DCIT, New Delhi V. M/s. Media Transasia India Ltd., New Delhi

ITA 1992/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6981 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNJA
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.1992/DEL/2014 A.Y. : 2010-11 DCIT, CIRCLE 6(1), NEW DELHI ROOM NO. 318, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S MEDIA TRANSASIA INDIA LTD., C-31, MAYFAIR GARDENS, NEW DELHI 110 016 (PAN: AAACM3542L) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. P. DAM KANUNJNJA, SR. DR ASSESSEE BY : NONE DATE OF HEARING : 20-06-2016 DATE OF ORDER : 01-07-2016 ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST T HE IMPUGNED ORDER DATED 22/1/2014 PASSED BY THE LD. ITA NO. 1992/DEL/2014 2 COMMISSIONER OF INCOME TAX (APPEALS-IX), NEW DELHI PERTAINING TO ASSESSMENT YEAR 2010-11 ON THE FOLLOW ING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) ERRED IN DELETING TH E DISALLOWANCE OF RS. 17,66,407/-, MADE BY THE A.O. ON ACCOUNT OF PRIOR PERIOD EXPENSES, WITHOUT APPRECIATING THE FACT THAT THESE BILLS WERE RAISED IN F.Y. 2009-10 BUT THE SERVICES WERE ACTUALLY PROVIDED IN THE F.Y. 2008-09 AND THUS THE LIABILITY WAS INCURRED IN A.Y. 2009-1O? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,10,300/-, MADE BY THE A.O. BY TREATING THE LEGAL AND PROFESSIONAL CHARGES PAID TO M/S CONSORT CAPITAL PVT. LTD. AS CAPITAL EXPENDITUR E, WITHOUT APPRECIATING THE FACT THAT THE ABOVE EXPENDITURE WAS INCURRED IN RELATION TO THE RAISING OF PRIVATE EQUITY AND THUS WAS EVIDENTLY A CAPITAL EXPENDITURE AND CLAIM OF THE ASSESSEE THAT IT WAS A ITA NO. 1992/DEL/2014 3 COMMISSION PAYMENT WILL NOT CHANGE THE NATURE OF PAYMENT? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2,16,78,914/- MADE BY THE A.O. BY TREATING THE ABOVE EXPENDITURE AS CAPITAL EXPENDITURE, WITHOUT APPRECIATING THE FACT THAT THE ABOVE PAYMENT WAS MADE ON ACCOUNT OF INVESTMENT MADE BY THE ASSESSEE IN THE JV COMPANY AND THUS THE PAYMENT WAS INHERENTLY CAPITAL IN NATURE? 4. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORGO ANY GROUND (S) OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF PUBLISHING OF MAGAZINES, TRADING IN ITA NO. 1992/DEL/2014 4 BOOKS / MAGAZINES AND FILED ITS RETURN OF INCOME DE CLARING A LOSS OF RS. 1,47,99,406/- ON 27.9.2010 WHICH WAS PRO CESSED BY THE AO U/S. 143(1) OF THE I.T. ACT, 1961 (HEREINAFTE R REFERRED AS THE ACT). THE CASE OF THE ASSESSEE WAS TAKEN FOR SCRUTINY AND A NOTICE U/S. 143(2) AND 143(1) OF THE ACT WAS I SSUED TO THE ASSESSEE. IN RESPONSE TO THE SAME LD. AR OF THE ASSESSEE APPEARED AND FILED REQUISITE DETAILS, BOOKS OF ACCO UNTS, BILLS AND VOUCHERS. THE AO DISALLOWED THE EXPENSES OF RS. 9,53,254/- ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARG ES BEING PRIOR PERIOD IN NATURE AND RS. 8,13,160/- BEING ADV ERTISEMENT AND PUBLICITY EXPENSES THUS TOTALING TO RS. 17,66,40 7/- ON THE GROUND THAT THIS EXPENSES DOES NOT RELATE TO THE YE AR UNDER CONSIDERATION AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2.1 SECONDLY, AN EXPENDITURE OF RS. 1,10,300/- HAS A LSO BEEN DISALLOWED BEING CAPITAL IN NATURE AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS INCURRED THESE EXPENSES ON ACCOUNT LEGAL AND PROFESSIONAL CHARGES PAID TO M/S CONSORT CAPITAL PVT. LTD. AS UPFRONT FEES IN RAI SING FUNDS ITA NO. 1992/DEL/2014 5 THROUGH PRIVATE EQUITY. THE AO TREATED THESE EXPENS ES AS CAPITAL EXPENDITURE AND ADDED TO THE INCOME OF THE ASSESSEE. 2.2 THIRDLY THE ISSUE IN DISPUTE IN THE PRESENT APPE AL IS REGARDING THE DISALLOWANCE OF RS. 2,16,78,914/- WHI CH THE ASSESSEE HAS INCURRED ON ACCOUNT OF ADVT. AND PUBLI CITY EXPENSES DURING THE YEAR UNDER CONSIDERATION WHICH INCLUDE RS. 1,52,31,327/- PAID TO INX NEWS PRIVATE LIMITED; R S. 55,95,519/- PAID TO NDTV LIFESTYLE LTD. AND RS. 8,52, 060/- PAID TO UTV NEWS LIMITED TOTALING TO RS. 2,16,78,914/-. ACCORDING TO THE ASSESSEE THESE EXPENSES WERE INCU RRED ON ADVT. AND CREATION OF (BLENDER) MAGAZINE. THESE EXP ENSES ARE MADE AS PER THE JOINT VENTURE ARRANGEMENT ENTERED I NTO ON 12.2.2009 BETWEEN M/S DENNIS PUBLISHING INTERNATIONA L LTD. AND THE ASSESSEE COMPANY. THE ASSESSEE HAS GIVEN ITS EX PLANATION BY WAY OF REPLY TO THE AO VIDE LETTER DATED 12.10 .2012 EXPLAINING THE NATURE OF EXPENSES, BUT THE AO DID NOT AGREE WITH THE REASONS MENTIONED BY THE ASSESSEE AND ADDE D THE AMOUNT OF RS. 2,16,78,914/- TO THE TOTAL INCOME OF T HE ASSESSEE BEING CAPITAL IN NATURE AND COMPLETED THE ASSESSMENT BY MAKING VARIOUS OTHER ADDITIONS WHICH ARE NOT IN DISPUTE IN ITA NO. 1992/DEL/2014 6 THE PRESENT APPEAL, VIDE ORDER DATED 26.2.2013 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. AGGRIEVED WITH THE AFO RESAID ADDITIONS, ASSESSEE FILED THE APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 2 2.1.2014 HAS DELETED THE ADDITIONS IN DISPUTE BY PARTLY ALLO WING THE APPEAL FILED BY THE ASSESSEE. 3. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDE R OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REV ENUE IN THE GROUNDS OF APPEAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVE R, NOTICE BY RPAD WAS ISSUED TO THE ASSESSEE FOR 20.6.2 016 AND IN RESPONSE TO THE SAME, NEITHER THE ASSESSEE NOR I TS AUTHORIZED REPRESENTATIVE/COUNSEL APPEARED AND NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIE W THAT NO USEFUL PURPOSE WOULD BE SERVED. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE DECIDING THE ISSUE IN DISPUTE EXPAR TE ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. ITA NO. 1992/DEL/2014 7 6. WE HAVE HEARD THE LD. DR AND PERUSED AND CONSIDER ED THE RELEVANT RECORDS AVAILABLE WITH US ESPECIALLY T HE ORDERS PASSED BY THE REVENUE AUTHORITIES, WE ARE OF THE C ONSIDERED VIEW THAT THE LD. FIRST APPELLATE AUTHORITY HAS DELE TED THE ADDITION OF RS. 17,66,407/- MADE BY THE AO ON ACCOUNT OF PRIOR PERIOD EXPENSES BECAUSE THE BILLS WERE DATED 1.4.2009 AND THE EXPENSES WERE MADE IN THE MONTH OF JANUARY & FEBRUARY, 2009. BEFORE THE FIRST LD. APPELLATE A UTHORITY ASSESSEE PLEADED THAT SINCE THE ASSESSEE HAS RECEIV ED THESE BILLS DURING THE RELEVANT ASSESSMENT YEAR AND MADE THE PAYMENT SUBSEQUENTLY AND THE AO HAS ALSO NOT DOUBT ED THE GENUINENESS OF EXPENSES. THEREFORE, THESE EXPENSES ARE ALLOWABLE. IN SUPPORT OF THE CONTENTION, ASSESSEE HAS ALSO CITED THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF KEDARNATH JUTE MANUFACTURING COMPANY LTD. VS . CIT (1971) 82 ITR 363 (SC). 7. AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ORDERS PASSED BY THE REVENUE A UTHORITIES ALONGWITH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING COMPANY LTD. ( SUPRA), ITA NO. 1992/DEL/2014 8 WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS RECEIVED THE BILLS DURING THE RELEVANT ASSESSMENT YEAR AND M AKING THE PAYMENT SUBSEQUENTLY. KEEPING IN VIEW OF THE DECISI ON OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF KEDAR NATH (SUPRA), THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTL Y DELETED THE ADDITION IN DISPUTE, HENCE, THERE IS NO NEED TO INTERFERE IN THE WELL REASONED FINDING GIVEN BY THE LD. FIRST AP PELLATE AUTHORITY, THEREFORE, WE UPHOLD THE ORDER OF THE LD . CIT(A) ON THE ISSUE INVOLVED IN GROUND NO. 1 AND DECIDE THE S AME IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. APROPOS ADDITION OF RS. 1,10,300/- BEING LEGAL A ND PROFESSIONAL CHARGES TO M/S CONSORT CAPITAL PRIVATE LTD. THE ASSESSEE COMPANY HAD CONSULTED M/S CONSORT CAPITAL PRIVATE LIMITED FOR RAISING PRIVATE EQUITY FROM OUTSOURCES OR SALE OF SHARES. THE AO HAD TREATED THE PAYMENT OF LEGAL AND PROFESSIONAL CHARGES OF RS. 1,10,300/- TO M/S CONSOR T CAPITAL AS EXPENDITURE OF CAPITAL NATURE. HOWEVER, LD. CIT( A) HAS HELD THAT SINCE THE EXPENDITURE IS IN NATURE OF COMMISSI ON PAID AND CANNOT BE TREATED AS CAPITAL EXPENDITURE AT PAR WIT H THE EXPENDITURE INCURRED DURING INITIAL CAPITAL RAISED. IN THE ITA NO. 1992/DEL/2014 9 BACKGROUND OF THE AFORESAID DISCUSSIONS, WE ARE OF T HE VIEW THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT THE COMMI SSION PAID COULD NOT BE TREATED AS CAPITAL EXPENDITURE, HENCE, W E DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER PASSE D BY THE LD. CIT(A) ON THIS ISSUE, THEREFORE, WE UPHOLD THE SAME AND DECIDE THE GROUND NO. 2 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. APROPOS ADDITION OF RS. 2,16,78,914/- BY TREATING THIS EXPENDITURE AS CAPITAL EXPENDITURE. THE AO TREATED A SUM OF RS. 2,16,78,914/- INCURRED ON ADVT. & PUBLICITY INCUR RED FOR PROMOTION OF BLENDER FOR WHICH RIGHTS WERE SOLD TO M/S DENNIS MEDIA TRANSASIA PUBLISHING PRIVATE LIMITED. T HE SAID EXPENSES WAS TREATED AS INVESTMENT OF THE ASSESSEE IN THE JOINT VENTURE COMPANY AND HENCE WAS DISALLOWED AS C APITAL EXPENDITURE. HOWEVER, LD. CIT(A), HAS OBSERVED THAT A S PER THE FACTUAL CORRECTION SUBMITTED BY THE ASSESSEE, TH E ACTUAL EXPENDITURE INCURRED ON PROMOTION OF BLENDER WAS R S. 1,20,86,122/- AND NOT THE AMOUNT OF ADDITION MADE BY THE AO. AS PER THE JOINT VENTURE AGREEMENT, THE ASSESSEE REC EIVED AN INCOME OF RS. 2.30 CRORE FOR SELLING OF PUBLISHING R IGHT OF ITA NO. 1992/DEL/2014 10 BLENDER AGAINST WHICH EXPENDITURE ARE INCURRED. THE ASSESSEE WAS THE ORIGINAL HOLDER OF PUBLISHING RIGHTS OF THE BLENDER MAGAZINE. AS PER THE JOINT VENTURE AGREEMENT WITH M /S DENNIS PUBLISHING INTERNATIONAL LTD., THE ASSESSEE WAS SUPP OSED TO DEVELOP AND PROMOTE THE BLENDER MAGAZINE AND TRANSF ER IT TO THE JOINT VENTURE COMPANY SUBSEQUENTLY. IN VIEW OF THE ABOVE, LD. CIT(A) HAS RIGHTLY HELD THAT THE ASSESSE E SPENT ON ADVERTISEMENT AND PROMOTION AND TRANSFERRED THE PUB LISHING RIGHT TO THE JOINT VENTURE COMPANY THAT IS TO M/S DENNIS MEDIA TRANSASIA PUBLISHING PVT. LTD. FOR A SALE CONSIDERATI ON OF RS. 2.30 CRORE. WE FURTHER FIND COGENCY IN THE OBSERVAT IONS OF THE LD. CIT(A) THAT IN THE P&L ACCOUNT FOR THE RELEVANT FINANCIAL YEAR, THE AMOUNT OF RS. 2,30,21,,523/- WAS SHOWN BELOW T HE LINE WHICH IS TAKEN AS THE PROFIT ON SALE OF FIXED ASSET IN THE COMPUTATION OF INCOME. SIMILARLY, GAIN ON SALE OF RI GHTS AMOUNTING TO RS. 2,24,23,100/- WAS OFFERED IN THE COMP UTATION INCOME AS SHORT TERM CAPITAL GAIN. IN VIEW OF THE ABOVE, IT WAS RIGHTLY HELD BY THE LD. CIT(A) THAT DISALLOWANCE O F EXPENDITURE IGNORING THE INCOME FROM SELLING OF PUBLISHING RIGH T IS NOT JUSTIFIABLE AND ADDITION WAS RIGHTLY DELETED, WHI CH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION ITA NO. 1992/DEL/2014 11 OF THE LD. CIT(A) ON THIS ISSUE AND DECIDE THE GROU ND NO. 3 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/07/2016. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/07/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES