TMI Blog2018 (4) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Member Assessee by : Shri Rajeev Ranka Revenue by : Shri V. Siva Kumar ORDER Per S. Rifaur Rahman, A. M. This appeal filed by the revenue is directed against the order dated 04/08/2017 of CIT(A) 4, Hyderabad for AY 2014-15 wherein the revenue has raised the following grounds of appeal: 1. The CIT (A) erred in deleting the disallowance of cost of Production of TV serials and programmers of ₹ 50,03,09,683/- claimed as revenue expenditure. 2. The CIT (A) erred in ignoring the fact that Revenue's appeal on identical issue in the assessee's own case for A.Y. 2011-12 is pending adjudication by the Hon'ble High Court. 3. The CIT (A) erred in allowing depreciation of ₹ 14,07,72,573/ - on Film Software Library @ 25% by treating it as an intangible asset. 4. The CIT(A) erred in ignoring the fact that Revenue's appeal on identical issue in the assessee's own case for A.Y. 2011-12 is pending adjudication by the Hon'ble High Court. 5. Any other ground that may be urged at the time of hearing. 2. As regards ground Nos. 1 2 regarding disallowance of cost of production on TV Serials and programs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or aired for a specified period from the date of release in theatres depending upon the success at the box office and other factors. Till the time, such films are broadcasted, they are to be treated as stock in trade. Once the films are broadcasted, the purchase value of the films is written-off. The expenditure on purchase of films is claimed in the first year itself. The assessee has got only satellite telecasting rights and has no universal rights for airing the films or serials. Once the film or the serial is aired, its value is diminished in subsequent telecasts. The assessee earns substantial revenue in the first telecast itself. In repeat telecast, the assessee is able to generate marginal revenue. Whatever income is earned from the subsequent telecasts is offered as income without claiming any expenditure. The assessee also generates revenue from broadcasting serials through satellite channels. The assessee gets revenue 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature, TV programs and the film rights. The details are given in the aforementioned 'Note No 7' to the financial statements. According to the same, while the news items purchased are debited to the P and L account as they do not have the repeat telecast value, other items like the TV program and the film rights constitutes 'current assets', which are amortised over the years and the period of such amortization is given in the said Note. Per contra, the case of the revenue on these issues is that these items constitute 'intangible depreciable capital assets' and provisions of section 32 of the Act apply. Considering the same, we shall now undertake to discuss the item wise adjudication as follows. a. On the debits relating to the purchases of the News items: Regarding the nature of the news items purchased by the assessee and debited to the P and L account, we find it is in the common knowledge of every citizen that the news items do not have enduring benefit. Normally, the news items/non fictional items purchased by the assessee lose its value once they are telecast. Therefore, such items do not have repeat telecast value in terms of the revenue gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported by any precedents and therefore, the arguments raised by the Revenue are not allowed. Thus, considering the covered nature of the issue as well as the consistent method of accounting followed by the assessee in this regard and also in the absence of any contrary material to support the arguments of the Revenue against the assessee's claim, we are of the opinion that the decision taken by the CIT (A) in the impugned order is required to be reversed. Accordingly, Ground nos. 2 and 3 raised by the assessee are allowed. 9.2. In coming to this conclusion, the Tribunal has followed the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Television Eighteen India Limited reported in (2014) 364 ITR 597 (Del.). The relevant portion of the judgment of the Hon'ble Delhi High Court is reproduced as under : The revenue has preferred this appeal claiming to be aggrieved by an order of the Income Tax Appellant Tribunal (ITAT) dated 17.03.2006. The question of law framed in this case is:- (i) Whether the Income Tax Appellate Tribunal was right in holding that the entire expenditure incurred by the assessee on production of programmes which became p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conomic realities of business. Viewed in that perspective, we are of the opinion that the estimated value assigned to the News Archives cannot be treated to be an expenditure incurred in the capital field. We, therefore, uphold the order of CIT (A) on this ground. In this case, there is no dispute that the data base of the programmes which are utilised for the creation of news archives belonged to the assessee. The future likelihood of these resources being a possible source of revenue, cannot in the opinion of this Court justify its inclusion in the capital stream. Furthermore, this Court notices that the expenditure i.e. 10% ₹ 88,83,128/- is a part of the entire total expenditure incurred by the assessee which is concededly treated as revenue, even otherwise. In view of the above discussions, this Court is of the opinion that the question of law framed is answered in favour of the assessee and against the revenue. The appeal is dismissed. 9.3. Thus, it is seen that the issue is fairly covered in favour of the assessee by the above decision and the A.O. is directed to treat the expenditure incurred by the assessee on cost of production of TV progra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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