ACIT 16(1), MUMBAI V. STAR ENTERTAINMENT MEDIA P. LTD, MUMBAI

ITA 5387/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4244 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 18-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Revised return; Set aside
• Section: 142(1); 37(1); 143(1); 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 5387 / M/ 20 1 7 ( ASSESSMENT YEAR : 2013 - 1 4 ) ACIT - 16(1) ROOM NO. 439, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 . VS. M/S. STAR ENTERTAINMENT MEDIA P. LTD. 95, GANPATRAO KADAM MARG, LOWER, PAREL (W), MUMBAI - 400013. ./ ./ PAN/GIR NO. : AAJCS6315G ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 03 . 01 .201 9 DATE OF PRONOUNCEMENT : 13. 03 . 201 9 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 28 . 05 .201 7 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 4 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2013 - 14 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALLOWANCE OF 25% OR MARKETING AND PUBLICITY EXPENSES WITHOUT DENYING THE FACT THAT THESE EXPENSES ULTIMATELY BENEFITTED THE FOREIGN SISTER CONCERN OF THE ASSESSEE HOLDING THE 'STAR' BRAND? ASSESSEE BY: SHRI PORUS KAKA DEPARTMENT BY: SHRI B.B. RAJENDRA PRASAD (DR) ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 2 'ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING TO DELETE THE DISALLOWANCE OF 25% OF MARKETING AND PUBLICITY EXPENSES DESPITE THE FACT THE BRAND - BUILDING EXERCISE CARRIED OUT BY THE ASSESSEE ULTIMATELY BENEFITTED ITS FOREIGN SISTER CONCERN AND IN THE ABSENCE OF IT NOT REIMBURSING A PART OF THESE EXPENSES, THE AO HAD NO OPTION THAN TO DISALLOW A PART OF THE MARKETING AND PUBLICITY EXPENSES INCURRED BY THE ASSESSEE COMPANY AS THOSE EXPENSES WHICH WERE NOT INCURRED EXCLUSIVELY FO R ITS OWN BUSINESS'. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED'. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3 . THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 27 . 11.201 3 FOR THE A.Y. 201 3 - 14 DECLARING TOTAL I NCOME TO THE TUNE OF RS.23,84,75,040 / - . THEREAFTER, THE ASSESSEE FILED THE REVISED RETURN OF INCOME ON 27.03.2015 DECLARING REVISED TOTAL INCOME TO THE TUNE OF RS.23,84,75,040/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE S U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESS EE IS IN THE BUSINESS OF TELEVISION BROADCASTING IN REGIONAL LANGUAGES. THE ASSESSEE HAS SHOWN THE INCOME FROM BUSINESS AND PROFESSION AND INCOME FROM OTHER SOURCES AND AL SO FILED THE NECESSARY DETAILS. THE ASSESSEE HAS DEBITED IN THE MARKETING & PUBLICITY EXPENSES TO THE TUNE OF RS.15,25,3 8,553/ - . THE SHOW - CAUSE - NOTICE WAS GIVEN AND AFTER THE CONSIDERATION OF TH E REPLY , 75% OF THE SAID EXPENSE WAS ALLOWED. FEELING AGGRIEVE D, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 3 4 . WE HAVE HEARD THE ARGUMENT AND ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 4.3 I HAVE CONSIDERED CAREFULLY THE FINDINGS OF THE ASSESSING OFFICER AND THE RIVAL SUBMISSIONS OF THE APPELLANT. THIS ISSUE HAS BEEN DECIDED IN THE CAS E OF OTHER BROADCASTERS AS WELL. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF STAR INDIA PRIVATE LIMITED AS WELL AS IN THE CASE OF NGC NETWORK (INDIA) PRIVATE LIMITED HAS DEALT WITH THE SIMILAR ISSUE AND HAS INVALIDATED AO'S ACTION OF GRANTING ONLY PART OF THE ADVERTISEMENT AND MARKETING EXPENDITURE ON THE GROUND THAT IT HAS ALSO BENEFITED THE PRINCIPALS. THE HON'BLE HIGH COURT RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF SASOON J DAVID HAS HELD THAT THE MERE FACT THAT THE FOREIGN PRINCIPALS ARE ALSO BENEFITED DOES NOT ENTAIL RIGHT TO DENY DEDUCTION UNDER SECTION 37(1) OF THE ACT. IN THESE CASES, THE RELATIONSHIP BETWEEN THE INDIAN ENTITIES AND THE FOREIGN ENTITIES WAS THAT OF PRINCIPAL AND AGENT, EVEN THEN, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN CASE OF THE APPELLANT, IT IS SEEN THAT THE APPELLANT HIMSELF IS BROADCASTER AND HENCE, THE CASE OF THE APPELLANT IS EVEN STRONGER AS COMPARED TO THE CASE OF STAR INDIA AND NGC INDIA REFERRED TO ABOVE. FURTHER, IN THE APPELLANT'S OWN CASE IN AY 2010 - 11, THE HON'BLE ITAT HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT BY RELYING ON THE ABOVE DECISIONS OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF STAR INDIA PRIVATE LIMITED AND NGC INDIA. 4.4. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE ITAT IN APPELLANT'S OWN CASE AS ALSO THE DECISIONS OF THE HON'BLE BOMBAY HIGH COURT, THE ADDITION OF RS3,81,34,639/ - MADE BY THE ASSESSING OFFICER CANNOT SURVIVE AND HENCE, IS DELETED. 5 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE CIT(A) HAS DELETED THE ADDITION ON THE BASIS OF THE DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2010.11 IN ITA. NO.1686/M/2015 DATED 29.04.2016 . THE RELEVANT FINDING IS HEREBY REPRODUCED AS UNDER .: - ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 4 5.1 THE BRIEF FACTS IN THIS REGARD AS NOTED BY THE AO ARE THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.9.75 CRORES BY WAY OF MARKETING AND PUBLICITY EXPENSES AND CLAIMED THEM AS DEDUCTION U/S 37(1) OF THE ACT FOR PROMOTING ITS CHANNELS VIZ. REGIONAL CHANNELS SUCH AS STAR PRAVAH AND STAR MA ZHA. HOWEVER, THIS PROMOTION AS PER THE AO INTER ALIA RESULTED ALSO INTO PROMOTION OF THE STAT BRAND WHICH IS OWNED BY M/S. STAR LTD. TO WHOM THE ASSESSEE HAD PAID BRAND ROYALTY FOR USING THE STAR BRAND WHERE AS THE ROYALTY AGREEMENT DID NOT REQUIRED THE A SSESSEE TO INCUR SUCH MARKETING AND PUBLICTY EXPENDITURE WHICH ALSO BENEFITED M/S. STAR LTD. UNDER THESE CIRCUMSTANCES, THE AO ALLOWED ONLY 75% OF THE SAID EXPENSES HOLDING THAT PORTION AS RELATING TO THE ASSESSEES BUSINESS ONLY WAS ALLOWABLE, THEREBY DIS ALLOWING THE BALANCE 25% OF SUCH EXPENSES AMOUNTING TO RS.2,48 CRORES. IN THIS CONNECTION, THE AO PLACED RELIANCE ON THE RULING OF THE HONBLE SPECIAL BENCH IN THE CASE OF CIT VS. LG ELECTROLICS PVT. LTD. (ITA. NO. 5140/DEL/2011). THE ASSESSEE ON THE OTHER HAND, RELIED ON THE THIRD MEMBER DECISION OF THE HONBLE MUMBAI TRIBUNAL IN THE CASES OF ACIT VS. STAR INDIA PVT. LTD. AND ACIT VS. NGC INDIA LTD. IN THESE CASES, SUBSEQUENTLY, HONBLE BOMBAY HIGH COURT HAD DISMISSED THE REVENUE APPEALS. 5.2 BEING AGGRIEV ED, THE ASSESSEE FILED OBJECTION BEFORE THE DRP, WHERE THE DISALLOWANCE MADE BY THE AO WAS DIRECTED TO DELETED WITH FOLLOWING OBSERVATIONS: - THE SOLE ISSUE HERE IS WHETHER A PARTIAL DISALLOWANCE OF MARKETING AND PUBLICITY EXPENDITURE IS POSSIBLE, SINCE ANOTHER PARTY TOO IS SEEN TO BENEFIT FROM SUCH EXPENDITURE.WITH SIMILARLY OF FACTS ARE NOW AVAILABLE. THE AO HAS IN FACT DISCUSSED AND ACKNOWLEDGED IN HIS ORDER THE DECISIONS IN THESE TWO CASES RELIED ON BY THE ASSESSEE. HE HAS STATED THAT IN THE CASE OF C IT V STAR INDIA PVT. LTD. THE HONBLE BOMBAY HIGH COURT HAD APPROVED THE THIRD MEMBER DECISION OF THE HONBLE MUMBAI TRIBUNAL VIDE ITS ORDER IN ITA. NO. 165 OF 2009 DATED 24.03.2009 A COPY OF WHICH HAS BEEN PLACED ON FILE THE ISSUE BEING BEFORE THE HO N BLE SC SIMILARLY IN THE CASE ACIT V NGC NETWORK P. LTD., THE THIRD MEMBER DECISION 635/M/2010 COPY PLACED ON FILE OF THE HONBLE MUMBAI TRIBUNAL HAD DECISION THE MATTER IN FAVOUR OF THE ASSESSEE. THE REVENUE HAVING FILED AN APPEAL BEING BEFORE THE HONBLE BOM BAY HIGH COURT. INCIDENTALLY, THE HONBLE JURISDICTIONAL HIGH COURT HAS RECENTLY RULED IN FAVOUR OF THE ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 5 ASSESSEE IN THE THEN PENDING CASE OF CIT V NGC NET WORK (INDIA) P. LTD. THEN PENDING 538 OF 2012 DATED 13.10.2014 COPY PIECED ON RECORD BY INVALIDATING THE AO ACTION OF GRANTING ONLY A THIRD OF THE ADVERTISEMENT EXPENDITURE AS IT HAD ALSO BENEFITED THE PRINCIPALS OF M/S. NGC NETWORK (INDIA0 P. LTD. VIZ NGC ASIA AND FOX. IN THESE CIRCUMSTANCES, RESPECTFULLY TO FOLLOWING THE DECISION OF BOTH THE STAR INDIA AND NGC NETWORK THE MARKETING AND PUBLICITY EXPENDITURE IS WHOLLY ALLOWED, NOTWITHSTANDING THE FACT THAT IT MAY HAVE RESULTED IN SOME BENEFIT TO M/S. STAR LTD. AS WELL. 5.3 BEFORE US, LD.DEPARTMENT REPRESENTATIVE RELIED UPON THE ORDER OF THE AO WHEREAS LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE FAVOUR OF THE ASSESSEE AND THEREFORE, THE ORDER OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED. 5.4 WE HAVE GO NE THROUGH THE FACTS OF THE CASE AND JUDGEMENT RELIED UPON BY THE DRP WHILE DECIDING THIS ISSUE. NO CONTRARY JUDGMENT HAS BEEN BROUGHT TO OURNOTICE BY THE OTHER SIDE ADMITTEDLY AS PER AO ALSO THE ASSESSEE HAD INCURRED IMPUGNED EXPENSES PRIMARILY FOR THE PU RPOSE OF ITS BUSINESS. IF THESE EXPENSES INCIDENTALLY PROVIDED SOME BENEFITS TO SOME OTHER ENTITY ALSO, THEN THAT ITSELF WOULD NOT MAKE THE SAID EXPENSES AS NOT RELATED TO BUSINESS OF THE ASSESSEEOR NOT HAVING BEEN INCURRED DURING THE COURSE OF OR FOR THE PURPOSE EXPENSES IS THAT IT SHOULD BE INCURRED DURING THE COURSE OF AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, WHICH IS DULY PASSED HERE, AND BEYOND THAT NOTHING MORE IS TO BE EXAMINED. IF ANY EXPENSES IS TO BE EXAMINED STRICTLY FROM THIS POINT OF VI EW AS HAS BEEN DONE BY THE AO, THEN WE ARE AFRAIS THAT MANY MORE EXPENSES WOULD BECOME DISALLOWABLE WHICH IS NEITHER THE INTENTION NOR THE REQUIREMENT OF THE LAW. IT IS NOTED BY US THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF NGC NETWORKS IN ITS ORD E R DAT ED 13.10.2014 IN ITA. NO. 538 OF 2012 HAS EXTENSIVELY DISCUSSED THIS ISSUE AND HELD THAT THIS KIND OF DISALLOWANCE IS NOT PERMISSIBLE UNDER THE LAW. SIMILARLY VI E W HAS BEEN TAKEN BY HONBLE BOMBAY HIGHCOURT IN ITS OTHER JUDGMENT IN THE CASE OF CIT V STAR I NDIA ITA. NO. 165, 282, 283 OF 2009. THUS KEEPING IN VIEW FACTS OF THIS CASE AND RESPECTFULLY FOLLOWING THESE JUDGMENTS, WE FIND THAT ORDER OF THE DRP IS IN ACCORDANCE WITH LAW AND FACTS AND IS INTERFERENCE IS CALLED FOR THERIN AND THEREFORE, SAME IS UPHEL D. GROUND RAISED BY THE REVENUE IS DISMISSED. ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 6 ON APPRAISAL OF THE FINDING OF THE HONBLE ITAT WE NOTICED THAT HONBLE ITAT HAS ALSO RELIED UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. STAR INDIA P. LTD. IN ITA. NO. 165, 282 AND 283 OF 200 9. SINCE THE CIT(A) HAS PASSED THE ORDER ON THE BASIS OF THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE AS WELL AS ON THE BASIS OF THE DECISION OF THE BOMBAY HIGH COURT, THEREFORE, WE FOUND NO ILLEGALITY AND INFIRMITY IN THE ORDER PASSED BY THE CIT(A) IN QUESTION , S PECIFICALLY, IN THE CIRCUMSTANCES, WHEN THERE IS NO DISTINGUISHABLE MATERIAL ON RECORD AND NO LAW CONTRARY TO THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE HAS BEEN PRODUCED BEFORE US. ACCORDINGLY, WE AFFIRM THE FINDING OF THE CIT(A) ON THIS ISSUE AND DISMISSED THE APPEAL OF THE REVENUE. 6 . IN RESULT, APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 1 3 . 03 .2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 1 3 . 03 .2019 V IJAY ITA. NO. 5387 /M/201 7 A.Y. 2013 - 14 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI