B R TV,MUMBAI vs. ACIT 16(1)(1), MUMBAI

The present appeal has been preferred by the Revenue against the order dated 28.07.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.

The issue raised in ground No.1 & 2 is against the order of Ld. CIT(A) confirming the addition of Rs.41,66,000/- as made by the AO in respect of royalty.

The facts in brief are that during the year under consideration the assessee firm has entered into different agreements with four parties to market and exploit the old serials manufactured by the assessee. Total agreement value

The Ld. A.R., at the outset, pointed out that the issue has been settled by the order of co-ordinate bench of the Tribunal in assessee’s own case in A.Y. 2011-12 vide order dated 31.05.2018 where identical issue has been decided in favour of the assessee. The Ld. A.R. therefore prayed that the issue in the current year may also be decided accordingly.

The Ld. D.R., on the other hand, relied on the order of Ld. CIT(A).

We have heard the rival submissions of both the parties and perused the material on record including the decision of the co-ordinate bench of the Tribunal as referred to by the ld AR. We observe that the co-ordinate bench of the Tribunal has decided the issue of income arising from sale of rights to telecast old serials produced by the assessee to be apportioned and treated as income over the period of agreement. The operative part is as under:

The facts in brief are that the AO upon perusal of the balance sheet of the assessee observed that assessee firm has 4 M/s. B.R. TV outstanding payments due to artists and technicians to the tune of Rs.72,14,845/-. According to the AO, the balances were long over due and no more payable. Accordingly vide order sheet entry dated 05.01.2015 by issuing show cause notice to the assessee as to why the same should not be added to the income of the assessee under section 41(1) of the Act which was replied by the assessee vide letter dated 25.02.2015 by submitting that the said dues of the artists and technicians have been paid off substantially in the subsequent years and therefore the said payables can not be treated as income under section 41(1) of the Act. The Ld. A.R. submitted that the liabilities which are outstanding for more than three years can not be assessed under section 41(1) of the Act when these liabilities were in fact payable and shown outstanding in the annual accounts. However, the reply of the assessee did not find favour with the AO and the same were added to the income of the assessee under section 41(1) of the Act as ceased liability.

In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under: “5.2 I have considered the findings of the Assessing Officer as well as rival submission of the Appellant, carefully. I find that the Appellant has failed to demonstrate any verifiable evidence showing that such liabilities are in existence and are being paid subsequently. Since the Appellant has not furnished any such evidence before the Assessing Officer nor confirmation was submitted. Therefore, in such circumstances, it cannot be presumed that such outstanding liability are really in existence. During the course of appellate proceeding, the Ld. A.R. has submitted computerized Ledger claims it has ledger entry of respective parties but these Ledger Accounts have not been certified by any of the persons claimed to be recipient of such outstanding. Further, it is noted that in most of the cases, no payment has been made in the subsequent years. Further, it is noted that in most of the cases such liability has been mentioned as outstanding. It is pertinent to mention that no full name or proper verifiable address of such recipient has been given in Ledger Account. In some of the cases, Sundry Balance has been written off. In subsequent year, cash payment has been shown without any confirmation and 5 M/s. B.R. TV verifiable vouchers. Thus, the copy of Ledger A/c. submitted through letter dated 20.06.2017 do not establish the existence of such liabilities under reference. It is also important to point out that even after receipt of assessment order dated 18.03.2015, the Appellant is not able to furnish any genuine & verifiable evidence to demonstrate the existence of such liability. Further, as mentioned hereinabove, the Appellant has failed to furnish any confirmations of such recipient hence, in such circumstances, I find that finding of the Assessing Officer has not been controverted or refuted with evidence by the Appellant hence, addition so made of Rs.72,14, 845/- u/s.41(1) of the Income-tax Act, 1961 is sustained.”

After hearing both the parties and perusing the material on record, we observe that the assessee has shown outstanding of Rs.72,14,845/- as due to artists and technicians which were coming over for more than four years. The Ld. A.R. argued before the Bench that firm has started TV serials namely Pari hu main and Sujata and incurred huge losses due to the fact that the main partner Shri Ravi Chopra was not keeping well and has not been able to attend to his work. The Ld. A.R. submitted that he was finally shifted to United States for treatment. The Ld. A.R. submitted that due to the reason that Shri Ravi Chopra was not looking after the business due to his ailing health and thus these liabilities were made outstanding for long time even the parties to whom these sums were payable have not pressurized for the payments due to long association with the group realizing that the main person was not well. The Ld. A.R. argued even the creditors have not foregone their claims neither has the assessee any attention of not paying the said dues. Since the claims of these technicians and artists have been accepted as alive, the same can not be subjected to be assessed as income of the assessee as has been done by the AO and confirmed by the Ld. CIT(A).

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 04.07.2019.