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TMI Blog2016 (6) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. The scheme of demerger was approved by the Hon'ble High Court of A.P. vide order dated 15th December, 2010 w.e.f. 1st April, 2010. The non-telugu channels other than Hindi and Urdu were clubbed together and transferred to M/s. Prism TV P. Ltd. The assessee filed its return of income for the A.Y. 2011-2012 on 28.03.2012 declaring a loss of Rs. 10,61,15,264. For the A.Y. 2012-2013, the assessee filed its return of income on 29.09.2012 admitting total income of Rs.NIL after set off of brought forward losses of Rs. 19,56,84,859. During the assessment proceedings under section 143(3) of the Act, the A.O. noticed that in the A.Y. 2007-08, M/s. Ushodaya Enterprises P. Ltd., which is the parent company of M/s. Prism TV P. Ltd., acquired M/s. Ushakiran Television and M/s. Ushakiran Movies and that it entered into a non-compete agreement with M/s. Ushakiran Television and M/s. Ushakiran Movies on 30.01.2008 for non-competing in the business directly or indirectly for a period of five years from the date of agreement and accordingly, in the previous year relevant to the A.Y. 2008-09, the assessee company paid an amount of Rs. 670 crores towards non-compete fee and during the F.Y. 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case before us. We find that the Tribunal at paras 25 to 28 of its order has held as under : "25. We have heard the submissions of the parties and perused the orders of revenue authorities as well as other materials on record and also gone through the decisions cited. A perusal of the assessment order as well as the order passed by CIT(A) would leave no room for doubt that assessee's claim of depreciation on non-compete fee has been rejected basically for the following two reasons: 1. Genuineness of the payment made and necessity of paying non-compete fee. 2. Non-compete fee not being in the nature of an intangible asset as defined in section 32(1)(ii), depreciation is not allowable. 26. Before examining whether non-compete fee can be considered to be an intangible asset so as to entitle the assessee to claim depreciation on it, it is necessary, at the outset, to address the issue of genuineness of payment of non-compete fee and necessity to make such payment. As can be seen from the assessment order, AO has treated the agreement entered into between assessee for payment of non-compete fee as a sham transaction as Shri Ramoji Rao is not only the owner of UKT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th assessee company in future, the domestic company invested substantial amount by acquiring 39% of share in the assessee company. 27. From the aforesaid facts it cannot be denied that Equator Trading Enterprises Pvt. Ltd is a major stakeholder in assessee company. As can be seen from the assessment order as well as order passed by the CIT(A) before coming to their respective conclusion that the transaction entered into by parties for payment of non-compete fee is not genuine or there is no necessity for paying the non-compete fee as the same person is controlling both the assessee company and the two other companies acquired by the assessee, the role of M/s Equator Trading Enterprises Pvt. Ltd. in any decision taken by assessee company has not at all been considered. Neither the AO nor the CIT(A) has examined the effect of acquisition of 39% of equity shares by another entity and whether after such acquisition of shares, it can still be held that Shri Ramoji Rao is the controlling authority of assessee company and it is a transaction between related parties. Unfortunately, the assessment order and order of CIT(A) is totally silent on this aspect. Though in the remand report, AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Ramoji Rao HUF to adjust it against its huge brought forward losses. In this context, it is to be observed that in course of hearing before us the learned AR has submitted certain documents as additional evidence. A perusal of the said documents reveal that Shri Ramoji Rao HUF for the assessment year 2008-09 has not only shown the non compete fee received by it as income but has also adjusted it against the brought forward losses of earlier years. AO i.e. JCIT, Range -16, while completing assessment in case of Shri Ramoji Rao HUF has accepted not only the income but also its adjustment against brought forward losses in an assessment order passed u/s 143(3) on 24/12/2010. Therefore, when the non-compete fee paid by assessee has been accepted at the hands of Shri Ramoji Rao HUF and allowed to be set off against the brought forward losses, it needs to be examined whether still the payment of non-compete fee made by the assessee to Shri Ramoji Rao HUF can be held to be either non-genuine or not necessary. Therefore, considering the totality of the facts and circumstances we are of the view that as the impact of acquisition of 39% of equity shares by M/s Equator Trading Enterprises Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nai in ITA.Nos.1515 to 1520/Mds/2013 by its order dated 31.10.2013 has held as under : "8. Now, we take up the common issue involved in all the appeals. The assessee is in the business of running satellite television channels. These channels telecast films, serials etc., through satellite channels. The rights over these films are purchased from the producers of the respective films for broadcasting through satellite television. These rights come with an embargo that the films shall not be broadcasted or aired for a specified period from the date of release in theatres depending upon the success at the box office and other factors. Till the time, such films are broadcasted, they are to be treated as stock in trade. Once the films are broadcasted, the purchase value of the films is written-off. The expenditure on purchase of films is claimed in the first year itself. The assessee has got only satellite telecasting rights and has no universal rights for airing the films or serials. Once the film or the serial is aired, its value is diminished in subsequent telecasts. The assessee earns substantial revenue in the first telecast itself. In repeat telecast, the assessee is able to gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Media Corporation Ltd., (Formerly known Zee News Limited), Mumbai vs. DCIT, Circle-7(3), Mumbai, the 'G' Bench of Tribunal at Mumbai in ITA.No.1590/Mum/2015 by order dated 12.08.2015 has held as under : "25. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited precedents and paper book filed before us. The case of the assessee on the merits is that the assessee has a method of valuation of the news items/non fictional in nature, TV programs and the film rights. The details are given in the aforementioned 'Note No 7' to the financial statements. According to the same, while the news items purchased are debited to the P and L account as they do not have the repeat telecast value, other items like the TV program and the film rights constitutes 'current assets', which are amortised over the years and the period of such amortization is given in the said Note. Per contra, the case of the revenue on these issues is that these items constitute 'intangible depreciable capital assets' and provisions of section 32 of the Act apply. Considering the same, we shall now undertake to discuss the item wise adjudication as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraphs and already placed in this order above. We find similar issue of amortization of the TV Programs/Film rights came up before the Chennai Bench of the Tribunal wherein the issue was decided in favour of the assessee and rejected the AD's proposal to invoke the provisions of section 32(ii) of the Act in respect of the above programs/rights. As such, the Ld DR's argument on the applicability of the AS-26 to the TV Programs and Film rights is not supported by any precedents and therefore, the arguments raised by the Revenue are not allowed. Thus, considering the covered nature of the issue as well as the consistent method of accounting followed by the assessee in this regard and also in the absence of any contrary material to support the arguments of the Revenue against the assessee's claim, we are of the opinion that the decision taken by the CIT (A) in the impugned order is required to be reversed. Accordingly, Ground nos. 2 and 3 raised by the assessee are allowed. 9.2. In coming to this conclusion, the Tribunal has followed the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Television Eighteen India Limited reported in (2014) 364 ITR 597 (Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 and all along the cost of production of such expenditure has been treated as revenue expenditure and also allowed by the Department. Learned A.R. has referred to judgment of Hon'ble Supreme Court in the case of Alembic Chemical Works Ltd. vs. CIT 177 ITR 377 which laid down that what is capital expenditure and what is revenue are not eternal verities but must needs to be flexible so as to respond to the changing economic realities of business. Viewed in that perspective, we are of the opinion that the estimated value assigned to the News Archives cannot be treated to be an expenditure incurred in the capital field. We, therefore, uphold the order of CIT (A) on this ground. In this case, there is no dispute that the data base of the programmes which are utilised for the creation of "news archives" belonged to the assessee. 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. Furthermore, this Court notices that the expenditure i.e. 10% Rs. 88,83,128/- is a part of the entire total expenditure incurred by the assessee which is concededly treated as revenue, even otherwise. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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