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TMI Blog2013 (12) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue – Decided in favour of Revenue. - ITA No.910/Mds/2011 - - - Dated:- 30-3-2012 - SHRI ABRAHAM P.GEORGE AND SHRI VIKAS AWASTHY, JJ. For the Appellant : Shri T. Banusekar, C.A. For the Respondent : Shri E.S.Nagendra Prasad, CIT DR Order Vikas Awasthy (Judicial Member).- The appeal has been filed by the assessee impugning the order dated March 16, 2011 passed by the Commissioner of Income-tax, Chennai-IV under section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). 2. The brief facts of the case are that the assessee/appellant is engaged in the business of purchasing audio rights, manufacturing audio cassettes, CDs and selling them. The assessee filed return of income for the assessment year 2006-07 on October 31, 2006 admitting total income of Rs.16,49,741. The case of the assessee was selected for scrutiny. Notice under section 143(2) was issued to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as discussed above and redo the assessment afresh after providing opportunity to the assessee." 5. Aggrieved by the order of the Commissioner of Income-tax, the assessee has filed the present appeal before the Tribunal. The grounds of appeal raised by the assessee are as under : "1. For that the order of the Commissioner of Income-tax is without jurisdiction, contrary to law, facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income-tax failed to appreciate that there was no error or prejudice much less both to warrant the invocation of the powers conferred under section 263. 3. For that the Commissioner of Income-tax erred in concluding that the expenditure towards acquisition of copyrights is not revenue in nature and has to be capitalised. 4. For that the Commissioner of Income-tax failed to appreciate that the expenditure towards acquisition of copyrights was allowed as revenue expenditure as claimed by the appellant in the earlier years also : 5. For that the Commissioner of Income-tax failed to appreciate that the Assessing Officer has allowed the same as reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of audio sound and music from master plate was allowable as revenue expenditure. The assessee was engaged in business of manufacturing preA-recorded audio and video cassettes as also blank audio and video cassettes, akin to the assessee's case. The concern purchased master plate by way of assignment of copyrights which contain original sound-track and songs, reproduced the same into blank cassettes with the help thereof and sold the same in market. The concern here had paid the consideration money partly in shape of a fixed sum initially and partly by way of percentage of sale value of the recorded cassettes. For every producer from whom the master plate was purchased, the plate was different. The assessee's claim was that the final product as produced by the assessee was different. For every series of item of music, sound, etc., was never uniform. The contents of the plate was a design, formula and raw material all embedded into one. The plate cannot be termed as of capital nature. The initial lump sum payment and subsequent reimbursement in the form of royalty on sales will not change the character of its expenditure being revenue in nature. The hon'ble members of the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the outlay was in consonance with the actual production and therefore a proper input of the income earning operation. Thus, it was clearly a revenue expenditure. We find that similar view has been taken on identical facts by the Delhi Bench of this Tribunal in the case of Super Cassettes Industries P. Ltd. [1992] 41 ITD 530 (Delhi), in I. T. A. No. 3108 of 1988 dated March 30, 1992." 10. Similar views were taken by the Kolkata and Mumbai Benches in Gramophone Co. of India Ltd. [1994] 48 ITD 145 (Cal), and Venus Records and Tape Mfg. Co. respectively. In the case of Tips Cassettes and Record Co. [2002] 82 ITD 641 (Mum), the Mumbai Bench of this Tribunal after considering the Tribunal judgments of Mumbai, Delhi, Kolkata and Chennai Benches observed as under : "In nutshell, the Tribunal held that the assessee was a dealer of music and the nature of capital or revenue vis-a-vis various expenditure has to be considered on this point. Since the assessee was dealer in music, the master plate or in turn the rights which enable the assessee to obtain the master plate (assignment of copyrights) become raw material of the assessee. The assessee sells music purchased on master p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue." 14. In the present case, the Assessing Officer in his assessment order passed the order of nil assessed income after going through the records. The Commissioner of Income-tax has failed to follow the well settled law laid down by the Tribunal in several cases discussed above. The expenditure incurred by the assessee for acquiring audio copyrights and CD, DVD rights is revenue in nature and thus has to be allowed as such. In view of the above findings, we have no hesitation to set aside the order of the Commissioner of Income-tax and restore the order of the Assessing Officer. 15. In the result, the appeal of the assessee is allowed. The order pronounced in the open cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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