2019 (5) TMI 92 - AT - Income Tax

Disallowance u/s 14A r/w rule 8D - HELD THAT - As in assessee s own case for assessment year 2006 07 we restore the issue to the file of the Assessing Officer to verify assessee s claim that in the facts of assessee s case, disallowance u/s 14A can be reasonably be computed @ 5% of the exempt income earned during the year. AO must decide the issue after due opportunity of being heard to the assessee. - Ground is allowed for statistical purposes. Addition towards publicity expenses by the assessee - HELD THAT - Identical issue arising in assessee s appeals for assessment year 2003 04 and 2004 05 was decided in favour of the assessee by the first appellate authority. Therefore, following the aforesaid decisions, he deleted the disallowance made by the Assessing Officer. TP Adjustment - determination of arm's length price of advertisement and publicity expenses, as raised in additional grounds - HELD THAT - The advertisement and publicity expenses whether is an international transaction and it at all it is so, what should be the arm's length price of the transaction requires verification of primary facts which, as per AO s own version, is neither available in Form no.3CEB report nor in the course of proceedings before the Transfer Pricing Officer - the issues raised in additional grounds require verification / investigation into fresh facts which are not available on record - as noticed that identical additional grounds were raised by the Department before the Tribunal in the appeal filed in assessee s own case for assessment year 2006 07. Accrual of income - addition on account of commission income - HELD THAT - Issue to be decided in favour of assessee as relying on assessee's own case 2009 (3) TMI 990 - BOMBAY HIGH COURT Depreciation on computer peripherals @ 60% to be allowed as relying on assessee's own case. Addition u/s 68 - HELD THAT - FAA has factually verified the claim of the assessee and has found that all the details relating to the Cable Operators who have made deposits with the assessee are available on record and have been duly reflected in the books of account of the assessee. Also recorded a finding of fact that not only the deposits were received by cheque but subsequently they have been adjusted/refunded back to the Cable Operators. DR has not controverted the aforesaid factual finding except submitting that Commissioner (Appeals) should have called for a remand report from the Assessing Officer on the submissions made by the assessee. Commissioner (Appeals) after verifying the facts brought on record has found that the deposits were received from Cable Operators and the aforesaid factual finding remains uncontroverted, there is no reason to interfere with the decision of learned Commissioner (Appeals). - Decided against revenue.

Summary

Issues Involved:
1. Disallowance under section 14A read with Rule 8D.
2. Deletion of addition on account of publicity expenses.
3. Deletion of addition on account of commission income.
4. Depreciation on computer peripherals.
5. Deletion of addition under section 68.

Detailed Analysis:

1. Disallowance under section 14A read with Rule 8D:
The assessee challenged the disallowance of ? 45,02,500 under section 14A read with Rule 8D. The Assessing Officer (AO) computed the disallowance at ? 58,94,863, which was reduced by the Commissioner (Appeals) to ? 45,02,500. The assessee argued that Rule 8D, introduced from 1st April 2008, was not applicable for the assessment year 2005-06. The Tribunal agreed, stating the computation under Rule 8D was legally unsustainable for the relevant year. The issue was restored to the AO to verify the reasonableness of the disallowance at 5% of the exempt income, allowing the ground for statistical purposes.

2. Deletion of addition on account of publicity expenses:
The Revenue challenged the deletion of ? 46,28,20,416 towards publicity expenses. The AO disallowed a significant portion of the advertisement and publicity expenditure, arguing it benefited the overseas principal, M/s. STAR, Hong Kong. The Commissioner (Appeals) deleted the disallowance, referencing consistent decisions in the assessee's favor from previous years. The Tribunal upheld this decision, noting the issue had been settled in favor of the assessee by both the Tribunal and the Hon'ble Jurisdictional High Court in earlier years. The additional grounds raised by the Revenue for examining the arm's length nature of these expenses were not admitted, as it would result in reopening the assessment, which is prohibited.

3. Deletion of addition on account of commission income:
The Revenue contested the deletion of ? 2,37,64,235 related to commission income. The AO had added this amount based on the accrual method, despite the assessee's shift to the receipt basis from assessment year 1997-98. The Commissioner (Appeals) deleted the addition, citing consistent Tribunal and High Court decisions in favor of the assessee. The Tribunal upheld this deletion, affirming the consistent favorable rulings in the assessee's case.

4. Depreciation on computer peripherals:
The AO disallowed the assessee's claim for 60% depreciation on computer peripherals, treating them as normal plant and machinery. The Commissioner (Appeals) allowed the depreciation at 60%, following decisions from previous years. The Tribunal upheld this decision, referencing consistent favorable rulings in the assessee's case for earlier years.

5. Deletion of addition under section 68:
The AO added ? 1,16,85,052 as unexplained cash credit under section 68, due to the assessee's failure to furnish addresses and PAN details for certain cable operators. The Commissioner (Appeals) deleted this addition, noting the assessee provided sufficient details and ledger copies showing the deposits were received by cheque and subsequently refunded. The Tribunal upheld this deletion, agreeing with the Commissioner (Appeals)'s factual findings and noting the Revenue's failure to controvert these findings.

Conclusion:
The assessee's appeal was partly allowed for statistical purposes, and the Revenue's appeal was dismissed. The Tribunal's decisions were consistent with previous rulings favoring the assessee on similar issues.