ACIT, CIRCLE - 16 (1), MUMBAI V. BBC WORLDWIDE MEDIA PVT. LTD., MUMBAI

ITA 158/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0478 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 10-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Business income; Depreciation; Transfer pricing; International transaction; Capital receipt
• Section: 143(3); 142(1); 115JB; 143(1); 274; 143(2); 113; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.158/Mum/2019 (A.Y:2013-14) & ITA No.2770/Mum/2019 (A.Y:2014-15) DCIT -16(1), Room No. 439, 4 th Floor, Aayakar Bhavan, MK Road, Mumbai – 400 020. Vs. M/s. BBC World Wide Media Pvt Ltd., 401, 4 th Floor, construction House A, Off linking Road, 24 th Road, Khar (West), Mumbai – 400052 PAN/GIR No. : AADCB2307F Appellant .. Respondent Appellant by : Shri.C T Mathew. DR Respondent by : Shri.Siddhesh Chougle. AR Date of Hearing 10.12.2021 Date of Pronouncement 07.01.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The revenue has filed these two appeals against the separate orders of the CIT(A)-55 passed u/s 143(3) r.w.s 144C(3) of the Act. ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 2 - Since the issues in these appeals are inter linked and similar, hence are clubbed, heard and consolidated order is passed. For the sake of convenience, we shall take up the revenue appeal in ITA No.158/Mum/2019 for the A.Y 2013-14 as a lead case and facts narrated therein. The revenue has raised the following revised grounds of appeal: 1. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of Rs. 5,63,54,389/- and Rs. 1,70,35,390/- made by the AO being collections made on behalf of holding against the archive sale and against the sale of motion gallery archive respectively. 2. While deleting the above addition, the Ld. CIT(A) has failed to appreciate that such receipts are squarely covered by the provisions of Sec. 41(1) and section 28(iv) of the Act. 3. The appellant prays that the order of CIT(A) on the above grounds be set-aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. The Brief facts of the case are that the assessee company is a subsidiary of BBC world wide holdings ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 3 - BV Netherlands and is primarily engaged in the business of rendering advertising sales services to BBC.Com Ltd., for sale of advertising the space on BBC.Com website and marketing supporting services to BBC.WC for sale of stock footage and BBC archives in India. The assessee has filed the return of income electronically for the A.Y 2013-14 on 26.11.2013 disclosing a total income of Rs.Nil after claiming set off of current year loss of Rs.2,32,01,367/-. Subsequently, the assessee has filed the revised return of income on 18.02.2014 with a revised total income (loss) of Rs.2,26,72,013/- and the return of income was processed u/s 143(1) of the Act. The case was selected for scrutiny and the notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the clarification and details. The A.O on perusal of the financial statements found that the assessee has international transactions exceeding Rs.15 crores with its Associate Enterprises (AEs) and the case was referred to the Transfer Pricing Officer (TPO) with the prior approval of Commissioner of Income Tax for ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 4 - computation of Arms Lengths Price (ALP). In respect of the other corporate issues the A.O has called for the various details and observed that the assessee is in the business of content and program production services to independent third party. The assessee has disclosed the loss from business and supporting evidences were filed and the A.O has examined the facts/evidences placed on record. Whereas the T.P.O has determined the ALP of International transactions with its AE and made the upward adjustment of Rs. 60,68,555/- and passed order u/s 92CA(3) of the I.T Act dated 31.10.2016. 3. The A.O. on perusal of the liability side of the balance sheet found that the assessee has credited to its capital reserve a sum of Rs. 13,12,44,779/- and the details are at note-30 to the financial statements. The assessee has explained that it has received financial assistance in the form of onetime voluntary grant from BBC.WWL by way of infusion of additional funds of Rs. 5,78,55,000/-. Apart from the financial grant, which is a non interest bearing loan received by the assessee, the BBC World Wide Ltd(BWL) has waived off the amount payable by the assessee as ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 5 - collection in charge made on behalf of BBC.WL against advertising sale of BBC entertainment channel of Rs.5,63,54,389/- and the collection made on behalf of BWL on sale of motion gallery achieves of Rs.1,70,35,390/-.The AO observed that the said amounts were credited to the capital reserve and was received during the normal trading operations between the assessee and BWL, therefore a show cause notice was issued calling for the details. Against the show cause notice, the assessee has filed the submissions on 13.12.2016 referred at Para 6.2 but the A.O was not satisfied with respect to claims made by the assessee on the cessation of liability and dealt extensively on the provisions of Sec. 41(1) of the Act at Para 6.5 to 6.8 and finally made the addition of both the amounts aggregating to Rs.7,33,89,779/- along with transfer pricing adjustment of Rs. 60,68,555/- and determined the gross total income of Rs. 5,67,86,321/- and after setting off of the brought forward business loss and depreciation the total income was determined at Rs.2,37,20,670/- and the A.O. has calculated the Book profit u/s 115JB of the ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 6 - Act of Rs.4,62,27,485/- and passed the order u/s 143(3) r.w.s 144C(3) of the Act dated 28.02.2017. 4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), the CIT(A) considered the grounds of the appeal, findings of the scrutiny assessment, submissions of the assessee and provisions of law. In respect of disallowance made by the A.O applying the provisions of Sec. 41(1)(a) and 28(iv) of the Act of on waiver of amount payable by the assessee on behalf of BWL against the advertising and sale of BBC entertainment channel of Rs.5,63,54,389/- and collections made on behalf of the BWL against the sale of motion gallery of Rs. 1,70,35,390/-. The CIT(A) has dealt elaborately on the submissions of the assessee referred at Para 3.2 of the order and finally after considering the judicial decisions observed that the amount of impugned waiver being in terms of money cannot be added u/s 28(iv) of the Act and allowed the grounds of appeal. Further the assessee has raised additional ground of appeal in respect of additions made, while calculating the Book Profits under the provisions of Sec. 115JB of the Act. Whereas, the waiver amount has been ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 7 - treated as capital receipt therefore there cannot be any addition in calculation of Book Profit u/s 115JB of the Act and allowed the additional ground of appeal. The CIT(A) on the second disputed issue with respect to Transfer pricing adjustment, the CIT(A) dealt on the assessee submissions, TPO findings order and the judicial decisions. The CIT(A) relied on the assessee’s own case for the A.Y 2011-12 dealt at Para 8 of the order and deleted the transfer pricing adjustment and allowed the partial relief in the other grounds and finally has partly allowed the assessee’s appeal. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Hon’ble Tribunal. 5. At the time of hearing, the Ld. DR submitted that the CIT(A) has erred in treating waiver of liability is not taxable u/s 28(iv) of the Act and u/sec 41(1) of the Act. The assessee has collected the amount and there is liability cast upon the assessee to make the payment but it was treated as a trading liability and CIT(A) has overlooked the findings of the A.O and deleted the addition. The Ld. DR further submitted that the judicial decisions relied by the CIT(A) are distinguishable on facts. ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 8 - 6. Contra, the Ld.AR supported the order of the CIT(A) and emphasized that the CIT(A) has considered the Honble Supreme Court decisions and similar claim was allowed and relied on judicial decisions. 7. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.DR that the CIT(A) has erred in deleting the addition by overlooking the facts that it is a trading liability and such liability cannot be discharged without actual payments. The Ld. DR emphasized that the waiver cannot be treated as a capital receipt and the assessee has directly credited the amount to the capital reserve which is not accordance with the principles of accountancy and the money liability cannot be treated as capital receipt. Whereas, the Ld. AR referred and relied on the observations of the CIT(A) and judicial decisions . At this juncture, we consider it appropriate to refer to the assesees submissions and findings of the CIT(A) at page 10 to 24 para 3.2 of the order, which is read as under: Appellant's Submissions: 3.2 During the course of appellate proceedings, the appellant's AR submitted as under: ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 9 - It is respectfully reiterated that the one-time subvention relief provided by BBCWW to the Appellant was on account of the following reasons: The Appellant company was facing significant cash crunch and was not expected to make any significant profits in the near term foreseeable future. BBCWW had effectively closed its Entertainment Channels in India, on account of which major source of revenues from BBCWW in the form of service fee for the Appellant ceased to exist. The production business of the Appellant was incurring significant losses over the past few years due to which it had built up accumulated losses. As per the budget estimates, the production business was not expected to make any significant gains or derive profits in order to discharge all the existing liabilities of the Appellant Company that became clue pursuant to closure of Entertainment Channels by BBCWW. The salient features of the subvention relief provided by the Appellant to BBCWW were, as under: It was purely on a non-refundable basis to protect BRCWW's overall capital investment in the Appellant Company. It was provided by BBCWW without any right to receive it back from the Appellant. It was provided by BBCWW to the Appellant with the intention to improve its financial position and net worth situation and to recoup the Appellant's losses. In this background, it is respectfully submitted that there are a plethora of decisions wherein it has been held that financial assistance in the nature of voluntary payments made by the parent company to its loss making Indian company in order to recoup its losses and to protect the capital investments are in the nature of capital receipts. Reliance in this regard is place on the Hon'bleApex Court's decision in the case of Siemens Public Communication Network P. Ltd(supra). The relevant extracts of the judgments ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 10 - reproduced, as under: The voluntary payments made by the parent Company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment of theAssessee Company. if that is so, we will have no hesitation to hold that the payments made to the Assessee Company by the parent Company for Assessment Years in question cannot be held to be revenue receipts."(Emphasis Supplied) Further, reliance is placed on the Hon'ble Delhi High Court's decision in the case of CIT v. Handicrafts and Handlooms Export Corporation of India Ltd.: (2014) 140 IT!? 532 (Del),(copy of order enclosed at page 255 A to 255P of the paper book), wherein the assessee was in the business of export of handloom, etc. The holding company of the assessee came to the rescue of its subsidiary which had incurred losses and to enable it to recoup those losses and continue carry on the business in spite of such losses. The Hon'ble Delhi High Court spelt out the relevant test, i.e. whether the subsid y or assistance is on order to ensure the recouping the losses. The relevant extract of the judgment is reproduced, as under: "As found by the Tribunal these are specific amounts paid by the STC to the assessee in order to enable the assessee, which was its subsidiar y and was incurring losses year after year, to recoup those losses and to enable it to meet its liabilities. These amounts, we are of opinion, cannot form part of the trading receipts of the assessee. As stated in our order for the earlier year, the position will be clear if we consider the case of father agreeing to recoup the losses incurred by a son in his business. The amounts given by the father will he only in the nature of gifts or voluntary payments motivated by affection or personal relationship and not stemming from any business considerations. The position is similar here." (Emphasis supplied) Reliance is also placed on the Hon'b!e Delhi Income Tax 'Appellate Tribunal's ('ITAT) decision in the case of CIT v. Deutsche Post Bank Home Finance Ltd.: (2014) 265 CTR 525 ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 11 - (Del), (copy of order enclosed at page 255P to 255 U of the paper book), wherein it has been held by the Bench, as under: On a proper application of the above test we see no difference between the facts of the present case and those in Handicrafts & Handloom Export Corporation of' India (supra). The assessee was inevitable on the road to incurring losses; its holding company decided to intervene and render assistance. The ITAT has also recorded that, keeping aside the depreciation which the assessee would have been entitled to actual losses amounted to Rs.8.7 crores. 13. Having regard to all these circumstances, this Court is of the opinion that the impugned order of the ITAT is based on sound reasoning and does not call for any in (Emphasis supplied) Following the above judgements, the Hon'ble Delhi 1TAT in the decision of Lurg India Company Ltd; [2008] 118 TTJ 377 (Del) held that if the holding company reimburses the losses of subsidairy company,_ then, such reimbursements are not in the revenue field. The copy of the decision is enclosed ; for your kind reference(enclosed at page 256 to 271 of the paper book) In view of the above discussion, may kindly be appreciated that during the year under consideration, BBCWW had granted voluntary nonrefundable subvention relief to the appellant by way wavier of amount payable by the Appellant to BBCWW only to recoup the Appellant's financial losses, and to improve the Appellant's financial position and net worth situation ,Accordingly, the aforesaid subvention relief is in the nature of `capital receipt' and cannot be taxed as revenue receipt Subvention relief amounting Rs. 73,389,779 by way of waiver of amount payable by the Appellant to BBCWWWW cannot be taxed under the provisions of section 41(1)(a) of the Act: It is respectfully submitted that the Appellant was provided subvention relief in the form of waiver amounting to Rs.73,389,779payable by the Appellant to BBCWW, on account of collections made by the Appellant on behalf of BROM against advertisement sales on BBC Entertainment Channel amounting ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 12 - to Rs.56,354,389 and sales of motion gallery archives amounting to Rs.17,035,390. As your Honour will appreciate, the Appellant was merely acting as service provider, by virtue of which it was assisting and supporting BBCWW in collection and follow-up of monies due and outstanding from customers and remittance thereof to BBCWW, in respect of advertisement , sales on BBC Entertainment Channel and sale of motion gallery archives. The copy of relevant agreements entered into between the Appellant and BBCWW, dated 21 August 2009 and 1 April 2010 are enclosed for your kind reference (enclosed at page 61 to 70 of the paper book). Further, it is submitted that for rendering the abovementioned services, the Appellant was remunerated by BBCWW at cost plus mark-up of 20% which was determined as an arm's length price, as per the prevailing transfer pricing guidelines. The monies collected by the Appellant on behalf of BBCWW does not pertain to the Appellant, and is in fact the revenue of BBCW. In this regard, please find enclosed the audit financial statements of the Appellant for financial year 2012-13 for your kind reference (enclosed at page 113 to 142 of the paper book). However, while passing the final assessment order for the subject year, the Ld. AO has alleged that the abovementioned subvention relief granted by BBCWW to the Appellant was remission or cessation of a trading liability and a benefit in the form of a waiver of the trading liability was also taken by the Appellant, due to which it was covered under the ambit of section 41(1)(a) of the Act. In this regard, we firstly wish to highlight the relevant extract of section 41(1)(a) of the Act for your kind reference, as under: "41(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (herein after referred to as the first- mentioned person) and subsequently during any other year,- ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 13 - (a) the first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business and profession and accordingly chargeable to income tax as the income of that previous year, whether the business of profession in respect of which the allowance or deduction has been made is in existence in that year or not;"( Emphasis supplied) It is submitted that the Hon'ble Supreme Court in the case of Polyflex India (P.) Ltd.:120021 124 Taxman 373 (SC) has explained the rationale behind section 41 of the Act, as under: "Section 41(1) applies if the following conditions and circumstances are satisfied: In the assessment for the relevant year an allowance or deduction has been made in respect of loss, expenditure or trading liability incurred by theassessee. Coming to the next step, the assessee must have subsequently (i) obtained any amount in respect of such loss or expenditure or (ii) obtained any benefit in respect of such trading liability by way of rernis,0017 or cessation thereon. In case either of these events happen, the deeming provision enacted in the closing part of sub-section (1) comes into play. Accordingly, the amount obtained by the assessee or the value of benefit accruing to him is deemed to be profits and gains of business or profession and it becomes chargeable to income-tax as the income of that previous year." (Emphasis supplied) Accordingly, the provisions of section 41(1) of the Act may have ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 14 - an application only if • an allowance or deduction has been made, in the computation of profits and gains of a business or profession, in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee; and • subsequently during any previous year the assessee had obtained, whether in cash or- in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof Subvention relief amounting to !?s.73,389,779 by wa y of waiver of amount pa y able b y the Appellant to I3BCWW not in the nature of 'trading liability': The expression 'trading liability' has not been defined in the Act. it is submitted that section 41(1) of the Act is concerned with onl y 'trading liabilit y ' and not with an y other t y pe of liabilit y . Ever y liabilit y Standing in the balance sheet cannot be presumed to be a 'trading !iabi1jy. The Hon'ble Jurisdictional Bombay High Court in the decision of Mahindra & Mahindra Ltd. v. C'IT:[2003] 261 ITR 501 (Born) held that for the applicabilit y of section 41(1) of the Act one of the requirements is that the assessee should have obtained a deduction in the assessment Jar an y year in respect of loss, expenditure or tradin g liabilit y incurred b y the assessee. Further, it was held that even if the assessee had got deduction on allowance, even then section 41(1) of the Act was riot applicable because such deduction was not in respect of loss, expenditure or trading . The copy of the judgment is enclosed for your kind reference (enclosed at page 272 to 281 of the paper book). Hence, the twin conditions required for the applicability of section 41(1) are: 1) there should be a trailing and ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 15 - 2) a deduction should have been obtained in respect of the trading liability. It is respectfully submitted that the Hon’ble Jurisdictional High Court in case of CIT Vs. India Textile Engineers Pvt Ltd: (1983) 141 ITR 69 (Bom) has held hat a subvention payment cannot be treated as a trading receipt of a company. The copy of the judgement is enclosed for your kind reference (enclosed at page 282 to 287 of the paper book). It is submitted that whether or not a liability is a trading liability depends on the facts and circumstances of a particular case. In this regard, reliance can be placed on the following judicial decisions. The Hon'ble Delhi High Court in the case of CIT v. Phool chand jiwan Ram: (1987) 131 ITR 37 (Del) held that only 'trading debts' which are allowed as deduction in earlier years can only be treated as a trading liability. In other words a trading a trading transaction will alone to a trading liability and not otherwise. The relevant extract of the judgement is produced for your kind reference: "The operation of this fiction should be limited to the language of the section. It is only where the assessee has incurred a trading liability and this trading liability has been alloyed in earlier years that section 10(2A) is attracted on the occasion when the trading liability is either remitted or ceased to exist. in our opinion, the Tribunal was right in coming to the conclusion that the sum of Rs.1,80,000 did not represent a trading liability owed by the assessee to M/s Janki Dass Banarsi Dass, nor had this amount of liability been allowed as a deduction in earlier assessments." (Emphasis supplied) The Hon'ble Madras High Court in the case of CIT v. A.V.M. Ltd.: (1984) 146 ITR 355 has held that every deposit money does not constitute trading receipt. It further held that, although such a receipt may be in connection with business, it could not be dealt with by the assessee as a receipt of its trade. The relevant extract of the judgement is produced far your kind reference: ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 16 - "There can be no doubt at all that at the time when the deposits were made, they were receipts of money by the assessee. But the deposits differ from the other receipts from, the film distributors, viz., theatre collections, in this sense, namely, whereas the deposit, at the time it was received, was not to be regarded as part and parcel of the trading receipts, the other monies received from the film exhibitors bore the character of trading receipts whether they were actual collections or advances towards future collections. It is in this sense that when a receipt did not bear the character of a trading receipt, it cannot subsequently become a trading receipt. Some receipts may be of a capital character. Some receipts may be trading receipts to be brought into the reckoning as part of the trading profits, but, there may yet be certain other receipts, which may be neither capital receipts nor trading receipts, but cannot nevertheless be brought to tax even though they happened to get into the hands of the assessee in the course of trade." (Emphasis supplied) It is respectfully submitted that even in the instant case, the Appellant merely assisted in collection and follow-up of monies due and outstanding from customers and remittance thereof to BBCWW. By virtue of the aforesaid services, the Appellant was remunerated by BBCWW at cost plus mark-up of 20%, as per the prevailing transfer pricing guidelines. Accordingl y , the monies collected by the Appellant on behalf of BBCWW cannot be treated to be in the nature of a 'trading receipt' or 'trading liability' in the hands of Appellant. in fact, they said monies collected by the Appellant on behalf of BBCWW is the 'trading receipt' or 'trading liability' of BBCWW In this regard, we wish to highlight Clause A (d) of the MOU entered between the Appellant and BBCWW which is reproduced hereunder (refer page 271 to 274 of the paper book).' "The Company collects the aforesaid money from the customers on behalf of WWL/ BBL and therefore does not take this in its profit and loss account in any manner." ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 17 - Further, we wish to also draw your kind attention to the relevant clauses of the agreement entered into between the Appellant and BBCWW, dated 21 August 2009 and 1 April 2010, wherein it has been clearly highlighted that the Appellant was liable to collect the monies due and outstanding from the customer of BBCWW , on its behalf and remittance thereof to BBCWW (refer page 61 to 70 of the paper book). Hence, as your Honour will appreciate, the Appellant was merely acting as a collection agent of outstanding monies due from end customers on behalf of BBCWW. Also, on perusal of the transfer pricing study of the Appellant for the subject year, it may kindly be appreciated that the appellant is not bearing any risk arising from non-payment of dues by customer (refer page 170 to 235 of the paper book). Hence, the monies followed up and collected by the Appellant on behalf of BBCWW cannot be said to be 'trading receipt' or 'trading liability' of the Appellant. in fact, the same is the 'trading receipt' or 'trading liability' of BBCWW. Accordingly, it is once again respectfully submitted that the subvention relief in the form of waiver of amount payable by the Appellant to BBCWW is not in the nature of a 'trading receipt' or trading liability' and hence, cannot be taxed under the ambit of section 41(1)(a) of the Act, No allowance or deduction obtained in respect of Subvention relief amounting to Rs.73,389,779: In view of the well-established principle of law, provisions of section 41(1) of the Act would apply only when a deduction/ allowance has been made in respect of loss/ expenditure made in computation of profit and gains of business or profession in any assessment year. Reliance can be placed upon following judicial precedents. The Hon'ble Delhi High Court in the case of CIT v. Phool Chand Jiwan Ram: (1987) 131 ITR 37 (Del) The Hon'ble Calcutta High Court in the case of CIT v. A. Tosh & Sons (P.) Ltd.: (1992) 107 CTR 233 (Cal), wherein it has been ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 18 - held that where the Appellant never claimed any deduction for an amount, then the same cannot be taxed under section 41(1) of the Act, even if subsequently credited to the profit and loss account. The copy of the judgement is enclosed for your kind reference refer to page 291 to 292 of the paper book. Hon'ble High Court of Punjab and Haryana in the case of CIT v. La! Textile Finishing Mills (P.) Ltd.: (1989) 180 ITR 45 (Punjab & Haryana) The Hon'ble High Court of Punjab and Haryana in the case of CIT v, Haryana Co-operative Sugar Mills Ltd.: (1985) 154 IT!? 751 (Punjab and Haryana) gift or a capital grant; and did not partake of character of a trading receipts - Held, yes [Para 13111n favour of assessee] (3)Commissioner of Income-tax vs.Deutsche Post Bank Home Finance Ltd.* [20121 24 taxmann.coni 341 (Delhi) Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Whether subvention assistance received by assessee from its holding company to recoup losses likely to be suffered by it, was a capital receipt not liable to tax - Held, yes [In favour of assessee There is no shift in the nature of the determinative test, to decide whether a receipt is revenue or capital. The revenue is undoubtedly correct in urging that the income under section 2(24) makes no difference between the nature and character of receipt. it is however the individual/acts of each case which are decisive. The decision in Handicrafts & Handloom Export Corporation of India v. CIT [198,31140 ITR 532/[1 982] 10 Taxman 232 (Delhi) spelt out the relevant test i.e., whether the subsidy or the assistance is in order to ensure the recouping of losses. It is not in dispute that the assessee did incur losses a fact noticed by the Tribunal in its narration of facts. In fact the assistance was given at point of time when the losses were anticipated, through the letters which were relied upon. So for as the decision in CIT v. Ponni Sugars & Chemicals Ltd. [2008] ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 19 - 174 Taxman 87 (SC) is concerned, no doubt the Court clarified how a subsidy should be treated i.e., by purposive test. The Court presciently held that if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on the revenue account. On the other hand, under the subsidy scheme, if object is to unable the assessee to set up a new unit or expand it then the receipt of the subsidy is to the capital account. Therefore, it is the assessee's action which determines whether subsidy is to avoid losses and liabilities or boost its profits. The assessee was inevitably on the road to incurring losses and, therefore, its holding company decided to intervene and render assistance. [Para 12] Having regard to all these circumstances, it is held that the impugned order of the Tribunal is based on sound reasoning and does not cal/for any interference (4) Deputy Commissioner of Income-tax, Circle 4(1), New Delhi vs Lurgi India Co. Ltd . * 120081 114 I'FD 1 (Delhi) Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment years 2000-01 and 2001-02 - During relevant years, assessee received certain sum from its parent company - In its return of income, assessee claimed deduction of same on ground that said sum was received for recoupment of its losses and, hence, same was a capital grant not chargeable to tax - However, Assessing Officer held that there was a business relationship between assessee and its holding company and since payment was made to compensate assessee for trading losses, it was revenue in nature - Facts mentioned in order oF Shah Sohonie and Company Vs State of Rajasthan and Others 208 ITR 321(RA] HC); and Shreeram Durga Prasad1R.B.) vs. Settlement Commission 11989] 176 ITR 169 (SC). Hon'ble Gujarat High Court's decision in the case of CIT v. Alchemic (P.) Ltd.: [1981] 130 ITR 168 (Guj), Decision: ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 20 - I have gone through the AO's order and appellant's submission. The appellant ha relied on the following decisions which are reproduced for clarity of the issue: (1) Siemen Public Communication Network (P.) Ltd. vs Commissioner of Income-tax, Bangalore* [2017] 77 taxmann.com 22 (SC) Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as (Subvention receipt) - Assessment years 1999- 2000 to 2001-02 - Assessee, an Indian company, received subvention from its parent company in Germany in a situation where it was making losses - High Court held that subvention received by assessee was revenue receipt - Whether subvention received by assessee was not revenue receipt - Held, yes [Paras 4 and 5] [In favour of assessee] HELD: The view taken by the High Court tends to overlook the fact that in the cases of Sahney Steel & Press Works Ltd. (supra) and POIM Sugars & Chemicals Ltd. (supra) the subsidies received were in the nature of grant-in-aid from public Jands and not by way of voluntary contribution by the parent company as in the instant case. The above apart, the voluntary payments made by the parent company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment o f the assessee-company. If that is so, the payments made to the assessee-company by the parent company for the assessment years in question cannot be held to be revenue receipt. The Court also finds such a view in a recent pronouncement in CIT v. Handicrafts & Handlooms Export Corpn. of India Ltd. [20141 49 taxmann.com 488/226 Taxman 178 (May.) (Delhi) with which the Court is in respectful agreement. [Para 31 (2) Commissioner of Income-Tax Vs Handicrafts and Handlooms Export Corporation of India Ltd.* [2014149 taxmann.com 488 (Delhi) Section 4 of the Income-tax Act, 1961 - Income - Chargeable as (Subsidy) - Assessment year 198S-86 - Assessee received ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 21 - subsidy from its holding company - Intention and purpose behind said payment was to secure and protect capital investment made by holding company in assessee - Whether payment of grant by holding company and receipt thereof by assessee was not during course of trade or performance of trade and, thus, could be categorized or classified as a Assessing Officer pointed that liquidity position of assessee was not good and its holding company had assisted it in obtaining credit by standing as a guarantor; that assessee was not in a position to perform its part of contract or to make payment to companies under its agreement with them; and that holding company made payments for alleged non-performance of contract by assessee - Whether these facts did not lead to a conclusion that there were business transactions between assessee and its holding company - Held, yes - Whether further, in absence of any details of loss having been incurred by assessee in transactions with associated concerns, it could not be said that whole or part of impugned amount represented reimbursement of loss earlier incurred by it and, therefore, it was in nature of business receipt - Held, yes - Whether, therefore, impugned receipts were in capital field - Held, yes Thus a careful analysis of the decisions as above makes it clear that any subvention assistance by parent company to recoup losses of the assessee is . capital receipt. In the present case, it is an admitted fact that the waiver of receivables is to improve the financial position of the assessee and to recoup its losses. In my opinion, the ratio of case laws are duly applicable for waiver the sums and therefore the same is held as capital receipt and therefore section 41(1) of the Act is not applicable. As regards applicability of section 28(iv) of the Act, very recently Hon'ble apex Court in the case of Mahindra and Mahindra Ltd, 93 taxmann.corn 32 held as under: IT-Waiver of loan for acquiring capital assets cannot be taxed as perquisite under section 28(iv) as receipt in hands of debtor/assessee are in form of cash/money and it also cannot be taxed as a remission of liability under section 41(1) as waiver of loan does not amount to cessation of trading liability ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 22 - Thus in view of the decision , the impugned waiver amount being in terms of money cannot be added u/s 28(iv) of the Act. Additional Ground: The additional ground is accepted being legal in nature. As the amount in question is already held as capital receipt therefore, this amount cannot be added u/s 115JB of the Act and therefore this ground is allowed. 8. We find that the CIT(A) has relied on the judicial decisions and submissions of the assessee on these aspects and the Honble Supreme Court decision in CIT Vs Mahindra and Mahindra (2018) 404 ITR1 (SC) and Honble High Court and coordinate bench of tribunal judicial decisions on the waiver and treated the sum as capital receipt and granted the relief. The Ld. DR has only relied on the observations of the A.O and whereas the CIT(A) has dealt on the provisions of law, judicial decisions and assessee’s submissions and the decisions on the similar issues before Hon’ble High Court and the Coordinate Bench of the Honble Tribunal and passed a reasoned and logical order. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or new information. Accordingly we are not inclined to interfere with the order of the CIT(A) on this disputed issue and dismiss the grounds of appeal of the revenue. ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 23 - ITA No. 2770/Mum/2019, A.Y 2014-15. 9. The revenue has raised the following grounds of appeal. 1. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of Rs. 2,31,73,316/- made in respect of subvention relief received by the assessee in the form of financial assistance from its holding company. 2. Whether on the facts, in the circumstances of the case and as per law, while deleting the above addition, the Ld. CIT(A) has failed to appreciate that such receipts are squarely covered by the provisions of Sec. 41(1) and section 28(iv) of the IT Act, 1961. 3. The appellant prays that the order of CIT(A) on the above grounds be set-aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 10. We find the CIT(A) has relied on the order of the assessee’s own case for the A.Y 2013-14 as discussed and dealt at page 25 to 29 at Para 6.1 of the order as under: 6.1 Ground No.1: Vide these ground of appeal the appellant is agitated against disallowance of subvention relief received by the Appellant under the provisions of section 41(1)(a) and 28(iv) of the Income-tax Act, 1961 (the Act'). In pare 4 of the assessment order the Ld. Assessing Officer had mentioned that the assessee company had credited in its capital reserve an amount of 2,31,73,316/-. The Ld. AC had further ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 24 - mentioned that similar matter had come up in the appellant's own case for previous year that was A.Y. 2013-14 wherein the assessee was even in the receipt of financial grant of 5,78,55,000I- . from M/s BBC Worldwide Ltd. (BWL)". The AC further mentioned that there was no such separate grant-in- aid but the benefits accrued to the assessee on waiver of following amounts payable by the assessee to BWL: a) Collection made on behalf of BWL against advertising sale on BBC entertainment channe Rs.2,25,47,988I- b) Collection made on behalf of BWL against sale of motion gallery archive: Rs.6,25,328/- The AC had further observed that the assessee had credited both these amounts in the Capital Reserve, so it was apparent from the nature of these transactions that the said amounts were received by the assessee during normal trading operations between the assessee company and BWL. hence constituting revenue income for the assessee. The AC accordingly issued a show cause notice to the assessee company on 08.12.2016. After considering the reply of assessee the Ld. AC treated the benefit of 2,31,73,316I- which accrued to the assessee on account of cessation of its trading liability against BWL gets squarely covered u/s 41(1) and hence taxable in the hands of the assessee as business receipt. 6.1.1 During the course of appellate proceedings, the appellant submitted that similar addition was made by the AC in appellant's own case in A. Y.2013-14. The appeal of the assessee for A.Y. 2013-14 has been decided by CIT(A)-55 vide order no CIT(A)-55/lT61/2016-17 dated 03.10.2018. The relevant part of the order is reproduced as under: "Decision I have gone through the AC's order and appellants submission. The appellant has relied on the following decisions which are reproduced for clarity of the issue: ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 25 - (1) Siemens Public Communication Network (P.) Ltd. vs Commissioner of Income-tax. Bangalore "[2017] 77 taxmann.com 22 (SC) Section 2() of the Income-tax Act, 1961 - Business income - Chargeable as (Subvention receipt) - Assessment years 1999- 2000 to 2001-02 - Assessee, an Indian company, received subvention from its parent company in Germany in a situation where it was making losses - High Court held that subvention received by assessee was revenue receipt - Whether subvention received by assessee was not revenue receipt - Held, yes [Paras 4 and 5] [In favour of assess cc] HELD: The view taken by the High Court tends to overlook the fact that in the cases of Sahney Steel & Press Works Ltd. (supra) and Ponni Sugars & Chen7ica/s Ltd. supra) the subsidies received were in the nature of grant-in-aid from public funds and not by way of voluntary contribution by the parent company as in the instant case. The above apart, the voluntary pa y ments mode by the parent company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment of the assessee-company. If that is so, the pa y ments made to the assessee-company by the parent company for the assessment years in question cannot be held to be revenue receipt. The Court also finds such a view in a recent pronouncement in CIT v. Handicrafts & Handlooms Export Corp of India Ltd [Q , 14749_taxmann.corn488/226 Taxman _178 (Mag) (Del) with which the Court is in respectful agreement. [Para 3J (2) Commissioner of Income- Tax Vs Handicrafts and Handloorns Export Corporation of india Ltd. " [2014] 49 taxmann.com 488 (Do/h!; Section 4 of the Income-tax Act, 1961 - Income - Chargeable as (Subsidy) - Assessment year 1985-86 - Assessee received subsidy from its holding company - Intention and purpose behind said payment was to secure and protect capital investment made by holding company in assessee- Whether ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 26 - payment of grant by holding company and receipt thereof by assessee was not during course of trade or performance of trade and, thus, could be categorised or classified as a gift or a capital grant; and did not partake of character of a trading receipts - Held, yes [Para 13][In favour of assessed] (3) Commissioner of Income-tax vs.Deutsche Post Bank Home Finance Ltd.* [2012] 24 taxmann.com 341 (Delhi) Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Whether subvention assistance received by assessee from its holding company to recoup losses likely to be suffered by it, was a capital receipt not liable to tax - Held, yes [In favour of assessee] There is no shift in the nature of the determinative test, to decide whether a receipt is revenue or capital- The revenue is undoubtedly correct in urging that the income under section 2(24) makes no difference between the nature and character of receipt It is however the individual facts of each case which are decisive. The decision) in Handicrafts & Handloom Export Corporation of India v. C/T [1983) 140 ITR 5321[1982) 10 Taxman 232 (Delhi) spelt out the relevant test i.e., whether the subsidy or the assistance is in order to ensure the recouping of losses, It is not in dispute that the assessee did incur losses a fact by the Tribunal in its narration of facts. In fact the assistance was given at point of time when the losses were anticipated, through the letters which were relied upon. So far as the decision in C/T v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392/ 174 Taxman 87 (SC) is concerned, no doubt the Court clarified how a subsidy should be treated i.e., by purposive test The Court presciently held that if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on the revenue account On the other hand, under the subsidy scheme, if the object is to enable the assessee to set up a new unit or expand it then the receipt of the subsidy is to the capital account. Therefore, it is the assessee's action which determines whether subsidy is to avoid losses and liabilities or boost its profits. The assessee was inevitably on the road to incurring ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 27 - losses and, therefore, its holding company decided to intervene and render assistance. [Para 12) Having regard to all these circumstances, it is held that the impugned order of the Tribunal is based on sound reasoning and does not call for any interference. (4) DCIT, Circle 4(1), New Delhi Vs Lurgi India Co. Ltd [2008] 114 ITD 1 (Delhi) Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment years 2000-01 and 2001-02 - During relevant years, assessee received certain sum from its parent company - In its return of income, assessee claimed deduction of same on ground that said sum was received for recoupment of its losses and, hence, same was a capital grant not chargeable to tax - However, Assessing Officer held that there was a business relationship between assessee and its holding company and since payment was made to compensate assessee for trading losses, it was revenue in nature - Facts mentioned in order of Assessing Officer pointed that liquidity position of assessee was not good and its holding company had assisted it in obtaining credit by standing as a guarantor; that assessee was riot in a position to perform its part of contract or to make payment to companies 'inder its agreement with them; and that holding company made payments for alleged non-performance of contract by assessee - Whether these facts did not lead to a conclusion that there were business transactions between assessee and its holding company - Held, yes - Whether further, in absence of any details of loss having been incurred by assessee in transactions with associated concerns, it could not he said that wile/c or part of impugned amount represented reimbursement of loss earlier incurred by it and, therefore, it was in nature of business receipt - Held, yes - Whether, therefore, impugned receipts were in capital field - Held, yes thus a careful analysis of the decisions as above makes it clear that any subvention assistance by parent company to rococo losses of the assessee is c. capital receipt. In the present case 1 it is an admitted fact that the waiver of ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 28 - receivables is to improve the financial position of the assessee and to recoup its losses. In my Opinion, the rat/c) of case laws are duly applicable for waiver the sums and therefore the same is held as capital receipt and therefore s-section 41(1) of the Act is not applicable. As regards applicability of section 28(iv) of the Act, very recently Hb apex Court in the case of Mahindra and v1ahindra Ltd. 93 taxmann. corn 32 held as under;. IT -Waiver of loan for acquiring capital assets cannot be taxed as perquisite under section 28(iv) as receipt in hands of debtor/assesses are in form of cash/money and it also cannot be taxed as a remission of liability under section 41(1) as waiver of loan does not amount to cessation of trading liability. Thus in view of the decision, the impugned waiver amount being in terms of money cannot be added u/s 28(iv) of the Act. Additional Ground: The additional ground is accepted being legal in nature. As the amount in question is already held as capital receipt therefore, this amount can not be added u/s 115J8 of the Act and therefore this ground is allowed. During the year under consideration neither there is any factual or any legal change. Therefore I have no reason to deviate from the findings given by the CIT(A)-55, Mumbai. In view of these facts, this ground of appeal is allowed. 11. We find that the CIT(A) has relied on the decision of the assessee’s own case for the A.Y 2013-14 which ITA No. 158 & 2770/Mum/2019 M/s BBC World Wide Media Pvt Ltd., Mumbai - 29 - is discussed. Therefore the decision rendered in the above paragraphs would apply mutatis mutandis for this appeal also. Accordingly, grounds of appeal of the revenue are dismissed. 12. In the result, both the appeals filed by the revenue are dismissed. Order pronounced in the open court on 07.01.2022 Sd/- Sd/- ( SHAMIM YAHYA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 07.01.2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ आ / The CIT(A) 4. आ आ ( ) / Concerned CIT 5. ! !" , आ $ %, हमद द / DR, ITAT, Mumbai 6. () फ ई / Guard file. ान ु सार/ BY ORDER, ! //True Copy// 1.