TO HAVE PAID THE AMOUNT TO KOLKATA POLICE FAMILY WELFARE CENTRE, THEREFORE, THE SAME COULD NOT BE TREATED AS A BONAFIDE EXPENDITURE. 51 . WE HAVE DELIBERATED AT LENGTH ON THE AFORESAID OBSERVATIONS OF THE LOWER AUTHORITIES , BUT HOWEVER, A RE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAME. WE FIND THAT THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT IT WAS LIABLE TO PAY A CONSIDERATION OF RS. 3,50,00,000/ - P A G E | 74 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 TO CAB FOR 7 MATCHES PLAYED AT EDEN GARDEN DURING IPL SEASON - 1 CAN SAFELY BE GATHERED FROM THE FACT THAT AN INCOME OF RS.3,50,00,000/ - WAS CREDITED ON ACCOUNT OF STADIUM USE CHARGES I N THE I NCOME AND EXPENDITURE ACCOUNT OF CAB FOR IPL SEASON 1 MATCHES PLAYED AT EDEN GARDEN. WE FIND THAT NOW WHEN THE ASSESSEE IN DISCHARGE OF ITS AFORESAID OBLIGATION HAD AS PER THE DIRECTIONS OF CAB MADE A PAYMENT OF RS.75,00,000/ - DIRECTLY TO THE KOLKAT A POLICE DEPARTMENT FOR THE SECURITY SERVICES TO BE PROVIDED AT THE STADIUM ON ITS BEHALF , THE VERACITY OF THE SAID CLAIM OF THE ASSESSEE CANNOT BE DISLODGE D FOR THE REASON THAT CAB HAD DEBITED THE SAID EXPENDITURE UNDER THE HEAD REFRESHMENT FOR POLICE FO RCE. WE ARE OF THE CONSIDERED VIEW THAT THE BOOKING OF THE AFORESAID EXPENDITURE BY CAB USING A DIFFERENT NOMENCLATURE WOULD BY NO MEANS NEGATE THE GENUINENESS OF THE AFORESAID CLAIM OF EXPENDITURE IN THE HANDS OF THE ASSESSEE. WE FIND THAT THE ASSESSEE I NSTEAD OF MAKING PAYMENT OF RS.3,50,00,000/ - TO CAB, HAD RATHER, AS PER THE LATTERS DIRECTION DISCHARGED PART OF ITS OBLIGATION BY MAKING PAYMENT OF PART OF THE AMOUNT, VIZ. RS.75,00,000/ - TO KOLKATA POLICE WELFARE CENTRE. WE ARE ALSO NOT IMPRESSED BY THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT AS NO WRITTEN AGREEMENT WAS EXECUTED BETWEEN THE ASSESSEE AND CAB FOR THE USE OF EDEN GARDEN DURING THE IPL MATCHES, THEREFORE, THE GENUINENESS OF THE PAYMENT OF RS.75,00,000/ - PAID TO KOLKATA POLICE FAMILY WELFAR E CENTRE WAS TO BE HELD AS NOT PROVED. WE ARE OF THE CONSIDERED VIEW THAT TO THE EXTENT THE ASSESSEE BEFORE US IS CONCERNED, THE FACT THAT THE ASSESSEE HAD PAID A CONSIDERATION OF RS.3,50,00,000/ - TO CAB FOR THE 7 MATCHES PLAYED AT EDEN GARDEN IPL SEASON - 1 , IS PROVED BEYOND DOUBT FROM THE FACT THAT AN AMOUNT OF RS.3,50,00,000/ - WAS CREDITED BY CAB AS ITS INCOME ON ACCOUNT OF STADIUM USE CHARGES IN ITS I NCOME AND EXPENDITURE ACCOUNT FOR IPL SEASON - 1 MATCHES PLAYED AT EDEN GARDEN. WE ARE OF THE CONSIDERED P A G E | 75 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 VIE W THAT NOW WHEN CAB HAD DULY ACKNOWLEDGED HAVING RECEIVED AN AMOUNT OF RS.3,50,00,000/ - FROM THE ASSESSEE FOR USE OF EDEN GARDEN STADIUM FOR STAGING OF IPL SEASON - 1 MATCHES , THEREFORE, AS OBSERVED BY US HEREINABOVE, NOTHING MORE REMAINS TO BE PROVED ON THE PART OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT THE OBSERVATIONS OF THE LOWER AUTHORIT IES AS REGARDS THE GENUINENESS OF THE PAYMENT AND THE FACT AS TO WHY THE SAID AMOUNT WAS PAID BY THE ASSESSEE TO KOLKATA POLICE WELFARE FUND WHICH WAS NOT A GOVERNMENT AUTHORITY , AND NOT TO THE S TATE GOVERNMENT , OR AS TO WHY THE ASSESSEE INSTEAD OF GIVING THE AMOUNT TO A WELFARE FUND HAD NOT PROVIDED REFRESHMENT TO POLICE PERS ONNEL ON ITS OWN, ARE ALL IRRELEVANT TO THE ENTITLEMENT OF THE ASSESSEE FOR THE CLAIM OF THE AFORESAID AMOUNT AS AN EXPENDITURE IN THE COURSE OF ITS BUSINESS . WE HAVE DELIBERATED ON THE FACTS AND ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF RS. 75 LAC WA S MADE BY THE ASSESSEE TO KOLKATA POLICE WELFARE FUND, NOT BY ITS CHOICE, BUT AS PER THE DIRECTIONS OF CAB WHO WAS RESPONSIBLE TO ARRANGE FOR SECURITY IN THE STADIUM AT THE TIME OF STAGING OF THE MATCHES BY THE ASSESSEE. WE THUS NOT BEING PERSUADED TO BE I N AGREEMENT WITH THE OBSERVATIONS OF THE LOWER AUTHORITIES AS REGARDS THE ALLOWABILITY OF THE CLAIM OF THE AMOUNT OF RS.75,00,000/ - (FORMING PART OF TOTAL EXPENDITURE OF RS.3,50,00,000/ - ) PAID BY THE ASSESSEE AS PER THE DIRECTIONS OF CAB TO KOLKATA POLICE WELFARE FUND, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) TO THE SAID EXTENT AND DELETE THE ADDITION/DISALLOWANCE OF RS.75,00,000/ - SUSTAINED BY HIM. THE GROUND OF APPEAL NO. 6 IS ALLOWED. 52 . WE SHALL NOW ADVERT TO THE DISALLOWANCE OF THE EXPENDITURE OF RS.1,28,34,490/ - WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID TO MR. JOHN BUCHANAN FOR PROVIDING COACHING SERVICES TO THE TEAM FOR IPL SEASON - 1. WE FIND THAT THE LOWER AUTHORITIES HAD DR AWN P A G E | 76 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ADVERSE INFERENCES AS REGARDS THE ALLOWABILITY OF THE AFORESAID AMO U NT OF RS.1,28, 34,490/ - WHICH WAS CLAIMED BY THE ASSESSEE AS AN EX PENSE, INCURRED FOR COACHING SERVICES PROVIDED TO ITS TEAM BY MR. JOHN BUCHANAN, FOR MULTIPLE REASONS, VIZ. (I) THAT T HE A.O ON PERUSING THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH MR. JOHN BUCHANAN OBSERVED THAT THE SAME WAS EXECUTED ON 07.01.2009, WHICH WAS MUCH SUBSEQUENT TO THE PERIOD IN WHICH THE I PL SEASON - 1 MATCHES WERE PLAYED I.E APRIL AND MAY, 2008 ; (II) THAT AS PER THE ITT BID DOCUMENT AND FRANCHISE AGREEMENT, THOUGH IT WAS MANDATORY TO ENTER INTO AN AGREEMENT FOR AVAILING COACHING SERVICES, HOWEVER, NO SUCH AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH MR. JOHN BUCHANAN, AS A RESULT WHEREOF IT COULD SAFEL Y CONCLUDED THAT THE PAYMENT MADE BY THE ASSESSEE COULD NOT BE ALLOWED AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION; AND (III) THAT THE SERVICES OF MR . JOHN BUCHANAN WERE CLAIMED BY THE ASSESSE E TO HAVE BEEN UTILIZED DURING THE IPL SEASON - 1, HOWEVER, AS THE PAYMENT WAS FOUND TO HAVE BEEN MADE TO A DISCRETIONARY TRUST, THEREFORE, THE EXPENDITURE WAS ALSO LIABLE TO B E DISALLOWED ON THE SAID GROUND. 53 . WE HAVE DELIBERATED ON THE FACTS PERTAINING TO THE ISSUE UNDER CONSIDERATION AND FURTHER PERUSED THE SERVICES AGREEMENT - DIRECTOR: CRICKET OPERATION ( PAGE 113 OF APB). WE FIND THAT THE SERVICE AGREEMENT BETWEEN THE ASSESSEE AND MR. JOHN BUCHANAN REVEALS THAT THE SAME WAS FOR THREE SEASONS , I.E. 2008 - 09, 2009 - 10 AND 2010 - 11, IN TERMS OF WHICH THE ASSESSEE AS PER THE DIRECTIONS OF MR. JOHN BUCHANAN WAS TO MAKE PAYMENTS FOR THE SAID SERVICES TO BUCHANAN CORPORATE COACHING TRUST. WE HAVE FURTHER PERUSED THE DOWNLOADED EXTRACT FROM WIKIPEDIA, THE FREE ENCYCLOPAEDIA AND THE RELEVANT EXTRACT OF THE TIMES OF INDIA, MUMBAI, DATED APRIL 18, 2008 PLACED P A G E | 77 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ON RECORD BY THE LD. A.R , FROM WHERE IT COULD BE GATHERED THAT MR. JOHN BUCHANAN HAD PROVIDED COACHING SERVICES TO THE ASSESSEE TEAM, VIZ. KOLKATA KNIGHT RIDERS IN IPL SEASON - 1 ( PAGE 127 129 OF APB). WE HAVE PERUSED THE SERVICE AGREEMENT WHICH REVEALS THAT THE SAME WAS EXECUTED BY MR. JOHN BUCHANAN, BOTH IN HIS INDIVIDUAL CAPACITY AND IN HIS CAPACITY AS DIRECTOR OF BUCHANAN SUCCESS CRICKET COACH ING PTY LTD. (ACN) AS TRUSTEE OF THE BUCHANAN DISCRETIONARY TRUST, HAVING ITS ADDRESS AT 26, LOVE STREET, HOLLAND PARK, QUEENSLAND, AUSTRALIA. THUS , IN THE BACKDROP OF THE AFORESAID FACTS, THE ADVERSE INFERENCE DRAWN BY THE LOWER AUTHORITIES AS REGARDS THE GENUINENESS AND VERACITY OF THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE AMOUNT WAS PAID TO A DISCRETIONARY TRUST, IS THUS PUT TO REST . WE FURTHER FIND THAT THOUGH IT REMAINS AS A MATTER OF FACT THAT THE AGREEMENT WAS SIGNED ON 0 7.01.2009, I.E MUCH SUBSEQUENT TO THE PERIOD THE IPL SEASON - 1 MATCHES WERE PLAYED , HOWEVER, A BARE PERUSAL OF THE AGREEMENT REVEALS THAT THE SAME SPECIFICALLY PROVIDED THAT IT WAS EXECUTED FOR 3 SEASONS , VIZ. 2008 - 09, 2009 - 10 AND 2010 - 11 AND SHALL BECOME EFFECTIVE FROM THE DATE OF SIGNING TILL 30 TH JUNE, 2011. WE FURTHER FIND THAT CLAUSE 3.2 OF THE AGREEMENT SPECIFICALLY PROVIDED THAT THE DIRECTOR, VIZ. MR. JOHN BUCHANAN WAS COMMITTED TO BE AVAILABLE FOR THE FRANCHISE FOR AT LEAST 26 WEEKS IN SEASON I (2009) AND 36 WEEKS EACH IN SEASON II AND III (I.E. 2010 AND 2011). WE FURTHER FIND THAT THE CLAUSE 4 WHICH PROVIDED THE TERMS OF PAYMENT OF FEES BY THE ASSESSEE TO MR. JOHN BUCHANAN CLEARLY MENTION ED THAT IN LIE U OF THE SERVICES PROVIDED BY HIM THE ASSESSEE WAS TO PAY A GROSS FEES OF US $ 255,000/ - FOR S EASON I (2009) , WHICH WAS TO BECOME DUE AND PAYABLE IN PARTS, VIZ. (I) 25% ON SIGNING OF THE CONTRACT (BUT BEFORE 30 TH NOVEMBER, 2008); (II) 50% ON 1 ST APRIL, 200 9 AND 25% ON 1 ST JUNE, 2009. WE FURTHER FIND THAT CLAUSE 12 OF THE AGREEMENT CLEARLY PROVIDED THAT THE TERMS OF THIS AGREEMENT WAS TO SUPERSEDE ANY PREVIOUS P A G E | 78 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 AGREEMENT (INCLUDING AGREEMENT DATED 17 TH FEBRUARY, 2008) OR ARRANGEMENT BETWEEN THE PARTIES. WE HAVE DELIBERATED ON THE VARIOUS RELEVANT CLAUSES OF THE AFORESAID SERVICE AGREEMENT AND ARE OF THE CONSIDERED VIEW THAT THE SAME CLEARLY LAID DOWN THE TERMS AND CONDITIONS IN RESPECT OF THE DURATION , AVAILABILITY OF THE COACH AND THE FEES STRUCTURE FOR THE IPL SEASON - 1. WE FIND THAT THE AFORESAID AGREEMENT WHICH WAS IN SUPERSESSION OF ANY PREVIOUS AGREEMENT (INCLUDING AGREEMENT DATED 17 TH FEBRUARY, 2008) OR ARRANGEMENT BETWEEN THE PARTIES , DULY CONTE MPLATED THE TERMS AND CONDITIONS AS PER WHICH MR. JOHN BUCHANAN WAS TO RENDER HIS SERVICES TO THE ASSESSEE AS REGARDS THE IPL SEASON - 1 LEAGUE. WE HAVE FURTHER DELIBERATED ON THE RELEVANT NEWSPAPER EXTRACTS OF TIMES OF INDIA AS WELL AS THE DOWNLOADED EXTR ACTS FROM WIKIPEDIA, THE FREE ENCY C LOP AE DIA. WE THOUGH ARE NOT OBLIVIOUS OF THE FACT THAT EXTRACTS OF NEWS PAPER ETC . CANNOT ON THEIR OWN ESTABLISH OR DISPROVE A FACT, BUT THE SAME CAN UNDOUBTEDLY BE ADMITTED AS A SECONDARY OR SUPPORTING EVIDENCE. WE FIND THAT THE NEWS ITEM DATED 18 TH APRIL, 2008 ( PAGE 127 - 12 9 OF APB), AS WELL AS THE EXTRACTS OF WIKIPEDIA, THE FREE ENCYCLOPAEDIA ( PAGE 124 - 125 OF APB) ALSO EVIDENCES THE FACT THAT MR. JOHN BUCHANAN HAD PROVIDED COACHING SERVICES TO THE ASSESSEE TEAM, VIZ. KOLKATA KNIGHT RIDERS IN IPL SEASON - 1. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEWS OF THE LOWER AUTHORITI ES THAT NO COACHING SERVICES WERE PROVIDED BY MR. JOHN BUCHANAN TO THE ASSESSE S CRICKET TEAM IN IPL SEASON - 1. WE FURTHER FIND THAT THE REVENUE HAD NEITHER PLACE D ON RECORD ANY IRREFUTABLE DOCUMENTARY EVIDENCE WHICH COULD PERSUADE US TO CONCLUDE THAT NO COACHING SERVICES WERE PROVIDED BY MR. JOHN BUCHANAN TO THE ASSESSE S CRICKET TEAM FOR IPL SEASON - 1, NOR THE MATERIAL PLACED ON RECORD BY THE LD. A.R BEFORE US TO F ORTIFY HIS AFORESAID CLAIM HAD BEEN REBUTTED OR DISPROVED BY THE LD. D.R. WE P A G E | 79 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THUS BEING OF THE VIEW THAT THE CLAIM OF THE ASSESSEE AS REGARDS THE EXPENDITURE OF RS.1,28,34,490/ - IN RESPECT OF THE COACHING FEES PAID TO MR. JOHN BUCHANAN FOR IPL SEASON - 1 IS FOUND TO BE IN ORDER , THEREFORE , SET ASIDE THE ORD ER OF THE CIT(A) TO THE EXTENT THE LATTER HAD SUSTAINED THE ADDITION/DISALLOWANCE OF RS.1,28,34,490/ - MADE BY THE A.O. THE GROUND OF APPEAL OF NO. 7 AND 8 RAISED BY THE ASSESSEE ARE ALLOWED. 54 . WE NOW AD VERT TO THE DISALLOWANCE BY THE A.O OF THE EXPENSES WHICH WERE CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT FO R THE YEAR UNDER CONSIDERATION, WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A) , VIZ. (I) OUT OF FOOD AND NUTRITION EXPENSES: RS.58,53,575/ - ; AND (II) OUT OF BOARDING AND LODGING EXPENSES OF RS.1,90,16,944/ - . WE FIND THAT AS PER THE A.O THE INFORMATION GATHERED DURING THE COURSE OF SURVEY PROCEEDINGS CONDUCTED UNDER SEC. 133A ON 21.04.2010 AT THE OFFICE PREMISE OF THE ASSESSEE AT EDEN GARDEN, CALCUTTA, REVEALED THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.1,35,46,255/ - (ROOM BILLING: RS. 96,25,375/ - AND PARTYING BILL: RS.39,19,880/ - ) AT ITC, SONAR, KOLKATA. WE FIND THAT T HE A.O HAD CARRIED OUT DISALLOWANCE OF THE PARTYING E XPENDITURE OF RS.39,19,880/ - BY OBSERVING THAT THE PARTIES HOSTED BY THE ASSESSEE AT ITC SONAR, KOLKATA INCLUDED VARIOUS RELATIVES OF DIRECTORS, VIPS AND CELEBRITIES , WHICH THUS COULD NOT BE HELD AS A BUSINESS EXPENDITURE . T HE A.O FURTHER HOLDING A CONVICT ION THAT THE ROOM BOOKING CHARGES OF RS.96,26,375/ - INCURRED BY THE ASSESSEE FOR ROOMS TAKEN ON HIRE AT ITC, SONAR, KOLKATA WERE ALSO TO SOME EXTENT INCURRED BY THE ASSESSEE FOR THE STAY OF RELATIVES OF DIRECTORS, VIPS AND CELEBRITIES, THEREFORE, ON THE SA ID COUNT HAD ON AN ESTIMATE BASIS DISALLOWED 33% OF SUCH EXPENSES AND MADE AN ADDITION OF RS.31,76,705/ - . THAT AS REGARDS THE BALANCE EXPENDITURE OF RS.1,13,24,264/ - (I.E. EXCLUDING EXPENDITURE INCURRED AT ITC, SONAR, P A G E | 80 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 KOLKATA), THE A.O HAD ON A SIMILAR ANA LOGY CARRIED OUT AN ESTIMATED DISALLOWANCE OF 33% OF THE SAID EXPENSES AND MADE A FURTHER ADDITION OF RS.37,37,007/ - . WE THUS FIND THAT ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O HAD CARRIED OUT AN AGGREGATE DISALLOWANCE OF RS.1,08,33,592/ - OUT OF THE FOOD AND NUTRITION AND BOARDING AND LODGING EXPENSES CLAIMED BY THE ASSESSEE. 55 . WE HAVE DELIBERATED ON THE OBSERVATIONS OF THE LOWER AUTHORITIES , AND FIND THAT THE PRIMARY REASON WHICH HAD WEIGHED IN THE MIND OF THE A.O WHILE MAKING THE DISALLOWANCE OF EXPENSES BOOKED BY THE ASSESSEE UNDER THE HEAD FOOD AND NUTRITION EXPENSES AND BOARDING AND LODGING EXPENSES , WAS THAT THE INFORMATION GATHERED DURING THE COURSE OF THE SURVEY PROCEEDINGS CONDUCTED U NDER SEC. 133A ON 21.04.2010 AT THE OFFICE PREMISES OF THE ASSESSEE AT EDEN GARDEN, CALCUTTA, REVEALED THAT THE PARTIES HOSTED BY THE ASSESSEE INCLUDED VARIOUS RELATIVES OF DIRECTORS, VIPS AND CELEBRITIES AS INVITEES . WE FIND THAT THE A.O HAD DISALLOWED TH E ENTIRE PARTYING EXPENDITURE OF RS.39,19,880/ - INCURRED BY THE ASSESSEE AT ITC, SONAR, KOLKATA, AS WELL AS DISALLOWED 33% OF THE ROOM EXPENSES OF RS.96,26,375/ - INCURRED BY THE ASSESSEE ON BOOKING OF ROOMS AT ITC, SONAR, KOLKATA , AND A FURTHER DISALLOWANCE OF 33% OF THE BALANCE EXPENDITURE OF RS.1,13,24,264/ - . WE FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. A.R THAT THE AFORESAID EXPENSES WERE INCURRED BY THE ASSESSEE IN THE COURSE OF OPERATING ITS TEAMS, WHEREIN THE VISITING TEAMS ALONGWITH PEOPLE F ROM SHOW BUSINESS, ACTORS, CELEBRITIES, VIPS ETC, W ERE INVITED FOR THE MATCHES FOR THE PURPOSE OF INCREASING THE VIEWING OF THE MATCHES, WHICH THUS CONSEQUENTLY LED TO INCREASE IN SALE OF TICKET S AND GENERATION OF HIGHER AMOUNT OF SPONSORSHIP FEES. WE HAVE DELIBERATED ON THE CONTENTIONS RAISED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES AND THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE P A G E | 81 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CONSIDERED VIEW THAT IT REMAINS AS A MATTER OF FACT THAT THE GAME OF CRICKET , UNLIKE IN THE PAST, AS ON DATE H AD BEEN HIGHLY COMMERCIALIZED. WE FIND THAT THE MAIN SOURCE OF INCOME OF A N IPL FRANCHISEE FROM HOSTING OF THE CRICKET MATCHES IS FROM TICKETING AND RECEIPT OF SPONSORSHIPS BY STAGING THE CRICKET MATCHES. WE ARE OF THE CONSIDERED VIEW THAT IT REMAINS NO HIDDEN A FACT THAT IN ORDER TO BOOST THE TICKET SALES AND TO RECEIVE HIGH ER SPONSORSHIPS THE FRANCHISEES OF THE IPL TEAMS LEAVE NO STONE U NTURNED, AND TO LURE THE PUBLIC FOR BUYING TICKETS , I NVITE ACTORS, CELEBRITIES, VIPS ETC. DURING THE MATCHES. WE FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. A.R THAT THIS IS THE WAY THE ASSESSEE OPERATES ITS TEAM AND CARRIES OUT ITS BUSINESS . WE CANNOT REMAIN OBLIVIOUS OF THE FACTUAL REALITY AS REGARDS THE STRATEGICAL PLANNING IN THE BUSINESS OF CRICKETING , AND A R E OF THE CONSIDERED VIEW THAT NOW WHEN THE ACTORS, CELEBRITIES, VIPS ETC., PURSUANT TO INVITATIONS BY THE FRANCHISEE , MARK THEIR PRESENCE IN THE MATCHES, THE SAME LEADS TO SUBSTANTIAL PUSH TO TICKETING SALES AND HIGHER SPONSORSHIP RECEIPTS. WE ARE OF THE C ONSIDER ED VIEW THAT THE VISITS OF THE ACTORS, CELEBRITIES, VIPS ETC. AT THE MATCHES STAGED IS STRATEGICALLY PLANNED BY THE FRANCHISEES, WHICH CARRIES WITH IT THE OBLIGATION AND RESPONSIBILITY OF PROVIDING BOARDING, LODGING, FOOD ETC. TO THE LEVEL OF THEIR STANDARD. WE ARE FURTHER OF THE VIEW THAT THE MARKING OF PRESENCE BY THE ACTORS, CELEBRITIES, VIPS ETC . AT THE MATCHES IS STRATEGICALLY PLANNED AND IS GUIDED BY THE BUSINESS PRUDENCE OF THE FRANCHISEE, KNOWING WELL THAT THE SAME WOULD BOTH BOOST THE SALES OF TICKETS AS MORE OF VIEWERS WOULD BE ATTRACTED FOR SUCH MATCHES, AS WELL AS GIVE A SUBSTANTIAL PUSH TO THE SPONSORSHIP RECEIPTS FROM THE BUSINESS HOUSES. WE WOULD NOT HESITATE TO OBSERVE THAT KEEPING IN VIEW THE COMMERCIALIZAT ION OF THE GAME OF CRICKET, IT WOULD NOT BE WRONG TO CONCLUDE THAT EVEN IF THE ASSESSEE WOULD HAVE ARRANGED PAID VISITS OF THE ACTORS, CELEBRITIES, VIPS FOR THE MATCHES, BEING WELL P A G E | 82 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CONVER SA NT WITH THE FACT THAT THE SAME WOULD SUBSTANTIALLY GIVE A BOOST TO HIS REVENUE COLLECTIONS FROM STAGING OF MATCHES, EVEN THE SAID PAYMENTS WOULD SAFELY FALL WITHIN THE SWEEP OF AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. BE