NDTV NETWORKS LTD.,NEW DELHI V. DCIT, CIRCLE- 18(1), NEW DELHI

ITA 6647/DEL/2018

AI Insights

The case involves NDTV Networks Ltd. appealing against the order of the Commissioner of Income Tax (Appeals)-6, which upheld the disallowance of certain business expenditures and other claims made by the company for the assessment year 2014-15. The primary contention was whether the company's activities qualified as 'business' under Section 2(13) of the Income Tax Act, 1961, which would allow them to claim deductions for business expenditures. The Tribunal considered previous judgments and the specific activities of NDTV Networks Ltd., ultimately deciding in favor of the assessee on the grounds of business expenditure and the non-applicability of disallowance under Section 14A due to lack of exempt income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26144 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Other Referred Cases: Mazagaon Dock Ltd. Vs. CIT, CIT Vs. Upasana Hospital, CIT Vs. Distributors (Baroda) (P.) Ltd., CIT Vs. Amalgamations (P.) Ltd., ESSAR Investments Ltd. Vs. DCIT, Chemnivest Ltd. vs. CIT, PCIT v. Era Infrastructure (India) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: KANCHAN KAUSHAL
• Keywords: Business income; Business expenditure; Capital Gains; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘E’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.6647/Del/2018 Assessment Year: 2014-15 NDTV Networks Ltd., 207, Okhla Industrial Estate, Phase-III, New Delhi Vs. DCIT, Circle-18(1), New Delhi PAN: AADCN3073A (Appellant) (Respondent) ORDER PER SATBEER SINGH GODARA, JM This assessee’s appeal for assessment year 2014-15, arises against the Commissioner of Income Tax (Appeals)-6 [in short, the “CIT(A)”], Delhi’s order dated 28.08.2018 passed in case no. CIT(A), Delhi-6/10346/2016-17, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Assessee by Sh. Kanchan Kaushal, Adv. Ms. Tanya, Adv. Department by Sh. Amit Katoch, Sr. DR Date of hearing 26.03.2025 Date of pronouncement 04.04.2025 ITA No.6647/Del/2018 2 | P a g e 2. Heard both the parties at length. Case file perused. 3. This assessee’s appeal raises the following substantive grounds: “1. That on the facts and circumstances of the case, the order dated 28.08.2018 passed by the learned Commissioner of Income Tax (Appeals) ['CIT(A)'] is without judicious appreciation of the facts and positon in law, and thus, erroneous insofar as the same upholds the order dated 31.08.2016 passed by the Assessing Officer ['AO']. 2. That the CIT(A) erred on facts and in law in confirming the disallowance of Rs.3,62,94,780 being the business expenditure incurred by the Appellant, and claimed as deduction, allegedly on the ground that: (i) the activities of the Appellant do not qualify as 'business as defined under Section 2(13) of the Income Tax Act, 1961 ('the Act'); and (ii) there was no 'business' income earned by the Appellant during the relevant previous year. 2.1 That the CIT(A) erred on facts and in law in ignoring the detailed submissions dated 15.06.2018 (submitted on 20.06.2018) filed by the Appellant whereby it was explained that the activities of the Appellant constitutes 'business' under Section 2(13) Act and also, that earning of business income is not a decisive factor for claiming business expenditure under Section 37(1) of the Act. 3. That the CIT(A) erred on facts and in law in confirming disallowance of Rs.1,60,00,000/-, being the excess Directors' remuneration paid by the Appellant during the relevant year under consideration, without appreciating that such amount having been reversed and offered to tax in subsequent year, would amount to double taxation. 3.1 That the CIT(A) erred on facts and in law in not following order of her predecessor for the Assessment Year 2012-13 deciding the similar issue of double taxation in favour of the Appellant. 4. That the CIT(A) erred on facts and in law in confirming disallowance of Rs.2,78,000 made by the AO under Section 14A of the Act read with Rule-8D of the Income Tax Rules, 1962 without appreciating that the Appellant did not earn any exempt income during the relevant year. ITA No.6647/Del/2018 3 | P a g e 4.1 Without prejudice, that CIT (A) erred in confirming the action of the AO in invoking the provisions of Section 14A of the Act without appreciating that no satisfaction was recorded having regard to the books of accounts of the Appellant, that certain expenditure was actually incurred for earning any exempt income. That the appellant seeks leave to add, alter, amend or withdraw any ground of appeal before or at the time of hearing of this appeal.” 4. We now advert to the basic relevant facts qua this assessee’s instant first and foremost substantive ground claiming business expenditure of Rs.3,62,94,780/-; made by the Assessing Officer and upheld in the lower appellate discussion reading as under:- “4. Determination 4.1 Grounds of appeal Nos. 1 and 2 challenge the disallowance of business expenditure and consequently set-off of business loss of Rs. 3,62,94,780/- against interest income under 4.1.1 The AO noted that the assessee was holding shares in NDTV lifestyle Ltd which was reflected under the head non-current investments in the balance sheet. It was also noted that no business has been carried out by the assessee within the meaning of section 2(13) and there was no income which was chargeable under the head 'Profits and gains of business of profession'. The AO further noted that holding investment income would yield income under the head 'Capital gains' in case there was a profit or loss on sale of shares or it would yield dividend income which would fall under the head 'Income from other sources'. In the case of the assessee it was noted that merely terming the activity of holding of investment as \"business to act as a holding company\" does not entitled the assessee to claim it as a business. Hence, expenditure claimed by the assessee under section 37(1) was held to be not admissible since there was no income under the head 'Profits and gains of business or profession'. The appellant has submitted that the company, which is a subsidiary of NDTV, was incorporated to further the business in non-news channel space by NDTV and the investment by the appellant company in the various companies was an essential business activity and was in furtherance of the main business. 4.1.2 I have considered the assessment order and the submissions of the appellant. It is to be noted that as per the memorandum of ITA No.6647/Del/2018 4 | P a g e Association, the main object of the assessee company has been stated to be to carry on the business of development, establishment and running of networks and distribution of non-news and current affairs television channels. arranging band placements, seeding of set-top boxes etc. within India and abroad across different mediums etc. Another of the main objects is to produce, buy, sell, import, export or otherwise deal in television programs etc. and to carry on the business of consultancy and management of projects in News and broadcasting sectors. As noted by the AO it is seen that no income from these activities is apparent from the financial statements of the assessee even though the said company was incorporated on 10/06/2010.From the balance sheet it is also noted that the assessee has no fixed assets, both tangible as well as intangible. Hence it cannot be said that the assessee was pursuing its main objects as per the Memorandum of Association. The view of the AO that the assessee has no income which is chargeable under the head 'Profits and gains of business or profession' is upheld. Further, as has also been pointed out by the AO, once there is no income which is chargeable under the head 'Profits and gains of business or profession', deductions which are specific to the said head of income are not admissible. Hence, the disallowance made is upheld. Since expenditure claimed under the head 'Profits and gains of business or profession' has been disallowed, there is no question of set-off of the loss against interest income. Grounds of appeal Nos. 1 and 2 are dismissed.” 5. Suffice to say, there would be hardly any dispute between the parties that both the learned lower authorities have rejected the assessee’s impugned business expenditure claim on the ground that it was neither carrying on any business within the meaning of section 2(13) of the Act, nor there was any income declared under the head “profits and gains from business or profession”. The Revenue’s case accordingly is that once the assessee was only a company, holding investments in subsidiaries, it could not be held as entitled for the expenditure claim in question. This is what leaves the assessee aggrieved. ITA No.6647/Del/2018 5 | P a g e 6. We have given our thoughtful consideration to the assessee’s and Revenue’s vehement rival submissions. We find no reason to sustain the impugned disallowance. Learned counsel first of all takes us to the Assessing Officer’s section 143(3) assessment for AY 2012-13 accepting this very expenditure claim. He next quotes various judicial precedents i.e Mazagaon Dock Ltd. Vs. CIT (1958) 34 ITR 368 (SC); CIT Vs. Upasana Hospital, (1997) 225 ITR 845 (Ker); CIT Vs. Distributors (Baroda) (P.) Ltd. (1972) 83 ITR 377 (SC); CIT Vs. Amalgamations (P.) Ltd. (1977) 108 ITR 895 (Madras) and ESSAR Investments Ltd. Vs. DCIT (2006) 7 SOT 378 (Mum) that a business expenditure could not be disallowed even in an instant of a holding company having made investments in subsidiary as such an activity could indeed be treated as business itself. We find merit in the assessee’s instant first and foremost substantive ground to delete the impugned disallowance, in very terms. 7. Next comes the second substantive issue between the parties regarding correctness of both the lower authorities’ action disallowing the assessee’s directors’ remuneration on the ground that the same was over and above that held allowable under the companies law. Learned counsel, inter alia, invites our attention to ITA No.6647/Del/2018 6 | P a g e the assessee’s alternate plea that it had already reversed the alleged excess expenses in financial year 2014-15 and got assessed for the same. That being the case, we are of the considered view that the instant issue deserves to be restored back to the learned Assessing Officer for his afresh appropriate verification/computation. Ordered accordingly. 8. Lastly comes the assessee’s third substantive ground that both the learned lower authorities have erred in law and on facts in making section 14A read with Rule 8D disallowance of Rs.2,78,000/- despite the fact that it had not derived any exempt income in the relevant previous year. 9. The Revenue vehemently quotes section 14A Explanation inserted by the Finance Act, 2022 w.e.f. 01.04.2022 that the actual except income being derived is no more the condition precedent for the purpose of making the disallowance herein. We find no merit in the Revenue’s foregoing arguments as not only the jurisdictional high court in Chemnivest Ltd. vs. CIT; (2015) 61 taxmann.com 118 (Del.) has settled the issue prior to the above amendment that the impugned disallowance does not get attracted in absence of any exempt income but also in PCIT v. Era Infrastructure (India) Ltd. ITA No.6647/Del/2018 7 | P a g e (2022) 448 ITR 674 (Del), their lordships have held that the above statutory amendment carries only prospective effect. We thus accept the assessee’s instant last ground, in very terms. 10. No other ground or argument has been pressed before us. 11. This assessee’s appeal is partly allowed. Order pronounced in the open court on 4th April, 2025 Sd/- Sd/- (MANISH AGARWAL) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 4th April, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "