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2017 (5) TMI 527 - AT - Income TaxAmortization or allowability of entire cost in the current year - Held that:- The claim of assessee is not in tune with the accounting policy in open market on this issue of amortization of TV programme/ Film Rights. No special reasons are demonstrated before us the reasons justifying the deviations by the assessee. Therefore, we are of the view that the AO is directed to apply the said order of the Tribunal in case of Zee Media (2015 (8) TMI 612 - ITAT MUMBAI ) of the granting reasonable opportunity of being heard to the assessee fully. AO is also directed to reduce the extent of cost already telecast i.e. ₹ 26,50,87,780/- from the total cost of ₹ 89.06 crore as there is no justification for not allowing the content, which is already telecast in the current year. Thus, AO should examine the correctness of the said figure and the extent relatable to both TVprogramme 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. Sales promotion & advance expenses - Held that:- The revenue is on the matching principle ie assessee cannot be allowed to claim huge expenditure against meagre income reported in this year. In the process, revenue lost the much established accounting principle of ‘Mercantile System of Accounting’ by the assessee in this year under consideration. We also find that the decisions relied on by the AO are distinguishable on both facts and legal issue. They are not on the brand building related issues. On the other hand, the decision in case of Core Healthcare Ltd and others (2008 (10) TMI 74 - GUJARAT HIGH COURT ) on this issue only. Nothing is made out by the Ld. DR that cricket sponsoring expenditure constitutes capital nature. It is never the case of the revenue that ₹ 7.03 crore of expenditure is not revenue in nature. The question is only if they should be amortized over the period of 6 years or otherwise. In our view, the CIT(A) order, on this issue, constitutes fair and reasonable and it does not call for any interference. The expenditure incurred on account of sponsoring of cricket or launch expenditure are allowable revenue expenditure as they are in the nature of advertisement expenditure. Accordingly, the relevant grounds of the revenue on this issue are dismissed. Disallowance of legal and professional fee - Held that:- The expenses incurred till 31.08.2007 should be considered for capitalization and the date of set up of the business in place of assessee’s claim of 01.06.2007. Delivery date is 6.8.2007 and reasonable time is needed for unp0arking, distribution and installation. Therefore, it cannot reliably argued that all the above activities are done only the said due date of 6.8.2007 for delivery to the assessee in Mumbai. Therefore, on estimation basis, we grant till the end of the month for installation activity. This is needed for completion of the set up of business completely. Consequently, the expenditure incurred by assessee between 1.9.2007 to November 2007 are to be allowed as deductible expenses. AO is directed to recomputed the above allowable expenses and assessee the income accordingly. Accordingly, the grounds raised are partly allowed. Addition u/s 68 on account of share application money (SAM), share capital and share Premium - Held that:- We are of the view ‘on the investments by the residentcompanies’ that the AO has not made out proper case and not fortified his addition with any clinching evidences either on identity or on creditworthiness or on the genuineness of the transactions. Thus, the addition of ‘investment by IIMPL and IIPL in the equity share capital and preferential share capital with premium’ is unsustainable in law. Therefore, the conclusions of the CIT (A) on this issue are fair and reasonable and it does not call for any interference. Accordingly, relevant grounds of the Revenue are dismissed. Addition on account of non-resident foreign institution investments into the share application money and share application and the preferential share capital with premium - Held that:- There is no incriminating material so far gathered by the AO / investigation wing of the Department against the claim of the assessee. As on date, the CBDT has not come out with any incriminating material against the assessee. Therefore, we are of the view that it is premature to make any addition on this account without having any information against the assessee either on identity or creditworthiness or genuineness of the transactions. Present addition is a case of surmises, suspicion etc. Therefore, the addition is unsustainable in law. For all these reasons also, we are of the view, the order of the CIT (A) is fair and reasonable. Therefore, the decision of the CIT (A) does not call for any interference.
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