Dy.CIT, Circle-2(1), Hyderabad V. M/s Incable Net (Andhra) Limited, Hyderabad

ITA 712/HYD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5982 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2013
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Keywords: Unexplained investment; Depreciation; Charitable institution; Retrospective amendment; Additional evidence; Deemed dividend; Revised return
• Section: 43B; 194C; 131; 68; 69; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 6 0 2 /H YD /201 3 ASSESSMENT YEAR: 20 0 7 - 08 M/S. INCABLE NET (ANDHRA) LTD., HY DERABAD [PAN: A ABCI2538K ] VS THE INCOME TAX OFFICER , WARD - 2 ( 1 ) , HYDERABAD (APPELLANT) (RESPONDENT) I.T.A. NO. 7 1 2/HYD/2013 ASSESSMENT YEAR: 200 7 - 08 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2 ( 1 ), HYDERABAD VS M/S. INCABLE NET (ANDHRA) LTD., HYDERABA D [PAN: AABCI2538K] (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL , AR FOR REVENUE : S MT. K. MYTHILI RANI , CIT - DR DATE OF HEARING : 13 - 0 1 - 201 6 DATE OF PRONOUNCEMENT : 04 - 0 3 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M : TH E S E ARE CROSS - APPEAL S BY A SSESSEE AND REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), VIJAYAWADA , DATED 27 - 0 2 - 201 3. THERE ARE VARIOUS ISSUES IN THE APPEAL ON ADDITIONS MADE BY ASSESSING OFFICER (AO) BUT PARTLY I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 2 - : DELETED BY THE LD. CI T(A). SINCE GROUNDS RAISED ARE COMMON ON ISSUES, WE HAVE CONSIDERED THEM TOGETHER WHEREVER NECESSARY. WE HAVE HEARD THE LD. DR AND LD. COUNSEL IN DETAIL AND PERUSED THE PAPER BOOK PLACED ON RECORD. 2. BRIEFLY STATED, ASSESSEE IS IN THE BUSINESS OF CABLE TV OPERATIONS. ORIGINALLY, IT HAD FILED THE RETURN OF INCOME ADMITTING INCOME OF RS. 15,42,806/ - AND LATER FILED REVISED RETURN OF INCOME ADMITTING LOSS OF RS. 9,10,404/ - . SURVEY OP ERATIONS WERE CONDUCTED ON 19 - 11 - 2009 AND STATEMENT S OF MD AND MR. PHAN I KRISHNA WERE RECORDED U/S. 131 OF THE INCOME TAX ACT [ACT]. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED THAT THEY HAVE PURCHASED DIRECT POINT CONNECTIONS FOR A CONSIDERATION OF RS. 3 CR ORES FROM P. MALLIKARJUNA KUMAR AND IN SUPPORT OF THIS CONTENTION COPY OF THE AGREEMENT OF PURCHASE OF DIRECT POINT CONNECTIONS WERE PRODUCED. IT WAS FURTHER SUBMITTED THAT ASSESSEE PURCHASED CERTAIN FILM RIGHTS FROM C - STAR MEDIA PVT. LTD., FOR A CONSIDERATION OF RS. 1 CRORE. ASSESSEE ALSO SUBMITTED THA T R. PHANI KRISHNA AND OTHER PERSON BY NAME D. SRINIVAS HAVE ADVANCED SHARE APPLICATION MONEY AMOUNTING TO RS. 3 CRORES & 2.025 CRORES RESPECTIVELY. ASSESSEE SUBMITTED COPIES OF BANK STATEMENT AND CONFIRMATION LETTERS FROM PERSONS WHO HAVE INVESTED IN SHA RE APPLICATION MONEY. ASSESSMENT WAS COMPLETED BY MAKING AN ADDITION OF RS. 3 CRORES WHICH WAS INVESTED FOR ACQUIRING DIRECT POINT CONNECTIONS, THE SHARE APPLICATION MONEY AMOUNTING TO RS. 2,02,50,000/ - ADVANCED BY SRI D. SRINIVAS TREATED AS UNEXPLAINED IN VESTMENT IN THE HANDS OF COMPANY, INCREASE IN PROVISION FOR EXPENSES AMOUNTING TO RS. 92,06,352/ - WAS ADDED TO THE INCOME, LOSS CLAIMED ON DIRECT POINT CONNECTIONS AT RS. 25 LA KHS WAS DISALLOWED , DONATIONS MADE TO POLITICAL PARTIES AND OTHERS I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 3 - : AMOUNTING TO RS. 11,21,000/ - WERE ALSO DISALLOWED AND FURTHER DISALLOWANCE U/S. 40(A)(IA) WAS MADE AT RS. 6,29,00,731/ - . THE TOTAL INCOME WAS D ETERMINED AT RS. 12,95,61,779/ - . THE AO ALLEGED THAT ASSESSEE FAILED TO FURNISH THE DETAILS SOUGHT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. 3. AGGRIEVED BY THE ORDER OF AO, AN APPEAL WAS FILED BEFORE THE CIT(APPEALS) - III, HYDERABAD WITH A PETITION UNDER RULE 46A TO ACCORD AN OPPORTUNITY TO SUBMIT THE INFORMATION IN SUPPORT OF THE GROUNDS OF APPEAL. CONSIDERING THE PLEADIN GS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) SOUGHT A REMAND REPORT FROM THE AO. THE INFORMATION SOUGHT BY THE AO WAS SUBMITTED DURING THE COURSE OF REMAND PROCEEDINGS. THE LD. CIT(A) AFTER CONSIDERING THE OBSERVATIONS OF THE AO IN REMAND REPORT AND ALSO WRITTEN SUBMISSIONS OF ASSESSEE, ALLOWED RELIEF PARTLY. 4. ASSESSEE IS AGGRIEVED ON THE FINDINGS OF LD. CIT(A) THAT DIRECT POINT CONNECTIONS WERE NOT PURCHASED AND CONSEQUENT DISALLOWANCE OF DEPRECIATION ON THAT AND OTHER ASSETS WHICH ARE NOT EVIDEN CED. IN THE COURSE OF PRESENT PROCEEDINGS, THE LD. AR WITHDREW THE GROUNDS 2, 3 & 10 PERTAINING TO THESE ISSUES. THE MAIN CONTENTION S ARE ON DISALLOWANCE OF VARIOUS AMOUNTS U/S. 40(A)(IA) AND NON - CONSIDERATION OF DONATIONS WHICH CIT(A) DID NOT ADJUDICATE . 5. REVENUE IS AGGRIEVED ON DELETION OF RS. 3 CRORES U/S. 68 AND ACCEPTANCE OF RS. 2,20,50,000/ - OF ONE D. SRINIVAS AS GENUINE INVESTMENT. MOREOVER, THE REVENUE IS AGGRIEVED ON SOME AMOUNTS U/S. 40(A)(IA) SUCH AS PAYMENTS MADE TO SIG NAL PROVIDERS, I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 4 - : PRO GRAMME EXPENSES , RENTS ETC., WHICH WERE DELETED BY LD. CIT(A) . T HE GROUNDS ARE RAISED ACCORDINGLY. 6. ISSUE OF SHARE CAPITAL ADDITION AND PURCHASE OF D IRECT P OINT C ONNECTIONS : 6.1 . DIRECT POINT CONNECTIONS: DURING TH E PERIOD RELEVANT TO THE IMPUGNE D ASSESSMENT YEAR, THE ASSESSEE CLAIMED TO HAVE PURCHASED DIRECT POINT CONNECTIONS FROM P. MALLIKARJUNA KUMAR FOR A CONSIDERATION OF RS.3 CRORES. SR I. P.M.KUMAR WAS PAID RS.3 CRORES BY WAY OF CHEQUE FROM THE ASSESSEE'S BAN K ACCOUNT AND THE TRANSACTION WA S DULY RECORDED IN TH E BOOKS OF ACCOUNTS. ASSESSING OFFICER OBSERVED THAT P.M.KUMAR ADVANCED THIS AMOUNT OF RS .3 CRORES TO SRI.R.PHANI KRISHNA WHO INVESTED THE SAME IN ASSESSEE COMPANY. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE MADE THE PAYMENT TO SR I. P.M .KUMAR ONLY TO BRING IT BACK TO T HE COMPANY IN THE FORM OF SHARE CAPITAL BY SR I. R.PHANI KRISHNA. IN THESE CIRCUMSTANCES, ASSESSING OFFICER HELD THAT THE AMOUNT OF RS.3 CRORES GIVEN TO SRI.P.M.KUMAR WA S FROM UNEXPLAINED SOURCES, THEREFORE, SHE MADE AN ADDIT ION OF RS.3 CRORES U/ S 68 OF THE IT ACT. IN HER REMAND REPORT, ASSESSI NG OFFICER AFTER VERIFYING THE D OCUMENTS PRODUCED OBSERVED THAT THE AMOUNT OF RS.3 CRORES RECEIVED BY SRI.P.M.KUMAR ON ACCOUNT OF SALE OF DIRECT POINT CONNECTIONS TO THE COMPANY WAS NOT UTILIZED BY HIM FOR MAKING PAYMENT TO 16 CABLE OPERATORS, FROM WHOM HE HAS PURCHASED DIRECT POINTS CONNECTIONS, BUT ACCORDING TO THE ASSESSING OFFICER HE HAS ADVANCED THE SAME AMOUNT TO R.PHANI KRISHNA, IN TURN THE DIRECTOR INVESTED THIS AMOUNT IN THE COM PANY AS SHARE APPLICATION MONEY. ACCORDING TO THE ASSESSING OFFICER IT CAN BE CONSTRUED THAT THE FUNDS OF THE ASSESSEE COMPANY, WITHDRAWN BY THE DIRECTOR FOR THE PURPOSE OF INVESTING IN SHARE APPLICATION MONEY OF THE ASSESSEE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 5 - : COMPANY. ACCORDING TO HER , S E CTION 68 IS NOT ATTRACTED AND FURTHER OBSERVED THAT IT CAN BE CONSTRUED THAT THE ENTIRE TRANSACTION IS SHAM. ACCORDING TO THE ASSESSING OFFICER THERE IS REDUCTION OF LIABILITY TO THE EXTENT OF RS.3 CRORES OVER THE ASSET S , THEREFORE, IN HER REMAND REPORT SH E HELD THAT IT SHOULD BE TREATED AS UNEXPLAINED INVESTMENT WITHIN THE MEANING OF SECTION 69 OF THE IT ACT. LD. CIT(A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES AND ALSO THE OBSERVATIONS OF THE ASSESSING OFFICER IN PAGE 6 OF THE ASSESSMENT ORDER AND IN REMAND REPORT HELD THAT THE TRANSACTION OF PURCHASE OF DIRECT POINT CONNECTIONS AS NOT GENUINE AND FURTHER HELD THAT THIS IS A LOAN TO SHARE HOLDER IN THE NATURE REFERRED IN S ECTION 2(22E) OF THE IT ACT. 6.2 . INVESTMENT IN SHARE CAPITAL: - SRI.DASARI SRINIVAS RESIDENT OF USA HAS SUBSCRIBED SHARE APPLICATION MONEY AMOUN TING TO RS.2,02,50,5001/ - DURING THE PERIOD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE CONFIRMATION LETTER AND OTHER PARTICULAR OF THE SHARE APPLICANT WERE SUBMITTED BUT AO MADE AN ADDITION U/S 68 OF THE IT ACT OF RS.2,02,50,500/ - . DURING THE COURSE OF REMAND PROCEEDINGS ASSESSING OFFICER AFTER CONSIDERING FORM NO.2 SUBMITTED TO THE ROC AND ALSO OTHER PARTICULARS HELD THE TRANSACTION AS GENUINE. HOWEVER, THE LEARNED ADDL. COMMISSIONER WHILE FORWARDING THE REMAND REPORT HAS NOT AGREED WITH THE CONTENTI ON OF ASSESSING OFFICER AND OBSERVED THAT THE CONFIRMATION PRODUCED WAS ONLY ON A PIECE OF PAPER AND NOT ON A LETTER HEAD, WITH NO TELEPHONE NUMBER ETC. 6.3 . LD. CIT(A) DEALT WITH THE ISSUES AS UNDER: 5.1. ADDITION U/S. 68 PURCHASE OF DIRECT POINT CONNECTIONS AS PER THE ASSESSEE THE ASSESSEE PURCHASED DIRECT POINT CONNECTIONS WORTH OF RS.3 CRORES FROM ONE MR. P. M ALLIKARJUNA KUMAR . THE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 6 - : ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SRI MALLIKARJ UNA KUMAR DURING THE COURSE OF ASSESS M ENT PROCEEDINGS, RELEVANT PART OF WHICH IS REPRODUCED IN THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSEE , THE CONSIDERATION RECEIVED BY SRI MALLIKARJUNA KUMAR IS ADVANCED TO SRI R.V.PH ANI KRISHNA, DIRECTOR OF THE ASSES SEE COMPANY. SRI R.V. PHANI KRISHNA , AGAIN INVESTED THIS AMOUNT FOR ACQUIRING SHARES OF ASSESSEE COMPANY. THE TRANSACTION WAS ALSO EXAMINED IN THE HANDS OF SRI P. MALLIKARJU NA KUMAR (PAN NO.AJGPP4429F) BY THE ACIT, CIRCLE - 2(2), HYDERABAD BY ISSUI N G NOTICE U/S.148 FOR THE ASST. YEAR 2007 - 08. AFTER CONSIDERING ALL THE FACTS, THE ACIT, CIRCLE - 2(2), HYDERABAD, ACCEPTED - THE INCOME ADMITTED IN THE HANDS OF SRI P. MALLIKARJUNA KUMAR. NO ADVERSE COMMENTS HAVE BEEN MADE IN RESPECT OF 1 TRANSACTION OF SALE OF DIRECT POINT CONNECTIONS IN THE HANDS OF SRI P. MALLIKA RJUN A KUMAR. HOWEVER, THE ASSESSING OFFICER HELD THAT THE ASSESSEE MADE THE PAYMENT TO SRI P. MALLIKARJUNA KUMAR ONLY TO BRING IT BACK TO THE COMPANY IN THE FORM OF SHARE CAPITAL BY SRI R. V .PHA N I KRISHNA AND HELD THAT THE AMOUNT OF RS. 3 CRORES GIVEN TO SHRI P. MALLIKARJUNA KUMAR IS FROM UNEXPLAINED SOURCES. THEREFORE, AN AMOUNT OF RS.3 CRORES IS ADDED TO THE INCOME RETURNED U/S.68 OF THE ACT. HOWEVER, IN HER REMAND REPORT, THE A.O. AFTER CONSIDERING ALL THE FA CTS AND CIRCUMSTANCES OPINED THAT THE TRANSACTION DOES NOT ATTRACT SECTION 6 8 BECAUSE THERE IS NO ACTUAL PASSING OR RECEIPT OF CASH AND TRANSACTIONS ARE MERE BOOK ENTRIES RESULTING IN ACQUISITION OF AN ASSET IN KIND WHILE SIMULTAN EOUSL Y CREATING A LIABILIT Y. DURING THE COURSE OF PROCEEDINGS BEFORE THE UNDERSIGNED, T H E ASSESSEE PRODUCED THE BANK STATEMENT AND LEDGER COPIES OF RELEVANT PARTIES. IN FACT, AS SEEN FROM THE BANK STATEMENT AND BOOKS OF ACCOUNTS, THE CASH HAS BEEN PASSED TO SRI P. MALLIKARJUNA KUMA R AND WHO IN TURN ADVANCED THE SAME TO SRI R. V . PHANI KRISHNA WHO MADE AN INVESTMENT IN ACQUIRING THE SHARES OF THE ASSESSEE COMPANY. THEREFORE, AS HELD IN THE ASSESSMENT ORDER, SRI R .V . P HANI KRISHNA IS ONLY A CONDUIT IN THE PROCESS. IN THE REALITY, THE A SSESSEE COMPANY ADVANCED AN AMOUNT OF R S .3 CRORES LOAN TO SRI R.V. PHANI KRISHNA TO MAKE AN INVESTMENT IN THE FORM OF SHARES. THEREFORE, THIS IS A TRANSACTION IN THE NATURE EXPLAINED IN SECTION 2(22)(E) OF THE ACT I.E. DEEMED DIVIDEND. HOWEVER, IN THE ABSE NCE OF ACCUMULATED PROFITS, THE TRANSACTION IS TO BE CONSIDERED ONLY AS A LOAN. THEREFORE, IN MY OPINION, THERE IS NO PURCHASE OF DIRECT POINT CONNECTIONS FROM SRI MALLIKARJUNA KUMAR AND DEPRECIATION @ 10% CLAIMED ON DIRECT PO INT C ONNECTIONS SHOULD NOT BE ALLOWED AND THE ADDITION MADE U/S.68 OF THE ACT A N D SUGGESTED IN THE REMAND REPORT AS ADDITION U/S.69 OF THE ACT IS DELETED. 