ZEE MEDIA CORPORATION LIMITED(FORMERLY KNOWN AS ZEE NEWS LIMITED), MUMBAI V. DCIT , CIRCLE -7(3), MUMBAI

ITA 1590/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100578 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-03-2015
• Court: TRIBUNAL
• Department Lawyers: PADMAJA
• Assessee Lawyers: NEERAJ SETH
• Keywords: Capital asset; Depreciation; Charitable institution; Rule of consistency; Cost of acquisition; Tangible material; Bad and doubtful debts; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 32; 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 1590/M/2015 (AY:2008 - 2009 ) ZEE MEDIA CORPORATION LIMITED, (FORMERLY KNOWN AS ZEE NEWS LIMITED), CONTINENTAL BUILDING, 135, DR. A.B. ROAD, MUMBAI - 18. / VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(3), AAYAKAR BHAVAN, R.NO.615, 6 TH FLOOR, MUMBAI 400 020. ./ PAN : AAACZ1213B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NEERAJ SETH / RESPONDENT BY : SMT. PADMAJA, CIT - DR / DATE OF HEARING : 17.07.2015 / DATE OF PRONOUNCEMENT : 12 .08.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 17.3.2015 IS AGAINST THE ORDER OF THE CIT (A) - 14, MUMBAI DATED 27.1.2015 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS , WHICH READ AS UNDER: 1. (A) THE LD CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING THE RE - OPENING AND RE - ASSESSMENT U/S 147 OF THE ACT WHICH WAS DONE WITHOUT PROPER REASONS SOLELY ON THE BASIS OF CHANGE OF OPINION. THE REASONS GIVEN FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. (B) THE LD CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING RE - OPENING AND RE - ASSESSMENT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, ON THE BASIS OF INFORMATION ALREADY ON THE RE CORD OF THE DEPARTMENT AND WITHOUT BRINGING ANY FRESH MATERIAL / EVIDENCE ON RECORD AND / OR WITHOUT PROVING ANY ESCAPEMENT OF INCOME. THE REASONS GIVEN FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. (C) THE L D CIT (A) / AO ERRED IN LAW AND FACTS IN RE - OPENING OF THE ASSESSMENT AND RE - ASSESSMENT U/S 147 OF THE ACT ON THE BASIS OF REASONS RECORDED WHICH STATES THAT DEPRECIATION IS ALLOWABLE @ 25 % ON FILM RIGHTS, WHILE AS PER ACCOUNTING POLICY AMORTIZATION HAS BE EN DONE BY THE ASSESSEE OVER 60 MONTHS OR LICENSE PERIOD I.E. 20% P.A. FOR YEARS, HIGHER THAN CLAIM MADE BY ASSESSEE, WHICH PROVES NO ESCAPEMENT OF INCOME. THE REASONS GIVEN FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISI ONS OF LAW. (D) THE LD CIT (A) / AO ARE NOT JUSTIFIED IN DISTURBING THE SETTLED ASSESSMENT WITHOUT ANY REASON SOLELY ON THE BASIS OF CHANGE OF OPINION. THEY OUGHT TO HAVE ACCEPTED THE CONSISTENT ACCOUNTING POLICIES FOLLOWED BY THE APPELLANT AND THE INDUST RY FOR YEARS. 2 2. (I) THE LD CIT (A) / AO ERRED IN LAW AND ACTS IN TREATING THE TV PROGRAMS AND FILM RIGHTS AS INTANGIBLE ASSETS, IN MEDIA INDUSTRY AND DISALLOWING ENTIRE COST ALLOWING ON DEPRECIATION ONLY. (II) THE LD CIT (A) ERRED IN LAW AND FACTS IN UPHO LDING THE DISALLOWANCE MADE BY AO BY TREATING ENTIRE PURCHASES INCLUDING TV PROGRAM, NEWS TO BE INTANGIBLE ASSETS AS AGAINST REASONS RECORDED WHICH PROPOSED TO TREAT ONLY FILM RIGHTS AS INTANGIBLE ASSET. THE LD CIT (A) / AO FAILED TO U NDERSTAND THE DIFFER ENCE BETWEEN NEWS, TV PROGRAM & FILM RIGHTS. (III) THE LD CIT (A) / AO FAILED TO UNDERSTAND THE FACTS OF THE CASE, IE NATURE OF BUSINESS OF THE ASSESSEE, DIFFERENCE BETWEEN TV PROGRAM / NEWS / FILM RIGHTS AND ACCOUNTING POLICIES FOLLOWED BY IT AND TREATED THE ENTIRE TV PROGRAM / NEWS / FILM RIGHTS AS INTANGIBLE ASSETS. 3. THE LD CIT (A) ERRED IN LAW AND FACTS IN MAKING FOLLOWING OBSERVATIONS CONTRARY TO FACTS OF THE CASE AND GROUNDS OF APPEAL. (I) THAT PRIMA FACIE THE APPELLANT HAS NOT CHALLENGED THAT FILM RIGHTS ARE INTANGIBLE ASSETS, WHICH IS CONTRARY TO THE FACTS OF THE CASE AS THE ASSESSEE HAS CHALLENGED THE SAME VIDE GROUND NO.3 AND ALSO MADE SUBMISSIONS BEFORE THE LD CIT (A). (II) THAT THE APPELLANT HAS STATED THAT ENTIRE COST OF THE FILMS SHOULD HAVE BEEN ALLOWED AS EXPENSES AS PER RULE 9A, WHILE ASSESSEE CATEGORICALLY SUBMITTED THAT RULE 9A IS NOT APPLICABLE TO THE FACTS OF THE CASE BUT TOTAL COST OF PRODUCTION OF FILM IS ALLOWED IN THE FIRST YEAR UNDER RULE 9A. 4. THE LD CIT (A) / AO ERRED IN LAW AND FACTS IN UPHOLDING / MAKING ADDITION / DISALLOWANCE / BY SINGLING OUT THE ASSESSEE IN WHOLE BROADCASTING INDUSTRY WITH THE INTENTION AND PREJUDICE TO DRAG THE ASSESSEE IN TO LITIGATION AND ENHANCE THE COLLECTION OF TAXES. 3. BRIEFLY STATED RELEVANT FACT S OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BROADCASTING AND RUNNING OF SATELLITE TELEVISION CHANNEL. ASSESSEE ALSO PRODUCES AND SELLS PROGRAMME SOFTWARES. ASSESSEE FILED THE RETURN OF INCOME ORIGINALLY ON 29.10.2008 FOR THE AY 2008 - 09 DECLARING THE TOTAL INCOME OF RS. 65,37,28,370/ - . SUBSEQUENTLY, THE SAID RETURN OF INCOME WAS REVISED BY DECLARING THE TOTAL INCOME OF RS. 65,75,90,650/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 10.12.2010 AND THE ASSESSED INCOME WAS DETERM INED AT RS. 65,88,02,777/ - . AGAINST THE SAID ORDER OF THE AO, ASSESSEE WENT ON APPEAL TO THE CIT (A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) ALLOWED THE APPEAL VIDE HIS ORDER DATED 14.9.2012. AGGRIEVED WITH THE DECISION OF THE CIT (A ), REVENUE IS IN APPEAL BE THE TRIBUNAL, AND THE SAME IS PENDING FOR DISPOSAL. SUBSEQUENTLY, AO ISSUED NOTICE U/S 148 OF THE ACT GIVING REASONS RECORDED AS UNDER: THE ASSESSEE DURING THE YEAR HAD ACQUIRED PROGRAM / FILMS RIGHTS OF RS. 99,05,07,680/ - . AN D THE SAME WAS DEBITED TO P & L ACCOUNT UNDER THE HEAD OPERATIONAL EXPENSES. SINCE, THE FILM RIGHTS ARE AN INTANGIBLE ASSET, ONE FOURTH OF THE SAME IE RS. 24,76,26,920/ - CAN ONLY BE ALLOWED. T HAT HAS RESULTED IN UNDERASSESSMENT OF INCOME OF RS. 74,28,80, 760/ - . 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WHICH ARE EXTRACTED AND PLACED IN PARA 7.1 OF THE ASSESSMENT ORDER, AO PROCEEDED TO MAKE ADDITION OF RS. 3 74,28,80,760/ - AS PER THE DISCUSSION GIVEN IN PARAS 7.2 AND 7.3 OF THE RE - ASSESSMENT ORD ER AND THE SAME ARE EXTRACTED AS UNDER: 7.2. THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED HOWE VER THE SAME IS NOT ACCEPTABLE FOR THE REASONS THAT THE PROGRAM / FILMS RIGHTS ARE INTANGIBLE RIGHTS ARE DESERVES TO BE AMORTIZED OF THE TOTAL EXPENDITURE. AS PER RULE 9(A)(1) OF THE IT RULE. ENVISAGE THAT IN COMPUTING THE PROFITS AND GAINS OF THE BUSINESS OF PRODUCTION OF FEATURE F ILMS CARRIED ON BY A PERSON, THE DEDUCTION IN RESPECT OF COST OF THE COST OF PRODUCTION OF FEATURE FILM SHALL BE ALLOWED. FURTHER DEDUCTION IN RESPECT OF THE COST OF ACQUISITION OF FEATURE FILM SHALL ALSO BE ALLOWED IN COMPUTING THE PROFITS AND GAINS OF T HE BUSINESS OF DISTRIBUTION OF FEATURE FILMS CARRIED ON BY A PERSON AS PER RULE 9B OF IT RULES. THUS, IF ASSESSEE IS ENGAGED IN THE BUSINESS OF TV BROADCASTING, COST OF ACQUISITION OF PROGRAMS / FILM RIGHTS IS REQUIRED TO BE TREATED AS INTANGIBLE ASSET AN D ONLY ON FORTH OF COST (IE 25% AS PER IT) IS ALLOWABLE. ACCOUNTING STANDARD 26 ALSO DEFINES THE PROGRAMS / FILMS RIGHTS AS INTANGIBLE ASSETS ESPECIALLY FOR THE BROADCASTER. 7.3. IN VIEW OF THE RULE 9(A)(1) OF THE IT RULE, THE ASSESSEE IS ENTITLED DEDUCTI ON OF RS. 24,76,26,920/ - ONLY. SINCE, THE ASSESSEE HAS CLAIMED THE FULL COST OF PROGRAM / FILMS RIGHT ACQUIRED AMOUNTING TO RS. 99,05,07,680/ - . THEREFORE, THE EXCESS CLAIM OF DEDUCTION ON THIS ACCOUNT AMOUNTING TO RS. 74,28,80,760/ - ARE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SINCE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME, THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE INITIATED SEPARATELY. 5. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT (A), ASSESSEE IS IN APPEAL WI TH THE ABOVE REFERRED GROUNDS. GROUND WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. 6. GROUND NO.1 RELATES TO THE VALIDITY OF RE - ASSESSMENT U/S 147 OF THE ACT. IN PRINCIPLE, ASSESSEE ARGUES IN THE GROUNDS THAT AN OPINION WAS FORM ED BY THE AO AT TIME OF REGULAR ASSESSMENT ON THE ISSUE RAISED IN THE REASONS RECORDED FOR RE - OPENING OF THE ASSESSMENT IE FIL M RIGHTS ARE INTANGIBLE RIGHTS AND ONLY TH OF THE TOTAL EXPENDITURE IS ALLOWABLE . ON THE OTHER HAND, THE ASSESSEE TAKE S THE STAND THAT THE FILM RIGHTS / TV RIGHTS / NEWS CONSTITUTE CURRENT ASSETS. THEREFORE, COST OF SUCH ASSETS, WHICH DO NOT HAVE ENDURING BENEFIT, SHOULD BE FULLY DEBITED FULLY TO THE P & L ACCOUNT DURING THE YEAR UNDER CONSIDERATION. FURTHER, TV RIGHTS / FI LM RIGHTS ARE AMORTIZED FOR THE PERIOD OF TIME DEPENDING ON THE PERIOD OF USE OF SUCH RIGHTS AND OBLIGATIONS SPECIFIED IN THE PURCHASE AGREEMENTS / LEASE AGREEMENTS. ASSESSEE RELIED ON THE CONTENTS OF NOTE NO.7 OF THE NOTES TO THE FINANCIAL STATEMENTS. 7 . AS SEEN FROM THE PARA 4 ABOVE, CIT (A) HAS NOT ADJUDICATED THE ASSESSEES ARGUMENTS RELATING TO THE INTANGIBLE NATURE OF SUCH RIGHTS, DEPRECIABLE NATURE OF SUCH INTANGIBLE RIGHTS AND ALLOWABILITY OF DEPRECIATION ETC. HOWEVER, BEING CURRENT ASSETS, THE SAID INTANGIBLE S WERE CONSIDERED BY THE ASSESSEE AS CURRENT ASSETS AND ARE EITHER 4 DEBITED FULLY OR AMORTIZED OVER THE YEAR DEPENDING ON THE ACCOUNTING POLICY OF THE ASSESSEE . OTHERWISE, ASSESSING OFFICER TOOK A STAND THAT THE SAID ASSETS CONSTITUTES INTAN GIBLE RIGHTS , BEING CAPITAL IN NATURE, THE PROVISIONS OF SECTION 32 (II) OF THE ACT APPLIES ACCORDINGLY. THEREFORE, THE C LAIM MADE BY THE ASSESSEE WAS NOT ALLOWED. HOWEVER, THIS IS THE FIRST TIME THAT THE ASSESSING OFFICER DISTURBED THE METHOD OF ACCOUNTI NG FOLLOWED IN THIS REGARD ON THE ISSUE OF NEWS / TV / FILM RIGHTS. EVENTUALLY, THE AO MADE RE - ASSESSMENT VIDE HIS ORDER DATED 17.2.2014 AND MADE ADDITION OF RS. 74,28,80,760/ - . RELEVANT DISCUSSION IS AVAILABLE IN PARA 7.2 AND 7.3 OF THE SAID ORDER AND T HEY ARE ALREADY EXTRACTED IN PARA 4 OF THIS ORDER. THE TOTAL INCOME OF THE ASSESSEE IS DETERMINED AT RS. 140,06,54,710/ - IN THE RE - ASSESSMENT. AGGRIEVED WITH THE ABOVE, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) WITH LEGAL GROUNDS QUESTIONING THE VALIDI TY OF THE RE - ASSESSMENT. GROUND NOS. 1 AND 2 OF THE GROUNDS OF APPEAL BEFORE THE CIT (A) RELATES TO THE SAID LEGAL ISSUE. 8. DURING THE PROCEEDINGS B EFORE THE CIT (A), ASSESSEE ARGUED THAT IT IS THE CASE OF CHANGE OF OPINION AND THEREFORE, THE AO MADE T HE RE - ASSESSMENT WITHOUT JURISDICTION. ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE THE CIT (A), WHICH ARE EXTRACTED IN PARA 3 OF THE IMPUGNED ORDER. IN THE SAID SUBMISSIONS, THE ASSESSEE ANALYSED THE FACTS ABOUT THE WAY, THE ISSUE RELATING TO THE PROGRAMS AND FILM RIGHTS IS EXAMINED AND DISCLOSURE OF RELEVANT INFORMATION BY WAY OF NOTE NO.7 IN THE FINANCIAL STATEMENTS. ABSENCE OF ANY TANGIBLE / NEW MATERIAL WAS ALSO REFERRED. HOWEVER, THE CIT (A) DISMISSED THE SAID LEGAL GROUNDS WITHOUT GIVING ANY SUS TAINABLE REASONS. THE CONTENTS OF PARAS 3.2; 3.3 AND 3.4 OF THE IMPUGNED ORDER ARE RELEVANT IN THIS REGARD. ON MERITS OF ADDITION AGAIN, THE CIT (A) CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVED WITH THE SAID ORDER OF THE CIT (A), ASSESSEE FILED THIS APPEAL AND RAISED THE SAID LEGAL GROUND QUESTIONING THE VALIDITY OF THE REOPENING AND THE RE - ASSESSMENT. 9 . BEFORE US, O N THE ISSUE OF RE - OPENING, LD COUNSEL FOR THE ASSESSEE NARRATED THE ABOVE FACTS OF THE CASE AND SUBMITTED THAT THIS LEGAL ISSUE RAISE D IN GROUND NO.1 RELATES TO REOPENING AND RE - ASSESSMENT AND ITS VALIDITY. BRINGING OUR ATTENTION TO THE REASONS RECORDED FOR RE - OPENING, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THE REASONS WAS THE SUBJECT MATTER OF SCRUTINY IN THE R EGULAR ASSESSMENT MADE ON 10.12.2010. IN THIS REGARD, TO SUBSTANTIATE THE ABOVE, LD 5 COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FINANCIAL STATEMENTS PLACED AT PAGE 5 OF THE PAPER BOOK (SCHEDULE - 7) AND SUBMITTED THAT THE CURRENT ASSETS OF THE ASS ESSEE CONSTITUTE 76,40,90,908/ - AND THESE ARE BASICALLY PROGRAM AND FILM RIGHTS FIGURING IN THE INVENTORIES. FURTHER, BRINGING OUR ATTENTION TO PAGE 6 OF THE PAPER BOOK (SCHEDULE 11), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT RS. 99,05,07,680/ - IS THE TO TAL PURCHASE / ACQUISITION OF THE PROGRAMS ON FILM RIGHTS. LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THERE IS AN OPENING BALANCE ON THIS ACCOUNT (ON ACCOUNT OF PROGRAM AND FILM RIGHTS) AMOUNTING TO RS. 48,42,86,388/ - . REFERRING TO THE ASSESSEES ME THOD OF ACCOUNTING FOLLOWED IN MATTERS OF VALUATION OF SUCH INVENTORIES, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO ITEM NO .7 OF SCHEDULE 16, WHICH IS PLACED AT PAGE 8 OF THE PAPER BOOK, AND MENTIONED THAT THE ASSESSEE CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING IN MATTERS OF PROGRAMS AND FILM RIGHTS AND INVENTORIES. THE SAID ITEM NO .7 IS EXTRACTED AS UNDER: 7. PROGRAMS / FILM RIGHTS AND INVENTORIES: A. PROGRAM / FILM RIGHTS. PROGRAM / FILM RIGHTS ARE STATED AT THE LOWER OF NET COST (COST MINUS ACCUMULATED AMORTIZATION / IMPAIRMENT) OR REALIZABLE VALUE. WHERE THE REALIZABLE VALUE ON THE BASIS OF ITS USEFUL ECONOMIC LIFE IS LESS THAN ITS CARRYING AMOUNT, THE DIFFERENCE IS EXPENSED AS IMPAIRMENT. I. COST OF NEWS / CURRENT AFFAIRS / CHAT CHOWS / EVENTS ETC ARE FULLY EXPENSED. II. PROGRAMS [OTHER THAN (I) ABOVE] ARE AMORTIZED OVER THREE YEARS FROM THE YEAR AND RELATED PROGRAM IS TELECAST. III. FILM RIGHTS ARE AMORTIZED ON A STRAIGHT - LINE BASIS OVER THE LICENSE PERIOD OR 60 MONTHS FROM THE DATE OF PURCHASE W HICHEVER IS SHORTER. B. INVENTORIES OF TAPES ARE VALUED AT LOWER OF COST OR ESTIMATED NET REALISABLE VALUE. COST IS TAKEN ON FIRST - IN - FIRST - OUT (FIFO) BASIS. 10 . THUS, IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS FOLLOWED METHOD OF ACCOUNTIN G IN MATTERS OF TREATING THE NEWS / TV / FILM RIGHTS AS CURRENT ASSETS AND VALUATION THEREON. FURTHER, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT ASSESSING OFFICER EXAMINED THE ABOVE METHOD OF ACCOUNTING DURING THE REGULAR ASSESSMENT AND FORMED AN OPINI ON . FOR THIS, THE QUESTIONNAIRE DATED 25.8.2010 ISSUED BY THE ASSESSING OFFICER IS RELEVANT. BRINGING OUR ATTENTION TO ITEM NOS. 5 AND 11 OF THE SAID QUESTIONNAIRE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER EXAMINED THE NATURE OF T HE BUSINESS OF THE ASSESSEE AS WELL AS EXAMINED THE DETAILS OF THE INVENTORIES AND THE BASIS OF VALUATION. ITEM NOS. 5 AND 11 OF THE SAID QUESTIONNAIRE ARE EXTRACTED AS UNDER: 5. PLEASE SUBMIT A DETAILED NOTE ON NATURE BUSINESS CARRYING ON BY YOUR AND MODUS OPERANDI OF THE BUSINESS. 6 11. PLEASE SUBMIT DETAILS OF INVENTORIES AND BASIS OF VALUATION. 11 . LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEES REPLIED TO THE SAID QUESTIONS. THE REPLIES DATED 24.11.2010, COPY OF WHICH IS PLACED AT P AGE 17 OF THE PAPER BOOK, READ AS UNDER: 11. DETAILS OF PROGRAM / FILM RIGHTS ENCLOSED. DETAILED NOTE ON INVENTORY VALUATION IS GIVEN AT NOTE 7 TO THE FINANCIAL STATEMENT. 12 . FURTHER, BRINGING OUR ATTENTIO N TO THE TABLE AT PAGE 21 TO 28 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME CONSTITUTES BREAK - UP OF PURCHASE / ACQUISITION OF PROGRAM AND FILM RIGHTS AMOUNTING TO RS. 99,05,07,680/ - . FURTHER, HE ALSO BROUGHT OUR ATTENTION TO THE COPY OF THE TAX AUDIT REPORT, WHICH IS FILED ALONG WITH THE RETURN OF INCOME, AND SUBMITTED THAT THE FACT OF TREATING THE PROGRAM AND FILM RIGHTS AS CURRENT ASSETS AND THE METHOD OF ACCOUNTING FOLLOWED IN THIS REGARD WERE MENTIONED IN THE SAID REPORT. CONSIDERING THE DETAILED SC RUTINY BY THE ASSESSING OFFICER DURING THE REGULAR ASSESSMENT, DETAILS OF RELEVANT INFORMATION FURNISHED BY THE ASSESSEE IN THE RETURN OF INCOME AND THE ANNEXURES THEREON, IT IS EASY TO INFER THAT THE ASSESSING OFFICER HAS FORMED AN OPINION ON THE NATURE OF THE FILM RIGHTS AND TV RIGHTS AS CURRENTS ASSETS. CONSEQUENTLY , NO ADDITION WAS MADE BY THE AO IN THE REGULAR ASSESS MENT. THUS , ISSUE OF NOTICE U/S 148 OF THE ACT FOR RE - ASSESSING THESE CURRENT ASSETS AS INTANGIBLE CAPITA L RIGHTS OF THE ASSESSEE, CONSTITUTES A CHANGE OF OPINION , WHICH IS NOT PERMITTED IN LAW. FOR THIS PROPOSITION, LD COUNSEL FOR THE ASSESSEE FILED NUMBER OF PRECEDENTS AND SOME OF THE DETAILS ARE AS FOLLOWS: (I) ARONI COMMERCIALS LTD VS. DCIT [WP NO.137 OF 2014 362 ITR 403 (BOM) IN THIS CASE, IN PARA 14, THE HON'BLE BOMBAY HIGH COURT HAS NOTED THAT THERE WAS A SPECIFIC QUERY AND A REPLY WAS GIVEN BY THE ASSESSEE AND THEREFORE, REASSESSMENT ON THE SAME ISSUE AMOUNTED TO A CHANGE OF OPINION. THE DEPARTME NT ARGUED THAT THERE . WAS NO FORMATION OF OPINION SINCE THE SAME WAS NOT REFERRED IN THE ASSESSMENT ORDER (BOTTOM OF PAGE 17). THE HIGH COURT REJECTED THIS CONTENTION BY HOLDING THAT ONCE A QUERY IS RAISED AND REPLY IS GIVEN , IT FOLLOWS THAT THE QUERY RAIS ED WAS A SUBJECT OF CONSIDERATION OF THE AO WHILE COMPLETING THE ASSESSMENT. IT IS NOT NECESSARY THAT AN ASSESSMENT ORDER SHOULD CONTAIN REFERENCE AND / OR DISCUSSION TO DISCLOSE ITS SATISFACTION IN RESPECT OF THE QUERY RAISED. IF AN ASSESSING OFFICER HAS TO RECORD THE CO N S I DERAT I ON BESTOWED BY H I M ON ALL ISSUES RAISED BY HIM DURING THE ASSESSMENT PROCEEDINGS EVE N WHERE HE I S SATISFIED, THEN , IT WOULD BE IMPOSSIBLE FOR THE AS S ESS IN G OFF I CER TO COMP L ETE ALL T HE AS SES S MENTS WHICH ARE REQU I RED TO BE SC R UTINISED BY HI M UNDER SECT I ON 143 ( 3 ) O F TH E A CT . MOREOVER , ONE MUST NOT FORGET THAT THE MAN N ER I N WHICH AN ASSESSMENT ORDE R IS TO BE DRAFTED I S THE SOLE DOMAIN OF THE ASSESSING OFF I CER AND I T IS NOT OPEN TO AN ASSESSEE TO I NSIST THAT THE ASSESSMENT 7 ORDER M UST REC O RD ALL TH E QUESTIONS RA I S ED AND THE SAT I SFACTION IN RESPECT THEREOF OF THE ASSESSING OFFICER . FURTHER , IN PARA 16 AT PAGE 20, THE HIGH COURT N O TED FR O M A R E VIEW OF T H E AUDIT OPINI O N ON WHICH HEAVY RELIANCE WAS PLACED BY THE DEPAR TM ENT THAT TH E BASIS O F THE AUDIT REPORT WAS THE INTERPRETATION / INFERENCE DRAWN BY THE AUDITORS FROM TH E ACCOUNTS SU B MITTED BY THE PETITIONER TO THE DE PARTMENT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE REASONS AS INDICATED IN THE AUDIT REPORT WERE SIMILAR TO THE REASONS AS SET OUT IN THE GROU N DS F OR REOPENING THE ASSESSMENT BY THE AO . THE HIGH COURT NOTED THAT THE AUDIT REPORT NOR THE GROUND FOR REOPENING ASSESSMENT D I SCLOSED ANY TANGIBLE MATERIAL FOR THE PURPOSE OF REOPENING THE ASSESSMENT BUT REL I ED UPON TH E OPINION / INFERENCE DRAWN BY THE INTERNAL AUDIT DEPARTMENT ON EXISTING MATER I AL AND THIS INFERENCE / OPINION D I FFER FROM THE ONE DRAWN BY THE AO WHILE PASSING THE ORIGINAL ASSESSMENT ORD E R. T ANG I BLE MATER I A L WOU L D MEAN FACTUA L MATER I AL AND NOT I NFERENCE / OPINION ON MATERIAL ALREADY I N EXISTENCE A N D CON SI DE R ED DUR I NG THE ASSE SS MEN T PRO C EED I NG S . IT I S SUBMITTED THAT THE OBSERVATIONS MADE IN THE CONTEXT OF OP I NION OF THE AUDIT DEPARTMENT AND THE AO ARE FULLY APPL I CABLE I N THE P R ESENT CASE S I NCE THE AO IN REOPEN I NG THE ASSESSMENT HAS SIMPLY DRAWN AN I NFERENCE / OPINION ON THE MATERIAL ALREADY ON RECORD A ND CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. IT I S SUBMITTED THAT THE VIEW OF THE AO IN THE PRESENT CASE THAT THE PRO GR A M / FILM R IGHT S A R E I NTANGIBLE A SSETS I S AN INFE R ENCE / OPINION ON M A TERIAL ALREADY I N EXISTENCE TO WHICH HIS ATTENTION HAS BEEN REPEATEDLY DRAWN I N THE COU R SE OF THE ORIGINAL ASSE SS MENT PROCEEDINGS , AS EXPLAINED ABOVE . (II) PLUS PAPER FOOD PAC LTD. VS . ITO 56 TAXMANN . COM 467 (BOM ) IN THIS CASE, IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS FOR AY 2009 - 10, THE AO CALLED FOR DETAILS OF LONG - TERM CAPITAL GA I NS , TRIAL RUN EXPENSES AND BAD DEBTS, ALL OF WH I CH WE R E FU RNI SHED (PAGE 4, PARA 4) . SATISFIED AFTER SCRUTINISING THE PARTIC ULARS , THE AO PASSED THE ASSESSMENT ORDER . THEREAFTER, ON 18 T H NOVEMBER 2013, I . E . , WITHIN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, A NOTICE UNDER SECTION 148 WAS I SSUED (PARA 8) . THE REASONS FOR ISSUANCE OF THE NOT I CE WERE: (1) BROUGHT FORWARD DEPRECIATION PERTAINING TO AY 1997 - 9 8 AND 1999 - 2000 COULD NOT BE SET OFF AGAINST INCOME OF AY 2009 - 10 S I NCE 8 Y EARS HAD ELAPSED (2) CLAIM OF DEDUCTION OF BAD DEBTS WRITTEN OFF WAS INCORRECT AND (3) I NCORRECT CLAIM OF LOWER OF THE UNABSORBED DEPREC I ATION AND BROUGHT FORWARD BUSINESS LOSS (PARA 9). THE H I GH COURT IN PARA 15 NOTED THE DEPARTMENT'S CONTENTION THAT THE ISSUES I NVOLVED IN THE REASSESSMENT PROCEEDINGS WERE NEVER EXAM I NED BY THE AO AND THAT THE AO WITHOUT LOOK I NG INTO THE ISSUES ALLOWED THE CLAIM OF THE ASSESSEE, WHICH IS NOT PERMISSIBLE. THE HIGH COURT I N PARA 18 HELD THAT THE ENTIRE APPROACH OF THE REVENUE WAS MISCONCEIVED. THE ASSESSMENT ORDER HAD OBVIOUSLY TAKEN INTO ACCOUNT THE ASPECT OF DEPRECIATION. PERUS AL OF THE ASSESSMENT ORDER REVEALED THAT ALL RELEVANT DOCUMENTS AND DETA I LS AS CALLED FOR WERE F I LED . IT WAS FURTHER RECORDED I N THE ASSESSMENT ORDER THAT THE DETA I LS FILED WITH THE RETURN OF INCOME AND DURING THE ASSESSMENT PROCEED I NGS WERE SCRUT I NISED (T HIS I S ALSO STATED BY THE AO I N THE PRESENT ASSESSEE ' S C ASE - PLEASE REFER PAGE 33 OF PAPER BOOK , PARA 7) . THE R E D I D NOT APPEAR TO BE ANY TANGIBLE M A TERIAL / REASON FOR THE AO TO REOPEN THE ASSESSMENT PROCEEDINGS . IN PARA 19, THE HIGH COURT DISTINGUISHED ITS DECISION IN EXPORT CREDIT AND GUARANTEE CORPORATION OF INDIA LTD. (RELIED UPON BY THE DR IN THE PRESENT CASE) ON THE GROUND THAT IN THAT CASE THERE WAS A SPECIFIC FINDING THAT THERE EXISTED TANGIBLE MATERIAL AND REASON TO REOPEN THE ASSESSMENT AND THAT WA S EVIDENT FROM THE RECORD IN THAT CASE . (III) IL&FS INVESTMENT MANAGERS LTD. VS. ITO 298 I TR 32 IN THIS CASE, ASSESSMENT FOR AY 2003 - 04 WAS COMPLETED UNDER SECTION 143(3) WHEREIN THE DETA I LS OF DEPREC I ATION WERE FURNISHED AND THE SAME WERE ACCEPTED . THEREAFTER , VIDE NOTICE DATED 2 ND MARCH 2006 ISSUED UNDER SECTION 148 8 (I . E., WITHIN 4 YEARS) , THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE GROUND THAT THE ASSET MANAGEMENT RIGHTS, THOUGH ASSETS , WERE NOT INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION AS THE COMPANY HAD MERELY PURCHASED FUTURE RIGHT TO RECEIVE INCOME. THE HIGH COURT HELD THAT ALL MATERIAL WAS DISCLOSED BY THE ASSESSEE AND THEREFORE THE REASSESSMENT PROCEEDINGS ON THE AFOREMENTIONED GROUND CONSTITUTED A CHANGE OF OPIN I ON . IT MAY BE NOTED T HAT EVEN THOUGH A SPECIFIC QUERY WAS NOT RAISED DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS ON THE ISSUE WHETHER THE ASSET MANAGEMENT RIGHTS WERE ELIGIBLE FOR DEPRECIATION, THE HIGH COURT DID NOT PERMIT A REASSESSMENT PROCEEDING ON THAT GRO U ND S I NCE THE DETAILS OF DEPRECIATION WERE CALLED FOR, EXAMINED AND THEREAFTER THE CLAIM OF DEPRECIATION WAS ALLOWED. THE PRESENT CASE STANDS ON A MUCH STRONGER FOOTING SINCE THE CLAIM MADE BY THE ASSESSEE IN THE PRESENT CASE IS BASED ON A CONSISTENT METHOD O F VALUATION / AMORTISATION FOLLOWED BY IT OVER A PERIOD OF YEARS AND WHICH HAS BEEN SCRUT I NISED BY THE AO OVE R THE YEARS INCLUDING THIS YEAR BY CALLING FOR THE RELEVANT DETAI L S AND EXAM I NING THEM , WHEREAS THE CASE BEFORE THE HIGH COURT WAS A ' ONE - OFF ' TRAN SACTION OF ACQUISITION OF ASSET MANAGEMENT RIGHTS. (IV ) ALLIANCE SPACE PVT . LTD. VS . ITO 58 TAXMANN.COM 112 (BOM) IN THIS CASE , THE ORIG I NAL ASSESSMENT PROCEEDINGS FOR AY 2009 - 10 WERE COMPLETED UNDER SECT I O N 143(3 ) O N 22 ND MARCH 2014 AFTER ENQU I RY INTO VARIOUS ASPECTS OF SHARE CAPITA L AND S H ARE PR E MIUM ISSU E D DUR I NG THE YEAR . ON 29 TH MARCH 2014 , I . E ., W I THIN A WEEK A NOT I CE UNDER SECT I ON 148 WAS ISSUED ON THE GROUND THAT SECTION 68 OF THE ACT WAS APPLICABLE IN RESPECT OF SHARE PREMIUM RECEIVED BY THE ASSESSEE. IT MAY BE NOTED THAT NO SPECIFIC QU E RY WA S RAISED BY THE AA DURING THE ORIGINAL ASSESSMENT PROCEEDINGS ON THE QUESTION OF APPL I CATION OF SECTION 68 OF THE ACT . THE H I GH COURT STRUCK DOWN THE REASSESSMENT PROCEEDINGS HOLDING THAT THERE WA S NO LACK OF DISCLOSURE OR SUPPRESSION OF ANY MATERIAL FACTS . ALL QUERIES OF THE AO WERE ANSWERED . THUS, THERE WAS NO TANGIBLE REASON FOR REOPENING THE ASSESSMENT . (V) MAHA R ASH TRA A IRPORT DE V E L OPME NT C O. LTD. VS. D C IT ( 201 3) 35 T AXM ANN.COM 591 (MUM TRI BUN AL) IN THIS CASE , THE ASSESSMENT FOR AY 2005 - 06 WAS REOPENED WITHIN FOUR YEARS ON THE GROUNDS THAT (1) THE EXPENDITURE DEBITED TO PROF I T AND LOSS ACCOUNT AMOUNTING TO RS . 1 , 37 , 06 , 149 CONSTITUTED PRE - OPERATIVE EXPENSES (2) DIRECT AND OTHER INCOME OF RS . 37,27,107 CONSTITUTED INCOME FROM OTHER SOURCES (PARA 3) . IN PARA 10, THE TRIBUNAL NOTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF NATURE OF BUSINESS ACTIVITY CARRIED OUT, WHICH WAS REPLIED BY THE ASSESSEE BY STATING THAT THE COMPANY WAS ENGAGED I N THE INFRASTRUCTURE AND DEVELOPMENT ACTIVITIES . THIS EXPLANATION WAS ALSO ELABORATED BY F I LING ANOTHER SUBMISS I O N. THE TRIBUNAL NOTED THAT THE ASSESSEE HAD SUBMITTED VARIOUS DETAILS RE : COMMENCEMENT OF BU SINESS, EXPENSES, I NCOME EARNED, SERVI C ES RENDERED , ETC . AND THAT ADMITTEDLY THE AA DID NOT HAVE ANY FRESH OR TANG I B L E MA T ERIAL WH I CH WORKED OUT AS A ' LIVE W IR E ' TO THE AO TO FORM A N OPINION OR CREATE A REASON T O BEL I EVE THAT THERE WAS CONCEALMENT OF INCOME . IT WAS A L SO OBVIOUS FROM THE REASONS THAT THE BASIS OF REOPEN I NG WAS ESSENTIALLY THE PRODUCT OF PERUSAL OF ASSESSMENT RECORDS (AS IS THE P OS ITI ON I N T HE PR ESE N T CA S E) . IN TH E SE CI RCUMSTANCES , THE REASSESSMENT PROCEED I NGS WERE HELD TO BE INVALID . IT IS RESPECTFULLY SUBMITTED THAT THE TRIBUNAL ON A PROPER APPREC I ATION OF THE NATURE OF BUSINESS CONDUCTED BY THE ASSESSEE HAS FOUND THAT THE DETAILS C A LLED FOR DURING THE ORIGINAL ASSESSMENT PROCEEDINGS HAD ENABLED THE AO TO FORM A REASONAB L E VIEW THAT THE EXPENDITURE AND INCOME WERE PROPERLY REPORTED . IN THE PRESENT CASE AS WELL, THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, HAVING REGARD TO THE NATURE OF BUSINESS, CAME TO A REASONABLE CONCLUSION THAT THE PROGRAM / FILM RIGHTS WERE PROPERLY VALUED / A MORTISED . (VI) VIJ A YKUMAR M . HIRAKHANW A LA (HUF) VS. ITO 207 CTR ( B OM) 345 9 IN THIS CASE, THE ASSESSMENT FOR AY 1997 - 98 , 1999 - 2000 , 2000 - 01 AND 2002 - 03 WERE SOUGHT TO BE REOPENED BY A NOTICE DATED 30 TH MARCH 2004 . THE ASSESSEE CARRIED ON BUSINESS OF COTTON GINNING AND PRESSING FROM ITS FOUR FACTOR I ES LOCATED AT VARIOUS PLACES IN MAHARASHTRA . THE HEAD OFFICE WAS SITUATED AT BOMBAY. THE RETURNS FOR THE AFORESAID ASST . YEARS WERE PROCESSED AND ACCEPTED U/S 143(1)(A) . T HE ASSESSEE CLAIMED EXPENDITURE INCU RRED AT THE HEAD OFFICE AT BOMBAY TO BE SET OF AGAINST OTHER INCOME . THE RE - ASSESSMENT PROCEEDINGS WERE INIT I ATED SO AS TO DISALLOW THE EXPEND I TURE SO INCURRED ON THE GROUND THAT THERE WAS HARDLY ANY ACTIV I TY FROM THE BOMBAY OFFICE . IT WAS POINTED OUT BY T HE ASSESSEE THAT THE VERY SAME ISSUE RELATING TO THE EXPENDITURE HAD BEEN ADJUDICATED AND ALLOWED IN THE REGULAR ASST . ORDERS PASSED U/S 143 (3) IN THE PAST ASSESSMENT YEARS . THE HIGH COURT HELD THAT IN THE AB SENCE O F A NY MATERIAL OR IN FORMA T ION , AC T I ON OF THE AO IN RE - OPENING THE ASSESSMENTS COULD NOT BE S USTA I N E D . THE HIGH COURT IN PARA 15 GAVE WEIGHTAGE TO THE FACT THAT FOR SEVERAL DEC AD E S T HE EXPENSE S I NCURRED AT THE BOMBAY OFF I CE HAD BEEN CONSISTENTLY ALLOWED I N THE R E GUL A R A SSESSMENTS AN D THERE WA S N O M A T ERIA L ON RECORD TO SHOW THAT IN PAST THE E X PE N D I TURE HAS BEEN ERRONEOUSLY ALLOWED . THUS THE HIGH COURT CONCLUDED THAT THERE WAS NO MA TER I AL OR INFORMATION BASED ON WHICH THE AO COULD FORM A REASONABLE BELIEF THAT I NCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND THAT THE RE - OPENINGS WERE BASED PURELY ON A CHANGE OF OPIN I ON. IN THE PRESENT CASE ALSO, THE METHOD OF ACC O UNTIN G HAS BEEN C ONSIS TENTLY FOLLOWED FOR A NUMBER OF YEARS IN PAST AND IS ALSO ACCEPTED IN SCRUTINY ASSESSMENTS BUT IS NOW SOUGHT TO BE REJECTED WITHOUT ANY TANGIB L E MATERIAL PURELY ON THE BASIS OF A CHAN G E OF OPINION . (V I I) CI T V S AM I TAB H BAC H CHAN 349 I TR 76 ( B O MBA Y) IN THIS CASE THE RETURN OF INCOME FOR AY 2002 - 03 WAS FILED ON 13 . 10.2002. THEREAFTER ON 31 . 03 . 2002 (SIC) THE RETURN WAS REVISED C L A I MING EXPENSES @ 30% AD HOC. WHEN THE OFFICER ASKED FOR THE SUBSTANTIATION OF THE EXPENSES THE CLAIM WAS WITHDRAWN . A NOTICE U/S 148 WAS ISSUED ON 05.04.2006 ON THE GROUND THAT EXPENSES @ 30% WHICH WERE SOUGHT TO BE CLAIMED ON ADHOC BASIS W ERE INCURRED OUT OF UNDISCLOSED SOURCE WHICH REQU I RE FURTHER V E RIFICATION UNDER THE PROVISIONS OF SECTION 69. THE HIGH COURT CONFIRMED THE TRIBUNAL'S FINDING THAT REASSESSMENT WAS INVALID SINCE NO NEW MATERIA L HAD COME TO THE NOTICE OF THE AO SO AS TO LEAD TO A REASONABLE BELIEF THAT INCOME CHARGEABLE T O TAX HAD ESCAPED ASSESSMENT . SIGNIFICANTLY THE HIGH COURT NOTED , ' ( THE ADHOC EXPENSE OF 30% FROM THE RECEIPTS WAS THE SUBJECT MATTER OF CONSIDERATION OF THE AO WHEN HE PASSED THE ASST . ORDER ON MARCH 29 , 200 5 U/S 143(3) OF THE SAID ACT .' THIS OBSERVATION SHOW THAT EVEN THOUGH THERE WASN ' T A SPEC IFIC QU E RY ON APPLICATION OF SECTION 69 DURING THE ORIGINAL ASST . PROCEEDI N GS , S I NCE THE SU B J E CT O F C ON SI DERAT I ON NAMELY THE ADHOC EXPENSES OF 3 0 % , WA S THE SAME, THE HIGH COURT HE L D THA T T HE R EASSESSMENT PROCEEDINGS WERE INVALID. IN TH E P R E S E N T CASE AL S O , T HE S UBJECT MATTER NAMELY PR OG RAM/FILM R I GHTS WAS UNDER C O N S I DERAT I ON DUR I NG THE OR I GINAL ASST . PROCEEDIN G S . TH E PR ESE N T CAS E STANDS ON A MUCH STRONGER FOOTING SINCE NOT O N LY THE FACTUM O F INCURRIN G O F EXPE NS E S O N AC Q UI S I T I O N O F PROGRAM/FILM RIGHTS BUT ALSO TH E IR CATEGORIZATION AS INV E NT O RY/CURRENT A SSET AND VALUATI O N / AMORT I SAT I ON POLICY HAS BE E N R E PEAT E DLY BROUGHT TO TH E N O TI CE O F T HE AD. IN V I EW OF THE ABOVE. IT I S SUBMITTED THA T THE REOPENING IS BAD - IN - L AW AND DESERVE S T O BE STRUCK DOWN AS I T IS BASED O N A ME R E CH ANGE OF OPINION WITHOUT ANY TANG I BLE MATERIA L BEING BROUGHT ON RECORD. 10 12 .1. FURTHER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT AO IS NOT IN POSSESSION OF ANY TANGIBLE MATERIAL BEFORE INVOKING THE PROVISIONS OF SECTION 147 / 148 OF THE ACT. 13 . ON THE OTHER HAND, ON THE ISSUE OF VALIDITY, LD DR FOR THE REVENUE CONTESTED VEHEMENTLY STATING THAT THE ASSESSING OFFICER RIGHTLY AND VAL IDLY ISSUED THE NOTICE U/S 148 OF THE ACT. TO START WITH THE ARGUMENT, LD DR FOR THE REVENUE RELIED ON THE FOLLOWING DECISIONS. (I) DR. AMIN PATHOLOGY LABORATORY VS. JCIT (252 ITR 673) (BOMBAY) (II) FATEH CHAND CHARITABLE TRUST VS. CIT (357 ITR 604) (ALLAHABAD) (III) IN NOVATIVE FOODS LTD VS. UNION OF INDIA (356 ITR 389) (KERALA) (IV) SRI SAKTHI TEXTILES LTD VS. JCIT (340 ITR 144) (KERALA) \ (V) EXPORT CREDIT GUARANTEE CORPORATION OF INDIA VS. ADDL.CIT (30 TAXMANN.COM 211) (BOMBAY) (VI) DCIT VS. TIVOLI INVESTMENT & TRADING CO. (P) LTD ITA NO.7713/MUM/2012 AND CO NO.32/MUM/2014. 14 . DURING THE REBUTTAL TIME, LD COUNSEL FOR THE ASSESSEE DISTINGUISHED THE DECISIONS RELIED ON BY THE LD DR BY MENTIONING AS UNDER: IT IS SUBMITTED THAT TH E DECISIONS REL I ED UP O N BY THE LD . DR A RE E ITH E R DISTIN G UISHABLE OR ARE NO LONGER GOOD LAW OR SUPPORT THE CASE O F THE ASSESSEE , AS EXPLAINED HEREINAFTER . (I) D R . AM IN PATHO L OG Y LABO R A T O RY VS J E IT ( 252 I TR 673 ) ( BOMBAY ) IN TH I S CASE THE REASSESSMENT PROCEED I NGS FOR AY 1994 - 95 WERE I N I TIATED VIDE A NOTICE U/S 148 ISSUED ON 14 . 03 . 2001 I . E . BEYOND A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASST . YEAR . TH E P RES E NT C A S E IS NO T O F THE S AME K IND . BE THAT AS IT MAY , THE H I GH COU R T IN ARR I VING A T THE CONCLUS I ON THAT THE REASSESSMENT PROC E EDINGS WER E PR OP ERLY INITIAT E D NOT E D THAT TH E ASSESSING O FFICE OVERL O OKED AN AMOUNT OF 6,70 , 758 WHICH R E PR E SENTED UNPAID PURCHASES . S INCE THE R E WA S A F A I LURE T O DIS C L O SE THE UNPA I D PUR C H ASES TH E ASS E SSEE FIRM HAD SUPP R ES S ED THE I NC O ME T O T HA T EXT E NT . T HERE IS NO ALL EGAT I ON O F ANY KI N D O F S UP P RESSI O N O F ANY PAR TI CULARS I N TH E P RESENT CASE . M O R EO VER T HE H I G H CO U R T H AS R E L I ED ON T H E DE CI S I O N OF HON ' BLE G U J ARAT HIGH COURT IN P RAF UL CH U N I LAL PATEL V S M . J . MAKW A NA { 2 3 6 I TR 832) .T H IS DE CISI O N HAS B E EN SPEC I FI C ALLY DISSENTED FROM IN THE FULL BEN CH DEC I SION OF DELHI H I GH COUR T I N T HE CA SE OF KELV I NATO R { 256 ITR L ), WH I CH I N TURN HAS BE E N AFFIRMED BY HON ' BLE SUPREME CO U R T I N 320 ITR 56 1 . THE R EFORE THE DEC I S I ON OF THE GU J ARAT HIGH COURT I N PRAFUL PATEL ' S CASE AS W EL L AS AMI N ' S CASE INSOFAR AS IT RE L IES ON TH E GUJARAT D E CI S I O N STAND OVERRULED . (I I ) FATEH CHAND CHAR I TABLE TRUST V S CI T ( 357 ITR 604)(ALLAHABAD) I N THIS CAS E I N THE OR I G I NAL A S S T . PROCEEDINGS THE FINANC I A L CA P ACITY OF THE DONOR TO DONATE A SUM OF RS . 1 . 55 CRORES WA S N O T PROPER L Y ENQUIRED I NTO. SUBSEQUENTLY THE DEP T . O N M A K IN G ENQUIR I ES GOT MATERIAL ON T HE ABOVE I SSUE AGAINST THE ASSESSEE . THE HIGH COURT HE L D THAT I T COULD NOT BE SAID THAT THE MATE R IAL RECEIVED THE BY DEPT . ON THE BASIS OF ENQU I RY HAD NO NEXUS O R WAS N OT RELEV A NT TO THE D I SP U TE A S TO WHETHER INCOME OF THE APPELLAN T H A D ESCAPE D ASST . OR NOT . IN THESE C I RCUMSTANCES REASSESSMENT PROCEEDINGS I N I T I ATED AFTER A PER I OD OF 4 YEARS WERE HELD TO BE VAL I D . 11 IN THE PRESENT CASE THERE IS NO MATER I AL WHATSOEVE R ON THE BASIS OF W HICH THE PRESENT PROCEEDING S WERE I NITIATED THEREFORE TH I S DECISION HAS NO R E LEVANCE TO THE PRESENT CASE . (I I I) INNO V ATIVE FOODS LTD . VS UNION OF INDI A (356 ITR 3 89 ) (K E RALA) IN TH I S CASE THE ASST . FOR AY 2007 - 08 WAS SOUGHT TO BE RE - OPENED ON THE GROUND THAT VARIOUS D IS ALLOWA B L E I T EMS W E RE N O T D IS A LL O WE D IN THE TA X C OMPUTAT I ON . T HE H I GH CO U R T R E LI ED O N RAJESH ZAVERI ' S CAS E ( 29 5 I TR 50 0) WHICH WAS RENDERED IN THE CONTEXT O F AN ASST . ORI G IN A LLY COMPLETED U/S 14 3 (1) AN D C AM E T O THE C O NCLUSION TH A T IF THE AO HIM SELF H A S C OM MITT ED A MISTAKE OR OMISSION I N THE ASST . COMPLET E D BY HIM WHAT TH E S TA TUTE VISU A LI SES IS RECONSIDERATION AND REVISI O N OF R E G ULAR ASST . B Y T H E AO IF HE FI ND S F O R AN Y REA S O N TH AT T HERE IS ESCA P EMENT OF INC O M E CHA R GE A BLE TO T AX IN THE OR I G I NAL ASST . THE H I GH COURT REL I ED ON I TS OWN E ARLIER DECISI O N IN THE C ASE OF C IT V S POPU L AR VEH I CLES AND SERVICES L T D . ( 191 TAXMAN 333). IT I S MOST RESP E CT F ULLY SUBM I T T ED T HA T THE DEC I S I O N IS IN DIRE C T CONFL I CT W I TH THE DEC I S I ON OF HON ' B L E S U PREME COURT IN THE CASE OF KELVINATOR (320 ITR 561) AND HENCE CANNOT BE R EGARDED A S GOOD LAW . (IV) SRI S A KTHI T EX TIL E S LTD. VS JCIT (3 4 0 IT R 1 44 ) (K E RALA) I N TH I S CASE THE ASSESSEE WAS ENGAGED I N THE MANUFACTURE OF TEXTILES. CERTAIN AMOUNTS SPENT O N R E PLACE M ENT OF ASSET S AND TOWARD S CONVERSION OF MATERIAL WE R E ALLOWED IN EARL I ER ASST . YEA R S AS REVENUE EXPEND I T UR E . THE HIGH CO U R T A T PA R A 22 HELD THA T NOT I CES U/ S 1 48 I SSUED FO R A Y 1 991 - 92 AN D 1992 - 93 WERE WHOL LY W I THOUT JUR I SD I CT I ON AS THEY WERE I SSUED BEYOND A PE RI OD OF 4 Y EA RS . AS F A R AS A Y 1 993 - 94 I S C ONCERNED IT WAS HELD THAT THERE WAS NO LEGAL NECESSITY THAT THE MATERIALS REFERRED TO I N SECTION 147 SHOULD BE FRESH MATERIAL COLLECTED SUBSEQUENT TO THE CONCL U S I ON OF THE OR I G I NA L ASST . PROCEED I NGS . I N THE PRESENT CASE THERE I S NO M A T ER I A L W H ATSOEVE R, E XI ST I NG O R NEW, AND THEREFORE THE DEC I SION I S D I STINGU I SHABLE. (V) EXPORT CREDIT GUARANTEE CORP . OF INDIA LTD . VS ADD! . CIT (30 TAXMANN . COM 211) ( BO M BA Y) IN THIS CASE THE ASST. FOR THE ASST . YEAR 2006 - 07 WAS SOUGHT TO BE RE - OPENED WITHIN 4 YEARS VI DE A N OTICE DT. 24.03.2011 ISSUED U/S 148 . THE HIGH COURT HELD THAT THERE WAS TANGIBLE M ATER I AL ON THE BASIS OF WHICH THE ASST . WAS SOUGHT TO BE RE - OPENED. FOR INSTANCE THE HIGH COURT PO I N T E D O UT THA T DURING THE YEA R IN QUESTION THERE WAS CHANGE IN ACCOUNTING POLICY AS A RES UL T OF WH I CH THE PROVISION FOR ESTIMATED RECOVERY IN RESPECT OF CLAIMS PAID AND OUTSTANDING FOR RECOVERIES FO R A PERIOD OF 3 YEARS OR MORE AS ON THE BALANCE SHEET DATE WAS ESTIMATED A T RS. 100 FOR EACH CLAIM IN SUBSTITUTION OF INDIVIDUAL ASSESSMENT/ESTIMATE MADE EARLIER WH I CH HAD THE EFFECT OF THE EXISTING PROVISION BEING WRITTEN OFF BY ABOUT RS . 20 CRORE IN THE REVENUE ACCOUNT AND REDUCING THE PROFIT OF THE ACCOUNTING YEAR CONSEQUENTLY. ACCORDING TO THE HIGH COURT THIS WAS THE SIGNIFICANT DEVELOPMENT AND EVIDENTLY THE AA HAS NOT CONSIDERED THE IMPACT THEREOF . THERE WERE NO QUERIES RAISED DURING THE ORIGINAL ASSES SMENT PROCEEDINGS ON THE SUBJECT. THE HIGH COURT HELD THAT ALL THAT WAS RELEVANT WAS TO SEE WHETHER THERE WAS REASON TO BELIEVE ON THE PART OF THE OFFICER THAT INCOME HAS ESCAPED ASSESSMENT AND HELD THAT THE ANSWER WAS IN AFF I RMATIVE. THE HIGH COURT ALSO N OTED THAT THERE WAS NO APPLICATION OF MIND TO THE RELEVANT FACTS BY THE AA DURING THE COURSE OF THE OR I GINAL ASST IN SO FAR AS THE OTHER I SSUES ARE CONCERNED . THEREFORE THE HIGH COURT HELD THAT THE AA HAD TANGIBLE MATER I AL BEFORE HIM AND THE REASSESSMENT P ROCEEDINGS WERE VALID. IT IS SUBMITTED THAT THIS DECISION ' IS COMPLETELY DISTINGUISHABLE SINCE THERE WAS A SIGNIFICANT EVENT WHICH OCCURRED DURING THE YEAR UNDER CONSIDERATION BEFORE THE HIGH COURT AND WHICH HAD NOT AT ALL BEING CONSIDERED OR ENQUIRED INTO BY THE AA. IN THE PRESENT CASE THERE IS NO SUCH EVENT . THE ISSUE UNDER CONSIDERATION I S AN ACCOUNTING POLICY 12 REGULARLY ADOPTED BY THE ASSE S SEE IN VALUAT I ON/AMORT I ZAT I ON OF PROGRAM/FILM RIGHTS WHICH HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE IN PAST AND WHICH HAS BEEN SCRUTINISED AND ACCEPTED . THEREFORE REASSESSMENT PROCEEDINGS FOR UNSETTLING A SETTLED AND ACCEPTED ACCOUNTING POLICY WITHOUT A NY MATERIA L CAN N OT BUT BE R EGA RD E D A S CHANGE O F O PI N I O N . AS N OTED EAR LI ER THE H O N' B L E B OM B A Y HI G H C OUR T IN THE CASE OF PLUS P A PER F OO D P AC L TD . VS ITO ( 57 TA X MN N. CO M 467) H A S H EL D THAT IN THE CA S E O F E XP ORT CRE D IT GUARANTE E C ORP . TH ER E W AS S PECIF IC FINDI N G TH AT THERE E XIS TED T AN G I BL E MA T ER I AL AND REASON TO R E - OPEN THE A S SES SME N T . ( V I) DCIL VS TIVOLI INVESTMENT & TRAD I NG CO. (P) LTD. - ITA NO. 7713/MUM - 2012 AND CO NO . 