TMI Blog2015 (12) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... use in order to claim depreciation thereon. As decided in Capital Bus Service Pvt. Ltd. (1980 (2) TMI 69 - DELHI High Court ) it was held that while interpreting the expression ‘used’ “it would be more appropriate to envisage the expression as comprehending cases where the machinery is kept ready by the owner for its use in the business and the failure to use it actively in the business is not on account of its incapacity for being used for that purpose or its non-availability. - Decided in favour of assessee. - ITA 190/2015 - - - Dated:- 9-12-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr N. P. Sahni, Senior Standing Counsel with Mr Nitin Gulati, Junior Standing Counsel For the Respondent : Mr Salil Aggarwal and Mr Ravi Pratap, Advocates ORDER Dr. S. Muralidhar, J. 1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act ) is directed against the impugned order dated 9th September 2014 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 2186/Del/2012 for the Assessment Year ( AY ) 2008-09. Questions of law 2. On 13th March 2015 while admitting this appeal, the following questions of law were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 190/2015 Page 3 of 15 2. New plant and machinery is acquired and installed after 31st March 2005; 3. It should be an eligible plant and machinery The Assessee company is engaged in the business of FM radio broadcasting and following are some of the Radio Programs produced by it during the Financial Year 2007-08: (a) Medical Meow; (b) Top Cat; (c) Sports Cat; (d) Meow Zindagi; (e) Meow Matinee; (f) Mama Meow; (g) Tutu Meow Meow Further, during the financial year 2007-08 the Assessee company has purchased only the new plant and machinery and used the same in the production of programs on which additional depreciation has been claimed by it Assessment order 6. However, the AO rejected the Assessee s contention that the above radio programmes were the articles or things produced by it . The AO held that by no stretch of imagination can production of radio programmes be considered as production of article or thing . The additional depreciation claimed was disallowed and added back to the total income of the Assessee. 7. As regards the depreciation claimed on the One Time Entry Fee for stations not operational, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airing of radio programmes cannot be said to be manufacturing or producing of article or thing as defined under Section 32 (1) (iia) of the Act. The CIT (A) further held as under: In the commercial sense no article or thing can be said to be produced by airing a radio programme as the appellant is not manufacturing or producing any article or thing which can be sold or commercially exploited. The radio programs cannot be regarded as an article or thing as per the definition given by various courts and the process involved for airing the programs cannot be regarded as manufacturing or production. Further, the channels earn revenue from advertisement and not from sale of radio programs. The public does not have to incur any expense to log on to any channel of any radio program. The expenses is only been incurred by the various companies who are providing revenue by advertising their products. Further, the floppy or CD of the radio programs are not tradable there are large number of programmes which are aired live for example cricket matches. All these clearly shows that the appellant cannot be said to be engaged in the business manufacture or production of an article or thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nleys Pvt. Ltd. 286 ITR 652 (Del) and CIT v. Refrigeration Allied Ind. Ltd. 247 ITR 12 (Del). Submissions of counsel 13. This Court has heard the submissions of Mr. N.P. Sahni, learned Senior standing counsel for the Revenue and Mr. Salil Aggarwal, learned counsel for the Respondent-Assessee. 14. Mr. Sahni sought to distinguish the decision of the Supreme Court in CIT v. Oracle Software India Limited (supra) on the ground that what was involved in the said case was processing of CDs which was envisaged by Section 80-IA of the Act, whereas for the purpose of Section 32 (1) (iia) of the Act it had to be examined whether the equipment in respect of which additional depreciation was claimed, was in fact used for the main business of the Assessee which in this case was broadcasting. In other words, the Assessee was not in fact engaged in the business of manufacture or production of any article or thing and 'broadcasting' was not processing . 15. Mr. Sahni submitted that the definition of manufacture under Section 2 (29BA) would not apply in the present case as it was introduced only with effect from 1st April 2009. Reliance was placed on the decision of the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery after 31st March 2005. The only dispute raised by the Revenue was that the Assessee did not 'use' the said plant and machinery for producing or manufacturing an article or thing. The ITAT held that production of radio programmes, since it involves the technical process of recording, editing, copying and then broadcasting, amounted to production of an article or thing and therefore, the Assessee was eligible for additional depreciation. 19. Apart from the decision of the Supreme Court in CIT v. Oracle Software India Limited (supra), reliance was placed on the decision in Commissioner of Income Tax-VIII v. Ms. Kiran Kapoor 372 ITR 321 (Del). Reference was made by Mr. Aggarwal to the decision of the learned Single Judge of this Court dated 7th October 2013 in CS (OS) No. 1085 of 2005 (T.V. Today Network Limited v. Kesari Singh Gujjar) to urge that dissemination of news and news reporting would be covered under the goods classified under Clauses 38 and 41 of the Schedule to the Trade Marks Rules. Mr. Aggarwal also submitted that in the succeeding AYs, i.e., 2009-10 and 2010-11 the claim for additional depreciation on production of radio programmes was allowed by the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect, as if for the words twenty per cent. , the words thirty-five per cent. had been substituted. Provided further that no deduction shall be allowed in respect of (A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or (C) any office appliances or road transport vehicles; or (D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any one previous year. 22. For the purpose of the above provision, the following conditions will have to be satisfied: (i) new plant and machinery has to be acquired and installed by the Assessee after 31st March 2005; and (ii) the Assessee should be engaged in the business of manufacture or production of any article or thing. 23. If the above conditions are satisfied, then the additional depreciation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogrammes produced by the Assessee is thing , if not an article. This satisfies the understood definition of thing in terms of the Black's Law Dictionary as under: (A) thing :- the subject matter of a right, whether it is a material object or not; , any subject matter if ownership within the sphere of proprietary or valuable rights. Things are divided into three categories (1) things real or immovable, such as land, tenements, and hereditaments, (2) things personal or movable, such as goods and chattels, and (3) things having both real and personal characteristics, such as title deed and a tenancy for a term. The civil law divided things' into corporeal or incorporeal. 28. Thing could, therefore, have intangible characteristic. The word manufacture envisages subjecting any material or thing to certain processes in order to produce something which has a distinct characteristic. In other words, the process must result in the transformation of a thing or article to result in a new or different article. 29. The definition of manufacture inserted with effect from 1st April 2009 in the form of Section 2 (29BA) of the Act reads as under: 2(29BA) manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 32 (1) (iia) of the Act, it is entitled to the additional depreciation as claimed by it for the AY in question. The Revenue has also no answer to the submission of the Assessee for AYs 2009-10 and 2010-11 its claim for additional depreciation has been allowed by the AO. 34. Question No. 1 is accordingly answered in favour of the Assessee and against the Revenue. Question 2: Depreciation on Licence Fee 35. Turning to Question No. 2, it is seen that the fact is that the Assessee kept ready for use the intangible assets in respect of three radio stations at Jodhpur, Amritsar and Patiala. This has not been denied even by the Revenue. The order of the AO recorded as under: 4.6.5 The Assessee has further submitted vide his letter dated 22.12.2010, that depreciation has not been claimed on any of the other assets in case of the other three stations, i.e., Patiala, Amritsar and Jodhpur, apart from One Time Entry Fee. This is not in consonance with the Assessee's statement of his written submission dated 2nd December 2010,wherein he has that stated that depreciation was claimed because of the existing case laws in his knowledge. He has stated that based on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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