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TMI Blog2017 (11) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... rt rendered in Asia Satellite Communications Co. Ltd. vs. DIT (2011 (1) TMI 47 - DELHI HIGH COURT) wherein discussed the nature of the similar payment and held that payment received towards transponder charges is business income and not Royalty in the hands of the recipient. Also see Empire Jute Company vs. CIT (1980 (5) TMI 1 - SUPREME Court )- Decided in favour of assessee. Payment to sister concerns - Addition u/s 40A(2)(b) license fee, programme amortization-payment to Nimbus Communication Ltd. for matches of BCCI - Held that:- Supplementary agreements between Nimbus and BCCI and between assessee and Nimbus were entered into and Nimbus transferred all the benefits to the assessee, which it received from BCCI. As per the terms of agreement the assessee was required to pay 10% over and above the license fees which was being paid by Nimbus to BCCI. CIT(A) has rightly held that the appellant has not given any amount to its sister concern by making adjustment in license fees in respect of cancelled match as alleged by the AO. Further the Ld. CIT(A) has rightly pointed that the AO has not brought any evidence on record to substantiate the allegation that the assessee has extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artly allowed the appeals pertaining to the A.Y.2007-08 2010-11 and allowed the appeals pertaining to the A.Y. 2008-09 and 2009-10 filed by the assessee against assessment orders passed u/s 143 (3) of the Income Tax Act (for short the Act ). 2. Since, all the four appeals pertain to the same assessee for different assessment years and most of the issues involved are common in all the appeals, the same were clubbed, heard together and are being disposed of by this consolidated order for the sake of convenience. ITA No. 1431/MUM/2015 (Assessment Year: 2007-08) 3. Brief facts of the case are that the assessee a subsidiary of M/s Zenith Sports Pvt. Limited Company, filed its return of income for the assessment year 2007-08 declaring the total loss of ₹ 1,84,36,23,962/-. The assessee filed revised return subsequently declaring loss of ₹ 1,90,87,35,894/- after taking into consideration the amortization of one time fees as per order u/s 143(3) for the A.Y. 2005-06. The case was selected for scrutiny and notice u/s 143(2) and 142(1) were accordingly issued. In response to the said notices, the authorized representative of the company furnished the information a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the due date as prescribed in the relevant Legislation and S 43B covers only the Employer s contribution to the PF ESIC and Employee s contribution is outside its ambit. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in upholding the assessee s claim that payment made towards Satellite space fess/ Transponder Charges to Panasmat International System Inc. is revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the impugned expenditure is capital expenditure? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of ₹ 5,44,17,143/- being the differential license fees payable to sister concern M/s Nimbus forgone by the assessee ignoring the fact that the assessee has ignored the available credit note of ₹ 24.99 crores and paid only ₹ 19.55 crores only and waived off the differential amount rendering excess payment to the sister concern and clearly attracted the provisions of S 40A(2)(b) of the Act. 4. Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of filing of return no addition can be made. Since, the decision of the Ld. CIT (A) is based on the law laid down by the Hon ble Supreme Court and the Hon ble jurisdictional High Court, we uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal of the revenue. 8. The second ground of appeal pertains to disallowance of transponder charges of ₹ 3,26,47,300/- paid to Intelsat Corporation Inc. (earlier known as Pansmat International System Inc.). The Ld. DR submitted before us the Ld. CIT (A) has wrongly held the payment in question is a revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the same is capital expenditure. The Ld. DR further submitted that the assessee ought to have deducted TDS on the said payment. Having failed to do so, the AO has rightly disallowed the same and added back to the income of the assessee. 9. On the other hand, the Ld. Counsel for the assessee submitted that the assessee paid the amount in question to Intelsat Corporation Inc. (earlier known as Pansmat International System Inc.) as transponder fees. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for uplinking its channel for future years but the said payment was made pertaining to the above assessment years nor it is the case that the appellant has incurred the same as an expenditure which will yield benefit in years to come. From the very nature of the payment it is abundantly clear that the payment in question is an annual event, the nomenclature of the expenditure suggest that it is an annual lease charges. Therefore, the conclusion drawn by the Ld. AO that expenditure will derive long and enduring benefit was not correct, as the Ld. A.O. has wrongly drawn the inference that buying the satellite spaces is permanent, but the expenditure is for usage (lease) of transponder segment capacity of communication satellite up-linking the channel. The Delhi High Court in the case of Asia Satellite Communications Co. Ltd. vs. DIT (2011) 238 CTR (Del) 233 has discussed the nature of payments and it has been held that the said amount is a Business Income and not Royalty in the hands of the recipient. The said expenditure is thus a revenue expenditure allowable u/s 37(1) of the Act. It is also a matter of record that the appellant had to pay lease charges throughout the year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee relying on the impugned order submitted that the observation of AO that there was a collusion between the Nimbus Communication Ltd. (NCL) and assessee is totally wrong as the terms and conditions between NCL and assessee were on back to back basis as per the agreement between NCL and BCCI. BCCI is a third party not related to the assessee. Therefore, the AO has wrongly relied on the decision of Juggilal Kamlapat 73 ITR 702 (SC). The addendum between BCCI and NCL and back to back agreement between NCL and the assessee clearly provide that no compensation for cancelled match will be paid by BCCI to NCL and NCL to the assessee. Therefore, section 40A (2)(b) is not applicable. 14. We have heard the rival submission and perused the record and also gone through the cases relied upon the authorities below. The Ld. CIT (A) has deleted the addition taking into consideration, the entire facts on record and after due application of mind. The concluding para of the order of the Ld. CIT (A) on this issue reads as under: 5.3.3 From the foregoing, it become apparent that the appellant had not given any amount as favour to its sister concern by adjustment of above mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the income as is the issue in the impugned case. The appellant has not claimed any expenditure on this count and Ld. AO treating the entire receipt as notional income which the appellant in view of the AO must have charged from the Nimbus. One of the essential conditions for application of this sub-section is that the assessee should have incurred expenditure and payment to close associates should have been made in respect of Expenditures . As explained by the Supreme Court in Indian Molasses Co. vs. CIT )1959) 37 ITR 66 (SC), expenditure connotes spending in the sense of paying out or away and is something which is gone irretrievably and there should not be possibility of money forming, on again, a part of the funds of the assessee. Therefore, the additions made by the Ld. AO were on assumptions and surmises without considering all the facts and agreements and cannot be sustained both on facts and in law. The same is accordingly deleted and this ground of appeal is allowed. 15. We notice that the appellant had entered into an agreement with Nimbus Communication Limited in March 2006 and acquired the telecast rights of cricket matches to be played in India from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 to October/November 2009. Since the agreement was for a long duration and it required discussion and meetings between the two governments, the formalized agreement got delayed. The assessee in the subsequent year applied under section 195 (2) of the Act before the Deputy Director of Income tax Range 4(2) Mumbai, however, the same was rejected. But the Ld. CIT(A) in appeal decided the issue in favour of the assessee holding that payment of license fees to BCCB is not in the nature of royalty hence not chargeable to tax in India hence no withholding tax is payable in India. The Department challenged the impugned order before the ITAT. The ITAT dismissed the appeal filed by the department. The Ld. counsel for the assessee further submitted that as per the Indian contract Act, even oral contract is valid and enforceable under law. Hence, the AO has wrongly held that the subsequent agreement entered between the assessee and BCCB will not apply to the retrospective transaction and the addition made by the AO was unwarranted. 19. We have heard the rival submissions and perused the orders of the authorities below in the light of the rival contentions. The learned CIT (A) has deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is payable in India, against which the department has filed an appeal before the Hon ble ITAT. The ITAT s order in the appellant s own case for AY 2008-09 dated 09/11/2011 reported in 133 ITD 468(Mum) is placed on page 1109-1125 of the compilation wherein it has held that payment made towards consideration for live feed of cricket matches cannot be held as royalty within the meaning of Section 9(1)(vi) of the Act and therefore, no withholding tax is payable in India thereby confirming the CIT appeal order. In view of the foregoing, the observations of the Ld. AO made in context of payment to BCCB are out of context and not supported by the findings of ITAT and deserve to be ignored. This ground of appeal is thus allowed. 20. We noticed that the AO has not doubted the existence of mutual understanding between the assessee and BCCB which gave the assessee the right to telecast live matches. AO has not doubted the existence of agreement between the assessee and BCCB for live telecast of matches during the year 2006 to 2009. The AO has not made any addition for non-direction of TDS under section 40 (a) of the Act, but, held that the expenses in question are not allowable be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l by ignoring the fact that they constitute brand building expenses with enduring benefit and does not constitute revenue expenditure? 5. The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the A.O. be restored. 2. The first ground of the present appeal is identical to the second ground of the appeal in assessee s own case for the assessment year 2007-08 discussed above. Since, we have upheld the findings of the Ld, CIT(A) and dismissed the identical ground of revenue s appeal in assessee s own case for the assessment year 2007-08, we dismiss this ground of appeal of the revenue for the same reasons and direct the AO to delete the additions in terms of the order of the Ld. CIT(A). 3. Second ground pertains to disallowance of transponder charges u/s 40(a) of the Act. The Ld. DR submitted that the Ld. CIT (A) has erred in deleting the disallowance u/s 40(a) for non deduction of TDS in respect of payment made towards satellite space fees/transponder charges to Panasmat International System Inc. by relying on the decision of the Delhi High Court in the case of Asia Satellite Telecommunication 238 CTR (Del) 233 ignoring that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that since the expenses are capital in nature, the Ld. CIT (A) ought to have confirmed the disallowance made by the AO. 8. On the other hand, the Ld. counsel for the assessee relying on the findings of the Ld. CIT (A) submitted that the expenditure being advertisement expenses are revenue in nature, therefore, the Ld. CIT (A) has rightly ordered to delete the said disallowance. The Ld. counsel further submitted that the findings of the Ld. CIT (A) is in accordance with the principles of law laid down by the Hon ble Bombay High Court rendered in CIT vs. Asian Paints (2016) 243 Taxman 348 (Bom). In the light of the said decision, the expenses incurred on advertisement are allowable u/s 37 of the Act. 9. We have heard the rival submissions and perused the material on record including the cases relied upon by the assessee. We notice that the Ld. CIT (A) has allowed this ground of appeal of the assessee relying upon the various judgments of the High Courts including the decision of Hon ble Bombay High Court rendered in CIT vs. Asian Paints (India) Ltd. (2016) 243 Taxman 348 (Bom). The relevant portion of the order of the Ld. CIT (A) reads as under:- 5.3.3 In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal:- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in upholding the assessee s claim that payment made towards Satellite space fees/Transponder Charges to Panasmat international System Inc. is a revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the impugned expenditure is capital expenditure? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of depreciation of ₹ 3,40,818/- in contravention of Rule 46A ignoring that the assessee has not produced purchase bills and other evidences during the assessment proceedings? 3. The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the A.O. be restored. 2. The first ground of the present appeal is identical to the second ground of the appeal in assessee s own case for the assessment year 2007-08 discussed above. Since we have upheld the findings of the Ld. CIT(A) and dismissed the identical ground of revenue s appeal in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in appeal before the Tribunal against the impugned order passed by the Ld. CIT (A) raising the following effective grounds of appeal:- 1 . Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in upholding the assessee s claim that payment made towards Satellite space fees/Transponder Charges to Panasmat international System Inc. is a revenue expenditure ignoring that the assessee has derived long term and enduring benefits by way of buying the satellite spaces for broadcasting its channels and therefore, the impugned expenditure is capital expenditure? 2. The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the A.O. be restored. 2. The only ground of the present appeal is identical to the second ground of the appeal in assessee s own case for the assessment year 2007-08 discussed above. Since we have upheld the findings of the Ld, CIT(A) and dismissed the identical ground of revenue s appeal in assessee s own case for the assessment year 2007-08, we dismiss this ground of appeal of the revenue for the same reasons and direct the AO to delete the additions in terms of the order of the ..... 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