ACIT, New Delhi V. Sparrow hawk India P Ltd., New Delhi

ITA 4301/DEL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7310 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 11-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BERNWAL
• Assessee Lawyers: SUNIL MOHAN BUCKSHEE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI C.M. GARG, JM ITA NO.4301/DEL/2009 ASSESSMENT YEAR : 2006-07 ACIT, CIRCLE 9(1), ROOM NO.163, CR BUILDING, NEW DELHI. VS. SPARROW HAWK INDIA PVT. LTD., FORMERLY KNOWN AS HALLMARK INDIA PVT. LTD., 602, ANTRIKSH BHAWAN, NEW DELHI. PAN : AAACH6943E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL MOHAN BUCKSHEE, ADVOCATE DEPARTMENT BY : MS ANIMA BERNWAL, SR. DR DATE OF HEARING : 11.01.2016 DATE OF PRONOUNCEMENT : 11.01.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 3.7.2009 IN RELATION TO TH E ASSESSMENT YEAR 2006-07. ITA NO.4301/DEL/2009 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE ALLOWING OF DEDUCTION OF EXPENSES AMOUNTING TO RS.1,45,45,673/- , WHICH WAS DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSE E HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR. 3. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DISTRIBUTING THE HALLMAR K CHANNEL IN INDIA. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE EXPEN SES CLAIMED BY IT BE NOT DISALLOWED AS NO BUSINESS ACTIVITY WAS CONDUCTE D, THE ASSESSEE SUBMITTED THAT IT WAS SET UP IN 1999 AND ENTERED IN TO AN AGREEMENT WITH M/S MODI ENTERTAINMENT LTD., FOR TAKING THEIR SERVI CES IN THE DISTRIBUTION OF HALLMARK CHANNEL IN INDIA. THIS AGREEMENT WAS S TATED TO HAVE EXPIRED IN DECEMBER, 2004, AFTER WHICH, IT STARTED NEGOTIATING WITH OTHER AGENCIES FOR DISTRIBUTION OF THE CHANNEL. THE ASSE SSEE FURTHER SUBMITTED THAT THE PROCESS OF NEGOTIATIONS REACHED A CRUCIAL STAGE WHEN THE ASSESSEES PARENT COMPANY WAS ACQUIRED BY A NEW SET OF ENTREPRENEURS IN APRIL, 2005 AND THE NEW OWNERS TOOK SOME TIME TO SE TTLE IN AND PROCESS THE NEGOTIATION WITH DIFFERENT AGENCIES IN INDIA WH EN THE BUSINESS ITA NO.4301/DEL/2009 3 ACTIVITY WAS STARTED. NOT SATISFIED WITH THE ASSES SEES CONTENTION, THE AO CAME TO HOLD THAT IN THE ABSENCE OF ANY BUSINESS CA RRIED ON BY THE ASSESSEE, SUCH EXPENSES AMOUNTING TO RS.1,45,45,673 /- WERE NOT ALLOWABLE. THE LD. CIT(A) OVERTURNED THE ASSESSMEN T ORDER ON THIS ISSUE AND ALLOWED DEDUCTION FOR EXPENSES BY OBSERVING THA T THE BUSINESS OF THE COMPANY WAS IN CONTINUATION THOUGH AT A LOWER LEVEL . THE REVENUE IS AGGRIEVED AGAINST THE ALLOWING OF DEDUCTION OF SUCH EXPENSES. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSE E COMPANY DURING THE YEAR EARNED SUBSCRIPTION FEES OF RS.18,900/-, APAR T FROM EARNING RENTAL INCOME AND INTEREST ON BANK DEPOSITS. IT IS APPARE NT THAT THE HALLMARK CHANNEL WAS RUNNING AS THE ASSESSEE ANNOUNCED ADVER TISEMENTS FOR TELECAST OF MOVIES FOR 20.11.2005 FOR THE MONTH OF MARCH, 2006 FOR WHICH THE ASSESSEE PAID SUBSCRIPTION TO CABLE TVS F OR THE PERIOD 1.12.2005 TO 28.2.2006 AND FROM 1.3.2006 TO 31.3.20 06. THE ASSESSEE ALSO PAID DECODER RENT TO CABLE TV FOR THE PERIOD 1 .3.2006 TO 31.3.2006. THE ABOVE NARRATION OF FACTS AMPLY DEMONSTRATES THA T THE ASSESSEE WAS ITA NO.4301/DEL/2009 4 ENGAGED IN BUSINESS DURING THE PREVIOUS YEAR RELEVA NT TO ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO EARNED SUBSCRIPTION FE ES, EVEN THOUGH IT WAS AT A LOWER LEVEL. THE VIEW POINT OF THE AO THA T NO DEDUCTION OF EXPENSES COULD BE ALLOWED BECAUSE NO BUSINESS ACTI VITY WAS CARRIED ON, IN OUR CONSIDERED OPINION, HAS BEEN RIGHTLY REJECTE D IN THE FIRST APPEAL. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE LD. CIT (A) IN ALLOWING DEDUCTION OF SUCH EXPENSES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.01.201 6. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 11 TH JANUARY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.