KNIGHT RIDERS SPORTS P. LTD,MUMBAI vs. ASST CIT CEN CIR 29, MUMBAI

The present appeal filed by the assessee company is directed against the order passed by the CIT(A)-40, Mumbai, dated 12.11.2012, which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (for short „Act‟), dated 30.12.2011. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal:-

Briefly stated, the facts of the case are that the assessee company which was incorporated on 27.02.2008 as a 100% subsidiary of Red Chillies Entertainment Pvt. Limited had e-filed its return of income for AY 2009-10 on 30.09.2009, declaring loss of Rs.11,19,55,440/-. The case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.

The assessee company had entered into an IPL Franchise Agreement with BCCI–IPL on 4th April, 2008 for Franchise rights of IPL

The A.O after giving a thoughtful consideration to the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The A.O after perusing the IPL Franchise Agreement and the various rights and obligations emerging there from, deliberated on the various aspects of the agreement, viz. (i). that BCCI had started the series by inviting bids to own and operate 8 teams for different locations and to be a part of and take part in the league; (ii). that the term of the league was indefinite as it was as long as the league continued; (iii). that the franchisees were entitled to sell their franchise to a third party or to effect a transfer of a controlling interest in the company which controlled the franchise after a minimum period of 3 years, subject to payment to IPL a percentage of a value of the business, viz. 10% for the first such sale or transfer and 5% thereafter; and (iv). that by virtue of the right to own and operate the respective franchisees, each franchisee became entitled to receive certain revenue relating to the league and their respective teams. Thus, in the backdrop of the aforesaid facts the A.O observed that the revenue arising in the hands of the assessee was from exploitation of Central Rights, Licensing & Merchandising Rights and Franchisee Rights. The A.O further observed that each respective franchisee was responsible for all the costs relating to the operation of its franchise, including the fees and salaries of all persons providing services for its P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 team, as well as all the costs involved in staging matches at the home grounds, including hiring of stadium & security and staff cost at stadium. It was further observed by the A.O that for a franchisee to operate a franchise and to be a member of the league, it was required to pay to the IPL certain amounts, viz. (i) a fee, described as the „Franchisee fee‟ to be paid in 10 equal instalments; and (ii) 20% of sums received by each franchisee from the exploitation of the Central Rights and Franchise Rights every year from the 11th year onward for the term of the league.

The A.O in the backdrop of the aforesaid facts observed that M/s Red Chillies Entertainment Pvt. Ltd. had made a successful bid for Kolkata team for a consideration of USD 75.09 million, which was payable as Franchise fees in 10 equal instalments. The A.O observed that each franchisee by paying the Franchise fees acquired the right to operate a team and be a member of the league for the term of the league, and by virtue of the said right was entitled to receive certain revenue relating to the league and their respective team. The A.O further observed that by making the payment of the Franchise fee the assessee had acquired the aforesaid rights as that of a franchisee. The A.O in order to fortify his view that the franchise payment made by the assessee was clearly in the nature of a capital expenditure placed reliance on the judgment of the Hon’ble Supreme Court in the case of Techno Shares and Stocks Ltd. Vs. CIT (2010) 327 ITR 323 (SC). The A.O observed that in the aforesaid case the issue before the Hon‟ble Apex Court was as to whether the BSE membership card held by a share broker in the Bombay Stock Exchange (BSE) was a “license” or a “business or commercial right” of a similar nature under Sec. 32(1)(ii), and therefore, an intangible asset eligible for depreciation under Sec.32(1)(ii), or not. The A.O observed that the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 Hon‟ble Supreme Court had concluded that the right of membership which enabled the assessee to trade on the floor of the BSE and access the market, though was a personal permission, however, the same was a business or a commercial right which was similar to “licence” or “franchise” or “akin to a licence”, which thus brought it within the sweep of Sec. 32(1)(ii) of the Act. The A.O by relying on the aforesaid judgment of the Hon‟ble Apex Court, observed, that as in the case of the assessee also each franchisee got a right which enabled it to operate a team in the IPL for profit, therefore, the right to operate a franchise and to be a member of the league was a “licence” or “franchise” or “akin to a licence or franchise”, and thus an item of intangible asset contemplated in Sec. 32(1)(ii) of the Act. The A.O further in order to fortify his aforesaid conviction that the Franchise fee paid by the assessee was not a revenue expenditure, relied on the judgment of the Hon’ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. Vs. CIT (1997) 224 ITR 342 (SC). The A.O observed that in the case before the Hon‟ble Supreme Court, the assessee had started a new business by availing the technical know-how and an exclusive right to use the patent or trademark of a foreign company. The Hon‟ble Apex Court observed that as per the agreement with the foreign company what was set up by the assessee was a new business and the foreign company had not only furnished information and technical know-how, but had also rendered valuable services in setting up of the factory and production of goods, with there being no embargo on the assessee to continue to manufacture the product in question even after the expiry of the agreement, therefore, the payments made by the assessee to the foreign company, whether a definite one or dependent upon certain contingencies, could not be held as a revenue expenditure for the reason that the same was to be made on a certain percentage of the gross turnover of the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 assessee. The A.O drawing force from the aforesaid judgment of the Hon‟ble Apex Court observed that the facts of the case of the assessee before him were in parity with those involved in the aforementioned case. The A.O observed that the assessee by making payment of the Franchise fee had bought a right to set up its business of operating the team in the league, which was a completely new business with no restriction on the assessee to run the business even after the expiry of the period of the league. Thus, in the backdrop of his aforesaid observations the A.O concluded that as the Franchise fees paid by the assessee for setting up its business was clearly in the nature of a capital expenditure, therefore, merely for the reason that the amount was to be paid in annual instalments or at a certain percentage, the same would in no way alter the character of the payment from capital to revenue.

The A.O further deliberating on the allowability of depreciation, observed, that the Hon’ble Supreme Court in the case of the CIT Vs. Alps Theatre (1967) 65 ITR 377 (SC) had held that depreciation would be allowable only on such capital asset whose value diminishes. Though, the A.O by relying on the aforesaid judgment was initially of the view that as the value of the IPL franchise did not depreciate, therefore, the same despite being an intangible asset under Sec. 32(1)(ii) would not be eligible for depreciation, but thereafter, by relying on the subsequent judgment of the Hon’ble Supreme court in the case of Techno Shares & Stock Ltd.(supra), he concluded that as the concept of diminishing value applied only to a tangible asset and not to an intangible asset, therefore, the assessee was entitled for claim of depreciation as regards the payment made towards Franchisee fee. That as regards the written down value (for short „W.D.V‟) on which the depreciation was to be allowed to the assessee, P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 the A.O after deliberating on the terms of the invitation to tender (for short „ITT‟) which were called for at the time of bidding for various teams, observed, that the assessee was to pay 1/10th of the Franchise fee every year for the first 10 years and thereafter an amount equal to 20 percent of the rights income received w.r.t 11th year and each subsequent year, till the term of the league. The A.O observed that the assessee was to pay the Franchise fee in annual instalments of Rs.30,03,60,000/- for the period 2008 to 2017 (inclusive), which sum was to be appropriated every year towards Franchise fee on the date when the first match of the league for that year was played. The A.O thus observed that the assessee had acquired the right to franchise in the year 2008 when it had paid the first annual instalment of the Franchisee fee in the said year. The A.O deliberating on the aforesaid facts and taking cognizance of the judgment of the Hon’ble Supreme Court in the case of Maharana Mills (F) ltd. Vs. ITO (1959) 36 ITR 350 (SC) observed that an A.O remained under a statutory obligation to not only work out the depreciation while considering the W.D.V of the previous year, but rather, was bound to scale down the same by the allowances granted in the past and thus re-work the W.D.V for the year before him. The A.O on the basis of his aforesaid observations concluded that the amount of Franchise fee of every subsequent year was to be added to the W.D.V of the block of intangible asset at the beginning of the year and the depreciation was to be allowed on such adjusted WDV for the said year. Thus, the A.O concluded that as the assessee had during the year under consideration, viz. A.Y 2009-10, paid the annual instalment of Rs.30,03,60,000/-, therefore, the depreciation of Rs.7,50,90,000/- i.e. at the prescribed rate of 25% was allowable to the assessee. The A.O held that the W.D.V of the block of intangible asset for A.Y 2009-10 amounting to Rs. 22,52,70,000/- would further be raised by the amount of Rs. 30,03,60,000/- in the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 succeeding year, and as such in the said latter year the assessee would be entitled to depreciation @ 25% on the WDV of Rs.52,56,30,000/-. The A.O on the basis of his aforesaid observations concluded that every subsequent years franchisee payment were to treated as additions to the block of asset and depreciation on such adjusted W.D.V was to be allowed at the prescribed rate.

The A.O on the basis of his aforesaid deliberations concluded ,viz. (i) that as the Franchise fee was paid by the assessee for creating an intangible asset, therefore, the same being a “licence” or “franchise” or “akin to licence or franchise” referred to in Sec. 32(1)(ii) of the Act, thus constituted a capital expenditure; and (ii) that as the Franchise fees of Rs. 30,03,60,000/-was capitalized as an intangible asset, therefore, the assessee was entitled for depreciation @ 25% amounting to Rs.7,50,90,000/-. The A.O in the backdrop of his aforesaid observations made an addition of Rs.22,52,70,000/- to the total income of the assessee.

That on appeal the CIT(A) upheld the view of the A.O that the Franchise fee of Rs.30,03,60,000/- was a capital expenditure on which the assessee was entitled for claim of depreciation. The CIT(A) did not find favour with the contention of the assessee that as the Franchise fee was paid for the right to participate in the tournament, without any guarantee that in the future year it will eligible to participate in the tournament, therefore, the same could not be characterised as a capital expenditure. The CIT(A) controverting the aforesaid contention of the assessee observed that since the franchisee was for a longer period, i.e. up to 2017, as evident from Clause 7.1(a),7.1(b),7.2,7.3, 8.1(a) and 8.1(b) of the agreement, therefore, the aforesaid claim of the assessee was factually incorrect. The CIT(A) further observed that from a perusal of the agreement it could safely P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 be gathered that by virtue of making the payment of the Franchise fee as the assessee got a right to be a part of the league and own and operate the franchise, from exploitation of which revenues were generated in its hands, therefore, the claim of the assessee that the payment of the Franchise fee did not lead to any enduring benefit could not be accepted. The CIT(A) was also not impressed by the claim of the assessee that as it had withheld taxes under Sec. 194J that had been accepted by the department, therefore, on the said count also its claim that the franchise fee was a revenue expenditure could not be dislodged. The CIT(A) further observed that as per the terms of the agreement the assessee was duly vested with the right to sell the franchise to a third party or transfer the controlling interest in the company which controls the franchise after a minimum period of 3 years, which proved the fact that a capital asset was created. The CIT(A) held a strong conviction that as the payment of Franchise fee of US $ 75.09 million by M/s Red Chillies Entertainment Pvt. Ltd. by the assessee in 10 equal instalments was with a purpose to acquire the right to operate the team and become a member of league for the entire term of league, as a result whereof it became entitled to receive certain revenues relating to the Kolkata team, therefore, the same was clearly in the nature of a capital expenditure. The CIT(A) in the backdrop of the aforesaid facts observed that as held by the Hon‟ble Supreme Court in the case of Techno Shares and Stock Ltd. Vs. CIT 327 ITR 323 (SC), it could safely be concluded that the assessee had acquired a business or commercial right similar to licence or franchise or akin to licence or franchise falling under Sec. 32(1)(ii), which was an intangible asset eligible for depreciation. Thus, the CIT(A) on the basis of his aforesaid deliberations concluded that the A.O had rightly observed that the franchise fee of Rs.30,03,60,000/- was a capital expenditure. The CIT(A) further relying on the judgment of the Hon‟ble P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 Supreme Court in the case of Maharana mills (supra) concluded that the working by the A.O of the entitlement of the assessee towards claim of depreciation was also found to be in order. The CIT(A) on the basis of his aforesaid observations upheld the addition of Rs. 22,52,70,000/- made by the A.O.

