ASSISTANT COMMISSIONER OF INCOME TAX-16(1), MUMBAI vs. VIACOM18 MEDIA PRIVATE LIMITED, MUMBAI

ITA 5658/MUM/2024Status: DisposedITAT Mumbai15 October 2025AY 2013-1464 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the issue of depreciation on non-compete fee was identical to the one for AY 2008-09, which was remanded by the Tribunal for fresh decision. In the subsequent proceedings for AY 2008-09, the AO, after referring the matter to the Valuation Officer, accepted the valuation and allowed the claim of depreciation. The Ld. Commissioner in the impugned order also noted that the AO had accepted the valuation report and allowed the claim of depreciation. The Tribunal observed that the AO himself had accepted the valuation determined by the Departmental Valuation Officer and allowed depreciation. Therefore, the issue was covered in favour of the assessee based on the AO's own acceptance of the valuation in earlier proceedings. The Tribunal did not decide the issue of cost of TV serials and film software library, as these grounds were not elaborated upon in the provided text, and the focus was solely on the non-compete fee. The operative direction was to uphold the Ld. Commissioner's order regarding the non-compete fee.

What were the facts?

The Revenue has appealed against the order of the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), Delhi, for Assessment Year 2013-14. The assessee, Prism TV Private Limited (now merged with Viacom 18 Media Pvt. Ltd.), had declared a loss. The Assessing Officer (AO) made additions/disallowances totaling Rs. 15,79,57,119/- on account of depreciation on non-compete fee, Rs. 134,79,41,873/- on cost of TV serials, Rs. 10,13,96,329/- on excess depreciation on 'Film Software Library', and Rs. 63,324/- on restriction of depreciation on computer accessories. The Ld. Commissioner deleted all these additions/disallowances except for the restriction on computer accessories. The Revenue is aggrieved by the deletion of the first three items.

What were the issues?

1. Whether, on the facts and circumstances, the Ld. CIT(A) was correct in allowing depreciation on Non-compete fee, considering the necessity and genuineness of the payment. (Section 32(1)(ii)) 2. Whether, on the facts and circumstances, the Ld. CIT(A) was justified in allowing the claim for the whole expense of cost of TV serials and programs as revenue, ignoring that it could have enduring advantage and long-term benefits, thus needing to be treated as capital expenditure. (Section 37(1)) 3. Whether, on the facts and circumstances, the Ld. CIT(A) was justified in deciding the ground of disallowance of film software library without considering that the final decision for AY 2007-08, from where the issue originated, is still pending. Assessee's contentions: - Relied on the Ld. Commissioner's order. - The AO had accepted the claim in AY 2008-09 after remand by the Tribunal and subsequent valuation by the Departmental Valuation Officer. - The issue is covered in favour of the assessee. Revenue's contentions: - The Ld. CIT(A) took a narrow view and allowed the claim based on an order that was binding on the AO for giving effect, not an order on merit. - The AO had sustained the reasons for disallowance in the consequential order dated 31.03.2017, particularly regarding the necessity and genuineness of the non-compete fee. - The transaction was a colourable device as both payer and payee were related parties (Shri Ch. Ramoji Rao being Chairman of the assessee and Karta of the HUF owning the payee entities). - Non-compete fees are not eligible for depreciation as they are not intangible assets of a similar nature to those specified in Section 32(1)(ii) and are not assets but a restriction. - The issue of genuineness of payment and necessity for non-compete fee needs to be decided on merit.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii),Section 250,Section 143(1),Section 143(3),Section 115JB,Section 37(1)

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Income Tax Appellate Tribunal, MUMBAI F BENCH :: MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & Ms. PADMAVATHY S

For Appellant: Shri Nimesh Vora, Ld. Adv, Shri Virabhadra Mahajan, Ld.Sr.DR
For Respondent: Shri Nimesh Vora, Ld. Adv, Shri Virabhadra Mahajan, Ld.Sr.DR
Hearing: 18.07.2025Pronounced: 15.10.2025

Per: NARENDER KUMAR CHOUDHRY, JM This appeal has been preferred by the Revenue against the order dated 27/08/2024 impugned herein passed by the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), Delhi (in short, `Ld. Commissioner') u/sec. 250 of the Income Tax Act, 1961 (in short, `Act') for the A.Y. 2013-14. 2. Relevant facts for adjudication of this appeal are that in the instant case, M/s. Ushodaya Enterprises (Pvt.) Ltd. (in short, `UEPL') was in the business of producing and telecasting entertainment/news/ information programmes under the trade name of ETV and under the scheme of demerger/arrangement und

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