TMI Blog2015 (1) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- AO made addition by taking a hypothetical approach and without any basis which was rightly deleted by the CIT(A) on the basis of conclusion arrived after logical analysis of the details, evidence and submissions of the assessee. The probability or improbability of realisation has to be seen and considered in a realistic manner and no addition can be made in this regard without bringing out the fact that the interest really accrued to the assessee. - Decided against revenue. Channel placement income - CIT(A) deleted the addition - Held that:- Income tax cannot be levied on hypothetical income. As per taxation jurisprudence, income accrues when it becomes due but also be supported by a corresponding liability of the other party (s) to pay the amount, only then for the purpose of taxability it can be said that income is not hypothetical and it has really accrued to the assessee. In the present case, the revenue authorities below miserably failed to substantiate this fact that the assessee actually earned income from channel placement and the same was accrued to the assessee company during financial year under consideration. Accordingly, we are inclined to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong on facts. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax(Appeals)-XIII,New Delhi erred in law in upholding the order of the Assessing Officer in making the addition/disallowance of ₹ 20,08,375/- on account of pay channel expenses. 2.1 That on the facts of the appellants case, the learned Commissioner of Income-tax (Appeals) XIII, New Delhi, erred in confirming the addition of ₹ 20,08,375/- without appreciating the submissions made. 4. Apropos aforementioned grounds of the assessee, we have heard arguments of both the sides and carefully perused the relevant material placed on record before us, inter alia assessment order, impugned order and paper book filed by the assessee consisting of 80 pages. Ld. AR submitted that the impugned order of the CIT(A) is not only bad in law but also wrong on facts and circumstances of the case. The AR further contended that the CIT(A) has erred in law and on facts upholding the order of the AO in making disallowance and addition of ₹ 20,08,375/- on account of pay channel expenses and confirming the same without appreciating rather ignoring the statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owner of Regent Communication for a consideration of ₹ 3.5 crore we.f. 1.8.2007 for which an agreement was executed on 31.3.2008, this fact has also not been disputed by the Revenue that the assessee sold his business as per agreement dated 31.3.2008 w.e.f. 1.8.2007. The ld. AR placing reliance on the decision of Hon'ble Supreme Court in the case of CIT vs Excel Industries Ltd. Others (2013) 358 ITR 295 (SC) submitted that as a businessman the assessee is the best decision maker inasmuch as in the situation of slump sale of business which expenditure and upto which period are to be borne by the seller/assessee and it is not open for the AO to make assessment on hypothetical income. Ld. AR further contended that the quantum of the expenditure incurred by the assessee on pay channel has not been disputed by the revenue, hence, part of expenditure cannot be disallowed on estimation basis without bringing out any adverse fact or material against the stand of the assessee. Ld. DR replied that when business has been sold w.e.f. 1.8.2007, then the assessee cannot claim expenditure of August, 2007. He supported the orders of the authorities below and submitted that when asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso noticed that DLF Ltd. has charged interest of 10% to 13% per annum upto 27.07.2007 and thereafter @6.5% per annum, therefore, the AO in order to have a reasonableness in the chargeable rate of interest allowed 8% per annum on the average of loans and advances which came to ₹ 25,76,282/- and accordingly the same was added to the income of the assessee which has not been charged by the assessee company from M/s DLF Limited. The DR supported the impugned order on the issue. 11. Replying to the above, ld. AR supported the impugned order and submitted that the assessee did not advance ₹ 604,13,577/- to DLF Ltd. out of interest bearing funds but the same was pertaining to the services rendered by the assessee to DLF Ltd. and such amount has been paid by the DLF Limited to the assessee company in regular intervals and, therefore, no notional interest can be charged on such amount. The AR vehemently contended that the AO has not brought out any adverse material to the fact that there was no nexus between the loan taken by the assessee from DLF Limited for expansion of its business and the amount due to the DLF Ltd. out of services rendered. 12. On careful consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic. 14. In the extant case, the Revenue has not brought out any fact or adverse material or evidence that the balance debit amount due to DLF Ltd. was actually a loan which was granted on interest or interest had actually been collected but the same was not recorded or reflected in the accounts of the assessee and in this situation, it cannot be presumed that the assessee earned interest income which was actually received or due out of books of accounts of the assessee. As we have already noticed that the amount picked up by the AO was actually the amount due on current service provided to DLF Ltd. by the assessee and the assessee received substantial amounts therein in regular intervals (paper book page no. 40 to 42 of the assessee). 15. In view of above discussion, we are of the considered view that the AO made addition by taking a hypothetical approach and without any basis which was rightly deleted by the CIT(A) on the basis of conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee received subscription income of ₹ 1,01,93,537 and advertising income of ₹ 9,96,701 for the period of 1.4.2007 to 31.7.2007 and at the same time, it is also not in dispute that the assessee had claimed expenditure of ₹ 1,00,41,877 on pay channel expenses for the period 1.4.2007 to 31.7.2007. At the same time, it is also not in dispute that the assessee has not shown any income from channel placement which was ₹ 74,05,117/- during the immediately preceding year and which was also shown by the assessee in the statement of accounts filed along with the return of income of preceding assessment year. On this issue, the assessee company explained that the company was in the process of selling business, therefore, the business was slowed down and there was no income under the head of channel placement. Ld. AR has placed reliance on the recent decision of Hon'ble Supreme Court in the case of Excel Industries Ltd. (supra) and submitted that the addition of income can not be made on the basis of conjectures and surmises without bringing out any fact to the effect that the assessee actually received impugned amount from channel placement. Ld. AR contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, we are inclined to hold that the AO made addition without any basis which was rightly deleted by the CIT(A). We are unable to see any valid reason to interfere with the impugned order on this issue. Therefore, ground no. 2 of the revenue is dismissed. Ground No.3 22. Apropos ground no. 3 of the revenue, ld. DR submitted that the AO rightly observed and concluded that the provision of ₹ 17 lakh towards provision for expenses of March 2008 was not an ascertained liability and assessee had not given any justification for allowing this expenditure as revenue expenditure, therefore, in absence of any justified explanation, the provision made of ₹ 17 lakh cannot be allowed as deduction being unascertained liability. The DR further contended that the AO was right in disallowing the same and added back to the total income of the assessee. The DR further pointed out that the CIT(A) deleted the addition without any basis, therefore, the impugned order may be set aside by restoring that of the AO. Replying to the above, ld. AR submitted that the assessee filed copy of the provision made and the payment of details of actual salary payment made to the staff which was amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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