The DCIT, Calicut V. M/s. Mathrubhumi Printing & Publishing Co. Ltd, Calicut

ITA 351/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8431 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2015
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Depreciation
• Section: 194C; 10

Judgement Text

ITA NOS.348-351/COCH/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL , COCHIN BENCH, COCHIN , , BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE.K, JM ./ I.TA NOS.348-351/COCH/2015 ( !' # /ASST. YEARS : 2008-09 TO 2011-12) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), CALICUT. $ VS M/S. MATHRUBHUMI PRINTING & PUBLISHING COMPANY LTD., K.P. KESAVA MENON ROAD, CALICUT-673 001. ( %& /REVENUE APPELLANT) ( '( %& /ASSESSEE -RESPONDENT) PAN NO. AAACT 8521G ) * /REVENUE BY SHRI A. DHANARAJ, SR. DR '( % ) * /ASSESSEE BY SHRI A.S. NARAYANAMOORTHY, CA +, ) -. /DATE OF HEARING 16/06/2016 /# ) -. /DATE OF PRONOUNCEMENT 25/07/2016 0 /ORDER PER BENCH: THESE FOUR APPEALS OF THE REVENUE ARISE FROM THE CO NSOLIDATED ORDER OF THE LD. CIT(A),KOZHIKODE DATED 20-03-2015 FOR THE ASSESSMEN T YEARS 2008-09 TO 2011-12. 2 . THE REVENUE HAS RAISED THE GROUNDS OF APPEAL MAINLY ON THREE ISSUES. HOWEVER, THE GROUNDS OF APPEAL FOR THE ASSESSMENT Y EAR 2008-08 WHICH ARE COMMON FOR OTHER YEARS, ARE REPRODUCED HEREINBELOW: - ITA NOS.348-351/COCH/2015 2 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS AGAINST FACTS, CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF THE INCOME TAX ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX(APPEALS) IS RIGHT IN LAW IN HOLDING THAT LICENSE FEE PAID TO THE GOVERNMENT OF INDIA FOR FM RADIO TR ANSMISSION (RS.16,74,02,144/-) AND FEE PAID TO BROADCASTING EN GINEERING COSULTANTS INDIA LTD. (BECIL) 9RS.2,70,00,000/-) AS PER PROJECT MANA GEMENT AGREEMENT FOR COMMON TRANSMISSION INFRASTRUCTURE RIGHT (CTI) FOR FM RADIO ARE ELIGIBLE FOR DEPRECIATION BY RELYING ON THE DECISION OF THE HON BLE SUPREME COURT IN CIT VS. TECHNO SHARES AND STOCKS LTD. (2011) 327 ITR 32 3(SC). INSTEAD OF AMORTIZING THE EXPENDITURE FOR THE LICENSE PERIOD OF TEN YEARS ?. 3. THE COMMISSIONER OF INCOME TAX(APPEALS) SHOULD H AVE NOTED THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TECHNO SHARES AND STOCKS LTD. (2011) 327 ITR 323 (SC) IS STRICTLY CON FINED TO THE RIGHT OF MEMBERSHIP CONFERRED BY THE BOMBAY STOCK EXCHANGE M EMBERSHIP CARD AND DISTINGUISHABLE TO THE FACTS OF THE CASE. 4. THE COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE NOTED THAT FOR SUBSEQUENT ASSESSMENT YEAR VIZ., 2011-12, 2012-13 E TC., THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE AMORTIZATION METHOD IN RESPECT OF THE ABOVE PAYMENTS. 5. HAS NOT THE COMMISSIONER OF INCOME TAX(APPEALS ) ERRED IN EQUATING THE LICENSE FEE PAID FOR FM RADIO TRANSMISSION WITH L ICENSE OR FRANCHISE OF SIMILAR NATURE IN TERMS OF SECTION 3291)(II) WHEN SECTION 35ABB OF THE IT ACT SPECIFICALLY STIPULATES THAT IN RESPECT OF EXPENDIT URE INCURRED FOR OBTAINING LICENSE TO OPERATE TELECOMMUNICATION SERVICES, APPR OPRIATE FRACTION OF SUCH EXPENDITURE BE ALLOWED AS DEDUCTION FOR EACH OF THE RELEVANT PREVIOUS YEARS? 6. THE COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE APPRECIATED THE FACT THAT LICENSE FEE PAID FOR FM RADIO TRANSMISSIO N AND FEE PAID FOR COMMON TRANSMISSION INFRASTRUCTURE RIGHT (CTI) ARE SIMILAR IN NATURE TO THE PAYMENT MENTIONED IN SECTION 35ABB OF THE INCOME TAX ACT AN D THE EXPENDITURE SHOULD HAVE BEEN AMORTIZED FOR TEN YEARS. 7. THE COMMISSIONER OF INCOME TAX(APPEALS) SHOUL D HAVE APPRECIATED THE FACT THAT THE PAYMENT OF RS.2,70,00,000/- MADE TO T HE BECIL AS PER THE ITA NOS.348-351/COCH/2015 3 PROJECT MANAGEMENT AGREEMENT IS A COMPOSITE PAYMENT TOWARDS FEE FOR PROVIDING PROJECT MANAGEMENT SERVICES AMOUNTING TO RS.26,79,000/- AND THE ESTIMATED COST OF EQUIPMENT FOR RS.2,43,21,000/- AN D THEREFORE, AS PER THE PROVISIONS OF SECTION 194C OR 194J OF THE INCOME TA X ACT, TDS PROVISIONS ARE APPLICABLE ON ANY SUM AND ALSO IN VIEW OF THE LAN GUAGE EMPLOYED IN CIRCULAR NO.715 DATED 08/08/1995, THE TOTAL AMOUNT OF RS.2,70,00,000/- IS LIABLE FOR TDS, FAILING WHICH DISALLOWANCE U/S. 40( A)(IA) IS ATTRACTED. 8. WITH REGARD TO THE ABOVE PAYMENT OF RS.2,70,000 /-, THE CIT(A) FAILED TO APPRECIATE THAT IN PARA 5.1 OF THE PROJECT MANAGEME NT AGREEMENT SIGNED BETWEEN THE ASSESSEE AND THE MINISTRY OF INFORMATIO N BROADCASTING FOR OPERATING FM RADIO BROADCASTING SERVICE, IT IS CLEA RLY STATED THAT IN ADDITION TO THE COST OF COMMON TRANSMISSION INFRASTRUCTURE R IGHT, THE FIRST PARTY SHALL ALSO PAY TO BECIL FOR PROVIDING MANAGEMENT SERVICE EQUIVALENT TO 10% OF THE SHARE OF ACTUAL NET COST AND THE PAYMENT OF FEES SH ALL BE SUBJECT TO DEDUCTION OF TAX AT SOURCE AS PER THE APPLICABLE IN COME TAX LAWS AND ACCORDINGLY THE ASSESSEE HAD DEDUCTED THE TAX AT SO URCE BUT REMITTED ONLY ON16-11-2011 TO THE GOVERNMENT ACCOUNT. 9. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) MAY BE SET A SIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE ISSUES IN THESE GROUNDS PERTAIN TO MAINLY T HREE ISSUES WHICH ARE DECIDED AS UNDER:- THE FIRST COMMON ISSUE IS AGAINST THE DELETION OF DISALLOWANCE BY THE ASSESSING OFFICER OF DEPRECIATION @25% ON THE WDV OF LICENSE FEE PAID BY THE ASSESSEE COMPANY TO THE GOVERNMENT OF INDIA FOR FM RADIO TRA NSMISSION, TREATING THE SAID PAYMENT AS INTANGIBLE ASSET. ITA NOS.348-351/COCH/2015 4 4. BEFORE THE LD. CIT(A), THE ASSESSEE MADE ELABOR ATE WRITTEN SUBMISSIONS WHICH ARE REPRODUCED IN PARA 6 OF THE LD. CIT(A)S ORDER . 5. THE LD. DR RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ISSUE IS WHETHER THE ONE TIME LICENSE FEE PAID BY T HE ASSESSEE COMPANY FOR ACQUIRING THE LICENSE FOR FM BROADCASTING IS AN IN TANGIBLE ASSET SO AS TO ALLOW DEPRECIATION ON THE SAME. THE LD. COUNSEL ELABORAT ELY DISCUSSED THE ISSUE, IN WRITTEN SUBMISSIONS, AS TO WHY THE ONE TIME LICENSE FEE PAID BY THE ASSESSEE COMPANY IS AN INTANGIBLE ASSET. ON GOING THROUGH PARA 2 OF THE AGREEMENT DATED 15/11/2006 BETWEEN THE ASSESSEE COMPANY AND T HE MINISTRY OF INFORMATION AND BROADCASTING, GOVERNMENT OF INDIA, IT HAS BEEN OBSERVED THAT IN CONSIDERATION OF ONE TIME ENTRY FEE AND SUBJECT TO OTHER CONDITIONS CONTAINED IN THE AGREEMENT, THE GRANTOR, VIZ. GOVERNMENT OF I NDIA, HAD GRANTED THE PERMISSION HOLDER, I.E., THE ASSESSEE, THE PERMISSI ON TO ESTABLISH, MAINTAIN AND OPERATE THE CONCERNED FM RADIO CHANNELS FOR 10 YEAR S. THE AO HAD REJECTED THIS PLEA OF DEPRECIATION U/S. 32(1)(II) ON THE BAS IS OF THE DECISION OF THE MUMBAI HIGH COURTS ORDER IN TECHNO SHARES AND STOCKS LTD. VS. CIT 323 ITR 69. HOWEVER, THIS DECISION OF THE MUMBAI HIGH COURT RELIED UPON BY THE ASSESSING OFFICER HAD BEEN SUBSEQUENTLY OVER TURNED BY THE APEX COURT IN (2011) 327 ITR 323 WHERE IT WAS HELD THAT A STOCK EXCHANGE MEMBERSHIP CARD IS L IKE A LICENSE OR FRANCHISE. ITA NOS.348-351/COCH/2015 5 SIMILARLY IT HAS TO BE HELD THAT A PERMISSION TO OP ERATE FM RADIO FOR 10 YEARS IS ALSO LIKE A LICENSE OR COMMERCIAL RIGHT AND THEREFO RE ELIGIBLE FOR DEPRECIATION UNDER SECTION32(1)(II) OF THE ACT. THUS ONE TIME L ICENSE FEE PAID BY THE ASSESSEE IS A TANGIBLE ASSET ELIGIBLE FOR DEPRECIATION U/S. 32(1)(II) OF THE ACT. IT IS ORDERED ACCORDINGLY. ACCORDINGLY, THIS GROUND OF THE REVENUE IS DISMISSED. 7. THE NEXT COMMON ISSUE IS AGAINST THE DELETION OF DISALLOWANCE BY THE ASSESSING OFFICER OF DEPRECIATION ON THE AMOUNT PAI D TO BROADCAST CONSULTANTS INDIA LTD. (BECIL) FOR THE PURCHASE OF COMMON TRANS MISSION INFRASTRUCTURE (CTI) FOR FM RADIO STATION. , 8. BEFORE THE LD. CIT(A), THE ASSESSEE MADE ELABOR ATE WRITTEN SUBMISSIONS WHICH ARE REPRODUCED IN PARA 7 OF THE LD. CIT(A)S ORDER . 9. THE LD. DR RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. AS STATED BY THE LD. COUNSEL IN HIS SUBMISSIONS BEFORE THE LD. CIT(A), BECIL IS THE SOLE AGENCY FOR COMMON TRANSMISSION INFRASTRUCTURE (CTI) REQUIRED FOR BROADCASTING OF FM RADIO. SINCE TRANSMISSION INFRA STRUCTURE IS SHARED BY THE ASSESSEE COMPANY WITH OTHERS ALSO, THE ASSESSEE HAD PAID AN AMOUNT OF RS.270 LAKHS TO THE BECIL AS THEIR SHARE WHICH INCLUDES TH E COST OF EQUIPMENTS WORTH ITA NOS.348-351/COCH/2015 6 RS.243.21 LAKHS AND RS.26.79 LAKHS HAD BEEN PAID BY THE ASSESSEE AS THEIR PROPORTIONAL SHARE OF PAYMENT TO BECIL FOR SERVICES TOWARDS THE COMMON TRANSMISSION INFRASTRUCTURE, INCLUDING A ONE YEAR G UARANTEE. TO QUOTE FROM CLAUSE 5.1 OF THE AGREEMENT DATED 09/05/2006 BETWEE N THE ASSESSEE AND BECIL FOR KOCHI THE FIRST PARTY SHALL PAY BECIL, ITS SHARE OF A CTUAL NET COSTS (AFTER DEDUCTION OF ALL DISCOUNTS, REBATES AND OTHER INCEN TIVES GIVEN BY THE SUPPLIERS OF THE EQUIPMENT). IN ADDITION TO THE COST OF CTI, THE FIRST PARTY SHALL ALSO PAY FEE TO BECIL FOR PROVIDING PROJECT MANAGEMENT SERVICES EQU IVALENT TO TEN PERCENT (10%) OF ITS SHARE OF ACTUAL NET COSTS AND ALSO THE SERVICE TAX AS APPLICABLE THEREON. IT IS APPARENT FROM THE NATURE OF ITEMS MENTIONED IN THE ANNEXURES TO THIS AGREEMENT THAT ALMOST WHOLE PAYMENT IS TOWARDS PURCHASE OF EQUIPMENT. SIMILAR AGREEMENTS WERE ALSO ENTERED INTO FOR FM S TATIONS AT THRISSUR, KANNUR AND TRIVANDRUM. THE BREAK-UP OF PAYMENTS IS SHOWN AS U NDER:- SL. NO. STATION ASSESSEES SHARE IN COST OF EQUIPMENT ASSESSEES SHARE IN CONSULTANCY CHARGES FOR THE PURCHASE OF EQUIPMENT TOTAL (AMOUNT IN LAKHS) 1) TRISSUR 58.55 6.45 65.00 2) KOCHI 67.56 7.44 75.00 3) KANNUR 58.55 6.45 65.00 4) TRIVANDRUM 58.55 6.45 65.00 243.21 26.79 270.00 SINCE THE PAYMENT MADE BY THE ASSESSEE IS A COMPOSI TE ONE, SUBSTANTIAL PART OF WHICH IS FOR ACQUIRING THE EQUIPMENTS, ACCORDINGLY, THE LD. CIT(A) HAS RIGHTLY ITA NOS.348-351/COCH/2015 7 HELD THAT THE PAYMENT MADE BY THE ASSESSEE TO BECIL IS ELIGIBLE FOR DEPRECIATION U/S. 32(1) OF THE ACT, UNDER THE HEAD PLANT AND MAC HINERY. IT IS ORDERED ACCORDINGLY. ACCORDINGLY, THIS GROUND OF THE REVENUE IS DISMISSED. 11 . THE NEXT COMMON ISSUE IS AGAINST THE DELETION OF DI SALLOWANCE BY THE ASSESSING OFFICER OF 10% OF PAYMENT OF RS.2,70,000/ - MADE TO BROADCAST ENGINEERING CONSULTANTS LTD. AS COMMON TRANSMISSION INFRASTRUCTURE (CTI) U/S. 40(A)(IA) OF THE ACT. 12. BEFORE THE LD. CIT(A), THE ASSESSEE MADE ELABO RATE WRITTEN SUBMISSIONS WHICH ARE REPRODUCED IN PARA 8 OF THE LD. CIT(A)S ORDER. 13. THE LD. DR RELIED UPON THE ORDER OF THE ASSES SING OFFICER. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. AS PER THE AGREEMENTS WITH BROADCAST ENGINEERING CONSU LTANTS INDIA LTD. (BECIL) AND IT IS EVIDENT FROM THESE AGREEMENTS THAT OUT OF THE TOTAL PAYMENT OF RS.2,70,00,000/-, RS.2,43,21,000/- WAS TOWARDS THE COST OF EQUIPMENTS, AND THE BALANCE OF RS.26,79,000/- CHARGED BY BECIL AS SHAR E IN CONSULTANCY CHARGES FOR THE PURCHASE OF EQUIPMENT. THE PAYMENTS WERE A COMPOSITE PAYMENT FOR PROCUREMENT OF EQUIPMENTS AND NOT IN THE NATURE OF A WORKS CONTRACT. ITA NOS.348-351/COCH/2015 8 THEREFORE, IT HAS RIGHTY BEEN HELD BY THE LD. CIT(A ) THAT THE ASSESSING OFFICER WAS NOT CORRECT IN HOLDING THAT TDS WAS EXIGIBLE ON SUC H PAYMENTS. IT IS ORDERED ACCORDINGLY. THUS THIS GROUND OF THE REVENUE IS DI SMISSED. ACCORDINGLY, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. 15. IN THE RESULT, THE APPEALS OF THE REVENUE IN I .T.A. NOS. 348-351/COCH/2015 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-07-2016. SD/- SD/- . ) (GEORGE GEORGE K.) ( . . ) ( B.P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER % /PLACE: /COCHIN 3 /DATED: 25TH S JULY, 2016 GJ COPY TO: 1. M/S. MATHRUBHUMI PRINTING & PUBLISHING COMPANY LTD., K.P. KESAVA MENON ROAD, CALICUT-673 001. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1( 1), CALICUT. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS),KOZHIKOD E. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 5. THE DR/ITAT, COCHIN BENCH. 6. GUARD FILE. 0+ /BY ORDER 4 /ASSISTANT REGISTRAR , . 5. . 6 . 5. ., /I.T.A.T., COCHIN