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2018 (12) TMI 1820 - AT - Income TaxNature of expenses - Expenditure on account of Sponsorship Rights - revenue or capital expenditure - as per assessee 10% of the fees were attributed towards participation and promotional activities by the team members and accordingly 50% of 90% of the revenue has been offered during the year and remaining 10% has been offered on pro-rata basis over the term of respective Sponsorship Right Agreement and the same has been offered for tax accordingly - HELD THAT - CIT- A observed that the methodology adopted is followed by the assessee is difficult to understand as the same is neither as per accounting standard nor as per any specified criteria once the Sponsorship Right Agreement have been signed for particular supporting event the amount received is already determined therefore the assessee on his own should have offered 50% of such income if 100% is not offered within the taxing year. However the assessee has adopted its own methodology by dividing the income into two parts. However the ld. CIT(A) directed the Assessing Officer that if the amount is taxed in Assessment Year 2011-12 same should be deleted to avoid the double taxation. We have seen that ld. CIT(A) has given reasonable direction to the Assessing Officer if the assessee has offered remaining receipt in subsequent Assessment Year then to reduce such income from assessee s total income assessed for Assessment Year 2011-12. In our view the direction given by ld. CIT(A) is quite reasonable and which does not require any interference. Addition on account of Annual consideration paid to BCCI - HELD THAT - As in 2009-10 in assessee s own case 2018 (1) TMI 786 - ITAT MUMBAI Tribunal is of the considered view that the payment of the Franchise fee for IPL Season-1 by the assessee can safely be held to be in the nature of a revenue expenditure which was rightly claimed by the assessee as such while computing its income for the year under consideration - thus Franchise fee paid by the assessee to BCCI is a revenue expenditure. Feasibility study expense - Allowable business expenses or not? - AO allowed only 1/5th of the expenses - HELD THAT - There is no dispute that lower authorities have not disputed the cost of the expenses. We have noted that the lower authorities have failed to specify as to how the case of assessee is covered under section 35D when no new stadium was made was assessee. The assessee has incurred the preliminary expenses for feasibility expenses. It is an undisputed fact that ultimately the assessee abundant the idea of construction of new Stadium. As neither the scheme nor the idea of assessee was materialized or no new unit/ stadium was made therefore the assessee is entitled for deduction of entire expenditure incurred on such feasibility report as revenue expenditure Similar view was express by Hon ble Delhi High Court in CIT Vs Priya Village Roadshaw 2009 (8) TMI 765 - DELHI HIGH COURT - Decided in favour of assessee. Stamp duty expenses - Revenue or capital expenditure - HELD THAT - We have noted that the stamp duty was paid by the assessee-company for the purpose of registration of new shareholder which cannot be treated as capital expenditure. Therefore we direct the Assessing Officer to delete the disallowances. Adhoc disallowance of airfare expense travelling expense and vehicle hire charges - HELD THAT - As in 2009-10 in assessee s own case 2018 (1) TMI 786 - ITAT MUMBAI grounds of appeal is also restored to the file of assessing officer with the similar directions to verify the documentary evidences and grant appropriate relief to the assessee in accordance with law. Needless to direct that before passing the order the assessing officer shall grant opportunity of hearing to the assessee. The contention of the ld. AR for the assessee that the assessee has placed sufficient evidences on record and appropriate relief be allowed to the assessee. We are not inclined to accept such prayer of assessee let all the evidence be examined by the assessing officer in accordance with law. In the result these grounds of appeal are allowed for statistical purpose. Disallowance of Lodging and Boarding and Food and Nutrition - HELD THAT - As in 2009-10 in assessee s own case 2018 (1) TMI 786 - ITAT MUMBAI n the backdrop of the observations of the CIT(A) that either the assessee had failed to relate the aforesaid bills pertaining to hosting of dinners tea parties etc. with the purpose for which the same had been incurred or the same suffered from certain discrepancies as regards the amounts mentioned therein in comparison to those stated by the assessee during the course of the proceedings and had not been reconciled therefore in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills, pertained to expenses incurred by the assessee in the course of its business or not. We may however clarify that the A.O shall while readjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications. Claim of the deduction of franchise fee /consideration - Admission of additional ground - HELD THAT - We have noted that the assessee has raised this ground of appeal on the basis of decision of Tribunal for assessment year 2009-10. The assessee has raised this ground of appeal for the first time before the Tribunal; therefore the additional ground of appeal is admitted and is restored to the file of assessing officer to decide the same in accordance with law. Needless to order that before passing the order the assessing officer shall grant the opportunity to the assessee to explain and substantiate its contention on the issue. In the result the additional ground of result is allowed for statistical purpose.
Issues Involved
1. Treatment of Website Design Charges 2. Addition of Revenues from Sponsorship Rights 3. Deduction of Franchise Consideration 4. Disallowance of Feasibility Study Expenses 5. Disallowance of Stamp Duty Expenses 6. Adhoc Disallowance of Airfare and Travelling Expenses 7. Adhoc Disallowance of Lodging and Boarding, Food and Nutrition Expenses 8. Consequential Levy of Interest and Penalty Proceedings Detailed Analysis Treatment of Website Design Charges The Revenue challenged the deletion of an addition of Rs. 61,77,358 made by the Assessing Officer (AO) by treating website design charges as capital expenditure. The AO allowed depreciation at 60%, restricting the deduction to Rs. 24,70,493. The CIT(A) treated the entire expenditure as revenue expenditure, directing the AO to delete the addition. The Tribunal noted that the tax effect involved was less than the monetary limit set by the CBDT, dismissing the Revenue's appeal as not maintainable. Addition of Revenues from Sponsorship Rights The assessee argued that the income from Sponsorship Rights accrued in the subsequent assessment year, as per their consistent accounting method. The AO taxed 50% of the total sponsorship amount for the year, which was upheld by the CIT(A). The Tribunal found the CIT(A)'s direction reasonable, allowing the AO to ensure no double taxation if the amount was taxed in the subsequent year. Deduction of Franchise Consideration The assessee's appeal regarding the annual consideration paid to BCCI was covered by the Tribunal's decision in their own case for AY 2009-10. The Tribunal had previously held that the franchise fee paid to BCCI-IPL was a revenue expenditure, not capital, as it facilitated participation in the league for the year without creating an asset or enduring benefit. The Tribunal allowed these grounds of appeal with similar observations. Disallowance of Feasibility Study Expenses The assessee argued that feasibility study expenses were business-related and revenue in nature. The AO treated these as preliminary expenses under Section 35D, allowing only 1/5th and disallowing Rs. 19,32,720. The Tribunal noted that the expenses were for a feasibility study that was ultimately abandoned, thus fully deductible as revenue expenditure. The Tribunal allowed these grounds of appeal. Disallowance of Stamp Duty Expenses The assessee claimed stamp duty expenses for the transfer of shares as revenue expenditure. The AO treated it as capital expenditure. The Tribunal directed the AO to delete the disallowance, noting that the stamp duty was paid for the registration of new shareholders, not creating a capital asset. Adhoc Disallowance of Airfare and Travelling Expenses The AO made an adhoc disallowance of 25% of airfare and travelling expenses, suspecting non-business use. The Tribunal restored the issue to the AO for verification of documentary evidence, directing the AO to grant appropriate relief after verification. Adhoc Disallowance of Lodging and Boarding, Food and Nutrition Expenses Similar to the previous issue, the AO made an adhoc disallowance of 33% of lodging and boarding, food and nutrition expenses. The Tribunal restored the issue to the AO for verification, following the decision in the assessee's own case for AY 2009-10. Consequential Levy of Interest and Penalty Proceedings The Tribunal noted that the grounds related to the consequential levy of interest under Section 234B and Section 234D, and the initiation of penalty proceedings under Section 271(1)(c) were general or consequential, requiring no adjudication. These grounds were dismissed. Conclusion The Tribunal provided a detailed analysis and directions for each issue, ensuring compliance with legal standards and previous rulings. The Revenue's appeal was dismissed, and the assessee's appeal was partly allowed, with several issues restored to the AO for further verification and appropriate relief.
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