DCIT CIR 7(3)(1), MUMBAI V. PANORAMA TELEVISION P.LTD, HYDERABAD

ITA 6507/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8639 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: MAHESH R AJORA
• Keywords: Capital asset; Depreciation; Share purchase agreement; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI G S PANNU, VICE-PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1483/HYD/2016 ASSESSMENT YEAR : 2012-13 PANORAMA TELEVISION PRIVATE LTD., FIRST FLOOR, EMPIRE COMPLEX, 414 SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. PAN AAFCP9274K VS. THE DY CIT CIRCLE 14(1), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO. 6507/MUM/2016 ASSESSMENT YEAR : 2012-13 THE DY CIT CIRCLE 7(3)(1), MUMBAI VS. PANORAMA TELEVISION PRIVATE LTD., MUMBAI 400 013. PAN AAFCP9274K (APPELLANT) (RESPONDENT) FOR THE REVENUE : SHRI LOVE KUMAR FOR THE ASSESSEE : SHRI MAHESH RAJORA DATE OF HEARING : 18.09.2018 DATE OF PRONOUNCEMENT : 14 .12.2018 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : THESE TWO CROSS-APPEALS ARISE OUT OF ORDER OF THE C IT(A)-6, HYDERABAD, PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE REVENUE IN ITS APPEAL IN ITA NO. 6507/MUM/20 16 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 2 1. 'THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF COST OF PRODUCTION OF TV SERIALS AN D PROGRAMMES AS REVENUE EXPENDITURE INSTEAD OF TREATING THE EXPENDI TURE AS CAPITAL ASSET AND ALLOWING DEPRECIATION 25% AS PER SECTION 32 OF THE ACT.' 2. 'THE LD CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN HOLDING THAT BUSINESS OF THE ASSESSEE IS COVERED UNDER 'BUSINESS OF DISTRIBUTION OF FEATURE FILMS' UNDER RULE 9A/9B OF THE INCOME TA X RULES.' 3. THE LD CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN HOLDING THAT 'FILM SOFTWARE LIBRARY' IS AN INTANGIBLE ASSETS AND ALLOWING DEPRECIATION @25% WITHOUT APPRECIATING THAT 'FILM S OFTWARE LIBRARY' IS ONLY A BUSINESS TOOL USED BY THE ASSESSEE IN ITS BUSINESS.' THE ASSESSEE IN ITS APPEAL IN ITA NO.1483/H/2016 HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ['THE CIT(A)'] ERRED IN LAW AND ON FACTS IN UPHOLDI NG THE ACTION OF THE LEARNED ASSESSING OFFICER ['THE AO'] IN DISALLO WING DEPRECIATION ON INTANGIBLE ASSET BY WAY OF NON-COMPETE FEE. 1.1 THAT THE CIT(A) FAILED TO APPRECIATE THAT T HE WRITTEN DOWN VALUE OF THE INTANGIBLE ASSET IN THE HANDS OF THE D EMERGED COMPANY HAD AUTOMATICALLY BECOME THE WRITTEN DOWN V ALUE IN THE HANDS OF THE RESULTING COMPANY PURSUANT TO SCHEME O F DEMERGER SANCTIONED BY THE HON'BLE HIGH COURT OF ANDHRA PRAD ESH AND THEREFORE IT WAS NOT OPEN TO A FRESH DETERMINATION IN THE CASE OF THE APPELLANT WHETHER SUCH INTANGIBLE ASSET QUALIFI ED FOR DEPRECIATION U/S 32 OF THE ACT. 1.2 WITHOUT PREJUDICE, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE INTANGIBLE ASSET ON ACCOUNT OF NON-COMPETE AS A COMMERCIAL RIGHT VESTED IN THE APPELLANT, BEING THE RESULTING COMPANY IN THE SCHEME OF DEMERGER SANCTIONED BY THE HON'BLE HIGH C OURT OF ANDHRA PRADESH, IS ELIGIBLE FOR DEPRECIATION U/S 32 OF THE ACT. 3. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE S UBMITTED THAT THE ISSUES RAISED IN BOTH THE APPEALS ARE COVERED BY TH E DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL, VIDE ORDER DATED 13.05.2016, IN ASSESSEES ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 3 GROUP CASE I.E. EENADU TELEVISION PRIVATE LIMITED V S. ACIT IN ITA NO. 760/HYD/2016 FOR A.Y. 2011-12. 4. THE LEARNED AR FURTHER SUBMITS THAT ISSUE RAISED IN ASSESSEES APPEAL RELATES TO DEPRECIATION ON INTANGIBLE ASSET ON ACCO UNT OF NON-COMPLETE FEES. HE SUBMITTED THAT THIS ISSUE IS COVERED BY THE ORDE R OF THE TRIBUNAL IN ASSESEES GROUP CASE (SUPRA), WHEREIN THE MATTER WA S RESTORED TO THE FILE OF THE ASSESSING OFFICER. HE, THEREFORE, SUBMITTED TH AT SIMILAR DIRECTIONS MAY BE GIVEN FOR THE YEAR UNDER CONSIDERATION ALSO. 5. THE LEARNED DR AFTER GOING THROUGH THE CONTENTS OF DECISION OF THE CO- ORDINATE BENCH IN ASSESSEES GROUP CASE (SUPRA), AG REED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WI TH SIMILAR DIRECTIONS. 6. WE HAVE CONSIDERED THE CONTENTIONS OF BOTH THE P ARTIES AND FIND THAT THE TRIBUNAL, IN ITS ORDER DATED 13.05.2016, OBSERV ED AND DIRECTED AS UNDER: 5. HAVING REGARD TO THE FACT THAT THE ISSUE WHICH H AD ARISEN IN THE CASE OF THE PARENT COMPANY AS WELL AS THE SISTER CO NCERN HAS BEEN REMITTED TO THE FILE OF THE A.O. FOR RECONSIDERATIO N, WE DEEM IT FIT AND PROPER TO SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE A.O. TO GIVE CONSEQUENTIAL EFFECT TO THE DECISIONS TAKEN BY HIM FOR THE A.Y. 2009- 2010 IN THEIR CASES. THE RELEVANT FINDINGS OF THE ORDER OF THE TRIBUNAL FOR THE A.Y. 2009-2010 ARE EXTRACTED HEREU NDER FOR THE SAKE OF READY REFERENCE : 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT ON DEMERGER OF THE PARENT C OMPANY, THE ASSESSEE HAS SUCCEEDED TO THE ISSUE OF THE DEPR ECIATION ON NON-COMPETE FEE AS WELL AND THEREFORE, THE DECIS ION OF THE TRIBUNAL FOR THE A.Y. 2008-2009 (CITED SUPRA) O N THE VERY SAME ISSUE WOULD BE CONSEQUENTIAL AND APPLICAB LE TO THE FACTS OF THE CASE BEFORE US. WE FIND THAT THE T RIBUNAL AT PARAS 25 TO 28 OF ITS ORDER HAS HELD AS UNDER : 25. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD AND ALSO GONE THROUGH THE DECIS IONS CITED. A PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY CIT(A) WOULD LEAVE NO ROOM FOR DOUBT THAT ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 4 ASSESSEES CLAIM OF DEPRECIATION ON NON-COMPETE FEE HAS BEEN REJECTED BASICALLY FOR THE FOLLOWING TWO REASO NS: 1.GENUINENESS OF THE PAYMENT MADE AND NECESSITY OF PAYING NON-COMPETE FEE. 2.NON-COMPETE FEE NOT BEING IN THE NATURE OF AN INT ANGIBLE ASSET AS DEFINED IN SECTION 32(1)(II), DEPRECIATION IS NOT ALLOWABLE. 26. BEFORE EXAMINING WHETHER NON-COMPETE FEE CAN BE CONSIDERED TO BE AN INTANGIBLE ASSET SO AS TO ENTIT LE THE ASSESSEE TO CLAIM DEPRECIATION ON IT, IT IS NECESSA RY, AT THE OUTSET, TO ADDRESS THE ISSUE OF GENUINENESS OF PAYM ENT OF NON-COMPETE FEE AND NECESSITY TO MAKE SUCH PAYMENT. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, AO HAS TREAT ED THE AGREEMENT ENTERED INTO BETWEEN ASSESSEE FOR PAYMENT OF NON-COMPETE FEE AS A SHAM TRANSACTION AS SHRI RAMOJ I RAO IS NOT ONLY THE OWNER OF UKT AND UKM BEING THE KART A OF HUF TO WHICH THESE CONCERNS BELONG BUT HE ALSO IN H IS INDIVIDUAL CAPACITY IS THE CHAIRMAN OF THE ASSESSEE COMPANY. AS SUCH, ASSESSEE CANNOT BE CONSIDERED TO BE COMPETING WITH HIMSELF. AS IT IS AN ARRANGEMENT BET WEEN RELATED PARTIES, THERE IS NO NECESSITY FOR PAYMENT OF NONCOMPETE FEE. AO FURTHER OBSERVED THAT THE ASSESS EE HAS ENTERED INTO AGREEMENT FOR PAYMENT OF NONCOMPETE FE E TO REDUCE ITS TAX BURDEN BY ALLOWING SHRI RAMOJI RAO H UF TO ADJUST THE NON-COMPETE FEE AGAINST THE HUGE BROUGHT FORWARD LOSSES SUFFERED BY IT. AO ALSO RAISED DOUBT S WITH REGARD TO THE VALUE OF NON-COMPETE FEE AT RS. 670 C RORES. HOWEVER, THE CIT(A) HAS REJECTED ASSESSEES CLAIM B Y HOLDING THAT AS SHRI RAMOJI RAO, WHO IS THE KARTHA OF HUF, WHICH OWNS UKT AND UKM AND ALSO IN HIS INDIVIDUAL C APACITY IS THE CHAIRMAN OF THE ASSESSEE COMPANY, THEREFORE, THERE IS NO QUESTION OF PAYING NON-COMPETE FEE AS A PERSO N CANNOT COMPETE WITH HIMSELF. OF COURSE THE CIT()A) HAS ALSO HELD THAT AS NON-COMPETE FEE DOES NOT PROVIDE ANY ASSET OF ENDURING NATURE, DEPRECATION CANNOT BE ALL OWED. IN THIS CONTEXT, IT IS TO BE NOTED THAT ASSESSEE ON 25 /01/2008 HAS ENTERED INTO SUBSCRIPTION AGREEMENT AND SHARE PURCHASE AGREEMENT WITH A DOMESTIC COMPANY, VIZ.; EQUATOR TRADING ENTERPRISES PVT. LTD. AS PER WHICH THE SAID DOMESTIC COMPANY AGREED TO MAKE SUBSTANTIAL INVESTM ENT IN PURCHASE OF EQUITY SHARES OF THE ASSESSEE COMPANY. HOWEVER, AS A PRECONDITION FOR MAKING SUCH INVESTME NT, THE ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 5 SAID DOMESTIC COMPANY REQUIRED THE ASSESSEE COMPANY TO ENTER INTO A NONCOMPETE AGREEMENT WITH UKT AND UKM. THOUGH, COPIES OF THE SHARE PURCHASE AGREEMENT AND SUBSCRIPTION AGREEMENT ARE NOT AVAILABLE ON RECORD BEFORE US, HOWEVER, ON PERUSAL OF THE CLOSING AGREEMENT DA TED 30/01/08 BETWEEN ASSESSEE AND M/S EQUATOR TRADING ENTERPRISES PVT. LTD. A COPY OF WHICH IS AT PAGE 22 0 OF PAPER BOOK, WE FIND A REFERENCE TO SUCH PRECONDITION IN C LAUSE 2(A). FURTHER, AS IT APPEARS FROM THE FACT ON RECOR D AND WHICH REMAINS UNCONTROVERTED IN PURSUANCE TO THE CO NDITION IMPOSED BY THE DOMESTIC INVESTOR ASSESSEE HAS ENTER ED INTO THE NON COMPETE AGREEMENT WITH UKT AND UKM FOR A PE RIOD OF 5 YEARS ON PAYMENT OF NONCOMPETE FEE OF RS. 670 CRORES, WHICH IS ALSO APPROVED BY THE DOMESTIC INVESTOR. IT IS THE CONTENTION OF ASSESSEE THAT AS A RESULT OF FULFILLM ENT OF SUCH CONDITION OF NON-COMPETE FEE THEREBY EXCLUDING UKT AND UKM COMPETING WITH ASSESSEE COMPANY IN FUTURE, THE DOMESTIC COMPANY INVESTED SUBSTANTIAL AMOUNT BY ACQ UIRING 39% OF SHARE IN THE ASSESSEE COMPANY. 27. FROM THE AFORESAID FACTS IT CANNOT BE DENIED TH AT EQUATOR TRADING ENTERPRISES PVT. LTD IS A MAJOR STA KEHOLDER IN ASSESSEE COMPANY. AS CAN BE SEEN FROM THE ASSESS MENT ORDER AS WELL AS ORDER PASSED BY THE CIT(A) BEFORE COMING TO THEIR RESPECTIVE CONCLUSION THAT THE TRANSACTION ENTERED INTO BY PARTIES FOR PAYMENT OF NON-COMPETE FEE IS N OT GENUINE OR THERE IS NO NECESSITY FOR PAYING THE NON -COMPETE FEE AS THE SAME PERSON IS CONTROLLING BOTH THE ASSE SSEE COMPANY AND THE TWO OTHER COMPANIES ACQUIRED BY THE ASSESSEE, THE ROLE OF M/S EQUATOR TRADING ENTERPRIS ES PVT. LTD. IN ANY DECISION TAKEN BY ASSESSEE COMPANY HAS NOT AT ALL BEEN CONSIDERED. NEITHER THE AO NOR THE CIT(A) HAS EXAMINED THE EFFECT OF ACQUISITION OF 39% OF EQUITY SHARES BY ANOTHER ENTITY AND WHETHER AFTER SUCH ACQUISITIO N OF SHARES, IT CAN STILL BE HELD THAT SHRI RAMOJI RAO I S THE CONTROLLING AUTHORITY OF ASSESSEE COMPANY AND IT IS A TRANSACTION BETWEEN RELATED PARTIES. UNFORTUNATELY, THE ASSESSMENT ORDER AND ORDER OF CIT(A) IS TOTALLY SIL ENT ON THIS ASPECT. THOUGH IN THE REMAND REPORT, AO HAS EXAMINE D THE ISSUE OF INVESTMENT MADE BY THE DOMESTIC INVESTOR A ND HAS ALLEGED THAT IT AS A SHAM TRANSACTION AND A COLLUSI VE AGREEMENT ENTERED INTO BETWEEN THE PARTIES TO REDUC E THE TAX BURDEN BY CLAIMING DEPRECIATION ON PAYMENT OF N ON- COMPETE FEE. HOWEVER, SUCH INFERENCE DRAWN BY AO, I N OUR ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 6 VIEW, IS MORE ON PRESUMPTIONS AND SURMISES RATHER T HAN ON THE BASIS OF STRONG EVIDENCE. WHEN TWO INDEPENDENT PARTIES ENTER INTO AN AGREEMENT ON CERTAIN TERMS AND CONDIT IONS, IT CANNOT BE TERMED AS SHAM OR COLLUSIVE WITHOUT BRING ING SUFFICIENT EVIDENCE TO PROVE SUCH FACT. AO CANNOT T REAT THE TRANSACTION AS A COLOURABLE DEVICE ADOPTED BY THE P ARTIES MERELY ON PRESUMPTIONS AND SURMISES WITHOUT PROVING THE FACT THAT EITHER THE PROMOTERS OF BOTH THE COMPANIE S ARE SAME OR M/S EQUATOR TRADING ENTERPRISES PVT. LTD. I S A FRONT COMPANY OF EITHER THE ASSESSEE OR THE RAMOJI RAO GR OUP. IN THESE CIRCUMSTANCES, THE INFERENCE DRAWN ON MERE ASSUMPTIONS AND PRESUMPTIONS THAT THE AGREEMENT IS A COLOURABLE DEVICE TO REDUCE THE TAX BURDEN CANNOT B E ACCEPTED. THEREFORE, WITHOUT EXAMINING THE IMPACT O F INVESTMENT MADE IN EQUITY SHARES TO THE EXTENT OF 3 9% BY THE DOMESTIC INVESTOR AND CONDITION IMPOSED BY IT, THE CONCLUSION DRAWN BY THE CIT(A) THAT THERE IS NO NEC ESSITY OF PAYMENT OF NON-COMPETE FEE AS THE SAME PERSON IS CONTROLLING THE ASSESSEE COMPANY AS WELL AS UKT AND UKM, IN OUR VIEW, IS WITHOUT PROPER APPRECIATION OF FACT S AND EVIDENCES BROUGHT ON RECORD, HENCE, CANNOT BE SUSTA INED. 28. EVEN THOUGH THE AO IN THE ASSESSMENT ORDER HAS ALSO RAISED THE ISSUE OF PAYMENT OF NON-COMPETE FEE FOR THE PURPOSE OF SETTING OFF THE LOSS SUSTAINED BY THE HU F AND ALSO HAS QUESTIONED THE VALUE OF NONCOMPETE FEE BUT THE LEARNED CIT(A) HAS NOT AT ALL DEALT WITH THESE ISSU ES. BE THAT AS IT MAY, IT NEEDS TO BE OBSERVED THAT SO FAR AS V ALUATION OF NON-COMPETE FEE IS CONCERNED, IN COURSE OF ASSESSME NT PROCEEDING, ASSESSEE HAS SUBMITTED A VALUATION REPO RT OF A CA FIRM IN SUPPORT OF THE VALUATION MADE BY IT. THE REFORE, IF THE AO HAD ANY DOUBT WITH REGARD TO THE VALUATION M ADE, HE SHOULD HAVE GOT IT VALUED THROUGH AN INDEPENDENT VA LUER IN STEAD OF REJECTING THE VALUATION BY SIMPLY OBSERVIN G THAT THE METHOD ADOPTED IS NOT CORRECT OR SCIENTIFIC. IT IS ALSO ALLEGED BY THE AO THAT THE PAYMENT OF NON-COMPETE FEE WAS M ADE ON THE ONE HAND TO ENABLE THE ASSESSEE TO REDUCE IT S PROFIT AND AT THE SAME TIME ALLOWING SHRI RAMOJI RAO HUF T O ADJUST IT AGAINST ITS HUGE BROUGHT FORWARD LOSSES. IN THIS CONTEXT, IT IS TO BE OBSERVED THAT IN COURSE OF HEA RING BEFORE US THE LEARNED AR HAS SUBMITTED CERTAIN DOCUMENTS A S ADDITIONAL EVIDENCE. A PERUSAL OF THE SAID DOCUMENT S REVEAL THAT SHRI RAMOJI RAO HUF FOR THE ASSESSMENT YEAR 20 08-09 HAS NOT ONLY SHOWN THE NON COMPETE FEE RECEIVED BY IT AS INCOME BUT HAS ALSO ADJUSTED IT AGAINST THE BROUGHT FORWARD ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 7 LOSSES OF EARLIER YEARS. AO I.E. JCIT, RANGE -16, W HILE COMPLETING ASSESSMENT IN CASE OF SHRI RAMOJI RAO HU F HAS ACCEPTED NOT ONLY THE INCOME BUT ALSO ITS ADJUSTMEN T AGAINST BROUGHT FORWARD LOSSES IN AN ASSESSMENT ORD ER PASSED U/S 143(3) ON 24/12/2010. THEREFORE, WHEN TH E NON-COMPETE FEE PAID BY ASSESSEE HAS BEEN ACCEPTED AT THE HANDS OF SHRI RAMOJI RAO HUF AND ALLOWED TO BE SET OFF AGAINST THE BROUGHT FORWARD LOSSES, IT NEEDS TO BE EXAMINED WHETHER STILL THE PAYMENT OF NON-COMPETE FEE MADE B Y THE ASSESSEE TO SHRI RAMOJI RAO HUF CAN BE HELD TO BE E ITHER NON-GENUINE OR NOT NECESSARY. THEREFORE, CONSIDERIN G THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WE ARE OF T HE VIEW THAT AS THE IMPACT OF ACQUISITION OF 39% OF EQUITY SHARES BY M/S EQUATOR TRADING ENTERPRISES PVT. LTD. HAS NOT A T ALL BEEN EXAMINED BY AO AT THE TIME OF ASSESSMENT PROCEEDING OR BY THE LEARNED CIT(A) WHILE DISPOSING OF ASSESSEES AP PEAL AND FURTHER AS THE ADDITIONAL EVIDENCES PRODUCED BEFORE US WERE NOT EXAMINED EITHER BY THE AO OR BY CIT(A), WHICH C ERTAINLY HAVE A CRUCIAL BEARING ON THE ISSUE AS TO WHETHER T HE PAYMENT OF NON-COMPETE FEE IS GENUINE AND NECESSARY , WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FILE O F AO FOR DECIDING AFRESH. ... 5.1. THIS APPEAL BEFORE US BEING FOR THE SUBSEQUENT ASSESSMENT YEAR, ALSO NEEDS TO BE REMANDED TO THE FILE OF THE A.O. TO GIVE CONSEQUENTIAL EFFECT TO THE DECISIONS TAKEN BY HIM FOR THE A.Y. 2009- 2010. THIS GROUND OF APPEAL IS ACCORDINGLY TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. 5.1. IN THE RESULT, THIS GROUND OF APPEAL IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 7. FACTS AND CIRCUMSTANCES BEING SIMILAR, FOLLOWING THE SAID ORDER OF THE TRIBUNAL IN ASSESSEES GROUP CASE, WE RESTORE THE I SSUE TO THE FILE OF THE ASSESSING OFFICER AS PER THE DIRECTIONS CONTAINED I N ORDER DATED 13.05.2016 (SUPRA). AS A RESULT, APPEAL IS ALLOWED FOR STATISTICAL PUR POSES. 8. IN RESPECT OF REVENUES APPEAL, THE LEARNED AR S UBMITTED THAT THE ISSUE IN GROUND OF APPEAL NOS. 1 & 2 IS ALSO COVERE D BY THE TRIBUNAL IN FAVOUR ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 8 OF THE ASSESSEE IN ITS GROUP CASE (SUPRA), WHEREIN THE CO-ORDINATE BENCH HAS HELD AS UNDER: 6. AS REGARDS GROUND NO.3, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THIS IS AGAINST THE DISALLOWANCE MAD E BY THE A.O. FOR COST OF PRODUCTION OF TV SERIALS AND PROGRAMMES INC URRED BY THE ASSESSEE AND ALLOWING DEPRECIATION ONLY @ 25% THERE ON BY TREATING THE SAME AS CAPITAL EXPENDITURE. THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF M/S. PRISM TV P. LTD., (CITED SUPRA) AND THE TRIBUNAL HAS ALLOWED THE SAME AS REVENUE EXPENDITURE. 7. THE LD. D.R. ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 8. HAVING REGARD TO THE RIVAL CO NTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF THE SISTER CONCERN PRISM TV PRIVATE LTD., HYDERA BAD VS. DCIT, CIRCLE16(3), HYDERABAD AND THIS TRIBUNAL VIDE ORDER S DATED 24.03.2016 IN ITA.NO.466 & 1249/HYD/2015 AT PARAS 6 TO 9 HAS HELD AS UNDER : 6. AS REGARDS GROUND NO.2, AGAINST THE TREATING OF THE COST OF PRODUCTION OF TV SERIALS AND PROGRAMMES AS CAPIT AL EXPENDITURE, BRIEF FACTS ARE THAT THE ASSESSEE COMP ANY DEBITED AN AMOUNT OF RS.123,63,94,000 TOWARDS COST OF PRODUCTION OF TV SERIALS AND PROGRAMMES FOR THE YEA R UNDER CONSIDERATION. INSTEAD OF CLAIMING DEPRECIATION, TH E ENTIRE EXPENDITURE WAS CLAIMED AS REVENUE EXPENDITURE AND DEBITED TO THE P & L ACCOUNT. THE A.O. OBSERVED THA T THE COST OF PRODUCTION OF TV SERIALS AND PROGRAMMES IS NOT COVERED UNDER RULE 9A OR 9B OF I.T. RULES. AS THESE RULES ARE APPLICABLE ONLY TO PRODUCTION OF FEATURE FILMS. THE A.O. TREATED THE ENTIRE EXPENDITURE AS CAPITAL EXPENDITU RE AND ALLOWED THE DEPRECIATION THEREON. AGGRIEVED, THE AS SESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFI RMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE, WHILE REITERAT ING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW, HAS RELIED UPON THE DECISION OF THE COORDINA TE BENCH OF THIS TRIBUNAL AT CHENNAI AND MUMBAI AND ALSO THE DECISION OF HONBLE HIGH COURT AT DELHI IN SUPPORT OF HIS CONTENTION THAT THE EXPENDITURE INCURRED ON PRODUCT ION OF TELEVISION PROGRAMMES SHOULD BE ALLOWED AS REVENUE ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 9 EXPENDITURE UNDER SECTION 37 OF THE I.T. ACT. COPI ES OF THE SAID DECISIONS ARE ALSO FILED BEFORE US. 8. THE LD. D.R. ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE A BENCH OF THIS TRIBUNAL AT CHENNAI IN THE CASE OF ACIT, MEDIA CIRCLE-II, CHENNAI VS. M/S. SUN TV NETWORK LTD., CHENNAI IN ITA.NOS.1515 TO 1520/MDS/2013 BY I TS ORDER DATED 31.10.2013 HAS HELD AS UNDER : 8. NOW, WE TAKE UP THE COMMON ISSUE INVOLVED IN AL L THE APPEALS. THE ASSESSEE IS IN THE BUSINESS OF RUNNING SATELLITE TELEVISION CHANNELS. THESE CHANNELS TELECAST FILMS, SERIALS ETC., THROUGH SATELLITE CHANNELS. THE RIGHTS OVER T HESE FILMS ARE PURCHASED FROM THE PRODUCERS OF THE RESPECTIVE FILMS FOR BROADCASTING THROUGH SATELLITE TELEVISION. THESE RI GHTS COME WITH AN EMBARGO THAT THE FILMS SHALL NOT BE BROADCA STED OR AIRED FOR A SPECIFIED PERIOD FROM THE DATE OF RELEA SE IN THEATRES DEPENDING UPON THE SUCCESS AT THE BOX OFFI CE AND OTHER FACTORS. TILL THE TIME, SUCH FILMS ARE BROADC ASTED, THEY ARE TO BE TREATED AS STOCK IN TRADE. ONCE THE FILMS ARE BROADCASTED, THE PURCHASE VALUE OF THE FILMS IS WRI TTEN-OFF. THE EXPENDITURE ON PURCHASE OF FILMS IS CLAIMED IN THE FIRST YEAR ITSELF. THE ASSESSEE HAS GOT ONLY SATELLITE TE LECASTING RIGHTS AND HAS NO UNIVERSAL RIGHTS FOR AIRING THE F ILMS OR SERIALS. ONCE THE FILM OR THE SERIAL IS AIRED, ITS VALUE IS DIMINISHED IN SUBSEQUENT TELECASTS. THE ASSESSEE EA RNS SUBSTANTIAL REVENUE IN THE FIRST TELECAST ITSELF. I N REPEAT TELECAST, THE ASSESSEE IS ABLE TO GENERATE MARGINAL REVENUE. WHATEVER INCOME IS EARNED FROM THE SUBSEQUENT TELEC ASTS IS OFFERED AS INCOME WITHOUT CLAIMING ANY EXPENDITURE. THE ASSESSEE ALSO GENERATES REVENUE FROM BROADCASTING S ERIALS THROUGH SATELLITE CHANNELS. THE ASSESSEE GETS REVEN UE FROM PRODUCTION AND BROADCASTING SERIALS ON THE LINES OF FEATURE FILMS, THE RIGHTS OF BROADCASTING SUCH SERIALS ARE ALSO TREATED AS STOCK IN TRADE TILL THE TIME THEY ARE AIRED AND THE EXPENSES ARE DEBITED TO THE PROFIT & LOSS ACCOUNT. THE ASSESSEE TREATS THE FILMS AND THE SERIALS AT PAR AN D APPLIED THE PROVISIONS OF RULE 9A AND 9B OF THE INCOME TAX RULES, AS ARE APPLICABLE IN CASE OF FILMS ON SERIALS AS WE LL. ON THE OTHER HAND, THE CONTENTION OF THE REVENUE IS THAT T HE FILM AND SERIAL BROADCASTING RIGHTS ACQUIRED BY ASSESSEE ARE PERPETUAL IN NATURE. AFTER FIRST TELECAST, THE ASSE SSEE DOES ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 10 NOT DISCARD THE FILMS BUT CAREFULLY STORE THE SAME IN DIGITAL LIBRARY FOR AIRING THE SAME AGAIN. THEREFORE, THE A SSESSEE GETS ENDURING BENEFIT FROM THE RIGHTS ACQUIRED IN F ILMS AND SERIALS AND THEY DO NOT EXPIRE ON THE DATE OF FIRST TELECAST AS CONTEMPLATED BY THE ASSESSEE. THE RIGHTS ARE INTANG IBLE ASSETS WITHIN THE MEANING OF EXPLANATION (III) TO S ECTION 32 AND DO NOT FALL WITHIN THE PURVIEW OF SECTION 37(1) . THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON SAME. 9. THE ISSUE OF AMORTIZATION OF COST OF MOVIE AND S ERIAL RIGHTS, PROGRAMME PRODUCTION EXPENSES, CONSUMABLE A ND MEDIA EXPENSES BY TREATING THEM AS INTANGIBLE ASSET S U/S.32(1)(II) HAS BEEN DEALT IN DETAIL BY THE CIT ( APPEALS) IN HIS ORDER DATED 23- 02-2013 RELEVANT TO THE A Y. 20 06-07 AND 2007- 08. WE FULLY AGREE WITH THE DETAILED FIND INGS AND THE REASONING GIVEN BY THE CIT(APPEALS) IN HIS ORDE R ALLOWING THIS GROUND OF APPEAL OF THE ASSESSEE. FOR THE SAKE OF BREVITY, WE ARE NOT REPRODUCING THE FINDINGS OF CIT (APPEALS) IN ACCORDANCE WITH THE JUDGMENT OF THE HO N'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. K. Y. PILLAH & SONS REPORTED AS 63 ITR 411 SUBSEQUENTLY FOLLOWED B Y THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. GLO BAL VANTEDGE (P) LTD., REPORTED AS 354 ITR 21 (DEL). TH E ID. DR HAS NOT BEEN ABLE TO CONTROVERT THE WELL REASONED O RDER OF THE CIT (APPEALS) ON THE ISSUE. ACCORDINGLY, THE FI NDINGS OF THE CIT (APPEALS) ON THE ISSUE ARE AFFIRMED AND THI S GROUND OF APPEAL OF THE REVENUE IN RESPECT OF ALL THE AYS IS DISMISSED. 8.1. RESPECTFULLY FOLLOWING THE SAME, THE ALTERNATE GROUND NO.3 OF THE ASSESSEE IS TREATED AS ALLOWED. 9. RESPECTFULLY, FOLLOWING THE SAID DECISION OF THE TRIBUNAL, THE ISSUE RAISED IN GROUND NOS. 1 & 2 IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. GROUND NO.3 IN REVENUES APPEAL PERTAINS TO HOL DING OF FILM SOFTWARE LIBRARY AS AN INTANGIBLE ASSET AND ALLOWING DEPRECI ATION @25% ON IT. THE LEARNED AR REITERATED THAT THIS ISSUE IS ALSO COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL VIDE ITS ORDER DATED 13.05.2016 IN ITA NO. 760/HYD/2016 (SUPRA), WHEREIN IT HAS HELD AS UNDER: ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 11 11. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT THIS ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL (TO WHICH BOTH OF US ARE SIGNATORIES) IN ITA.NO.1265/HYD/13 IN THE CASE OF M /S. UEPL FOR THE A.Y. 2007-08 AND AFTER CONSIDERING THE ISSUE AT LEN GTH, WE HAVE HELD THAT THE FILM SOFTWARE LIBRARY IS IN THE NATUR E OF AN INTANGIBLE ASSET AND THE DEPRECIATION THEREON IS ALLOWABLE AT THE RATE ALLOWABLE ON AN INTANGIBLE ASSET. HOWEVER, AS REGAR DS THE VALUATION OF THE ASSET, THIS TRIBUNAL HAS POINTED OUT THAT CE RTAIN CIRCUMSTANCES LEADING TO THE VALUATION OF THE ASSET HAVE NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW AND HENCE, HAS SET ASIDE THE SAME FOR RE-VALUATION. RESPECTFULLY FOLLOWING THE S AME, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE FIL E OF THE A.O. WITH SIMILAR DIRECTIONS AND DIRECT THE A.O. TO ALLOW DEP RECIATION AS IS ALLOWABLE ON AN INTANGIBLE ASSET. THIS GROUND OF AP PEAL NO.4 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. FACTS AND CIRCUMSTANCES BEING IDENTICAL AND IN THE ABSENCE OF ANY FRESH EVIDENCE TO TAKE A CONTRARY VIEW, RESPECTFULLY FOLL OWING THE SAID DECISION OF THE TRIBUNAL, WE DISMISS THE GROUND RAISED BY THE R EVENUE. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 14 TH DECEMBER 2018. SD/- SD/- (G S PANNU) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED: 14 TH DECEMBER 2018 SA ITA NOS. 6507/MUM/2016 & 1483/H/2016 PANORAMA TELEVISION P. LTD. 12 COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI