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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: Shri Mahavir Singh & Shri G Manjunatha
Date of hearing 06 -08-2018 Date of pronouncement 06-08-2018 O R D E R
Per G Manjunatha, AM :
This appeal filed by the revenue is directed against order of the CIT(A)-3, Mumbai dated 16-12-2016 and it pertains to AY 2010-11. The revenue has raised the following grounds of appeal:-
1. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of audio right expenses amounting to Rs. 2,09,48,337/- holding the same as revenue expenses without appreciating that the expenses incurred are of enduring nature and categorically falls under the head of
2. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of audio right expenses amounting to Rs. 2,09,48,337/- without appreciating that the audio rights acquired by the assessee given it a perpetual right to exploit the same and as such the expenses incurred are of capital in nature.”
2 ITA 1894/Mum/2017
The brief facts of the case are that the assessee company which is engaged in the business of manufacturing and sale of audio cassettes and CDs and also production and distribution of feature films, filed its return of income for AY 2010-11 on 28-09-2010 declaring total loss of Rs.14,49,68,002. The case was selected for scrutiny and the assessment was completed u/s 143(3) on 22-03-2013 determining the total income at Rs.5,33,55,610 by making various additions including disallowance of expenditure incurred on purchase of audio-video rights of feature films by holding that it is in the nature of capital expenditure.
The assessee carried the matter in appeal before the first appellate authority. Before the CIT(A), the assessee has submitted that it is in the business of manufacturing of audio video and video CDs of feature films for which it has purchased master plate from producer of feature films to be used in the business of manufacturing audio video CDs and cassettes which is in the nature of revenue expenditure are allowable as deduction.
The assessee also relied upon the decision of ITAT, Mumbai in its own case for AY 1990-91 wherein under similar set of facts, ITAT, Mumbai has held that expenditure incurred on purchase of master plate for producing audio video cassettes and CDs is revenue in nature. The CIT(A), after considering relevant submissions of the assessee and also by following the decision of ITAT, Mumbai in assessee’s own case for 3 ITA 1894/Mum/2017 earlier year held that expenditure incurred towards purchase of master plates for producing audio video cassettes & CDs is revenue in nature.
Aggrieved by the order of CIT(A), the revenue is in appeal before us.
The Ld.AR for the assessee, at the time of hearing, submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT, E-Bench, Mumbai in assessee’s own case for AY 2009-10 in wherein under similar circumstances, the ITAT held that expenditure incurred for purchase of master plates is revenue in nature. The Ld.DR fairly accepted that the issue is covered in favour of assessee by the decision of ITAT for earlier years. However, the AO has made addition in the current year to keep open the issue alive as the revenue has preferred appeal before the Hon’ble High Court challenging order of ITAT.
We have heard both the parties and perused the materials available on record. The issue of expenditure incurred for purchase of audio and video rights of feature films for production of cassettes and CDs has been considered by the Tribunal in assessee’s own case for earlier years and after considering relevant facts held that expenditure incurred for purchase of master plates is revenue in nature. The relevant portion of the order is extracted below:-
“4. After considering the relevant findings of the Assessing Officer and the learned Commissioner (Appeals) and also the earlier year's
4 ITA 1894/Mum/2017 order of the Tribunal, we find that this issue has been decided in favour of the assessee right upto the assessment year 2008-09. In the latest decision of the Tribunal in ITA no.6925/Mum./2011 for the assessment year 2008-09, order dated 29th January 2013, the Tribunal, after relying upon the earlier year orders has observed and held as under:- "4, We have the benefit of the decision of the Tribunal in TTA No. 599/Mum/09 wherein the Tribunal at para-5, page-2 has held as under:- "As regards ground No. 1, the Tribunal has dealt with this issue at para 3.1 of its order in I.T,A.No.2407/M/08 which is reproduced hereunder for easy reference- 3.1 Ground No.l is on the issue of allowability of Expenditure incurred on purchase of audio rights treated by the assessing officer as capital expenditure. The assessee is engaged in the business of manufacture and sale of audio rights and CDs and for this purpose it purchases audio rights of film songs from producers. Expenditure incurred on purchase of audio rights, music for which is released [accepted as audio rights] is treated by the assessee as revenue expenditure. The income-tax department has been since assessment year 1990-91, disallowing the claim of the assessee on the ground that the expenditure is capital in nature. The Tribunal for all the earlier assessment years has been deciding the issue in favour of the assessee. The assessing officer made the addition observing at paragraph 3.3 on page 7 that the revenue has not accepted the decision of the Tribunal and has filed an appeal before Hon'ble Bombay High Court and that the addition is made by following the stand of the revenue in the earlier years to keep the issue alive. The first appellate authority applied the decision of the tribunal and deleted the addition. We see no infirmity in the same. In fact, ground IB of the revenue appeals states that the ground is taken because the department has not accepted the decision of the Tribunal. In view of the above discussion, we respectfully apply the decision of the coordinate bench of the Tribunal in the assessee's own case for earlier years and dismiss the ground taken by the revenue. In view of the same, ground of appeal
No. 1 is rejected,"
5. As no distinguishing facts have been brought on record by the Ld. Departmental Representative, we have no hesitation in following the decision of the Tribunal (supra). Accordingly, the revenue's appeal is dismissed."
5. Thus, respectfully following the judicial precedence of the earlier years, we do not find any merits on the ground raised by the Revenue and the same is dismissed.”
5. In this view of the matter and consistent with the view taken by the 5 ITA 1894/Mum/2017 co-ordinate bench, we are of the considered view that expenditure incurred for purchase of audio video rights is revenue in nature. The CIT(A), after considering relevant facts, has rightly deleted addition made by the AO. We do not find any error in the order of the Ld.CIT(A) and hence, we are inclined to uphold the findings of Ld.CIT(A) and dismiss the appeal filed by the revenue.
In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 06th August, 2018.