2014 (5) TMI 626 - HC - Income Tax

Allowability of expenses u/s 37 of the Act Production as a part of news achieve Held that - Following Commissioner of Income Tax Versus Director General of Income Tax 2014 (5) TMI 588 - DELHI HIGH COURT - The data base of the programmes which are utilised for the creation of news archives belonged to the assessee - The future likelihood of the resources being a possible source of revenue, it would not be justify to include it in the capital stream - the expenditure is a part of the entire total expenditure incurred by the assessee which is concededly treated as revenue Decided against Revenue. Allowability of expenses incurred on CNBC expansion project Revenue expenses OR capital expenses Held that - The findings of the CIT (A) and Tribunal are concurrent - no advantage of enduring nature has accrued to the assessee - On account of the expanded work and enhanced capacity, the assessee had incurred expenses towards the salaries of professionals and hire charges also towards media professional charges the nature of the expenditure required it to be treated as one falling u/s 37(1) of the Act, compelled by business purposes and not resulting in any enduring advantage requiring to be treated in the capital stream Decided against Revenue.

Summary

Issues:
1. Whether the expenditure on production of news archives should be allowed as a revenue expense or treated as creating a capital asset.
2. Whether the expenditure incurred on the 'CNBC Expansion Project' should be considered as revenue expenditure or capital expenditure.

Issue 1: Expenditure on Production of News Archives
The High Court referred to a previous decision and concluded that the expenditure towards creating news archives should be allowed as a revenue expense under Section 37 of the Income Tax Act, 1961. The Court held that this expenditure did not result in creating a capital asset, thus ruling in favor of the assessee against the Revenue.

Issue 2: Expenditure on 'CNBC Expansion Project'
Regarding the expenditure on the 'CNBC Expansion Project,' the Court analyzed the facts. The assessee aimed to increase airtime from 1.5 to 12 hours daily by making arrangements with CNBC. The Revenue disputed the expenditure of Rs.57,32,689 on various items. The Assessing Officer initially disallowed the expenditure, claiming it provided a capital advantage. However, the CIT (Appeals) and ITAT disagreed. The ITAT emphasized that the expenditure was incurred to enhance existing business efficiency and generate more revenue, not creating a tangible asset. The Court concurred, stating that the expenditure was for business purposes under Section 37(1) and did not result in an enduring advantage, thus ruling in favor of the assessee.

In conclusion, the High Court dismissed the appeal, upholding that both the expenditure on production of news archives and the 'CNBC Expansion Project' expenditure were allowable as revenue expenses. The Court's decision favored the assessee against the Revenue, emphasizing that the expenditures were incurred for business purposes and did not lead to the creation of capital assets or enduring advantages.