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2018 (4) TMI 859 - AT - Income TaxAllowability of the non-compete fee - Held that - Coordinate Bench of this Tribunal has considered the issue at length in the case of Prism T.V Pvt. Ltd 2016 (6) TMI 419 - ITAT HYDERABAD for A.Y 2011- 12 to which one of us i.e. J.M is a signatory and has remanded the issue to the file of the AO for reconsideration after a decision is taken on the allowability of the non-compete fee in the case of Ushodaya Enterprises (P) Ltd. The assessee being a resultant company out of demerger of M/s. Ushodaya Enterprises as in the case of Prism TV Pvt Ltd and the facts and circumstances being enact by the same, this ground of appeal of the assessee is also accordingly remanded to the file of the AO with similar direction and is treated as allowed for statistical purposes. Cost of production of T.V. serials and programmes - Held that - It is seen that the issue is fairly covered in favour of the assessee by the above decision in Prism T.V above and the A.O. is directed to treat the expenditure incurred by the assessee on cost of production of TV programmes as revenue expenditure. Depreciation on the film software library at 25% treating it as an intangible asset - Held that - Remand the issue to the file of the AO to examine the issue of valuation of the asset and thereafter to allow depreciation @ 25% treating the software library as an intangible asset.
Issues Involved:
1. Disallowance of depreciation on non-compete fee. 2. Disallowance of cost of production of TV serials and programs. 3. Credit for TDS not granted. Detailed Analysis: 1. Disallowance of Depreciation on Non-Compete Fee: The assessee, engaged in Satellite Television Broadcasting, filed its return of income declaring “nil” income after setting off total profit. The AO disallowed the depreciation on non-compete fee, observing that it is not a right acquired by the payer but a restriction on the recipient. The CIT (A) upheld this disallowance, following the decision in the assessee’s own case for the A.Y. 2011-12 and considering the ITAT's decision in the parent company’s case, M/s. Ushodaya Enterprises Pvt. Ltd. The ITAT remanded the issue back to the AO for reconsideration after a decision on the allowability of the non-compete fee in the parent company’s case, emphasizing the need to examine the impact of equity share acquisition by M/s. Equator Trading Enterprises Pvt. Ltd. 2. Disallowance of Cost of Production of TV Serials and Programs: The assessee claimed an amount towards the cost of production of TV serials and programs, which the AO treated as capital expenditure, allowing only 25% depreciation. The CIT (A) confirmed this treatment. The ITAT referred to similar cases, including M/s. Prism Television Pvt. Ltd. and M/s. Sun TV Network Ltd., where it was held that such costs should be treated as revenue expenditure. The ITAT directed the AO to treat the expenditure as revenue expenditure, aligning with the precedent set by the Hon'ble Delhi High Court in CIT vs. Television Eighteen India Limited. 3. Credit for TDS Not Granted: The assessee claimed credit for TDS, which the AO partially allowed. The assessee did not initially challenge this before the CIT (A) but filed an application u/s 154 of the Act before the AO, which was pending. The ITAT noted that the issue was not arising out of the CIT (A)'s order and directed the AO to consider the application expeditiously. Additional Judgments: The Revenue’s appeal against the CIT (A)’s direction to allow depreciation on the film software library at 25% was dismissed. The ITAT upheld the CIT (A)’s order, which followed the ITAT's direction in the case of M/s. Ushodaya Enterprises Pvt. Ltd., treating the software library as an intangible asset subject to revaluation. Conclusion: The ITAT partly allowed the assessee’s appeal and dismissed the Revenue’s appeal, directing the AO to reconsider the issues based on the precedents and additional evidence provided.
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