ACIT - 9(3)(2), MUMBAI V. FUTURE MEDIA (INDIA) LIMITED, MUMBAI

ITA 5162/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: NAMRATA KASALE
• Keywords: Depreciation; Condonation of delay
• Section: 143(3); 32

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SH. R. C. SHARMA , AM & SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 5162 / MUM/ 2016 ( / ASSESSMENT YEAR: 2012 - 13 ) ACIT - 9 (3) (2) ROOM NO. 418, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD , MUMBAI - 40002 0 / VS. FUTURE MEDIA (INDIA) LTD. KNOWLEDGE HOUSE, OFF JOGESHWARI VIKHOROLI LINK ROAD, SHYAM NAGAR, JOGESHWARI(E) , MUMBAI - 400060 . ./ ./ PAN NO. AAACF 9652 Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI M. C. OMI NINGSHEN / RESPONDENTBY : MS. NAMRATA KASALE / DATE OF HEARING : 07 .02 .1 8 / DATE OF PRONOUNCEMENT : 1 4.03.18 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 16, MUMBAI DATED 30.05.16 F OR AY 20 12 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD.CIT(A) WAS RIGHT IN HOLDING THAT THE ADVERTISEMENT RIGHT 'WAS ELIGIBLE FOR DEPRECIATION WITHOUT SPECIFYING ANY REASON AS TO HOW IT FALLS WITHIN THE CLAUSE ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' OF SECTION 32(1)9I!) AND AS TO HOW THE DOCTRINE OF JUSDEM GEN RIS' IS' APPLICABLE IN THE INSTANT CASE. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) FAILED TO APPRECIATE THAT EVERY COMMERCIAL OR BUSINESS RIGHT IS NOT ELIGIBLE FOR DEPRECIATION UNLESS IT PARTAKES THE NATURE OF 'KNOW - HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT PANTALOON RETAIL INDIA LIMITED IS MERELY ASSIGNING THE RIGHT FOR A LIMITED PERIOD OF 10 YEARS AND NOT TRANSFERRING THE OWNERSHIP OF ADVERTISEMENT RIGHT TO ASSESSE COMPANY, FUTURE MEDIA (INDIA) LIMITED AND THIS RIGHT SHALL ALSO AUTOMATICALLY STAND TERMINATED AFTER THIS PERIOD UNLESS IT IS RENEWED WHICH IMPLIES THAT 3 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. THE ASSESSE COMPANY FMIL IS NOT TH E OWNER OF THE ASSET AS IT NEVER ACQUIRED A RIGHT SO AS TO ALIENATE THE SAID ASSET FROM ITSELF AND HENCE IT FAILS IN THE PRIMARY TEST ELIGIBILITY OF DEPRECIATION WHICH IS OWNERSHIP' OF THE ASSET. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABO VE GROUND BE SET ASIDE AND THAT OF THE DCIT - 9(3)(2 ) BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NE W GROUND WHICH MAY NECESSARY. 2. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FO R AY. 2012 - 13 ON 29 - 09 - 2012, DECLARING TOTAL INCOME OF RS. NIL AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSSES OF RS. 612,14,661/ - UNDER THE NORMAL PROVISION OF THE INCOME TAX ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY AND AN ORDER U/S 143(3) OF THE I. T.ACT 1961 WAS PASSED ON 29 - 03 - 2015 BY MAKING DISALLOWANCE OF 'DEPRECIATION ON INTANGIBLE ASSETS OF RS. 3,60,66,731/ - . 4 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. AGGRIE VED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIE S PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. WE NOTICED THAT FROM THE OBJECTION RAISED BY THE REGISTRY THAT THE PRESENT APPEAL FILED BY THE REVENUE IS TIME BARRED FOR 442 DAYS AND NO APPLICATION FOR CONDONATION OF DELAY HAS BEEN FILED. SINCE THE APPELLANT/REVENUE HAS NOT SHOWN ANY SUFFICIENT CAUSE FOR FILING THE PRESENT APPEAL BELATEDLY. THEREFORE, WE SEE NO REASONS TO CONDONE THE DELAY. EVEN ON MERITS, WE NOTICED THAT THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. GROUND NO. 1 TO 3 . 3. THESE GROUND S RAISED BY THE REVENUE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN HOLDING THAT THE ADVERTISEMENT RIGHT WAS ELIGIBLE FOR 5 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. DEPRECIATION, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 2 TO 7 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 6.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 6.2 GROUND NO.2 6 .2.1 VIDE THIS GROUND, THE APPELLANT COMPANY HAS AGITATED AGAINST THE DISALLOWANCE OFDEPRECIATION ON INTANGIBLE 2SSETS OF RS. 3,60,66,731 - / - .. DURING THE COURSE OF APPELLATEPROCEEDING A WRITTEN SUBMISSION WAS FILED WHICH FIND PLACE IN PARA 5 OF THIS ORDER. IT WAS SUBMITTED THAT THE DEPRECIATION ON INTANGIBLE ASSETS SHOULD NOT BE DISALLOWED AS THE APPELLANT HAD SATISFIED ALL THE CONDITIONS LAID DOWN U/S 32 R.W.S. 6 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. 2(11) OF THE ACT. THE APPELLANT HAS ALSO ARGUED ON VARIOUS POINTS RELATED TO THE SAID DISALLOWAN CES. IT IS ALSO PERTINENT TO NOTE THAT IDENTICAL ISSUE HAD ALSO ARISEN IN THE APPELLANT'S CASE FOR THE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10; THE APPELLANT HAD FILED AN APPEAL TO MY OFFICE. HOWEVER, MY PREDECESSOR HAS DISMISSED'THE SAID APPEALS. FURTHER, WHE N THE MATTER CAME BEFORE THE HON'BLE ITAT, MUMBAI BENCH, THE HON'BLE ITAT HAS DECIDED THE APPEAL IN FAVOUR OF THE APPELLANT VIDE ORDER REFERENCE NO.ITA. NO 1134/1135/M/2012 & ITA NO. 5404/M/2013 DATED 10TH JULY, 2015. THE RELEVANT PARTS OF THE SAID ORDER I S REPRODUCED AS UNDER: 'PARA NO 10 - WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO CONSIDERED THE JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE AND BROUGHT TO OUR NOTICE DURING THE COURSE OF THE PROCEEDINGS AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE PERUSED VARIOUS CLAUSES OF THE COMPENSATION AGREEMENT DT. 19.9.2007. THE ENTIRE DISPUTE REVOLVES AROUND WHETHER THE COMPENSATION PAID BY THE ASSESSEE TO PRIL FITS WITHIN THE FOUR WALL OF 'INTANGIBLE ASSET S' ELIGIBLE FOR DEPRECIATION U/S. OF THE ACT. INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE IST DAY. OF APRIL 1998 ARE ELIGIBLE FOR DEPRECIATION. ALL WE HAVE TO SEE IS WHETHER THE IMPUGNED RIGHT TAKEN BY THE 7 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. ASSESSEE FROM PRIL IS ELIGIBLE FOR DEPRECIATION IT IS PROVIDED IN THE AGREEMENT DT. 19.9.2007 THAT PRIL HAS AGREED TO GRANT/ASSIGN FUTURE MEDIA VARIOUS EXCLUSIVE MARKING RIGHTS ON A PRINCIPAL - TO - PRINCIPLE BASIS IN RESPECT OF THESE ADVERTISING RIGHTS IN THE FORM OF ADVERTISING SPACES AND ADVERTISING MEDIA A VAILABLE IN THE PRIL STORE. 10.1 UNDER THE HEAD DEFINITIONS AND INTERPRETATION ADVERTISING RIGHTS HAS BEEN DEFINED AS UNDER: - 'ADVERTISING RIGHTS' MEANS ALL TELEVISION, RADIO AND INTERNET RIGHTS, AS WELL AS VARIOUS PLACES, THINGS AND MATERIAL, INCLUDING, BUT NOT LIMITED TO WALL SPACES, TROLLEYS, CARRY BAGS, BILL BACKS, UNUSED SPACES ON FLOORS, LIFT WALLS/ PANELS, WASHROOMS/ RESTR OOMS, PARKING, CORRIDORS, GLASS PANELS, AVAILABLE WITH PRIL IN THE PRIL STORES WHICH CAN BE USED FOR MARKETING OR PROMOTIONAL PURPOSES, BY WAY OF DISPLAY, SIGNAGES, LOGOS, ADVERTISING, ETC. AND IDENTIFIED BY PRIL AS CAPABLE OF BEING USED FOR ADVERTISING. 1 0.2. UNDER THE HEAD RIGHTS DUTIES AND OBLIGATIONS, IT/S PROVIDED THAT FUTURE MEDIA SHALL HAVE THE FOLLOWING RIGHTS DUTIES AND OBLIGATIONS: '(A)SUBJECT TO THE PROVISIONS OF THIS CLAUSE 4, FUTURE MEDIA SHALL BE FREE TO BE ENGAGED BY WHICHEVER CLIENTS 8 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. IT DEEM S FIT, PROVIDED THAT ALL OF FUTURE MEDIA'S DEALINGS WITH ANY CLIENT SHALL BE AT AN ARMS LENGTH BASIS ('FM CLIENTS') AND SUBJECT TO THE RIGHTS OF PRIL UNDER THIS AGREEMENT. (B) FUTURE MEDIA SHALL USE ON ITS OWN ACCOUNT OR RENT OR LET ON HIRE, ANY OF THE SAI D ADVERTISING RIGHTS OR PROVIDE SUCH SERVICES IN ANY PRIL STORES TO FM CLIENTS FOR ANY LAWFUL USE OR PURPOSES BEST SUITED TO THEIR NEEDS FOR MARKETING OF THE FM CLIENTS' PRODUCTS. (C) FUTURE MEDIA SHALL BE FREE TO CHARGE ANY RENTS, SPACE HIRING CHARGES, MA RKETING FEES OR ANY OTHER SERVICE FEES OF ANY KIND FROM FM CLIENTS, AND SHALL BE ENTITLED TOUNINTERRUPTEDLY ENJOY AND COMMERCIALLY EXPLOIT THE BENEFITS ACCRUING IN RESPECT THEREOF FOR ITSELF. (D) FUTURE MEDIA MAY DO ALL SUCH ACTS AND DEEDS AS MAY BE REQUIR ED FOR EFFECTIVELY EXPLOITING THE EXCLUSIVE RIGHTS OR PROVIDING THE SERVICES.' 11. AFTER GIVING A THOUGHTFUL CONSIDERATION TO, THE AFOREMENTIONED CLAUSES OF THE AGREEMENT, A PERUSAL OF THE STATEMENT OF ACCOUNTS OF THE ASSESSEE SHOWS THAT THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS FROM ADVERTISEMENT. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT BY TAKING SUCH COMMERCIAL RIGHT FROM PRIL, THE 9 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. ASSESSEE IS DOING ITS BUSINESS WHICH ALSO MEANS THAT THE ASSESSEE'S BUSINESS TOTALLY DEPENDS ON THE ADVERTISEMENT RIGHT ACQUIRED FROM PRIL. BY ACQUIRING THIS COMMERCIAL RIGHT, THE ASSESSEE IS DOING ITS BUSINESS. THEREFORE, IN THE LIGHT OF THE DECISIONS REFERRED TO ELSEWHERE, WE HAVE NO HESITATION TO HOLD THAT THE RIGHT ACQUIRED BY THE ASSESSEE IS AN INTANGIBLE ASSET ELIGIB LE FOR DEPRECIATION. 11.1 IT IS C LEAR THAT THE ASSESSEE HAS PAID THE CONSIDERATION FOR THE PURPOSE OF ITS BUSINESS IN THE FIELD OF ADVERTISING BY ACQUIRING THE RIGHTS AND OTHER ATTACHED TO THE ADVERTISEMENT SPACE. FOR THE SAKE OF COMPLETENESS, THE SPECIFIC WORDS USED IN SEC. 32(1)(II) OF THE ACT REVEAL THE SIMILARITY IN THE SENSE THAT ALL THE INTANGIBLE ASSETS SPECIFIED ARE TOOLS OF THETRADE WHICH FACILITATE THE ASSESSEE CARRYING ON THE BUSINESS. THEREFORE, IN OUR CONSIDERED OPINION, THE EXPRESSION 'ANY OTH ER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' WOULD INCLUDE SUCH RIGHTS WHICH CAN BE USED AS A TOOL TO CARRY ON THE BUSINESS. IF THIS TEST IS APPLIED, THEN THE RIGHTS ACQUIRED BY THE ASSESSEE UNDER THE AGREEMENT WOULD FALL WITHIN THE EXPRESSION MENTI ONED ABOVE, SINCE THE RIGHT ACQUIRED BY THE ASSESSEE WAS USED BY IT AS A TOOL FOR ENHANCING ITS BUSINESS. THEREFORE, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) 10 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. AND DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON THE RIGHT SO ACQUIRED AS INTANGIBLE ASS ET. 12. SINCE WE HAVE ALLOWED THE CLAIM OF DEPRECIATION, THE ALTERNATIVE CLAIMSOF THE ASSESSEE BECOME OTIOSE.' 6.1.2 THE FACTS OF THE CASE UNDER CONSIDERATION ARE PARI - MATERIA TO THE FACTS OF THE APPELLANT'S CASE FOR THE A.Y. 2007 - 08 TO 2009 - 10 WHICH HAS B EEN DECIDED BY THE HON'BIE ITAT, MUMBAI IN THE FAVOUR OF THE APPELLANT. 6.1.3 IN VIEW OF THE FORGOING DISCUSSION, AND RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ITAT, MUMBAI, THE ADDITION MADE BY THE A.O. IS DELETED AND HENCE THIS GROUND OF APPEAL IS A LLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT LD. CIT(A) HAS CONSIDERED THE FACTS OF THE PRESENT CASE AND WHILE RELYIN G UPON THE ORDERS PASSED BY HONBLE ITAT IN ITA NO. 1134/1135/MUM/2012 & ITA NO. 5404/MUM/2013 IN ASSESSEES OWN CASE DECIDED THESE GROUNDS. 11 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LDCIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE W E LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . 5 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH , 2018 SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 14 . 0 3 .201 8 SR.PS . DHANANJAY 12 I.T.A. NO. 5 162 /MUM/201 6 FUTURE MEDIA (INDIA) LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI