M/s. Sri Baba Theatres Pvt Ltd., Coimbatore V. DCIT, Coimbatore

ITA 1618/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64600 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-12-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: T VASUDEVAN
• Keywords: Business income; Cost of acquisition; Speculation loss
• Section: 234B; 43(5); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NOS.357 & 1618/MDS/2012 ASSESSMENT YEARS : 2008-09 & 2009-10 M/S SRI BABA THEATRES PVT. LTD NO.36/52, DEVANGA HIGH SCHOOL ROAD R.S.PURAM COIMBATORE [PAN AAACB4551K] VS THE DY. CIT COMPANY CIRCLE I(3) COIMBATORE (APPELLANT) (RESPONDENT) I.T.A.NO.478/MDS/2012 ASSESSMENT YEAR : 2008-09 THE DY. CIT COMPANY CIRCLE I(3) COIMBATORE VS M/S SRI BABA THEATRES PVT. LTD NO.36/52, DEVANGA HIGH SCHOOL ROAD R.S.PURAM COIMBATORE (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.VASUDEVAN, ADVOCATE DEPARTMENT BY : DR.S.MOHARANA, CIT/DR DATE OF HEARING : 06-12-2012 DATE OF PRONOUNCEMENT : 07-12-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER I.T.A.NOS.357/MDS/2012 AND 478/MDS/2012 ARE CORSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE I.T.A.NOS.357,1618 & 478/2012 :- 2 -: CIT(A)-I , COIMBATORE, DATED 26.12.2011, FOR ASSESS MENT YEAR 2008- 09. I.T.A.NO. 1618/MDS/2012 IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-I, COIMBATORE, DATE D 22.6.2012, FOR ASSESSMENT YEAR 2009-10. 2. IN BOTH THE APPEALS OF THE ASSESSEE THE COMMON GR OUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE CIT(A) E RRONEOUSLY APPLIED THE PROVISIONS OF SECTION 73(4) TREATING THE BUSINE SS LOSS OF ` 2,15,23,899/- IN ASSESSMENT YEAR 2008-09 AND ` 3,31,26,699/- IN ASSESSMENT YEAR 2009-10 AS LOSS ARISING ON PURCHASE AND SALE OF SHARES AS SPECULATION LOSS AND DISALLOWED INTEREST PAYMENT OF ` 25 LAKHS IN ASSESSMENT YEAR 2008-09 AND ` 15,81,977/- IN ASSESSMENT YEAR 2009-10 PAID ON ACCOUNT OF SHARES TRANSACTIONS . 3. THE BRIEF FACTS FOR ASSESSMENT YEAR 2008-09 ARE THA T THE ASSESSEE OFFERED INCOME OF ` 56,50,000/- BEING PROFIT ARISING ON ACCOUNT OF SELLING OF SATELLITE RIGHTS TO M/S RAJ T ELEVISION NETWORK LTD. AS UNDER: NAME OF MOVIE COST OF PURCHASE SALE OF RIGHTS NAMMAVAR 5,00,000 10,00,000 DHANDAYUTHAPANI 5,50,000 12,00,000 MANASUKKULLE 6,00,000 12,00,000 I.T.A.NOS.357,1618 & 478/2012 :- 3 -: VASANTHAM VANDACHU 10,00,000 17,00,000 KARKA KASADARA 17,50,000 30,00,000 GANAPATHY VANDACHI 5,50,000 25,00,000 TOTAL 49,50,000 1,06,00,000 PROFIT 56,50,000 4. THE ASSESSEE-COMPANY ALSO INCURRED LOSS ON SALE OF SHARES OF RAJ TELEVISION NETWORK LTD. OF ` 1,94,09,058/-, LOSS ON SALE OF SHARES OF OTHER COMPANIES OF ` 16,52,923/- AND ALSO INCURRED SHARE EXPENSES OF ` 4,61,908/-, TOTALING TO ` 2,15,23,889/-. 5. THE ASSESSING OFFICER DISALLOWED THE LOSS ON SALE O F SHARES BY INVOKING THE PROVISIONS OF EXPLANATION TO SECTIO N 73(4) OF THE ACT WHICH PROVIDES THAT WHERE THE COMPANY OTHER THAN IN VESTMENT COMPANY OR NBFC PURCHASES OR SELLS OR DEALS IN SHAR ES, THEN THE LOSS/PROFIT ARISING THEREFROM SHOULD BE TREATED AS SPECULATIVE PROFIT/LOSS. THE ASSESSING OFFICER ALSO OBSERVED T HAT THE ASSESSEE HAS PAID INTEREST OF ` 25 LAKHS TO M/S R.S.MANNADIAR & SONS FOR INVESTMEN T IN SHARES AND THEREFORE, ALSO DISALLOWED THE EXPEN DITURE ON ACCOUNT OF INTEREST. HE HELD THAT THE LOSS TOTALING TO ` 2,40,23,899/- WAS SPECULATIVE LOSS WHICH CAN BE ADJUSTED AGAINST FUTU RE PROFITS. I.T.A.NOS.357,1618 & 478/2012 :- 4 -: 6. IN ASSESSMENT YEAR 2009-10 ALSO THE ASSESSING OFFIC ER FOUND FROM THE PROFIT & LOSS ACCOUNT THAT THE ASSESSEE H AS CLAIMED SHARE TRADING LOSS OF ` 3,31,26,669/-. HE ALSO OBSERVED THAT HE ASSESSEE HAS BORROWED MONEY FROM A GROUP COMPANY NAMELY, CRS MANNADIAR & BROS. AND PAID INTEREST THEREON TO THEM AMOUNTIN G TO ` 15,81,977/- FOR PURCHASE OF SHARES WHICH WAS DEBITED IN THE PRO FIT & LOSS ACCOUNT. THEREFORE, A TOTAL AMOUNT OF ` 3,47,08,646/- WAS DISALLOWED BY THE ASSESSING OFFICER TREATING IT AS SPECULATIVE LOSS T O BE ADJUSTED AGAINST FUTURE PROFITS. 7. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED AS UNDER: THE ASSESSEE COMPANY HAS BEEN REGULARLY ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES IN ADDITION TO EXHIB ITION AND DISTRIBUTION OF FILMS AND SALE OF SATELLITE RIGHTS. CLAUSE 17 OF THE OBJECTS CLAUSE OF THE COMPANY PERMITS THE COMPANY TO ENGAGE IN PURCHA SE AND SALE OF SHARES. THE ASSESSING OFFICER HAS DISALLOWED THE LO SS CLAIMED AS BUSINESS LOSS AND HAS TREATED THE SAME AS SPECULATI ON LOSS U/S 73(4) TO BE ADJUSTED AGAINST SPECULATIVE PROFITS IN FUTUR E. EXPLANATION TO SECTION 73 PROVIDES THAT WHERE ANY PART OF THE BUSI NESS OF A COMPANY (OTHER THAN CERTIFIED SPECIFIED COMPANIES AS MENTIO NED IN THE EXPLANATION) CONSISTS IN THE PURCHASE AND SALE OF S HARES IN OTHER COMPANIES, SUCH COMPANIES SHALL, FOR THE PURPOSES O F THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF S UCH SHARES. IT IS CLEAR FROM THE ABOVE PROVISION THAT SALE AND PURCHA SE OF SHARES FROM OTHER COMPANIES, WITHIN THE AMBIT OF THE EXPLANATIO N, MUST BE CARRIED OUT AS ACTIVITY OF BUSINESS. THE ASSESSEE A S A MATTER OF BUSINESS EXPEDIENCY WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OF RAJ TELEVISION NETWORK LIMITED. T HE MEMORANDUM OF UNDERSTANDING ENTERED INTO ON 7 TH JUNE, 2004 BETWEEN THE APPELLANT COMPANY AND RAJ TELEVISION NETWORK LIMITED IS BEING SUBMITTED ALONG WITH PETITION FOR ADMITTING ADDITIONAL FRESH EVIDEN CE. IN THE COURSE OF DEALING WITH RAJ TELEVISION NETWORK LIMITED, THE AS SESSEE COMPANY I.T.A.NOS.357,1618 & 478/2012 :- 5 -: WAS ABLE TO SELL ITS SATELLITE RIGHTS TO THEM AT PR EMIUM. WHILE DOING SO, THE ASSESSEE COMPANY CAME TO CONCLUSION THAT THE BU SINESS OR PURCHASE AND SALE OF SHARES OF RAJ TELEVISION NETWO RK LIMITED WOULD ALSO BE A PROFITABLE BUSINESS PROPOSITION. RAJ TELE VISION NETWORK LIMITED CAME OUT WITH A PUBLIC ISSUE DURING APRIL 2 007 AND THE ASSESSEE COMPANY THOUGHT IT WOULD BE PROFITABLE TO TRADE IN THE SHARES. THE ASSESSEE COMPANY MADE A TOTAL INVESTMENT OF RS. 6,08,37,040 IN SHARES OF RAJ TELEVISION NETWORK LIMITED. IN ADDITI ON TO THE ABOVE SUM, AN AMOUNT OF RS.2,50,00,000/- WAS BORROWED FROM C.R .S.MANNADIAR & BRO., FOR MAKING THE ABOVE INVESTMENTS. THE ASSESSE E COMPANY INCURRED A LOSS OF RS.1,94,09,057/- ON ACCOUNT OF S ALE OF RAJ TELEVISION NETWORK LIMITED SHARES. HENCE, IT IS SUBMITTED THAT THE LOSS AMOUNTING TO RS.1,94,09,057/- DOES NOT COME WITHIN THE AMBIT OF EXPLANATION TO SECTION 73. THE LOSS OCCURRED TO THE ASSESSEE DURIN G THE COURSE OF NORMAL BUSINESS ACTIVITY. 8. THE CIT(A), AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE GROUNDS BY OBSERVING AS UND ER: 4.3 I HAVE GONE THROUGH THE SUBMISSIONS MADE BY TH E APPELLANT AND THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING O FFICER APPLYING THE PROVISIONS OF SECTION 73(4) TREATED THE LOSS ARISIN G ON PURCHASE AND SALE OF SHARES AS SPECULATION LOSS. THE ASSESSING O FFICER ALSO DISALLOWED INTEREST OF RS.25,00,000/- PAID DURING T HE YEAR TO M/S R.S.MANNADIAR & SONS ON ACCOUNT OF SHARE TRANSACTIO N. GOING THROUGH THE PROVISIONS OF SECTION 73(4), IT IS CLEAR THAT T HE APPELLANT COMES UNDER THE EXPLANATION TO SECTION 73 AND I CONFIRM T HE ACTION OF THE ASSESSING OFFICER IN TREATING THE LOSS AS SPECULATI ON LOSS TO BE ADJUSTED AGAINST FUTURE SPECULATIVE PROFITS. THESE GROUNDS OF APPEAL ARE DISMISSED. 9. THE A.R OF THE ASSESSEE FILED BEFORE US A COPY OF THE CBDT CIRCULAR NO.204 DATED 24.7.1976 AND BY REFERRING TO PARA 19.2 OF THE CIRCULAR, SUBMITTED THAT THE OBJECT OF THE PROVISIO N CONTAINED IN SECTION 73 WAS TO CURB THE FEATURES RESORTED TO BY BUSINESS HOUSES CONTROLLING I.T.A.NOS.357,1618 & 478/2012 :- 6 -: GROUP OF COMPANIES TO MANIPULATE AND REDUCE THE TAX ABLE INCOME UNDER THEIR CONTROL. HE SUBMITTED THAT IN THE PRES ENT CASE OF THE ASSESSEE, THERE WAS NO SUCH DEVICE ADOPTED BY IT. THE LOSS WAS INCURRED IN THE BUSINESS OF SHARE TRADING CARRIED O N BY THE ASSESSEE. HE FURTHER RELIED ON THE DECISION OF THE HON'BLE KA RNATAKA HIGH COURT IN THE CASE OF MYSORE ROLLING MILLS PVT. LTD. VS CI T, 195 ITR 404, WHEREIN IT WAS HELD THAT THE FACTS OF EACH CASE WIL L HAVE TO BE EXAMINED TO ARRIVE AT A CONCLUSION WHETHER THE TRAN SACTION IN QUESTION IS A SPECULATIVE VENTURE OR BUSINESS. THE NATURE O F THE ASSESSEES BUSINESS IN GENERAL, THE PURPOSE BEHIND THE PARTICU LAR TRANSACTION, THE EFFECT OF THE TRANSACTION, ETC., ARE ALL TO BE CONS IDERED. UNLESS IT IS CONCLUSIVELY ESTABLISHED THAT THE ASSESSEE ENTERED INTO THE TRANSACTION CLEARLY AS A SPECULATIVE VENTURE, THE COURTS CANNOT INFER THE TRANSACTION TO BE A SPECULATIVE VENTURE ONLY BECAUSE THE ASSES SEE DERIVED SUBSEQUENTLY THE BENEFIT OF TAX REDUCTION. THE A.R FURTHER SUBMITTED THAT THE HON'BLE KARNATAKA HIGH COURT IN THE SAID D ECISION ALSO WAS IN AGREEMENT WITH THE DECISION OF THE FULL BENCH OF TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ OIL MILLS VS CIT, 115 ITR 824(GUJ.) WHEREIN THE HON'BLE HIGH COURT HELD THAT IN SPECULA TIVE TRANSACTION THE MODUS OPERANDI OF PERSONS INDULGING IN THEM IS THAT WHEN ONE ENTERS INTO A CONTRACT OF PURCHASE, HE ALSO SIMULTANEOUSLY ENTERS INTO ONE OR I.T.A.NOS.357,1618 & 478/2012 :- 7 -: MORE CONTRACTS OF SALE AGAINST THE SAME QUANTITY DE LIVERABLE AT THE SAME TIME EITHER TO THE ORIGINAL VENDOR OR TO SOMEO NE ELSE, SO AS EITHER TO SECURE PROFIT OR TO MINIMIZE LOSS, BEFORE THE VAIDA DAY; AND, SIMILARLY, WHEN HE ENTERS INTO A CONTRACT OF SALE, HE SIMULTANEOUSLY ENTERS INTO ONE OR MORE CONTRACTS TO PURCHASE THE S AME QUANTITY BEFORE THE VAIDA DAY. THE RESULT OF SUCH DEALING S, WHEN THE SALE AND PURCHASE ARE TO AND FROM THE SAME PERSON, HAS THE E FFECT OF CANCELLING THE CONTRACTS LEAVING ONLY DIFFERENCES TO BE PAID. 10. FURTHER, THE A.R OF THE ASSESSEE RELIED ON THE DEC ISION OF THE HON'BLE P&H HIGH COURT IN THE CASE OF PORRITS AND S PENCER (ASIA) LTD. VS CIT, 329 ITR 222, WHEREIN IT WAS HELD THAT LOSS INCURRED ON PURCHASE AND SALE OF UTI UNITS WITHIN THE MEANING O F SECTION 73 AND THEREFORE, THE ASSESSEE IS ENTITLED TO SET OFF OF SUCH LOSS; TRANSACTION OF PURCHASE AND SALE OF UNITS HAVING BEEN HELD TO B E GENUINE BY THE TRIBUNAL, IT IS NOT MERELY BECAUSE IT HAS BEEN ENTE RED INTO WITH A MOTIVE TO AVOID TAX. 11. THE A.R OF THE ASSESSEE FURTHER RELIED ON THE DECI SION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S SHRI V.PRABHAKAR RAM IN I.T.A.NOS. 1286 AND 1287/MDS/2011, ORDER DAT ED 28.6.2012 I.T.A.NOS.357,1618 & 478/2012 :- 8 -: WHEREIN IT WAS HELD THAT LOSS SUFFERED BY THE ASSE SSEE DURING THE FUTURE AND OPTION TRANSACTION WAS NOT A SPECULATIVE LOSS. 12. ON THE OTHER HAND, THE DR RELIED ON EXPLANATION TO SECTION 73 AND SUBMITTED THAT IT WAS A DEEMING PROVISION TH AT WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABL E UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPER TY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES, OR A COMPANY THE P RINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHAR ES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSE OF T HIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SAL E OF SUCH SHARES. HE SUBMITTED THAT IT IS NOT TO BE SEEN WHETHER THE TRANSACTION OF PURCHASE AND SALE INCURRED BY THE ASSESSEE ARE ACT UALLY SPECULATIVE IN NATURE FOR THE APPLICATION OF SECTION 73 IN THE CAS E OF LIMITED COMPANIES. 13. THE DR RELIED ON THE DECISION OF HON'BLE CALCUTTA H IGH COURT IN THE CASE OF R.P.G. INDUSTRIES LTD. VS CIT, 338 I TR 313 WHERE IT WAS HELD THAT IN VIEW OF THE LEGAL FICTION CREATED BY E XPLANATION TO SECTION I.T.A.NOS.357,1618 & 478/2012 :- 9 -: 73, LOSS SUFFERED BY A COMPANY IN SHARE TRANSACTION IS TO BE TREATED AS SPECULATIVE LOSS NOTWITHSTANDING THE FACT THAT, THE RE WAS ACTUAL DELIVERY OF SCRIPS AND SHARES AND THE TRANSACTION I S NOT WITHIN THE PURVIEW OF THE DEFINITION OF SPECULATIVE TRANSACTIO N IN SECTION 43(5) OF THE ACT. 14. HE FURTHER RELIED ON THE DECISION OF THE HON'BLE CA LCUTTA HIGH COURT IN THE CASE OF PAHARPUR COOLING TOWERS LTD. V S CIT, 338 ITR 295, WHEREIN IT WAS HELD THAT IN VIEW OF THE LEGAL FICTI ON IN EXPLANATION TO SECTION 73, THE TRANSACTIONS OF PURCHASE AND SALE O F SHARES MADE BY A COMPANY OTHER THAN A COMPANY FALLING IN THE EXEMPTE D CATEGORIES ARE TO BE TREATED AS SPECULATIVE TRANSACTIONS EVEN IF T HE SALES ARE EFFECTED BY THE PHYSICAL DELIVERY OF SHARES AND THE LOSS ARI SING FROM THE PURCHASE AND SALE OF SHARES HAS TO BE TREATED AS LO SS ON SPECULATIVE BUSINESS. 15. THE DR FURTHER RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS BIG APPLE CLOTHI NG (P) LTD., 5 TRIB.(44) (DEL) WHERE IT WAS HELD THAT ASSESSEE-COM PANY WHICH HAD PURCHASED AND SOLD THE SHARES OF OTHER COMPANIES DO ES NOT COME WITHIN THE EXCLUDED CATEGORIES OF EXPLANATION TO SECTION 73 , HENCE, IT SHALL BE DEEMED TO BE CARRYING ON SPECULATION BU SINESS TO THE EXTENT I.T.A.NOS.357,1618 & 478/2012 :- 10 -: OF PURCHASE AND SALE OF SUCH SHARES, THEREFORE, THE ORDER OF THE CIT(A) DIRECTING THE ASSESSING OFFICER TO ALLOW THE SAID L OSS AS BUSINESS LOSS WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE W AS NOT JUSTIFIED. 16. THE DR ALSO RELIED ON THE DECISION OF THE AHMEDABAD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMP SPG. & WVG . MILLS PVT. LTD VS ITO, 100 ITD 142 (AHD) (SB) WHERE IT WAS HELD THAT PROVISIONS OF EXPLANATION TO SECTION 73 APPLY TO ALL THE TRANSACT IONS OF PURCHASE AND SALE OF SHARES OF THE COMPANIES WHOSE BUSINESS CONS ISTS OF PURCHASE AND SALE OF SHARES AND THE SAME CANNOT BE RESTRICTE D TO ONLY THOSE TRANSACTIONS WHICH ARE FOUND TO BE A DEVICE FOR TAX AVOIDANCE; LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES ACQUIRE D BY ALLOTMENT ATTRACTS PROVISIONS OF EXPLANATION TO SECTION 73 AN D THE LOSS IS TO BE TREATED AS SPECULATIVE LOSS. 17. IN THE REJOINDER, THE A.R OF THE ASSESSEE RELIED O N THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS CONCORD COMMERCIALS PVT. LTD., 95 ITD 117(MUMBAI) (SB) WHE REIN IT WAS HELD THAT CHARACTER OF GROSS TOTAL INCOME FOR THE PURPOS E OF EXPLANATION TO SECTION 73 IS TO BE EXAMINED IN THE LIGHT OF THE C HARGEABILITY TO TAX OF VARIOUS COMPONENTS OF THE GROSS TOTAL INCOME UNDER THE SPECIFIED HEADS OF INCOME; ASSESSEES GROSS TOTAL INCOME AFT ER NECESSARY I.T.A.NOS.357,1618 & 478/2012 :- 11 -: ADJUSTMENTS BEING DIVIDEND INCOME CHARGEABLE UNDER THE HEAD OTHER SOURCES, EXPLANATION TO SECTION 73 WILL NOT APPLY AND THE ASSESSEE WOULD BE ENTITLED TO SUCH LOSSES INCURRED IN SALE A ND PURCHASE OF SHARES AGAINST THE OTHER INCOME. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS ARE THAT THE ASS ESSEE-COMPANY, INTER ALIA, ALSO ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SUFFERED LOSS OF ` 2,15,23,899/- IN ASSESSMENT YEAR 2009-09 AND ` 3,31,26,699/- IN ASSESSMENT YEAR 2009-10. THE ASSE SSING OFFICER TREATED THE SAID LOSS AS SPECULATIVE LOSS IN VIEW O F EXPLANATION 1 TO SECTION 73 AND THEREBY DISALLOWED THE CLAIM OF THE ASSESSEE OF SET OFF OF THIS LOSS WITH NON-SPECULATIVE BUSINESS INCOME. 19. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 20. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE -COMPANY DOES NOT FALL WITHIN THOSE COMPANIES IN RESPECT OF WHICH EXCEPTION CARVED OUT IN THE SAID EXPLANATION. THE CLAIM OF T HE ASSESSEE BEFORE US IS THAT AS THE SAID TRANSACTIONS WERE NOT ENTERE D INTO WITH THE I.T.A.NOS.357,1618 & 478/2012 :- 12 -: MOTIVE TO EVADE PAYMENT OF TAX AND THEREFORE, EXPLA NATION 1 TO SECTION 73 IS NOT ATTRACTED IN THIS CASE. 21. THE A.R RELIED UPON THE DECISION OF THE HON'BLE P&H HIGH COURT IN THE CASE OF PORRITS AND SPENCER (ASIA) LTD VS CIT (SUPRA) AND THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL I N THE CASE OF ACIT VS SHRI V.PRABHAKAR RAM IN I.T.A.NOS.1286 AND 1287/ MDS/2011 (SUPRA) AND THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MYSORE ROLLING MILLS PVT. LTD VS CIT (SUPRA). 22. WE FIND THAT THE HON'BLE P&H HIGH COURT WAS CONFRON TED WITH THE CASE WHERE LOSS ACCRUED TO THE ASSESSEE O N A TRANSACTION IN UNITS WHEREAS EXPLANATION 1 TO SECTION 73 IS APPLIC ABLE IN CASES WHERE LOSS HAS ARISEN BECAUSE OF DEALING IN SHARES. IN T HE INSTANT CASE, THE LOSS TO THE ASSESSEE-COMPANY AROSE BECAUSE OF DEALI NG IN SHARES AND THEREFORE, THE SAID DECISION OF THE P&H HIGH COURT IS NOT APPLICABLE. 23. SIMILARLY, THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI V. PRABHAKAR RAM(SUPRA) RELATES TO TRANSACTIONS IN OPTIONS AND FUTURES WHICH ARE DERIVATIVES IN SHARES AND THEREFORE, DISTINGUISHABLE FROM THE FACTS OF THE INSTANT CASE AND NOT APPLICABLE. I.T.A.NOS.357,1618 & 478/2012 :- 13 -: 24. WE FIND THAT THE AHMEDABAD SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF AMP SPG. & WVG. MILLS PVT. LTD VS ITO(S UPRA), AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HON'BLE KARN ATAKA HIGH COURT IN THE CASE OF MYSORE ROLLING MILLS PVT. LTD (SUPRA), HAS HELD AS UNDER: A CAREFUL PERUSAL OF EXPLANATION TO SECTION 73 IND ICATES THAT THIS EXPLANATION LAYS DOWN THAT THE EXPRESSION SPE CULATION BUSINESS WAS UNDER THE SPECIAL CIRCUMSTANCES, WILL COVER ASSESSEES BUSINESS TO THE EXTENT TO WHICH THE BUS INESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. UNLIKE THE DEFINITION UNDER SECTION 43(5) WHICH DEFINES SPECU LATIVE TRANSACTIONS, THE PROVISIONS OF EXPLANATION TO SECT ION 73 LAY DOWN THE CIRCUMSTANCES IN WHICH, AND THE EXTENT TO WHICH, A BUSINESS IS TO BE DEEMED AS SPECULATION BUSINESS. THE THRUST OF THE PROVISIONS UNDER EXPLANATION TO SECTI ON 73 IS ON THE NATURE OF BUSINESS, RATHER THAN NATURE OF TR ANSACTION. EVEN THE CIRCULAR ITSELF PROVIDES THAT THE EXPLAN ATION WOULD APPLY TO THE BUSINESS OF PURCHASE AND SALE OF SHARE S OF CERTAIN COMPANIES. THEREFORE, LOOKED AT FROM ANY ANGLE, THE CASE OF THE ASSESSEE IS COVERED BY THE PLAIN, CLEAR AND UNAMBIG UOUS STATUTORY LANGUAGE OF THE PROVISIONS OF EXPLANATI ON TO SECTION 73 WHICH REQUIRES NO EXTERNAL AID, LIKE OBJECT, ETC . TO CONSTRUE THEM DIFFERENTLY AND THEREFORE, THE LOSS SUFFERED ON ACCOUNT OF ACQUISITION BY ALLOTMENT AND SALE THEREOF BEING IN THE NATURE OF LOSS ARISING ON PURCHASE AND SALE OF SHAR ES OF A COMPANY AND ALSO BEING IN THE NATURE OF BUSINESS OF THE ASSESSEE BEING PURCHASE AND SALE OF SHARES OF OTHER COMPANIES IS TO BE TAKEN AS A SPECULATIVE LOSS. 25. IN RESPECT OF THE INTEREST EXPENDITURE OF ` 25 LAKHS IN ASSESSMENT YEAR 2008-09 AND ` 15,81,977/- IN ASSESSMENT YEAR 2009- 10 PAID ON ACCOUNT OF SHARE TRANSACTIONS, IT IS NOT IN DISPUTE THAT THE SAME IS RELATABLE TO SHARE BUSINESS OF THE ASSESSE E AND IT IS ONLY I.T.A.NOS.357,1618 & 478/2012 :- 14 -: CONSEQUENTIAL TO THE DECISION IN RESPECT OF THE NAT URE OF LOSS IN RESPECT OF SHARE BUSINESS. 26. OUR VIEW IS FORTIFIED BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GANJAM TRADING CO. PVT. LTD VS DCIT, [2012] (10) TMI 667 ITAT, MUMBAI, WHERE IT WAS HELD THAT AUTHORITIES ARE ALSO JUSTIFIED IN DISALLOWING INTEREST EXPENSES TOWARDS THE LOSS ARISING FROM TRADING OF SHARES AS WHILE COMPUTING T HE PROFIT AND LOSS FROM TRADING OF SHARES, ALL EXPENSES HAVE TO BE CON SIDERED. DISALLOWANCE OF INTEREST AND TREATING THE SAME AS P ART OF SPECULATION BUSINESS IN BOTH THE YEARS UNDER CONSIDERATION IS U PHELD. 27. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. HENCE THE GROUNDS OF APPEAL OF THE ASSESSEE FOR BO TH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DISMISSED. 28. IN BOTH THE ASSESSMENT YEARS THE ASSESSEE HAS ALSO TAKEN GROUNDS AGAINST CHARGING OF INTEREST U/S 234B AND 234D. 29. NO ARGUMENTS WERE MADE ON THIS ISSUE AT THE TIME OF HEARING BY THE A.R OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST I.T.A.NOS.357,1618 & 478/2012 :- 15 -: U/S 234B AND 234D IS CONSEQUENTIAL AND ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 30. IN THE REVENUES APPEAL, THE DR SUBMITTED THAT TH E SOLE ISSUE INVOLVED WAS THAT THE CIT(A) ERRED IN DELETIN G THE ADDITION BEING INCOME FROM PURCHASE AND SALE OF SATELLITE RIGHTS. 31. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PURCHASED SATELLITE RIGHTS BY ENTERING INTO AGREEMENT AND PAYING THE ENTIRE PURCHASE PRICE TO THE DISTRIBUTORS. SIMILARLY, THE ASSESSEE HAS SOLD TH E SATELLITE RIGHTS BY IRREVOCABLE AGREEMENT FOR A PERIOD OF 99 YEARS AND RECEIVED CONSIDERATION, THE DETAILS OF WHICH ARE AS UNDER: FILM PURCHASE PRICE OF SATELLITE RIGHTS SALE PRICE OF SATELLITE RIGHTS PROFIT ASOKA 25,00,000 45,00,000 20,00,000 KURUSHETRAM 40,00,000 75,00,000 35,00,000 MANIKANDA 50,00,000 75,00,000 25,00,000 UZHAIPPALI 5,00,000 22,00,000 17,00,000 VARALARU 2,00,00,000 2,50,00,000 50,00,000 TOTAL PROFIT 1,47,00,000 I.T.A.NOS.357,1618 & 478/2012 :- 16 -: 32. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE H AS SHOWN THE AMOUNTS PAID FOR PURCHASE AS ADVANCE GIVEN AND AMOUNTS RECEIVED ON SALE AS ADVANCE RECEIVED IN THEIR BOOKS. NO PROFIT HAS BEEN ADMITTED BY THE ASSESSEE ON THE PURCHASE AND SALE OF THE SATELLITE RIGHTS OF THE ABOVE FILMS. ACCORDING TO THE ASSESSI NG OFFICER, THE A.R DURING THE COURSE OF HEARING, SUBMITTED THAT THOUGH THE SATELLITE RIGHTS HAVE BEEN SOLD BY THE ASSESSEE, THE PROFIT ON SALE WILL BE ADMITTED ONLY WHEN THE RIGHTS TO ACQUIRE BY THE PURCHASERS C OMMENCES AND THIS PRACTICE HAS BEEN FOLLOWED FOR THE EARLIER YEARS. ACCORDING TO THE ASSESSING OFFICER, NORMALLY THE SATELLITE RIGHTS AR E GIVEN BY THE PRODUCER TO THE PURCHASER AFTER CERTAIN PERIOD AFTE R THE DATE OF RELEASE OF MOVIES. THE SATELLITE RIGHTS ARE GIVEN FOR A PE RIOD OF 99 YEARS. THE PERSON WHO WANTS TO EXPLOIT THE RIGHTS AND EARN INC OME BY ENTERING INTO AGREEMENT WITH TV COMPANIES, WILL BE ABLE TO D ERIVE INCOME AFTER THE RIGHT TO TELECAST COMMENCES AS PER THE AGREEMEN T. IF THE ASSESSEE HAD EXPLOITED RIGHTS TO TELECAST IN THE TV COMPANIES BY ENTERING INTO AGREEMENT WITH THEM, THE ASSESSEE CA N POSTPONE THE PURCHASE AND WHEN THE TELECAST RIGHT ARE EXPLOITED, THE ASSESSEE CAN ADMIT INCOME AND SHOW THE PURCHASE PRICE AS EXPENSE S. HOWEVER, THE ASSESSEE IF TRANSFERS THE RIGHTS IN ENTIRETY TO A T HIRD PARTY AND IF THE CONSIDERATION ACCRUES OR RECEIVED DURING THE YEAR T HEN IT IS TO BE I.T.A.NOS.357,1618 & 478/2012 :- 17 -: TREATED AS PURCHASE AND SALE OF RIGHTS AND IT SHOUL D BE ADMITTED AS INCOME OF THAT YEAR. IN THE CASE OF THE ASSESSEE , THE INCOME HAS ACCRUED AND ALSO RECEIVED DURING THE YEAR. HENCE, THE EXPLANATION FURNISHED BY THE ASSESSEE CANNOT BE ACCEPTED. ACC ORDINGLY, THE ASSESSING OFFICER HELD THAT THE INCOME FROM PURCHSE AND SALE OF SATELLITE RIGHTS OF ` 1,47,00,000/- WILL BE TAXED THIS YEAR AND MADE ADDITION TO THE RETURNED INCOME OF THE ASSESSEE. 33. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED AS UNDER: THE ASSESSING OFFICER MADE AN ADDITION OF RS.L , 47,00,000/- BEING THE DIFFERENCE BETWEEN THE PURCHASE COST OF THE SAT ELLITE RIGHTS AND THE SELLING PRICE OF THE SATELLITE RIGHTS. THE APPELLAN T IN HIS SUBMISSIONS OBJECTED TO THE ACTION OF THE ASSESSING OFFICER AND SUBMITTED THE FOLLOWING DETAILS : I. ASHOKA RS. 25,00,000/- II. MANIKANTA RS. 50,00,000/- III. KURUSHETRAM RS. 40,00,000/- IV. VARALAARU RS. 2,00,00,000/- V. UZHAIPPALI RS. 5,00,000/- RS. 3,20,00,000/- A S PER THE AGREEMENTS ENTERED INTO WITH THE ABOVE PART IES , COPIES OF EACH HAVE BEEN ENCLOSED HEREWITH. THE SATELLITE RIG HTS COMMENCES ONLY ON THE EXPIRY OF A CERT A IN PERIOD FROM THE DATE OF RELEASE OF THE FILM. IN THE CASE OF ALL THE MOVIES MENTIONED ABOVE , THE COMMENCEMENT OF RIGHTS STARTS FROM THREE YEARS AFTE R THE DATE OF RELEASE . THE ABOVE RIGHTS HAVE BEEN SOLD BY THE ASSESSEE COM PANY TO RAJ TE L EV I S I ON NETWORK LIMITED. THE DETAILS OF THE AGREEMENT EN TERED INTO FOR THE SALE OF SATELLITE RIGHT S ARE NAME OF MOV I E AMOUNT DATE OF AGREEMENT ASHOKA 45,00,000 07.03 . 2008 MANIKANTA 75 , 00 , 000 30.03 . 2007 KURUKSHETRAM 75,00 , 000 30 . 03 . 2007 VARALAARU 2,50,00,000 30 . 03 . 2007 UZHAIPPALI 22,00,000 09 . 06.2007 4,67,00,000 I.T.A.NOS.357,1618 & 478/2012 :- 18 -: IN THIS CONNECTION IT I S SUBMITTED THAT THE SALE AGREEMENTS WILL COME INTO EFFECT ONLY WHEN THE ASSESSEE COMPANY ACQUIRES THE RIGHTS FROM THE PRODUCERS OF THESE MOV I ES. THE DATE OF COMMENCEMENT OF RIGHTS IS ONLY ON THE EXPIRY OF A MINIMUM PER I OD OF 3 YEARS FROM THE DATE OF RELEASE . SINCE THE RIGHT TO TELECAST THE FILMS COMMENCES ONL Y IN THE SUBSEQUENT YEARS, THE PROFIT OR LOSS ON SALE OF THE SE RIGHTS ARE OFFERED ONLY IN THE YEAR WHEN THE RIGHTS ARE COMMENCED . DURING THE FINANCIAL YEAR ENDING 31.3.2008 , THE ASSESSEE COMPANY HAS OFFERED AN INCOME OF RS . 56,50 ,000/- BEING THE PROFIT ARISING ON S ALE OF SATELLITE RIGHTS WHICH HAVE THE RIGHT TO TELECAST DUR I NG THE YEAR. THE DETAILS ARE NAME OF MOVIE COST OF PURCHASE SALE OF RIGHTS NAMMAVAR 5,00 , 000 10 , 00,000 DHANDAVUTHAPANI 5 , 50,000 12,00 , 000 MANASUKKULLE 6,00,000 12,00,000 VASANTHAM VANDACHU 10,00 , 000 17,00,000 KARKA KASADARA 17,50,000 30,00,000 GANAPATHY VANDACHI 5, 50, 000 25, 00, 000 49,50,000 1,06,00, 000 PROFIT 56,50 , 000 ------- -- --- -- - - THE ASSESSEE COMPANY HAS BEEN CONSISTENTLY FOLLOWIN G THIS PRACTICE SINCE THE YEAR 1996 BASED ON THE ACCRUAL METHOD OF ACCOU NTING. 34. AFTER CONSIDERING THE SUBMISSIONS, THE CIT(A) HAS A LLOWED THE DISALLOWANCE. 35. THE DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE A.R OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) HAS HELD AS UNDER: I.T.A.NOS.357,1618 & 478/2012 :- 19 -: 5 . 2 I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE A PPELLANT AND THE ORDER OF THE ASSESSING OFFICER. THE AGREEMENTS FILE D BY THE APPELLANT HAVE BEEN GONE THROUGH. AS PER THE AGREEMENT ENTERED INT O WITH THE PRODUCERS, COPIES OF WHICH HAVE BEEN GONE THROUGH , THE SATELLITE RIGHTS COMMENCE ONLY ON THE EXPIRY OF A CERTAIN PERIOD FROM THE DAT E OF RELEASE OF THE FILM. FOR EXAMPLE , IN THE CASE OF ASHOKA, THE DATE OF AGREEMENT I S 28.2 . 2008 AND THE DATE OF RELEASE OF THE FILM IS 1.2 . 2008 . THE SATELLITE RIGHTS WERE SOLD BY THE ASSESSEE COMPANY TO RAJ TELEVISION NETW ORK LIMITED VIDE AGREEMENT DATED 7 . 3.2008. THE DATE OF COMMENCEMENT OF RIGHTS STARTS FROM 1 . 2.2011 . SIMILARLY , IN THE CASE OF MANIKANTA, THE APPELLANT ENTERED INTO DEED OF AGREEMENT AND PAID AMOUNT OF RS . 50 ,00,000/- ON 7.6.2004. THE DATE OF RELEASE OF THE FILM WAS 24.3 . 2007 AND THE SATELLITE RIGHTS WERE SOLD ON 30.3.2007 FOR AN AMOUNT OF RS.75,00,000/-. THE DATE OF COMMENCEMENT OF TELECASTING RIGHTS STARTS ON 24 . 3.2010 . SIMILARLY, IS THE CASE OF ALL THE OTHER FILMS. 5 . 3 THE ASSESSING OFFICER WHILE MAKING ADDITION WAS O F THE OPINION THAT SINCE THE ASSESSEE HAS TRANSFERRED THE RIGHTS IN EN TIRETY TO THIRD PARTY AND THE CONSIDERATION WAS RECEIVED DURING THE YEAR, IT SHOULD BE TREATED AS PURCHASE AND SALE OF RIGHTS AND THE INCOME HAS ACCR UED DURING THE YEAR. AS SEEN FROM THE DETAILS FILED BY THE APPELLANT, TH E APPELLANT COMPANY ENTERS INTO AN AGREEMENT WITH THE FILM PRODUCER FOR LEASE RIGHT FOR SATELLITE TELECAST EITHER AT THE TIME OF COMMENCEMENT OF PROD UCTION OR DURING THE COURSE OF PRODUCTION OR ON THE DAY OF RELEASE OF TH E FILM. ON SIGNING THE AGREEMENT, INTIMATION IS GIVEN TO THE FILM LABORATO RY . THE APPELLANT COMPANY APPROACHES THE CONCERNED FILM LABORATORY ON THE DATE OF RELEASE OF THE RELEVANT FILM WITH A COPY OF THE AGREEMENT S IGNED WITH THE PURCHASER AND A CONFIRMATION LETTER FROM THE PRODUC ER CONFIRMING THAT LEASE RIGHTS HAVE BEEN GRANTED TO THE APPELLANT COM PANY. ON RECEIPT OF THE ABOVE, THE LABORATORY GIVES A CONFIRMATION LETT ER WITH RESPECT TO DATE FOR COMMENCEMENT OF TELECAST RIGHTS. 5 . 4 AS SUBMITTED BY THE LEARNED AR, IN THE CASE OF MA NY PICTURES, IT IS A NORMAL TRADE PRACTICE FOR THE FILM PRODUCERS TO PER MIT THE APPELLANT COMPANY TO ACCEPT THESE RIGHTS BEFORE THE EXPIRY OF THE PERIOD OF THREE YEARS BASING ON THE SUCCESS / FAILURE OF THE FILM . ON THE DAY PRIOR TO THE TELECAST, THE FILM LABORATORY HANDS OVER TO THE TEL EVISION NETWORK COMPANY, SOUND AND PICTURE NEGATIVE OF THE CONCERNE D FILM FOR CONVERTING INTO U-MATIC, BETA OR ANY OTHER FORM AS DESIRED AT THEIR COST AND THESE ARE TO BE RETURNED BACK TO THE LABORATORY AFTER COMPLET ION OF THE SALE. 5.5 AS SEEN FROM THE DETAILS OF VARIOUS EVENTS DURI NG THE TELECAST OF MOVIE MANIKANTA, THE AGREEMENT WAS SIGNED WITH THE PRODUC ER ON 7.6.2004. ON 10.6.2004, THE LETTER WAS ISSUED BY VIJAYA COLOUR L ABORATORY TO THE APPELLANT COMPANY CONFIRMING THE RECEIPT OF AGREEME NT. HOWEVER, ON 24.3.2007, VIJAYA COLOUR LABORATORY ISSUED A LETTER STATING THAT SATELLITE RIGHTS HAVE ALSO BEEN SOLD . TO MR.UTHAM CHAND. SUBSEQUENTLY, ON NEGOTIATION WITH THE PRODUCER, SHRI UTHAM CHAND HAS GIVEN A LETTER TO THE I.T.A.NOS.357,1618 & 478/2012 :- 20 -: LABORATORY CONFIRMING THE RIGHTS IN FAVOUROF THE AP PELLANT COMPANY. ON 30 . 3.2007 , LETTER WAS ISSUED BY THE APPELLANT COMPANY TO LABOR ATORY INFORMING THE DATE OF RELEASE OF THE FILM. ON 16.2. 2008 , LETTER WAS RECEIVED FROM PRODUCER CONFIRMING THAT THE APPELLANT COMPANY GAVE TELECASTING RIGHT AFTER THE EXPIRY OF 1 YEAR FROM THE DATE OF F IRST R ELEASE AS AGAINST THE ORIGINAL PERIOD OF 3 YEARS. ON 1 . 1 . 2009 , LETTER WAS ISSUED BY THE APPELLANT COMPANY TO THE SATELLITE CHANNEL CONFIRMING THEM TO TELECAST THE MOVIE . ON 4.1 . 2009, VIJAYA COLOUR LAB HANDS OVER BETA TAPE AND TH E CENSOR CERTIFICATE TO RAJ TELEVISION NETWORK LIMITED. THE MOVIE WAS TELECAST ON 14 . 1 . 2009 . SINCE THE DATE OF TELECAST IS VERY CRUCIAL IN THE D ETERMINATION OF ACCRUAL OF INCOME, THE INCOME HAS BEEN OFFERED IN T HE FINANCIAL YEAR ENDING 31.3 . 2009 AMOUNTING TO RS.1 , 47 ,00,000/-. 5 . 6 THE APPELLANT COMPANY HAS BEEN FOLLOWING THIS MET HOD OF ACCOUNTING RIGHT FROM THE BEGINNING FOR ALL THE SATELLITE RIGH TS DEALT BY THEM. IT IS ALSO A FACT THAT THE FILM PRODUCERS AFTER SIGNING THE AGRE EMENT AND TAKING ADVANCES FOR SATELLITE RIGHTS MAY NOT COMPLETE THE FILM PROD UCTION IN THE EVENT OF NON- FULFILMENT OF THE OBLIGATION, THEN THE APPELLANT CO MPANY M AY HAVE TO REFUND THE AMOUNT TO THE SATELLITE TV CHANNEL OR ADJUST TH E AMOUNT AGAINST OTHER SATELLITE RIGHTS TO BE ASSIGNED IN FUTURE. THERE M A Y BE CASES OF ADJUSTMENT WITH THE TELEVISION NETWORKS DEPENDING ON THE SUCCE SS / FAILURE OF THE MOVIE . AS ARGUED BY THE LEARNED AR, A SITUATION MAY ALSO A RISE AFTER ENTERING INTO AN AGREEMENT FOR TELECAST RIGHTS THE TELEVISION NETWOR K CHANNEL MAY ALSO TERMINATE THEIR AGREEMENT AND MAY ASK FOR THE AMOU NTS TO BE REFUNDED TO THEM OR ADJUSTED AGAINST OTHER AGREEMENTS TO BE SIG NED IN FUTURE. ON GOING THROUGH THE FACTS OF THE APPELLANT'S CASE, IT IS IM PORTANT THAT THE DATE OF TELECAST IS CRUCIAL IN DETERMINING THE ACCRUAL OF I NCOME TO THE APPELLANT COMPANY. HENCE, THE APPELLANT IS CORRECTLY OFFERING THE INCOME BASED ON THE ABOVE PROCEDURE. IT IS NOT A CASE OF INCOME BEING N OT OFFERED, BUT A CASE WHERE INCOME IS RECOGNIZED BASED ON TELECAST OF MOV IE . THE APPELLANT HAS OFFERED THE AMOUNT OF RS . 1 , 47,00,000/- FOR THE ASSESSMENT YEAR 2009-10 . HENCE, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. THIS GROUND OF APPEAL IS ALLOWED. 37. WE FIND THAT NO SPECIFIC MISTAKE IN THE FINDING OF THE CIT(A) COULD BE POINTED OUT BY THE DR. COPY OF THE AGREEM ENT FOR PURCHASE AND SALE OF RIGHTS COULD NOT BE PRODUCED BEFORE US. NO MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE FINDINGS O F THE CIT(A) THAT THE FILM PRODUCERS AFTER SIGNING THE AGREEMENT AND TAKING ADVANCES FOR SATELLITE RIGHTS MAY NOT COMPLETE THE FILM PROD UCTION IN THE EVENT OF I.T.A.NOS.357,1618 & 478/2012 :- 21 -: NON-FULFILLMENT OF THE OBLIGATION, THEN THE APPELLA NT COMPANY MAY HAVE TO REFUND THE AMOUNT TO THE SATELLITE TV CHANNEL OR ADJUST THE AMOUNT AGAINST OTHER SATELLITE RIGHTS TO BE ASSIGNED IN FU TURE; THERE MAY BE CASES OF ADJUSTMENT WITH THE TELEVISION NETWORKS DE PENDING ON THE SUCCESS/FAILURE OF THE MOVIE; A SITUATION MAY ALSO ARISE AFTER ENTERING INTO AN AGREEMENT FOR TELECAST RIGHTS, THE TELEVISI ON NETWORK CHANNEL MAY ALSO TERMINATE THEIR AGREEMENT AND MAY ASK FOR THE AMOUNTS TO BE REFUNDED TO THEM OR ADJUSTED AGAINST OTHER AGREE MENTS TO BE SIGNED IN FUTURE; ARE NOT CORRECT. 38. WE FIND THAT ACCORDING TO THE CIT(A), THE RIGHTS WE RE NOT ACTUALLY PURCHASED OR SOLD BUT ONLY AGREEMENT TO PU RCHASE AND SALE OF RIGHTS WAS ENTERED INTO BY THE ASSESSEE AND CONSID ERATION AS ADVANCES AGAINST THAT AGREEMENT WERE PAID AND RECEI VED AND THE ACTUAL TRANSFER OF RIGHT TAKES PLACE ONLY ON COMPLE TION OF THE FILM. FURTHER, IT IS ALSO NOT IN DISPUTE THAT THE PRACTIC E IS CONSTANTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT AN D THE INCOME IN QUESTION HAS BEEN ASSESSED IN THE HANDS OF THE ASS ESSEE IN THE ASSESSMENT OF ASSESSMENT YEAR 2009-10. IN THE ABOV E FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY GOOD AND JUSTIFIA BLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE GROU NDS OF APPEAL OF THE REVENUE ARE DISMISSED. I.T.A.NOS.357,1618 & 478/2012 :- 22 -: 39. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2008-09 AND 2009-10, AND THE APPEAL OF THE RE VENUE FOR ASSESSMENT YEAR 2008-09, ALL ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 07 TH OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 07 TH DECEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR