ACIT 10(1), MUMBAI V. MUSIC BROADCAST P.LTD, MUMBAI

ITA 6763/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88221 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: PARAS S SAVLA; HEMANTWANI
• Keywords: Business income; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 6763/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) DY. CIT-10(1), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M. K. MARG, MUMBAI-400 020 VS. MUSIC BROADCAST PVT. LTD. 5 TH FLOOR, RNA CORPORATE PARK, OPP. WESTERN EXPRESS HIGHWAY, KALANAGAR, BANDRA (E), MUMBAI-400 051 ! ./PAN/GIR NO. AACCM 4036 H ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) '%& / APPELLANT BY : SHRI LOVE KUMAR #$ '%& / RESPONDENT BY : SHRI PARAS S. SAVLA AND SHRI HEMANT WANI ' ()%*+ / DATE OF HEARING : 04.02.2015 ,-.%*+ / DATE OF PRONOUNCEMENT : 10.02.2015 /0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI (CIT(A) FOR SH ORT) DATED 19.07.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2009-10 VIDE ORDER DATED 20.12.2011. 2 ITA NO. 6763/MUM/2012 (A.Y. 2009-10) DY. CIT VS. MUSIC BROADCAST PVT. LTD. 2. THE APPEAL RAISES, IN EFFECT, THREE GROUNDS, WHI CH WE SHALL TAKE UP IN SERIATIM. GROUNDS # 1 & 2 OF THE REVENUES APPEAL RELATE TO T HE ASSESSEES CLAIM IN RESPECT OF SOFTWARE LICENSE FEE, PAID IN THE SUM OF RS.1,58,85 ,227/-. THE ASSESSING OFFICER (A.O.) TREATED THE SAME AS CAPITAL EXPENDITURE, SO THAT IT WAS ELIGIBLE FOR CLAIM OF DEPRECIATION, WHICH WAS ALLOWED AT 25%, DISALLOWING THE BALANCE R S.39,71,307/-. IN APPEAL, THE ASSESSEE CLAIMING THE AMOUNT TO BE PAID BY WAY OF R ECURRING LICENSE FEE, SO THAT IT WAS REVENUE IN NATURE, STOOD ALLOWED ITS CLAIM TO THE EXTENT OF RS.50.21 LACS PAID TO FOUR PARTIES. ANOTHER AMOUNT OF RS.107.24 LACS, PAID BY WAY OF ANNUAL MAINTENANCE CHARGES FOR RADIO SOFTWARE, WAS ALSO ALLOWED BY THE FIRST A PPELLATE AUTHORITY AS REVENUE EXPENDITURE U/S.37(1) OF THE ACT, FOLLOWING HIS DEC ISION IN THE ASSESSEES CASE FOR AN EARLIER YEAR, I.E., A.Y. 2006-07. AGGRIEVED, THE RE VENUE IS IN APPEAL, DISPUTING THE ENTIRE ALLOWANCE, VIDE ITS GROUNDS 1 AND 2. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE HAVE PERUSED THE ORDER BY THE TRIBUNAL, TO WHICH THE MATTER WAS CARRIED IN APPEAL BY THE REVENUE, FOR A.Y. 2006-07 (IN ITA NO. 6842/MUM/2012 DATED 30.05.2014), PLACED ON RECORD BY BOTH THE PARTIES. THE TRIBUNAL FOUND THAT EVEN THOUGH CONSIDERED BY THE FIRST APPELLATE AUTHORITY, THE AS SESSING AUTHORITY HAD NOT BEEN ALLOWED ANY OPPORTUNITY TO OBJECTIVELY EXAMINE THE MATERIAL BEING RELIED UPON BY THE ASSESSEE TOWARDS ITS CLAIM OF THE IMPUGNED EXPENDITURE AS B EING A REGULAR LICENSE FEE, PAID ON ANNUAL BASIS, WITH NO ENDURING BENEFIT, SO THAT IT IS ONLY A RECURRING EXPENDITURE, AND THAT THEREFORE THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN AMWAY INDIA ENTERPRISES VS. DY. CIT [2008] 111 ITD 112 (DEL) (SB) WOULD NOT APPLY. FOR THE CURRENT YEAR, AGAIN, WE FIND THAT THE LD. CIT(A) HAS ONLY FOLLOWED HIS E ARLIER ORDER FOR A.Y. 2006-07. FURTHER, FROM THE SAMPLE COPIES OF THE INVOICES ON RECORD (P B PGS.17-18), WE OBSERVE THAT THE LICENSE FEE PAID IS FOR A PERIOD OF ONE YEAR, WHICH THOUGH DOES NOT MATCH WITH THE FINANCIAL YEAR, SO THAT ONLY THE AMOUNT RELATABLE T O THE PREVIOUS YEAR WOULD WARRANT BEING CLAIMED FOR THE CURRENT YEAR. EVEN AS IT WAS STATED TO BE ACTUALLY SO BY THE LD. AUTHORIZED REPRESENTATIVE (AR) BEFORE US, SO THAT THE AMOUNT R ELATABLE TO THE NEXT FISCAL HAD BEEN 3 ITA NO. 6763/MUM/2012 (A.Y. 2009-10) DY. CIT VS. MUSIC BROADCAST PVT. LTD. CLAIMED ONLY IN THE FOLLOWING YEAR, THERE IS NO MAT ERIAL ON RECORD TO SUBSTANTIATE THE SAME. TWO, THE FINDINGS BY THE LD. CIT(A) ARE IN RE SPECT OF AN AGGREGATE SUM OF RS.157.46 LACS, WHILE THE DISALLOWANCE MADE IS FOR RS.158.85 LACS. THE NATURE OF THE BALANCE EXPENDITURE OF RS.1.39 LACS, THEREFORE, REM AINED TO BE DETERMINED BY HIM. THESE ASPECTS, I.E., BESIDES THE ASPECT AFORE-MENTIONED, WOULD ALSO MERIT BEING EXAMINED BY THE A.O., TO WHOM WE REMIT THE MATTER WITH SAME DIRECTI ONS AS BY THE TRIBUNAL IN THE ASSESSEES CASE FOR A.Y. 2006-07. BEFORE PARTING, HOWEVER, WE MAY CLARIFY, FOR WHICH THE A.O. IS FREE TO VERIFY THE LICENSE OR OTHER RELEVANT AGREEMENTS, THAT IF THE N ATURE OF THE EXPENDITURE IS ANNUAL MAINTENANCE CHARGE OR ANNUAL LICENSE FEE, ETC., WIT H NO ENDURING BENEFIT/COMPONENT, THERE IS NO QUESTION OF THE SAME BEING NOT REVENUE IN NAT URE OR BEING CAPITAL IN NATURE. THE A.O. SHALL, IN EITHER CASE, I.E., WHERE NOT IN AGRE EMENT WITH THE ASSESSEES CLAIMS, ISSUE DEFINITE FINDINGS OF FACT PER A SPEAKING ORDER. THE ASSESSEE SHALL AT HIS END EXTEND FULL CO- OPERATION, WITH A VIEW TO PROVE ITS CLAIMS. WE DECI DE ACCORDINGLY. THE REVENUES GROUNDS # 1 AND 2 ARE DECIDED ACCORDINGLY. 4. THE LAST AND THE THIRD GROUND OF THE REVENUES A PPEAL RELATES TO THE ACCEPTANCE OF THE ASSESSEES CLAIM OF THE INTEREST INCOME OF RS.2 24.12 LACS BEING ASSESSED AS BUSINESS INCOME, I.E., AS AGAINST INCOME FROM OTHER SOURCES BY THE A.O. THE FINDINGS BY THE LD. CIT(A), BEING DISPUTED BY THE REVENUE, ARE AS UNDER : 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THIS ISSUE WAS ALSO THERE IN APPELLANTS CASE IN A.Y. 2007-08 WHEREIN THE UNDERS IGNED HELD THAT THE INTEREST INCOME EARNED ON FDS MADE WITH THE BANK AS MARGIN MONEY FOR OBTAINING BANK GUARANTEE, ETC. WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. FOLLOWING THE APPEAL ORDER OF A.Y. 2007-08, THE A.O. IS DIRECTED TO ASSESS THE INTEREST INCOME UNDER THE HEAD BUSINESS INCOME. INCIDENTALLY THIS ISSUE IS ACADEMIC IN NATURE SINCE THERE IS NO TAX I MPLICATION WHETHER THE INTEREST INCOME IS ASSESSED UNDER THE HEAD INCOME F ROM OTHER SOURCES OR UNDER THE HEAD BUSINESS INCOME. THIS GROUND OF APPE AL IS ALSO ALLOWED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) BEFORE US COULD NOT CONTEST OR REBUT THE SAID FINDINGS BY THE FIRST APPELLATE AUTHORITY IN A NY MANNER. IF IT IS NOT DISPUTED THAT THE 4 ITA NO. 6763/MUM/2012 (A.Y. 2009-10) DY. CIT VS. MUSIC BROADCAST PVT. LTD. INTEREST IS ON FDRS, PLACED BY WAY OF MARGIN MONEY, I.E., TO OBTAIN GUARANTEES, REQUIRED FOR OPENING LETTERS OF CREDIT IN FAVOUR OF ITS SUP PLIERS, OR OTHERWISE IN THE REGULAR COURSE OF ITS BUSINESS, BY THE ASSESSEE FROM ITS BANKERS, AS IS IN FACT THE CASE, WE FIND NO INFIRMITY IN THE FINDING OF THE SAID INTEREST AS IM BUED WITH THE CHARACTER OF BUSINESS INCOME, AND FOR WHICH THE ASSESSEE HAS PLACED RELIA NCE ON THE DECISION IN THE CASE OF CIT VS. GOVINDA CHOUDHURY & SONS [1993] 203 ITR 881 (SC). WE, UNDER THE CIRCUMSTANC ES, DECLINE TO INTERFERE, DISMISSING THE REVENUES RELE VANT GROUND. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. 1.*2(% 3% 456760( 8 *% *9 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 10, 2015 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / / ACCOUNTANT MEMBER ' :) MUMBAI; ;/ DATED : 10.02.2015 (< ROSHANI , SR. PS ! ' #$%& ' &$ COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' =* > ? / THE CIT(A) 4. ' =* / CIT - CONCERNED 5. @(AB#<*