2018 (8) TMI 1802 - AT - Income Tax

Expenditure incurred for purchase of audio and video rights of feature films for production of cassettes and CDs -nature of expenditure - revenue or capital expenditure - HELD THAT - Issue as considered by the Tribunal in assessee s own case for earlier years and after considering relevant facts held that expenditure incurred for purchase of master plates is revenue in nature. - Decided against revenue

Summary

Issues:
1. Whether the expenses incurred on audio right expenses amounting to ?2,09,48,337 should be treated as revenue or capital expenses.
2. Whether the CIT(A) erred in directing to delete the addition of audio right expenses without appreciating the nature of the expenses.

Analysis:
1. The appeal pertains to the assessment year 2010-11 where the revenue challenged the order of the CIT(A) regarding the treatment of expenses incurred on audio right expenses. The assessee, engaged in manufacturing and sale of audio cassettes and CDs, claimed the expenses as revenue expenditure. The CIT(A) allowed the deduction based on the ITAT, Mumbai's decision in the assessee's own case for an earlier year, holding the expenses as revenue in nature.

2. The Tribunal noted that the issue had been consistently decided in favor of the assessee for earlier years. The Tribunal relied on the precedent set by its earlier decisions and dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition of audio right expenses. The Tribunal emphasized that no distinguishing facts were presented by the Revenue, leading to the dismissal of the appeal.

3. The Tribunal concluded that the expenditure incurred for the purchase of audio video rights should be treated as revenue in nature, in line with the judicial precedence of earlier years. The Tribunal found no error in the CIT(A)'s order and upheld the deletion of the addition made by the Assessing Officer. Consequently, the Tribunal dismissed the appeal filed by the revenue.

4. The Tribunal's decision was based on the consistent application of legal principles and the interpretation of expenses related to audio right acquisitions. The judgment highlighted the importance of following established precedents and upholding the principles of revenue versus capital expenditure in such cases.

5. Ultimately, the Tribunal's detailed analysis and reliance on past decisions provided a clear rationale for dismissing the revenue's appeal and confirming the treatment of the expenses as revenue in nature. The judgment emphasized the significance of legal precedents and consistent interpretation of tax laws in determining the nature of expenses for tax purposes.