THAT AS IT MAY, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW OF THE A.O THAT THE EXPENSES INCURRED BY THE ASSESSEE TOWARDS FOOD AND NUTRITION EXPENSES AND BOARDING AND LODGING EXPENSES PROVIDED TO THE ACTORS, CELEBRITIES AND VIPS ARE LIABLE TO BE DISALLOWE D BY CHARACTERISING THEM AS EXPENSES WHICH COULD NOT BE HELD TO HAVE BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS. WE ARE OF THE CONSIDERED VIEW THAT AS THE VISITS OF THE ACTORS, CELEBRITIES AND VIPS AT THE VENUES WHERE THE MATCHES ARE STAGED IS STRATEGICALLY PLANNED BY THE ASSESSEE IN THE VERY INTEREST OF ITS BUSINESS, THEREFORE, EXPENSES INCURRED BY THE ASSESSEE BY WAY OF PROVIDING THEM FOOD AND NUTRITION OR ARRANGING FOR THEIR STAY IN HOTELS CAN SAFELY BE HELD TO BE AN EXPENDITURE INCURRED IN THE COURSE OF ITS BUSINESS. WE ARE FURTHER OF THE VIEW THAT HOSTING OF PARTIES BY THE ASSESSEE AT ITC, SONAR KOLKATA OR AT OTHER VENUES ON THE DAYS WHEN THE MATCHES WERE PLAYED AT THE HOME GROUNDS OF THE ASSESSEE, WHICH WERE ATTENDED BY THE ASSESSEES OWN TEAM, VISITING TEAMS, SUPPORT STAFF, DIRECTORS AND INVITE E GUESTS , WHICH INCLUDED AMONGST OTHERS ACTORS, CELEBRITIES, VIPS WHO HAD MARKED THEIR PRESENCE AT THE MATCHES, CAN SAFELY BE HELD TO BE EXPENDITURE INCURRED BY THE ASSESSEE IN THE VERY INTEREST OF ITS BUSINESS. WE ARE OF THE CONSIDERED VIEW THAT THE ALLOWABILITY OF AN EXPENDITURE UNDER SEC.37(1) OF THE ACT IS REQUIRED TO SATISFY THE REQUISITE CONDITION CONTEMPLATED THEREIN, VIZ. (I) THE EXPENSES ARE NOT OF THE NATURE OF THE EXPENSES DEFIN ED IN SEC.32 TO 36 OF THE ACT; (II) THE EXPENSES ARE NOT IN THE NATURE OF A CAPITAL EXPENDITURE; (III) THE EXPENSES ARE NOT THE PERSONAL EXPENSES OF THE ASSESSEE; AND (IV) THE P A G E | 83 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 EXPENSES ARE INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. WE FIND THAT IN THE PRESENT CASE BEFORE US THE AFORESAID REQUISITE CONDITIONS HAD DULY BEEN SATISFIED BY THE ASSESSEE, AND AS OBSERVED BY US HEREINABOVE , THE EXPENDITURE INCURRED BY THE ASSESSEE ON FOOD AND NUTRITION AND BOARDING AND LODGING INCURRED IN RESPECT OF THE INVITEES ACTORS, CELEBRITIES AND VIPS, BEING A PART OF THE STRATEGICAL PLAN NING OF THE ASSESSEE TO BOOST ITS GENERATION OF REVENUES IS THUS ALLOWABLE UNDER SEC. 37(1) OF TH E ACT. WE MAY HEREIN OBSERVE THAT NEITHER BEFORE THE LOWER AUTHORITIES NOR BEFORE US IT HAS BEEN ESTABLISHED BY THE REVENUE THAT EITHER THE EXPENSES CLAIMED BY THE ASSESSEE IN RESPECT OF THE AFORESAID PERSONS IS FOUND TO BE BOGUS, OR THE SAID EXPENDITURE S O INCURRED ON THEM WERE NOT IN CONTEXT OF THE BUSINESS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID EXPENDITURE INCURRED BY THE ASSESSEE BY HOSTING DINNERS ON THE DAYS ON WHICH THE MATCHES WERE PLAYED AT THE HOME GROUND , WHICH AMONGST OTHERS WERE ATTENDED BY THE AFORESAID ACTORS, CELEBRITIES ETC, AND ARRANGING FOR THEIR STAY AT THE HOTELS OF REPUTE, CAN SAFELY BE HELD AS AN EXPENDITURE INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. WE THUS BEING OF THE CONSIDERED VIEW THAT AS THE EXPENDITURE INCURRED BY THE ASSESSEE ON FOOD AND NUTRITION AND BOARDING AND LODGING FOR THE MEMBERS OF THE TEAM (INCLUDING VISITING TEAMS), SUPPORT STAFF, DIRECTORS AND THE INVITED GUESTS, WHICH AMONGST OTHERS INCLUDED ACTORS, C ELEBRITIES, VIPS, BEING IN THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN THE VERY INTEREST OF ITS BUSINESS, THEREFORE, IN THE ABSENCE OF ANY IRREFUTABLE DOCUMENTARY EVIDENCE WHICH COULD HAD ESTABLISHED BEYOND ANY DOUBT THAT THE SAME HAD BEEN INCURR ED BY THE ASSESSEE EITHER TO MEET OUT A PERSONAL OBLIGATION OR WAS FOR A PURPOSE WHICH COULD NOT BE HELD TO BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, THEREFORE, ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE P A G E | 84 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 TO THE DISALLOWANCE OF THE EXPEN SES BY THE A.O FOR THE REASON THAT THE PARTIES HOSTED BY THE ASSESSEE WERE ATTENDED BY SUCH ACTORS, CELEBRITIES AND VIPS, AS WELL AS EXPENDITURE WAS INCURRED TOWARDS BOOKING OF ROOMS FOR THE IR STAY IN HOTELS OF REPUTE . WE ARE FURTHER IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R WHO HAD RIGHTLY STATED THAT THIS IS THE WAY THE ASSESSEE CARRIES OUT HIS BUSINESS, AND ARE OF THE CONSIDERED VIEW THAT AS LONG AS THE CLAIM OF THE ASSESSEE IN RESPECT OF THE AFORESAID EXPENSES SATISFIED THE CONDITIONS CONTEMPLATED UNDER SEC. 37 (1), THE ENTITLEMENT OF THE ASSESSEE CANNOT BE INTERFERED WITH. HOWEVER, WHILE PERUSING THE ORDER OF THE CIT(A) WE FIND THAT LATTER HAD REFERRED TO CERTAIN BILLS WHEREIN A CLEAR NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE PURPOSE OF HOSTI NG THE PARTIES COULD NOT BE ESTABLISHED, VIZ. (I) BILL OF RS.3,44,410/ - FOR 300 SNACKS, 300 SOFT BEVERAGES AND TRANSPORT CHARGES , WHEREIN NOTHING COULD BE GATHERED FROM PERUSING THE SAME ABOUT THE PURPOSE A ND PERSONS ATTENDING THE PARTY; (II) BILL OF RS.5,31,573/ - , DATED 30.04.2008 WHICH THOUGH WAS RAISED IN FAVOUR OF IPL ODC FOR DINNER OF 400 PERSONS, HOWEVER, AS TO HOW THE SAME WAS PAYABLE BY THE ASSESSEE HAD REMAINED UNEXPLAINED ; (III) . THAT CERTAIN OTHER BILLS, VIZ. BILL OF RS.5,31,893/ - FO R 08.05.2008; BILL OF RS.5,31,893/ - FOR 13.05.2008; AND BILL OF RS.5,31,894/ - FOR 20.05.2008, WHICH INCLUDED DINNER, EQUIPMENT RENTAL, TOBACCO, ETC, BUT THEY TOO DID NOT INDICATE THE PURPOSE AND THE PERSONS ATTENDING THE SAID OCCASION ; (IV) . BILL OF RS.4, 51,900/ - WHICH WAS FOR 400 SNACKS, SOFT DRINKS, TRANSPORTATION, EQUIPMENT RENTAL, WHICH DID BEAR A DISCREPANCY, AS AGAINST THE SAID DATE THE AMOUNT MENTIONED IN THE SUBMISSIONS BY THE ASSESSEE WAS RS.6,83,071/ - WHICH COULD NOT BE RECONCILED ; AND (V) BILL O F RS.5,31,893/ - FOR 25.05.2008 WHICH WAS STATED TO BE OF RS.6,69,698/ - IN THE SUBMISSIONS WHICH TOO COULD NOT BE RECONCILED BY THE ASSESSEE . WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE OBSERVATIONS OF THE CIT(A) THAT EITHER THE ASSESSEE P A G E | 85 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HAD F AILED TO RELATE THE AFORESAID BILLS PERTAINING TO HOSTING OF DINNERS, TEA PARTIES ETC., WITH THE PURPOSE FOR WHICH THE SAME HAD BEEN INCURRED, OR THE SAME SUFFERED FROM CERTAIN DISCREPANCIES AS REGARDS THE AMOUNTS MENTIONED THEREIN IN COMPARISON TO THOSE S TATED BY THE ASSESSEE DURING THE COURSE OF THE PROCEEDINGS AND HAD NOT BEEN RECONCILED, THEREFORE, IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF THE A.O FOR VERIFYING AS TO WHETHER THE AFORESAID BILLS, VIZ. (I). BILL OF RS.5,31,573/ - , DATED 30.04.2008 ; (II) BILL OF RS.5,31,893/ - , DATED 08.05,2008 ; (III). BILL OF RS.5,31,893/ - , DATED 13.05.2008 ; (IV). BILL OF RS.5,31,894/ - , DATED 20,05.2008 ; (V). BILL OF RS.4,51,900/ - ;AND (VI) AND BILL OF RS.5,31,893/ - , DATED 25.05.2008 PERTAINED TO EXPENSES INCURRED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS, OR NOT. WE MAY HOWEVER CLARIFY THAT THE A.O SHALL WHILE RE - ADJUDICATING THE AFORESAID ISSUE KEEP IN VIEW OUR AFORESAID OBSERVATIONS. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS RESTORE THE MATTER TO THE FILE OF THE A.O FOR CARRYING OUT NECESSARY VERIFICATIONS IN RESPECT OF THE LIMITED ISSUE FOR WHICH THE MATTER HAD BEEN RESTORED TO HIS FILE. NEEDLESS TO SAY , THE A.O SHALL WHILE RE - ADJUDICATING THE AFORESAID ISSUE AFFORD SUFFICIENT OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE, WHO SHALL REMAIN AT A LIBERTY TO FURNISH MATERIAL AND DOCUMENTS TO SUBSTANTIATE HIS CLAIM. THE GROUND S OF APPEAL NO. 9 & 10 ARE ALLOWED FOR STATISTICAL PURPOSE IN TERMS OF OUR AFORESAID PURPOSES. 61. WE SHALL NOW TAKE UP THE DISALLOW ANCE OF A SUM OF RS.95,63,132/ - (I.E 25% OF RS.3,82,52,527/ - ) BEING EXPENDITURE INCURRED IN CONNECTION WITH AIRFARE EXPENSES, TRAVELLING EXPENSE AD VEHICLE HIRE CHARGES. WE FIND THAT THE A.O HOLDING A CONVICTION THAT AS THE ASSESSEE HAD INCURRED EXPENSES O N FOOD AND STAY OF VIPS AND CELEBRITIES, THEREFORE, THE AIRFARE EXPENSES OF RS.3,28,96,505/ - , TRAVELLING EXPENSES OF RS.12,66,462/ - AND VEHICLE HIRE CHARGES OF P A G E | 86 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 RS.40,89,560/ - MUST ALSO BE INCLUDING EXPENSES INCURRED ON VIPS AND CELEBRITIES . THE A.O ON THE BASIS OF HIS AFORESAID CONVICTION THUS CARRIED OUT AN ADHOC DISALLOWANCE OF THE EXPENSES, VIZ. (I). RS.82,25,126/ - OUT OF AIRFARE EXPENSES ; (II). RS.3,16,616/ - OUT OF TRAVELLING EXPENSES ; AND (II). RS.10,22,390/ - OUT OF VEHICLE HIRE CHARGES, AS A RESULT W HEREOF A TOTAL DISALLOWANCE OF RS.95,63,132/ - WAS MADE BY HIM. WE FIND THAT THE ASSESSEE HAD CLAIMED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS DOCUMENTARY EVIDENCE SUPPORTING THE AFORESAID EXPENSES INCURRED BY IT WERE FURNISHED WITH THE A.O . HOWEVER, THE CIT(A) WHILE UPHOLDING THE ADHOC DISALLOWANCE MADE BY THE A.O OBSERVED THAT THE ASSESSEE HAD FAILED TO PRODUCE BEFORE HIM ANY EVIDENCE, VIZ. AIR TICKETS, DETAILS OF VEHICLE S , NAME OF SERVICE PROVIDERS, PERSONS UTILIZING THE SERVICES AND THEIR NEXUS WITH THE BUSINESS OF TH E ASSESSEE. WE FIND THAT A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT AN ADHOC DISALLOWANCE OF THE AFOREMENTIONED EXPENSES WAS CARRIED OUT BY THE A.O NOT FOR THE REASON THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINE NESS AND VERACITY OF THE EXPENSES, BUT RATHER, FOR THE REASON THAT AS PER HIM NOW WHEN THE ASSESSEE HAD INCURRED EXPENSES TOWARDS FOOD , BOARDING AND LODGING FOR THE ACTORS, CELEBRITIES, VIP S ETC., THEREFORE, IT WOULD ALSO HAVE INCURRED AIRFARE EXPENSES, T RAVELLING EXPENSES AND VEHICLE CHARGES IN RESPECT OF THE SAID PERSONS. WE FIND THAT THE CIT(A) OBSERVING THAT THE ASSESSEE HAD NOT PLACED BEFORE HIM ANY EVIDENCE, E.G AIR TICKETS, DETAILS OF VEHICLE, NAME OF SERVICE PROVIDERS, PERSONS UTILIZING THESE SERVI CES AND THEIR NEXUS WITH BUSINESS ETC, THEREFORE, CONCLUDED THAT THE POSSIBILITY OF THE EXPENDITURE BEING PARTLY FOR NON BUSINESS PURPOSES COULD NOT BE RULED OUT . THUS THE CIT(A) ON THE AFORE SAID REASONING HAD UPHELD THE DISALLOWANCE OF THE AFORESAID EXPENDITURE MADE BY THE A.O. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF TH E CONSIDERED VIEW THAT AS OBSERVED BY US P A G E | 87 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 HEREINABOVE , TH E EXPENSES INCURRED BY THE ASSESSEE ON THE ACTORS, CELEBRITIES AND VIPS IN ORDER TO FACILITATE MARKING THEIR PRESENCE AT THE MATCHES, WHICH SUBSTANTIALLY CONTRIBUTE D TOWARDS GENERATION OF HIGHER REVENUE IN THE HANDS OF THE ASSESSEE BY WAY OF PUSHING TICKETING SALES AND HIGHER SPONSORSHIP RECEIPTS, CAN SAFELY BE HELD TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE . WE THUS ARE OF THE VIEW THAT EXPENSES INCURRED TOWARDS AIRFARE EXPENSES, TRAVELLING EXPENSE AND VEHICLE HIRE CHARGES BY THE ASSESSE E IN RESPECT OF THE SUCH PERSONS CANNOT BE DIVORCED FROM THE BU SINESS OF THE ASSESSEE , AND HAS TO BE HELD AS AN EXPENDITURE INCURRED BY THE ASSESSEE IN THE COURSE OF HIS BUSINESS OF CRICKETING . WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE OBSERVATIONS OF THE A.O WHO HAD CARRIED OUT AN ADHOC DISALLOWANCE OF 25% OF THE EXPENSES, FOR THE REASON THAT THE ASSESSEE MUST HAD INCURRED THE EXPENSES ON SUCH PER S ONS, VIZ. ACTORS, CELEBRITIES, VIPS, WHICH COULD NOT BE HELD AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS . WE ARE OF THE C ONSIDERED VIEW THAT IF THE A.O HAD THAT STRONG A CONVICTION THAT THE AFORESAID EXPENSES INCURRED ON THE AFORESAID