ACIT., CIRCLE-5(1), HYDERABAD vs. EENADU TELEVISION PRIVATE LIMITED, HYDERABAD

ITA 648/HYD/2024Status: DisposedITAT Hyderabad16 May 2025AY 2020-2173 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal consolidated four appeals involving common issues. Regarding the cost of production of TV serials and programmes, the Tribunal noted that the CIT(A) had directed verification of depreciation on non-compete fee and film software library, and allowed the claim for cost of production of TV serials and programmes as revenue expenditure, relying on the ITAT's order in the case of the assessee's sister concern, M/s. Prism TV Limited. The Revenue's grounds of appeal questioned this treatment, arguing that the expenditure created an asset with enduring benefit and repeat telecast value, and that the reliance on Zee Media Corporation Ltd. and Television Eighteen India Ltd. was misplaced. The Tribunal's decision on these specific grounds is not fully detailed in the provided excerpt, but the general direction to verify certain claims and allow others suggests a nuanced approach. For the issue concerning the shortfall in subscription revenue for March 2020 (ITA.No.563/Hyd./2024), the Tribunal found that while the assessee followed a consistent method of accounting due to the difficulty in collecting data from agents, the income accrued in March 2020. Since the assessee could not adequately explain why the revenue was not accounted for in March 2020, and the difference was adjusted in April, the Tribunal upheld the AO's addition. The Tribunal stated that the assessee was not able to explain why the said revenue has not been accounted for in March 2020 and therefore, the AO rightly assessed the difference income. The CIT(A) was also found to have rightly sustained the addition. The operative direction for this specific issue was to reject the ground taken by the appellant company. The overall result for all appeals was partly allowed for statistical purposes.

What were the facts?

The appeals by the Revenue (ITA.Nos.654 & 665/Hyd./2023 and ITA.No.648/Hyd./2024) and the assessee's cross-appeal (ITA.No.563/Hyd./2024) concern assessment years 2017-2018, 2018-2019, and 2020-2021. The assessee, M/s. Eenadu Television Private Limited, was formed from a demerger. The Assessing Officer (AO) made additions for disallowance of depreciation on non-compete fee, disallowance of cost of production of TV serials and programmes claimed as revenue expenditure, and disallowance of excess depreciation on 'Film Software Library'. The CIT(A) directed verification of some claims and allowed others. A specific issue in ITA.No.563/Hyd./2024 for AY 2020-2021 involves an addition of Rs.54,85,832/- by the AO for a shortfall in subscription revenue for March 2020, which the CIT(A) sustained.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the CIT(A) was right and justified in allowing the claim of cost of production of TV serials and programmes as revenue expenditure as against depreciation granted by AO treating it as Capital expenditure? (Section 37(1) of the Income Tax Act, 1961). The assessee contended that the cost of production of TV serials and programmes should be treated as revenue expenditure. The Revenue argued that such expenditure results in an asset with enduring benefit due to repeat telecast value, thus it should be capital expenditure or depreciated. 2. Whether, on the facts and in the circumstances of the case and in law, the CIT(A) erred in following the directions of the ITAT in allowing the claim of the assessee following the decision of ITAT Mumbai bench in the case of Zee Media Corporation Ltd, when in the said case assessee itself amortized such expenditure over the period of its exploitation considering the repeat telecast value and not as revenue expenditure in the first year itself? (Section 37(1) of the Income Tax Act, 1961). The Revenue questioned the reliance on the Zee Media case, arguing the assessee in that case amortized the expenditure, unlike the present assessee claiming it as revenue expenditure in the first year. 3. Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in following the directions of the ITAT in allowing the claim of the assessee following the decision of Delhi High Court in Television Eighteen India Ltd (364 ITR 597) in which the subject matter was 'news content’ which does not have repeat telecast value as against expenses incurred towards TV serials and programmes and film rights having repeat telecast value? (Section 37(1) of the Income Tax Act, 1961). The Revenue argued that the Television Eighteen India Ltd case was distinguishable as it dealt with news content without repeat telecast value, unlike TV serials and film rights. 4. Whether, on the facts and circumstances of the case and in law, the CIT(A) was correct and justified in allowing depreciation @25% on film software library by treating it as an intangible asset Ignoring the finding of A.O. that the said asset is an integral part of the tools used by the assessee to carry on its business and needs to be treated Plant and Machinery? (Section 32 of the Income Tax Act, 1961). The Revenue contended that the film software library should be treated as plant and machinery, not an intangible asset. 5. Whether, on the facts and circumstances of the case and in law, the addition of Rs.54,85,832/- made by the Assessing Officer towards short fall of revenue in the month of March, 2020 is justified? (Section 137 of the Income Tax Act, 1961). The assessee argued that it followed a consistent method of accounting for subscription revenue, recognizing it based on previous month's billing and adjusting differences later. The Revenue contended that income accrues when it arises, irrespective of receipt, and the shortfall should be taxed in March 2020.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 143(1),Section 143(3),Section 142(1),Section 250,Section 32,Section 26,Section 137

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Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G

Hearing: 18.03.2025Pronounced: 16.05.2025

PER MANJUNATHA G. :

The above three appeals ITA.Nos.654 & 665/ Hyd./2023 & ITA.No.648/Hyd./2024 are filed by the Revenue against the respective orders dated 13.10.2023 and 10.04.2024, of the learned CIT(A)-National Faceless Appeal Centre [in short the “NFAC”], Delhi, relating to the assessment years 2017-2018, 2018-2019 & 2020-2021, respectively

The order continues below.

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