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Dy. CIT -Central Circle-20, Mumbai Versus M/s Multi Screen Media Pvt Ltd (Earlier Known As Set India Pvt Ltd)

2015 (10) TMI 2433 - ITAT MUMBAI

Reopening of assessment - disallowance of advertisement and sales promotion expenses - AO disallowed the aforesaid expenses on the ground that the expenditure is of the Channel principal - Held that:- While deciding the appeal for AY 2005-06 the Tribunal has discussed the issue as under after considering the submission and perusing the material on record, we find that the assessee deserves to succeed on the issue involved. We find that learned CIT(A) was not justified in observing that Hon'ble H .....

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essee. - ITA Nos. 4471 to 73/Mum/2013, CO No. 180/Mum/2014 - Dated:- 9-10-2015 - Rajendra, AM And Saktijit Dey, JM For the Petitioner : Shri Nishan Thakkar For the Respondent : Shri N P Singh-DR ORDER Per: Bench: Challenging the orders dt. 26. 3. 2013 of the CIT(A)-39 Mumbai, the AO has filed the appeal for the above mentioned three AY. s. The assessee has filed cross objection for the AY 2004- 05. The effective grounds of appeal are almost similar for all the years. Therefore, for the sake of c .....

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of income on 1. 11. 2004, declaring total income of ₹ 16. 35lacs. The AO completed the assessment u/s. 143(3) of the Act on 22/12/2006, determining the income of the assessee at ₹ 19. 39 crores. Subsequently, the matter was re-opened by the AO as per the provisions of section 147 of the Act. He completed the assessment u/s. 143 (3)r. w. s. 147 of the Act, on 5. 5. 2010 computing the total income of the assessee at ₹ 38. 42 crores. As per the AO during the course of assessment .....

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of the expenditure incurred on advertisement and sales promotion amounting to ₹ 21. 74 crores. While completing the assessment, the AO mentioned that the amount of income escaping assessment was mentioned at ₹ 29. 26 crores, that the entire reasoning was based on assessment completed for AY 2005- 06, that in the assessment the AO had disallowed 81. 25% of only advertisement and sales promotion rather than full selling expenses, that for the year under consideration the disallowance .....

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y(FAA). Before him, it was contended that the expenditure had been incurred wholly and exclusively for the purpose of business and it was eligible for deduction u/s. 37 of the Act, that the expenditure helped the assessee to increase the subscription revenue. It relied upon the case of Star India P. Ltd. (103 ITD 73) , Viacom 18 Media Pvt. Ltd. (ITA 5057/Mum/07) and Sabena Detergents P. Ltd. (303 ITR 320). After considering the submission of the assessee and the assessment order, the FAA referre .....

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ve(AR) relied upon the order of the Tribunal dated 20. 3. 2013 (supra). We have heard the rival submissions and perused the material before us. We find that while deciding the appeal for AY 2005-06 the Tribunal has discussed the issue as under: "3. Remaining issue is against confirming disallowance of advertisement and sales promotion expenses of ₹ 32, 49, 91 , 062/-, being 81. 25% of total expenses claimed under Section 37(1) of the Act. 4. The AO disallowed the aforesaid expenses on .....

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rred wholly and exclusively for the purpose of business, and, therefore, the expenses are allowable in full. It was argued that the expenditure on advertisement and sales promotion amounting to ₹ 32, 49, 91, 062/- was disallowed without appreciating the fact that the Transfer Pricing Officer had examined the international transactions between the Appellant and its associated enterprises and had held that the margin arrived at as per the Transactional Net Margin Method is at arms' lengt .....

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the viewers constantly interested, it was important to incur expenditure on advertising and sales promotion as it also, helped its distribution business and in developing content in line with viewership preference and to maintain its subscription fees. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Sassoon J. David & Co. Ltd. After considering the submission and perusing the material on record, learned CIT(A) noted that full copies of other agreements reg .....

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the case of Star India Ltd. , the revenue has filed an appeal before the Hon'ble High Court, however, Hon'ble Bombay High Court has dismissed the appeal of the revenue but not detail finding has been given. Thereafter the CIT(A) noted that there are certain distinguishing feature in the case of Star India Pvt. Ltd. (supra) and in case of the assessee, therefore, without following the decision in the case of Star India Pvt. Ltd. , learned CIT(A) confirmed the action of the AO. Distinguis .....

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ecessary all the time that the Hon'ble High Court should discuss the facts in detail then pass an order. The Hon'ble High Court has observed that the Tribunal has passed a detailed order by discussing all the facts and no question of law arises out of the order of the Tribunal. Accordingly, the order of the Tribunal has been confirmed by the Hon'ble High Court which is binding in nature. 6. 1 In respect to distinguishing the facts by the CIT(A), learned counsel of the assessee has fi .....

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e in favour of the assessee. The order of the Tribunal has been reported in 103 ITD 73, which pertains to assessment year 1998-99 and 1999-2000. The facts are identically same in the case of the assessee and in the case of Star India Pvt. Limited. 7. Learned OR has placed reliance on the order of CIT(A). It was further submitted that the full documents were not filed before the CIT(A). In respect to decision of the Hon'ble Bombay High Court, it was stated that the Hon'ble High Court has .....

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consideration and, therefore, stated that facts are not discussed in detail, is not correct. It was further submitted that facts of the case of Star India Pvt. Ltd. and the facts in the case in hand, are identically same. The decision of Star India Pvt. Ltd. has been affirmed by the Hon'ble Jurisdictional High Court , therefore, the same is binding. 9. We have heard rival submissions and considered them carefully, After considering the submission and perusing the material on record, we find .....

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s been explained by the assessee while filing a chart. 9. 1 The first objection of the CIT(A) is that the Star India was entitled to commission of 15% on advertisement revenues secured by it whereas in appellant's case it is stated by Assessing Officer to be at 12. 5%. Whether the commission is 15% or 12. 5%, in our view, there should not be any objection. Even we noted that in subsequent years, Star India has also been earning 10% commission on advertising revenues which fact is recorded in .....

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oes this for a fixed fee. The assessee has filed explanation that the average mark-up earned by MSMI on content supplied during the period is 18. 75% which fact is accepted by the Assessing Officer in is order at page 17. Therefore, again we find that there is no distinguishable feature as to whether supplying programmes to Star Hong Kong at cost +5% or some other rates, but the fact is that method of doing business is the same. 9. 3 The next objection noted by the learned CIT(A) that the Star I .....

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act is recorded in ITAT Order in case of Star India for A Y 2002-03, yet the advertisement expense was held to be allowable. In case of Viacom 18 Media Pvt. Ltd. (ITA No. 5057/Mum/07, PB Pg. No. 225/ the advertisement expenses were held to be allowable considering Viacom 18 was advertising sale agent of overseas channel company. In case of assessee , assessee had been subjected to scrutiny under Transfer Pricing assessment and the TPO has confirmed that the margin earned by the assessee as per t .....

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her order that line of business is separate and distinct to each other. 9. 4 The next objection noted by the learned CIT(A) that the Star India had "exclusive rights" for the territory assigned in respect of the three revenue streams whereas the assessee has only "non-exclusive rights" in the territory assigned. In reply it has been stated that this is factually incorrect. Star India also' had only non-exclusive rights which fact is itself recorded by the ITAT order of St .....

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that same expenditure has been incurred by the assessee. However, it is seen that in case of Star India, the CIT(A) the CIT(A) allowed 20% of the expenditure and on second appeal, the Tribunal has allowed the full expenditure. Therefore, for the same reason also it cannot be said that there is any distinguishable feature in the case of Star India as compared to the case of the assessee. 10. On observation of all the above five objections raised by the CIT(A) in his order, in our view, do not sp .....

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