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Before: Shri Abraham P. George & Shri Duvvuru RL Reddy
O R D E R PER BENCH: These four appeals filed by the Revenue are directed against the common order of the ld. Commissioner of Income Tax (Appeals) 14, Chennai dated 28.02.2018 relevant to the assessment years 2008-09, 2009- 10, 2010-11 and 2011-12. The only common ground raised in the appeals of the Revenue is that the ld. CIT(A) has erred in deleting the addition made towards purchase of music rights.
In the returns of income, the assessee claimed deduction of the expenditure towards purchase of music rights. As the purchase of music rights is an intangible asset, the Assessing Officer observed that the same is capital in nature. Accordingly, by following the decision of the Hon’ble Madras High Court in the case of CIT v. M. Subramaniam reported in 272 ITR 525, wherein, it was held that where the agreement provides for the assignment of rights, the copyright so assigned is in the nature of capital asset, by allowing depreciation to the capital asset, the Assessing Officer disallowed the claim of expenditure and brought to tax.
On appeal, after analysing various case and by following the decision of the Tribunal in the case of ACIT v. Sun TV Network Ltd. in to 1520/Mds/2013 dated 31.10.2013, the ld. CIT(A) directed the Assessing Officer to allow the claim of expenditure towards purchase of music rights as revenue expenditure under section 37 of the Act as claimed by the assessee.
Aggrieved, the Revenue is in appeal before the Tribunal for all the assessment years. The ld. DR has submitted that the orders of the Tribunal in the case of ACIT v. Sun TV Network Ltd. (supra) and in the case of Star Music v. DCIT [2013) (34 taxmann.com 235) have not been accepted by the Department and the appeals preferred are pending before the Hon’ble Madras High Court and therefore, pleaded that the decision of the Hon’ble Madras High Court in the case of CIT v. M. Subramaniam 272 ITR 525 should be followed.
5. Despite service of notice RPAD on record, none appeared on behalf of the assessee or any adjournment petition filed by the assessee. Hence we proceed to decide the appeal on merits after hearing the ld. DR.
We have heard the ld. DR, perused the materials available on record and gone through the orders of authorities below. We have also perused the case law followed by the authorities below. Before the ld. CIT(A), the assessee has distinguished the decision in the case of CIT v. M. Subramaniam, which was followed by the Assessing Officer while making the disallowance. It was the submission of the assessee before the ld. CIT(A) that in the case of M. Subramaniam, the nature of payments was initial lump-sum and recurring royalty payments and the benefit was extended to over the years, whereas, in the assessee’s case, it was only a single lump-sum payment and there was no recurring royalty payments and moreover the expenditure is short shelf-life and generate insignificant revenue streams in the future period.
4.1 Further, in the case of ACIT v. Sun TV Network Ltd. (supra), with regard to the claim of expenditure of amortization of cost of movie & serial rights, programme production expenses, consumable and media expenses, the Tribunal has held that the same are revenue in nature and the same decision has also been followed by the Tribunal in various subsequent assessment years. While deciding the appeal, the ld. CIT(A) followed the above decision. The ld. DR could not controvert the above findings of the Tribunal and no decision of any Higher Court having modified or reversed has been brought on record. Under the above facts and circumstances, we are of the considered opinion that the ld. CIT(A) has rightly directed the Assessing Officer to allow the claim of expenditure towards purchase of music rights as revenue expenditure. Thus, the ground raised by the Revenue stands dismissed for all the assessment years.
In the result, all the appeals filed by the Revenue are dismissed. Order pronounced on the 20th November, 2018 at Chennai.