32/MUM - 2014 IN THIS CASE THE TR I BUNAL UPHELD THE REOPENING ON THE GROUND THAT THERE WAS FRESH MATER I AL IN THE F O RM OF AN ASSESSMENT ORDER PAS S ED FO R AY 2004 - 05 ( PAGE 7 , PARA 3 . 3) . AT PAGE 5 , THE T RI B U NAL WAS PLEASED TO EXPLA I N THE DI F FERENCE BETWEEN REV I EW OR CHANGE OF OP I NION ( WH I CH W O ULD RESULT IN I NVAL I DAT I ON OF R EASSE S SMENT PRO C EED I NGS ) AND REASSESSMENT BASED O N F RESH MATERI A L . THE TR I BUNAL OBSE R V ED THUS : ' THE MOOT QUESTION, HOWEVER, WOULD BE OF WHAT CONSTITUTE A REVIEW' OR' CHANGE OF OPINION' . IN OUR VIEW AND WHICH CORRESPONDS WITH THAT OF THE FIRST APPELLATE AUTHORITY ITSELF , IT WOULD BE REAPPRAISAL OF THE FACTS THE CASE. WHEN , HOWEVER , A NEW FACT COMES INTO PICTURE, AND THERE IS A CHANGE IN THE FACTUAL MATR I X OF THE CASE CONSEQUENT THERETO, IT CANNOT BE SA I D TO BE A REVIEW, WHICH PREDICATES EXAMINING THE SAME FACTUAL MATRIX, WHICH MAY LEAD TO A VIEW EITHER IN THE AGREEMENT OR IN MODIFICATION OF THAT FORMED EARLIER . IT IS WELL SETTLED THAT EVE N ONE FACT CAN CHANGE THE WHOLE COMPLEXION AND LEAD TO A CHANGE OF OP I NION FORMED IN THE ABSENCE OF SUCH FACTS OR ITS CONSIDERATION (REFER PADMASUNDARA RAO (DECD) VS. STATE OF TAMIL NADU 225 ITR 147 (SE). THIS WOULD NOT AMOUNT TO A MERE CHANGE OF OPINION B UT A FRESH OPINION IN LIGHT AND CONSIDERATION OF THE NEW EMERGING POSIT I ON . ' IT I S SUBM I TTED TH A T I N THE PRESEN T CAS E , T HE R E I S NO S U CH FRESH MATER I AL . RATHE R , THE AO HAS REOPENED THE COMPLETED ASSESSMENT ON THE BASIS O F REAPPRAIS A L OF THE MATE RI A L AVA IL ABLE ON RECORD . THEREFORE , ON THE BAS I S OF THE P RIN CIP L E LAID DOWN BY THE HON'BLE TRIB U N A L I N THE DECIS I ON RELIED UPON BY THE LEARNED DR , I T SHOULD BE HELD THAT THE REASSESSMENT PROCEEDINGS ARE INVALID . A S D I RE C TED BY THE HON ' BLE TR I BUNAL, THE PRESENT SUBMISSIONS ARE CONFINED TO THE VALIDITY OF REAS SE SS MENT PROCEEDINGS ONLY . THE APPELLANT CRAVES LEAVE TO MAKE FURTHER SUBMISSIONS ON MER I TS OF THE MATTER , IF NEED BE . 15 . WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE OF VALIDITY OF REAS SESSMENT PROCEEDINGS AND PERUS ED THE ORDERS OF THE REVENUE, THE CORRESPONDENCE FILED BY THE ASSESSEE DURING THE SCRUTINY PROCEEDINGS AS W ELL AS THE REGULAR PROCEEDINGS AND THE PAPER BOOK / JUDGMENTS FILED BEFORE US. 15 .1. WE HAVE READ THROUGH THE CONTENTS OF THE Q.NOS.5 AND 11 OF THE QUESTIONNAIRE AND FIND THAT THE AO IS AWARE OF THE NATURE OF BUSINESS OF THE ASSESSEE. FURTHER, AO IS AWARE OF THE CONTENTS OF THE INVENTORY OF THE ASSESSEE (IE NEWS / NON - FICTIONAL ITEMS, TV PROGRAMS, FILM ETC) AND THEIR VALU ATION TOO. CONSIDERING THE SIGNIFICANCE OF THE SAID Q.NO.5 & 11 OF THE AO, THE SAME ARE EXTRACTED AS FOLLOWS: 13 5. PLEASE SUBMIT A DETAILED NOTE ON NATURE BUSINESS CARRYING ON BY YOUR AND MODUS OPERANDI OF THE BUSINESS. 11. PLEASE SUBMIT DETAILS OF I NVENTORIES AND BASIS OF VALUATION. 15.2. FROM THE ABOVE Q.NOS. 5 AND 11 RAISED BY THE AO IN THE REGULAR ASSESSMENT, W E FIND WHILE Q.NO.5 IS ON THE NATURE OF THE BUSINESS; Q.NO. 11 IS DIRECTLY ON THE INVENTORY AND METHOD OF THEIR VALUATION IE TV PROGRA MS AND FILM RIGHTS. THESE DETAILS WERE SUBMITTED BY THE ASSESSEE VIDE ITS LETTER DATED 24.11.2010 (PARA 9 AND 10 OF THIS ORDER ARE RELEVANT IN THIS REGARD) . IT IS ALSO RELEVANT TO MENTION THAT THE ABOVE QUESTIONS CROPPED UP IN THE COTEXT OF THE NOTE NO 7TO THE FINANCIAL STATEMENTS. WE ALSO FIND THAT T HE ASSESSEES REFERENCE TO THE NOTE NO.7 OF THE ACCOUNTS ALSO IS IN THE KNOWLEDGE OF THE AO DURING THE REGULAR ASSESSMENT. THUS, THE ASSESSEES DISCLOSURE OF INFORMATION IN THE NOTE NO.7 RELATING TO THE C ONSISTENTLY MAINTAINED METHOD OF VALUATION TO THE INVENTORIES OF TV PROGRAMS AND FILM RIGHTS TOGETHER WITH THE ABOVE QUESTIONS AND ANSWERS RAISED BY THE ASSESSING OFFICER DURING THE REGULAR ASSESSMENT , SUGGEST THAT THE AO IS DIRECTLY ON THE ISSUE OF INVEN TORIES AND THEIR METHOD OF ACCOUNTING. 16. FURTHER, WE HAVE PUT A QUESTION TO OURSELVES ON THE ORIGINAL INTENTION OF THE AO IN RAISING SUCH QUERIES IN THE QUESTIONNAIRE. IN OUR OPINION, THOUGH THE ABOVE QUERIES, THE AO WANTS TO EXAMINE THE CORRECTNESS ON THE TREATMENT OF THE ASSESSEE TO THE INVENTORIES AND ALSO THE BASIS OF THE VALUATION. IT IS RELEVANT TO MENTION HERE THAT THE NONE NO.7 PROVIDES FOR THE METHOD OF VALUATION OF THE PROGRAMS AND THE FILM RIGHTS, THE PASTS OF THE INVENTORY. THE CONTENT S OF THE SAID NOTE NO.7 IS VERY CLEAR AS TO HOW THE TV PROGRAMS AND FILM RIGHTS ARE AMORTIZED, AND THE AO IS AWARE OF THESE FACTS DURING THE TIME OF REGULAR ASSESSMENT. THEREFORE, AO RAISED THE SAID QUESTIONS WITH THE VIEW TO MAKE DISALLOWANCE ON ACCOUNT OF AMORTIZATION OF THE INVENTORIES, IF ANY, AND ALSO TO DENY THE DEDUCTION CLAIMED BY THE ASSESSEE. OTHERWISE, WE FIND NO OTHER REASON FOR RAISING SUCH QUESTION IN THE REGULAR ASSESSMENT. THEREFORE, IT IS UNAVOIDABLE INFE RENCE THAT THE SAID ISSUE RAISED IN Q.NO.11 IS AKIN TO THE ISSUE RAISED IN THE REASONS RECORDED BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT. HENCE, THE AO APPLIED HIS MIND TO THE ISSUE RAISED IN THE REASONS RECORDED BY HIM BEFORE THE RE - ASSESSMENT PROCEE DINGS ARE INITIATED. OF COURSE, THE LANGUAGE USED BY THE AO IN THE REASONS RECORDED IS IN DIFFERENT, BUT , OTHERWISE , THE ISSUE RAISED IS IDENTICAL TO THE ONE WHICH WAS ALREADY EXAMINED BY THE AO IN THE 14 REGULAR ASSESSMENT ON WHICH AN OPINION IS FORMED . WH EN THE Q.NO. 11 RELATING TO THE METHOD OF VALUATION OF INVENTORIES IS RAISED, IT HAS TO BE ONLY WITH THE VIEW TO DISTURB THE BASIS OF VALUATION IE TO SPREAD OVER THE VARIOUS ASSESSMENT YEARS, THE DETAILS OF WHICH ARE ALREADY PROVIDED IN NOTE NO.7 OF THE FI NANCIAL STATEMENTS. THE SAME IS REFERRED BY THE ASSESSEE IN THE REPLY TO THE SAID Q.NO. 11. THE SAID NOTE NO.7 WAS ALREADY EXTRACTED AND ELABORATED IN PARA 8 OF THIS ORDER, WHICH IS SELF - CONTAINED AND THE PROGRAMS ARE AMORTIZED (TV PROGRAMS) FOR THREE YE ARS FROM THE YEAR THE PROGRAM IS TELECASTED WHEREAS THE FILM RIGHTS ARE AMORTIZED ON A STRAIGHT LINE BASIS OVER THE LICENSE PERIOD OR 60 MONTHS FROM THE DATE WHICHEVER IS SHORT. WHEN THIS INFORMATION IS ALREADY AND PARTICULARLY AVAILABLE TO THE AO IN THE REGULAR ASSESSMENT, ATTEMPTING TO RE - EXAMINE THIS ISSUE THROUGH THE PROVISIONS OF SECTION 147 / 148 OF THE ACT CONSTITUTES CHANGE OF OPINION AND THE SAME IS NOT PERMITTED IN LAW. THIS VIEW IS CEMENTED BY THE VARIOUS DECISIONS AND THE JUDGMENTS RELIED UP ON BY THE ASSESSEE, WHICH FORM PART OF TH IS ORDER. 17 . FURTHER, ON THE ARGUMENTS RELATING TO THE EXISTENCE OF NEW OR TANGIBLE MATERIAL FOR THE AO BEFORE INITIATING THE RE - ASSESSMENT PROCEEDINGS, WE FIND FROM THE REASONS THAT IT IS NOT THE CASE OF REVENUE T HAT AO HAS ANY SUCH TANGIBLE MATERIAL ON THE INCORRECTNESS OF THE CLAIM OF AMORTIZATION OF THE INVENTORIES OF PROGRAMS / FILMS OR THE METHOD OF VALUATION THEREOF. IN THE PRECEDING PARAGRAPHS, WE HAVE EXTRACTED RATIOS OF VARIOUS CASE LAWS IN THE FORM OF TH E ASSESSEE ON THE REQUIREMENT OF TANGIBLE / NEW MATERIAL. ON THESE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE ALSO, THE REVENUE FAILS. T HE PROCEEDINGS INITIATED BY THE AO ARE UNSUSTAINABLE IN LAW. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSEE IS ALL OWED . 18 . GROUND NOS. 2 AND 3 RELATE TO THE MERITS OF ADDITION ON ACCOUNT OF DISALLOWANCE OF INTANGIBLE ASSETS IE NEWS / TV PROGRAM / FILM RIGHTS. AS DESCRIBED ALREADY IN THE PRECEDING PARAGRAPHS, ASSESSEE PURCHASED THE SAID NEWS / TV PROGRAM / FILM RIGHT S AMOUNTING TO RS. 90,05,07,680/ - (PAGES 24 TO 28 OF THE PAPER BOOK). IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THE BREAK - UP (PAGE 49 OF THE PAPER BOOK) OF TV PROGRAMS, NEWS AND NON - FICTION, FILM RIGHTS . IT PROVIDES THE DETAILS OF MANNER OF AMORTIZATION. 19 . ON PERUSAL OF SAID PAGE 49, WE FIND THE O PENING BALANCE OF THESE ITEMS WORKS OUT TO RS. 48.42 CRS (ROUNDED OFF); TOTAL PURCHASES AMOUNTING TO RS. 99.05 CRS 15 (ROUNDED OFF) WHILE THE NEWS AND NON - FICTION WERE COMPLETELY AMORTIZED BY DEBITING TO THE P & L ACCOUNT WHEREAS THE TV PROGRAMS AND FILM RIGHTS WERE DIFFERENTLY AMORTIZED OVER A PERIOD OF TIME DEPENDING UPON THE AGREEMENT AND THE NATURE AND POTENTIAL OF THE TV PROGRAMS AND FILM RIGHTS. THE TOTAL SUCH AMORTIZATION UNDER THESE THREE HEAD S WORKS OUT TO RS. 76.41 CRS (ROUNDED OFF) AND THE SAME IS ACCOUNTED ON SCIENTIFIC BASIS WITHOUT TREATING THEM AS CURRENT ASSETS WITH THE FACILITY OF AMORTIZATION AND NOT BY NAMING THEM AS INTANGIBLE ASSETS CLAIMING DEPRECIATION. 20 . DURING THE PROCEEDI NGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SUPPORTED THE ACCOUNTING METHOD OF THE ASSESSEE IN THIS REGARD AND SUBMITTED THAT THE NEWS ITEMS DO NOT HAVE LONG LIFE AND THEY ARE NOT FIT FOR REPEATED BROADCASTING AND THEREFORE, NEWS AND THE NON - FICTION ITEMS HAVE TO BE AMORTIZED IN TOTO IN THE YEAR OF ACQUISITION AND USE. THEREFORE, CONSIDERING THE SAME THIS PART OF THE PURCHASES OF NEWS ITEMS AND NON - FICTION ITEMS ARE RIGHTLY DEBITED TO THE P & L ACCOUNT UNDER THE HEAD OPERATIONAL COST. THE DECISION BASE D ON A SCIENTIFIC ANALYSIS AND THEREFORE, THE DECISIONS OF THE AO AND THE CIT (A) ARE REQUIRED TO BE REVERSED ON THESE CLAIMS RELATING TO THE NEWS / NON - FICTION ITEMS . LD AR RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TELEVISION EIGHTEEN INDIA LTD (SUPRA) [2014] 364 ITR 597 (DELHI). 21 . SIMILARLY, ON THE TV PROGRAMS AND FILM RIGHTS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THEY WERE AMORTIZED AS PER THE NOTES 7 TO THE FINANCIAL STATEMENTS, WHICH IS EXTRACTED AND PLACED ABOVE. T HIS METHOD OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND THE SAME WAS ACCEPTED BY THE AO IN EARLIER ASSESSMENT YEARS WITHOUT ANY DISPUTE. CONSIDERING THE SET PRINCIPLE OF CONSISTENCY, THE CONCLUSIONS DRAWN BY THE AO AND THE CIT (A) ARE ALSO REQUIRED TO BE REVERSED. BRINGING OUR ATTENTION TO THE PROVISIONS OF RULE 9A & B OF THE IT RULES, 1962, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID RULES RELATE TO THE MANUFACTURERS AND DISTRIBUTORS ONLY . THEREFORE, THE RELIANCE BY THE REVEN UE AUTHORITIES ON THESE RULES IS MISPLACED. FURTHER, REFERRING TO THE ACCOUNTING STANDARD (AS) 26, RELATING TO THE INTANGIBLE ASSETS, LD COUNSEL FOR THE ASSESSEE READ OUT THE DEFINITION GIVEN TO THE INTANGIBLE ASSETS AT PARA 6.1 AND SUBMITTED THAT THE FIL M RIGHTS AND TV PROGRAMS ARE OUTSIDE THE SAID DEFINITION GIVEN TO THE INTANGIBLE ASSETS. FURTHER, LD COUNSEL FOR THE ASSESSEE ALSO BROUGHT OUR ATTENTION TO THE PARA 16 63 OF THE SAID AS - 26, AND MENTIONED THAT THE AMORTIZATION IS VERY MUCH RECOGNIZED IN THE ACCOUNTS AND THEREFORE, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IN FULL. 22 . ON THE OTHER HAND, LD DR FOR THE REVENUE SUBMITTED THAT THE DEFINITION TO THE INTANGIBLE ASSETS VIDE PARA 6.1 OF THE SAID AS - 26, THE EXPRESSION AN INTANGIBLE ASSET IS AN I DENTIFIABLE NON - MONETARY ASSET........HELD FOR USE IN .............. SUPPLY OF .......AND SERVICES......... AND IT COVERS THE TV PROGRAMS AND FILM RIGHTS . T HEREFORE, THE PROVISIONS OF AS - 26 SHOULD APPLY IN FULL. FURTHER, BRINGING OUR ATTENTION TO THE DEFINITION CURRENT ASSETS, LD DR SUBMITTED THAT THE CURRENT ASSET IS DEFINED AS AN ASSET SUCH AS RECEIVABLES, INVENTORY, WORK IN PROGRESS OR CASH IE CONSTANTLY FLOWING IN AND OUT OF THE ORGANIZATION IN THE NORMAL COURSE OF ITS BUSINESS , SUCH AS CASH IS C ONVERTED INTO GOODS AND THEN BACK INTO THE GOODS . IN ACCOUNTING, A NY ASSET BEING IN USE FOR LESSER THAN ONE YEAR , IS CONSIDERED A CURRENT ASSET . RELYING ON THE ABOVE DEFINITION, LD DR FOR THE REVENUE SUBMITTED THAT NEWS / NON - FICTIONAL ITEMS, TV PROGRA MS, FILM RIGHTS DID NOT CONSTANTLY FLOW IN AND OUT FOR THE ASSESSEE. IN FACT, ASSESSEE USES THESE TV PROGRAMS / FILM RIGHTS AS BAIT FOR ATTRACTING THE ADVERTISEMENTS AND TELEVISION RATING POINT (TRP) RATES. IN THAT SENSE, THE SAID RIGHTS DO NOT CONSTITUT E CURRENT ASSETS. THEREFORE, THESE ITEMS CONSTITUTE INTANGIBLE ASSETS, WHICH ARE ELIGIBLE FOR DEPRECIATION AND THEREFORE, THE AMORTIZATION ADOPTED BY THE ASSESSEE SHOULD DISMISSED AS DONE BY THE REVENUE AUTHORITIES DURING THE ASSESSMENT AS WELL AS FIRST A PPELLATE PROCEEDINGS. 23 . DURING REBUTTAL TIME, LD COUNSEL FOR THE ASSESSEE FILED A COPY OF THE ORDER OF THE ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS. M/S. SUN TV NETWORKS LTD IN ITA NOS.1515 TO 1520/MDS/2013 FOR THE AYS 2004 - 05 TO 2009 - 10, DATED 31.10.2 013 AND SUBMITTED THAT THE ISSUE OF AMORTIZATION OF TV PROGRAMS AND FILM RIGHTS WAS APPROVED IN THE SAID ORDER VIDE PARAS 8 AND 9 OF THE SAID TRIBUNALS ORDER. THE SAID PARAS READ AS UNDER: 8. NOW, WE TAKE UP THE COMMON ISSUE INVOLVED IN ALL THE APPEALS. THE ASSESSEE IS IN THE BUSINESS OF RUNNING SATELLITE TELEVISION CHANNELS. THESE CHANNELS TELECAST FILMS, SERIALS ETC THROUGH SATELLITE CHANNELS. THE RIGHTS OVER THESE FILMS ARE PURCHASED FROM THE PRODUCERS OF THE RESPECTIVE FILMS FOR BROADCASTING THROU GH SATELLITE TELEVISION. THESE RIGHTS COME WITH AN EMBARGO THAT HE FILMS SHALL NOT BE BROADCASTED OR AIRED FOR A SPECIFIED PERIOD FROM THE DATE OF RELEASE IN THEATRES DEPENDING UPON THE SUCCESS AT THE BOX OFFICE AND OTHER FACTORS. TILL THE TIME, SUCH FIL MS ARE BROADCASTED; THEY ARE TO BE TREATED AS STOCK - IN - TRADE. ONCE THE FILMS ARE BROADCASTED, THE PURCHASE VALUE OF THE FILMS IS WRITTEN - OFF. THE EXPENDITURE ON PURCHASE OF FILMS IS CLAIM IN THE FIRST YEAR ITSELF. THE A S SESSEE HAS GOT ONLY SATELLITE TEL ECASTING RIGHTS AND HAS NO UNIVERSAL RIGHTS FOR 17 AIRING THE FILMS OR SERIALS. ONCE THE FILM OR THE SERIAL IS AIRED, ITS VALUE IS DIMINISHED IN SUBSEQUENT TELECASTS. THE ASSESSEE EARNS SUBSTANTIAL REVENUE IN THE FIRST TELECAST ITSELF. IN REPEAT TELECAST, THE ASSESSEE IS ABLE TO GENERATE MARGINAL REVENUE. WHATEVER INCOME IS EARNED FROM THE SUBSEQUENT TELECASTS IS OFFERED AS INCOME WITHOUT CLAIMING ANY EXPENDITURE. THE ASSESSEE ALSO GENERATES REVENUE FROM BROADCASTING SERIALS THROUGH SATELLITE CHANNELS. T HE ASSESSEE GETS REVENUE FROM PRODUCTION AND BROADCASTING SERIALS ON THE LINES OF FEATURE FILMS , THE RIGHTS OF BROADCASTING SUCH SERIALS ARE ALSO TREATED AS STOCK IN TRADE TILL THE TIME THEY ARE AIRED AND THE EXPENSES ARE DEBITED TO THE PROFIT AND LOSS ACC OUNT. THE ASSESSEE TREATS THE FILMS AND THE SERIALS AT PAR AND APPLIED THE PROVISIONS OF RULE 9A AND 9B OF THE INCOME TAX RULES, AS ARE APPLICABLE IN CASE OF FILMS ON SERIALS AS WELL. ON THE OTHER HAND, THE CONTENTION OF THE REVENUE IS THAT THE FILM AND S ERIAL BROADCASTING RIGHTS ACQUIRED BY ASSESSEE ARE PERPETUAL IN NATURE. AFTER FIRST TELECAST, THE ASSESSEE DOES NOT DISCARD THE FILMS BUT CAREFULLY STORE THE SAME IN DIGITAL LIBRARY FOR AIRING THE SAME AGAIN. THEREFORE, THE ASSESSEE GETS ENDURING BENEFIT FROM THE RIGHTS ACQUIRED IN FILMS AND SERIALS AND THEY DO NOT EXPIRE ON THE DATE OF FIRST TELECAST AS CONTEMPLATED BY THE ASSESSEE. THE RIGHTS ARE INTANGIBLE ASSETS WITHIN THE MEANING OF EXPLANATION (III) TO SECTION 32 AND DO NOT FALL WITHIN THE PURVIEW OF SECTION 37(1). THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON SAME. 9. THE ISSUE OF AMORTIZATION OF COST OF MOVIE AND SERIAL RIGHTS , PROGRAMME PRODUCTION EXPENSES, CONSUMABLE AND MEDIA EXPENSES BY TREATING THEM AS INTANGIBLE ASSETS U/S 32(1)(II) HAS BEEN DEALT IN DETAIL BY THE CIT (A) IN HI S ORDER DATED 23.2.2013 RELEVANT TO THE AY 2006 - 07 AND 2007 - 08. WE FULLY AGREE WITH THE DETAILED FINDINGS AND THE REASONING GIVEN BY THE CIT (A) IN HIS ORDER ALLOWING THIS GROUND OF APPEAL OF THE ASSESSEE. FOR TH E SAKE OF BREVITY, WE ARE NOT REPRODUCING THE FINDING OF THE CIT (A) IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. K.Y. PILLAH & SONS REPORTED AS 63 ITR 411 SUBSEQUENTLY FOLLOWED BY THE HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. GLOBAL VANTEDGE (P) LTD REPORTED AS 354 ITR 21 (DEL). THE LD DR HAS NOT BEEN ABLE TO CONTROVERT THE WELL REASONED ORDER OF THE CIT (A) ON THE ISSUE. ACCORDINGLY, THE FINDINGS OF THE CIT (A) ON THE ISSUE ARE AFFIRMED AND THIS GROU ND OF APPEAL OF THE REVENUE IN RESPECT OF ALL THE AYS IS DISMISSED. 24 . FURTHER, ON THE ISSUE OF ALLOWABILITY OF THE CLAIM ON THE NEWS ITEMS / NON - FICTIONAL ITEMS, LD COUNSEL FOR THE ASSESSEE ALSO BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TELEVISION EIGHTEEN INDIA LTD (NO.1) [2014] 364 ITR 597 (DELHI), WHEREIN THE ISSUE RELATING TO NEWS / NON - FICTIONAL ITEMS, WAS DEC IDED IN FAVOUR OF THE ASSESSEE, AND READ OUT THE HELD PORTION OF THE SAID JUDGMENT WHICH READS AS UNDER: HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISPUTE THAT THE DATA BASE OF THE PROGRAMS WHICH WERE UTILISED FOR THE CREATION OF NEWS ARCHIVES BELO NGED TO THE ASSESSEE. THE FUTURE LIKELIHOOD OF THESE RESOURCES BEING A POSSIBLE SOURCE OF REVENUE COULD NOT JUSTIFY THEIR INCLUSION IN THE CAPITAL STREAM. FURTHERMORE, THE EXPENDITURE, I.E., 10 PER CENT. RS. 88,83,128/ - WAS A PART OF THE ENTIRE TOTAL EX PENDITURE INCURRED BY THE ASSESSEE WHICH WAS CONCEDEDLY TREATED AS REVENUE, EVEN OTHERWISE. 24.1. THUS, IT IS THE CLAIM OF THE ASSESSEE THAT ALL THE CLAIMS OF THE ASSESSEE ARE ALLOWABLE ON MERITS TOO IN VIEW OF THE COVERED NATURE OF THE ITEMS. 18 2 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED PRECEDENTS AND PAPER BOOK FILED BEFORE US. THE CASE OF THE ASSESSEE ON THE MERITS IS THAT THE ASSESSEE HAS A METHOD OF VALUATION OF THE NEWS ITEMS/NON FI CTIONAL IN NATURE, TV PROGRAMS AND THE FILM RIGHTS. THE DETAILS ARE GIVEN IN THE AFOREMENTIONED NOTE NO 7 TO THE FINANCIAL STATEMENTS. ACCORDING TO THE SAME, WHILE THE NEWS ITEMS PURCHASED ARE DEBITED TO THE P AND L ACCOUNT AS THEY DO NOT HAVE THE REPEAT TELECAST VALUE, OTHER ITEMS LIKE THE TV PROGRAM AND THE FILM RIGHTS CONSTITUTES CURRENT ASSETS, WHICH ARE AMORTISED OVER THE YEARS AND THE PERIOD OF SUCH AMORTIZATION IS GIVEN IN THE SAID NOTE. PER CONTRA , THE CASE OF THE REVENUE ON THESE ISSUES IS TH AT THESE ITEMS CONSTITUTE INTANGIBLE DEPRECIABLE CAPITAL ASSETS AND PROVISIONS OF SECTION 32 OF THE ACT APPLY. CONSIDERING THE SAME, WE SHALL NOW UNDERTAKE TO DISCUSS THE ITEM WISE ADJUDICATION AS FOLLOWS. A. ON THE DEBITS RELATING TO THE PURCHASES OF TH E NEWS ITEMS : REGARDING THE NATURE OF THE NEWS ITEMS PURCHASED BY THE ASSESSEE AND DEBITED TO THE P AND L ACCOUNT, WE FIND IT IS IN THE COMMON KNOWLEDGE OF EVERY CITIZEN THAT THE NEWS ITEMS DO NOT HAVE ENDURING BENEFIT. NORMALLY, THE NEWS ITEMS/NON FICTION AL ITEMS PURCHASED BY THE ASSESSEE LOSE ITS VALUE ONCE THEY ARE TELECAST. THEREFORE, SUCH ITEMS DO NOT HAVE REPEAT TELECAST VALUE IN TERMS OF THE REVENUE GENERATION BY WAY OF ADVERTISEMENT FROM THE SPONSORS. AS SUCH, IT IS A SETTLED ISSUE AT THE LEVEL OF H ONBLE DELHI HIGH COURT IN THE CASE OF TELEVISION EIGHTEEN INDIA LTD (SUPRA) THAT THE CLAIMS OF THE ASSESSEE RELATING TO NEWS / NON - FICTIONAL ITEMS ARE ALLOWABLE. EVEN OTHERWISE, EVEN IF SOME INCOME GENERATED, THAT IS NOT CRITERION FOR DESCRIBING THE ITEM S AS INTANGIBLE ASSETS FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 32(II) OF THE ACT. WE RELY ON THE ABOVE REFERRED DELHI HIGH COURTS JUDGMENT IN THE CASE OF TELEVISION EIGHTEEN INDIA LTD (SUPRA). FURTHER, WE FIND THAT THE ASSESSEE HAS A DECL ARED METHOD OF ACCOUNTING RELATING TO ACCOUNTING OF THESE TRANSACTIONS. HE HAS BEEN CONSISTENTLY FOLLOWING THE SAME WITHOUT ANY CHANGE. IN FACT, THE REVENUE HAS CONSISTENTLY ALLOWED THE CLAIM IN THE PAST. THIS IS FOR THE FIRST TIME, AO DISTURBED THE CLAIM OF THE ASSESSEE AND INVOKED THE PROVISIONS OF SECTION 32 (II) OF THE ACT, WITHOUT ANY SUSTAINABLE REASONING. THEREFORE, CONSIDERING ALL THE POINTS MENTIONED ABOVE, WE ARE OF THE FIRM OPINION THAT THE DECISION OF THE AO/CIT(A) IS UNSUSTAINABLE LEGALLY. HENC E, THE ASSESSEE IS ENTITLED TO CLAIM THE PURCHASES OF NEWS ITEMS/NON 19 FICTIONAL ITEMS AS AN ALLOWABLE EXPENDITURE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE RELEVANT ADDITION. B. ON THE DEBITS RELATING TO THE PURCHASES OF THE TV PROGRAMS/FILM RIGHTS: ASS ESSEE AMORTISED THE INVENTORIES AS PER THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY HIM OVER THE YEARS. IN FACT, THE REVENUE HAS CONSISTENTLY ALLOWED THE CLAIM IN THE PAST. THIS IS FOR THE FIRST TIME, AO DISTURBED THE CLAIM OF THE ASSESSEE AND INVOK ED THE PROVISIONS OF SECTION 32 (II) OF THE ACT WITHOUT ANY SUSTAINABLE REASONING. WE HAVE PERUSED HE JUDGMENT OF HONBLE HIGH COURT OF DELHI AND THE ORDER OF THE TRIBUNAL OF CHENNAI BENCH IN THE CASE OF M/S SUN TV NETWORKS LTD (SUPRA). WE HAVE ALSO EXTRACT ED THE RELEVANT PARAGRAPHS AND ALREADY PLACED IN THIS ORDER ABOVE. WE FIND SIMILAR ISSUE OF AMORTIZATION OF THE TV PROGRAMS/FILM RIGHTS CAME UP BEFORE THE CHENNAI BENCH OF THE TRIBUNAL WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND REJECTED TH E AOS PROPOSAL TO INVOKE THE PROVISIONS OF SECTION 32(II) OF THE ACT IN RESPECT OF THE ABOVE PROGRAMS/ RIGHTS . AS SUCH, THE LD DRS ARGUMENT ON THE APPLICABILITY OF THE AS - 26 TO THE TV PROGRAMS AND FILM RIGHTS IS NOT SUPPORTED BY ANY PRECEDENTS AND THERE FORE, THE ARGUMENTS RAISED BY THE REVENUE ARE NOT ALLOWED. THUS, CONSIDERING THE COVERED NATURE OF THE ISSUE AS WELL AS THE CONSISTENT METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN THIS REGARD AND ALSO IN THE ABSENCE OF ANY CONTRARY MATERIAL TO SUPPORT THE ARGUMENTS OF THE REVENUE AGAINST THE ASSESSEES CLAIM, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IN THE IMPUGNED ORDER IS REQUIRED TO BE REVERSED. ACCORDINGLY, GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE ARE ALLOWED . 26 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNC ED IN THE OPEN COURT ON 12 TH AUGUST, 2015. SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 12 .8 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 20 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