ACIT, New Delhi V. Smt. Achla Sabharwal, Delhi

ITA 1808/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81662 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Cost of acquisition
• Section: 32

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI J. S. REDDY , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1808 /DEL/ 2013 (ASSESSMENT YEAR: 2009 - 10 ) ACIT CIRCLE - 29(1), ROOM NO. 107 DRUM SHAPE BUILDING , IP ESTATE, NEW DELHI VS. ACHLA SABHARWAL PROP M/S. MEDIA INTERNATIONAL 1596, DIWAN HALL, BHAGIRATH PLACE, CHANDNI CHOWK, DELHI PAN: ABBPS7047D (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD CIT(A) - XXV, NEW DELHI DATED 04.01.2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1 THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING A SUM OF RS. 30,11,304/ - MADE BY THE AO ON ACCOUNT OF DEPRECIATION. 2. THE LD CIT(A) HAS ERRED ON FACT AND IN LAW IN DELETING OF RS. 75,00,000/ - MADE BY THE AO ON ACCOUNT PRIOR EXPENSES. 3. APROPOS DELETION OF ADDITION OF RS. 30.11.304/ - MADE BY THE AO ON ACCOUNT OF DEPRECIATION. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF DISTRIBUTION OF FILMS AND SONGS. RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 41,60,115/ - WAS FILED BY THE ASSESSEE ON 30.09.2009. THE CASE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT FOR BREVITY). THE CASE WAS THEREAFTER SELECTED FOR SCRUTINY THROUGH CASS. THE AO ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT, TOOK NOTE APPELLANT BY : Y KAKKAR, SR. DR RESPONDENT BY : RANO JAIN , CA PAGE NO. 2 OF THE FACT THAT TH E ASSESSEE HAD DEBITED AN AMOUNT OF RS. 1,36,68,771/ - AS DEPRECIATION ON FILMS - CINEMATOGRAPH. THE ANNEXURE OF FIXED ASSETS SUGGEST ED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON FILMS - CINEMATOGRAPH @ 100%. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FILE THE EVIDENCE FOR THE SAID CLAIM. IN RESPONSE TO THIS THE ASSESSEE FILED COPIES OF AGREEMENTS ENTERED INTO WITH CERTAIN PARTIES FOR PURCHASE OF FILMS RIGHTS. AFTER A PERUSAL OF THESE AGREEMENTS AO WAS OF THE OPINION THAT BY VIRTUE OF THES E AGREEMENTS , THE ASSESSEE ACQUIRED CERTAIN DISTRIBUTION, BROAD CASTING, EXHIBITION, SATELLITE RIGHTS ETC. FOR THE PERIODS SPECIFIED IN THE AGREEMENTS. ACCORDING TO THE AO, THE RIGHTS DERIVED BY THE ASSESSEE FROM THE SAID AGREEMENTS ARE OF TWO TYPES: A) PERPETUAL RIGHTS OR PERIOD OF ASSIGNMENT OF RIGHTS BEING MORE THAN ONE YEAR. B) LIMITED RIGHTS ACQUIRED FOR ONE YEAR. 5 . THEREFORE THE AO WAS OF THE OPINION THAT VIDE THESE AGREEMENTS THE ASSESSEE DID NOT PURCHASE ANY CINEMATOGRAPHIC FILMS FOR ITS CONS UMPTION BUT IT WERE ONLY BROADCASTING/ EXHIBITION RIGHTS, SATELLITE RIGHTS ETC RELATED TO CERTAIN MOVIES. AND SINCE THE ASSETS ACQUIRED BY THE ASSESSEE APPEARS TO BE INTANGIBLE ASSETS WITHIN THE M EANING OF SECTION 32 OF THE ACT AFTER SEEKING THE EXPLANATIO N OF THE ASSESSEE, T HE AO ALLOWED THE DEPRECIATION U/S 32(1)(II) OF THE ACT, AT THE @ 25% AND THUS THE DEPRECIATION ALLOWED ON PURCHASE OF FILM RIGHTS WORTH RS.44,17,864/ - WAS RESTRICTED TO 25% I.E. RS.11,04,466/ - AND RS.33,13,398/ - WAS BEING DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 6 . BEFORE THE LD CIT(A) IT WAS CLAMED BY THE ASSESSEE THAT UNDER RULE 9B(2)(A) OF INCOME TAX RULE S 1962 , (HEREIN AFTER THE RULES) , THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION/ DEDUCTION AT THE RATE OF 100% ON THE PURCHASE OF FILMS EXCEPT THAT PAGE NO. 3 OF TWO FILMS I.E. BEWAFA (RS.2,77,094/ - ) AND MARMITEGE (RS.25,000/ - ) WHICH WERE NOT SOLD IN RELEVANT A.Y . THE LD CIT(A), AFTER CONSIDERING RULE 9B(2), HELD THAT THE ASSESSEE IS ELIGIBLE FOR FULL DEDUCTION. THE RELEVANT FINDING OF THE LEARNED LD CIT(A) READS AS UNDER: - 4.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSION OF THE ASSESSEE THAT IN THE CASE OF PURCHASE AND SALE OF FILMS THE PROVISIONS OF RULE 9B IS APPLICABLE AND THE ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION OF THE ENTIRE COST OF PURCHASE IF THE FILMS ARE SOLD IN THE SAME YEAR. IN THE PRESENT CASE, THE ASSESSEE HAD MADE THE PURCHASE OF RS.44,17,864/ - AND THE ENTIRE FILMS HAS BEEN SOLD EXCEPT THE TWO FILMS FOR RS.3,02,094/ - (RS.2,77,094/ - (+) RS.25,000/ - ) AS DISCUSSED ABOVE. AFTER CONSIDERING ALL THE CASE FACTS AND CIRCUMST ANCES OF THE CASE, I AM OF THE VIEW THAT THERE IS NO MERIT IN THE ADDITION MADE BY THE AO AND ACCORDINGLY THE ADDITION TO THE EXTENT OF RS.3,02,094/ - IS CONFIRMED AS DISCUSSED ABOVE AND THE BALANCE ADDITIONS OF RS.30,11,304/ - (RS.33,13,398/ - ( - ) RS.3,02,094 / - ) ARE DELETED. 7 . AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE REVENUE IS BEFORE US. 8. AT THE OUTSET THE LD AR BROUGHT TO OUR NOTICE THE ORDER PASSED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11, WHEREIN THE TRIBUNAL HAS UPHELD THE ORDER OF THE LD CIT(A) ON THE SAME ISSUE, WHEREIN IT WAS HELD BY THE TRIBUNAL HAS UNDER: - 6. IT IS NOT IN DISPUTE THAT DURING THE PREVIOUS YEAR, THE ASSESSEE HAD ACQUIRED THE FEATURE FILM FOR A SUM OF RS.1,20,00,000/ - A ND THE ASSESSEE HAS SOLD THE RIGHTS OF EXHIBITION OF THE FILM. WE ALSO FIND THAT BEFORE THE ASSESSING OFFICER ALSO, THE ASSESSEE, IN ITS REPLY DATED 15.3.2013, HAS SUBMITTED THAT 100% DEDUCTION IN RESPECT OF COST OF PURCHASE OF FEATURE FILM IS ALLOWABLE UN DER RULE 9B. THE RELEVANT PORTION OF THE ASSESSEES REPLY READS THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE BASIS OF PROVISION OF RULE 9B OF THE ACT AS IT HAS SOLD RIGHTS PURCHASE DURING THE PREVIOUS YEAR RELEVANT TO CURRENT AY. THE ABOVE FACTUAL STATEM ENT MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER HAS NOT BEEN CONTROVERTED BY THE REVENUE. IN VIEW OF THE ABOVE, IN OUR OPINION, RULE 9B(2) WAS APPLICABLE TO THE FACTS OF THE CASE AND LEARNED CIT(A) RIGHTLY ALLOWED THE RELIEF FOLLOWING RULE 9B(2) OF T HE INCOME - TAX RULES, 1962. WE, THEREFORE, FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). THE SAME IS SUSTAINED. 9 . WE FIND THAT EXCEPT FOR TWO FILMS STATED ABOVE THE FILMS PURCHASED BY THE PAGE NO. 4 ASSESSEE WAS SOLD IN THE SAME YEAR AND SO T HE LD CIT(A) RIGHTLY HELD THAT RULE 9B IS APPLICABLE AND RIGHTLY DELETED RS.30,11,304/ - . RESPECTFULLY FOLLOWING THE ORDER OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE WE THEREFORE CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 10 . THE SECOND ISSUE IS REGARDING DELETION OF ADDITION OF RS.75 LACS BY CIT(A) WHICH THE AO HAS MADE UNDER THE HEAD PRIOR PERIOD EXPENSES . THE OBSERVATION OF THE AO IS IN PARA 7 ON PAGE 4 OF THE ASSESSMENT ORDER IS AS UNDER: - 7. THE ASSESSEE HAS PURCHASED RIGHTS OF RS. 75,00,0001 - FROM M/S SPOT LIGHT ON 30.09.2007 AND DELIVERY PERIOD MENTIONED IN MOU WAS WITHIN 30 DAYS FROM THE DATE OF MOU. THE ASSESSEE HAS BOOKED THIS PURCHASE IN A Y 2009 - 10. THE AR OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 28 . 