B R TV, MUMBAI V. ACIT 16(1)(1), MUMBAI

ITA 6092/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5608 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 03-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6092/M/2017 ASSESSMENT YEAR: 2012-13 M/S. B.R. TV, PLOT NO.G-38, ANAND VILLA, 15 TH ROAD, SANTACRUZ (W), MUMBAI 400 054 PAN: AAAFB0941M VS. ACIT 16(1)(1), AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HARI S. RAHEJA, A.R. REVENUE BY : SHRI C.S. SHARMA, D.R. DATE OF HEARING : 09.05.2019 DATE OF PRONOUNCEMENT : 04.07.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 28.07.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ISSUE RAISED IN GROUND NO.1 & 2 IS AGAINST T HE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.41,66,000/ - AS MADE BY THE AO IN RESPECT OF ROYALTY. 3. THE FACTS IN BRIEF ARE THAT DURING THE YEAR UNDE R CONSIDERATION THE ASSESSEE FIRM HAS ENTERED INTO DI FFERENT AGREEMENTS WITH FOUR PARTIES TO MARKET AND EXPLOIT THE OLD SERIALS MANUFACTURED BY THE ASSESSEE. TOTAL AGREEM ENT VALUE ITA NO.6092/M/2017 M/S. B.R. TV 2 WITH FOUR PARTIES WERE RS.42,18,000/-. HOWEVER, TH E ASSESSEE ONLY ACCOUNTED FOR RS.52,000/- ON THE GROUND THAT T HESE AGREEMENTS WERE MADE FOR A SPECIFIC PERIOD DURING W HICH THE SAID PARTIES WILL TELECAST THE SERIALS AND THEREFOR E THE AGREEMENT VALUE IS IN THE NATURE OF ROYALTY AND HAS TO BE TRE ATED AS INCOME OVER THE PERIOD OF THE AGREEMENT. HOWEVER, ACCORDI NG TO THE AO SINCE THE ASSESSEE HAS DELIVERED THE TAPES TO THE D ISTRIBUTOR THEREFORE ENTIRE AGREEMENT VALUE BECOMES THE INCOME OF THE CURRENT YEAR AND ACCORDINGLY ADDED THE DIFFERENCE O F RS.41,66,000/- TO THE INCOME OF THE ASSESSEE. 4. THE LD. A.R., AT THE OUTSET, POINTED OUT THAT TH E ISSUE HAS BEEN SETTLED BY THE ORDER OF CO-ORDINATE BENCH OF T HE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.5729/M/2015 A.Y. 2011 -12 VIDE ORDER DATED 31.05.2018 WHERE IDENTICAL ISSUE HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A.R. THEREFORE PRAYED THAT THE ISSUE IN THE CURRENT YEAR MAY ALSO BE DECIDED ACCOR DINGLY. 5. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL AS REFERRED TO BY THE LD AR. WE OBSERVE THAT THE CO-ORDINATE BENCH OF THE TRIBUN AL HAS DECIDED THE ISSUE OF INCOME ARISING FROM SALE OF RI GHTS TO TELECAST OLD SERIALS PRODUCED BY THE ASSESSEE TO BE APPORTIO NED AND TREATED AS INCOME OVER THE PERIOD OF AGREEMENT. TH E OPERATIVE PART IS AS UNDER: ITA NO.6092/M/2017 M/S. B.R. TV 3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUS ED THE MATERIAL ON RECORD. VIDE THE FIRST GROUND OF APPEAL THE ASSESSEE HAS CHALLEN GED THE ACTION OF THE LD. CIT (A) IN HOLDING THAT THE WHOLE OF THE INCOME OF RS.1,83, 47,000/- DERIVED FROM SALE OF RIGHTS TO TELECAST OLD TV SERIALS PRODUCED BY THE F IRM DID NOT ACCRUE TO THE ASSESSEE DURING THE PREVIOUS YEAR 2010-11 BUT SHOULD BE SPRE AD OVER THE PERIOD OF AGREEMENT IN EACH CASE. THE LD. CIT (A) HAS DECIDE D THE SAID ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER:- '3.3 I HAVE CONSIDERED THE ISSUE UNDER APPEAL CAREF ULLY, I FIND THAT THESE TV SERIALS NAMELY, MAHABHARAT, MAHABHARAT KATHA, VISHN U PURAAN AND MAA SHAKTI HAD BEEN GIVEN TO THE 8 COMPANIES FOR 2 TO 6 YEARS, HENCE ENTIRE AMOUNT CANNOT BE TAXED IN ONE YEAR. LD. A.O. HAS ME NTIONED THE FACT OF DATE OF AGREEMENT AND PERIOD OF SHOW/ TELECAST FOR 2 TO 6 YEARS, HENCE ENTIRE PROCEED CANNOT BE PRESUMED TO BE ACCRUED IN THIS VERY YEAR. I FIND THAT IDENTICAL ISSUE WAS THERE IN THE CASE OF B.R. FILMS VS. ACIT-LL(L) ITA NO. 3632/MUM/2012-13 DATED 14.01.2015. RESPEC TFULLY FOLLOWING THE DECISION OF HON'BLE ITAT, THE A.O. IS DIRECTED TO D ELETE THE ADDITION OF RS.1,64,87,903/-.' 7. WE NOTICE THAT THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF B.R. FILMS VS. ACIT (MU M) (SUPRA). SINCE, THE LD. CIT (A) HAS DECIDED THIS ISSUE BY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ITA NO. 3632/MUM/2012 (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). WE ACCORDINGLY UPHOLD THE ORDER PASSED BY THE LD. CIT (AJ AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 7. WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAID D ECISION OF THE COORDINATE BENCH HOLD THAT THE ROYALTY RECEIVED BY THE ASSESSEE FOR TELECASTING THE SERIALS OVER A PERIOD OF TIME H AS TO BE TREATED AS INCOME OVER THE PERIOD OF THE AGREEMENT . ACCO RDINGLY, THE GROUND NO.1 & 2 ARE ALLOWED BY SETTING ASIDE THE OR DER OF LD. CIT(A) ON THIS ISSUE. 8. GROUND NO.3 IS AGAINST THE ORDER OF LD. CIT(A) U PHOLDING THE ACTION OF AO IN BRINGING TO TAX A SUM OF RS.72, 14,845/- BEING THE OUTSTANDING LIABILITIES TREATED AS CEASED LIABILITIES BY APPLYING PROVISIONS OF SECTION 41(1) OF THE ACT. 9. THE FACTS IN BRIEF ARE THAT THE AO UPON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE OBSERVED THAT ASSESSE E FIRM HAS ITA NO.6092/M/2017 M/S. B.R. TV 4 OUTSTANDING PAYMENTS DUE TO ARTISTS AND TECHNICIANS TO THE TUNE OF RS.72,14,845/-. ACCORDING TO THE AO, THE BALANC ES WERE LONG OVER DUE AND NO MORE PAYABLE. ACCORDINGLY VIDE ORD ER SHEET ENTRY DATED 05.01.2015 BY ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE SAME SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 41(1) OF THE ACT WHIC H WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 25.02.2015 BY SUB MITTING THAT THE SAID DUES OF THE ARTISTS AND TECHNICIANS HAVE B EEN PAID OFF SUBSTANTIALLY IN THE SUBSEQUENT YEARS AND THEREFORE THE SAID PAYABLES CAN NOT BE TREATED AS INCOME UNDER SECTION 41(1) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE LIABILITIES W HICH ARE OUTSTANDING FOR MORE THAN THREE YEARS CAN NOT BE AS SESSED UNDER SECTION 41(1) OF THE ACT WHEN THESE LIABILITI ES WERE IN FACT PAYABLE AND SHOWN OUTSTANDING IN THE ANNUAL ACCOUNT S. HOWEVER, THE REPLY OF THE ASSESSEE DID NOT FIND FAV OUR WITH THE AO AND THE SAME WERE ADDED TO THE INCOME OF THE ASS ESSEE UNDER SECTION 41(1) OF THE ACT AS CEASED LIABILITY. 10. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DI SMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 5.2 I HAVE CONSIDERED THE FINDINGS OF THE ASSESSIN G OFFICER AS WELL AS RIVAL SUBMISSION OF THE APPELLANT, CAREFULLY. I FIND THAT THE APPELLANT HAS FAILED TO DEMONSTRATE ANY VERIFIABLE EVIDENCE SHOWING THAT SU CH LIABILITIES ARE IN EXISTENCE AND ARE BEING PAID SUBSEQUENTLY. SINCE THE APPELLAN T HAS NOT FURNISHED ANY SUCH EVIDENCE BEFORE THE ASSESSING OFFICER NOR CONFIRMAT ION WAS SUBMITTED. THEREFORE, IN SUCH CIRCUMSTANCES, IT CANNOT BE PRESUMED THAT S UCH OUTSTANDING LIABILITY ARE REALLY IN EXISTENCE. DURING THE COURSE OF APPELLATE PROCEEDING, THE LD. A.R. HAS SUBMITTED COMPUTERIZED LEDGER CLAIMS IT HAS LEDGER ENTRY OF RESPECTIVE PARTIES BUT THESE LEDGER ACCOUNTS HAVE NOT BEEN CERTIFIED BY AN Y OF THE PERSONS CLAIMED TO BE RECIPIENT OF SUCH OUTSTANDING. FURTHER, IT IS NOTED THAT IN MOST OF THE CASES, NO PAYMENT HAS BEEN MADE IN THE SUBSEQUENT YEARS. FURT HER, IT IS NOTED THAT IN MOST OF THE CASES SUCH LIABILITY HAS BEEN MENTIONED AS O UTSTANDING. IT IS PERTINENT TO MENTION THAT NO FULL NAME OR PROPER VERIFIABLE ADDR ESS OF SUCH RECIPIENT HAS BEEN GIVEN IN LEDGER ACCOUNT. IN SOME OF THE CASES, SUND RY BALANCE HAS BEEN WRITTEN OFF. IN SUBSEQUENT YEAR, CASH PAYMENT HAS BEEN SHOWN WIT HOUT ANY CONFIRMATION AND ITA NO.6092/M/2017 M/S. B.R. TV 5 VERIFIABLE VOUCHERS. THUS, THE COPY OF LEDGER A/C. SUBMITTED THROUGH LETTER DATED 20.06.2017 DO NOT ESTABLISH THE EXISTENCE OF SUCH L IABILITIES UNDER REFERENCE. IT IS ALSO IMPORTANT TO POINT OUT THAT EVEN AFTER RECEIPT OF ASSESSMENT ORDER DATED 18.03.2015, THE APPELLANT IS NOT ABLE TO FURNISH AN Y GENUINE & VERIFIABLE EVIDENCE TO DEMONSTRATE THE EXISTENCE OF SUCH LIABILITY. FUR THER, AS MENTIONED HEREINABOVE, THE APPELLANT HAS FAILED TO FURNISH ANY CONFIRMATIO NS OF SUCH RECIPIENT HENCE, IN SUCH CIRCUMSTANCES, I FIND THAT FINDING OF THE ASSE SSING OFFICER HAS NOT BEEN CONTROVERTED OR REFUTED WITH EVIDENCE BY THE APPELL ANT HENCE, ADDITION SO MADE OF RS.72,14, 845/- U/S.41(1) OF THE INCOME-TAX ACT, 19 61 IS SUSTAINED. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE HAS SHOWN OUTS TANDING OF RS.72,14,845/- AS DUE TO ARTISTS AND TECHNICIANS WH ICH WERE COMING OVER FOR MORE THAN FOUR YEARS. THE LD. A.R. ARGUED BEFORE THE BENCH THAT FIRM HAS STARTED TV SERIALS N AMELY PARI HU MAIN AND SUJATA AND INCURRED HUGE LOSSES DUE TO THE FACT THAT THE MAIN PARTNER SHRI RAVI CHOPRA WAS NOT KEEPING W ELL AND HAS NOT BEEN ABLE TO ATTEND TO HIS WORK. THE LD. A.R. SUBMITTED THAT HE WAS FINALLY SHIFTED TO UNITED STATES FOR TREATME NT. THE LD. A.R. SUBMITTED THAT DUE TO THE REASON THAT SHRI RAV I CHOPRA WAS NOT LOOKING AFTER THE BUSINESS DUE TO HIS AILING HE ALTH AND THUS THESE LIABILITIES WERE MADE OUTSTANDING FOR LONG TI ME EVEN THE PARTIES TO WHOM THESE SUMS WERE PAYABLE HAVE NOT PR ESSURIZED FOR THE PAYMENTS DUE TO LONG ASSOCIATION WITH THE GROUP REALIZING THAT THE MAIN PERSON WAS NOT WELL. THE L D. A.R. ARGUED EVEN THE CREDITORS HAVE NOT FOREGONE THEIR CLAIMS NEITHER HAS THE ASSESSEE ANY ATTENTION OF NOT PAYING THE SAID D UES. SINCE THE CLAIMS OF THESE TECHNICIANS AND ARTISTS HAVE BE EN ACCEPTED AS ALIVE, THE SAME CAN NOT BE SUBJECTED TO BE ASSES SED AS INCOME OF THE ASSESSEE AS HAS BEEN DONE BY THE AO AND CONF IRMED BY THE LD. CIT(A). ITA NO.6092/M/2017 M/S. B.R. TV 6 12. WE NOTICE THAT THE ASSESSEE HAS GRADUALLY START ED MAKING PAYMENTS TO THESE TECHNICIANS AND ARTISTS IN THE SU BSEQUENT YEARS AND IN SOME CASES THE AMOUNTS HAVE BEEN WRITT EN OFF AND OFFERED TO TAX IN THE CURRENT YEAR AS WELL AS IN TH E SUBSEQUENT YEARS WHERE THE PARTIES HAVE AGREED TO FOREGO THEIR CLAIMS. WE ALSO NOTE THAT THE WRITING BACK THESE AMOUNTS WILL NOT HAVE ANY TAX IMPLICATIONS AS THE ASSESSEE HAVE HUGE LOSSES B UT THE ASSESSEE AGGRIEVED BY THE FACT THAT THE SAID SUMS W ERE STILL PAYABLE AND SHOULD NOT BE TREATED AS FOREGONE FOR I NCOME TAX PURPOSES. THUS WE FIND THAT THE OUTSTANDING BALANC ES HAVE REMAINED SO DUE TO FINANCIAL CRUNCH IN THE ASSESSEES BUSINESS AND IT IS ALSO SETTLED LAW THAT NO DEBTS COULD BE W RITTEN BACK U/S 41(1) OF THE ACT BY THE REVENUE WHEN THE SAME ARE S HOWN AS PAYABLE IN THE BOOKS OF ACCOUNTS. THE CASE OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF PR. CIT VS. NEW WORLD SYNTHETICS LTD. (2018 ) 97 TAXMANN.COM 399 (DEL.) AND ITO VS. M/S. VIKRAM A. PR ADHAN ITA NO.2212/M/2012 A.Y. 2008-09. IN THE CASE OF PR . CIT VS. NEW WORLD SYNTHETICS LTD. (SUPRA) THE HONBLE DELHI HIGH COURT HAS HELD THAT THE PROVISIONS OF SECTION 41(1) OF TH E ACT ARE NOT APPLICABLE IN RESPECT OF ADMITTED AND ACKNOWLEDGED LIABILITY. IN THE CASE OF ITO VS. M/S. VIKRAM A. PRADHAN (SUPRA), THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT WHERE THE CREDITORS ARE SHOWN IN THE BALANCE SHEET AND AO HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT LIABILITIES HAVE AC TUALLY EXTINGUISHED IN RESPECT OF OUTSTANDING CREDITORS, T HE ADDITION BY THE AO OF THE CREDITORS UNDER SECTION 41(1) OF THE ACT CAN NOT BE SUSTAINED. WE, THEREFORE, RESPECTFULLY FOLLOWING T HE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT AND CO-ORDINAT E BENCH OF ITA NO.6092/M/2017 M/S. B.R. TV 7 THE TRIBUNAL HOLD THAT ORDER OF CIT(A) IS WRONG AND ACCORDINGLY SET ASIDE ON THIS ISSUE. THE AO IS DIRECTED TO DEL ETE THE DISALLOWANCE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.07.2019. SD/- SD/- (SANDEEP GOSAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 04.07.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.