ITO, New Delhi V. M/s. Rajdhani Communication Networks (P) Ltd., New Delhi

ITA 3930/DEL/2010

• Counselvise Citation: 393020114 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: T N CHOPRA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3930/DEL/2010 ASSESSMENT YEAR : 2006-07 ITO, M/S RAJDHANI COMMUNI CATION WARD-15 (2), NETWORKS (P) LTD., PRAKASH TOWER, NEW DELHI. V. J-BLOCK MKT. PHASE-I, ASHOK VIHAR, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACR AAACR AAACR AAACR- -- -4494 4494 4494 4494- -- -E EE E APPELLANT BY : SMT. RENUKA JAIN GUPTA, SR. DR RESPONDENT BY : SHRI T.N. CHOPRA, ADVOCATE. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF LD CIT(A)-XVIII, NEW DELHI DATED 4.5.2010 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEALS ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF `.7 0,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF OPERATIONAL EXPE NSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSEE FAILED TO FILE CONFIRMATIONS FROM THE PARTI ES TO ITA NO3930/DEL/2010 2 WHOM PAYMENTS HAVE BEEN MADE DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER BY MERELY STATING THAT MUCH HIGHER PAY MENTS MADE TO PARTIES ON ACCOUNT OF DISTRIBUTION CHARGES HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR AS EVERY ASSESSMENT YEAR IS TO BE TREATED AS SEPARATE IN INCO ME TAX PROCEEDINGS, THE ABOVE REASONING IS NOT ACCEPTABLE. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRE SH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY BELONGING TO ZEE GROUP OF COMPANIES. IT WAS IN THE BUSINESS OF TRANSMITTING AIR SIGNALS RECEIVED FROM SITI C ABLE NETWORK TO VARIOUS CABLE OPERATORS IN INDIA. SITI CABLE NETWORK USED TO RECEIVE AIR SIGNALS FROM VARIOUS BROADCASTERS SUCH AS ZEE TELE FILMS L TD., ESPN INDIA, SONY INDIA AND STAR INDIA (P) LTD. ETC. 2.1. FOR RECEIVING THE SIGNALS THROUGH SITI CABLE NET WORK FOR RE- TRANSMITTION THE ASSESSEE COMPANY USED TO SHARE EXPENSES A ND INCOME THEREOF WITH SITI CABLE. THE EXPENSES AND INC OME WERE SHARED AS PER TERMS & CONDITIONS OF AGREEMENTS WHICH THE ASSESSE E USED TO ENTER WITH SITI CABLE FROM TIME TO TIME. 2.2. THE RETURN FOR THE ASSESSMENT YEAR 2006-07 WAS SELEC TED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I NCOME TAX ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ITA NO3930/DEL/2010 3 ASSESSING OFFICER NOTED THAT THERE WERE CERTAIN PAYMENT S FOR EXPENSES WHICH WERE MADE TO CERTAIN PARTIES AND WHICH ARE HUG E IN COMPARISON TO THE PREVIOUS YEAR. TO CHECK THE GENUINENESS OF THE SE EXPENSES, HE ASKED THE ASSESSEE TO FILE CONFIRMATIONS FROM THE FOLLOWI NG PARTIES TO WHOM PAYMENTS WERE MADE AS DISCERNIBLE AGAINST EACH OF THEM. --------------------------------------------------- ------------------------------------------------ NAME OF THE PARTY ASSESSMENT YEAR 2006-07 --------------------------------------------------- ------------------------------------------------ 1. ZEE PACKAGE CHARGES `.12,15,922/- 2. ESPN/STAR PACKAGE PAY CHARGES `. 