12.2011 WAS ASKED THAT WHY PURCHASE OF RS. 75,00,000/ - SHALL NOT BE DISALLOWED AS PRIOR PERIOD EXPENSE. THE AR OF THE ASSESSEE SUBMITTED THE LEDGER OF M/S SPOT LIGHT A Y 2008 - 09 BUT HE COULD NOT PRODUCE ANY REASON FOR BOOKING THE PRIOR PERIOD PURCHASE IN A Y 2009 - 10. SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THE PURCHASE SHOULD HAVE BEEN BOOKED IN THE YEAR OF PURCHASE. THEREFORE, RS.75,00,0001 - IS BEING DISALLOWED AS PRIOR PERIOD EXPENSE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSE SSEE. 11 AGGRIEVED BY THE SAID ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO WAS PLEASED TO DELETE THE SAME BY HOLDING AS UNDER: - '5.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CON SIDERABLE MERIT IN THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION OF RS.75,00,000/ - A THE FILMS HAS BEEN SOLD IN THE CURRENT YEAR AND THE ASSESSEE DID NOT CLAIM THE DEDUCTION IN THE EARLIER YEAR AS THE FILMS WERE NOT SO LD AS PROVIDE UNDER RULE 9 B (2) AND (4). AFTER CONSIDERING ALL THE CASE FACTS AN CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE AO HAS NOT FOLLOWED THE PROVISIONS OF RULE 9 B AND THE ASSESSEE IS ELIGIBLE FOR FULL DEDUCTION AS PER RULE 9 B AND AS SUCH TH E ADDITION/DISALLOWANCE MADE BY THE AO IS WITHOUT ANY JUSTIFICATION AND ACCORDINGLY, THE SAME IS DELETED. ' 12 . WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE SUB - RULE (4) OF RULE 9B. AS PER SUB - RULE (2) OF RULE 9B WHERE A FEATURE FILM IS ACQUIRED IN ANY PREVIOUS YEAR AND THE RIGHTS OF SUCH FILM ARE SOLD BY THE FILM DISTRIBUTOR, THE ENTIRE COST NEED TO BE ALLOWED PAGE NO. 5 IN THAT YEAR. AS PER SUB - RULE (4) IF DURING THE PREVIOUS YEAR, THE FEATURE FILM ACQUIRED BY THE DISTRIBUTOR HAS NOT BEEN SOLD , NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE COST OF ACQUISITION IN THAT PREVIOUS YEAR I.E. THE YEAR OF ACQUISITION , BUT THE ENTIRE COST OF ACQUIS ITION SHALL BE CARRIED FORWARD AND ALLOWED AS DEDUCTION IN THE NEXT YEAR. THE ASSESSEE HAS ACQUIRED THE RIGHTS ON 30.09.2007 I.E. IN THE PRECEDING YEAR. IT HAS NOT SOLD THE SAME IN THE FINANCIAL YEAR 2007 - 08. IT HAS SOLD ITS RIGHTS IN THE FINANCIAL YEAR 20 08 - 09 I.E. ASSESSMENT YEAR 2009 - 10, THAT IS THE YEAR UNDER CONSIDERATION. THEREFORE AS PER SUB - RULE (4) IT IS ENTITLED TO CLAIM THE ENTIRE COST OF ACQUISITION IN THIS ASSESSMENT YEAR I.E. 2009 - 10 WHICH IS THE FOLLOWING AY 2008 - 09, THE YEAR IN WHICH THE RIG HTS WERE ACQUIRED. AS SUCH THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AS PER LAW . 13 . IN THE AFORESAID REASONS WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD CIT(A), THEREFORE, WE DISMISS THE GROUND OF THE REVENUE. 14 . IN THE RESULT THE APPEAL PREFERRED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 5 . 09 .2014. - S D / - - S D / - ( J. S. REDDY ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 5 / 09 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI