TMI Blog2023 (11) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 61,405,646/-. If brought forward of unabsorbed depreciation, which is lower of the brought forward losses and unabsorbed depreciation of ₹ 315,453,321/ is allowed, the book profit would be, subject to taxation under section 115JB of the act is Rs Nil. Even if all the issues with respect to book profit computation were held against assessee, the Income U/s 115JB would be Nil. Therefore we set-aside the issue back to the file of the learned assessing officer to compute the book profit or loss after verification of the above certificate in form no 29B u/s 115JB of the Act, after giving an opportunity of hearing to the assessee. Addition u/s 68 being share application money received by the assessee - assessee has received share application money through bank remittance from NSR PE Mauritius LLC - AO held that it is not accepted that any wise business-persons will invest huge money in such apparently loss making company and held that the nature and source of funds received by the assessee have not been offered to his satisfaction - HELD THAT:- Irrespective of the newspaper reports, irrespective of violation of FEMA , unless it affects the issue under The Income tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecast on the channel in the same month of delivery. Therefore to that extent the learned assessing officer is directed to follow the order of the coordinate bench for assessment year 2008- 2009 [ 2017 (5) TMI 527 - ITAT MUMBAI ] and allow the cost which has been telecast in the same year. With respect to the in-house production cost should also receive the same treatment i.e. that if the in-house production programs are telecast, the cost of such production should be allowed to the assessee in the year in which it is telecast. Therefore, we hold that the direction of the learned CIT A to consider 85% of the amount as revenue expenditure and spread the rest of the amount over a period of three years in three equal installments is without any logic and support of law. The revenue expenditure incurred by the assessee should be allowed in the year in which those expenses are incurred and if there is capital expenditure than they are subject to depreciation. There cannot be any formula to allow expenditure in various years in equal installments because it does not have support of law. Whenever the honourable courts have taken such a view is only because of the concession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... channel placement as a fee, is not royalty in terms of Explanation 2 to Sec.9(1)(vi), no disallowance of expenditure can be made u/s 40(a)(ia). No infirmity can be found in the order of the ld CIT [A]. Accordingly, ground number 5 7 of the appeal of the learned assessing officer is dismissed. Addition being the surplus on demerger of entertainment channel undertaking to the book profit computed u/s 115JB - HELD THAT:- Appropriation account is the part of profit and loss account. If the same amount is credited to the profit and loss account, why it is not considered for the purpose of provisions of section 115JB of the act is not comprehensible. Undisputedly the assessee has sold its general entertainment channel business and has earned a profit, which is credited to the profit and loss account whether below the line or above the line does not make any difference. Further, there is no direction of the honourable High Court approving the scheme that the amount requires to be credited below the line and not in the normal profit and loss account. Further we found support from the decision of Varun Corporation [ 2023 (8) TMI 884 - BOMBAY HIGH COURT ] where in loss arising on deme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion contained in form number 26AS - HELD THAT:- Many of the parties did not respond and to many of the parties the enquiry letters could not be served. The outcome of this enquiry was made known to the assessee. Despite this, no effort was made to reconcile the amount, therefore, we do not find any reason to interfere in the findings of the lower authorities. However, it has been claimed before us that there is no transaction entered into by the assessee with some of the parties. Further, it was stated that the total receipts shown by the assessee is ₹ 78.23 crores whereas the AIR information is with respect to only ₹ 16.49 crores. We restore ground back to the file of the learned assessing officer directing the assessee to produce the reconciliation of the above amount and to show that how the assessee says that it has not transacted with some of the parties. Assessee is also directed to show whether in the total receipts shown in books of accounts, all the receipts mentioned in form no 26 As is included. Therefore, one more opportunity is granted to the assessee to explain the difference with the parties with which it has transacted. - Shri Prashant Maharishi, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Without prejudice, on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in dismissing Ground No. 5 in the appeal before him as being infructuous and he ought to have given a finding that the balance of the amortized cost would be allowable in equal installments in the immediately ensuing next four Form 26As mismatch 7. On the facts and circumstances of the case, the Ld. CIT (Appeals) was not justified in upholding the additions of the following amounts made by the Ld. Assessing Officer to the income of the Appellant on account of difference between amounts shown as income tax in Form 26AS and that shown in the books of the Appellant. i. Direcorate of Advertising Visual Publicity Rs. 40,68,353 ii. Onscreen Broadcasting Entertainment Pvt. Ltd Rs. 1,15,127 iii. Geetanjali Gems ltd. Rs. 4,55,192 iv. Katha Medimix India Rs. 21,12,301 v. TVC Skyshop Ltd. Rs. 25,781 vi. Vinod Singh [(prop. Khyati co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in directing to delete the addition made by the AO u/s 68 of the Act on account of monies received by way of Share Application from NSR without appreciating that the ultimate source of the money is from companies located in Cayman Island, a lax heaven country and the creditworthiness of the companies and that of the ultimate beneficiary is not proved 3. Whether on the facts, in the circumstances of the case and as per law the Ld. CIT(A) has erred in directing to delete the addition made by the AO u/s 68 of the Act on account of monies received by way of Share Application from NSR without appreciating that the assessee has failed to prove the creditworthiness of the investor 4. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to consider 85% of the amount of Rs. 4,54,18,547/- (representing Rs 3,90,12,647/- on animated character episodes and Rs. 64,05,900/- on in-house cost of production programme) as revenue expenditure and the rest of the amount over a period of 3 years in 3 equal installments without realizing that in respect of the expenses incurred of Rs 4,54,18,547/-. The assessee has acquired perpetual ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is identical to ground number 4 of the appeal of the AO for assessment year 2011 12. The assessing officer is further aggrieved where the non-deduction of tax on carriage fees, channel placement fees resulted into disallowance during the course of assessment proceedings in view of introduction of explanation 6 to section 9 (1) (iv) of the act with effect from 1/6/1976. 05. Assessee is aggrieved against the appellate order against confirming the addition of ₹ 2,312,314/ on account of mismatch between the books of account and income shown in form number 20 6AS. This ground is identical to ground number seven 9 of the appeal for assessment year 2011 12 of the assessee. The assessee is further aggrieved by the decision of the learned CIT A wherein he allowed only 85% of the content cost and directed the further sum of 15% to be allowed in three equal installments. This is identical to ground raised in assessment year 2011 12 of the appeal of the assessee connected with the appeal of the learned assessing officer. Assessee is further aggrieved wherein the disallowance under section 14 A of rupees/42,969 has been upheld by the learned CIT A without there being any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of 40,106 USD for A.Y. 2011 and loss of 36,823 USD in A.Y. 2010. Therefore, the learned Assessing Officer was of the view that the investors do not have own funds. The source of funds for the balance sheet was share capital received in advance from the investors. The assessee in response submitted that it has already submitted 1. Various details vide letter dated 4 October 2013 such as ledger account, foreign inward remittance certificate, share subscription agreement and the balance sheets. 2. return of income filed before the Mauritius tax authorities of investor 3. Investor has audited accounts, bank statements and confirmation of having money invested in the assessee company. 4. FT TR have also submitted the details of the investors. 5. None of the Directors of the investors is a director or related party of the assessee. 6. Investor is a foreign investor, assessee is not required to submit source of the sources of the fund as per the requirement of Section 68 of the Act. The learned Assessing Officer held that assessee is not able to satisfactorily prove nature and immediate sources of funds of the further investor company, has been facing losses and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum is not chargeable to tax under the normal computation provisions but it is chargeable to tax while computing book profit under Section 115JB of the Act. The learned Assessing Officer held that the Hon'ble Bombay High Court has never stated that above sum is not chargeable to tax under Section 115JB of the Act. He also rejected the contention of the assessee that the said receipt is a capital receipt and therefore, it is not taxable under Section 115JB of the Act. The learned Assessing Officer supported his view stating that Hon'ble Bombay High Court has also directed that such amount should be taken to the profit and loss account and therefore, it cannot be considered as capital receipt. Accordingly, he made an addition of ₹13,30,79,646/- to the total income under Section 115JB of the Act. iii. The learned Assessing Officer further found that assessee has shown provision for doubtful advances amounting to ₹1,42,64,197/- and did not add the same to the computation of book profit. The learned Assessing Officer was of the view that in view of amendment to section 115JB of the Act to add the amount set aside as provision for diminution in the value of any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , out of the total content cost of ₹16.35 crores ₹4,54,18,547/- was held to be a capital expenditure. viii. The learned Assessing Officer further found that assessee has received agency commission of ₹75,27,50,136/- from advertising agencies towards advertisements, however, assessee accounted for the commission income after netting off the agency commission. He further held that out of the net commission income, the commissions paid are also not subjected to tax deducted at source and therefore, it is disallowable. Accordingly, ₹12,55,43,017/- was disallowed under Section 40a(ia) of the Act. However, it is not an issue before us. ix. The learned Assessing Officer further noted that assessee has paid carriage fee of ₹10,87,48,125/- on which tax is required to be deducted at source under Section 194J of the Act in view of retrospective amendment in the definition of Royalty U/s 9(1) (vi) of the Act by introduction of explanation [6] with effect from 1/6/1976. As assessee has failed to do so, the above sum was disallowed under Section 40a (ia) of the Act. x. The learned Assessing Officer noted that despite no exempt income earned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same below the line, it does not make any difference. He further held that the Hon'ble Bombay High Court has not directed the assessee to credit the same below the line and not in the normal profit and loss account. Thus, according to him, such adjustment was against the spirit of demerger. He further relied upon the decision of the Hon'ble Supreme Court in case of Apollo Tyres Ltd. Vs. CIT 255 ITR 273. He also rejected the contention of the assessee that such sum is capital profit. He held that such surplus is not a simple capital profit, but is a capital gain arising on transfer of a live business. Accordingly, he confirmed the action of the learned Assessing Officer. iii. Regarding the addition of ₹1,42,63,197/-, being provision for doubtful advances debited in the profit and loss account while computing the book profit under Section 115JB of the Act was also confirmed in view of retrospective amendment. iv. With respect to the applicability of Provision of Section 35DD of the Act, fees paid to Ernst Young (E Y) of ₹1.28 crores, confirmed action of ld AO holding that the provisions of that section clearly applies to the facts of the case. v. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival contention and perused the orders of the lower authorities. This ground is identical to ground number 4 of the appeal of the assessee. This ground is not required to be admitted therefore. However, we find that the claim made by the assessee is in accordance with the law and it is part of the computation of the book profit under section 115JB of the income tax act. According to explanation (1) (iii) the amount of book profit is required to be reduced by the aggregate amount of unabsorbed depreciation and loss brought forward, whichever is less, as per the books of account. Therefore the claim of the assessee is a legal claim and when the income of the assessee is computed under section 115JB of the income tax act, it has to be computed by giving effect to the all the provisions of the income tax act and that section. Accordingly, we entertain the claim of the assessee and decided here it by deciding ground number 4 of the appeal of the assessee. 015. After careful hearing the parties, on this issue we find that assessee has submitted calculation of book profit and losses according to form number 29B certified by the chartered accountant as per letter dated 28/4/2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LP Cayman Island. It was seen by the learned assessing officer that NSR has made the remittance from share application money after getting the same money received from its shareholder companies. From the details submitted by the Mauritius revenue authority, the learned assessing officer was also of the view that NSR has a loss of US$ 40,106 for impugned year in which it had made remittance for share application money. It was further mentioned by the learned assessing officer that even in the immediately preceding year the entity had shown a loss of US$ 36,823. It was also the observation of the learned assessing officer that since inception the assessee company has also been showing heavy losses and has no active profits. Therefore the AO held that it is not accepted that any wise businesspersons will invest huge money in such apparently loss making company. Therefore, he invoked the provisions of section 68 of the income tax act and held that the nature and source of funds received by the assessee have not been offered to his satisfaction. Thus, the addition under section 68 of ₹ 14 crores was made. 017. When matter reached before the learned CIT A he deleted the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of Appeal No.1, 2 3 of Revenue's appeal. Accordingly, following note has been prepared and submitted. 02. Grounds No.1, 2 3 are against the addition of Rs. 14 crores being share application money. The relevant facts are like this. During the course of assessment proceedings, it was noted by the AO that the assessee had received share application money of Rs. 14 crore through bank remittance from NSR-PE Mauritius, LLC. (Hereafter mentioned as NSR). The AO asked the assessee to submit certain details regarding NSR, which was not done. The AO however, got an enquiry conducted through FT TR of CBDT whereby certain details from Mauritius Revenue Authority was received. From the information received the AO noted that NSR had two major shareholders based in Cayman Islands namely a) New Silk Route PE Asia Fund, L.P Cayman Islands, b) New Silk Route PE Asia Fund-A L.P Cayman Islands. It was seen by the AO that NSR has made the remittance for share application money after getting the same money from its shareholder companies. From the details submitted by the Mauritius Revenue Authority, the AO noted that M/S NSR had shown a loss of 40106 US $ in the impugned year in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there was a share subscription cum Shareholders Agreement which had been submitted to the FIPB and it is pursuant to this agreement that the amount has been received. f) Further the assessee has cited various judicial decisions wherein it is implied that in any event, the source of source is not required to be proved when the lender has been held as a genuine company and transaction has not been found bogus. g) Further, the LD.CIT(A) is of the opinion that the various decisions relied upon by the AO are not pertinent to this case. In view of the above, the Ld.CIT(A) has directed to delete the amount of Rs. 14 crores added u/s.68 of the Act on account of amount received by way of share application from NSR during the year under consideration because as per his decision the identity, credit-worthiness and genuineness of NSR have been proved. 05. It is seen from the order of the Ld. CIT(A) that while giving relief on this issue, he has relied heavily on the approval given by the FIPB.. Foreign Investment Promotion Board was an inter-ministerial body under the Department of Economic Affairs. It was abolished in 2017 and was replaced by FIFP i.e. Foreign Investment Facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se against INX Media for alleged violations of the Foreign Exchange Management Act (FEMA). Last year, while investigating a company associated with Karti, ED found some documents related to the INX Media deal in the computer of Karti's CA Bhaskarraman. The documents indicated payments made to Karti's alleged company by INX Media at the time the Finance Ministry granted it FIPB approval. ED sent a reference in this regard to CBI, which registered a case of corruption in May 2017, and searched premises connected to both Karti and his father P Chidambaram. Following this, ED lodged a case of money laundering against Karti.. According to the CBI FIR, on March 13, 2007, INX Media approached the FIPB for permission to issue 14.98 lakh equity shares and 31.22 lakh convertible non-cumulative redeemable preference shares of Rs 10 a piece to three non-resident investors Dunearn Investment (Mauritius) Pte Ltd, New Silk Route PE Mauritius LLC, and New Vernon Pvt Equity Ltd, under the FDI route. These shares represented 46.21% of the issued equity capital of INX Media. INX Media, according to CBI sources, sought this approval to start a music channel, 9XM, a Hindi general ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the payment had been made for reply towards FIPB notification and clarification . ED has also claimed to have found four invoices, dated in September 2008, raised by ACPL, its Singapore subsidiary and two other companies for US $ 700,000. According to CBI, INX Media was later granted FIPB permission for the investment in violation of norms. 08. Similarly, in an article available on internet of The Hindu dated 18.02.2020 the following information can be gathered: A Delhi court directed the CBI on Tuesday to hand over to P. Chidambaram and his son Karti certain documents filed along with the charge sheet in the INX Media corruption case. Special Judge Ajay Kumar Kuhar issued the direction to the CBI during the hearing in the INX Media corruption case. The court was also hearing the money laundering case lodged by the Enforcement Directorate. The Chidambarams were present in the court. Mr. Chidambaram was taken into custody on August 21 when he was arrested by the Central Bureau of Investigation (CBI) in INX Media corruption case. On October 16, the ED arrested him in the separate money-laundering case. Six days later, on October 22, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other State. 3. Notwithstanding the provisions of paragraph (2) of this article, gains from the alienation of ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. [3A. Gains from the alienation of shares acquired on or after 1st April 2017 in a company which is resident of a Contracting State may be taxed in that State. 3B. However, the tax rate on the gains referred to in paragraph 3A of this Article and arising during the period beg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India 341 ITR 1 (SC) (2012). In this judgment, the Hon'ble SC has given certain tests which can be used to understand whether the transaction of investment by a foreign company into an Indian company is genuine or not. These tests are described in brief in the subsequent paragraphs: Look at Principle: (Para 60 of the order) It has been observed by the Hon'ble SC that It is the task of the Court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not to adopt a dissecting approach. In the context of the present case it is to be seen that the investment has been merely routed through a Mauritius based company. The genuineness of the investments made by NSR-PE has been accepted by the LD. CIT(A) largely on the ground that FIPB has given approval for this transaction. However, as discussed in Para No.4 above, the approval itself has been questioned by law enforcement agencies. Thus, the Hon'ble ITAT should look into the entire gamut of facts of this transaction. Fiscal Nullity Test: (Para 68 of the order):- It has been observed by the Hon'ble SC. Similarly, in a case where the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to India using TRC as a defense, but once it is established that such an investment is black money or capital that is hidden, it is nothing but circular movement of capital known as Round Tripping: then TRC can be ignored, since the transaction is fraudulent and against national interest. 012. From the foregoing analysis and discussion, it appears that the Ld.CIT(A) has wrongly deleted the addition of Rs. 14 crores made by the AO u/s.68. This observation is made on the basis of following points. a) The Ld.CIT (A) has relied heavily on FIPB approval. In fact, the Ld. CIT (A) has come to a conclusion that the genuineness of transaction, the identity of the creditor and its credit- worthiness are established because the remittance by NSR has been made after obtaining approval from the FIPB. However, as mentioned in para 4 above, the process and act of FIPB approval in this case has been found to be questionable and has been subjected to criminal investigation. b) NSR does not have the wherewithal to make any investment in the Indian Company and has been merely interposed to take advantage of DTAA between India and Mauritius. c) The appellant company has been showing heav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 014. During the course of hearing before the bench, the learned authorized representative was asked to show i. all the shareholders agreement entered into by the assessee with the investors, ii. any financial and legal due diligence made by the investor prior to making any investment, iii. appointment of any of the directors on the board of the assessee company by the investor, iv. any rational available and shared by the investor at the time of negotiation of the price of the company, v. Any valuation report of the company vi. The relevant resolution of the Board of Directors et cetera to prove the genuineness of the investment. 015. In response to that the assessee has filed a letter dated 27 April 2023 wherein it is submitted i. copy of share subscription agreement dated 26/2/2007, ii. shareholders agreement dated 26/2/2007, iii. amended agreement dated 14/8/2007 iv. Shareholding pattern of the assessee from 31/3/2012, 31/3/2014 till 31/3/2023. 016. With respect to other details, it was submitted that assessee is not privy to the information. 017. The learned authorized representative also referred to page number 74 of the paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those letters of ED and CBI are old communication and it is public domain that investigation is continuing. The letters of those agencies were categorically refereeing to the present status then. Present status is not shown by the assessee and publicly available information states that it is in progress. She submits that the order of AY 2008-09 of ITAT does not discuss any evidences furnished by the assessee. As well in case . the dl DR was not granted an adjournment and bench heard the matter refusing adjournment to Revenue but also levied cost on ld AO . Therefore, it was an order like exparte order. She referred to various paras of the order and submits that there is no finding that creditworthiness and genuineness of the transaction is proved. She submits that written note provided by his predecessor DR needs to be considered. She extensively read the written submission and stated that FIPB approvals are under challenge and ITAT has considered the same evidence as sacrosanct. Therefore, that order should not be followed. 019. We have carefully considered the rival contention and perused the orders of the lower authorities. Facts, at the cost of repetition, shows that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further raised the query to the assessee that was replied to as per letter dated 30/4/2014. The learned AO is not satisfied with the explanation of the assessee and made the addition. The identical addition for assessment year 2008 09 was also made in the case of the assessee where the same entity has invested ₹ 1,321,439,817. This addition was also deleted by the learned CIT A as per order dated 15/7/2011. This was also confirmed by the ITAT deleting the addition of the same. For that year, there was no reference to the competent authority for any information. However, during the year, there was a reference to FT TR and information asked by the learned assessing officer was received. Therefore, the addition was deleted. Before us, the learned departmental representative has specifically referred to news items appearing in The Indian express on 1/3/2018 as well as in article available on Internet in The Hindu newspaper dated 18/2/2020 wherein certain facts were mentioned that there is a investigation by Central bureau of investigation and enforcement directorate. The learned authorized representative has also relied the various tests given by the honourable Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder agreement executed on 26 February 2007 to define the mutual rights and obligations of the parties. It is also mentioned that in terms of subscription agreement two parties have invested their portion of the initial preference investment shares and initial equity investment. However, some of the parties also explained that, they are no longer interested in participating in complying with the terms of the subscription agreement and shareholders agreement. Therefore, some of the other parties have agreed to subscribe to the portion of the investment agreed by those other parties. It also shows that trench -wise breakup of the shareholding of all the four trenches, after four trenches seven parties were the subscribers of preference shares in the company. NSR PE is 20% investor at the end of fourth trench. The shareholding pattern of the assessee as on 31st of March 2012 also shows that out of 7,14,53,000 shares of the assessee company, 5,70,00,000 shares are held by NSR PE Mauritius LLC. Identical shareholding pattern till 31st of March 2023 continues subject to minor changes. It is also stated that the investor is an investment management firm, which is making private equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investor as on 31/3/2008 is at US$ 140,368,006 which has fair value of US$ 140,295,169, as at 31/3/2009 of US$ 179,517,307 which has the fair value of US$ 100,321,578 and as at 31 March 2010 of US$ 181,505,112 which has a fair value of US$ 160,895,216. Therefore, merely saying that because of the low profitability/loss in Mauritius of investor makes the investment in the assessee company is not genuine is not acceptable. With respect to the news reports, it was stated that the coordinate bench in assessment year 2008 09 has already dealt with and therefore the issue is decided in favour of the assessee. We find that the learned assessing officer has not considered all the above financial factors of the investor. We have also considered issue decided in favour of the assessee for assessment year 2008 09, which is placed at page number 780 804 of the paper book. However on carefully looking at paragraph number 40 of that decision, it was found that before the coordinate bench the issue was whether there is any incriminating material against the assessee or not. In paragraph number 41, it is stated that some investigation was initiated by the revenue on both the counts of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge of the FIPB / Ministry of Finance. Assessee filed FC GPRs Transaction (page 350 to 377 and 381 to 408) (para 74). Assessee referred the AO s decision in invoking the provisions of section 68 of the Act. However, FAA deleted the entire addition. Rejecting the same, AO proceeded to make addition of the share application money, equity share capital and preferential share capital premium collected by the assessee from the said companies. AO invoked the provisions of section 68 of the Act. AO questioned the onus is not discharged by the assessee fully and the premium collected @ ₹ 862.15/- per share is very high when the company is a loss making one and the company NAV is only 131.45 Crs (Para 60(i) of the written submissions of the assessee are relevant. AO is of the view that FIPB approved only ₹ 4.60 Crs and ₹ 263 Crs is brought in without FIPB route. AO made use of the assesses inability to supply certain details of the said investors of foreign origin. 36. Before the FAA, assessee reiterated the submissions made before the AO that the foreign investors are either Government owned indirectly or owned by the Bank Executives of international fame. They h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issues mentioned above, we are of the opinion that AO should go into the issue afresh and examine the said parameters laid down in para 68. In this case, it is argument of the Ld Counsel that the source of funds are substantiated to be if AO has to go into the root of the original source of the credits. AO may consider this also and submit the detail report after examining the chain of transaction involving many entities whether doing or not doing business activities. Similar exercise is required with regard to Foreign Funding ie Share Capital, Share Application and Share Premium. Even if assessee exhibits inability to furnish information regarding identity, creditworthiness and source of foreign fund, the AO is directed to invoke all the powers vested on him by the statute and gather relevant facts necessary for complete of proceeding under consideration meaningfully. Thus, AO is directed to furnish and reasoned report / speaking order and all the issues mentioned above and submit the same within a month time from the date of receipt of this direction. The case is adjourned for 15th July, 2016. 39. In response to the above, the Revenue sought adjournments on 15.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue has gone on record in mentioning that, with reference to the foreign funding of share application money/ share capital / share premium, a reference is made tothe Joint Secretary, (FT TR-II) CBDT, New Delhi for obtaining information under Exchange of Information Article in the DTAAs/ TIEAs/ Multilateral Agreements. Outcome of the same is awaited. Similarly, with reference to the domestic funding, the Department has issued notices u/s 133(6) of the Act to all the four companies (supra). Thus, some investigation is now initiated by the Revenue on both the accounts of investments by resident and non-residents, foreign investors. These efforts now supports the decision on the CIT (A), who deleted the addition for want of evidences / any incriminating information against the assessee. As and when such evidences are gathered, the Department is free to make use of the said information as per law and assess the income of the assessee after granting reasonable opportunity of being heard to the assessee. With these observations, the relevant grounds of the appeal of the Revenue relating to both domestic and foreign funding are dismissed. [bold and underline supplied by us] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te bench has already directed the revenue in the order for the earlier assessment year, Therefore, we set-aside this issue back to the file of the learned assessing officer to consider all these evidences furnished by the assessee, information received from Mauritius tax authorities, investment strength of the investor, investment made by the investor etc. Thus, ground numbers 1 3 of the appeal of the learned AO are restored back to the file of the learned AO to examine the transaction as per parameters of section 68 of the Act. 021. Identical grounds are raised by the learned assessing officer in appeal of assessment year 2012 13 as per ground number 1 3, wherein the addition under section 68 of income tax act of ₹ 41 crores has been deleted by the learned CIT [A] for the same investor. As we have already restored back the identical grounds for assessment year 2011 12 to the file of the learned assessing officer, with similar directions, we restore these grounds of appeal for assessment year 2012 13 also to the file of ld AO. 022. Ground number 4 of the appeal of the AO is against direction of the learned CIT A to consider 85% of the amount of ₹ 45, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said figure and the extent relatable to both TV programme or Film rights before granting the full deduction out of ₹ 89.06 crore. On the balance, the accounting policies in the market relating to this industry should be applied. AO shall grant reasonable opportunity to the assessee. With these directions, the issue raised in both appeals are allowed as above. 024. Further, with respect to the in-house production cost should also receive the same treatment i.e. that if the in-house production programs are telecast, the cost of such production should be allowed to the assessee in the year in which it is telecast. Therefore, we hold that the direction of the learned CIT A to consider 85% of the amount as revenue expenditure and spread the rest of the amount over a period of three years in three equal installments is without any logic and support of law. The revenue expenditure incurred by the assessee should be allowed in the year in which those expenses are incurred and if there is capital expenditure than they are subject to depreciation. There cannot be any formula to allow expenditure in various years in equal installments because it does not have support of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Prasar Bharti on which no tax was required to be deducted as it had an exemption certificate under section 12 A of the act. The claim of the assessee is that for the impugned assessment year i.e. AY 2011 12, this explanation is not applicable as it was inserted retrospectively with effect from 1/6/1976 by The Finance Act 2012 and therefore it cannot fasten a liability for tax deduction at source on the assessee for assessment year 2011 12. It is claimed that the assessee could not have conceived that such a retrospective amendment would come in the future and therefore the TDS at the lower rate of 1% would not be in order. 027. After hearing the parties, We find that above issues is covered in favour of the assessee by the decision of the honourable Bombay High Court in NGC Networks (India) Pvt. Ltd [TS-41-HC-2018(BOM)] wherein it has been held that a party cannot be called upon to perform an impossible Act i.e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. Honourable court relied upon the co-ordinate bench decision in the case of Cello Plast wherein the legal maxim lex non-cogit ad impossibilia (law does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss account, which had a debit balance of ₹ 7,403,612,682 at the beginning of the year i.e. on 1/4/2010. In the scheme of arrangement between the assessee and Zee entertainment Enterprises Ltd approved by the honourable Bombay High Court, above amount was supposed to be reduced against the balance of profit and loss account in the balance sheet. The learned assessing officer found that though the assessee has credited the sum to the profit and loss account, however the same was not included in the computation of the book profit under section 115JB of the act. According to the learned assessing officer, the above amount is chargeable to tax under section 115 JB of the Act. Therefore, the book profit was increased by the above sum. The learned CIT A when confronted with this ground by the assessee held that the General Entertainment Channel [ GEC] business has been transferred under the scheme of demerger and therefore there is a profit to the appellant, which is to be shown in the profit and loss account. The assessee has earned a profit of ₹ 13.31 crores but has disclosed it below the line in appropriation account, which is against the direction of the Honourable Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the assessee had filed a scheme of arrangement between the assessee and Zee entertainment Ltd on 23 July 2010 for the demerger and transfer of its general entertainment channel business to Zee entertainment Ltd with effect from the closing hours of business on 30. March 2010. The scheme was approved by the honourable Bombay High Court as per order dated September 9/2010. Such approved scheme was filed with the Registrar Of Companies in September 22, 2010. The assessee has given effect to the demerger and transfer in the financial statements. It was found that total assets of ₹ 509,327,461/- were transferred along with total liabilities of 64,24,07,108/-. Thus, There was the net gain on transfer was ₹ 133,079,647/-. It is apparent that total liabilities transferred by the assessee were much higher than the total assets transferred. This amount was credited to the Profit loss account below the line . The profit and loss account was drawn and profit/(loss) after tax was determined for the year. Thereafter the balance brought forward from earlier year of the profit and loss account was shown at loss of ₹ 7,403,612,682, from that adjustment on account of deme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 034. However, during appellate proceedings before us the assessee submitted that even if the net profit as per the profit and loss account is increased by the above sum but assessee s claim of brought forward loss or unabsorbed depreciation , whichever is less, is granted as deduction from book profit, it will remains Nil. While deciding Ground no 4 , we have directed the learned assessing officer to allow the lower of brought forward losses as per books of account and unabsorbed depreciation as per books of account to reduce from the book profit. The lower of two is the unabsorbed depreciation as per the books of account of ₹ 315,453,321/ which is less than the amount involved of ₹ 133,079,646/ as per ground number 1, and therefore, though we have dismissed ground number [1] of the appeal of the assessee but it may not have any impact on the book profit taxation under section 115JB of the act. 035. Ground number 2 of the appeal of the assessee wherein the learned CIT A has upheld the order of the learned assessing officer by making an addition to the book profit of amount of ₹ 1,42,63,197/ representing provision for doubtful advances t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve two amount should be granted to the assessee as a deduction from the book profit under section 115JB of the act, as we have already allowed this ground of the appeal. 039. Ground number 5 is with respect to the disallowance of legal and professional fees of ₹ 1.28 crores paid to Ernst young for services rendered in connection with providing assistance in relation to the demerger of general entertainment channel business of the appellant to Zee entertainment Enterprises Ltd. Assessee claimed it as revenue expenditure. Ld AO applied section 35 DD and allowed 1/5th of the same. The learned CIT A has restricted the same by applying the provisions of section 35DD of the act to the extent of ₹ 2,560,000/- . Ground number 6 of the appeal is with respect to the claim of the assessee that if the above sum is considered as a deductible sum under section 35DD of the act, than for the balance of the amortized period, Such amortized cost should be allowable in equal installments in the subsequent four assessment years. The fact shows that the assessee has paid ₹ 1.28 crore to E Y for rendering services in connection with providing assistance in relation to the demerg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts exist with respect to the other two parties. The learned assessing officer made an enquiry under section 133 (6) of the act which was also communicated to the assessee along with the result of such enquiry and further opportunity was given to the assessee to reconcile the discrepancy but the assessee failed to do so and accordingly the addition was confirmed. 042. The learned authorized representative before us submitted details furnished at per page number 812 and 813 of the paper book. It was further stated that in assessee s own case for assessment year 2008 09 identical addition were deleted. The learned authorized representative further relied upon the several judicial precedents stating that in absence of the material or enquiry done by the assessing Officer no addition could be made in the hands of the assessee. 043. The learned departmental representative vehemently supported the orders of the lower authorities and stated that the reliance placed on the decision of the coordinate bench in assessee s own case for assessment year 2008 09 is not relevant as in that case the amount disclosed in the books of accounts of the assessee are more than the amount state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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