New Delhi Television Ltd., New Delhi V. DCIT, New Delhi

ITA 4833/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3784 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 1 , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM ITA NO. 4833/DEL/2015 : ASSTT. YEAR : 2007 - 08 M/S NEW DELHI TELEVISION LTD., 207, OKHLA IND USTRIAL ESTATE, PHASE - II, NEW DELHI - 110020 VS DCIT, CIRCLE - 13(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN /GIR NO. AA ACN0865D ITA NO. 5170/DEL/2015 : ASSTT. YEAR : 2007 - 08 DCIT, CIRCLE - 18(1), NEW DELHI VS M/S NEW DELHI TELEVISION LTD., 207, OKHLA INDUSTRIAL ESTATE, PHASE - II, NEW DELHI - 110020 (APPELLANT) (RESPONDENT) PAN /GIR NO. AAACN0865D ASSESSEE BY : SH. SACHIT JOLLY, ADV. REVENUE BY : SH. KUMAR PRANAV , SR. DR DATE OF HEARING : 29.01 .201 8 DATE OF PRONOUNCE MENT : 07 .0 2 .201 8 ORDER PER N. K. SAINI, AM : THESE CROSS APPEALS BY THE ASSESSEE AND DEPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 27.05.2015 OF LD. CIT(A) - 6 , DELHI . 2. T HE GROUNDS RAISE D IN THE ASSESSEE S APPEAL READ AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX [LD.CIT(A)] ERRED IN CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT BY THE LD. AO ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT U/S 92CA(3) OF THE ACT IN THE IMPUGNED PENALTY ORDER PASSED ON MARCH ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 2 31, 2014 BY THE DY. COMMISSIONER OF INCOME TAX , CIRCLE 13(1), NEW DELHI ('LD. AO'). 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. AO IN LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE PURPORTED GROUND THAT THE APPELLANT HAD CONCEALED PARTICULARS OF ITS INCOME AS ALSO FURNISHED INACCURATE PARTICULAR S OF INCOME IN RESPECT OF TRANSFER PRICING ADJUSTMENT U/S 92CA(3) OF THE ACT AMOUNTING TO RS 94,16,785/ - . 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ACTION OF LD. AO LEVYING PENALTY U/S 271(1)(C) OF THE ACT IS INCORRECT IN VIEW OF THE EXPLANATION 7 TO SECTION 271(1)(C) OF THE ACT, THUS, DESERVES TO BE DELETED. 1.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ACTION OF LD. CIT(A) CONFIRMING THE ORDER OF LD. AO LEVYING PENALTY U/S 271(1)(C) OF THE AC T IS UNJUSTIFIED AND DESERVES TO BE DELETED. THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. IN THE DEPARTMENTAL APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) IS JUSTIFIED IN DELETING THE PENALTY OF RS,6,80,11 ,186/ - IMPOSED BY THE AS SESSING OFFICER (A O) U/S 271(1) (C) OF THE ACT WITHOUT CONSIDERING PROVISIONS OF EXPLANATION 1 TO SECTION 271(L)(C) OF THE ACT? ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 3 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) IS JUSTIFIED IN DELETING THE PENA LTY IMPOSED BY THE AO U/S 271(1 ) (C) OF THE ACT WITHOUT CONSIDERING THAT THE ASSESSEE HAD MADE A CLAIM WHICH IS INCORRECT IN LAW AND THE EXPLANATION OF THE ASSESSEE IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONAFIDE? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE PENALTY IGNORING RATION DECIDENDI AS LAID DOWN BY HON'BLE DELHI HIGH COURT IN THE CASE OF C1T VS. ZOOM COMMUNICATION PVT. LTD. (327 ITR 510)? 4. THAT THE ORDER OF THE CI T(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THAT APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4. FROM THE AFORESAID GROUNDS, IT IS GATHERED THAT THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENAN CE OF THE PENALTY WHILE THE DEPARTMENT IS IN APPEAL AGAINST THE DELETION OF PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 5. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF IN COME ON 02.11.2017 DECLARING NIL INCOME. HOWEVER, THE ASSESSMENT WAS FRAMED BY THE AO AT AN INCOME OF RS.15,01,72,110/ - BY MAKING THE FOLLOWING ADDITIONS /DISALLOWANCES: (I) DISALLOWANCE OF ESOP EXPENSES OF RS.21,28,41,993/ - (II) DISALLOWANCE OF SOFTWARE EXPENSES OF RS.3,06,009/ - ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 4 (III) DISALLOWANCE OF EXCESS CLAIM OF UNABSORBED BUSINESS LOSS OF RS.17,16,48,402/ - . (IV) ADDITION ON ACCOUNT OF DISALLOWANCE AS PER TP ADJUSTMENT U/S 92CA(3) OF RS.94,16,785/ - . THE AO INITIATED THE PENALTY PROCEED INGS U/S 271 (1)(C) OF THE ACT AND OBSERVED THAT THE LD. CIT(A) VIDE HIS ORDER DATED 06.03.2013 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AS UNDER: (I) DISMISSED THE APPEAL OF THE ASSESSEE ON ISSUE NO. (I), (II) DELETED THE ADDITION MADE ON ISSUE NO. (II), (III) UPHOL D THE ADDITION OF AO/TPO ON ISSUE NO. (III), (IV) DIRECTED THE AO TO VERIFY THE B/F LOSSES AND UNABSORBED DEPRECIATION FROM THE RECORDS AND GIVE SET OFF OF SUCH LOSSES. 6 . THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) OF THE AC T SHOULD NOT BE LEVIED, SINCE THERE WAS NO RESPONSE FROM THE ASSESSEE S SIDE. THE AO COMPLETED THE PENALTY PROCEEDINGS EX - PARTE AND LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT. THE AO HELD THAT THE ASSESSEE HAD CONCEALED AND ALSO FURNISHED INACCURATE PARTI CULARS OF ITS INCOME IN RESPECT OF DISALLOWANCE OF E SOP EXPENSE S OF RS. 21,28,41,993/ - AND ADDITION OF RS.94,16,785/ - ON ACCOUNT OF DISALLOWANCE AS PER TP ADJUSTMENT U/S 92CA(3) OF THE ACT. THE AO LEVIED THE PENALTY OF RS.6,80,11,186/ - U/S 271(1)(C) OF THE ACT. 7 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO DELETED THE PENALTY IN RESPECT OF THE ESOP EXPENSES AMOUNTING TO RS.21.28 CRORES BY OBSERVING THAT IT WAS A DEBATABLE LEGAL ISSUE. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE APEX COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS (P.) LTD. ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 5 189 TAXMAN 322. THE LD. CIT(A) AL SO DIRECTED THE AO TO RECOMPUTE THE PENALTY ON ACCOUNT OF ADDITIONS MADE AS PER TP ADJUSTMENT U/S 92CA(3) OF THE ACT. 8 . NOW BOTH THE PARTIES ARE I N APPEAL. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ADDITIONS ON THE BASIS OF WHICH THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED BY THE AO WAS A SUBJECT MATTER OF THE CROSS APPEALS BY THE ASSESSEE AS WELL AS THE DEPARTMENT IN I TA NOS. 2851 & 2752/DEL/2013 RESPECTIVELY WHEREIN VIDE ORDER DATED 17.08.2016, THE ADDITION RELATING TO ESOP EXPENSES WAS DELETED WHILE PART OF THE ADDITION ON ACCOUNT OF TP ADJUSTMENT WAS DELETED. OUR ATTENTION WAS DRAWN TOWARDS PARA 10.9 AT PAGE NO. 19 A ND PARA 13 AT PAGE NO. 29 OF THE AFORESAID REFERRED TO ORDER DATED 17.08.2016. 9 . IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR SUPPORTED THE ORDER OF THE AO. 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL A VAILABLE ON THE RECORD. IT IS NOTICED THAT THE ADDITION RELATING TO ESOP EXPENSES HAS BEEN DELETED AND RELEVANT FINDINGS ARE GIVEN IN PARA 13 OF THE AFORESAID REFERRED TO ORDER DATED 17.08.2016 WHICH READ AS UNDER: 13. IN ANY EVENT, IN VIEW OF THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BIOCON LTD. WHICH IS BINDING ON US THIS ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE AO FOR THE A.Y. 2008 - 09 IN AN ORDER PASSED U/S 250/143(3) OF THE ACT ON 14.09. 2015, ON THE DIRECTIONS OF THE LD. CIT(A) AND ALLOWED THE CLAIM OF ESOPS EXPENDITURE BY ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 6 FOLLOWING THE DECISION OF THE SPECIAL BENCH AFTER VERIFICATION. HENCE THE ISSUE IN THIS YEAR SHOULD ALSO BE DECIDED BY HIM AFRESH. 1 1 . IN VIEW OF THE ABOVE, WE DO N OT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. ACCORDINGLY, WE CONFIRM THE VIEW TAKEN BY THE LD. CIT(A) FOR DELETING THE PENALTY U/S 271(1)(C) OF THE ACT LEVIED BY THE AO ON ACCOUNT OF ADDITION FOR ESOP EXPENSES . 1 2 . AS REGARDS TO THE ADDITION ON ACCOU NT OF TP ADJUSTMENTS, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 10.9 OF THE AFORESAID REFERRED TO ORDER DATED 17.08.2016 WHICH READ AS UNDER: 10.9 THUS WE HOLD THAT: (A) THERE CAN BE NO MARK - UP ON REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE PRI OR TO INCORPORATION OF NDTV NETWORK PLC UK. (B) THE ACTION OF THE AO IN CHARGING A MARK - UP ON REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE ON MANAGEMENT SERVICES AFTER INCORPORATION IS UPHELD. THOUGH THE LD. COUNSEL FOR THE ASSESSEE RAISED ARGUMENT S ON PERCENTAGE OF MARK - UP, IN VIEW OF THE PERCENTAGE OF MARK - UP ADOPTED BY THE ASSESSEE IN THE SUBSEQUENT YEARS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE RATE OF MARK - UP ADOPTED BY THE LD. TRANSFER PRICING OFFICER. 13 . IN VIEW OF THE AFORESAID FI NDINGS GIVEN BY THE ITAT, WE RESTO RE THE ISSUE RELATING TO LEVY OF PENALTY ON ACCOUNT OF TP ADJUSTMENT TO THE FILE OF THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW AFTER CONSIDERING THE OUTCOME OF THE ORDER TO BE PASSED ON THE QUANTUM ADDITIONS IN ACC ORDANCE WITH THE DIRECTIONS GIVEN IN AFORESAID REFERRED TO ORDER DATED 17.08.2016. ITA NO S. 4833 & 5170 /DE L/2015 NEW DELHI TELEVISION LTD. 7 14 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES WHILE THE APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRON OUNCED IN THE COURT ON 07 /0 2 / 2018 ) SD/ - SD/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07 /0 2 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGIS TRAR