2012 (8) TMI 302 - AT - Income Tax

Royalty payable to T.V. channels - dis-allowance on ground that assessee failed to file confirmations from few parties - assessee engaged in the business of receiving, distributing and transferring local and satellite channel programmes through various cable operators - non-admission of additional evidences - Held that - CIT(A) was not justified in not admitting additional evidence particularly when the assessee produced evidence to show that it had made efforts to obtain confirmations which were received only after assessment order was passed. Also, no dis-allowance has been made in earlier years and subsequent years of such royalty payment. Moreover, payments had been made by cheque details of which have been given. Additional evidence should be admitted. Order of CIT(A) set aside, matter restored to file of AO Addition on account of discrepancy in the account of Cable Video India - credit balance outstanding was Rs.9,89,640/- but the party had confirmed credit only to the extent of Rs.6,25,980/- - assessee explained that discrepancy is on account of transactions in the earlier years - Held that - It is clear that discrepancy is on account of transactions in the earlier years and assessee has already offered income in AY 2000-01 on reconciliation of discrepancy and therefore making addition this year would amount to double taxation. therefore addition stands deleted Bad debts - dis-allowance on ground of failure of assessee to disclose nature, date of debt and the year in which the income had been offered - Held that - Though assessee submitted that bad debt claim was on account of subscription fee receivable from cable operators but it was never shown as to the year in which the corresponding income had been offered. We therefore upheld dis-allowance. However, bad debts in case of advance to employees has to be allowed as business loss. Addition made to fixed assets - dis-allowance of expenditure and consequent depreciation on ground of absence of evidences of addition - Held that - Since details of addition of fixed assets had been given and only bills could not be produced as the same were not traceable. We, therefore, set aside the order of CIT(A) and delete the said addition. However in absence of evidence to support uses of amounts for business dis-allowance of depreciation is justified - Decided partly in favor of assessee.

Summary

Issues:
1. Disallowance of royalty expenses payable to T.V. channels.
2. Addition due to discrepancy in the account of Cable Video India.
3. Disallowance of bad debts.
4. Disallowance of addition made to fixed assets.

Analysis:

1. Disallowance of royalty expenses payable to T.V. channels:
The AO disallowed a sum of Rs.45,80,950/- as expenses on royalty payable to T.V. channels due to lack of confirmations from specific parties. The assessee contended that efforts were made to obtain confirmations, which were received after the assessment order. The Tribunal found the CIT(A)'s refusal to admit additional evidence unjustified, considering the efforts made by the assessee. The Tribunal directed the matter back to the AO for reevaluation after examining the additional evidence.

2. Addition due to discrepancy in the account of Cable Video India:
An addition of Rs.3,63,655/- was made by the AO due to a discrepancy in the account of Cable Video India. The assessee clarified that the discrepancy was from previous years and had been reconciled in a subsequent assessment year. The Tribunal found no discrepancy in the current year's transactions and ruled against the addition, as it would lead to double taxation. The addition was deleted.

3. Disallowance of bad debts:
A sum of Rs.3,62,571/- was disallowed by the AO as bad debts due to lack of details regarding the year the debt was incurred and offered as income. The Tribunal upheld the disallowance for subscription fees and advertisements but allowed the claim for advances to employees, stating it should be treated as a business loss. The issue was remanded to the AO for fresh consideration.

4. Disallowance of addition made to fixed assets:
An addition of Rs.2,86,588/- to fixed assets and disallowance of depreciation at Rs.36,203/- were made by the AO due to missing bills. The Tribunal found the disallowance unjustified as the assets were not claimed as expenses, and bills were untraceable. The addition to total income was deleted, but the depreciation disallowance was confirmed due to lack of evidence on the assets' business use.

In conclusion, the appeal of the assessee was partly allowed, with different issues being decided in favor or against the assessee based on the Tribunal's analysis and findings.