9911796707
TMI Blog2018 (1) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the learned CIT(A) : General 1. erred in upholding the order of the learned Assessing Officer ('AO'), buy confirming the total income of the Appellant at Rs/ 22,79,69,796 as against loss of Rs. 11,19,55,440 claimed as per the return of income. Deduction of franchise consideration - Capital of revenue expenditure 2. erred in upholding the order of the learned AO, by confirming that annual consideration of Rs. 30,03,60,000 paid/payable by the Appellant to The Board of Control for Cricket in India ('BCCI'), which is revenue in nature, as a capital expenditure. 3. Erred in upholding the order of the learned AO, by confirming that the annual consideration paid/payable to BCCI is in the nature of licence of franchise of any other business or commercial right of similar nature (i.e. intangible asset) as per the provisions of section 32(1)(ii) of the Act. 4. Without prejudice to the above, erred in upholding the learned AO's order by confirming the cost of the intangible asset to be Rs. 30,03,60,000 (i.e. the annual consideration), instead of adjusting the actual cost of the franchise for the purpose of computing the depreciation. Deduction of franchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and lodging of directors, invited celebrities and VIPs in ITC Ltdm and Rs. 37,37,007 (ie 33% of Rs. 1,13,24,264) towards boarding and lodging and food and nutrition expenses of other hotels. Arbitrary adhoc disallowance in connection with airfare expense, travelling expense and vehicle hire charges 11. erred in upholding the order of the learned AO, by confirming that the arbitrary adhoc disallowance of the expenditure in connection with airfare expense, travelling expense and vehicle hire charges on the premise that the said expenses are not in nature of business expenditure allowable under section 37(1) of the Act. 12. Without prejudice to the above, erred in upholding the arbitrary adhoc disallowance of a sum of Rs. 95,63,132 (ie 25% of Rs. 3,82,52,527) being expenditure in connection with airfare, travelling expenses and vehicle hire charges of its invited guests (including directors). 13. Without prejudice to the above, learned, the learned CIT(A) erred in stating that the Appellant had not produced any evidence e.g. air ticket, details of vehicles, name of service provider, person utilizing these services the nexus with business etc, inspite of the fact that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2008 for Franchise rights of IPL team with home ground at Eden Garden, Kolkata, which was named as Kolkata Knight Riders (for short 'KKR'). That during the course of the assessment proceeding the A.O observed that as per the agreement dated 04.04.2008 between the assessee company and Board of Control of Cricket in India (for short 'BCCI'), the assessee was to pay for the period 2008-17 (inclusive) an annual Franchise fee of Rs. 30,03,60,000/-. The A.O held a conviction that the Franchise fee of Rs. 30,03,60,000/- was a part of the consideration which was paid by the assessee for owning the IPL team and not as a fee for playing the IPL matches vested an enduring benefit with the assessee, therefore, the same being a capital expenditure, was however wrongly claimed as a revenue expenditure by the assessee during the year under consideration. The A.O on the basis of his aforesaid observations called upon the assessee to put forth an explanation as regards its claim of the aforesaid amount as a revenue expenditure. The assessee in order to impress upon the A.O that the franchisee fees was rightly claimed as a revenue expenditure, submitted as under: - 1.1 "As you are aware, KR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for the purposes of clauses 11 or otherwise." KRSPL does not have the right to compel BCCI-PL to organize the event in any year. If in a particular year the event is not organized by BCCI then KRSPL neither pays annual consideration nor does it earn any revenue in that year. Thus the annual payment to BCCI-IPL is intrinsically linked to the hosting of the event for that year. In fact, there is no obligation upon BCCI to host the event for the current year in the subsequent years. 1.5 Termination of the Agreement: Further, as per Clause 11.1 of the Agreement, states as under: "Either party may terminate this Agreement with immediate effect by notice in writing if the other party has failed to remedy any remediable material breach of this Agreement within a period of 30 days of the receipt of a notice in writing requiring it to do so which notice shall expressly refer to this Clause 11.1 and to the fact that termination of this Agreement may be a consequence of any failure to remedy the breach specif ied in it. For the avoidance of doubt a breach by the Franchisee of its payment obligations under this Agreement or under Clause 22 shall be deemed to be a material breac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own in the following judicial precedents a distinction has be made between 'capital expenditure' and 'revenue expenditure': * Securing a right for carrying on the business would be on revenue account and not a capital asset * Enduring benefit: Capital expenditure produces benefits for several previous years, whereas revenue expenditure is consumed within a previous year; * Improves the earning capacity and business expediency: Capital expenditure makes improvements in the earning capacity of a business. Revenue expenditure, on the other hand, maintains the profit-making capacity of a business. In the case of an ongoing business, expenditure made for bringing into existence an asset or an advantage for the enduring benef it of the trade is capital expenditure. What needs to be considered in such a case is the advantage in a commercial sense and i t is only where the advantage is in the capital f ield that the expenditure would be considered as capital expenditure. What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it would have to pay the payment in the next year. Only when KRSPL makes the payment in the subsequent year that it gets the participate in the tournament and earn income from it. Since the benefit of the payment is restricted to the current year, there is no future benefit that accrues to KRSPL by making the annual franchise payment. Reliance is also placed on the following judicial precedents: * The Supreme Court in the case of CIT Vs. Coal Shipments Private Limited 82 ITR 902, wherein it has been held that although an enduring benef it need not be of an everlasting nature it should not also be so transitory and ephemeral that it can come to an end at any time. * Empire Jute Company Limited vs. CIT (124 ITR 1) (SC) The Honorable Supreme Court has in this case laid down the principles to be applied in determining whether an expense is capital or revenue in nature. The broad principles as per this decision and their applicability are as follows: "If any enduring advantage is obtained, it is not necessary that in every case the expenditure for securing it must be treated as a capital expenditure. If the advantage consists merely in facilitating the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide a means for disseminating the information about the assessee.The same could very well have been achieved and, indeed, in the past, it was achieved by printing travel brochures and other published materials and pamphlets. The advance of technology and the wide-spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much larger set of people worldwide." Ø Improves the earning capacity and business necessity: The payment does not enable KRSPL to improve its earning capacity. The annual payment is essential for the current year participation and without the payment there is no possibility of earning any income from that year participation. The annual payment to BCCI-IPL merely facilitates KRSPL's business of operating the team and to earn revenue for the year under consideration. The expenses incurred by KRSPL are in the nature of revenue even though the benefits that it acquired under the Agreement are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, payment made by assessee to foreign company was to be treated as revenue expenditure. Conclusion In view of the facts of the case and the above judicial precedents, KRSPL wishes to submit that; a) The annual payment does not provide any benef it of enduring nature; b) The annual payment does not improve the profit making capacity but is in fact necessitated by business expediency; c) The payment is recurring in nature. and therefore the annual payment to BCCI-IPL should be treated as revenue expenditure. Also for the payment to qualify as capital asset, it is important that KRSPL to pass the ownership test. In the present case, payment of annual payment to BCCI does not lead to the creation or ownership of any asset and therefore question of recurring annual consideration as a capital asset does not arise. Recognizing annual consideration paid to BCCI (where taxes are withheld under section 194J of the Act) as a capital asset is unjust and unwarranted and against the law. B) Position adopted by Revenue authorities. 1.1 KRSPL has withheld taxes under section 194J of the Act while making payment to BCCI-IPL. The payment to BCCI-IPL is subject to withh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to payment to IPL a percentage of a value of the business, viz. 10% for the first such sale or transfer and 5% thereafter; and (iv). that by virtue of the right to own and operate the respective franchisees, each franchisee became entitled to receive certain revenue relating to the league and their respective teams. Thus, in the backdrop of the aforesaid facts the A.O observed that the revenue arising in the hands of the assessee was from exploitation of Central Rights, Licensing & Merchandising Rights and Franchisee Rights. The A.O further observed that each respective franchisee was responsible for all the costs relating to the operation of its franchise, including the fees and salaries of all persons providing services for its team, as well as all the costs involved in staging matches at the home grounds, including hiring of stadium & security and staff cost at stadium. It was further observed by the A.O that for a franchisee to operate a franchise and to be a member of the league, it was required to pay to the IPL certain amounts, viz. (i) a fee, described as the 'Franchisee fee' to be paid in 10 equal instalments; and (ii) 20% of sums received by each franchisee from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue expenditure, relied on the judgment of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. Vs. CIT (1997) 224 ITR 342 (SC). The A.O observed that in the case before the Hon'ble Supreme Court, the assessee had started a new business by availing the technical know-how and an exclusive right to use the patent or trademark of a foreign company. The Hon'ble Apex Court observed that as per the agreement with the foreign company what was set up by the assessee was a new business and the foreign company had not only furnished information and technical know-how, but had also rendered valuable services in setting up of the factory and production of goods, with there being no embargo on the assessee to continue to manufacture the product in question even after the expiry of the agreement, therefore, the payments made by the assessee to the foreign company, whether a definite one or dependent upon certain contingencies, could not be held as a revenue expenditure for the reason that the same was to be made on a certain percentage of the gross turnover of the assessee. The A.O drawing force from the aforesaid judgment of the Hon'ble Apex Court observed that the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards Franchise fee on the date when the first match of the league for that year was played. The A.O thus observed that the assessee had acquired the right to franchise in the year 2008 when it had paid the first annual instalment of the Franchisee fee in the said year. The A.O deliberating on the aforesaid facts and taking cognizance of the judgment of the Hon'ble Supreme Court in the case of Maharana Mills (F) ltd. Vs. ITO (1959) 36 ITR 350 (SC) observed that an A.O remained under a statutory obligation to not only work out the depreciation while considering the W.D.V of the previous year, but rather, was bound to scale down the same by the allowances granted in the past and thus re-work the W.D.V for the year before him. The A.O on the basis of his aforesaid observations concluded that the amount of Franchise fee of every subsequent year was to be added to the W.D.V of the block of intangible asset at the beginning of the year and the depreciation was to be allowed on such adjusted WDV for the said year. Thus, the A.O concluded that as the assessee had during the year under consideration, viz. A.Y 2009-10, paid the annual instalment of Rs. 30,03,60,000/-, therefore, the deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its hands, therefore, the claim of the assessee that the payment of the Franchise fee did not lead to any enduring benefit could not be accepted. The CIT(A) was also not impressed by the claim of the assessee that as it had withheld taxes under Sec. 194J that had been accepted by the department, therefore, on the said count also its claim that the franchise fee was a revenue expenditure could not be dislodged. The CIT(A) further observed that as per the terms of the agreement the assessee was duly vested with the right to sell the franchise to a third party or transfer the controlling interest in the company which controls the franchise after a minimum period of 3 years, which proved the fact that a capital asset was created. The CIT(A) held a strong conviction that as the payment of Franchise fee of US $ 75.09 million by M/s Red Chillies Entertainment Pvt. Ltd. by the assessee in 10 equal instalments was with a purpose to acquire the right to operate the team and become a member of league for the entire term of league, as a result whereof it became entitled to receive certain revenues relating to the Kolkata team, therefore, the same was clearly in the nature of a capital expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein submitted before the A.O that as the said payment was made pursuant to a contractual obligation to discharge a liability, therefore, as per the mercantile system of accounting, it was rightly claimed as an expenditure in the year under consideration, viz. AY 2009-10. The A.O after deliberating on the aforesaid explanation of the assessee was however not persuaded to subscribe to the same. The A.O observed that the claim of the assessee that the proportionate fees for the first three months of the IPL Season-2 pertained to the year under consideration, as the liability for the said three months period (i.e January, 2009 to March, 2009) for the IPL Season-2 was relatable to the year under consideration, viz. A.Y. 2009-10, did not satisfy the 'Matching Principle of Accounting', which was one of the basic principle of accounting. The A.O in order to fortify his aforesaid view, observed that the assessee company had during the year under consideration not offered any income corresponding to its aforesaid claim of expense. The A.O on the basis of his aforesaid observations concluded that the amount of Rs. 7,50,90,000/- was wrongly claimed by the assessee by relating the same to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee assailing the aforesaid disallowance by the A.O, carried the matter in appeal before the CIT(A). The assessee reiterated the submissions made before the A.O and tried to impress upon the CIT(A) that as it was following a mercantile system of accounting, therefore, as the period of three months (January, 2009 to March 2009) relatable to IPL Season-2 fell within the year under consideration, viz. AY 2009-10, the proportionate fee for the aforesaid period of three months was rightly claimed as an expenditure for the year under consideration. The assessee in order to drive home its aforesaid contention, submitted before the CIT(A), as under:- 2.1 The Appellant had entered into the Agreement with BCCI -IPL to participate in the IPL tournament on 4 April 2008. As per the Agreement, the appel lant was required to pay annual consideration annual ly amounting to Rs. 30,03,60, 000/- for a year for each season of IPL. 2.2 The term "year" has been def ined as per the Agreement to mean as under: 'each 12 month period (or part thereof ) from 1 January - 31 December during the Term save that the f irst year shall be from signature of this Agreement until 2008.' Thus, a season i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03,60, 000/- plus Rs. 7,50,90, 000/-) in A Y 2009-10: 2.7 Contractual obligation to discharge a liability The Appellant has paid the franchise fee for the calendar year 2008 (including period from 1 January 2008 to 31 March 2008), post the execution of the Agreement (is April 2008) and debited the entire sum during the financial year ended 31 March 2009. It is a well established principle that expenditure is incurred only after liability to payment arises and only after such liability crystallizes that the same can be claimed as deduction for computing taxable profits under the head, 'Profits and gains of business or profession". In the present case, the liability for payment of franchise fee for IPL-season 1 arises only after the execution of the Agreement between BCCI-IPL and the Appellant. Since the Agreement was signed in the month of April 2008, the liability for payment of franchise fee arises in the month of April 2008 and is therefore the same is claimed as deduction while computing the taxable income for the year ending on 31 March 2009. In this regard reliance has been placed on the principles laid down in the following cases: * Swadeshi "cotton Mill Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09. 2.8 Expenses debited as per the mercantile basis of accounting. Further, the Appellant had to pay annual consideration of Rs. 30,03,60, 000/- for season -2 i.e for the period 1 January 2009 to 31 December 2009 by 2 January 2009. As mentioned above, the Appellant follows the mercantile system of accounting. As per mercantile system of accounting, income and expenditure are recorded at the time of their occurrence during the previous year. Accordingly, expenditure is recorded if it becomes due during the previous year. Since the three months of season 2 fall in FY 2008-09 (January 2009 to March 2009), the franchisee fee pertaining to those three months was due in FY 2008-09. Accordingly, based on the mercantile system of accounting an amount of Rs. 7,50,90,000/- was debited as an expense for (being 25% of Rs. 30,03,60, 000 for the 3 month period) even though the actual sum paid during the FY 2008-09 was Rs. 9,01,08,000/-. It is also submitted that the even the Auditors Report for the financial year 2008-09 has recognized the franchisee consideration of Rs. 7,50,90,000/- as current year expenditure. Reliance has been placed on the following decisions to support t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberating on the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The CIT(A) observed that the aforesaid claim of the assessee did not satisfy the matching principle of accounting, as per which the expenditure can be claimed against the income of the financial year. The CIT(A) further observed that as per Para 4.3 of the franchise agreement, the liability to pay the Franchise fee accrued on the first day of the match of the series, therefore, now when no such match of IPL Season-2 was played before 31.03.2009, the claim of the assessee that the expenditure as regards the same had accrued during the year under consideration, viz. A.Y 2009-10 could not be accepted. The CIT(A) thus approved the observations of the A.O in respect of the issue under consideration and upheld the disallowance of Rs. 7,50,90,000/-. 11. The A.O during the course of the assessment proceeding observed that the assessee company had claimed an amount of Rs. 3,50,00,000/- on account of payment to Cricket Association of Bengal (for short 'CAB') for use of Eden Garden, Calcutta. The A.O observed that no written agreement was executed between BCCI and CAB with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid observations disallowed the aforesaid claim of expenditure of Rs. 75,00,000/- on the ground that the same was not allowable as a deduction under Sec. 37(1) of the Act. 12. The assessee being aggrieved with the aforesaid disallowance of Rs. 75,00,000/- by the A.O assailed the same in appeal before the CIT(A). The assessee submitted before the CIT(A) that as the aforesaid payment being in the nature of security expense was incurred by the assessee wholly and exclusively for the purpose of its business, therefore, the same was allowable in terms of the provision of Sec. 37(1) of the Act. The assessee in support of its aforesaid claim of expense, submitted before the CIT(A), as under: 3.1 "During the FY 2008-.09, the Appellant had incurred expenditure of Rs. 3)50,00,000/- towards stadium rent of its home stadium (i.e Eden Gardens, Calcutta) and had deducted appropriate taxes while making payment to CAB. 3.2 As per the arrangement between the Appel lant and CAB, the Appellant was required to pay an amount of Rs. 50,00,000/- per match to be played during IPL-1 at Eden Gardens. In IPL - 1, there were seven matches played at Eden Gardens, translating the total expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Income and Expenditure accounts. Also, it is relevant to note that CAB has also recognized its obligation to pay to Police Department on the debit side of audited Income and Expenditure accounts. Even the Annual Report of CAB recognizes that payment of Rs. 3,50,00,000/- (which includes Rs. 75,00,000/-) represent fill satisfaction of the payment obligation of the Appellant towards CAB. 3.6 In light of the above, the Appellant wish to submit that security expenses incurred by the Appellant is clearly a business expenditure and hence allowable as a deductible expenditure. Also, it is evident from the reasons provided in the Assessment Order that such expenditure is disallowed by the Learned AO without any valid and cogent reasons. 3.7 In this regard, the Appellant wish to draw your attention to the trivial reasons mentioned in his assessment order for disallowance of claim of expenditure: * The payment is not made to the Government authority. * The Income and Expenditure accounts of CAB reflect this amount as refreshment for police force. 3.8 In this regard, the Appellant wish to submit that for any expenditure to be allowable as a business deduction, the tax law doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Family Welfare Centre was for the purpose of its business and thus allowable as a deduction under Sec. 37(1) of the Act, therefore, upheld the aforesaid disallowance/addition in the hands of the assessee. 14. The A.O during the course of the assessment proceedings further observed that the assessee had claimed an expenditure of Rs. 1,28,34,490/- on account of payment to Buchanan Corporate Coaching Trust for Buchanan Discretionary Trust. The A.O on perusing the agreement entered into by the assessee with Mr. John Buchanan, observed that the same was executed on 07.01.2009, i.e much subsequent to the period in which the IPL Season-1 matches were played. The A.O observed that the IPL Season-1 matches were played in the month April and May, 2008. The A.O further observed that as per the ITT bid document and franchise agreement it was mandatory to enter into agreement for availing coaching services, however, no such agreement was entered into by the assessee with Mr. John Buchanan, as a result whereof it could safely be concluded that the amount of payment made by the assessee could not be allowed as an expenditure incurred for the purpose of the business of the assessee for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Duration "This Agreement shall be for the three seasons i.e. 2008-09, 2009-10 and 2010-11 and shall be effective from the date of signature until 30th June, 2011 unless terminated or extended as provided in this agreement." * Clause 3 reads as under: 3.2 The Director: Cricket Operations is committed to be available for the Franchisee for at least 26 weeks in Season 1 (2009) and 36 weeks each in Season II and III (i.e. 2010 and 2011), out of which he shall be frilly and exclusively available for 14 weeks during the JPL and/ or Champions Trophy league and/or training camps in India as required by the Franchise..............................." * Clause 4 of the Agreement reads as under; "In consideration of the provision of the Services............USD 255000......................during Season 1 (2009) which shall become due and payable in the following manner: 25% on signing of this contract (but before 30th November, 2008) 50% on 1st April, 2009 25% on 1st June 2009" "In consideration of the provision of the Services............USD 350000.......................during Season 2 (2010) and Season 3 (2011) which shall become due and payable in the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did emerge from the material placed on record by the assessee. The CIT(A) further observed that the material placed on record by the assessee rather proved that Mr. John Buchanan had a contract from 07.01.2009 to June, 2009, when he was sacked by the assessee for the poor performance of the team. The CIT(A) on the basis of his aforesaid observations concluded that the A.O had rightly disallowed the claim of expenditure of Rs. 1,28,34,490/- raised by the assessee. 17. The A.O further in the course of the assessment proceedings observed that the assessee had in its profit and loss account claimed certain expenses, viz. (i) food and nutrition expenses: Rs. 58,53,575/-; and (ii) boarding and lodging expenses of Rs. 1,90,16,944/-. The A.O observed that in course of survey proceedings which were conducted under Sec. 133A on 21.04.2010 at the office premise of the assessee at Eden Garden, Calcutta, it emerged that the assessee had incurred an expenditure of Rs. 1,35,46,255/- (Room billing: Rs. 96,25,375/- and Partying bill: Rs. 39,19,880/-) at ITC, sonar, Kolkata. The A.O observed that as partying expenditure was not incurred for the business of cricketing of the assessee, therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the same was allowable as per the provisions of Sec. 37 (1) of the Act. The assessee in order to fortify the genuineness and veracity of the expenses, which were claimed to have been incurred wholly and exclusively for the purpose of its business, therein placed on record exhaustive submissions before the CIT(A). It was submitted by the assessee that the observations of the A.O that the assessee had incurred expenditure on "partying" was completely untrue and without any valid basis. It was submitted by the assessee that the invoices placed on record proved that the dinner expenses were incurred only on the days when the matches were played at the home stadium. The assessee further submitted that the expenditure incurred for organizing dinners for the assessee's own team, visiting teams, support staff, directors and invited guests was allowable as a deduction under Sec. 37 (1) of the Act, as the same satisfied all the requisite conditions contemplated therein, viz. (i) the expenses were not of the nature defined in sec. 32 to 36 of the Act; (ii) the expenses were not in the nature of a capital expenditure; (iii) the expenses were not the personal expenses of the assessee; and (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d attend the event, being prompted by business prudence to increase the revenue from sale of tickets and higher sponsorship fees, was thus allowable in the hands of the assessee. 19. The CIT(A) after deliberating on the contentions of the assessee, observed that on verification of the bills for food and nutrition expenses, it emerged that there was a bill of Rs. 3,44,410/- for 300 snacks, 300 soft beverages and transport charges, however nothing could be gathered from perusing the same about the purpose and persons attending the party. The CIT(A) further observed that a bill of Rs. 5,31,573/-, dated 30.04.2008 was though raised in favour of IPL ODC for dinner of 400 persons, however, as to how the same was payable by the assessee had remained unexplained. The CIT(A) further referring to certain other bills, viz. bill of Rs. 5,31,893/- for 08.05.2008; bill of Rs. 5,31,893/- for 13.05.2008; and bill of Rs. 5,31,894/- for 20.05.2008, therein observed that the same included dinner, equipment rental, tobacco etc., but they too did not indicate the purpose and the persons attending the said occasion. The CIT(A) further referring to a bill of Rs. 4,51,900/- which was for 400 snacks, soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid deliberations the CIT(A) upheld the disallowance of 33% of the expenses, viz. Rs. 31,76,705/- made by the A.O. That on the basis of the similar reasoning for sustaining the aforesaid disallowance, the CIT(A) further upheld the disallowance of Rs. 37,37,007/- (i.e 33% of the balance expenses of Rs. 1,13,24,264/-) made by the A.O. 21. The A.O while framing the assessment observed that the assessee had claimed air fare expenses of Rs. 3,28,96,505/-, travelling expenses of Rs. 12,66,462/- and vehicle hire charges of Rs. 40,89,560/-. The A.O held a conviction that as the assessee had incurred expenses on food and stay of VIPs and celebrities, therefore, the aforesaid air fare expenses, travelling expenses and vehicle hire expenses must also be including expenses incurred on such VIPs and celebrities. The A.O on the basis of his aforesaid observations disallowed 25% of the expenses, viz. Rs. 82,25,126/- out of air fare expenses, Rs. 3,16,616/- out of travelling expenses and Rs. 10,22,390/- out of vehicle hire charges, as a result whereof a total disallowance of Rs. 95,63,132/- was made by him. 22. The assessee assailed the aforesaid disallowance of expenses of Rs. 95,63,132/- b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for the airfare, travelling expenses and vehicle hire charges of the Appellant 's own team, visiting teams, support staff, directors and invited guests (being celebrities and VIPs) and should be allowed as a deductible expenditure under section 37(1) of the Act as it satisfies the following conditions: * The expenses are not of the nature defined in section 30 to 36 of the Act; * The expenses are not capital in nature; * The expenses are not the personal expenses of Appellant; and * The expenses have been incurred wholly and exclusively for the purposes of the business of Appellant. In light of the above, the Appellant prays before your Honour to hold that airfare, travelling expenses and vehicle hire charges incurred by the appellant of Rs. 95,63,132/- are wholly and exclusively for the purpose of its business and should be al lowable in terms of the provisions of sect ion 37(1) of the Act. 23. The CIT(A) after deliberating on the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The CIT(A) observed that as the assessee had failed to produce before him any evidence, viz. air tickets, details of vehicles, name of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guest, VIPs and celebrities for the cricket matches held in home stadium. Your Honour will appreciate that inviting VIP guests, celebrities etc during the matches results in increase of the attendance of the public for the matches which in turn increases the ticket sales and revenues of the Appellant. Further, it increases in premium from the sponsors, as the sponsors would want to be associated with the team which can improve their marketability by increasing public viewership. Accordingly, where the invited guests, VIP guests and celebrities are invited by the Appellant for the benefit of its business, their security and protection is also responsibility of the Appellant. Accordingly, the Appellant had incurred expenditure on security charges of the invited guest, VIP's and celebrities during the captioned AY. 7.4 However, the Learned AO disallowed Rs. 1,08,700/- incurred by the Appellant during the matches towards security charges for the members of the KKR team and the VIP guests of the Appellant on the premise that these are personal expenses. 7.5 It is submitted before your Honour that the above expenditure of Rs. 1,08,700/- are genuine business expenditure incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not correlate with the term of IPL Season-1 matches. It was further observed by the A.O that the expenditure for designing and exhibition of player outfits for the KKR teams was even otherwise not allowable, for the reason that the said outfits had already been designed and displayed by the team during the IPL Season-1 matches which were held during the month of April and May, 2008. The A.O on the basis of his aforesaid observations concluded that as the claim of the aforesaid expenses so raised by the assessee was haunted by serious doubts, therefore, the expenses of Rs. 8,85,600/- could not be allowed during the year under consideration. 28. The assessee being aggrieved with the disallowance of the aforesaid expenditure of Rs. 8,85,600/-assailed the same in appeal before the CIT(A). The assessee submitted before the CIT(A) that it had during the year under consideration made payments amounting to Rs. 8,85,600/ to Mr. Manish Malhotra in connection with participation in the Lakme Fashion Week and Wills Lifestyle India Fashion Week, both of which events were held in March, 2009. The assessee explaining the genesis of the aforesaid payments submitted before the CIT(A) that Mr. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred website design charges of Rs. 16,98,609/-, had however claimed only 50% of the total expenditure i.e. Rs. 8,49,305/-. The assessee during the course of the assessment proceedings requested the A.O to allow the entire expenditure of Rs. 16,98,609/-.However, the A.O being of the view that the expenditure incurred on website designing was in the nature of capital expenditure and the intangible asset generated therein was not subject to any wear and tear, therefore, the assessee was not even entitled for depreciation under Sec.32 of the Act on the amount of the capitalized expenditure. The A.O on the basis of his aforesaid observations disallowed the claim of expenditure of Rs. 8,49,305/- raised by the assessee in its return of income. 31. Aggrieved, the assessee assailed the disallowance of the website design charges expenses by the A.O, before the CIT(A). It was submitted by the assessee that as the website design charges of Rs. 16,98,609/- were incurred in connection with designing of the website whose benefit was available over a period of two years, therefore, the assessee had erroneously recognized only 50% of the said expenses, viz. Rs. 8,49,305/- during the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further deliberating on the nature of the expenses, observed that as the website was designed for the first time, therefore, the expenditure incurred by the assessee clearly revealed providing of an enduring benefit to him. Thus, in the backdrop of the aforesaid observations, it was concluded by the CIT(A) that the expenditure incurred by the assessee on website designing was on the capital side, since in the subsequent years the assessee would only be required to update the website which was designed by him during the year. The CIT(A) on the basis of his aforesaid observations concluded that the aforesaid expenditure was rightly disallowed by the A.O by treating it as capital in nature. 33. The learned authorized representative (for short 'A.R') for the assessee Shri J.D. Mistry, Senior Counsel, at the very outset took us through the facts of the case and submitted that the assessee company had entered into an IPL franchise agreement with BCCI-IPL on 04.04.2008 for franchise rights of IPL team with home ground at Eden Garden, Kolkata, which was named as Kolkata Knight Riders (for short 'KKR'). The ld. A.R submitted that though the assessee had claimed the Franchise fee paid for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the limited rights as got vested with the assessee pursuant to the payment of the Franchise fee, therein drew our attention to the details of the Central licensing/Franchisee licensing forming part of the 'Franchisee agreement' (Page 60 of 'APB'). The ld. A.R taking us through the obligations as were cast upon the franchisee in respect of the payment of the franchise consideration to BCCI-IPL, took us through Clause 7 of the Franchise agreement (Page 62 of 'APB'), which therein provided that in respect of the period 2008-17 (inclusive) the assessee was to make a payment of USD 22,52,700 equivalent to INR 9,01,08,000/- towards "League deposit" on or before 2nd January in each such year, which thereafter was to be appropriated towards the annual Franchise consideration on the date of the First match of the League in the year in which the League Deposit was paid. That still further an amount of USD 52,56,300/- equivalent to INR 21,02,52,000/- was to be paid by the assessee in each such year on the date of First match in the League in each such year. The ld. A.R in order to support his claim that the payment of the Franchise fee did not lead to vesting of any enduring benefit with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us through Para 5-10 of the order, submitted that the Tribunal had in the aforesaid case concluded that the Franchise fee paid by the franchisee to BCCI-IPL was with the purpose of allowing participation of the team in IPL, and as the same did not vest with the assessee any enduring benefit, therefore, the same was allowable as a revenue expenditure. The ld. A.R submitted that all the aforesaid agreements were executed by BCCI-IPL on the same date, viz. 10.04.2008. The ld. A.R further relied on a similar view taken by another coordinate bench of the Tribunal, viz. ITAT Hyderabad Bench "B", Hyderabad in the case of DCIT Vs. M/s Deccan Chargers Sporting Ventures Ltd. (ITA No. 1043/Hyd/2013, dated 28.10.2015. The ld. A.R in support of the proposition under consideration also relied on the order of ITAT "C" Bench, Chennai in the case of ACIT Vs. M/s The India Cement ltd. (ITA No. 1342/Mds/2010, dated 01.01.2016). 34. The ld. A.R further adverted to his claim of an amount of Rs. 7,50,90,000/- pertaining to IPL Season-2 as an expenditure for the year under consideration. The ld. A.R submitted that the amount of Rs. 7,50,90,000/- was claimed by the assessee as an expenditure for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the CIT(A) in context of the issue under consideration recorded at Page 49 - Para 6.4 of his order. The ld. A.R submitted that as per the arrangement between the assessee and CAB, the assessee was required to pay Rs. 50,00,000/- per match played at Eden Garden Stadium. It was thus submitted by the ld. A.R that as 7 matches were played at Eden Garden during IPL Season-1, therefore, the assessee was liable to pay a consideration of Rs. 3,50,00,000/-. In the backdrop of the aforesaid facts it was submitted by the assessee that as it was the responsibility of CAB to arrange for security at the stadium, therefore, at the direction of CAB the assessee had made a payment of Rs. 75,00,000/- directly to Kolkata police department for security services to be provided at the stadium. It was thus submitted by the ld. AR that as the aforesaid expenditure was incurred in the normal course of the business of the assessee, therefore, the same was allowable as an expenditure in the hands of the assessee. 36. The ld. A.R further taking us through the disallowance of the fee of Rs. 1,28,34,490/- paid/payable to Mr. John Buchanan, therein took us through the "Services Agreement- Director: Cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC Ltd., Kolkata; (ii) disallowance of Rs. 31,76,705/- out of the room bill expenses paid by the assessee to ITC Ltd., Kolkata (i.e 33% of the total room bill of Rs. 96,26,375/-); and (iii) disallowance of Rs. 37,37,007/- in respect of expenses of other hotels (i.e 33% of the balance expenses of Rs. 1,13,24,264/-). It was submitted by the ld. A.R that the aforesaid expenses were incurred by the assessee in the course of operating its teams, and this was the way in which the teams were being operated by the assessee. The ld. A.R submitted that it remains as a matter of fact that the visiting teams along with people from the show business, actors, celebrities, VIPs etc., were invited for the matches with the purpose of pushing the sale of tickets and generation of higher amount of sponsorship fees. The ld. A.R submitted that the A.O had erred in disallowing the aforesaid expenses for the reason that the same were not related to the business of the assessee. The ld. A.R took us through the observations of the CIT(A) recorded at Page 54 - Para 8.2 of his order. The ld. A.R submitted that as Sec. 37(2) which earlier provided a restriction on claim of entertainment expenditure while comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same were allowable as an expenditure under Sec.37(1) of the Act. 40. The ld. A.R adverting to the disallowance of the amount of Rs. 8,85,600/- paid by the assessee to Mr. Manish Malhotra, submitted that the said payment was for the purpose of design and outfits of KKR teams for the IPL Season-2 held in April-May 2009 and not for IPL Season-1 held in April- May, 2008. It was submitted by the ld. A.R that as the assessee was following the mercantile method of accounting, therefore, the expense was recognized and claimed as a deduction in F.Y: 2008-09. It was the contention of the ld. AR that for allowability of an expenditure in a particular year it was not necessary that the same must be one required for the purposes of carrying on the business or earning of profits of that year. The ld. A.R in support of his aforesaid contention relied on the judgment of the Hon'ble High Court of Bombay in the case of Mysore Spinning and Manufacturing Co. Ltd. Vs. CIT (1966) 61 ITR 572 (Bom) (Para 38 of the order). 41. The ld. A.R lastly in context of the disallowance by the A.O of the website designing expenses of Rs. 8,49,305/-which had been sustained by the CIT(A), therein submitted that as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the disallowance of the fees of Rs. 1,28,34,490/- claimed by the assessee as amount paid to Mr. John Buchanan for IPL Season-1, the ld. D.R relied on the order of the CIT(A) and submitted that as the assessee had failed to establish that any such coaching services were provided by Mr. John Buchanan in the IPL Season-1, therefore, the same was rightly disallowed by the lower authorities. That as regards the adhoc disallowance of boarding and lodging and food and nutrition expenses of Rs. 1,08,33,592/-, the ld. D.R relied on the orders of the lower authorities. That as regards the adhoc disallowance of 25% of air fare expenses, travelling expenses and vehicle hire charges of Rs. 95,63,132/- the ld. D.R again took support of the orders of the lower authorities. That as regards the disallowance of the security charges of Rs. 1,08,700/- the ld. D.R relied on the order of the CIT(A). That in respect of the disallowance of expenses of Rs. 8,85,600/- incurred by the assessee on participation in fashion shows, the ld. D.R submitted that as observed by the lower authorities, as the said expenses were not incurred for the business of the assessee, therefore, the same had rightly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly disallowed by the lower authorities. We find that the assessee had entered into a franchise agreement with BCCI- IPL in April, 2008. That pursuant to the aforesaid agreement the assessee was vested with the right to operate the franchise and to be a member of the league and operate a team in the city of Kolkata and participate in the IPL tournament, which was owned and operated by BCCI-IPL. The assessee in terms of Clause 7 of the franchise agreement remained under an obligation to pay to BCCI-IPL the annual Franchise fee of the following amount: (a). in respect of the period 2008-17 (inclusive), as under:- (i) a sum of USD 22,52,700/- equivalent to INR 9,01,08,000/- towards "League deposit" on or before 2nd January in each such year, which thereafter was to be appropriated towards the annual Franchise consideration on the date of the First match of the League in the year in which the League Deposit was paid. The League deposit was refundable in any year if the league did not take place at all in such year, under which circumstance the amount was to be refunded without interest; AND (ii) a sum of USD 52,56,300/- equivalent to INR 21,02,52,000/- was to be paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and earn revenue from the same. We further find that the payment of the Franchise fee by the assessee was in the nature of recurring annual payment which was paid to facilitate participation in the league and operating the team only for the year for which the payment pertained, with neither vesting of any right of participation in the subsequent years, nor leading to creation/ownership of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We further find that the year under consideration was the 'first year', and as such was to be construed from the date of signing of the agreement till 31st December, 2008. We have deliberated at length on the rights and obligations contemplated in the franchise agreement. We find that in case of non-staging of the league by BCCIIPL (in whole or part) the same was not to constitute a breach of the agreement, and the assessee was divested of his right to take any legal action against the other party, viz. BCCI or enforce the playing of the matches. We further find that as can fairly be gathered from perusing the details of the Central licensing/Franchisee licensing as defined in the franchisee agreement per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BCCI-IPL for IPL Season-1 only enabled the assessee to participate in the league tournaments for IPL Season-1 and operate its team for the aforesaid period for which the payment was made. We are unable to persuade ourselves to subscribe to the view of the lower authorities that any benefit of enduring nature was generated in the hands of the assessee by making the payment of the Franchise fee of Rs. 30,03,60,000/-, which as observed by us was only for facilitating the assessee to participate in the league tournaments for IPL Season-1. We have deliberated on the nature of rights of the assessee franchisee on payment of the Franchise fee and find that while for the "Central Rights" were retained by BCCI, the "Franchisee rights" remained with the assessee. We further find that though by making the payment of the Franchise fee the assessee got a right to participate in the league and operate its home team for the year for which the payment was made, but however, the non-staging of the league by BCCI-IPL (in whole or part) would not constitute a breach of the agreement, and the assessee was neither vested with any right to enforce the playing of such matches by BCCI nor had any right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein too the Tribunal had concluded that the Franchise fee paid by the franchisee assessee to BCCI-IPL was in the nature of a revenue expenditure. We find that the judgments of the Hon'ble Supreme Court in the case of Techno Shares & Stocks Ltd. & Ors. vs. Commissioner Of Income Tax (2010) 327 ITR 323( SC) and Jonas Woodhead And Sons (India) Ltd. Vs. Commissioner of Income-Tax (1997) 224 ITR 342 (SC) relied upon by the A.O are distinguishable on facts. We find that in the case of Techno Shares & Stocks Ltd. & Ors (supra) the issue before the Hon'ble Apex Court was as to whether the right of membership conferred upon the members under the BSE membership card is a "business or commercial right" which gives a non-defaulting continuing member a right to access the exchange and to participate therein, and in that sense a license or akin to licence in terms of Sec. 32(1)(ii) of the Act. We find that as the aforesaid right of membership conferred upon the members under the BSE membership card an enduring benefit, which would vest with the stock exchange only on the default/demise in terms of Rules and bye-laws of BSE, therefore, it was in the backdrop of the aforesaid material facts that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Franchise fee for IPL Season-1 of Rs. 30,03,60,000/- by the assessee can safely be held to be in the nature of a revenue expenditure, which was rightly claimed by the assessee as such while computing its income for the year under consideration. We thus set aside the order of the CIT(A) and direct the A.O to delete the addition of Rs. 30,03,60,000/-. We may herein observe that as we have held that the Franchise fee of Rs. 30,03,60,000/- paid by the assessee to BCCI is a revenue expenditure, therefore, the contentions of the assessee as regards quantification of the W.D.V for computing the depreciation in respect of the franchise rights is rendered as redundant and is not being adjudicated by us. The Ground of appeal No. 2 to 4 are allowed in terms of our aforesaid observations. 48. We shall now take up the validity of the disallowance of an amount of Rs. 7,50,90,000/- claimed by the assessee as an expenditure under the head "Franchise fee" for the year under consideration, viz. A.Y 2009-10. We find that as a period of the first three months (January, 2009 to March, 2009) pertaining to IPL Seaosn-2 fell within the sweep of the year under consideration, viz. A.Y 2009-10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the said event during the year under consideration. We thus are of the considered view that in the backdrop of the fact that the assessee was following the mercantile system of accounting, as no part of the Franchise fee expenditure for IPL Season-2 had accrued or crystallized during the year under consideration, viz. AY 2009-10, therefore, no part of the same could have been claimed as an expenditure by the assessee during the year under consideration. Before parting, we may herein clarify that to the extent the league deposit of Rs. 9,01,08,000/- which the assessee had paid as a deposit as per Clause 7.1(a)(i) of the franchise agreement, the same till the date of its appropriation as against the annual franchise consideration on the date of the first match of the league in the year in which the league deposit was paid, could only be characterized as an advance/deposit, i.e an amount deposited by the assessee on account of a contractual obligation. We find that the reliance placed by the ld. A.R on the judgment of the Hon'ble Supreme Court in the case of Taparia Tools Limited Vs. Joint Commissioner of Income-tax (2015) 372 ITR 605 (SC) is distinguishable on facts. The facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of the non-convertible debenture issue floated by the assessee, on the exercise of option by the aforesaid debenture holders, which occurred in the respective assessment years in which deduction of this expenditure was claimed, therefore, the claim of the assessee in making the payment of interest liability which had crystallised during the year under consideration, was well in order. The Hon'ble Apex Court observed as under: "15) What is to be borne in mind is that the moment second option was exercised by the debenture holder to receive the payment upfront, liability of the assessee to make the payment in that very year, on exercising of this option, has arisen and this liability was to pay the interest @ Rs. 55 per debenture. In Bharat Earth Movers v. Commissioner of Income Tax (2000) 6 SCC 645, this Court had categorically held that if a business liability has arisen in the accounting year, the deduction should be allowed even if such a liability may have to be quantified and discharged at a future date." We have given a thoughtful consideration to the judgment of the Hon'ble Supreme Court and find that the observations of the court that as the payment of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the lower authorities had raised doubts as regards the allowability of the aforesaid amount of Rs. 75,00,000/- as an expenditure in the hands of the assessee for multiple reasons, viz. (i) that while for on the one hand the assessee had claimed that it had paid an amount of Rs. 75,00,000/- to Kolkata Police Family Welfare Centre at the instructions of CAB, however, a perusal of the income and expenditure statement of CAB revealed that the amount was shown as refreshment for police force; (ii) that as no written agreement was executed for the use of Eden Garden during the IPL matches, therefore, the genuineness of the payment of Rs. 75,00,000/-paid to Kolkata Police Family Welfare Centre was not proved; (iii) the claim of the assessee was also not justified for the reason that the amount was directly paid to Kolkata Police Welfare Fund which was not a Government Authority, and since the services of police were utilized during the IPL Matches, therefore, either the amount should have been paid to the State government or the assessee should have provided refreshment to police personnel on its own, instead of giving the amount to a welfare fund; and (iv) that there was no cogent r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the considered view that now when CAB had duly acknowledged having received an amount of Rs. 3,50,00,000/- from the assessee for use of Eden Garden stadium for staging of IPL Season-1 matches, therefore, as observed by us hereinabove, nothing more remains to be proved on the part of the assessee. We are of the considered view that the observations of the lower authorities as regards the genuineness of the payment and the fact as to why the said amount was paid by the assessee to Kolkata Police Welfare fund which was not a government authority, and not to the State government, or as to why the assessee instead of giving the amount to a welfare fund had not provided refreshment to police personnel on its own, are all irrelevant to the entitlement of the assessee for the claim of the aforesaid amount as an expenditure in the course of its business. We have deliberated on the facts and are of the considered view that the payment of Rs. 75 lac was made by the assessee to Kolkata Police Welfare fund, not by its choice, but as per the directions of CAB who was responsible to arrange for security in the stadium at the time of staging of the matches by the assessee. We thus not being persu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to Buchanan corporate Coaching trust. We have further perused the downloaded extract from "Wikipedia, the free encyclopaedia" and the relevant extract of "The Times of India", Mumbai, dated April 18, 2008 placed on record by the ld. A.R, from where it could be gathered that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in IPL Season-1 (Page 127 - 129 of 'APB'). We have perused the service agreement which reveals that the same was executed by Mr. John Buchanan, both in his individual capacity and in his capacity as director of Buchanan success cricket coaching Pty ltd. (ACN) as trustee of the Buchanan discretionary trust, having its address at 26, Love Street, Holland Park, Queensland, Australia. Thus, in the backdrop of the aforesaid facts, the adverse inference drawn by the lower authorities as regards the genuineness and veracity of the allowability of the claim of the assessee for the reason that the amount was paid to a discretionary trust, is thus put to rest. We further find that though it remains as a matter of fact that the agreement was signed on 07.01.2009, i.e much subsequent to the period the IPL Season-1 matches w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Riders in IPL Season-1. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to subscribe to the views of the lower authorities that no coaching services were provided by Mr. John Buchanan to the assesse's cricket team in IPL Season-1. We further find that the revenue had neither placed on record any irrefutable documentary evidence which could persuade us to conclude that no coaching services were provided by Mr. John Buchanan to the assesse's cricket team for IPL Season-1, nor the material placed on record by the ld. A.R before us to fortify his aforesaid claim had been rebutted or disproved by the ld. D.R. We thus being of the view that the claim of the assessee as regards the expenditure of Rs. 1,28,34,490/- in respect of the coaching fees paid to Mr. John Buchanan for IPL Season-1 is found to be in order, therefore, set aside the order of the CIT(A) to the extent the latter had sustained the addition/disallowance of Rs. 1,28,34,490/- made by the A.O. The Ground of appeal of no. 7 and 8 raised by the assessee are allowed. 54. We now advert to the disallowance by the A.O of the expenses which were claimed by the assessee in its profit and los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire partying expenditure of Rs. 39,19,880/-incurred by the assessee at ITC, sonar, Kolkata, as well as disallowed 33% of the room expenses of Rs. 96,26,375/- incurred by the assessee on booking of rooms at ITC, sonar, Kolkata, and a further disallowance of 33% of the balance expenditure of Rs. 1,13,24,264/-. We find substantial force in the contention of the ld. A.R that the aforesaid expenses were incurred by the assessee in the course of operating its teams, wherein the visiting teams alongwith people from show business, actors, celebrities, VIPs etc, were invited for the matches for the purpose of increasing the viewing of the matches, which thus consequently led to increase in sale of tickets and generation of higher amount of sponsorship fees. We have deliberated on the contentions raised by the authorized representatives for both the parties and the material available on record. We are of the considered view that it remains as a matter of fact that the game of cricket, unlike in the past, as on date had been highly commercialized. We find that the main source of income of an IPL franchisee from hosting of the cricket matches is from ticketing and receipt of sponsorships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h could not be held to have been incurred by the assessee wholly and exclusively for its business. We are of the considered view that as the visits of the actors, celebrities and VIPs at the venues where the matches are staged is strategically planned by the assessee in the very interest of its business, therefore, expenses incurred by the assessee by way of providing them food and nutrition or arranging for their stay in hotels can safely be held to be an expenditure incurred in the course of its business. We are further of the view that hosting of parties by the assessee at ITC, sonar Kolkata or at other venues on the days when the matches were played at the home grounds of the assessee, which were attended by the assessee's own team, visiting teams, support staff, directors and invitee guests, which included amongst others actors, celebrities, VIPs who had marked their presence at the matches, can safely be held to be expenditure incurred by the assessee in the very interest of its business. We are of the considered view that the allowability of an expenditure under Sec.37(1) of the Act is required to satisfy the requisite condition contemplated therein, viz. (i) the expenses ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and VIPs, as well as expenditure was incurred towards booking of rooms for their stay in hotels of repute. We are further in agreement with the contention of the ld. A.R who had rightly stated that this is the way the assessee carries out his business, and are of the considered view that as long as the claim of the assessee in respect of the aforesaid expenses satisfied the conditions contemplated under Sec. 37 (1), the entitlement of the assessee cannot be interfered with. However, while perusing the order of the CIT(A) we find that latter had referred to certain bills wherein a clear nexus between the expenditure incurred and the purpose of hosting the parties could not be established, viz. (i) bill of Rs. 3,44,410/- for 300 snacks, 300 soft beverages and transport charges, wherein nothing could be gathered from perusing the same about the purpose and persons attending the party; (ii) bill of Rs. 5,31,573/-, dated 30.04.2008 which though was raised in favour of IPL ODC for dinner of 400 persons, however, as to how the same was payable by the assessee had remained unexplained; (iii). That certain other bills, viz. bill of Rs. 5,31,893/- for 08.05.2008; bill of Rs. 5,31,893/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travelling expense ad vehicle hire charges. We find that the A.O holding a conviction that as the assessee had incurred expenses on food and stay of VIPs and celebrities, therefore, the airfare expenses of Rs. 3,28,96,505/-, travelling expenses of Rs. 12,66,462/- and vehicle hire charges of Rs. 40,89,560/- must also be including expenses incurred on VIPs and celebrities. The A.O on the basis of his aforesaid conviction thus carried out an adhoc disallowance of the expenses, viz. (i). Rs. 82,25,126/- out of airfare expenses; (ii). Rs. 3,16,616/- out of travelling expenses ; and (ii). Rs. 10,22,390/- out of vehicle hire charges, as a result whereof a total disallowance of Rs. 95,63,132/- was made by him. We find that the assessee had claimed that during the course of the assessment proceedings documentary evidence supporting the aforesaid expenses incurred by it were furnished with the A.O. However, the CIT(A) while upholding the adhoc disallowance made by the A.O observed that the assessee had failed to produce before him any evidence, viz. air tickets, details of vehicles, name of service providers, persons utilizing the services and their nexus with the business of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext of the business of the assessee, or were in the nature of its personal expense, then he remained under a statutory obligation to have specifically demonstrated the same by referring to the expenses booked by the assessee in its books of accounts. However, we find that the CIT(A) had taken a shift for sustaining the said disallowance and had observed that as the assessee had not produced before him any evidence, viz. air tickets, details of vehicles, name of service providers, persons utilizing these services and their nexus with the business etc., therefore, the possibility of the expenditure partly having been for non business purposes could not be ruled out. We further find that the assessee also had averred before us that it was not given an opportunity of being heard by the A.O while making an adhoc disallowance of the aforesaid expenses. We have given a thoughtful consideration to the issue before us, and as observed by us hereinabove, are of the considered view that the observations of the A.O that an adhoc disallowance of airfare expenses, travelling expenses and vehicle hiring expenses was called for in the hands of the assessee for the reason that expenses under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the A.O being of the view that the said expenses were incurred by the assessee for providing security to Mr. Shah Rukh Khan and VIPs, celebrities etc during the matches at Eden Garden, therein being of the view that as the said expenses were in the nature of personal expenditure and could not be held to have been incurred for the purpose of the business of the assessee, therefore, disallowed the claim of Rs. 1,08,700/- raised by the assessee. We find that the CIT(A) concurred with the A.O and upheld the aforesaid disallowance. We have given a thoughtful consideration to the issue before us and are of the considered view that as averred by the ld. A.R before us, Mr. Shah Rukh Khan was not only a celebrity but also the director of the holding company, viz. Red Chillies Entertainment Pvt. Ltd. We are of the considered view that now when there remains no doubt in our mind that the visits of the actors, celebrities and VIPs was a part of the strategic planning by the assessee for generating higher revenues, therefore, we advert to the issue keeping in view the fact that the presence of the aforesaid celebrities at the matches staged by the assessee was in the very interest of the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Malhotra had already paid an amount of Rs. 8,85,600/- for participating in both of the aforesaid events, which thereafter was reimbursed to him in March, 2009. We find that the assessee had submitted before the CIT(A) that the underlying purpose for participation in the fashion show was to advertise and promote the KKR team, and as both the fashion shows were organised in March, 2009, therefore, they were recognized as an expense for the year under consideration, viz. AY 2009-10. We find that the assessee had also submitted before the lower authorities that as all the requisite conditions contemplated in Sec.37(1) were satisfied by him, therefore, its claim of expense incurred in the course of its business was well in order. We find that the assessee in contradiction of its claim that was raised before the A.O that the expenditure of Rs. 8,85,600/- was incurred for designing and exhibition of player outfits, had however averred before the CIT(A) that the expenditure was incurred towards advertisement of the KKR team. We find that the CIT(A) being of the view that neither the nature of the expenditure was clearly brought out by the assessee, nor the fact as to how the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed and claimed as a deduction in F.Y: 2008-09. We may at this stage observe that the playing of the matches by the league had been spread over different calendar years falling between 2008-17 (inclusive), therefore, the period of first three months of IPL Season-2 (January, 2009 to March, 2009) fell within the sweep of the year under consideration, viz. F.Y 2009-10. We are of the considered view that the claim of expenses by an assessee in a particular year cannot be put in a strait jacket, and the allowability of the same be made absolutely dependent subject to the condition that the same must have been incurred for the purpose of carrying on the business or earning of profits of that year. We are in agreement with the aforesaid contention of the ld. A.R and find that the same is covered by the judgment of the Hon'ble High Court of Bombay in the case of Mysore Spinning and Manufacturing Co. Ltd. Vs. CIT (1966) 61 ITR 572 (Bom), which thereafter had been affirmed by the Hon'ble Supreme Court in the case of CIT Vs. Mysore Spinning and Manufacturing Co. Ltd. (1970) 78 ITR 4 (SC) and the appeal of the revenue was dismissed. The Hon'ble High Court had in the abovementioned case observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 50% of the deferred website expense may also be allowed during the year. However, the A.O even disallowed the claim of Rs. 8,49,305/- raised by the assessee in its return of income by observing that the same was in the nature of a capital expenditure. 67. We find that the claim of the assessee that the expenditure incurred towards website design charges is not in the nature of a capital expenditure stands settled by the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Indian Visit Com. Pvt. Ltd. (2009) 176 Taxman 164 (Del) as well as the order of a coordinate bench of the ITAT, Mumbai in the case of Radial Marketing Pvt. Ltd. Vs. ITO [ITA No. 3868/Mum/2008] wherein the website design charges had been held in the aforesaid judicial pronouncements as a revenue expenditure. We further find that as averred by the ld. A.R, the CIT(A) in the assesse's own case for the subsequent years, viz. AY 2010-11 to AY 2012-13 had held the web designing charges as a revenue expenditure. We are of the considered that as claimed by the ld. A.R before us that the website design charges had been held by the CIT(A) in the subsequent years, viz. AY 2010-11 to AY 2012-13 as a revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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