DEPUTY COMMISSIONER OF INCOME TAX-, MUMBAI V. PIONEER CHANNEL FACTORY PRIVATE LIMITED, MUMBAI

ITA 4433/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4231 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

AAYAK AAYAK AAYAK AAYAKR APILAIYA AIQ R APILAIYA AIQ R APILAIYA AIQ R APILAIYA AIQAKRNA N AKRNA N AKRNA N AKRNA NYAAYAPIZ YAAYAPIZ YAAYAPIZ YAAYAPIZ MAMUBA[ MAMUBA[ MAMUBA[ MAMUBA[- -- - MAO MAOMAO MAO. .. . IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR A GGARWAL, AM AAYAKR APILA SA AAYAKR APILA SA AAYAKR APILA SA AAYAKR APILA SAM MM M . / ITA NO.4433/MUM/2017 ( INAQA-ARNA BAYA- / ASSESSMENT YEAR 2012-13) DCIT 2(3)(2), MUMBAI VS. M/S. PIONEER CHANNEL FACTORY PVT LTD., PLOT NO.142, SHREE SADAN, UPPER GOVIND NAGAR, MALAD (E), MUMBAI ( APILAAQA APILAAQA APILAAQA APILAAQAI II I - -- - / APPELLANT) .. ( P` P`P` P`%YAQAA %YAQAA %YAQAA %YAQAAI II I- -- - / RESPONDENT) PAN NO. AABCT 3268 P REVENUE BY : SHRI ABI RAMA KARTIKEYAN, DR ASSESSEE BY : NONE DATE OF HEARING: 12.3.2019 DATE OF PRONOUNCEMENT : 12-03- 2019 AADOSA AADOSA AADOSA AADOSA / O R D E R PER MAHAVIR SINGH, JM: THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-5, MUMBAI [IN SHORT CIT(A)], IN APPEAL NO. IT-14/15-16/293/16-17 DATED 1.3..2017. THE ASSESSMENT WAS FRAMED BY THE DCITG 2(3)(2), MUMBAI FOR THE A.Y. 2 012-13 VIDE ORDER DATED 27.2.2015 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2 ITA NO.4433/MUM/2017 ASSESSMENT YEAR 2012-13 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) IN DELETING THE EXPENDITURE CLA IMED BY THE ASSESSEE. FOR THIS, THE REVENUE HAS RAISED THE FOLL OWING GROUNDS: 1. 'WHETHER ON THE /ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY AUTHENTIC BILL AND VOUCHERS AND HENCE CANNOT BE SAID TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS.' 2.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE W ITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE BRING INTO EXISTENCE BENEFIT OF ENDURING NATURE AND HENCE A CAPITAL EXPENDITURE WHICH IS NOT AND ALLOWABLE DEDUCTION .' 3. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE WHEN THE CASE WAS CALLED FOR HEARING. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL OF THE REVENUE AFTER HEARING LD SR. D.R. AND ON THE BASIS OF MATERIALS AVAILABLE ON RECORD. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF ENTERTAINMENT AND MEDIA, SOFTWARE & RELATED PRODUCTS. ON PERUSAL OF PROFIT AND LOSS AC COUNT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB ITED AN AMOUNT OF 69,06,772/- TOWARDS PROGRAMMING EXPENSES WRITTEN OF F DURING THE YEAR. THE ASSESSING OFFICER NOTED FROM THE AUD IT REPORT IN COLUMN 17(A) RELATED TO EXPENDITURE OF CAPITAL IN N ATURE, WHEREIN, THE AUDITOR HAS SPECIFICALLY MADE A REMARK THAT PR OGRAMMING EXPENSES OF 69,06,772/- DEBITED TO STATEMENT OF P&L ACCOUNT, WHICH WAS DEVELOPED IN THE LAST YEAR AND USED IN TH IS YEAR AS PER THE OPINION OF THE MANAGEMENT. ACCORDING TO THE A SSESSING 3 ITA NO.4433/MUM/2017 ASSESSMENT YEAR 2012-13 OFFICER, THIS EXPENDITURE PERTAINS TO ASSESSMENT YE AR 2011-12 AND IS IN THE NATURE OF PRE-OPERATIVE EXPENDITURE. ACC ORDING TO HIM, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING AND THIS EXPENDITURE SHOULD HAVE BEEN MADE IN THE YEAR IN WH ICH THESE EXPENDITURES HAVE BEEN INCURRED. HE ALSO NOTED THA T THE AUDITOR HAS POINTED OUT THESE AS CAPITAL IN NATURE. ON THE SE REASONS, THE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED BAC K TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE CAME IN APPEAL BEFORE TH E CIT(A). 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE BY NOTHI NG THAT THE INCOME FROM THE PROGRAMMING HAS BEEN DISCLOSED IN T HIS YEAR AND BY TAKING THE MATCHING CONCEPT OF EXPENDITURE VIS- -VIS INCOME, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 3.3. AS UNDER: 3.3 I HAD CONSIDERED THE APPELLANT'S SUBMISSION. AP PELLANT IS INTO THE BUSINESS OF EXHIBITING TV CHANNELS. APPELLANT GOT T HE LICENSE TO COMMENCE TWO TV CHANNELS NAMELY, M TUNES AND MUSIC XPRESS IN THE MONTH OF AUGUST 2011 (IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2012-13). IN THE EARLIER ASSESSMENT YEAR APPELLANT HAD INCURRED EXPENDITURE OF RS.69,06,7227- AS PROGRAMMING EXPENSES WHICH APPELL ANT HAD SHOWN IN THE CURRENT ASSESSMENT. THE DETAILS OF PROGRAMMING EXPENSES ARE AS UNDER EXPENDITURE AMOUNT(RS.) EQUIPMENT HIRE CHARGES 1,62,000 PROFESSIONAL EXPENSES 25,36,328 SALARY 13,09,720 SHOOTING EXPENDITURE(ARTIST) 4,27,774 4 ITA NO.4433/MUM/2017 ASSESSMENT YEAR 2012-13 TECHNICAL SERVICE CHARGES 24,70,951 69,06,773 WHEN WE EXAMINE THE ABOVE PROGRAMMING EXPENSES, THI S IS MAINLY FOR THE HIRING OF PROFESSIONALS AND ALSO EQUIPMENT HIRI NG CHARGES AND TECHNICAL SERVICE CHARGES. APPELLANT HAD INCURRED T HIS EXPENSE OF RS.69,06,7737- IN THE PREVIOUS YEAR WHICH WAS SHOWN IN THE CURRENT ASSETS IN THAT YEAR. IN THE SUBMISSIONS APPELLANT S TATES THAT THE ABOVE EXPENDITURE WAS INCURRED FOR GATHERING CONTENTS, VI DEO TAPES OF INTERVIEWS AND ENTERTAINMENT PROGRAMMES, WHICH DOES NOT HAVE A LONGER LIFE AND CAN BE EXHIBITED ONCE IN THE TV CHANNEL. T HESE EXPENSES DID NOT HAVE ANY ENDURING ADVANTAGE AND THEREFORE ALL T HESE EXPENSES ARE NOT CAPITAL EXPENDITURE AT ALL. WHEN WE EXAMINE THE ABOVE EXPENDITURE INCURRED BY APPELLANT, ALL THESE EXPENSES ARE FOR S ALARY AND HIRING OF EQUIPMENTS. THESE EXPENDITURES ARE INCURRED FOR MAK ING TV PROGRAMMES WHICH CAN BE SHOWN IN THE CHANNEL ONLY O NCE, AFTER WHICH IT LOSES IT VALUE. SO THIS EXPENDITURE AND THE PROGRAM MES WHICH ARE PREPARED BY THESE EXPENSES CANNOT BE CONSIDERED OF ENDURING NATURE. THEY CANNOT BE TREATED AS CAPITAL EXPENDITURE. EVEN IN THE AUDIT REPORT AUDITOR HAD MENTIONED THE PROGRAMMING EXPENSES OF R S.60,06,7727- WHICH WAS DEVELOPED IN THE LAST YEAR AND USED IN TH IS YEAR AS PER THE OPINION OF THE MANAGEMENT. IT WAS REVENUE EXPENDITU RE CONSIDERING THE BUSINESS OF APPELLANT WHICH IS TO MAKE TV PROGRAMME S AND WHOSE VALUE AFTER BROADCAST LOOSES VALUE CONSIDERABLY AND IT CANNOT BE CONSIDERED AS ENDURING NATURE. AS THERE IS NO ENDUR ING VALUE, THIS PROGRAMMING EXPENSES CANNOT BE CONSIDERED AS CAPITA L IN NATURE. HERE THE PROGRAMMES WHICH ARE MADE FROM THIS EXPENDITURE WAS BROADCASTED NEXT YEAR AND BY SHOWING THIS APPELLANT HAD EARNED REVENUE. THIS REVENUE WAS OFFERED BY APPELLANT AS INCOME. SO ONCE APPELLANT HAD OFFERED IT IN INCOME, APPELLANT IS ELIGIBLE FOR EXP ENDITURE IN VIEW OF MATCHING CONCEPT. THE EXPENDITURE SHOULD BE ALLOW ED IN THE YEAR IN WHICH INCOME WAS EARNED SO THAT IT DOES NOT GIVE AN Y DISTORT PICTURE OF INCOME WHERE INCOME AND EXPENDITURE ARE MATCHING AT THE SAME TIME. IN THE MATCHING CONCEPT, REVENUE OR INCOME EARNED D URING THE ACCOUNTING PERIOD IRRESPECTIVE OF ACTUAL CASH INFL OW IS REQUIRED TO BE COMPARED WITH THE EXPENSES INCURRED DURING THE SAME PERIOD IRRESPECTIVE OF THE ACTUAL OUTFLOW OF CASH. SO IN T HE CASE OF THE ASSESSEE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING THIS MATCHING CONCEPT IS VERY RELEVANT TO COMPUTE THE TAXABLE INCOME. THE AB OVE VIEW WAS DEALT WITH IN TAPARIA TOOLS LTD. JT. CIT [2003] 260 ITR 1 02 (BOM). HERE IN APPELLANT'S CASE ALSO ON THE EXPENDITURE INCURRED T HE INCOME WAS OFFERED IN THIS YEAR SO APPELLANT SHOULD BE ALLOWED TO CLAIM THIS EXPENDITURE WHICH ACCORDING TO HIM IS NOT OF CAPITA L NATURE BUT REVENUE NATURE. SO APPELLANT'S CLAIM FOR RS. 69,06,7727- IS TO BE ALLOWED AND AO'S ADDITION IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5 ITA NO.4433/MUM/2017 ASSESSMENT YEAR 2012-13 8. BEFORE US, LD SR. D.R. SIMPLY RELIED ON THE ASSE SSMENT ORDER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE GENUIN ENESS OF THE EXPENDITURE IS NOT IN DISPUTE. EVEN THE NATURE OF EXPENDITURE AS NOTED BY THE CIT(A) IS OF REVENUE NATURE FOR THE REASON THAT THE EXPENDITURE IS ON ACCOUNT OF EQUIPMENT HIRING CHARGES, TECHNICAL SERVICES CHARGES, SALARY & SHOOTING EXPENSES. THESE EXPENDITURES IN NO WAY, CAN BE CALLED AS CAPITAL IN NATURE DESPITE THE FACT THAT THE AUDITOR MAY HAVE GIVEN ANY OBJECTION IN THE AUD IT REPORT BUT IT IS NOT CONCLUSIVE. ADMITTEDLY, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING BUT BY TAKING THE MATCHING CONCEPT, THE ASSESSEE IS ELIGIBLE FOR THIS EXPENDITURE IN THIS YEAR AS THE EXPENDITURE IS TO B E ALLOWED IN THE YEAR IN WHICH THE INCOME WAS EARNED, SO THAT IT DOES NOT GIVE AN Y DISTORTED PICTURE OF INCOME. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE HAS BEEN DEALT WITH BY HONBLE BOMBAY HIGH COURT IN THE CASE OF TA PARIA TOOLS LTD VS JCIT, 260 ITR 102(BOM). RESPECTFULLY FOLLOWING THE VIEW ADOPTED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF TAPARIA TOOLS (SUP RA), WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 - 03- 2019. AADOSA KI AADOSA KI AADOSA KI AADOSA KI GAAO GAAOGAAO GAAOYANAA KULAO MAO IDNAMK YANAA KULAO MAO IDNAMK YANAA KULAO MAO IDNAMK YANAA KULAO MAO IDNAMK 15. 03.2019 KAO KI KAO KI KAO KI KAO KI GA GAGA GA SD/- SD/- (MANOJ KUMAR AGGARWAL) (MAHAVIR S INGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 15- 03- 2019 6 ITA NO.4433/MUM/2017 ASSESSMENT YEAR 2012-13 BKP/SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//