5.2. INVESTMENT IN SHARE CAPITAL OF RS. 2,02,50,000/ - BY SHRI D. SRINIVAS SHRI D. SRINIVAS, 16 BROOKE LANE, SOUTH BARRINGTON IL 60010, U.S.A. HAS MADE AN INVESTMENT OF RS. 2,02,50,000/ - TOWARDS ACQUIRING THE SHARES OF ASSESSEE COMPANY. IN HER REMAND REPORT, THE A.O. AFTER CONSIDERING THE CONFIRMATION SUBMITTED AND I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 7 - : ALSO CONSIDERING THE TRANSACTIONS ROUTED THROUGH THE BANKING CHANN ELS, ACCEPTED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. HENCE, THE ADDITION MADE ON THIS ACCOUNT STANDS DELETED. REVENUE IS IN APPEAL IN GROUND NO.3 FOR DELETING THE ADDITION U/S 68 OF THE IT ACT, THE ASSESSEE IS IN APPEAL WITH G ROUND N O.2 & 3 OF THE GROUNDS OF APPEAL. REVENUE IS IN APPEAL ON THE RELIEF ALLOWED BY THE COMMISSIONER ON DELETION OF SHARE APPLICATION MONEY. (VIDE G ROUND N O.4). 6.4 . AFTER CONSIDERING THE ABOVE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE OBSERVATI ONS OF THE LD. CIT(A) WITH REFERENCE TO THE ISSUE OF DIRECT POINT CONNECTIONS. SINCE ASSESSEE ALSO WITHDREW THE GROUNDS ON THAT ISSUE, THE FINDING OF THE LD. CIT(A) THAT ASSESSEE HAS NOT PURCHASED THEM IS BEING UPHELD. CONSEQUENTLY, THE CLAIM OF DEPRECIA TION ON THAT CANNOT BE ALLOWED. THEREFORE, THE ORDER OF LD. CIT(A) IS UPHEL D TO THAT EXTENT. THE EFFECT ON BOOK ENTRIES PASSED BY ASSESSEE ABOUT THE TRANSACTIONS , PARTICULARLY BRINGING IT BACK AS SHARE CAPITAL/APPLICATIO N MONEY MAY BE EXAMINED, IF ANY C L AIM IS MADE IN A LATER YEAR O N THOSE ENTRIES, WHICH AO CAN EXAMINE AND DEAL ACCORDING TO LAW. 6.5 . COMING TO THE ISSUE OF SHARE CAPITAL BY SRI D. SRINIVAS, THE LD. CIT(A), DELETED ON THE BASIS OF REMAND REPORT DT. 20 - 06 - 2012 , WHICH WAS NOT PLACED ON RECOR D FOR VERIFICATION. HOWEVER, AS SEEN FROM THE FORWARDING REPORT OF LD. ADDL. CIT(A), THE OBJECTION RAISED WITH REFERENCE TO IDENTITY AND CREDITWORTHINESS OF SRI D. SRINIVAS WAS ONLY CONFIRMATION ON WHITE SHEET WAS FILED WITHOUT ESTABLISH ING THE GENUINENES S. SO, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE TO THE FILE OF AO TO RE - EXAMINE AND DECIDE AFTER GIVING DUE OPPORTUNITY TO ASSESSEE TO SUBMIT NECESSARY EVIDENCE. I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 8 - : GROUND NO.4 OF REVENUE ON THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. DONATIONS CLAIMED : 7. AO DISALLOWED DONATIONS TO AN EXTENT OF RS. 11,21,000/ - . LD. CIT(A) SUMMARISED THE FINDING OF AO IN THE REMAND REPORT AT PAGE 6 PARA (V) AS UNDER: V. AS REGARDS THE DONATION OF RS. 11,21,000/ - , THE A.O. HAS STATED THAT THE ASSESSEE HAS FUR NISHED SUPPORTING RECEIPTS OF PAYMENTS MADE TO POLITICAL PARTY CPI(M), HYDERABAD FOR TOTAL AMOUNT OF RS. 8,50,000/ - AND AMOUNT PAID TO TIRUMALA CHARITABLE TRUST OF RS. 50,000/ - . HENCE, THE A.O. HAS STATED THAT THE DONATION PAID OF RS. 9 LAKHS MAY BE CONSI DERED AND THE BALANCE OF RS. 2.21 LAKHS MAY BE SUSTAINED IN THE ABSENCE OF DOCUMENTARY PROOF; HOWEVER, LD. CIT(A) DID NOT ADJUDICATE THE ISSUE FINALLY. HENCE , THE GROUND BY ASSESSEE . 7.1. AFTER CONSIDERING THE SUBMISSION S , WE ARE OF THE OPINION THAT TH E CLAIM IS TO BE EXAMINED BY AO. EVEN THOUGH, THE PAYMENT OF RS. 8,50,000/ - TO A POLITICAL PARTY IS EVIDENCED BY A RECEIPT, ELI GIBILITY OF THE AMOUNT U/S 80GGB , PARTICULARLY ELIGIBILITY OF AMOUNT WITH REFERENCE TO PROFITS OF LAST THREE YEARS REQUIRE EXAMI NATION. THEREFORE, THE CLAIM OF DONATIONS (INCLUDING THE BALANCE AMOUNT) IS RESTORED TO THE FILE OF AO, WHO SHOULD EXAMINE THE CLAIM OF EACH AMOUNT AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. T HE GROUND NO. 11 RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 9 - : DISALLOWANCE U/S. 40(A)(IA) : 8. THE AO , ON VERIFICATION OF THE EXPENDITURE DEBITED TO P&L ACCOUNT , FOUND THAT VARIOUS ITEMS OF EXPENDITURE ATTRACT TDS PROVISIONS UNDER CHAPTER X VIIB. A SSESSEE HAS NOT FURNISHED ANY DETAILS OF TAXES DEDUCTED AND REMITTED AND ALSO NO LEDGER EXTRACTS WERE FURNISHED TO EXAMINE THE APPLICABILITY OF TDS PROVISIONS . SINCE DETAILS OF PAYMENTS TO WHICH TDS RELATE TO ARE NOT AVAILABLE, THE TDS HAS BEEN CONSIDERED AS HAVING BEEN NOT DEDUCTED/ PAID IN RESPECT OF THAT ITE M OF EXPENDITURE TO WHICH THE SAID SECTION (194I OR 194J) WOULD PRIMA FACIE APPLY. ACCORDINGLY, THE AO HAS DISALLOWED EXPENDITURE AMOUNTING TO RS. 6,29,00,731/ - U/S. 40(A)(IA) OF THE ACT. THE DETAILS OF VARIOUS DISALLOWANCE S INVOKING THIS SECTION ARE AS UNDER: 1. PAYMENT TO PAY CHANNELS, ROYALTIES, COMMISSION (U/S. 194J) 5,78,85,998/ - 2. PROGRAMME & NEWS EXPENSES (U/S.194 I ) - 15,10,842/ - 3. LEGAL & PROFESSIONAL CHARGES (U/S. 194J) - 7,79,857/ - 4. RENT (U/S. 194 - I) - 14,93,037/ - 5. CON SUMABLES & CAB LE LAYING CHARGES - 9,18,933/ - 6. ADVERTISEMENT - 3,06,064/ - ------------------ 6,29,00,731/ - ------------------ 8.1. LD. CIT(A) IN HIS ORDER PARTLY GAVE RELIEF. APART FROM FACTUAL ASPECTS OF DETAILS OF AMOUNT WHETHER THEY ARE COVERED UNDER THE R ELEVANT PROVISION, BOTH PARTIES HAVE ALSO RELIED ON VARIOUS CASE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 10 - : LAW. FOR THE SAKE OF CLARITY THE SUBMISSION OF ASSESSEE ARE EXTRACTED AS UNDER : 1. PAYMENTS MADE TO PAY CHANNELS (ROYALTIES & COMMISSION ): - DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PAID AN AMOUNT OF RS.5,78,85,998 / - TO PAY CHANNELS. THE LEARNED ASSESSING OFFICER ALSO OBSERVED THAT SUCH PAYMENTS IS IN THE NATURE OF ROYALTIES, THEREFORE, TDS SHOULD HAVE BEEN MADE U/S. 194J OF THE IT ACT. AS NO TDS WAS MADE THE AMOUNT WAS DISALLOWED U / S . 40 (A)(IA) OF THE IT ACT. DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT IT WAS SUBMITTED THAT OUT OF THE AGGREGATE AMOUNT OF RS.5,78,85,998 / - , AMOUNT PAID TO SIGNAL PROVIDERS IS AT RS .4 ,85,67,151 / - AND COMMISSION PAID TO CABLE OPERATOR IS RS.82,88,183 / - AND FURTHER AMOUNT OF RS.1,84,557 / - IS PAID TO VARIOUS INDIVIDUALS FOR PROCURING CABLE CONNECTIONS, OUT OF THIS AMOUNT ONLY AN AGGREGATE AMOUNT OF RS.1,42,351 / - IS ON ACCOUNT OF PAYMENT TO EACH INDI VIDUAL, WHICH IS MORE THAN RS.2,500 / - THE BALANCE AMOUNT PAID TO VARIOUS PERSONS IS LESS THAN RS.2,500 / - TO EACH PERSON. IN ADDITION TO THESE AMOUNTS THE ASSESSEE ALSO PAID AN AMOUNT OF RS.8,00,000 / - TOWARDS 0 & M & NETWORK CHARGES, THEREFORE, IT WAS SUBMI TTED THAT THE AMOUNT TO BE CONSIDERED FOR THE PURPOSE OF 194J IS AT RS.5,77,97,685 / - . IT WAS SUBMITTED THAT THE TERM ROYALTY WAS NOT AVAILABLE IN THE IT ACT 2006, WHICH IS A GUIDE FOR TAX PAYERS TO DEDUCT THE TDS DURING THE PERIOD 2006 - 07 RELEVANT TO THE A SSESSMENT YEAR 2007 - 08. THE TERM ROYALTY WAS BROUGHT INTO THE SECTION 194J BY THE TAXATION LAWS (AMENDMENT) ACT, 2006 W.E.F 13 - 07 - 2006, AS SEEN FROM THE IT ACT 2007. IT IS FURTHER SUBMITTED THAT THE CBDT HAS ISSUED A CIRCULAR EXPLAINING THE AMENDMENTS MADE TO SECTION 194J BY TAXATION LAWS (AMENDMENT) ACT 2006, ON 27 - 04 - 2007 IN CIRCULAR NO.1/2007. THEREFORE, IT WAS SUBMITTED THAT THERE WAS NO GUIDANCE DURING THE PERIOD 2006 - 07 TO DEDUCT THE TAX, CONSIDERING THE AMOUNTS PAID TO PAY CHANNELS AS ROYALTY, THEREF ORE, THE ASSESSEE WAS HAVING NO KNOWLEDGE OR INFORMATION AS SEEN FROM THE IT ACT, THAT THE PAYMENTS CONSIDERED AS ROYALTY ARE INTRODUCED UNDER THE PROVISIONS OF SECTION 194J OF THE IT ACT. IN VIEW OF THIS AS THERE IS NO TERM ROYALTY IN THE IT ACT 2006, PLE ADINGS OF THE ASSESSEE FOR NON DEDUCTION WAS ACCEPTED BY THE CIT AND AMOUNT OF RS . 4 ,85,67,151 / - DISALLOWED U / S . 194J WAS DELETED. AS SUBMITTED THE TERM ROYALTY APPEARED FOR THE FIRST TIME IN SECTION 194J OF THE IT ACT, IN 2007 ACT WHICH IS PUBLISHED MUCH BEYOND 31 - 03 - 2007, THEREFORE, THERE IS NO SCOPE FOR THE ASSESSEE TO DEDUCT THE TAX IN RESPECT OF PAYMENTS MADE FOR OBTAINING THE SIGNALS FROM THE SIGNAL PROVIDERS. AGGRIEVED BY THE RELIEF COMMISSIONER APPEALS THE DEPARTMENT IS IN APPEAL IN GROU ND N O.5 & 6. IT IS FURTHER SUBMITTED THAT THE PAYMENTS MADE FOR OBTAINING SIGNALS WAS CONSIDERED IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION COMPANY LTD I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 11 - : VS DIT (AND VICE VERSA) (2011) 332 ITR 340, BY THE HON'BLE DELHI HIGH COURT AND IT WAS HELD THAT THE PAYMENTS ARE NOT IN THE NATURE OF ROYALTY. CONSIDERING THIS DECISION OF HON'BLE DELHI HIGH COURT EXPLANATION - 6 WAS BROUGHT UNDER CLAUSE - (VI) O F SUBSECTION (1) OF SECTION (9) OF THE IT ACT, CLARIFYING THE TERM 'PROCESS' AS PROCESS INCLUDES TRANSMISSION BY SATELLITE, CABLE, OPTIC FIBER OR ANY OTHER TECHNOLOGY BY THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01 - 06 - 1976. IDENTICAL ISSUE WAS B EFORE THE HON'BLE ITAT, COCHIN BENCH IN ITA NO.794 / COCHIN/2013 IN THE CASE OF KERALA VISION LTD VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), TRICHUR. THE HON'BLE ITAT OBSERVED AS UNDER: IN THE INSTANT CASE, THE VIEW ENTERTAINED BY THE ASSESSEE THAT THE PAY CHANNEL CHARGES CANNOT BE CONSIDERED AS ROYALTY IS IN FACT GETS SUPPORT FROM THE DECISION RENDERED BY HON'BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION C. LTD (SUPRA). THOUGH THE EXPLANATION 6 TO SECTION 9(1)(VI) INSERTED BY THE FINANCE ACT, 2012 IS CLARIFICATORY IN NATURE, YET IN VIEW OF THE FACT THAT THE VIEW ENTERTAINED BY THE ASSESSEE GETS SUPPORT FROM THE DECISION OF DELHI HIGH COURT, REFERRED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE HELD TO BE LIABLE TO DED UCT TAX AT SOURCE FROM THE PAY CHANNEL CHARGES. HENCE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF PAY CHANNEL CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT - (A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. AS THE TERM ROYALTY WAS NOT THERE IN SECTION 194J OF THE IT ACT OF 2006 AND ALSO THE PAYMENT MADE FOR OBTAINING THE SIGNALS IS NOT IN THE NATURE OF ROYALTY AS HELD BY THE HON'BLE DELHI HIGH COURT AND ALSO CONSIDERING THE FACT THE AMENDMENT BROUGHT TO SECTION 9(1)(VI) BY INTRODUCING AN EXPLANATION 6 IN WHICH TERM PROCESS WAS EXPLAINED AN ALSO CONSIDERING THE RATIONALE OF THE HON'BLE COCHIN BENCH IN IDENTICAL FACTS AND CIRCUMSTANCES, IT IS PLEADED BEFORE THE HON'BLE BENCH TO DELETE THE ADDITION MADE U/S. 40(A)(IA) OF THE IT ACT, AMOUNTING TO RS.5,78,85,998/ - WHICH IS THE AMOUNT PAID TO PAY CHANNELS . WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS ALTERNATELY, IT IS SUBMITTED THAT THE AMOUNT DISALLOWED U/S 194J IS AT RS.5,78,85,998/ - , THE ASSESSEE PAID AN AMOUNT OF RS.5,06,99,133/ - BEFORE 31 - 03 - 2007, THE BALANCE PAYABLE IS ONLY RS.34,18,246/ - . CONSIDERING THE RATIONALE OF THE HON'BLE ITAT, SPECIAL BENCH, VISHAKHAPA TNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS 136 ITD 23, WHEREIN, IT WAS HELD THAT SECTION 40(A)(IA) COMES INTO PLAY ONLY IN THE CASE OF AMOUNT PAYABLE AND NOT WITH REFERENCE TO THE AMOUNT PAID. SIMILAR VIEW WAS TAKEN BY THE HON'BLE ALLAHABAD HIGH COU RT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD 38 TAXMANN.COM 77 (ALL) ON WHICH THE SLP, FILED BY THE REVENUE HAS BEEN REJECTED. THE RATIONALE OF THE MERILYN SHIPPING & TRANSPORTS IS ALSO FOLLOWED BY THE HON'BLE ITAT, 'A' BENCH MUMBAI IN THE CASE OF M/ S ARCADIA SHARE & STOCK BROKERS PVT LTD VS DCIT, RANGE - 4(L) IN ITA NO.1871/MUM/2013 DT . 22 - 12 - I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 12 - : 2014. IT IS FURTHER SUBMITTED THAT THE HON'BLE AP HIGH COURT IN ITTA NO. 352 OF 2014 BETWEEN CIT - II, HYDERABAD AND M/S . JANAPRIYA ENGINEERS SYNDICATE IN PARA 4 O BSERVED AS UNDER: WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DECISION OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMALLER BENCH AND COORDINATE BENCH OF THE TRIBUNAL . CONSIDERING THE RATIONALE OF THE ABOVE DECISIONS THE HON'BLE BENCH IS PLEA DED TO RESTORE THE DELETION MADE BY LD. CIT(A) (APPEALS) TO THE EXTENT OF AMOUNT PAID RS.5,06,99, 133/ - . APPLICABILITY OF SECTION 194J ON COMMISSION : - IN RESPECT OF COMMISSION PAYMENTS AGGREGATING TO RS.92,30,534/(5,77,97,685 - 4,85,67,151), FROM OUT O F WHICH THE ASSESSEE ALREADY PAID A MAJOR PART OF THE AMOUNT DURING THE ACCOUNTING YEAR, THEREFORE, THE ASSESSEE RELI ED ON THE HON'BLE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM, IN THE CASE OF MERILYN SHIPPING AND TRANSPORT, VISHAKHAPATNAM V S CIT, (146 TT J 1 ). LD. CIT(A) APPEALS HAS NOT AGREED TO THE THE CONTENTION AND RETAINED AN AMOUNT OF RS. 92,30,534/ - AS AMOUNT DISALLOWABLE U/S. 40(A)(IA) OF THE IT ACT, AGGRIEVED BY THIS ORDER THE DEPARTMENT IS IN APPEAL VIDE GROUND NO.6 AN ASSESSEE IS IN APPEAL VIDE GRO UND NO. 4 . . IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN THE CASE OF, IN ITTA NO.352 OF 2014 BETWEEN CIT - II, HYDERABAD AND MIS JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MA Y KINDLY BE DELETED. 2. DISALLOWANCE U/S 194J OF THE IT ACT (PROGRAM & NEWS EXPENSES - R S .15,10,842 / - ) : - . THE EXPENDITURE IS INCURRED MAINLY FOR THE DAY TO DAY EXPENDITURE IN THE COURSE OF BUSINESS EXIGENCY, HOWEVER, PAYMENTS MADE TO M / S . SK ANTENNA SY STEM - RS. 2,50,000 / - AND M / S INDIA SIGN PVT LTD RS . 4 ,90,000 / - ARE IN THE NATURE OF HIRE CHARGES FOR MACHINERY AND UP LINKING CHARGES FOR LIVE TELECAST OF THE PROGRAMS IS IN THE NATURE OF ROYALTY PAYMENT RESPECTIVELY. LIKE THE TERM ROYALTY THE MACHINERY HIRE CHARGES WERE ALSO INSERTED IN SECTION 194 I BY THE TAXATION LA W S (AMENDMENT) ACT 2006 W . E.F 13 - 07 - 200 6. AS SUBMITTED IN DETAIL THE AMENDED PROVISIONS WERE NOT AVAILABLE IN THE IT ACT 2006. CONSIDERI N G THE PLEADINGS OF THE ASSESSEE, LD. CIT(A) APPEALS DELETED ADDITIONS MADE U / S . 194J, IN RESPECT OF MACHINERY HIRE CHARGES AND PAID TOWARDS ROYALTY. THE DEPARTMENT IS IN APPEAL IN GROUND N O.7 & 8 AND ASSESSEE IS IN APPEAL WITH GROUND NO.4 . IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN THE CASE OF, IN ITTA NO.352 OF 2014 BETWEEN CIT - II, HYDERABAD AND M / S JANAPRIYA ENGINEERS I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 13 - : SYNDICATE, THE DISALLOWANCE MADE BY THE A SSESSING OFFICER MAY KINDLY BE DELETED. 3. LEGAL PROFESSIONAL CHARGES U/S 194J (RS.7,79,857/ - ) : - IT WAS SUBMITTED THAT THE TOTAL AMOUNT PAID BY THE ASSESSEE UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES IS RS.12,10,695 / - OUT OF THIS THE LEARNED ASSESSING OFFICER ALLOWED AN AMOUNT OF RS.4,30,8 38 / - AS TDS WAS DEDUCTED ON THIS PART OF AMOUNT. IN RESPECT OF THE BALANCE AMOUNT IT WAS SUBMITTED THAT THE PAYMENTS ARE MOSTLY BELOW RS.20,000 / - THEREFORE, THE PROVISIONS OF SECTION 194J ARE NOT APPLICABLE, ALTERNATELY IT WAS ALSO SUBMITTED THAT AS THE EN TIRE AMOUNT OF RS.7,79,857 / - IS ALREADY PAID AS ON 31 - 03 - 2007 AND NO AMOUNT IS PAYABLE THEREFORE, THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT IS APPLICABLE. HOWEVER, LD. CIT(A) APPEALS ALLOWED O NLY AN AMOUNT OF RS. 87,852 / - AND RESTORED THE ADDITION TO THE EXTENT OF RS.6,92,000 / - . THE ASSESSEE IS IN APPEAL WITH GROUND N O.6. IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE RATIONALE OF THE HON'BLE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014 , IN THE CASE OF M / S . JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY KINDLY BE DELETED. 4. RENT U/S 194 I (RS.14,99,037/ - ) : - DURING THE COURSE OF REMAND PROCEEDINGS IT WAS SUBMITTED THAT THE RENT PAID TO AMISH SHAH, GAURAN G N.SHAH AND JAYAWANTHI SHAH AND MENJIK.SHAH OF RS.2,17,060 / - FOR EACH ATTRACTS THE PROVISIONS OF SECTION 194 I , THE REST OF THE AMOUNTS PAID TOWARDS RENT IS BELOW THE LIMIT PROVIDED IN SECTION 194 I I.E RS.1,20,000 / - . IN RESPECT OF RENT PAID TO THESE 4 PERS ONS AGGREGATING TO RS.8,68,240 / - IT WAS SUBMITTED THAT THE ENTIRE AMOUNT IS PAID BEFORE 31 - 03 - 2007 AND NO AMOUNT IS PAYABLE THEREFORE, THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT IS APPLICABLE. H OWEVER, LD. CIT(A) DELETED AN AMOUNT OF RS.6,74,433/ - WHICH DOES NOT ATTRACT THE PROVISIONS OF SECTION 194I AND RESTORED (SIC) THE DISALLOWANCE AT RS.8,68,240 / - . THE ASSESSEE IS IN APPEAL WITH GROUND N O.7. IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014, IN THE CASE OF M / S . JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY KINDLY BE DELETED. 5. ADVERTISEMENT 194C (RS.3,06,064/ - ) : - IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 194C APPLIES TO M / S MANJULA ADVERTISERS, WHERE AN AMOUNT OF RS.2 , 17 , 864/ - WAS PAID, MIS KINNARA ADS RS.25,000 / - WAS PAID, M / S EENADU AN AMOUNT OF I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 14 - : RS.20,400 / - WAS PAID AND M / S MURTHY MEDIA AN AMOUNT OF RS.24,000 / - WAS PAID, THEREFORE, IT WAS SUBMITTED THAT THE AGGREGATE AMOUNT WHERE THE PROVISIONS OF SECTION 194C ATTRACTS IS RS.2,87,264/ - IT WAS SUBMITTED THAT THE ENTIRE AMOUNT WAS PAID BEFORE 31 - 03 - 2007 AND NO AMOUNT IS PAYABLE THEREFORE, THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VI SHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT IS APPLICABLE. HOWEVER, LD. CIT(A) DELETED AN AMOUNT OF RS.18,800 / - AND RESTORED THE ADDITION TO AN EXTENT OF RS.2,87,264 / - . THE ASSESSEE IS IN APPEAL WITH GROUND N O.9. IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014, IN THE CASE OF MIS JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY KINDLY BE DELETED. 6. CONSUMABLE AND CABLE LAYING CHARGES 194C RS.9 ,18,933/ - : - IN RESPECT OF THIS EXPENDITURE IT WAS SUBMITTED THAT OPERATING, ADMINISTRATION AND OTHER EXPENSES ARE MOSTLY IN THE NATURE OF SMALL AMOUNTS INCURRED DURING THE COURSE OF BUSINESS AND DOES NOT ATTRACT THE PROVISIONS OF SECTION 194C OF THE IT A CT. HOWEVER, IT WAS FURTHER SUBMITTED THAT CABLE MAINTENANCE CHARGES PAID TO M / S SRI BALAJI COMMUNICATIONS, SRI VENKATESHWARARAOKUKATPALLY& RAVI KUMAR OF MALKAJGIRI WERE PAID AN AMOUNT OF RS.96,000 / - EACH, AGGREGATING TO RS.2,98,000 / - ARE ONLY THE PAYMENTS WHICH ATTRACTS THE PROVISIONS OF S ECTION 194C. IT WAS SUBMITTED THAT THE ENTIRE AMOUNT WAS PAID BEFORE 31 - 03 - 2007 AND NO AMOUNT IS PAYABLE THEREFORE, THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT IS APPLICABLE. HOWEVER, LD. CIT(A) DELETED AN AMOUNT OF RS.6,30,933/ - AND RESTORED THE ADDITION TO AN EXTENT OF RS.2,88,000 / - . THE DEPARTMENT IS IN APPEAL WITH GROUND NO.11 AND ASSESSEE IS IN APPEAL WITH GROUND N O.8. IT IS RESPECTFULLY SUBMITTED THAT CON SIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014, IN THE CASE OF M / S JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY KINDLY BE DELETED . 8.2 LD CIT DR HOWEVER RELIED ON THE ORDERS OF AO AND O BJECTED TO THE RELIEF GRANTED BY LD.CIT(A). 8.3 . WE HAVE CONSIDER E D THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. EACH OF THE AMOUNTS IS CONSIDERED AS UNDER : I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 15 - : A. PAYMENTS MADE TO PAY CHANNELS (ROYALTIES & COMMISSION: A S SEEN FRO M THE ORDER OF LD. CIT(A), HE HAS ACCEPTED ASSESSEES CONTENTIONS THAT THE PROVISION S OF SECTION 194J AS AMENDED WERE NOT APPLICABLE AS THEY CAME INTO OPERATION IN NEXT YEAR. BUT WITH REFERENCE TO THE AMOUNT PAID TO CA BLE OPERATORS T HE CONTENTION WAS NOT UPHELD. AS SEEN FROM THE SUBMISSION S , ASSESSEE RELIES ON THE PROVISION S OF SECTION 194J AND ALSO THE DECISION OF HON'BLE DELHI HIGH COURT WHICH HAS UPHELD THE CONTENTION THAT THE SAID PAYMENTS ARE NOT IN THE NATURE OF ROYALTY IN THE CASE OF ASIA SATELLIT E TELECOMMUNICATION COMPANY LTD VS DIT (AND VICE VERSA) (2011) [ 332 ITR 340 ] (SUPRA) BEFORE AMENDMENT TO THE ACT BY INTRODUCING EXPLANATION 6 TO SEC. 9(1)(VI). FURTHER, THE CO - ORDINATE BENCH IN TH E CASE OF M/S. KERALA VISION LTD., VS. ACIT IN ITA NO. 794/COCH/2013 DT. 06 - 06 - 2014 HAS CONSIDERED SIMILAR ISSUE FOR AY. 2009 - 10 AND HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. FOR THE PURPOSE OF SEC. 194J, THE TERM 'ROYALTY' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI ) OF SUB - SECTION (1) OF SEC. 9. THE SAID EXPLANATION READS AS UNDER: - 'EXPLANATION 2 - FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE R ECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS') FOR - I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRA DE MARK OR SIMILAR PROPERTY; IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 16 - : (IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUD ING THE AMOUNTS REFERRED TO IN SECTION 44BB; (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISI ON OR TAPES FOR USE I N CONNECTION WITH RADIO BROADCASTING BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WITH THE ACTIVITIES REFER R ED TO IN SU - CLAUSES (I ) TO (IV), (IVA) AND (V).' WE NOTICE THAT CLAUSE (I) OF EXPLANATION 2 INCLUDES THE EXPRESSION 'PROCESS'. WE FURTHER NOTICE THAT THE FINANCE ACT, 2012 HAS INSERTED EXPLANATION 6 BELOW CLAUSE (VI) OF SUB - SECTION (1) OF SEC. 9 DEFINING THE WORD 'PROCESS'. T HE SAID EXPLANATION 6 READS AS UNDER: - 'EXPLANATION 6 - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE EXPRESSION 'PROCESS' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP - LINING, AMPLIFICATION, CO NVERSION FOR DOWN - LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCESS IS SECRET;' WE NOTICE THAT THE EXPRESSION 'PROCESS' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE , CABLE, OPTIC FIBRE OF ANY OTHER TECHNOLOGY. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSMITTING THE TELEVISION CHANNELS OR SIGNALS BY CABLE BY RECEIVING SIGNALS THROUGH SATELLITE. SUCH KIND OF TRANSMISSION (BOTH RECEIPT OF SIGNAL AND TRANSMISSION OF THE SAME) IS INCLUDED I N THE DEFINITION OF 'PROCESS' UNDER EXPLANATION 6, WHICH HAS BEEN INSERTED BY THE FINANCE ACT, 2012 TO REMOVE THE DOUBTS. SINCE THIS EXPLANATION STARTS WITH THE WORDS 'FOR REMOVAL OF DOUBTS', IN OUR VIEW, IT IS C LARIFICATORY IN NATURE AND IT WOULD APPLY FOR THE YEAR UNDER CONSIDERATION ALSO. AS STATED EARLIER, THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF A 'PROCESS' SHALL FALL IN THE CATEGORY OF 'ROYALTY' AS PER' CLAUSE (I) OF EXPLANATION 2. HENCE, IN OUR VIEW, THE PAYMENT MADE BY THE ASSESSEE AS 'PAY CHANNEL CHARGES' SHALL FALL IN THE CATEGORY OF 'ROYALTY' AS DEFINED IN CLAUSE (I) OF EXPLANATION 2 TO SEC. 9(1) OF THE ACT. 6. THE LD COUNSEL PRESENTED AN ALTERNATIVE ARGUMENT, VIZ., THE AMENDMENT BROUGHT IN BY THE FINANCE ACT WITH RETROSPECTIVE EFFECT, WHICH WAS PASSED IN THE YEAR SUBSEQUENT TO THE YEAR UNDER CONSIDERATION, SHOULD NOT BE CONSIDERED FOR PENALIZING THE ASSESSEE BY WAY OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE LD COUNSEL SUBMITTED THAT T HE HON'BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD VS. DIT (332 ITR 340) HAD TAKEN THE VIEW THAT THE TRANSMISSION OF TELEVISION SIGNALS THROUGH SATELLITE / TRANSPONDERS WOULD NOT FALL IN THE CATEGORY OF 'ROYALTY' AS DEFINE D UNDER EXPLANATION 2 TO SEC. 9(1) OF THE ACT. HE SUBMITTED THAT THE EXPLANATION 6, WHICH EXPANDED THE SCOPE OF THE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 17 - : EXPRESSION 'PROCESS' HAS BEEN INSERTED BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT, WAS BROUGHT INTO THE ACT ONLY TO NULLIFY THE DECI SION RENDERED BY THE HON'BLE DELHI HIGH COURT. ACCORDINGLY, THE LD AR SUBMITTED THAT THE VIEW ENTERTAINED BY THE ASSESSEE THAT THE PAYMENT OF 'PAY CHANNEL CHARGES' WILL NOT FALL IN THE CATEGORY OF ROYALTY WAS SUPPORTED BY THE DECISION OF HON'BLE DELHI HIGH COURT REFERRED ABOVE . ACCORDINGLY HE SUBMITTED THAT THE DISALLOWANCE U/S 40(A)(IA) SHOULD NOT BE MADE ON THE BASIS OF SUBSEQUENT AMENDMENT MADE WITH RETROSPECTIVE EFFECT. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWIN G CASE LAW: - (A) SONATA INFORMATION TECHNOLOGY LTD VS. DCIT (2012) (TAXCORP (INTL) 4659 (MUMBAI - TRIB) (B) INFOTECH ENTERPRISES LIMITED VS. ADD L . CIT (2014) TAXCORP (INTL) 6945 (ITAT - HYDERABAD) ( C ) CHANNEL GUIDE INDIA LIMITED VS. ACIT (2013) TAXCORP (IN TL) 6702 (ITAT - MUM) WE HAVE GONE THROUGH THE ABOVE SAID DECISIONS RENDERED BY DIFFERENT BENCHES OF THE TRIBUNAL. WE NOTICE THAT THEY HAVE HELD THAT THE ASSESSEE CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE RELYING ON THE SUBSEQUENT AMENDMENTS MADE IN THE ACT WITH RETROSPECTIVE EFFECT. 7. IN THE INSTANT CASE, THE VIEW ENTERTAINED BY THE ASSESSEE THAT THE PAY CHANNEL CHARGES CANNOT BE CONSIDERED AS ROYALTY IS IN FACT GETS SUPPORT FROM THE DECISION RENDERED BY HON'BLE DELHI HIGH COURT IN THE' CASE O F ASIA SATELLITE T ELECOMMUNICATION CO. LTD (SUPRA). THOUGH THE EXPLANATION 6 TO SEC. 9(1)(VI) INSERTED BY FINANCE ACT, 2012 IS CLARIFICATORY IN NATURE, YET IN VIEW OF THE FACT TH AT THE VIEW ENTERTAINED BY THE ASSESSEE GETS SUPPORT FROM THE DECISION OF DELH I H I GH COURT, REFERRED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE HELD T O BE LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAY CHANNEL CHARGES. HENCE, WE A R E OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF PAY CHAN NEL CHARGES BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE . IN VIEW OF THE ABOVE PRINCIPLES LAID DOWN, WE UP HOLD THE ORDER OF LD. CIT(A) ON AMOUNTS OF RS. 4,85,67,151 AND RS.8,00,000 UNDER THE HEAD ROYALTIES AND REJECT THE REVENUES GROUNDS. B. COMING TO THE ISSUE OF PAYMENT S TO CABLE OPERATORS OF RS. 82,88,183/ - UPHELD BY LD. CIT(A), WE ARE OF THE VIEW THAT TH E SAME I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 18 - : CANN OT BE DISALLOWED U/S. 40(A)(IA) AS THAT AMOUNT WAS NOT OUTSTANDING AT THE END OF THE YEAR. E NTIRE AMOUNT THAT WAS PAID BEFORE 31 - 03 - 2007 WAS NOT DISALLOWABLE U/S 40 A(IA) ON THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT. SIMILAR VIEW WAS TAKEN BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD 38 TAXMANN.COM 77 (ALL) ON WHICH THE SLP, FILED BY THE REVENUE HAS BEEN REJECTED. THE RATIONALE OF THE MERILYN SH IPPING & TRANSPORTS IS ALSO FOLLOWED BY THE HON'BLE ITAT, 'A' BENCH MUMBAI IN THE CASE OF M/S ARCADIA SHARE & STOCK BROKERS PVT LTD VS DCIT, RANGE - 4(L) IN ITA NO.1871/MUM/2013 DT. 22 - 12 - 2014. FURTHER CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014, IN THE CASE OF M/S JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE CAN ONLY BE RESTRICTED TO THE OUT STANDING AMOUNT AT THE END OF THE YEAR. TO VERIFY THE OUTSTANDING AMOUNT AT THE END OF YEAR THE ISSUE IS RESTORED TO THE FILE OF AO FOR NECESSARY EXAMINATION AND TO QUANTIFY THE DISALLOWANCE IF ANY. C . PROGRAMME & NEWS EXPENSES (U/S.194I) : WE UPHOLD THE FINDING OF LD. CIT(A) ON MACHINE HIRE CHARGES AND UP - LINKING CHARGES, AND CONFIRM THE DELETION FOR THE REASONS STATED THERE IN . D . LEGAL & PROFESSIONAL CHARGES (U/S. 194J) : TO THE EXTENT OF AMOUNTS BELOW RS. 20,000 THERE IS NO DISPUTE. ON THE AMOUNT CONFIRMED BY LD. CIT(A) OF RS. 6.92 LAKHS, IT WAS THE CONTENTION THAT DECISION OF SPECIAL BENCH WILL APPLY AND ONLY OUTSTAND ING AMOUNT CAN BE DISALLOWED. WE ARE OF THE VIEW THAT THE SAME CANN OT BE DISALLOWED U/S. 40(A)(IA) AS THAT AMOUNT WAS NOT OUTSTANDING AT THE END OF THE YEAR. ENTIRE AMOUNT THAT WAS PAID BEFORE 31 - 03 - I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 19 - : 2007 WAS NOT DISALLOWABLE U/S 40A(IA) ON THE RATIONALE OF THE SPECIAL BENCH OF ITAT, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT. SIMILAR VIEW WAS TAKEN BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD 38 TAXMANN.COM 77 (ALL) ON WHICH THE SLP, FILED BY THE R EVENUE HAS BEEN REJECTED. THE RATIONALE OF THE MERILYN SHIPPING & TRANSPORTS IS ALSO FOLLOWED BY THE HON'BLE ITAT, 'A' BENCH MUMBAI IN THE CASE OF M/S ARCADIA SHARE & STOCK BROKERS PVT LTD VS DCIT, RANGE - 4(L) IN ITA NO.1871/MUM/2013 DT. 22 - 12 - 2014. FURTHER CONSIDERING THE RATIONALE OF THE AP HIGH COURT DECISION IN ITTA NO.352 OF 2014, IN THE CASE OF M/S JANAPRIYA ENGINEERS SYNDICATE, THE DISALLOWANCE CAN ONLY BE RESTRICTED TO THE OUT STANDING AMOUNT AT THE END OF THE YEAR. TO VERIFY THE OUTSTANDING AMOUNT A T THE END OF YEAR THE ISSUE IS RESTORED TO THE FILE OF AO FOR NECESSARY EXAMINATION AND TO QUANTIFY THE DISALLOWANCE IF ANY. E . RENT (U/S. 194 - I) : HERE IN ALSO THE RELIEF GRANTED BY LD.CIT(A) IS UPHELD FOR THE REASONS ADDUCED BY HIM. BUT THE AMOUNT C ONFIRMED WAS STATED TO BE NOT OUTSTANDING, FOLLOWING THE REASONING GIVEN IN ABOVE PARA, THE DISALLOWANCE CAN BE RESTRICTED TO OUTSTANDING AMOUNT AT THE END OF THE YEAR. TO VERIFY THE OUTSTANDING AMOUNT AT THE END OF YEAR THE ISSUE IS RESTORED TO THE FILE O F AO FOR NECESSARY EXAMINATION AND TO QUANTIFY THE DISALLOWANCE IF ANY. F . CONSUMABLES & CABLE LAYING CHARGES : LD. CIT(A) GAVE RELIEF TO THE EXTENT OF RS. 6,30,933 AND CONFIRMED BALANCE AMOUNT OF RS. 2,88,000. REVENUE WANT PROOF OF THE AMOUNTS. AO DID NOT QUESTION THE PAYMENTS AND ONLY DISALLOWED INVOKING 40A(IA) WHICH INDICATE THAT THE CLAIM IS GENUINE. OTHERWISE AO SHOULD HAVE INVOKED SEC. I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 20 - : 37(1). SO TO THAT EXTENT THERE IS NO MERIT IN REVENUE GROUNDS. ASSESSEE CLAIM THAT NO AMOUNT WAS OUTSTAND ING REQUIRE EXAMINATION. FOLLOWING THE REASONING GIVEN IN ABOVE PARA, THE DISALLOWANCE CAN BE RESTRICTED TO OUTSTANDING AMOUNT AT THE END OF THE YEAR. TO VERIFY THE OUTSTANDING AMOUNT AT THE END OF YEAR, THE ISSUE IS RESTORED TO THE FILE OF AO FOR NECESSAR Y EXAMINATION AND TO QUANTIFY THE DISALLOWANCE IF ANY. G . ADVERTISEMENT : LD. CIT(A) GAVE RELIEF TO THE EXTENT OF RS. 18,800 / - AND CONFIRMED BALANCE AMOUNT OF RS. 2,87,254 / - . REVENUE WANTS PROOF OF THE AMOUNTS. AO DID NOT QUESTION THE PAYMENTS AND ONLY DISALLOWED INVOKING 40A(IA) WHICH INDICATE THAT THE CLAIM IS GENUINE. OTHERWISE AO SHOULD HAVE INVOKED SEC. 37(1). SO TO THAT EXTENT THERE IS NO MERIT IN REVENUE GROUNDS. ASSESSEE CLAIM THAT NO AMOUNT WAS OUTSTANDING REQUIRE EXAMINATION. FOLLOWING THE REAS ONING GIVEN IN ABOVE PARA, THE DISALLOWANCE CAN BE RESTRICTED TO OUTSTANDING AMOUNT AT THE END OF THE YEAR. TO VERIFY THE OUTSTANDING AMOUNT AT THE END OF YEAR, THE ISSUE IS RESTORED TO THE FILE OF AO FOR NECESSARY EXAMINATION AND TO QUANTIFY THE DISALLOWA NCE IF ANY. 8.4 . EVEN OTHERWISE, THERE IS NO MERIT IN REVENUE GROUNDS. LD CIT(A) HAS CONSIDERED THE REMAND REPORT OF AO ON VARIOUS ISSUES, SO CONTESTING THE SAME AFTER DUE EXAMINATION BY AO IS NOT CORRECT. WE REJECT THE REVENUE GROUNDS AND THE GROUNDS RA ISED BY ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. LAST ISSUE FOR CONSIDERATION IS PROVISION FOR EXPENSES : AS S ESSING OFFICER MADE A DISALLOWANCE OF PROVISION FOR EXPENSES AMOUNTING TO RS. 92,06,352 / - . DURING THE COURSE OF A PPELLATE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 21 - : PROCEEDINGS B EFORE LD.CIT(A) A LEDGER COPY OF THE SAID ACCOUNT WAS SUBMITTED, FOR THE PERIOD 01 - 04 - 2006 TO 31 - 03 - 2007. AFTER CONSIDERING THE SUBMISSIONS LD. CIT(A) OBSERVED THAT THE PROVISIONS ARE PARTLY AMOUNT PAYABLE TOWARDS CST, ENTERTAINMENT TAX, ESI PAYABLE, PROFESSIONAL TAX AND VAT ETC WERE REFLECTED IN THE PROVISION FOR EXPENSES. THE ASSESSING OFFICER WAS DIRECTED TO RESTRICT SUCH DISALLOWANCES AND BALANCE W AS DIRECTED TO BE DELETED. DURING THE COURSE OF PROCEEDINGS FOR MODIFICATION THE ASSESSEE SUBMITTED ACCOUNT COPY OF THE SAME. AFTER CONSIDERING THE EXPLANATION AO ALLOWED AN AMOUNT OF RS.88,63,901 / - . THE DEPARTMENT IS IN APPEAL WITH G ROUND N O.13. 9. 1 . A FTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THIS CLAIM REQUIRE S RE - EXAMINATION BY AO. AS SEEN FROM THE SCHEDULES OF BALANCE SHEET, THE PROVISION FOR EXPENSES INCLUDING INCOME TAX WAS SHOWN AT RS. 1,38,91,165/ - . THE DETAILS ARE NOT PLACED ON RECORD. T HE AOS REMAND REPORT AS EXTRACTED BY LD. CIT(A) IN PARA (IV) IN PAGE 6 OF THE ORDER INDICATE THAT ASSESSEE HAS NOT FURNISHED ANY OBJECTIONS OR INFORMATION REGARDING THE SAID ADDITION EVEN DURI NG THE REMAND PROCEEDINGS. ON W HAT BASIS, LD. CIT(A) HAS RESTRICTED THE AMOUNT ONLY TO STATUTORY DISALLOWANCE U/S. 43B IS NOT KNOWN. UNLESS ONE EXAMINE THE NATURE OF EXPENSES, THE CRYSTALLISATION OF LIA BILITY AND PAYMENT AT A LATER POINT OF TIME, THE SAME CANNOT BE ALLOWED. SINCE NO DETAILS ARE ON RECORD, WE HAVE NO OPTION THAN TO SET ASIDE THE ORDER OF LD. CIT(A) ON THIS AND RESTORE THE SAME TO AO FOR FRESH EXAMINATION. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY. 10. GROUND NO. 2 IN REVENUES APPEAL IS ON THE ISSUE OF NOT FOLLOWING RULE 46A. AS SEEN FROM THE ORDER OF THE LD. CIT(A), THE I.T.A. NO S . 602 & 7 1 2 / HYD / 201 3 M/S. INCABLE NET (ANDHRA) LTD., : - 22 - : ADDITIONAL EVIDENCE FILED WAS SENT TO AO ON REMA ND . THEREFORE, THIS GROUND DOES NOT SURVIVE. ACCORDINGLY, THE SAME IS REJECTED. 11. IN THE RESULT, BOTH REVENUES APPEAL AND ASSESSEES AP PEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH MARCH , 201 6 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 04 TH M ARCH , 2016 TNMM COPY TO : 1. M/S. INCABLE NET (ANDHRA) LTD., 1 - 2 - 298, OM PLAZA, DOMALAGUDA, HYDERABAD. C/O. MOHD. AFZAL, ADVOCATE, 11 - 5 - 465, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2 ( 1 ), 8 TH FLOOR, B - BLOCK, I.T. TOWERS, HYDERABAD. 3 . THE INCOME TAX OFFICER , WARD - 2 ( 1 ), HYDERABAD. 4 . CIT (APPEALS) , VIJAYAWADA . 5 . CIT - I I , HYDERABAD. 6 . D.R. ITAT, HYDERABAD. 7 . GUARD FILE.