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2018 (9) TMI 705 - AT - Income TaxCost of production of TV serials and programmes relating to the year under consideration claimed as revenue expenditure - Held that - As relying on case of Prism TV Pvt. Ltd. 2016 (6) TMI 419 - ITAT HYDERABAD AO directed to treat the expenditure incurred by the assessee on cost of production of TV programmes as revenue expenditure as the future likelihood of these resources being a possible source of revenue, cannot in the opinion of this Court justify its inclusion in the capital stream. Excess depreciation claimed on film software library - AO observed that since the assessee is in the business of satellite television and the film software library forms an important apparatus of its business which squarely fall within the definition of plant and machinery and accordingly allowed depreciation @ 15% and disallowed excess deprecation @ 25% - Held that - This issue is squarely covered in assessee s own case for AY 2007-08 2016 (3) TMI 820 - ITAT HYDERABAD as held that the films and TV programmes are essential for the assessee company to carry on its business of telecasting of films and other programmes, but there is no caveat that the assessee company has to telecast only these films and programmes and none other for assessee s business. Further, not only the films and programmes in the Film Software Library , but the assessee may also telecast any other programmes or films on its channels. By purchasing the library, the assessee is gaining exclusive right over the asset but this library cannot be held as a tool for carrying on of its business as assessee can carry on its business even without the Film Software Library . Therefore, we hold that the asset which consists of Copyrighted Films and Programmes is an Intangible Asset eligible for depreciation at the rate of 25%. - Decided against revenue TDS u/s 194H - non deduction of tds on commission amount - Held that - As decided in assessee s own case 2014 (1) TMI 250 - ITAT HYDERABAD TDS is not required to be made on payments made by TV channels/News paper companies to the advertising agency for booking or procuring or canvassing for advertisement. In view of that, we do not see any reason to defer from the findings. Disallowance of part of depreciation claim on computers/peripherals - Held that - Similar issue came up for consideration in assessee s own case for AY 2002-03 and 2003-04 2013 (10) TMI 1376 - ITAT HYDERABAD decide this issue in favour of the assessee by holding that depreciation claimed at 60% on printers, scanners, modems, switches, hubs, cables/cards and software etc., should not be disallowed as these devices are used along with the computer and their functions are integrated with the computer. Depreciation claimed on non-compete fee - assessee submitted that non-compete fee rights acquired by it are intangible assets u/s 32(1)(ii) of the Act eligible for depreciation @ 25% - Held that - As decided in assessee s own case 2014 (12) TMI 7 - ITAT HYDERABAD - Neither the AO nor the CIT(A) has examined the effect of acquisition of 39% of equity shares by another entity - without examining the impact of investment made in equity shares to the extent of 39% by the domestic investor and condition imposed by it, the conclusion drawn by the CIT(A) that there is no necessity of payment of non-compete fee as the same person is controlling the assessee company as well as UKT and UKM is without proper appreciation of facts and evidences brought on record cannot be sustained - as the impact of acquisition of 39% of equity shares by M/s Equator Trading Enterprises Pvt. Ltd. has not at all been examined by AO at the time of assessment proceeding or by the CIT(A) while disposing of assessee s appeal and further as the additional evidences produced before us were not examined either by the AO or by CIT(A), which certainly have a crucial bearing on the issue as to whether the payment of non-compete fee is genuine and necessary the matter is to be remitted back to the AO for fresh adjudication Decided in favour of assessee for statistical purposes..
Issues Involved:
1. Disallowance of cost of production of TV serials and programs claimed as revenue expenditure. 2. Excess depreciation claimed on 'film software library'. 3. Disallowance of commission paid on sale of space for advertisement in newspapers and television time slots under section 40(a)(ia). 4. Restriction of depreciation on computer accessories. 5. Disallowance of depreciation on non-compete fee. 6. Disallowance of employees' contribution to PF & ESI under section 36(1)(va) read with section 2(24)(x). Issue-wise Detailed Analysis: 1. Disallowance of Cost of Production of TV Serials and Programs Claimed as Revenue Expenditure: The AO disallowed the cost of production of TV serials and programs amounting to ?143,49,17,000/- claimed by the assessee as revenue expenditure, treating it as capital expenditure. The CIT(A) confirmed the addition made by the AO. The ITAT, however, referred to the coordinate bench decision in the case of Prism TV Pvt. Ltd., which held that the expenditure incurred on production of television programs should be allowed as revenue expenditure under section 37 of the IT Act. Following this precedent, the ITAT directed the AO to delete the addition made towards the cost of production of TV serials and programs, thus allowing the grounds raised by the assessee. 2. Excess Depreciation Claimed on 'Film Software Library': The AO allowed depreciation at 15% on 'film software library', treating it as 'plant and machinery', instead of 25% claimed by the assessee treating it as an intangible asset. The CIT(A) confirmed the disallowance. The ITAT, referring to its decision in the assessee's own case for AY 2007-08, held that the 'film software library' should be treated as an intangible asset eligible for depreciation at the rate of 25%. Consequently, the ITAT dismissed the ground raised by the revenue on this issue, affirming the assessee's claim. 3. Disallowance of Commission Paid on Sale of Space for Advertisement in Newspapers and Television Time Slots under Section 40(a)(ia): The AO disallowed ?101,35,38,405/- under section 40(a)(ia) for failure to deduct TDS on agents' commission for sale of advertisement space. The CIT(A) deleted the disallowance, following the decision in the assessee's own case for AY 2006-07. The ITAT upheld the CIT(A)'s decision, referencing its earlier decisions in the assessee's own cases and a CBDT Circular clarifying that TDS is not required on payments made by TV channels/newspaper companies to advertising agencies. Thus, the ITAT dismissed the revenue's appeal on this ground. 4. Restriction of Depreciation on Computer Accessories: The AO restricted depreciation on computer accessories to 15%, disallowing the excess claim of ?17,61,897/-. The CIT(A) deleted the disallowance, following the decision in the assessee's own case for earlier years. The ITAT upheld the CIT(A)'s decision, referring to its earlier decision in the assessee's own case for AY 2002-03 & 2003-04, where it was held that depreciation at 60% on computer peripherals should not be disallowed. Thus, the ITAT dismissed the revenue's appeal on this ground. 5. Disallowance of Depreciation on Non-Compete Fee: The AO disallowed depreciation on non-compete fee of ?109.92 crores, questioning the genuineness and necessity of the payment. The CIT(A) confirmed the disallowance. The ITAT, referring to its decision in the assessee's own case for AY 2008-09, remitted the issue back to the AO for fresh adjudication, directing the AO to consider the impact of the investment made by Equator Trading Enterprises Pvt. Ltd. and the necessity of the non-compete fee. Thus, the ITAT allowed the ground for statistical purposes. 6. Disallowance of Employees' Contribution to PF & ESI under Section 36(1)(va) Read with Section 2(24)(x): The CIT(A) confirmed the disallowance of employees' contribution to PF & ESI amounting to ?2,90,527/-. The assessee did not appeal against this disallowance, and hence it was not adjudicated by the ITAT. Conclusion: The ITAT allowed the assessee's appeals for AY 2009-10 and 2010-11, with the appeal for AY 2010-11 allowed for statistical purposes, while dismissing the revenue's appeals for both assessment years.
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