TMI Blog2018 (4) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... TV programmes as revenue expenditure. Depreciation on the film software library at 25% treating it as an intangible asset - Held that:- Remand the issue to the file of the AO to examine the issue of valuation of the asset and thereafter to allow depreciation @ 25% treating the software library as an intangible asset. - ITA No. 1245/Hyd/2016, ITA No. 1389/Hyd/2016 - - - Dated:- 9-8-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For Assessee : Shri V. Siva Kumar For Revenue : Smt. Shalini Bhargava Kaushal, DR ORDER Per Smt. P. Madhavi Devi, J. M. Both are assessee s appeals for the A.Y 2012-13 against the order of the CIT (A)-6, dated 14.07.2016. ITA No.1245/Hyd/2016 2. In the assessee s appeal, the assessee has raised the following grounds of appeal: 1. The order of the Commissioner of Income Tax (Appeals) - 6 Hyderabad dated 14-07-2016 is erroneous, contrary to law and facts of the case. : 2(a). The Commissioner of Income Tax (Appeals) [C.I.T(A)] erred in sustaining the disallowance of depreciation of ₹ 39,81,32,920/-on non-complete fee made by the Assessing Officer following the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, he has now raised it as an additional ground of appeal and filed a petition for admission of additional evidence in support of the said ground. 4. As regards Grounds No.2 (a) to 2(c), brief facts are that the assessee company, engaged in the business of Satellite Television Broadcasting, filed its return of income on 29.09.2012 after declaring nil income after set off of total profit of ₹ 35,50,00,494. Book profit u/s 115JB of the Act was also admitted as Nil . During the assessment proceedings the AO observed that the assessee company i.e. M/s. Eenadu Television Private Limited was formed as a result of demerger of M/s. Ushodaya Enterprises Pvt Ltd into three companies i.e (1) Eenadu Television Private Ltd; (2) M/s. Prism T.V. Private Limited; and (3) M/s. Panorama Television Private Limited. He also observed that the above scheme of arrangement was approved by the Hon'ble High Court of Andhra Pradesh w.e.f. 1.4.2010. The AO observed that in the A.Y 2007-08, the parent company i.e. M/s. Ushodaya Enterprises Pvt. Ltd acquired Usha Kiron Television and Usha Kiron Movies (TV Division) and during the financial year 2007-08, it entered into a noncompete agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the case of Ushodaya Enterprises (P) Ltd. The relevant portion of the order of the Tribunal is reproduced hereunder for the sake of clarity and ready reference: 5. Having regard to the rival contentions and the material on record, we find that on demerger of the parent company, the assessee has succeeded to the issue of the depreciation on non-compete fee as well and therefore, the decision of the Tribunal for the A.Y. 2008-2009 (cited supra) on the very same issue would be consequential and applicable to the facts of the case before us. We find that the Tribunal at paras 25 to 28 of its order has held as under : 25. We have heard the submissions of the parties and perused the orders of revenue authorities as well as other materials on record and also gone through the decisions cited. A perusal of the assessment order as well as the order passed by CIT(A) would leave no room for doubt that assessee's claim of depreciation on non-compete fee has been rejected basically for the following two reasons: 1. Genuineness of the payment made and necessity of paying non-compete fee. 2. Non-compete fee not being in the nature of an intangible asset as defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 of paper book, we find a reference to such precondition in clause 2(a). Further, as it appears from the fact on record and which remains uncontroverted in pursuance to the condition imposed by the domestic investor assessee has entered into the non compete agreement with UKT and UKM for a period of 5 years on payment of non- compete fee of ₹ 670 crores, which is also approved by the domestic investor. It is the contention of assessee that as a result of fulfillment of such condition of non-compete fee thereby excluding UKT and UKM competing with assessee company in future, the domestic company invested substantial amount by acquiring 39% of share in the assessee company. 27. From the aforesaid facts it cannot be denied that Equator Trading Enterprises Pvt. Ltd is a major stakeholder in assessee company. As can be seen from the assessment order as well as order passed by the CIT(A) before coming to their respective conclusion that the transaction entered into by parties for payment of non-compete fee is not genuine or there is no necessity for paying the non-compete fee as the same person is controlling both the assessee company and the two other companies acquired by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on- compete fee is concerned, in course of assessment proceeding, assessee has submitted a valuation report of a CA firm in support of the valuation made by it. Therefore, if the AO had any doubt with regard to the valuation made, he should have got it valued through an independent valuer instead of rejecting the valuation by simply observing that the method adopted is not correct or scientific. It is also alleged by the AO that the payment of non-compete fee was made on the one hand to enable the assessee to reduce its profit and at the same time allowing Shri Ramoji Rao HUF to adjust it against its huge brought forward losses. In this context, it is to be observed that in course of hearing before us the learned AR has submitted certain documents as additional evidence. A perusal of the said documents reveal that Shri Ramoji Rao HUF for the assessment year 2008-09 has not only shown the non compete fee received by it as income but has also adjusted it against the brought forward losses of earlier years. AO i.e. JCIT, Range -16, while completing assessment in case of Shri Ramoji Rao HUF has accepted not only the income but also its adjustment against brought forward losses in an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is reproduced hereunder for the sake of clarity and ready reference: 9. Having regard to the rival contentions and the material on record, we find that the 'A' Bench of this Tribunal at Chennai in the case of ACIT, Media Circle-II, Chennai vs. M/s. Sun TV Network Ltd., Chennai in ITA.Nos.1515 to 1520/Mds/2013 by its order dated 31.10.2013 has held as under : 8. Now, we take up the common issue involved in all the appeals. The assessee is in the business of running satellite television channels. These channels telecast films, serials etc., through satellite channels. The rights over these films are purchased from the producers of the respective films for broadcasting through satellite television. These rights come with an embargo that the films shall not be broadcasted or aired for a specified period from the date of release in theatres depending upon the success at the box office and other factors. Till the time, such films are broadcasted, they are to be treated as stock in trade. Once the films are broadcasted, the purchase value of the films is written-off. The expenditure on purchase of films is claimed in the first year itself. The assessee has got only sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 354 ITR 21 (Del). The Id. DR has not been able to controvert the well reasoned order of the CIT (Appeals) on the issue. Accordingly, the findings of the CIT (Appeals) on the issue are affirmed and this ground of appeal of the Revenue in respect of all the AYs is dismissed. 9.1. In the case of Zee Media Corporation Ltd., (Formerly known Zee News Limited), Mumbai vs. DCIT, Circle-7(3), Mumbai, the 'G' Bench of Tribunal at Mumbai in ITA.No.1590/Mum/2015 by order dated 12.08.2015 has held as under : 25. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited precedents and paper book filed before us. The case of the assessee on the merits is that the assessee has a method of valuation of the news items/non fictional in nature, TV programs and the film rights. The details are given in the aforementioned 'Note No 7' to the financial statements. According to the same, while the news items purchased are debited to the P and L account as they do not have the repeat telecast value, other items like the TV program and the film rights constitutes 'current assets', which are amortised over the years and the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, AO disturbed the claim of the assessee and invoked the provisions of section 32 (ii) of the Act without any sustainable reasoning. We have perused he judgment of Honble High Court of Delhi and the order of the Tribunal of Chennai Bench in the case of M/s Sun TV Networks Ltd (supra). We have also extracted the relevant paragraphs and already placed in this order above. We find similar issue of amortization of the TV Programs/Film rights came up before the Chennai Bench of the Tribunal wherein the issue was decided in favour of the assessee and rejected the AD's proposal to invoke the provisions of section 32(ii) of the Act in respect of the above programs/rights. As such, the Ld DR's argument on the applicability of the AS-26 to the TV Programs and Film rights is not supported by any precedents and therefore, the arguments raised by the Revenue are not allowed. Thus, considering the covered nature of the issue as well as the consistent method of accounting followed by the assessee in this regard and also in the absence of any contrary material to support the arguments of the Revenue against the assessee's claim, we are of the opinion that the decision taken by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... felt a part of footage of the news based on programmes produced has repeat value which could be used for the production of programme in future. The assessee, therefore, estimated 10% expenditure incurred as reasonable to be attributable to the News Archives library. The assessee has been engaged in the production of such programmes since assessment year 1994-95 and all along the cost of production of such expenditure has been treated as revenue expenditure and also allowed by the Department. Learned A.R. has referred to judgment of Hon'ble Supreme Court in the case of Alembic Chemical Works Ltd. vs. CIT 177 ITR 377 which laid down that what is capital expenditure and what is revenue are not eternal verities but must needs to be flexible so as to respond to the changing economic realities of business. Viewed in that perspective, we are of the opinion that the estimated value assigned to the News Archives cannot be treated to be an expenditure incurred in the capital field. We, therefore, uphold the order of CIT (A) on this ground. In this case, there is no dispute that the data base of the programmes which are utilised for the creation of news archives belonged to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, it would have to refer the issue to the file of the AO for consideration after verification of the assessee s claim. The assessee s claim is already pending consideration before the AO and therefore, it would suffice to direct the AO to consider the application expeditiously. 13. In the result, additional ground of appeal raised by the assessee is not admitted. ITA No.1389/Hyd/2016 14. Coming to the Revenue s appeal, the only ground raised by the Revenue is against the direction of the CIT (A) in allowing depreciation on the film software library at 25% treating it as an intangible asset. We find that this issue is covered in favour of the assessee by the decision of the ITAT in the case of M/s. Ushodaya Enterprises (P) Ltd in ITA No.760/Hyd/2015 wherein the Tribunal has remanded the issue to the file of the AO to examine the issue of valuation of the asset and thereafter to allow depreciation @ 25% treating the software library as an intangible asset. We find that the CIT (A) has only followed the direction of the ITAT in holding that, subject to the revaluation of the asset, the depreciation is to be allowed at 25% as claimed by the assessee. Therefore, we see no re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
