2015 (2) TMI 110 - AT - Income Tax

Excess amortization cost debited to the profit and loss account - addition was in respect of Satellite rights of 107 films, Split wide open (satellite rights) and Satellite rights of six films - CIT(A) deleted the addition - Held that - CIT(A) has given his finding and to the extent details were not available Ld. CIT(A) has directed the AO to verify the details. The findings recorded by Ld. CIT(A) are based on the details filed by the assessee before Ld. CIT(A). No discrepancy has been pointed out by the Revenue in the findings recorded by Ld. CIT(A). With regard to 107 satellite rights, it has been specifically mentioned by Ld. CIT(A) that realization of the assessee from these films were upto the date of rights available with the assessee and these facts have been described in the table which remains uncontroverted. Similarly, with regard to split wide open, the cable TV and video rights available to the assessee were upto 30/09/2005 and 28/06/2005 respectively which were sold upto 7/12/2005 and similarly for other films also Ld. CIT(A) has recorded the dates and that portion of Ld. CIT(A) s order has also reproduced in the above part of this order. In absence of any discrepancy pointed out in these findings, it cannot be said that Ld. CIT(A) has granted the relief to the assessee without application of mind or in absence of details of facts. The respective dates are clearly mentioned in respect of rights available to the assessee and the period upto which those rights were sold. Therefore, we decline to interfere in the relief granted by Ld. CIT(A) and the appeal filed by the Revenue is dismissed. - Decided in favour of assessee.

Issues Involved:
1. Deletion of excess amortization cost debited to the profit and loss account by the assessee.
2. Whether the order of CIT(A) should be set aside and that of the Assessing Officer (AO) restored.

Detailed Analysis:

Issue 1: Deletion of Excess Amortization Cost
The primary issue in this case revolves around the deletion of excess amortization cost debited to the profit and loss account by the assessee, which the Revenue contends was in contravention of the provisions of the Income-tax Act and Income-tax Rules. The assessee, engaged in the business of purchasing video rights and other rights of feature films and selling and distributing the same, filed its return of income at a loss of Rs. 1,51,35,150/-. During the assessment proceedings, the AO observed that the assessee had been debiting the entire amount of purchase in the year in which it had some revenue, leading to an excess cost amortized during the year. The AO identified specific cases of excess amortization and added Rs. 1,64,62,093/- to the income of the firm.

The assessee argued that the valuation of closing stock of all the titles in question was rightly taken at NIL, as upon sale of the said rights, no Satellite Rights would revert back to the assessee, in terms of Rule 9B, which is applicable for the firm rights whether theatrical or non-theatrical. The AO, however, rejected this contention and assessed the income of the assessee at nil after giving the benefit of set-off of carried forward losses of earlier years.

Issue 2: Whether the Order of CIT(A) Should Be Set Aside and That of AO Restored
On appeal, the CIT(A) observed that the AO had not made any attempt to establish the facts of the case and had not verified the assessee's submission. The CIT(A) found that the assessee had disclosed inventory as on 31/3/2004 at Rs. 6,44,94,247/- and was valuing its stock of film copy rights and maintaining inventory on the basis of cost or fair market value, whichever is less. The CIT(A) concluded that the amortization in respect of 107 films and the film "Split Wide Open" was allowable. However, in respect of the satellite rights of six films, the CIT(A) allowed amortization for "Lahu Ke Do Rang" and "Agni Chakra" but sustained disallowance for "Roza" and "Joshila". For "Muthu Maharaj" and "Dil Hi Dil Me", the CIT(A) directed the AO to verify the period of rights available to the assessee.

The Revenue, aggrieved by the CIT(A)'s decision, argued that the method adopted by the assessee for claiming the entire expenditure was improper and that the CIT(A) had wrongly deleted the disallowance. The assessee, on the other hand, contended that no excess expenditure had been claimed and that the CIT(A) had given a finding after verification of facts.

Tribunal's Decision
The Tribunal, after hearing both parties, noted that the CIT(A) had required the assessee to submit various details and had given findings based on the details provided. The Tribunal observed that no discrepancy had been pointed out by the Revenue in the findings recorded by the CIT(A). The Tribunal found that the realization of the assessee from the 107 satellite rights was up to the date of rights available with the assessee and that the cable TV and video rights for "Split Wide Open" were sold within the period of rights available.

In the absence of any discrepancy in these findings, the Tribunal concluded that the CIT(A) had granted relief to the assessee based on detailed facts and verification. Therefore, the Tribunal declined to interfere with the relief granted by the CIT(A) and dismissed the appeal filed by the Revenue.

Conclusion
The Tribunal upheld the CIT(A)'s decision to delete the disallowance of excess amortization cost for the 107 satellite rights and the film "Split Wide Open". However, it sustained the disallowance for the satellite rights of "Roza" and "Joshila" and directed the AO to verify the period of rights for "Muthu Maharaj" and "Dil Hi Dil Me". The appeal filed by the Revenue was dismissed, and the order was pronounced in the open court on 10.12.2014.

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