PERSONS WERE IN NO WAY IN CONTEXT OF THE BUSINESS OF THE ASSESSEE , OR WERE IN THE NATURE OF ITS PERSONAL EXPENSE, THEN HE REMAINED UNDER A STATUTORY OBLIGATION TO HAVE SPECIFICALLY DEMONSTRATED THE SAME BY REFERRING TO THE EXPENSES BOOKED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. HOWEVER, WE FIND THAT THE CIT(A) HAD TAKEN A SHIFT FOR SUSTAINING THE SAID DISALLOWANCE AND HAD OBSERVED THAT AS THE ASSESSEE HAD NOT PRODUCED BEFORE HIM ANY EVIDENCE , VIZ. AIR TICKETS, DETAILS OF VEHICLE S , NAME OF SERVICE PROVIDERS, PERSONS UTILIZING THESE SERVICES AND THEIR NEXUS WITH THE BUSINESS ETC . , THEREFORE, THE POSSIBILITY OF THE EXPENDITURE PARTLY HAVING BE EN FOR NON BUSINESS PURPOSES COULD NOT BE RULED OUT. WE FURTHER FIND THAT THE ASSESSEE ALSO HAD AVERRED BEFORE US THAT IT WAS NOT GIVEN AN P A G E | 88 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 OPPORTUNITY OF BEING HEARD BY THE A.O WHILE MAKING AN ADHOC DISALLOWANCE OF THE AFORESAID EXPENSES. WE HAVE GIVEN A T HOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US, AND AS OBSERVED BY US HEREINABOVE, ARE OF THE CONSIDERED VIEW THAT THE OBSERVATION S OF THE A.O THAT AN ADHOC DISALLOWANCE OF AIRFARE EXPENSES, TRAVELLING EXPENSES AND VEHICLE HIRING EXPENSES WAS CALLED FOR IN THE HANDS OF THE ASSESSEE FOR THE REASON THAT EXPENSES UNDER THE SAID RESPECTIVE HEADS MUST HAD BEEN INCURRED BY THE ASSESSEE IN RESPECT OF ACTORS, CELEBRITIES, AND VIPS, CANNOT BE SUSTAINED. HOWEVER, KEEPING IN VIEW THE FACT THAT AS OBSERVED BY THE CIT(A ) THAT THE ASSESSEE HAD FAILED TO PLACE BEFORE HIM ANY EVIDENCE E.G AIR TICKETS, DETAILS OF VEHICLE S , NAME OF SERVICE PROVIDERS, DETAILS OF PERSONS UTILIZING THESE SERVICES AND THEIR NEXUS WITH BUSINESS ETC, THEREFORE, AS PER HIM THE POSSIBILITY OF THE EXPENDITURE PARTLY HAVING BEEN INCURRED FOR NON BUSINESS PURPOSES COULD NOT BE RULED OUT, AND THE FACT THAT THE ASSESSEE TOO HAD SUBMITTED BEFORE US THAT SUFFICIENT OPPORTUNITY WAS NOT ALLOWED TO IT AT THE TIME WHEN SUCH ADHOC DISALL OWANCE OF EXPENSES WAS MADE, THEREFORE, IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF THE A.O FOR MAKING NECESSARY VERIFICATIONS ON THE BASIS OF DOCUMENTARY EVIDENCE AS REGARDS THE ENTITLEMENT OF THE ASSESSEE TOWARDS THE CLAIM OF THE AFORESAID EXPENSES . WE HEREIN DIRECT THAT THE A.O SHALL IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS MAKE NECESSARY VERIFICATION S AS REGARDS THE AFORESAID CLAIM OF EXPENSE OF THE ASSESSEE BOOKED UNDER THE SAID RESPECTIVE HEADS, VIZ. AIRFARE EXPENSES, TRAVELLING EXPENSES AN D VEHICLE HIRING CHARGES. NEEDLES TO SAY, THE A.O SHALL DURING THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD SUFFICIENT OPPORTUNITY OF BEING OF HEARD TO THE ASSESSEE, WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS CLAIM BY PLACING ON RECORD FRESH DOCUM ENTARY EVIDENCE. HOWEVER, WE MAY HEREIN CLARIFY THAT IN CASE THE A.O IN THE COURSE OF THE SET ASIDE PROCEEDINGS IS NOT SATISFIED WITH P A G E | 89 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 THE DOCUMENTARY EVIDENCE AND SUBMISSIONS OF THE ASSESSEE IN SUPPORT OF ITS CLAIM OF THE AFORESAID EXPENSES , THEN HE THOUGH WOULD BE AT A LIBERTY TO DISALLOW THE SAME, BUT HOWEVER, THE SAID DISALLOWANCE SHALL NOT EXCEED THAT MADE BY HIM TOWARDS THE RESPECTIVE EXPENSES WHILE PASSING THE ORIGINAL ASSESSMENT ORDER. THE GROUND OF APPEAL NO. 11 TO 13 ARE ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 62. WE NOW ADVERT TO THE DISALLOWANCE OF SECURITY CHARGES EXPENSES OF RS.1,08,000/ - WHICH WERE INCURRED BY THE ASSESSEE FOR PROVIDING SECURITY TO VIPS AND CELEBRITIES. WE FIND THAT THE A.O OBSERVED THAT THE ASSESSEE HAD CLAIMED SECURITY CHARGES EXPENDITURE OF RS.60,700/ - PAID TO SCORPIONS AND RS.48,000/ - PAID TO ACE SECURITY FOR SECURITY CHARGES INCURRED FOR VIPS AND CELEBRITIES. WE FIND THAT THE A.O BEING OF THE VIEW THAT THE SAI D EXPENSES WERE INCURRED BY THE ASSESSEE FOR PROVIDING SECURITY TO MR. SHAH RUKH KHAN AND VIPS, CELEBRITIES ETC DURING THE MATCHES AT EDEN GARDEN, THEREIN BEING OF THE VIEW THAT AS THE SAID EXPENSE S WERE IN THE NATURE OF PERSONAL EXPENDITURE AND COULD NOT BE HELD TO HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, THEREFORE, DISALLOWED THE CLAIM OF RS.1,08,700/ - RAISED BY THE ASSESSEE. WE FIND THAT THE CIT(A) CONCURRED WITH THE A.O AND UPHELD THE AFORESAID DISALLOWANCE. WE HAVE GIVEN A TH OUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF THE CONSIDERED VIEW THAT AS AVERRED BY THE LD. A.R BEFORE US, MR. SHAH RUKH KHAN WAS NOT ONLY A CELEBRITY BUT ALSO THE DIRECTOR OF THE HOLDING COMPANY, VIZ. RED CHILLIES ENTERTAINMENT PVT. LTD. WE AR E OF THE CONSIDERED VIEW THAT NOW WHEN THERE REMAINS NO DOUBT IN OUR MIND THAT THE VISITS OF THE ACTORS, CELEBRITIES AND VIPS WAS A PART OF THE STRATEGIC PLANNING BY THE ASSESSEE FOR GENERATING HIGHER REVENUES, THEREFORE, WE ADVERT TO THE ISSUE KEEPING IN VIEW THE FACT THAT THE P A G E | 90 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 PRESENCE OF THE AFORESAID CELEBRITIES AT THE MATCHES STAGED BY THE ASSESSEE WAS IN THE VERY INTEREST OF THE BUSINESS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT WHEN ACTORS, CELEBRITIES AND VIPS WOULD BE INVITED BY THE ASSES SEE , THE SAME WOULD KEEPING IN VIEW THEIR POPULARITY AND TO AVOID ANY UNTOWARD INCIDENT CARRY HEAVY BURDEN AND OBLIGATION OF PROVIDING NECESSARY SECURITY COVER TO THEM. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE COULD NOT HAVE SHIRKED FROM ITS AFORESAID RESPONSIBILITY, AND IF HE WAS FORESEEING AND ANTICIPATING HIGHER GENERATION OF REVENUES BY INCREASE IN TICKETING SALES AND HIGHER RECEIPTS OF SPONSORSHIP FEES, THEREFORE, AT THE SAME TIME HE REMAINED UNDER A N OBLIGATION OF PROVIDING THE REQUISITE SECURITY COVER TO SUCH ACTORS, CELEBRITIES AND VIPS. WE ARE UNABLE TO COMPREHEND THE OBSERVATION OF THE CIT(A) WHO HAD CONCLUDED THAT NOW WHEN THE POLICE WAS TAKING CARE OF THE SECURITY ARRANGEMENTS IN THE STADIUM, THEREFORE, IT WAS THE RESPONSIBILITY OF THE S TATE OF GOVERNMENT TO HAVE PROVIDED THE NECESSARY SECURITY ARRANGEMENTS TO THE AFORESAID PERSONS. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID OBSERVATIONS OF THE CIT(A). WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN IT STANDS ESTAB LISH ED THAT THE VISITS OF THE ACTORS, CELEBRITIES AND VIPS TO THE MATCHES STAGED BY THE ASSESSEE WAS A PART OF THE BUSINESS STRATEGY OF THE ASSESSEE TO GENERATE MORE REVENUES, THEREFORE, WHAT QUALITY OF SECURITY COVER WAS REQUIRED TO BE PROVIDED TO THE AFO RESAID PERSONS REMAINED WITHIN THE EXCLUSIVE REALM OF THE WISDOM OF THE ASSESSEE AND THE A.O COULD NOT GUIDE HIM AS TO THE NATURE OF THE SECURITY COVER THAT SHOULD HAVE BEEN PROVIDED. WE THUS BEING OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE OF RS.1,08,700/ - INCURRED FOR SECURITY FOR VIPS AND CELEBRITIES WHO ATTENDED THE MATCHES AT EDEN GARDEN WAS WELL IN ORDER, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) SUSTAINING THE AFORESAID DISALLOWANCE. THE GROUND OF APPEAL NO. 14 IS ALLOWED. P A G E | 91 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 63. WE NOW TAKE UP THE CLAIM OF THE ASSESSEE AS REGARDS THE DISALLOWANCE OF EXPENSE OF RS.8,85,600/ - . WE FIND THAT THE ASSESSEE HAD MADE PAYMENTS AMOUNTING TO RS.8,85,600/ - TO MR. MANISH MALHOTRA IN CONNECTION WITH PARTICIPATION IN LAKME FASHION WEEK AND WILLS LIFEST YLE INDIA FASHION WEEK, BOTH OF WHICH EVENTS WERE HELD IN MARCH, 2009. WE FIND THAT INTERESTINGLY THE ASSESSEE HAD BEEN TAKING SHIFTING STANDS AS REGARDS THE NATURE OF THE AFORESAID EXPENSE. IT WAS AVERRED BY THE ASSESSEE THAT MR. MANISH MALHOTRA HAD ALRE ADY PAID AN AMOUNT OF RS.8,85,600/ - FOR PARTICIPATING IN BOTH OF THE AFORESAID EVENTS, WHICH THEREAFTER WAS REIMBURSED TO HIM IN MARCH, 2009. WE FIND THAT THE ASSESSEE HAD SUBMITTED BEFORE THE CIT(A) THAT THE UNDERLYING PURPOSE FOR PARTICIPATION IN THE FASHION SHOW WAS TO ADVERTISE AND PROMOTE THE KKR TEAM , AND AS BOTH THE FASHION SHOWS WERE ORGANISED IN MARCH, 2009, THEREFORE, THEY WERE RECOGNIZED AS AN EXPENSE FOR THE YEAR UNDER CONSIDERATION, VIZ. AY 2009 - 10. WE FIND THAT THE ASSESSEE HAD ALSO SUBMITT ED BEFORE THE LOWER AUTHORITIES THAT AS ALL THE REQUISITE CONDITIONS CONTEMPLATED IN SEC.37(1) WERE SATISFIED BY HIM, THEREFORE, ITS CLAIM OF EXPENSE INCURRED IN THE COURSE OF ITS BUSINESS WAS WELL IN ORDER. WE FIND THAT THE ASSESSEE IN CONTRADICTION OF IT S CLAIM THAT WAS RAISED BEFORE THE A.O THAT THE EXPENDITURE OF RS.8,85,600/ - WAS INCURRED FOR DESIGNING AND EXHIBITION OF PLAYER OUTFITS, HAD HOWEVER AVERRED BEFORE THE CIT(A) THAT THE EXPENDITURE WAS INCURRED TOWARDS ADVERTISEMENT OF THE KKR TEAM. WE FIND THAT THE CIT(A) BEING OF THE VIEW THAT NEITHER THE NATURE OF THE EXPENDITURE WAS CLEARLY BROUGHT OUT BY THE ASSESSEE, NOR THE FACT AS TO HOW THE EXPENDITURE INCURRED IN MARCH, 2009 FOR ADVERTISEMENT/ PUBLICITY WAS GOING TO CONTRIBUTE TO THE REVENUE OF THE ASSESSEE FOR EVENTS WHICH HAD ALREADY BEEN HELD IN APRIL/MAY, 2008 COULD BE EXPLAINED BY THE ASSESSEE, THEREFORE, UPHELD THE DISALLOWANCE OF RS.8,85,600/ - . P A G E | 92 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 64. WE FIND THAT THE LD. A.R HAD AVERRED BEFORE US THAT THE PAYMENT WAS MADE FOR THE PURPOSE OF DE SIGN AND OUTFITS OF KKR TEAMS FOR THE IPL SEASON - 2 HELD IN APRIL - MAY 2009 AND NOT FOR IPL SEASON - 1 HELD IN APRIL - MAY, 2008 . IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE WAS FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING, THEREFORE, THE EXPENSE WAS R ECOGNIZED AND CLAIMED AS A DEDUCTION IN F.Y: 2008 - 09. THE LD. A.R HAD SUBMITTED BEFORE US THAT FOR ALLOWABILITY OF AN EXPENDITURE IN A PARTICULAR YEAR, IT WAS NOT NECESSARY THAT THE SAME MUST BE ONE REQUIRED FOR THE PURPOSES OF CARRYING ON THE BUSINESS OR EARNING OF PROFITS OF THAT YEAR . THE LD. A.R IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION HAD RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MYSORE SPINNING AND MANUFACTURING CO. LTD. VS. CIT ( 1966) 61 ITR 572 (BOM). 65. WE H AVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND FIND THAT THE GENUINENESS AND VERACITY OF THE PAYMENT OF RS.8,85,600/ - BY THE ASSESSEE TO MR. MANISH MALHOTRA HAD NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. WE FIND THAT THE CLAIM OF THE ASSES SEE WAS PRIMARILY REJECTED BY THE LOWER AUTHORITIES FOR THE REASON THAT AS THE PAYMENT WAS MADE IN THE MONTH OF MARCH, 2009, THEREFORE, IT WAS BEYOND COMPREHENSION AS TO HOW THE SAME WAS RELATABLE AND WOULD GO TO CONTRIBUTE TO THE REVENUE OF THE ASSESSEE F OR EVENTS OF IPL SEASON - 1, WHICH HAD ALREADY CONCLUDED IN APRIL/MAY, 2008. WE FIND THAT THERE REMAINS NO OCCASION TO GO INTO THE INTRICACIES OF THE ISSUE AS TO WHETHER THE AFORESAID EXPENSE WAS IN CONTEXT OF THE OUTFIT OF THE PLAYERS FOR IPL SEASON - 1 OR IP L SEASON - 2, AS THE LD. A.R HAD FAIRLY CONCEDED BEFORE US THAT THE SAID PAYMENT WAS MADE FOR THE PURPOSE OF DESIGN AND OUTFITS OF KKR TEAMS FOR THE IPL SEASON - 2 , MATCHES WHICH WERE HELD IN APRIL - MAY 2009, AND NOT FOR THE IPL SEASON - 1 MATCHES THAT HAD ALREADY CONCLUDED IN APRIL - MAY, 2008. WE P A G E | 93 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. A.R THAT AS THE ASSESSEE WAS FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING, THEREFORE, THE EXPENSE WHICH WAS INCURRED DURING THE YEAR UNDER CONSIDERATION WAS RECO GNIZED AND CLAIMED AS A DEDUCTION IN F.Y: 2008 - 09. WE MAY AT THIS STAGE OBSERVE THAT THE PLAYING OF THE MATCHES BY THE LEAGUE HAD BEEN SPREAD OVER DIFFERENT CALENDAR YEARS FALLING BETWEEN 2008 - 17 (INCLUSIVE), THEREFORE, THE PERIOD OF FIRST THREE MONTHS OF IPL SEASON - 2 (JANUARY, 2009 TO MARCH, 2009) FELL WITHIN THE SWEEP OF THE YEAR UNDER CONSIDERATION, VIZ. F.Y 2009 - 10. WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF EXPENSES BY AN ASSESSEE IN A PARTICULAR YEAR CANNOT BE PUT IN A STRAIT JACKET, AND THE ALLO WABILITY OF THE SAME BE MADE ABSOLUTELY DEPENDENT SUBJECT TO THE CONDITION THAT THE SAME MUST HAVE BEEN INCURRED FOR THE PURPOSE OF CARRYING ON THE BUSINESS OR EARNING OF PROFITS OF THAT YEAR. WE ARE IN AGREEMENT WITH THE AFORESAID CONTENTION OF THE LD. A. R AND FIND THAT THE SAME IS COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MYSORE SPINNING AND MANUFACTURING CO. LTD. VS. CIT ( 1966) 61 ITR 572 (BOM) , WHICH THEREAFTER HAD BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. MYSORE SPINNING AND MANUFACTURING CO. LTD. (1970) 78 ITR 4 (SC) AND THE APPEAL OF THE REVENUE WAS DISMISSED. THE HONBLE HIGH COURT HAD IN THE ABOVEMENTIONED CASE OBSERVED AS UNDER: WITH RESPECT, WE FIND IT DIFFICULT TO ACCEPT THE AFORESAID CONTENTIONS OF MR. JOSHI. WE DO NOT FIND ANY LIMITATION IN THE LANGUAGE OF CL. (XV) TO RESTRICT THE EXPENDITURE MENTIONED THEREIN TO AN EXPENDITURE RELATING TO THE CARRYING ON OF THE BUSINESS IN T HAT YEAR. ALL THAT IS SAID IS, IT MUST BE AN EXPENDITURE INCURRED IN THAT YEAR AND IT MUST BE AN AMOUNT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THE LIMITATIONS MENTIONED IN THIS CLAUSE ARE, IT SHOULD NOT BE AN EXPEN DITURE WHICH IS COVERED BY OR WHICH FALLS UNDER CLS. (I) TO (XIV) OF SUB - S. (2) OF S. 10 AND IT SHOULD NOT BE AN EXPENDITURE OF A CAPITAL NATURE OR PERSONAL EXPENSES OF THE ASSESSEE. THERE IS NO FURTHER LIMITATION THAT THE EXPENDITURE MUST NECESSARILY BE A N EXPENDITURE REQUIRED FOR THE PURPOSES OF CARRYING ON THE BUSINESS OF THAT YEAR. THERE WOULD BE AMPLE AUTHORITY TO SHOW THAT AN EXPENDITURE INCURRED TO MEET P A G E | 94 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 ANY LIABILITY OF THE BUSINESS ACCRUING IN THAT YEAR IS AN EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSES OF THE BUSINESS AND THEREFORE ALLOWABLE UNDER S. 10(2)(XV) . WE THUS BEING OF THE CONSIDERED VIEW THAT AS THE EXPENDITURE UNDER CONSIDERATION WAS INCURRED BY THE ASSESSEE TO MEET THE AFORESAID LIABILITY OF THE BUSINESS WHICH HAD ACCRUE D DURING THE YEAR, THEREFORE, THE AMOUNT OF RS.8,85,600/ - WAS RIGHTLY CLAIMED AS AN EXPENDITURE WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION . WE THUS SET ASIDE THE ORDER OF THE CIT(A AND DELETE THE ADDITION/DISALLOWANCE OF R S. 8,85,600/ - . THE GROUND OF APPEAL NO.15 IS ALLOWED. 66. WE NOW ADVERT TO THE DISALLOWANCE OF SUM OF RS.8,49,305/ - CLAIMED BY THE ASSESSEE IN CONNECTION WITH WEBSITE DESIGN CHARGES DURING THE YEAR UNDER CONSIDERATION. WE FIND THAT THE ASSESSEE WHO HAD I NCURRED WEBSITE DESIGN CHARGES OF RS.16,98,609/ - , HAD IN ITS RETURN OF INCOME CLAIMED 50% OF THE TOTAL EXPENDITURE I.E RS.8,49,305/ - . HOWEVER, THE ASSESSEE HAD AVERRED BEFORE THE LOWER AUTHORITIES THAT AS THE CONCEPT OF DEFERRED REVENUE EXPENDITURE WAS NOT RECOGNIZED UNDER THE INCOME TAX PROVISIONS, THEREFORE, THE AFORESAID WEBSITE DESIGN EXPENSES INCURRED NOT FOR THE PURPOSE OF IMPROVISATION OF A FIXED ASSET, BUT TO FACILITATE ITS BUSINESS OPERATION WERE THUS ALLOWABLE IN TOTO DURING THE YEAR UNDER CONSIDE RATION, VIZ. AY 2009 - 10, THEREFORE, REQUESTED THAT THE DEDUCTION OF THE BALANCE 50% OF THE DEFERRED WEBSITE EXPENSE MAY ALSO BE ALLOWED DURING THE YEAR. HOWEVER, THE A.O EVEN DISALLOWED THE CLAIM OF RS.8,49,305/ - RAISED BY THE ASSESSEE IN ITS RETURN OF INCOME BY OBSERVING THAT THE SAME WAS IN THE NATURE OF A CAPITAL EXPENDITURE. 67. WE FIND THAT THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE INCURRED TOWARDS WEBSITE DESIGN CHARGES IS NOT IN THE NATURE OF A P A G E | 95 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 CAPITAL EXPENDITURE STANDS SETTLED BY THE JUDGMENT OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. INDIAN VISIT COM. PVT. LTD. (2009) 176 TAXMAN 164 (DEL) AS WELL AS THE ORDER OF A COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF RADIAL MARKETING PVT. LTD. VS. ITO [ITA NO. 3868/M UM/2008] WHEREIN THE WEBSITE DESIGN CHARGES HAD BEEN HELD IN THE AFORESAID JUDICIAL PRONOUNCEMENTS AS A REVENUE EXPENDITURE. WE FURTHER FIND THAT AS AVERRED BY THE LD. A.R , THE CIT(A) IN THE ASSESSES OWN CASE FOR THE SUBSEQUENT YEARS, VIZ. AY 2010 - 11 TO A Y 2012 - 13 HAD HELD THE WEB DESIGNING CHARGES AS A REVENUE EXPENDITURE. WE ARE OF THE CONSIDERED THAT A S CLAIMED BY THE LD. A.R BEFORE US THAT THE WEBSITE DESIGN CHARGES HAD BEEN HELD BY THE CIT(A) IN THE SUBSEQUENT YEARS, VIZ. AY 2010 - 11 TO AY 2012 - 13 AS A REVENUE EXPENDITURE IN THE ASSESSE S OWN CASE, THEREFORE, IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF THE A.O TO MAKE NECESSARY VERIFICATIONS AS REGARDS THE FACTUAL POSITION AND READJUDICATE THE ENTITLEMENT OF THE ASSESSEE AS REGARDS THE WEB DESIGN ING CHARGES, KEEPING IN VIEW THE AFORESAID JUDICIAL PRONOUNCEMENTS. THE GROUND OF APPEAL NO. 16 AND 17 IS ALLOWED FOR STATISTICAL PURPOSES. 68. THE GROUND OF APPEAL NO. 1 AND GROUND OF APPEAL NO. 18 BEING GENERAL IN NATURE ARE DISMISSED AS NOT PRESSED 69. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCE D IN THE OPEN COURT ON 29 /12/2017. SD/ - SD/ - (G.S P ANNU ) ( RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER P A G E | 96 ITA NO. 1307 /MUM/201 3 AY: 20 09 - 1 0 KNIGHT RIDERS SPORTS PRIVATE LIMITED VS. ACIT - CENTRAL CIRCLE - 29 MUMBAI ; 29 .1 2 .2017 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI