DCIT, Circle-1, Meerut V. Meerut Cable Network Pvt. Ltd., Meerut

ITA 4503/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7421 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: YOGESH SHARMA
• Assessee Lawyers: V K GOEL
• Keywords: Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES CAMP AT MEERUT BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4503/DEL/2018 ASSESSMENT YEAR 2009-10 DCIT, CIRCLE - 1, MEERUT. VS MEERUT CABLE NETWORK PVT. LTD., 56-57A, NIRANJAN VATIKA, CHHIPI TANK, MEERUT. PAN: AADCM 9883F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH SHARMA, SR.D.R. RESPONDENT BY : SHRI V.K. GOEL, ADV. / DATE OF HEARING : 09/01/2019 / DATE OF PRONOUNCEMENT: /01/2019 ORDER PER N.S. SAINI, A. M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER OF LEARNED CIT(A), MEERUT DATED 12.03.2018 FO R THE ASSESSMENT YEAR 2009-10. 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF T HE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2 LAC MADE BY THE AO UNDER THE HEAD COPYRIGHT CHARGES. ITA NO.4503/DEL/2018 2 3. THE BRIEF FACTS OF THE CASE ARE THAT FROM PERUSA L OF PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED COPYRIGHT CHARGES OF RS.2 LAC. IN HIS OPINION, THIS WAS A CAPITAL EXPENDITURE, AND THEREFORE, HE S HOW CAUSE THE ASSESSEE WHY THIS EXPENDITURE SHOULD NOT BE DISALLO WED. THE ASSESSEE SUBMITTED THAT AS PER AGREEMENT WITH SHIV INTERNATIONAL, THEY ARE PROVIDING SERVICES TO PRODUCE AND DISPLAY ELECTRONIC COPIES OR PRODUCTION OF ANY WORK, TO PERFORM OR DISPLAY AN Y WORK PUBLICLY WHICH FALL UNDER THE HEAD COPYRIGHTS, TO SALE OR ASSIGN THESE RIGHTS TO OTHER, TO TRANSMIT OR DISPLAY BY RADIO OR VIDEO INCLUDING THE CABLE, NEWS FILMS, SONGS, MESSAGES, ADVERTISEMENT, REALITY SHOWS OR JOURNALISM. FROM THESE THE AO CONCLUDED THAT THE NA TURE OF WORK SHOWS THAT IT WAS GIVING LONG TERM ENDURING BENEFIT S TO THE ASSESSEE COMPANY AND THAT THE COMPANY WAS RENEWING IT EACH Y EAR, THEREFORE, HE DISALLOWED RS.2 LAC HOLDING IT TO BE A CAPITAL E XPENDITURE. 4. ON APPEAL, THE LD. CIT(A) VACATED THE DISALLOWAN CE BY OBSERVING THAT ON GOING THROUGH THE AGREEMENT WITH M/S. SHIV ENTERTAINMENT, HE WAS OF THE VIEW THAT THE EXPENDIT URE IS NOT CAPITAL IN NATURE. HE OBSERVED THAT EXPENDITURE OF SIMILAR NATURE OF RS.3 LAC ITA NO.4503/DEL/2018 3 WAS INCURRED TO THE CONCERN AUTHORITY IN THE ASSESS MENT YEAR 2008- 09. THE ASSESSING OFFICER IN ASSESSMENT ORDER PASSE D U/S.143(3) ALLOWED THE SAME, IT WAS EVIDENT FROM COPY OF ASSES SMENT ORDER FILED BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOT BROU GHT ANY MATERIAL TO SHOW THAT ANY DISTINCTION BETWEEN THE NATURE OF EXPENSE INCURRED IN THE IMMEDIATELY PRECEDING YEAR VIZ-A-VIZ, IN THI S YEAR, THEREFORE, BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMY SATSANG VS CIT, (1992) 193 ITR 321 (SC) HE HELD THAT THE EXPENDITURE BEING OF REVENUE IN NATURE AND ALLO WED THE GROUND OF APPEAL OF THE ASSESSEE. 5. LD. DR RELIED UPON THE ORDER OF THE ASSESSING WH EREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT( A). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE LD. DR BESIDES SUPPORTING THE ORDER OF THE ASSESSING OFFICER COULD NOT POINT OUT ANY MISTAKE IN THE ORDER OF THE LD. CIT(A). HE ALSO COU LD NOT SHOW ANY GOOD REASON AS TO WHY SIMILAR EXPENDITURE ALLOWED T O THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008-09 P AID TO THE VERY ITA NO.4503/DEL/2018 4 SAME PARTY WAS NOT ALLOWABLE IN THE YEAR UNDER CONS IDERATION. HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN GROUND NO.2 OF THE APPEAL OF THE REVENUE, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.42,97,500/- MADE BY THE AO ON ACCOUNT OF EXCE SS PAYMENT TO DEN FOR ADDITIONAL SERVICES. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER OBSERVED THAT FROM THE LETTER OF DEN DATED 9.2.2009 , IT IS CLEAR THAT IT WAS ALREADY PROVIDING THESE SERVICES WHICH ARE MENT IONED IN THE SAID LETTER WHEN NO NEW SERVICES ARE BEING PROVIDED THE AMOUNT GIVEN IN EXCESS PAYMENT OF RS.42,97,500/- IS NOT ALLOWABLE. HENCE, HE ADDED THE SAME IN THE INCOME OF THE ASSESSEE. 9. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION. HE OBSERVED THAT THE CLAIM OF ASSESSEE IS THAT THE EXTRA PAYMEN T RELATES TO ADDITIONAL SERVICES AS PER AGREEMENT DATED 30.04.20 09 WHICH ARE UNDISPUTEDLY NOT INCLUDED IN ANNEXURE-A OF MAIN AGR EEMENT DATED ITA NO.4503/DEL/2018 5 01.04.2008. THE REASONING OF THE ASSESSING OFFICER FOR DISALLOWANCE OF RS.42,97,500/- DOES NOT REST ON SOUND FOOTINGS. 10. LD. DR HAS RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. C IT(A). 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE FIND THAT ALTHOUGH THE LD. D R HAS RELIED UPON THE ORDER OF THE AO, HE COULD NOT POINT OUT ANY SPE CIFIC ERROR IN THE ORDER OF THE LD. CIT(A). HE COULD NOT BRING ANY MAT ERIAL ON RECORD TO SHOW THAT THE AMOUNT PAID OF RS.42,97,500/- WAS IN FACT NOT FOR ADDITIONAL SERVICES BUT WAS PAID FOR THE EXISTING S ERVICES RENDERED BY DEN TO THE ASSESSEE. IN ABSENCE OF ANY MATERIAL BRO UGHT ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF THE LD. CIT(A) WHICH IS HEREBY CONFIRMED AND THE GROUND OF THE REVENUE IS DISMISSED. 12. IN GROUND NO.3 OF THE APPEAL OF THE REVENUE, TH E GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.40 LAC MADE BY THE AO UNDER THE HEAD PLACEME NT EXPENSES. ITA NO.4503/DEL/2018 6 13. THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBS ERVED FROM THE P&L ACCOUNT OF THE ASSESSEE, COMPANY THAT IT HAD DE BITED RS.40 LAC AS PLACEMENT EXPENSES, WHICH WAS NIL LAST YEAR. H E CALLED FOR THE DETAILS OF SERVICES RENDERED. 14. THE AO OBSERVED THAT THE SERVICES WERE BEING RE NDERED BY SHRI MANOJ MISHRA AND SMT. NEETA MISHRA FOR WHICH THE AS SESSEE- COMPANY HAS MADE AGREEMENT WITH BOTH THE ABOVE MENT IONED PERSONS. THE ASSESSING OFFICER OBSERVED THAT FROM P ERUSAL OF THE DETAILS GIVEN, IT WAS FOUND THAT SHRI MANOJ MISHRA AND SMT. NEETA MISHRA ARE NOT RENDERING THE SERVICES THEMSELVES. T HEY ARE TAKING SERVICES FROM SHIV INTERNATIONAL WHICH IS AN AOP IN WHICH MR. ROMI SHIVA IS A MEMBER AND ALSO WORKING AS A DIRECTOR IN MEERUT CABLE NETWORKS. SHRI MANOJ MISHRA AND SMT. NEETA MISHRA A RE CLOSE RELATIVES OF SHRI ROMI SHIVA WHICH WAS CLEAR FROM T HE STATEMENT GIVEN BY SMT. NEETA MISHRA, THEREFORE, THE ASSESSIN G OFFICER HELD THAT AS ALL THE WORK WAS BEING DONE BY SHIV INTERNA TIONAL AND ALL THE PAYMENTS ARE ACTUALLY GOING TO SHIV INTERNATIONAL, IN WHICH DIRECTOR, MEERUT CABLE NETWORK, MR. ROMI SHIVA IS A MEMBER. H E DISALLOWED RS.40 LAC AND ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.4503/DEL/2018 7 15. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE ON THE GROUND THAT THE EXPENDITURE WAS IN PURSUANCE TO AN AGREEMENT DATED 1.11.2008 EXECUTED SEPARATELY BY THE ASSESSEE WITH SHRI MANOJ MISHRA AND SMT. NEETA MISHRA. THE ASSESSING OFFICER HAS NOT DOUBTED THE SERVICES PROVIDED TO THE ASSESSEE. IN T HE ASSESSMENT ORDER, HE HAS STATED THAT THE SERVICES ARE ACTUALLY BEING RENDERED BY SHIV INTERNATIONAL. THE OBJECTION OF THE ASSESSING OFFICER IS THAT SHRI MANOJ MISHRA AND SMT. NEETA MISHRA HAVE NOT PROVIDE D THE SERVICES PERSONALLY BUT THROUGH SHIV INTERNATIONAL AN AOP IN WHICH SHRI ROMI SHIV IS A MEMBER AND ALSO A DIRECTOR IN THE ASSESSE E-COMPANY. THE AO HAS STATED THAT SHRI MANOJ MISHRA AND SMT. NEETA MISHRA ARE CLOSE RELATIVES OF SHRI ROMI SHIV. THUS, ALTHOUGH A DMITTING THE SERVICES HAVE BEEN RENDERED, BUT THE EXPENSES HAVE BEEN DISALLOWED. HE OBSERVED THAT THERE IS NO PROHIBITIO N OR BAR AT ALL IN THE AGREEMENT OR IN THE STATUTE THAT THIS KIND OF W ORK CANNOT BE OUTSOURCED. IN CASE, THE SERVICE PROVIDER AND SERVI CE RECEIVER ARE SATISFIED THERE IS NO EMBARGO FOR GETTING THE SERVI CE PROVIDED BY OUTSOURCING THE SAME. HE WAS OF THE VIEW THAT IT WA S NOT FATAL FOR ALLOWING SUCH EXPENDITURE UNDER THE INCOME TAX ACT. THE CLOSE ITA NO.4503/DEL/2018 8 RELATIONSHIP BETWEEN SHRI MANOJ MISHRA AND SMT. NEE TA MISHRA AND SHRI ROMI SHIV, WHO IS ALSO A DIRECTOR IN THE ASSES SEE-COMPANY, CANNOT BE A VALID REASON FOR DISALLOWING THE EXPEND ITURE INCURRED FOR BUSINESS PURPOSES. THE ASSESSING OFFICER SHOULD HAV E EXAMINED THE QUANTUM OF EXPENDITURE WITH RESPECT TO SECTION 40A( 2) (B). HE HAS NOT DONE SO, THEREFORE, HE DELETED THE ADDITION. 16. LD. DR HAS RELIED UPON THE ORDER OF THE AO WHER EAS THE LD. AR HAS RELIED UPON THE ORDER OF THE LD. CIT(A). 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS F ILED THE COPY OF AGREEMENT BETWEEN THE ASSESSEE AND SHRI MANOJ MISHR A AND SMT. NEETA MISHRA AT PAGES 67 TO 78 OF THE PAPER BOOK. A BARE PERUSAL OF THE SAID AGREEMENT SHOWS THAT THE RECIPIENT OF THE AMOUNT HAD RENDERED FOLLOWING SERVICES. (A) THE SERVICE PROVIDER SHALL CONDUCT RANDOM CHECK S AT THE PREMISES OF THE SUBSCRIBERS AND LCOS; (B) THE SERVICE PROVIDER SHALL FORTHWITH INTIMATE MCN IF THE CHANNELS ARE NOT BEING RECEIVED BY THE SUBSCRIBERS ON THE DEDICA TED FREQUENCIES; ITA NO.4503/DEL/2018 9 (C) THE SERVICE PROVIDER SHALL FACILITATE MCN TO R ESOLVE ANY PROBLEMS RELATING TO PLACEMENT OF THE CHANNELS ON THE DEDICA TED FREQUENCIES IN THE TERRITORY. (D) THE SERVICE PROVIDER SHALL CO-OPERATE WITH MCN WHILE PURSUING ANY LEGAL ACTION AGAINST ANY INFRINGER. 18. A READING OF THE ABOVE SHOWS THAT THE ABOVE SER VICES ARE VAGUE AND GENERAL IN NATURE AND DOES NOT SHOW AS TO WHAT THE ACTUAL SERVICES WERE TO BE RENDERED BY THE SAID PERSONS TO THE ASSESSEE COMPANY AND WHAT BENEFIT THE ASSESSEE COMPANY DERIV ED OUT OF THEIR SERVICES. NO CORRESPONDENCE OR REPORTS OF THE SAID PERSONS WERE ALSO FILED TO SHOW THE NATURE OF SERVICES RENDERED BY TH EM. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GRO UND OF APPEAL OF THE REVENUE. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 16/0 1/2019. SD/- SD/- (KULDIP SINGH) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16/01/2019 PRABHAT KUMAR KESARWANI, SR.P.S.