TMI Blog2018 (12) TMI 1820X X X X Extracts X X X X X X X X Extracts X X X X ..... in Assessment Year 2011-12, same should be deleted to avoid the double taxation. We have seen that ld. CIT(A) has given reasonable direction to the Assessing Officer, if the assessee has offered remaining receipt in subsequent Assessment Year then to reduce such income from assessee s total income assessed for Assessment Year 2011-12. In our view, the direction given by ld. CIT(A) is quite reasonable and which does not require any interference. Addition on account of Annual consideration paid to BCCI - HELD THAT:- As in 2009-10 in assessee s own case [ 2018 (1) TMI 786 - ITAT MUMBAI] Tribunal is of the considered view that the payment of the Franchise fee for IPL Season-1 by the assessee can safely be held to be in the nature of a revenue expenditure, which was rightly claimed by the assessee as such while computing its income for the year under consideration - thus Franchise fee paid by the assessee to BCCI is a revenue expenditure. Feasibility study expense - Allowable business expenses or not? - AO allowed only 1/5th of the expenses - HELD THAT:- There is no dispute that lower authorities have not disputed the cost of the expenses. We have noted that the lower author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the proceedings and had not been reconciled, therefore, in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills,pertained to expenses incurred by the assessee in the course of its business, or not. We may however clarify that the A.O shall while readjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications. Claim of the deduction of franchise fee /consideration - Admission of additional ground - HELD THAT:- We have noted that the assessee has raised this ground of appeal on the basis of decision of Tribunal for assessment year 2009-10. The assessee has raised this ground of appeal for the first time before the Tribunal; therefore, the additional ground of appeal is admitted and is restored to the file of assessing officer to decide the same in accordance with law. Needless to order that before passing the order the assessing officer shall grant the opportunity to the assessee to explain and substantiate its contention on the issue. In the result the additional ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure 3. erred in upholding the order of the learned AO, by confirming the annual consideration of ₹ 30,03,60,000 paid/payable by the Appellant to The Board of Control for Cricket in India ('BCCI'), which is revenue in nature, as a capital expenditure. 4. erred in upholding the order of the learned AO, by confirming that the annual consideration paid/payable to BCCI is in the nature of license or franchise or any other business or commercial right of similar nature (i.e intangible asset) as per the provisions of section 32(1)(ii) of the Act. 5. without prejudice to the above, erred in upholding the learned AO's order by confirming the cost of the intangible asset to be only ₹ 30,03,60,000 (i.e the annual consideration), instead of adjusting the actual cost of the franchise for the purpose of computing the depreciation. Disallowance of feasibility study expenses 6. erred in upholding the order of the learned AO, by confirming the disallowance of ₹ 19,32,720 in connection with feasibility study expenses, on the premise that the expenditure is in nature of preliminary expenditure and covered under section 350 of the Act. 7. erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. Others 13. erred in upholding the additions made to the returned loss of the Appellant on an adhoc basis, on the basis of incorrect assumptions and not considering that the business expenses have been solely incurred for the purpose of the Appellant's business, which the Appellant does not agree and disputes. 14. erred in upholding consequential levy of interest under section 234B of the Act and section 2340 of the Act. 15. erred in upholding the initiation of penalty proceedings under section 271(l)(c) of the Act. Each of the above ground is independent and without prejudice to one another. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal at or before the hearing of the appeal, to decide the appeal according to law. 3. The assessee vide its application 26th June 2018 raised the following additional ground of appeal: 16. Without prejudice to Ground No.1 to Ground No.15 and out of abundant caution (in light of the order dated 29 December 2017 passed by the Hon ble Income-tax Appellate Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing, we have noted that the sole ground of appeal raised by revenue relates to deleting the addition of Website design charges. The Revenue in its ground of appeal has wrongly mentioned that ld. CIT(A) erred in deleting the addition of ₹ 61,77,358/-. In fact the assessee claimed deduction of ₹ 61,77,358/-. The Assessing Officer while passing assessment order treated the expenditure on Website design as capital expenditure and allowed depreciation @ 60% (₹ 37,06,415/-) thereby restricted to ₹ 24,70,493/-. The ld. CIT(A) treated the entire expenditure as revenue expenditure and directed the Assessing Officer to delete the entire addition. 7. In the aforesaid background, we have noted that the tax effect involved in the revenue s appeal is less than the monetary limit determined by CBDT in its Circular No. 3/2018 dated 11th July, 2018. Therefore, keeping in view that tax effect involved in the revenue s appeal is less than the monetary limit fixed by the CBDT for filing appeal before the Tribunal. Hence, the appeal filed by revenue is dismissed as not maintainable. 8. In the result, appeal of the Revenue is dismissed. ITA No. 4310/Mum/2014 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a total amount of ₹ 36,90,33,574/- on account of Sponsorship Right, 50% of which is ₹ 18,45,16,787/-, however, the assessee while filing return of income has offered ₹ 16,45,21,911/- thereby offered less income of ₹ 1,99,94,876/-. Therefore, the difference amount was brought to tax. Before the ld. CIT(A), the assessee urged that similar contention as urged before us that 10% of the fees were attributed towards participation and promotional activities by the team members and accordingly 50% of 90% of the revenue has been offered during the year and remaining 10% has been offered on pro-rata basis over the term of respective Sponsorship Right Agreement and the same has been offered for tax accordingly. The ld. CIT(A) after considering the contention of the assessee observed that the methodology adopted is followed by the assessee is difficult to understand as the same is neither as per accounting standard nor as per any specified criteria, once the Sponsorship Right Agreement have been signed for particular supporting event, the amount received is already determined, therefore, the assessee on his own should have offered 50% of such income, if 100% is not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -17 (inclusive), as under:- (i) a sum of USD 22,52,700/- equivalent to INR 9,01,08,000/- towards League deposit on or before 2nd January in each such year, which thereafter was to be appropriated towards the annual Franchise consideration on the date of the First match of the League in the year in which the League Deposit was paid. The League deposit was refundable in any year if the league did not take place at all in such year, under which circumstance the amount was to be refunded without interest; AND (ii) a sum of USD 52,56,300/- equivalent to INR 21,02,52,000/- was to be paid by the assessee every year on the date of the First match of the League in each such year. (b). that from and including the year 2018 onwards, the franchisee remained under an obligation to pay an amount equal to 20% of the franchisee income received in respect of such year, which sum was to be paid in four instalments, i.e within 60 days of 31st March, 30th June, 30th September and 31st December in 2018 and each subsequent year of the term. We further find that the term Year as defined in Clause 1 was to be construed as each 12 month period (or part thereof) from 1st January to 31st Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of signing of the agreement till 31st December, 2008. We have deliberated at length on the rights and obligations contemplated in the franchise agreement. We find that in case of non-staging of the league by BCCI- IPL (in whole or part) the same was not to constitute a breach of the agreement, and the assessee was divested of his right to take any legal action against the other party, viz. BCCI or enforce the playing of the matches. We further find that as can fairly be gathered from perusing the details of the Central licensing/Franchisee licensing as defined in the franchisee agreement per the terms of the agreement, all the broadcasting rights as regards the telecast of the matches remained with the BCCI, while for the assessee was only vested with the rights as that of a franchisee. We further find that the assessee as gathered from Clause 10 of the franchise agreement was not vested with any right to assign or delegate the performance of any right or obligation under the agreement. That still further as per Clause 22 of the agreement, in case of breach by the franchisee of the terms contemplating the payment obligation to BCCI, the same was to be construed as a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of rights of the assessee franchisee on payment of the Franchise fee and find that while for the Central Rights were retained by BCCI, the Franchisee rights remained with the assessee. We further find that though by making the payment of the Franchise fee the assessee got a right to participate in the league and operate its home team for the year for which the payment was made, but however, the non-staging of the league by BCCI-IPL (in whole or part) would not constitute a breach of the agreement, and the assessee was neither vested with any right to enforce the playing of such matches by BCCI nor had any right to take any legal action for the said failure on the part of the BCCI to stage the matches. We have further observed that the aforesaid franchise rights as per Clause 16 of the franchise agreement were personal to the franchisee and it had no right to either assign the agreement or to sub-contract or otherwise delegate the franchisees obligations under it without the BCCI-IPLs written consent. We further find that the issue before us as to whether the Franchise fee paid to BCCI-IPL is a revenue expenditure or a capital expenditure had already been looked into and adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8223;ble Apex Court was as to whether the right of membership conferred upon the members under the BSE membership card is a business or commercial right which gives a non-defaulting continuing member a right to access the exchange and to participate therein, and in that sense a license or akin to licence in terms of Sec. 32(1)(ii) of the Act. We find that as the aforesaid right of membership conferred upon the members under the BSE membership card an enduring benefit, which would vest with the stock exchange only on the default/demise in terms of Rules and bye-laws of BSE, therefore, it was in the backdrop of the aforesaid material facts that the Hon‟ble Apex Court had concluded that the same was an intangible right which was entitled for claim of depreciation. We may herein observe that the Hon‟ble Apex Court in the aforesaid case had as a word of caution observed that the said judgment may not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of Sec. 32(1)(ii) of the Act, by holding as under: 24. Before concluding, we wish to clarify that our present judgment is strictly confined to the right of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the contentions of the assessee as regards quantification of the W.D.V for computing the depreciation in respect of the franchise rights is rendered as redundant and is not being adjudicated by us. The Ground of appeal No. 2 to 4 are allowed in terms of our aforesaid observations. 16. Considering the decisions of Tribunal in assessee s own case, the ground No. 3 to 5 of the appeal are allowed with similar observation as per the order dated 29.12.2017 in ITA No. 1307/Mum/2013. 17. Ground No. 6 7 relates to Feasibility study expense. The ld. AR of the assessee submits that Feasibility study expenses incurred by the assessee are related with the business expenses. There is no allegation of lower authorities that it was not for the business purpose. The ld. AR of the assessee further submits that after IPL Season 2008, the assessee deliberate that since annual cost hiring of Stadium under by Greater Association of Bengal is substantially high, it may be cost efficient to complete own and manage cricket Stadium in Eastern India, catchment area for home matches of assessee. The Stadium used by assessee was State Government Stadium and assessee was unable to improve as the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure incurred on such feasibility report as revenue expenditure Similar view was express by Hon ble Delhi High Court in CIT Vs Priya Village Roadshaw (supra). 20. In the result, ground no. 6 7 of appeal are allowed. 21. Ground No. 8 relates to Stamp duty expenses. The ld. AR of the assessee submits that the expenses incurred by assessee on stamp duty expenses paid on various agreements are purely a revenue expenses. The Assessing Officer treated the expenditure as capital in nature. 22. On the other hand, the ld. DR for the Revenue supported the order of lower authorities. The ld. DR for the revenue submits that expenses were not incurred for the purpose of business of the assessee. 23. We have considered the rival submission and perused the orders of authorities below. We have noted that the assessee claimed expenditure of ₹ 2,75,010/- towards stamp duty expenses for transfer of assessee s company share from Red Chilli s Entertainment Pvt. Ltd. to Shahrukh Khan Gauri Khan. The Assessing Officer treated the expenses as capital in nature and disallowed the same. The ld. CIT(A) confirmed the action of Assessing Officer holding that the expenditure is go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O observed that the assessee had failed to produce before him any evidence, viz. air tickets, details of vehicles, name of service providers, persons utilizing the services and their nexus with the business of the assessee. We find that a perusal of the assessment order reveals that an adhoc disallowance of the aforementioned expenses was carried out by the A.O not for the reason that the assessee had failed to substantiate the genuineness and veracity of the expenses, but rather, for the reason that as per him now when the assessee had incurred expenses towards food, boarding and lodging for the actors, celebrities, VIP's etc., therefore, it would also have incurred airfare expenses, travelling expenses and vehicle charges in respect of the said persons. We find that the CIT(A) observing that the assessee had not placed before him any evidence, e.g air tickets, details of vehicle, name of service providers, persons utilizing these services and their nexus with business etc, therefore, concluded that the possibility of the expenditure being partly for non business purposes could not be ruled out. Thus the CIT(A) on the aforesaid reasoning had upheld the disallowance of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered view that the observations of the A.O that an adhoc disallowance of airfare expenses, travelling expenses and vehicle hiring expenses was called for in the hands of the assessee for the reason that expenses under the said respective heads must had been incurred by the assessee in respect of actors, celebrities, and VIPs, cannot be sustained. However, keeping in view the fact that as observed by the CIT(A) that the assessee had failed to place before him any evidence e.g air tickets, details of vehicles, name of service providers, details of persons utilizing these services and their nexus with business etc, therefore, as per him the possibility of the expenditure partly having been incurred for non business purposes could not be ruled out, and the fact that the assessee too had submitted before us that sufficient opportunity was not allowed to it at the time when such adhoc disallowance of expenses was made, therefore, in all fairness restore the matter to the file of the A.O for making necessary verifications on the basis of documentary evidence as regards the entitlement of the assessee towards the claim of the aforesaid expenses. We herein direct that the A.O shall i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submits that the assessee be allowed full relief as the assessee has furnished complete evidences. 29. On the other hand the ld. DR for the revenue supported the order of thr authorities below. 30. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the assessee has raised similar ground of appeal in appeal for A.Y. 2009-10 and the Tribunal restored the issues to the file of Assessing Officer with the following direction: 54. We now advert to the disallowance by the A.O of the expenses which were claimed by the assessee in its profit and loss account for the year under consideration, which thereafter had been sustained by the CIT(A), viz. (i) out of food and nutrition expenses: ₹ 58,53,575/-; and (ii) out of boarding and lodging expenses of ₹ 1,90,16,944/-. We find that as per the A.O the information gathered during the course of survey proceedings conducted under Sec. 133A on 21.04.2010 at the office premise of the assessee at Eden Garden, Calcutta, revealed that the assessee had incurred an expenditure of ₹ 1,35,46,255/- (room billing: ₹ 96,25,375/- and partying bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith people from show business, actors, celebrities, VIPs etc, were invited for the matches for the purpose of increasing the viewing of the matches, which thus consequently led to increase in sale of tickets and generation of higher amount of sponsorship fees. We have deliberated on the contentions raised by the authorized representatives for both the parties and the material available on record. We are of the considered view that it remains as a matter of fact that the game of cricket, unlike in the past, as on date had been highly commercialized. We find that the main source of income of an IPL franchisee from hosting of the cricket matches is from ticketing and receipt of sponsorships by staging the cricket matches. We are of the considered view that it remains no hidden a fact that in order to boost the ticket sales and to receive higher sponsorships the franchisees of the IPL teams leave no stone unturned, and to lure the public for buying tickets, invite actors, celebrities, VIPs etc. during the matches. We find substantial force in the contention of the ld. A.R that this is the way the assessee operates its team and carries out its business. We cannot remain oblivious of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business. We are further of the view that hosting of parties by the assessee at ITC, sonar Kolkata or at other venues on the days when the matches were played at the home grounds of the assessee, which were attended by the assessee's own team, visiting teams, support staff, directors and invitee guests, which included amongst others actors, celebrities, VIPs who had marked their presence at the matches, can safely be held to be expenditure incurred by the assessee in the very interest of its business. We are of the considered view that the allowability of an expenditure under Sec.37(1) of the Act is required to satisfy the requisite condition contemplated therein, viz. (i) the expenses are not of the nature of the expenses defined in Sec.32 to 36 of the Act; (ii) the expenses are not in the nature of a capital expenditure; (iii) the expenses are not the personal expenses of the assessee; and (iv) the expenses are incurred wholly and exclusively for the purposes of the business of the assessee. We find that in the present case before us the aforesaid requisite conditions had duly been satisfied by the assessee, and as observed by us hereinabove, the expenditure incurred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusing the order of the CIT(A) we find that latter had referred to certain bills wherein a clear nexus between the expenditure incurred and the purpose of hosting the parties could not be established, viz. (i) bill of ₹ 3,44,410/- for 300 snacks, 300 soft beverages and transport charges, wherein nothing could be gathered from perusing the same about the purpose and persons attending the party; (ii) bill of ₹ 5,31,573/-, dated 30.04.2008 which though was raised in favour of IPL ODC for dinner of 400 persons, however, as to how the same was payable by the assessee had remained unexplained; (iii). That certain other bills, viz. bill of ₹ 5,31,893/- for 08.05.2008; bill of ₹ 5,31,893/- for 13.05.2008; and bill of ₹ 5,31,894/- for 20.05.2008, which included dinner, equipment rental, tobacco, etc, but they too did not indicate the purpose and the persons attending the said occasion; (iv). bill of ₹ 4,51,900/- which was for 400 snacks, soft drinks, transportation, equipment rental, which did bear a discrepancy, as against the said date the amount mentioned in the submissions by the assessee was ₹ 6,83,071/- which could not be reconciled; and (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee submits that the assessee has raised additional grounds of appeal, which is without prejudice to the original grounds of appeal raised by the assessee. The ld. AR for the assessee submits that all the facts for adjudication of additional ground of appeal are emanating from the record and no new facts are necessary to brought on record. The ld. AR for the assessee submits that the additional grounds of appeal may be admitted and appropriate direction may be given to the lower authorities to consider the additional grounds in the light of decision of Tribunal dated 29th December 2017, which are without prejudice to the original grounds of appeal. 34. On the other hand the ld. DR for the revenue opposed the plea of the ld. AR for the assessee. The ld. DR for the revenue further submits that the assessee intends to claim double relief on the basis of decision of Tribunal for assessment year 2009-10. 35. We have considered the rival submissions of the parties and perused the additional ground of appeal. We have noted that the assessee has raised this ground of appeal on the basis of decision of Tribunal for assessment year 2009-10 dated 29.12.2017. The assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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