UTN Cable Communications Private Limited, Bangalore V. JCIT, Bangalore

ITA 1427/BANG/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8738 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

ITA.1427/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1427/BANG/2013 (ASSESSMENT YEAR : 2008-09) UTN CABLE COMMUNICATIONS PVT. LTD, NO.288, II FLOOR, CHINNAPPA LAYOUT, KAMMANAHALLI, BENGALURU 560 084 .. APPELLANT PAN : AAACU4903H V. JOINT COMMISSIONER OF INCOME-TAX, CIRCLE -7(2), BANGALORE .. RESPONDENT ASSESSEE BY : MS. TANMAYEE RAJKUMAR, ADVOCATE REVENUE BY : SHRI. CHANDRASEKAR, JCIT HEARD ON : 17.12.2015 PRONOUNCED ON : 06.01.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT HAS TAKEN ALTO GETHER SEVEN GROUNDS OF WHICH GROUNDS 6 AND 7 ARE GENERAL NEEDING NO ADJ UDICATION. GROUND 4 IS RELIEF SOUGHT BY THE ASSESSEE. VIDE GROUNDS 1 TO 3 IT ASSAILS THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DIFFERENC E BETWEEN CONFIRMATION RECEIVED FROM CERTAIN CREDITORS AND TH E BALANCE AS APPEARING ITA.1427/BANG/2013 PAGE - 2 IN THE BOOKS OF THE ASSESSEE. THESE WERE DISALLOWA NCE OF RS.14,343/- BEING THE DIFFERENCE RELATING TO M/S. CHANNEL PLUS APPEAR ING AT GROUND.1. DISALLOWANCE OF RS.11,77,732/- IN RESPECT OF ZEE TU RNER LTD APPEARING AT GROUND 2 AND DISALLOWANCE OF RS.15,05,912/- IN RESP ECT OF M/S. USHODAYA ENTERPRISES (ETV) APPEARING AT GROUND.3. 02. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT HE WAS NOT PRESSING GROUND 1 CONSIDERING INSIGNIFICANT AMOUNT INVOLVED. ACCORDINGLY, GROUND 1 IS TREATED AS NOT PRESSED. 03. FACTS RELATING TO GROUNDS 2 AND 3 CAN BE EXTRAC TED TOGETHER. ASSESSEE, A DISTRIBUTOR OF CHANNELS FOR CABLE NET W ORK OPERATORS IS A SUBSIDIARY OF AN M/S. HATHWAY CABLE & DATACOM LTD ( HCDL IN SHORT). AS A CABLE SYSTEM OPERATOR IT TRANSMITTED SIGNALS T O LOCAL CABLE OPERATORS. VARIOUS PAY CHANNELS HAD CONTRACTED WITH HCDL FOR D ISTRIBUTION OF THEIR CHANNELS. ASSESSEE HAD BILLED THE LOCAL CABLE OPER ATORS AND WAS IN TURN PAYING THE VARIOUS CHANNEL COMPANIES. HCDL, ASSESS EES PARENT COMPANY WAS BEING BILLED BY THE CHANNELS. HCDL WAS A DISTR IBUTOR OF THESE SIGNALS TO VARIOUS CONCERNS COMING UNDER IT OF WHICH ASSESS EE WAS ONE. SOME OF THE CHANNEL COMPANIES DIRECTLY BILLED HCDL WHEREAS SOME OTHERS BILLED BOTH ASSESSEE AS WELL AS HCDL. AS PER THE BOOKS OF ACCOUNT OF THE ITA.1427/BANG/2013 PAGE - 3 ASSESSEE A SUM OF RS.45,69,463/- WAS SHOWN AS OUTST ANDING AGAINST ONE M/S. CHANNEL PLUS; RS.13,00,164/- WAS SHOWN AS DUE TO M/S ZEE TURNER AND RS.15,05,912/- WAS SHOWN AS DUE TO M/S. USHODAY A ENTERPRISES. AO ISSUED NOTICE U/S.133(6) OF THE ACT TO THESE PAY CH ANNELS. ZEE TURNER REPLIED THAT THE BALANCE OUTSTANDING AS DUE FROM TH E ASSESSEE AS ON 31.03.2008 IN THEIR BOOKS WAS ONLY RS.1,22,432/-. M/S. USHODAYA ENTERPRISES REPLIED THAT NOTHING WHATSOEVER WAS DUE FROM THE ASSESSEE TO IT. WHEN EXPLANATIONS FROM THE ASSESSEE WERE SOUGHT ASS ESSEE SUBMITTED A LETTER FROM HCDL. IN THE SAID LETTER HCDL STATED T HAT A SUM OF RS.13,00,164/- WAS DUE FROM THEM TO M/S. ZEE TURNER ON ACCOUNT OF SIGNALS RECEIVED BY THEM AND DISTRIBUTED THROUGH TH E ASSESSEE. ASSESSEE ALSO PRODUCED A LETTER FROM HCDL MENTIONING THE AMO UNT DUE TO USHODAYA ENTERPRISES AS RS.15,05,912/-. HOWEVER, AO REFUSED TO ACCEPT THESE LETTERS. ACCORDING TO HIM IN RESPECT OF AMOUNTS SH OWN AS DUE TO ZEE TURNER, THE CREDITOR HAD SHOWN THE BALANCE AS RS.1, 22,432/-, WHEREAS HCDL HAD CONFIRMED A BALANCE OF RS.13,00,164/-. AC CORDING TO HIM THERE WAS A DIFFERENCE OF RS.11,77,732 /-. IN SO FAR AS M/S. USODAYA ENTERPRISES WAS CONCERNED, AO NOTED THAT THE CONFIRMATION FROM HCDL COULD NOT BE BELIEVED. HE CONSIDERED THE WHOLE OF THE AMOUNT AS UNEXPLAINED CASH ITA.1427/BANG/2013 PAGE - 4 CREDIT. ADDITION WERE MADE OF BOTH AMOUNTS OF RS. 11,77,732/- AND RS.15,05,912/-. 04. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE C IT (A). SUBMISSION OF THE ASSESSEE WAS THAT IT WAS A SUBSID IARY OF HCDL AND IT HAD ENTERED INTO AGREEMENT ALONG WITH OTHER SUBSIDIARIE S OF HCDL. AS PER THE ASSESSEE, ZEE TURNER HAD RAISED A PART OF THE BILL ON HCDL AND PART OF THE BILL ON THE ASSESSEE. ACCORDING TO THE ASSESSEE, I T WAS OBLIGED TO PAY ZEE TURNOVER FOR THE SIGNALS RECEIVED FROM THEM. CONTE NTION OF THE ASSESSEE WAS THAT THE AMOUNTS WERE DUE ON BILLS ROUTED THROU GH ITS HOLDING COMPANIES. HOWEVER THE CIT(A) DID NOT ACCEPT THESE CONTENTIONS. HE CONFIRMED THE ADDITION. 05. NOW BEFORE ME, LD. AR STRONGLY ASSAILING THE OR DERS OF LOWER AUTHORITIES SUBMITTED THAT THE BILLS RAISED BY ZEE TURNOVER ON HCDL TOTALLED TO RS.13,00,164/-. ZEE TURNER HAD CONFIRM ED RS.1,22,432/-. THE DIFFERENCE WAS CONSIDERED FOR ADDITION BY THE AO. THUS THE METHODOLOGY FOLLOWED OF ROUTING THE TRANSACTIONS THROUGH ITS PR INCIPAL WERE NEVER DOUBTED. AS PER THE LD. AR AO HAD HIMSELF TAKEN TH E DIFFERENCE BETWEEN THE BALANCE AS APPEARING IN THE BOOKS OF HCDL AND T HE BALANCE AS CONFIRMED BY ZEE TURNER FOR ADDITION. LD. AR SUBMI TTED THAT ASSESSEE WAS ITA.1427/BANG/2013 PAGE - 5 FOLLOWING AN ACCEPTED BUSINESS PRACTICE WHERE A BAS KET OF CHANNELS WERE SUPPLIED TO A SINGLE COMPANY WHO IN TURN DISTRIBUTE D TO VARIOUS AREAS THROUGH THEIR SUBSIDIARIES OR THROUGH THEIR SISTER CONCERNS. CONTRACTS WERE ENTERED BY HCDL WITH VARIOUS CHANNELS SO THAT ECONO MIES SCALE COULD BE ACHIEVED. 06. IN SO FAR M/S. USHODAYA ENTERPRISES WAS CONCERN ED, LD. AR SUBMITTED THAT THEY WERE SUPPLYING ALL ETV CHANNELS AND THE BILLS CONSIDERED BY THE CIT (A) ONLY RELATED TO ETV NON-K ANNADA CHANNEL. APRIL TO AUGUST BILLS CONSIDERED ONLY ETV TELUGU CH ANNELS WHEREAS THE BILLS FOR OTHER MONTHS CONSIDERED BOTH ETV TELUGU A S WELL AS ETV KANNADA CHANNELS. ACCORDING TO THE LD. AR THERE WE RE ABOUT 75,000/- SUBSCRIBERS FOR ETV KANNADA CHANNELS ALONE. ASSESS EE, AS PER THE LD. AR COULD NOT PRODUCE THE BILLS RAISED BY M/S. USHODAYA ENTERPRISES IN RESPECT OF ETV KANNADA CHANNEL DUE TO VARIOUS DIFFICULTIES FACED BY IT. THIS WAS THE REASON FOR RECONCILIATION DIFFERENCE. ACCORDIN G TO HER, THESE WERE GENUINE BUSINESS EXPENDITURE DISALLOWED WITHOUT ANY RHYME AND REASON. 07. PER CONTRA, LD. DR SUBMITTED THAT ASSESSEE COUL D NOT PROVE THE CREDITS APPEARING IN THE BOOKS TO THE SATISFACTION OF THE LOWER AUTHORITIES. ASSESSEE COULD NOT ADDUCE EVIDENCE IN SUPPORT OF IT S CONTENTIONS. THUS ITA.1427/BANG/2013 PAGE - 6 ACCORDING TO HIM ADDITIONS WERE RIGHTLY DONE BY THE AO AND CONFIRMED BY THE CIT (A). 08. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. ADDITION MADE BY THE AO IN RESPECT OF ZEE TURNER IS DIFFEREN CE BETWEEN THE CREDIT AS APPEARING IN THE BOOKS OF HCDL AND WHAT WAS CONFIRM ED BY ZEE TURNER. CONFIRMATION OBTAINED BY THE ASSESSEE FOR THE DUES SHOWN BY THEM AGAINST ZEE TURNER WAS THAT OF HCDL. SINCE ONLY THE DIFFER ENCE WAS ADDED BY THE AO IT IS CLEAR THAT THE METHODOLOGY OF BILLING AND PAYMENT OF THE BILLS FOLLOWED BY THE ASSESSEE, WHERE SOME BILLS WERE ROU TED THROUGH ITS PRINCIPAL HAS BEEN ACCEPTED BY NECESSARY IMPLICATIO N. NEVERTHELESS WHAT WE FIND IS THAT ASSESSEE COULD NOT SHOW BEFORE THE LOWER AUTHORITIES ON WHAT BASIS THE BILLS RAISED ON HCDL WERE BIFURCATED BY T HEM BETWEEN THEIR VARIOUS SUBSIDIARY CONCERNS SERVICING THE CABLE NET WORK OF DIFFERENT AREAS. QUESTION WHETHER APPORTIONMENT OF EXPENDITURE DONE BY HCDL WAS BASED ON AN ACCEPTABLE CRITERIA HAS NOT BEEN ADDRESSED BY ANY OF THE LOWER AUTHORITIES. IN THE CASE OF M/S. USHODAYA ENTERPRI SES THE CONTENTION OF THE ASSESSEE IS THAT THE DIFFERENCE IN RECONCILIATION W AS DUE TO NON- CONSIDERATION OF PAYMENTS EFFECTED BY IT FOR SUBSCR IBERS OF ETV KANNADA CHANNELS. IN MY OPINION THE WHOLE ISSUE REQUIRES A FRESH LOOK BY THE AO. ITA.1427/BANG/2013 PAGE - 7 ASSESSEE SHALL PRODUCE NECESSARY RECORDS BEFORE THE AO THROUGH WHICH IT CAN PROVE THAT APPORTIONMENT OF EXPENSES DONE BY HC DL BETWEEN ITS VARIOUS CABLE NETWORK SUBSIDIARIES FOR VARIOUS AREA S HAVE BEEN DONE IN A FAIR AND EQUITABLE MANNER. ASSESSEE SHALL ALSO SHO W THAT THE BALANCES APPEARING IN ITS BOOKS AND IN THE BOOKS OF HCDL ARE PROPERLY RECONCILED WITH THAT OF THE BALANCES REFLECTED IN THE BOOKS OF ZEE TURNER AND USHODAYA ENTERPRISES. I, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE QUESTION OF ADDITION U/S.69 OF THE AC T, BACK TO THE FILE OF THE AO FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. GROUNDS 2 AND 3 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DAY OF JANUARY, 2016. SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX ITA.1427/BANG/2013 PAGE - 8 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR