ASSISTANT COMMISSIONER OF INCOME TAX 16 (1), MUMBAI vs. UNITED HOME ENTERTAINMENT PRIVATE LIMITED, MUMBAI

Accordingly, the AO determined the total income of the assessee at Rs. 33,06,04,930/- (rounded off) under the normal provisions of the Act and Rs. 29,49,21,991/- as per MAT calculation u/s 115JB of the Act. Aggrieved by the assessment order, the assessee challenged the same before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee confirmed the addition of Rs. 1,93,057/- on account of discrepancy in respect of AIR information, confirmed the addition of 46,08,458/- on account of capitalization of dubbing cost, confirmed the addition of Rs. 61,78,154/- on account of disallowance u/s 40 (a)(ia), confirmed the addition of Rs. 24,05,664/- on account of interest on Income Tax refund, however, deleted the addition of Rs. 5,47,00,000/- made on account of disallowance u/s 37 of the Act. Aggrieved by the impugned order, both revenue and the assessee are in appeal before the Tribunal. Assessment Year: 2014-15

The revenue has challenged the impugned order passed by the Ld. CIT (A) by raising the following effective grounds:- 1. “Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT (A) has erred in deleting the disallowance of Central Support Fees of Rs. 5,47,00,000/- u/s 37 of the Act without appreciating that the assessee has not determined the Central Support Fee on actual basis and the working of the same has been given only on estimated basis.

Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT (A) has erred in holding that the Revenue has not brought on record any evidence to show that the expenditure done was excessive without appreciating that from A.Y. 2010-11 onwards the assessee itself has adopted a subjective formula for allocating cost which could have been made on actual basis which was evident from the fact that the said formula was worked out by the assessee after the Financial Year got over and the original Service Agreement was modified by an addendum which results in increase of the cost by more than 100% of the initial cost decided upon.”

At the outset, the Ld. counsel for the assessee submitted that this issue is covered in favour of the assessee by the order of the ITAT in assessee’s own case for the AY 2008-09 and 2009-10. Since, the Ld. CIT (A) has allowed this ground of appeal by following the decision of the ITAT, there is no merit in the appeal of the revenue. The Ld. counsel further pointed out that there is no material change of facts in the present case, therefore, the order passed by the Ld. CIT (A) may be upheld.

On the other hand, the Ld. Departmental Representative (DR) fairly admitted that the ITAT has decided the identical issue in favour of the assessee in assessment year 2008-09 and 2009-10, however, strongly supported the assessment order passed by the AO.

We have heard the rival submissions and perused the relevant material on the record. As pointed out by the Ld. counsel for the assessee AO made the similar disallowance to the extent of total amount paid towards ‘central support fees’ in assessment years 2008-09 and 2009-10. The assessee challenged the Assessment Year: 2014-15

As pointed out by the Ld. counsel, in subsequent years the order rendered by the ITAT were followed and the disallowance were deleted. Further, no change of facts in the year relevant to the assessment year under consideration was pointed out by the revenue. The findings of the Ld. CIT(A) are based on the decision of the coordinate Bench rendered in assessee’s case for the earlier years. Under these circumstances, we do not find any reason to interfere with the findings of the Ld. CIT(A). We, therefore, uphold the findings of the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue. Accordingly, we direct the AO to delete the addition. On the other hand, the assessee has challenged the impugned order passed by the Ld. CIT (A) by raising the following effective ground:- 1. “On the facts and circumstances of the case and in law, the Assessing Officer has erred in disallowing Dubbing cost of Rs. 46,08,458/-,. The Assessing Officer failed to appreciate that dubbing expenses were incurred wholly and exclusively in connection with the business of the Appellant and being revenue in nature, deductable under section 37(1) of the Act.

The Assessing Officer erred in making an addition u/s 40(a)(ia) of Programming Cost of Rs. 4,78,474/- and Transmission Cost of Rs. 56,99,680/- on year end provision of Rs. 61,78,154/- on which TDS are not deducted.

The Assessing Officer erred in adding Rs. 24,05,664/- of interest on income tax refund. The appellant submits that no such interest on refund has been received by it and accordingly such amount could not have been accounted as income.”

Vide ground No. 1 of the appeal, the assessee has challenged the action of the Ld. CIT(A) in confirming the addition made on account of disallowance of Assessment Year: 2014-15

The Ld. DR admitted that the ITAT has dealt with the identical issue in assessee’s own case for assessment year 2012-13 and did not oppose the submissions made by the Ld. counsel.

We have gone through the material on record, the assessee had raised the identical issue in the assessment year 2012-13. The authorities below rejected the contention of the assessee, however, the ITAT allowed the alternative claim of the assessee that dubbing cost should be allowed to be amortized over the period of license. The relevant para of the order rendered by the coordinate Bench in assessee’s appeal ITA No. 6926/Mum/2016 reads as under:

Since, the coordinate Bench has dealt with the identical issue in assessee’s own case aforesaid and directed the AO to allow amortization of the balance amount of dubbing cost claimed in the impugned assessment year in the subsequent four assessment years, respectfully following the decision of the coordinate Bench we direct the AO to allow amortization of dubbing cost in terms of the order dated 18.04.2018 rendered by the coordinate Bench discussed above.

Vide ground no. 2, the assessee has challenged the action of the Ld. CIT (A) in confirming the addition u/s 40(a)(ia) of programming cost amounting to Rs. 4,78,474/- and transmission cost of Rs. 56,99,680/- on year and provision of Rs. 61,78,154/- on which the assessee had not deducted the tax at source. The Ld. CIT (A) confirmed the addition made by the AO for the reason that the assessee has failed to provide details regarding the subsequent treatment of the provisions. The Ld. counsel for the assessee submitted before us that the assessee had made an accrual of expenses and no party had been credited as the amounts were not crystallized, invoices had not been received from the parties and as on 31st March there was no obligation to pay. Hence, it was not possible to deduct tax on accrual made on estimation basis. The Ld. counsel further relied on the decision of the Mumbai Tribunal in the case of Mahindra and Mahindra, ITA No. 8597/Mum/2010. 7. The Ld. counsel further submitted that some portion of the amount has already been disallowed by the assessee u/s 40(a) (i)(ia) of the Act while computing the total income for the year under consideration which resulted in double disallowance to some extent. The Ld. counsel invited our attention to statement showing computation of tax for the AY 2014-15 in which the assessee has made disallowance u/s 40(a)(i) of the amounting to Rs. 49,43,821/- and u/s 40(a)(ia) amounting to Rs. 39,97,942/-. The Ld. counsel further submitted that some of the expenses are not subject to the TDS and there should not be any disallowance of expenses on account of non deduction Assessment Year: 2014-15

On the other hand, the Ld. DR submitted that the department has no objection in case the issue is sent to the AO for verification and decide the issue afresh.

We have perused the material on record in the light of the submissions of the Ld. counsel for the assessee. We notice that the assessee could not furnish the subsequent treatment of the provisions as the same were not readily available. Now the assessee is in a position to furnish the same, hence we are of the considered view that the assessee should be granted an opportunity to furnish the details and documents to substantiate its claim in the interest of justice. Accordingly, we set aside the findings of the Ld. CIT (A) and send this issue back to the AO for deciding the same afresh after taking into consideration, the submissions of the assessee. No other ground was pressed by the assessee. In the result, appeal filed by the revenue is dismissed and the assessee’s appeal is partly allowed for statistical purposes . Order pronounced in the open court on 6th November, 2019. (RAJESH KUMAR) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 06/11/2019