CHEERS INTERACTIVE (INDIA) PVT. LTD.,MUMBAI vs. INCOME TAX OFFICER-6(2)(1), MUMBAI, MUMBAI

During the course of hearing the assessee did not press Ground Nos.2 and 6 specifically and grounds no. 1 and 7 are formal in nature, therefore, these grounds need no adjudication.

Coming to Ground No.3 which pertains to disallowance made by the AO and confirmed by the Ld. CIT(A) on account of depreciation on intangible assets, the assessee has claimed that in assessee's own case for the A.Y.2012-2013 (ITA No.2418/Mum/2024) vide order dated 24.01.2025, the Hon'ble coordinate bench of the Tribunal has dealt with the identical issue and allowed the alternative claim of the assessee as revenue expenditure allowable under Section 37(1) of the Act, by observing and holding as under :-

Per contra, Ld. Sr. DR strongly placed reliance on the orders of the authorities below.

We have heard both the parties and perused the material on record. "Business or commercial rights of similar nature" has to be understood in the facts and circumstances of every business or commercial arrangement undertaken by assessee. For this purpose, we analysed the terms and conditions set forth in the agreement entered into between the assessee and EADS which is titled as "Agreement for services related to support of licensing activities". Assessee has capitalized the consideration under this agreement payable to EADS as an 'Intangible asset' claiming depreciation on the same which the Ld. Assessing Officer as disallowed. Recognition of "business or commercial rights of similar nature" has its peculiar nuances. In the present case, Cheers Interactive (India) Pvt. Ltd., AY 2012-13 facts of undertaking business transaction by the assessee with EADS in terms of aforesaid agreement is not in dispute. The sole issue is regarding whether to recognize the same as an asset eligible for depreciation under Section 32 of as revenue expenditure eligible for deduction under Section 37(1) of the Act. To put it differently, it is only a matter of timing difference on the allowability of the claim, i.e. spread over several years by way of charging depreciation or in one go in the year under consideration. Since assessee has taken an alternate plea of considering the claim as revenue expense for allowability under Section 37(1) if the treatment of Ld. Assessing Officer is not negated, we are inclined to consider the same for adjudicating this appeal.

Considering the facts and circumstances of the case, as the finding of the Tribunal in the case referred to above, has not been controverted by the Ld. Sr. DR by placing on record any judgment or material contrary and therefore on same reasoning as given by the Tribunal in the aforesaid case, we are inclined to allow the claim of the Assessee. Thus the AO is directed to recompute the tax liability accordingly. Resultantly, ground No.3 raised by the assessee is allowed.

In ground no. 4 also, assessee has raised alternative claim towards foreign exchange loss of Rs.22,13,375/- actually paid as revenue expenditure which it has considered as part of cost of intangible. This ground is covered by our above stated observations and finding since it stems from the same transaction of impugned agreement under which assessee had recognized it as an intangible asset, having consequential effect. Accordingly, in terms of our aforesaid finding, ground no. 4(c) is allowed. Ld. Assessing Officer is directed to give appropriate effect in computing the total income.

Respectfully following the decision of the Hon'ble coordinate bench of the Tribunal, qua the issue in hand, we are inclined to allow the instant ground raised by the assessee and consequently direct the AO to consider foreign exchange loss of Rs.97,80,000/- as revenue expenditure and to give appropriate effect in computing the total income in same terms, as directed by the Hon'ble coordinate bench of the Tribunal in the case referred to above. Thus, ground No.4 is also allowed.

Coming to Ground No.5, the assessee has claimed that the Ld.CIT(A) has erred in law in fact in confirming the action of the AO in disallowing the carry forward and set off of business loss and unabsorbed depreciation against the assessed income of the Assessee. The AO has disallowed the set off the business loss of Rs.2,79,10,732/- while computing the total income of the assessee and the Ld. Commissioner has also held that there is no balance carry forward loss available for carrying to the subsequent year as per law and consequently he confirmed the disallowance of set off of unabsorbed depreciation. The Assessee therefore has raised the claim that both the authorities below have not considered the carry forward and set off of business loss and unabsorbed depreciation in its right perspective and also not decided correctly and, therefore, this issue may be remanded to the file of the Ld. AO for decision afresh.

On the other hand, Ld. Sr. DR refuted the claim of the assessee.

We have given our thoughtful considering to the facts and circumstances of the case and rival claims of the parties and are of the considered view that to cut short the litigation and substantial justice, it would be appropriate to remand the instant issue to the file of the AO for decision afresh, while considering the claim of the assessee qua loss claimed in respect of earlier years of assessment or alternatively considering such business loss or unabsorbed depreciation and its allowability for setting off in the assessment year under consideration on the basis of the appellate order passed by the Ld. Commissioner. Thus, the instant issue is remanded to the file of the Ld.AO. Resultantly, ground No.5 is allowed for statistical purposes.13. In the result, appeal of the assessee is allowed partly for statistical purposes.