9,80,580/- 3. SONY PAY CHANNEL CHARGES. `. 34,62,150/- 4. STAR PACKAGE PAY CHARGES. `. 56,69,016/- ---------------------- `.1,13,27,688/- ---------------------- --------------------------------------------------- ------------------------------------------------ 2.3. THE ASSESSEE COULD NOT FILE THE CONFIRMATION OF TH ESE PAYMENTS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT DURING THE IMMEDIATELY PRECEDING YEAR THE TOTAL PAYMENTS FO R THESE CHARGES WERE ONLY TO THE TUNE OF `.23,15,302/- WHICH HAD IN CREASED TO `.1,13,27,688/-. ON NON FILING OF CONFIRMATIONS FROM PAYEES BY TH ASSESSEE, THE ASSESSING OFFICER DISALLOWED A SUM OF `.70 LAK HS BEING EXCESSIVE EXPENSES CLAIMED BY THE ASSESSEE. 2.4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT (A). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD COUNSEL FO R THE ASSESSEE ON THE STRENGTH OF SUBMISSIONS DATED 20.10.2009, HAD ARG UED AS UNDER:- THAT M/S RAJDHANI COMMUNICATION NETWORK PVT. LTD. W ASS ONE OF ZEE GROUP COMPANY AND IT WAS THE DISTRIBUTOR OF M/S SI TI CABLE NETWORK LTD. (IN SHORT SITI) A MSO (MULTI SYSTEM OPER ATOR) OF ZEE ITA NO3930/DEL/2010 4 GROUP. LATER ON THE NAME OF SITI CABLE NETWORK LTD. WAS CHANGED TO THE WIRE & WIRELESS INDIA LTD. (IN SHORT WWIL). VAR IOUS BROADCASTERS E.G. ZEE TELE FILMS LTD., STAR INDIA PVT. LTD., ESPN INDIA LTD., SONY INDIA LTD. TRANSMITS VARIOUS AIR SIGNA LS THROUGH SATELLITES STATIONED IN ORBIT. THESE AIR SIGNALS COULD B E RECEIVED BY VARIOUS MSO INCLUDING SITI/WWIL, IN CABLE WIN CAB LE ETC. FOR RECEIVING AIR SIGNALS THESE MSO PAID CHARGES KNOWN AS CHANNEL PAY CHARGES TO VARIOUS BROADCASTERS. AFTER RECEIVING AIR SIGNALS THROUGH DISH ANTENAS AND OTHER TECHNICAL EQUIPMENTS THE MSO I.E. SITI/WWIL RETRANSM ITTED THOSE AIR SIGNALS TO VARIOUS CABLE OPERATORS INCLUDING THE APPELLANT THROUGH CABLES AGAINST CHARGES KNOWN AS CABL E CHARGES. AFTER RECEIVING TRANSMITTED AIR SIGNALS THE CABLE OPERATORS SUPPLY THESE SIGNALS TO VARIOUS CONSUMERS I.E. T V OWNERS OR SUBSCRIBERS. IN SHORT THE BUSINESS OF THE APPLICANT WAS TO RECEIVE AI R SIGNALS THROUGH DISH ANTENAS FROM MSO I.E. SITI/WWIL AGAINST THE SHARING OF PAY CHANNEL CHARGES I.E. COST TO THE APPLIC ANT AND SHARE OF CABLE CHARGES RECEIVED FROM VARIOUS CABLE OP ERATOR I.E. INCOME OF THE APPLICANT. DUE TO CUT THROAT COMPETITION AMONG VARIOUS BROADCAST ERS AND AMONG THEIR MSO AND AMONG DISTRIBUTORS THE SHARING RAT IO OF PAY CHANNEL CHARGES AND CABLE CHARGES CHANGED FREQUENTLY AND CANNOT BE COMPARED WITH PREVIOUS YEAR. FOR EXAMPLE DURING THE ACCOUNTING YEAR 2003-04 & 2004-05 THE SHARING RATIO OF PAY ITA NO3930/DEL/2010 5 CHANNEL CHARGES BETWEEN MSO I.E. SITI/WWIL AND THE APPLICANT WAS AS UNDER: NAME OF BROADCASTERS MSO SHARE DISTRIBUTOR SHARE SITI/WWIL RCNL DD SPORTS 50% 50% ESPN 50% 50% SONY 50% 50% STAR 50% 50% TEN SPORTS 50% 50% ZEE TELE FILMS 100% NIL THUS THE APPLICANT HAD PAID FOLLOWING CHARGES: 2004-05 2003-04 DD SPORTS NIL 65,940/- ESPN 343,422/- 641,946/- SONY 680,844/- 1153,455/- STAR 1291,036/- 1741,507/- TEN SPORTS NIL 175,325/- TOTAL 2315,302/- 3778,173/- THE REVENUE /CABLE CHARGES BETWEEN MSO I.E. SITI/WWI L AND THE APPLICANT WERE SHARED AS FOLLOWS DURING THE ABOVE ACCO UNTING YEAR. MSO SITI/WWIL 85% DISTRIBUTOR RCNL(THE ASSESSEE) 15% ACCORDINGLY, THE APPLICANT RECEIVED `.21,09,324/- I N A/C YEAR 2003-04 AND `.16,53,006/- IN A/C YEAR 2004-05. WITH EFFECT FROM 1.4.2005, THE SYSTEM OF SHARING PAY C HANNEL CHARGES AND SYSTEM OF SHARING OF REVENUE CHANGED. WITH EFFECT FROM 1.4.2005, THE APPLICANT WAS MADE LI ABLE TO PAY THE FULL AMOUNT OF PAY CHANNEL CHARGES. THERE WAS NO SHARE TO ITA NO3930/DEL/2010 6 BE BORNE BY THE MSO. ACCORDINGLY THE APPLICANT HAS P AID FOLLOWING CHARGES:- --------------------------------------------------- ------------------------------------------------ NAME OF THE PARTY ASSESSMENT YEAR 06-07 ZEE TELE FILMS 12,15,922/- ESPN/STAR 9,80,580/- SONY 34,62,150/- STAR 56,59,016/- TOTAL 1,13,27,688/- IT IS BUT NATURAL THAT THE INCREASE IN PAY CHANNEL CH ARGES WAS INEVITABLE AS IN PAST THE APPELLANT WAS PAYING ONLY 50 % OF CHARGES AGAINST 100% CHARGES IN THE CURRENT YEAR. MOR EOVER, IN PAST THE APPELLANT WAS NOT PAYING ANY SHARE FOR PAY CH ANNEL CHARGES TO ZEE TELE FILMS. AS THE COST TO APPELLANT WAS INCREASED DUE TO INCREASE I N PAY CHANNEL CHARGES, THE RATIO OF REVENUE CABLE CHARGES W AS ALSO CHANGED AS FOLLOWS:- MSO SITI/WWIL 10% AGAINST 85% IN PAST DISTRIBUTOR RCNL 90% AGAINST 15% IN PAST. DUE TO THIS CHANGE THE APPELLANT HAD RECEIVED `.77,8 4,632/- IN THE CURRENT YEAR AGAINST `.16,53,606/- IN ASSESSMENT YEA R 2005- 06 AND `.21,09,324/- IN ASSESSMENT YEAR 2004-05. 3. THE LD AR HAD ALSO FILED PAPER BOOK CONTAINING CO PY OF DISTRIBUTION AGREEMENT BETWEEN THE ABOVE PARTIES AND COPY OF AUDITED STATEMENT OF ACCOUNTS FOR THE ASSESSMENT YEARS 2004-05, 2 005-06 & 2006-07. ITA NO3930/DEL/2010 7 4. AFTER HEARING THE PLEADINGS OF LD AR AND AFTER OB TAINING REMAND REPORT FROM THE ASSESSING OFFICER AND THEN AFTER RECEI VING COMMENTS ON THE REMAND REPORT, THE LD CIT(A) DECIDED THE CASE IN FAVOUR OF THE ASSESSEE AND DELETED THE ADDITION OF `.70,00,000/-. THE ADDITION WAS DELETED ON THE BASIS OF CONSIDERATION OF THE FOLLOWING FACTS:- 1. THAT ALL PAYMENTS MADE BY THE APPELLANT WAS TO LARGE CORPORATE FIRMS AS PER AGREEMENTS AGAINST SPECIFIED BILLS RAISED BY THE FIRMS. 2. THE PAYMENTS WERE MADE THROUGH A/C PAYEE CHEQUES AFTE R DEDUCTING TDS & SERVICE TAX AS PER LAW. 3. THE RELEVANT INCOME OF THE ASSESSEE HAD ALSO INCREASED FR OM `.18,90,831/- TO `.78,94,639/- WHICH THE ASSESSING OFFI CER IGNORED. 5. AGGRIEVED AGAINST THE ORDER OF CIT(A), THE DEPART MENT PREFERRED AN APPEAL BEFORE THE TRIBUNAL. DURING PROCEEDINGS BE FORE US, THE LD DR STRESSED UPON THAT SINCE CONFIRMATION FROM PARTIES WAS NO T OBTAINED AND THE AMOUNT INVOLVED WAS HUGE AS COMPARED TO PREVI OUS YEAR, THE GENUINENESS OF THE EXPENSES WAS NOT ESTABLISHED BY THE ASSE SSEE AND HENCE THE DISALLOWANCE TO THE EXTENT OF `.70 LAKHS WA S JUSTIFIED. 6. THE LD AR PLEADED THAT DUE TO CUT THROAT COMPETI TION IN THE INDUSTRY THE TERMS AND CONDITIONS OF THE AGREEMENT WER E REVISED WHEREBY EARLIER THE CHARGES TO BE BORNE BY THE ASSESSEE WERE 50% WHICH WERE INCREASED TO 100% W.E.F. 1.4.2005. THE LD AR FURTHER PLEADED THAT DUE TO INCREASE IN SHARING OF EXPENSES THE AMOUNT OF EXPENSES TO BE BORNE BY THE ASSESSEE HAD INCREASED. HE FU RTHER STRESSED THAT REVENUE SHARING WAS ALSO CHANGED FROM 15% T O 90% AND ITA NO3930/DEL/2010 8 CONSEQUENTLY REVENUE OF THE ASSESSEE HAD ALSO INCREASED F ROM `.18,90,031/- TO `.78,94,639/-. 7. THE LD AR ALSO STRESSED THE POINT THAT THE ASSESSING OFF ICER HAD OBSERVED INCREASE IN EXPENSES ABSOLUTELY AND HAS NOT SEEN IN COMPARISON TO INCREASE IN INCOME. MOREOVER, THE GENU INENESS OF EXPENSES WAS DOUBTED ONLY BECAUSE CONFIRMATIONS COULD NO T BE FILED. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THR OUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE STUDIED THE AG REEMENTS BETWEEN THE ASSESSEE AND CITY CABLE NET WORK LTD. AND H AS OBSERVED THAT THE ASSESSEE HAD RIGHTLY MADE PAYMENTS IN ACCORDANC E WITH TERMS & CONDITIONS OF THE AGREEMENT AND HAD ALSO DEDU CTED RELEVANT TDS AND SERVICE TAX ON THE SAME. WE ARE OF THE OPINI ON THAT THERE IS NO POINT TO INTERFERE WITH THE DECISION OF THE LD CI T(A) AND WE UPHOLD THE DECISION OF THE LD CIT(A) AND CONSEQUENTLY THE AP PEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13TH DAY OF APRIL, 2012. SD/- SD/- (RAJPAL YADAV) (T.S. KAPOO R) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 13.4.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. (ITAT, NEW DELHI). ITA NO3930/DEL/2010 9 ITA NO3930/DEL/2010 10