2017 (2) TMI 986 - AT - Income Tax

Treatment of Dubbing Costs - allowable revenue expenditure - whether or not the dubbing cost incurred on translating the foreign language entertainment programmes into Indian languages for making them ready for use/broadcast on the assessee s T.V. Channel Hungama should have formed part and parcel of the licence fee for use of the foreign language entertainment programme and amortised along with the cost of such licences? - Held that - The facts of the case on hand as per details on record are that the assessee was in the business of running a television channel Hungama an entertainment channel for children for broadcasting entertainment programmes; which it procured by payment of licence fees to various channels and production houses. The cost of such licence fees was amortised by the assessee over the period of the licence. It is seen that the dubbing cost was incurred for translating the foreign language entertainment programmes into Indian languages; without incurring of which such foreign language programmes could not have been broadcast on the assessee s channels since the viewers mostly children could not have understood or appreciated them. In this factual matrix of the case we are of the considered view that without the incurring of dubbing costs the asset i.e. the licence could not be utilised for earning revenue. In our view all expenditure incurred for setting up the asset for making it ready for use would amount to and be in the nature of capital expenditure and therefore the dubbing cost incurred by the assessee should form part and parcel of the cost of acquisition of such rights as part of licence i.e. the foreign language entertainment programme and should be amortised alongwith the cost of the licence. We hold and direct accordingly and consequently reverse the order of the learned CIT(A) and restore the order/finding of the AO on this issue. Revenue s grounds of appeal are accordingly allowed.

Summary

Issues:
Treatment of Dubbing Costs in relation to foreign language entertainment programmes for broadcasting on the appellant's television channel 'Hungama' for A.Y. 2010-11.

Detailed Analysis:

Issue 1: Treatment of Dubbing Costs
The primary issue raised in the appeal pertains to the treatment of dubbing costs incurred by the appellant in translating foreign language entertainment programs into Indian languages for broadcasting on their television channel 'Hungama.' The appellant claimed these costs as revenue expenditure, while the Assessing Officer (AO) contended that such costs should be treated as part of the license fee for acquiring rights and amortized over the license period. The CIT(A) allowed the appellant's claim, considering the dubbing costs as revenue in nature, relying on a previous decision. However, the tribunal disagreed with this view and held that the dubbing costs should be considered capital expenditure, forming part of the cost of acquiring rights and amortized along with the license fee. The tribunal found that without incurring dubbing costs, the asset (license) could not be utilized for revenue generation. The tribunal also highlighted the distinction between the cited case and the current scenario, emphasizing the capital nature of dubbing costs in the appellant's case. Consequently, the tribunal allowed the Revenue's appeal for A.Y. 2010-11.

This detailed analysis provides a comprehensive overview of the issues involved in the legal judgment regarding the treatment of dubbing costs in the context of foreign language entertainment programs for broadcasting on the appellant's television channel 'Hungama' for the assessment year 2010-11.