Apna Incable Broad Band Services Pvt.Ltd., Nizamabad, Mumbai V. DCIT, Circle-1, Nizamabad, Nizamabad

ITA 800/HYD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3040 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 13-02-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MURTHY NAIK
• Keywords: Depreciation
• Section: 142(1)

Judgement Text

ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.800/HYD/2016 (ASSESSMENT YEAR: 2010-11) APNA INCABLE BROAD BAND SERVICES PRIVATE LTD NIZAMABAD PAN:AAHCA3357L VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-1 NIZAMABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A. SRINIVAS FOR REVENUE : SHRI MURTHY NAIK, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11 AGAIN ST THE ORDER OF THE CIT (A)-5, HYDERABAD, DATED 29.02. 2016. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE CABLE TV BUSINESS, FILED ITS RETURN OF INCOME FOR THE A.Y 2010-11 ON 30.09.2010 RETURNING LOSS OF (-) RS.30,52,838/-. THE CASE WAS SELECTED FOR SCRUTINY AND NECESSARY NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUE D AND SERVED ON THE ASSESSEE. THE ASSESSEE APPEARED THROUGH ITS REPRESENTATIVE AND FURNISHED THE DETAILS CALLED FOR. DATE OF HEARING : 13.02.2019 DATE OF PRONOUNCEMENT: 27.02.2019 ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 2 OF 6 3. THE AO OBSERVED THAT THE ASSESSEE HAS ENTERED IN TO AN AGREEMENT DATED 18.11.2008 FOR PURCHASE OF CABLE TV BUSINESS OF M/S. APNA CABLE NETWORK FOR A TOTAL CONSIDERATION O F RS.2,30,00,000/-. HE OBSERVED THAT THE SAID AMOUNT INCLUDED THE CONSIDERATION FOR EQUIPMENT & MATERIAL OF RS.24,91, 620/- CABLES OF RS.37,56,800/-AND DEPOSITS TO THE TUNE OF RS.5,0 1,580/- TOTALING TO RS.67,50,000/-. THE AO OBSERVED THAT AS PER SCHEDULE C, FIXED ASSETS, THE COMPANY HAS CLAIMED DEPRECIATI ON ON NETWORK RIGHTS OF RS.1,62,66,250/- I.E. THE BALANCE AMOUNT. THE AO WAS OF THE OPINION THAT THE NETWORK RIGHTS ARE NOT INTANGI BLE ASSETS AND THEREFORE, DEPRECIATION IS NOT ALLOWABLE THEREON. T HE AO TREATED THE NETWORK RIGHTS AS GOODWILL AND OBSERVING THAT NO DEPRECIATION IS ALLOWABLE ON GOODWILL U/S 32(1)(II) OF THE ACT, HE DISALLOWED THE CLAIM OF DEPRECIATION AND BROUGHT IT TO TAX. 4. FURTHER, THE AO ALSO OBSERVED THAT THE ASSESSEE HAS PAID A SUM OF RS.18,75,000.- TO M/S. INDUSLND MEDIA & COMMUNICATIONS LTD AS TECHNICAL AND MANAGEMENT FEES . THE AO REQUIRED THE ASSESSEE TO FURNISH THE NATURE AND DET AILS OF THE SERVICES RENDERED BY THEM AND TO SUBSTANTIATE THE S AME WITH NECESSARY EVIDENCE. VIDE LETTER DATED 24.02.2013, T HE ASSESSEE SUBMITTED AS UNDER: DURING THE YEAR UNDER ASSESSMENT, COMPANY HAS PAID A SUM OF RS.18.75 LACS TO INDUSLND MEDIA & COMMUNICATIONS LTD AS TECHNICAL AND MANAGEMENT FEES. AIBBSPL, BEING A SMALL MSO, ADMINISTRATIVELY MANAGED BY IMCL, ITS HOLDING COMPANY. IMCL IS ONE OF THE LARGEST MSO IN INDIA AND CONSIDERING ITS EXPERIENCE IN THE FIELD OF CABLE TV BUSINESS, PROVI DES TECHNICAL/ADMINISTRATIVE SUPPORT TO AIBBSPL TO OPERATE ITS BUSINESS. FOLLOWING ARE THE MAIN SERVIC ES PROVIDED BY IMCL TO AIBBSPL: ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 3 OF 6 PROVIDING TECHNOLOGY REQUIRED FOR DELIVERING OF CAT V SIGNALS TO THE SUBSCRIBERS DIRECTLY OR THROUGH LOCAL CABLE OPERATORS. HELPING THE COMPANY TO NEGOTIATE WITH BROADCASTERS FOR CARRIAGE FEE INCOME AND PAY CHANNEL. OVERSEEING THE OVERALL MANAGEMENT OF THE COMPANY IN CLUDING MAINTENANCE OF HEAD END, ACCOUNTING, COMPLIANCE, BI LLING AND OTHER DAY TO DAY OPERATIONS 5. OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED AN Y EVIDENCE IN SUPPORT OF THE ABOVE CONTENTION AND ALS O OBSERVING THAT THE ASSESSEE ALSO HAS CLAIMED TO HAVE INCURRED EXPENSES TOWARDS SALARIES, WAGES AND STAFF WELFARE TOTALING TO RS.18,29,569, THE AO HELD THAT FURTHER INCURRANCE OF EXPENDITURE OF RS.18.75 LACS IS NOT GENUINE AND DISALLOWED THE SAME AND BRO UGHT IT TO TAX. 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO THAT THE NETWORK RIGHTS ARE NOT INTANGIBLE ASSETS AND THEREFORE, NO DEPRECIATION CAN BE ALLOWED. FURTHER, HE ALSO DISALLOWED THE EXP ENDITURE TOWARDS TECHNICAL AND MANAGEMENT SERVICES ON THE GR OUND THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE ON THE NATU RE OF PAYMENT, SERVICES RENDERED, MODE OF PAYMENT ETC. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US BY RAISING THE FOLLOWIN G GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN UPHOLDING A DISALLOWANCE OF RS.35,58,242/- BY DISALLOWING DEPRECIATION ON NETWORK RIGHTS ONLY ON ACCOUNT OF NON-APPEARANCE AS THE HEARING NOTICE WAS NOT RECEIVED BY THE APPELLANT AND IGNORING THE FACTS SUBMITTED ALONG WITH THE APPEAL. THE LEARNED CIT (A ) HAS ERRED IN LAW IN NOT CONSIDERING THE PAYMENT MADE FOR TRANSFER OF THE CABLE TV NETWORK AND CABLE NETWORK ASSOCIATED RIGHTS, AS INTANGIBLE ASSETS, SINCE THE PAYMENT REPRESENTS ACQUISITION O F ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 4 OF 6 INTANGIBLE RIGHTS BY THE APPELLANT RELATING TO SUBSCRIBER BASE OF THE VENDOR U/S 32(1)(II) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) HAS ERRED IN DISALLOWING A SUM OF RS.18,29,569/- PAID TOWARDS OVERALL MANAGEMENT INCLUDING MAINTENANCE, ACCOUNTING COMPLIANCES TO THE APPELLANTS HOLDING COMPANY. THE APPELLANT RESERVES ITS RIGHT TO ADD TO, ALTER, AMEND, MODIFY OR DELETE ANY OF THE GROUNDS TAKEN IN THIS APPEAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A. SRI NIVAS, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSES SEE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE FINDINGS OF TH E AO THAT THE NETWORK RIGHTS IS NOT AN INTANGIBLE ASSET BUT IS A GOODWILL HAS NOT BEEN DISTURBED BY THE CIT (A). THEREFORE, HE SU BMITTED THAT THE ASSESSEE ACCEPTS THE SAID NETWORK RIGHTS TO BE GOODWILL AND AS PER THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT KOLKATA VS. SMIFS SECURITIES LTD REPORTED IN 34 8 ITR 302 (S.C), GOODWILL IS AN INTANGIBLE ASSET AND DEPREC IATION IS ALLOWABLE THEREON. THUS, HE PRAYED FOR ALLOWANCE OF DEPRECIATION. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 8. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT THE FINDINGS OF THE AO THAT NETWORK RIGHTS IS GOODWI LL HAS NOT BEEN DISTURBED BY THE CIT (A) AND AS HELD BY THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD ( SUPRA), DEPRECIATION IS ALLOWABLE ON GOODWILL. RESPECTFUL LY FOLLOWING THE JUDGMENT OF THE HON'BLE APEX COURT, WE DIRECT THE A O TO ALLOW DEPRECIATION ON NETWORK RIGHTS. ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 5 OF 6 9. AS REGARDS GROUND OF APPEAL NO.2, WE FIND THAT T HOUGH THE ASSESSEE HAS STATED THAT SERVICES RENDERED BY M /S. INDUSLND MEDIA & COMMUNICATIONS LTD ARE TECHNICAL AND MANAGE RIAL, IT HAS NOT FILED ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE THE LEARNED CIT (A) TO SUBSTANTIATE THE CLAIM. EVEN BEF ORE US, NO EVIDENCE IS FILED. THE LEARNED COUNSEL FOR THE ASSE SSEE ONLY REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND PRAYED THAT THE ISSUE MAY BE REMITTED TO THE FILE O F THE AO BEFORE WHOM, THE ASSESSEE IS WILLING TO FILE ALL THE RELEV ANT EVIDENCE. THE LEARNED DR ALSO REITERATED THE FINDINGS OF THE AUTH ORITIES BELOW. HAVING REGARD TO THE RIVAL CONTENTIONS, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FILE OF THE AO WITH A DIR ECTION TO VERIFY WHETHER THE ASSESSEE HAS ACTUALLY MADE THE PAYMENT AND IF SUCH PAYMENT IS MADE, THEN TO ALLOW THE SAME AS IT IS FO R BUSINESS PURPOSES OF THE ASSESSEE. THEREFORE, GROUND OF APPE AL NO.2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 27 TH FEBRUARY, 2019. VINODAN/SPS ITA NO 800 OF 2016 APNA INCABLE BROAD BAND SERVICES P LTD NIZAMABAD. PAGE 6 OF 6 COPY TO: 1 APNA INCABLE BROAD BAND SERVICES (P) LTD, IN CENT RE, 49/50 MIDC, 12 TH ROAD, ANDHERI (EAST) MUMBAI 400093 2 DY.CIT, CIRCLE-1 NIZAMABAD 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER