TMI Blog2020 (7) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... r the business, as VIPs and Celebrities are invited to attract more crowd and add glamour to the sporting event - HELD THAT:- As decided in own case [ 2018 (1) TMI 786 - ITAT MUMBAI] 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. A.O shall in the backdrop of our aforesaid observations make necessary verifications as regards the aforesaid claim of expense of the assessee booked under the said respective heads, viz. airfare expenses, travelling e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchise , u/s 32(1)(ii) of the Income Tax Act, 1961 (herein after referred to as the Act ) and is an intangible asset. The Assessing Officer concluded that payment of Franchisee Fee is capital in nature. The Assessing Officer allowed depreciation @25% on Franchisee Fee. Apart from above addition, the Assessing Officer in assessment proceedings disallowed certain expenses claimed by the assessee viz. Air fare expenses, travelling expenses, boarding and lodging expenditure, etc. Aggrieved against the assessment order dated 28/03/2014 passed under section 143(3) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) granted part relief to the assesse by allowing some of the expenditures disallowed by the Assessing Officer. However, on the issue of nature of Franchisee Fee i.e. capital vs. revenue and disallowance of air travelling expenditure, boarding and lodging expenditure, the CIT (A) upheld the findings of Assessing Officer. Hence, the present appeal by the assessee. 3. Shri J.D. Mistry, ld. Counsel appearing on behalf of the assessee submitted that ground No.2 to 4 of the appeal are in respect of deduction of franchisee consideration. The primary issue is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee pointed that in the aforesaid assessment years there were allegation of discrepancy and non-furnishing of documents. The assessee is on a better footing in the assessment year under appeal as there is no allegation of discrepancy or non-furnishing of documents. The AO made disallowance in a mechanical manner without examining the details. The ld. Counsel for the assessee prayed for allowing the assessee s claim in full. 5. In respect of ground No.7 and 8 relating to disallowance of expenditure on boarding and lodging and food, the ld. Counsel for the assessee submitted that the disallowance has been made without verifying the records, in an arbitrary and unjustified manner. No discrepancy is alleged by the Assessing Officer. The assessee claimed expenditure of ₹ 1,14,47,456/- on boarding, lodging food, etc. The Assessing Officer made adhoc disallowance of 33%. The ld. Counsel for the assessee pointed that in assessment year 2009-10 similar disallowance was made. The assesse assailed the addition before the Tribunal. The Tribunal vide order dated 12/12/2017 in ITA No.4087/Mum/2014 is restored the issue back to the Assessing Officer for de-novo adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at length as regards the nature of the rights as got vested with the assessee on the payment of the Franchise fee of ₹ 30,03,60,000/- to BCCI. We have given a thoughtful consideration to the issue before us and are of the considered view that the payment of the Franchise fee by the assessee to BCCI-IPL only facilitated participation in the league and operating the team for the year for which the payment pertained, with no vested right to participate in the events for the subsequent year/years. We are of the considered view that as the aforesaid payment of Franchise fee which facilitated the participation in the league and operating the team was restricted only to the year to which the payment pertained, therefore, it can safely be concluded that by making such payment there was neither a creation of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We find that a conjoint reading of Clause 7 of the agreement contemplating the payment of the Franchise fee and Clause 1 defining the term year , clearly reveals beyond any scope of doubt that the payment of the Franchise fee of ₹ 30,03,60,000/- by the assessee for IPL Season-1 was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition of any asset but for an annual right to manage the franchise. The purpose of the expenditure to be incurred under the agreement by the assessee has been stated in Clause 6 of the agreement as consideration for the right to operate the Franchise and to be a member of the league. The total expenditure of ₹ 44,76,00,000/- payable in yearly instalments of ₹ 44,76,00,000/- for ten years was clearly for the purpose of securing franchise right from BCCI. Thus payments made by the assessee were for the annual benefits only not extending beyond one year. Its right to operate and manage the team is subject to prior payment of annual franchise fee; if the assessee fails to make the payment, then it would not be allowed to participate in IPL. Thus, the assessee has made the annual payments to earn the annual income. The nature of transaction/payment clearly demonstrates that the assessee is neither obtaining any enduring benefit by making payment of annual instalment these payments are giving rise to any assets. These payments are mere annual payments to BCCI-IPL to give a right to the assessee to participate in the matches with its team. Therefore, the annual franchise pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vests in the Exchange only on default/demise in terms of the rules and bye-laws of BSE, as they stood at the relevant time. Our judgment should not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of s. 32(1)(ii) of the 1961 Act. Similarly, in the case of Jonas Woodhead And Sons (India) Ltd. (supra) the Hon‟ble Apex Court in the backdrop of the facts involved in the case before it, observed, that as the foreign company pursuant to an agreement with the assessee had provided technical know how and services for setting up of the plant and manufacturing of products, with no embargo on the assessee to continue with the manufacturing of the products even after the expiry of the agreement, therefore, an enduring benefit got vested with the assessee, and thus the payment made by the assessee for the same was a capital expenditure. We are of the considered view that unlike the facts involved in the aforesaid case laws relied upon by the A.O, in the case before us, as no enduring benefit by making the payment of the Franchise fee got vested with the assessee, therefore, the said judicial pronouncements being d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuous. The ground No. 4 of the appeal is dismissed as such. 11. In grounds No.5 and 6 of the appeal, the assessee has assailed adhoc disallowance of air fare and travelling expenditure. The assessee in the impugned assessment year claimed air fare and travelling expenditure of ₹ 1,03,85,544/-. The Assessing Officer held that the expenditure includes travelling expenditure incurred for VIPs and Celebrities and, hence, not allowable under section 37(1) of the Act. The Assessing Officer made adhoc disallowance of 25% of such expenditure claimed. The contention of the assessee is that the expenditure is necessary for the business, as VIPs and Celebrities are invited to attract more crowd and add glamour to the sporting event. The ld. Counsel for the assessee asserted that in the impugned assessment year, the Assessing Officer has not pointed any discrepancy, hence, entire expenditure should be allowed. We find that in AY 2009-10 adhoc disallowance of 25% in respect of air fare and travelling expenditure was made by Assessing Officer on similar grounds. The Tribunal restored the issue back to the file of Assessing Officer by observing as under:- 61. ....................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations 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 in the backdrop of our aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of its business. We thus being of the considered view that as the expenditure incurred by the assessee on food and nutrition and boarding and lodging for the members of the team (including visiting teams), support staff, directors and the invited guests, which amongst others included actors, celebrities, VIPs, being in the nature of expenditure incurred by the assessee in the very interest of its business, therefore, in the absence of any irrefutable documentary evidence which could had established beyond any doubt that the same had been incurred by the assessee either to meet out a personal obligation or was for a purpose which could not be held to be wholly and exclusively for the purpose of the business, therefore, are unable to persuade ourselves to subscribe to the disallowance of the expenses by the A.O for the reason that the parties hosted by the assessee were attended by such actors, celebrities and VIPs, as well as expenditure was incurred towards booking of rooms for their stay in hotels of repute. We are further in agreement with the contention of the ld. A.R who had rightly stated that this is the way the assessee carries out his business, and are of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-;and (vi) and bill of ₹ 5,31,893/-, dated 25.05.2008 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 re-adjudicating 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 in respect of the limited issue for which the matter had been restored to his file. Needless to say, the A.O shall while re-adjudicating the aforesaid issue afford sufficient opportunity of being heard to the assessee, who shall remain at a liberty to furnish material and documents to substantiate his claim. The Grounds of appeal No. 9 10 are allowed for statistical purpose in terms of our aforesaid purposes. We find that in assessment year 2010-11, similar disallowance was made. The Tribunal relying on the decision for 2009-10 in assessee s own case, restored the issue to AO for fresh adjudication. Since the facts in the impugned assessment year are identical, we deem it appropriate to restore this issue back to the file of Assessing Officer with similar directions. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ockdown held:- 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present sit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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