The A.O during the course of the assessment proceedings observed that though the assessee company as per the agreement dated 04.04.2008 with BCCI remained under an obligation to pay an annual franchisee fees of Rs.30,03,60,000/-, however, it had claimed an amount of Rs.37,54,50,000/- against the head “Franchisee fee” in its Profit and loss account for the year under consideration. The assessee on being called upon by the A.O to explain its aforesaid claim, submitted that in lieu of the agreement with BCCI which was entered on 04.04.2008, the entire franchise fee of Rs. 30,03,60,000/- for IPL Season-1 for the year 31 December, 2008 which was due for payment in the financial year 2008-09 was claimed as an expenditure in the books of account for the year ended 31st March, 2009. The assessee further submitted that as a period of 3 months (January, 2009 to March, 2009) pertaining to the IPL Season-2, viz. period 1st January, 2009 to 31st December, 2009 fell within the year under consideration, viz. A.Y 2009-10, therefore, the assessee who was following the mercantile system of accounting, had accordingly debited an amount of Rs.7,50,90,000/ as an expense during the year under consideration (being 25% of Rs.30,03,60,000/- for the 3 month period). The assessee in order to drive home its contention that the claim of the Franchise fee for the period January, 2009 to March, 2009 pertaining to IPL Season-2 was well in order, therein submitted before the A.O that as the said payment was made pursuant to a contractual obligation to discharge a liability, therefore, as per the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 mercantile system of accounting, it was rightly claimed as an expenditure in the year under consideration, viz. AY 2009-10. The A.O after deliberating on the aforesaid explanation of the assessee was however not persuaded to subscribe to the same. The A.O observed that the claim of the assessee that the proportionate fees for the first three months of the IPL Season-2 pertained to the year under consideration, as the liability for the said three months period (i.e January, 2009 to March, 2009) for the IPL Season-2 was relatable to the year under consideration, viz. A.Y. 2009-10, did not satisfy the „Matching Principle of Accounting‟, which was one of the basic principle of accounting. The A.O in order to fortify his aforesaid view, observed that the assessee company had during the year under consideration not offered any income corresponding to its aforesaid claim of expense. The A.O on the basis of his aforesaid observations concluded that the amount of Rs.7,50,90,000/- was wrongly claimed by the assessee by relating the same to the year under consideration. The A.O in order to fortify his aforesaid conviction relied on Clause 7 of the Franchisee Agreement, which provided as regards the franchisee fee as under:- “7.1. As consideration for the right to operate the Franchise and to be a member of the League and in addition to the obligations referred to in clause 6 the Franchisee shall pay to BCCI-IPL Franchise Consideration in the following sum and manner-: (a) in respect of the period 2008-17 (inclusive): (i) the sum of USD 2,252,700/- equivalent to INR. 9,01,08,000/- (Rupees Nine Crores, One Lakh, Eight Thousand Only) calculated at the exchange rate of INR 40/=1USD (the "League Deposit") on or before 2 January in each such year. This League Deposit shall be appropriated towards the annual Franchise Consideration on the date of the first match of the League in the year in which the League Deposit is paid. The amount of what is referred to in the Tender Document as the "Performance Deposit" which has been paid by the franchisee upon submission of its bid for a Franchise shall, in respect of 2008, be credited towards the League Deposit in respect of 2008 and if the amount of the Performance Deposit is less than the sum referred to above in this paragraph (1) then the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 Franchisee shall within 10 days of signature of this Agreement pay the remainder of the League Deposit in respect of 2008. The Lea.gue Deposit shall only be refundable in any year if the League does not take place at all in such gear In all in such circumstances shall be refunded without interest; and (ii) the sum of USD 5,256,300/- equivalent to INR 21,02,52,000/- (Rupees Twenty One Crores, Two Lakhs Fifty Two Thousand Only) which shall in each such year be paid on the date of the first match in the League in each such year.” The A.O on the basis of his aforesaid observations concluded that as the liability of the assessee to pay the Franchise fee to BCCI crystallised only on the first day of the match of a series, therefore, since no match for IPL Season-2 was played on or before 31st March, 2009, thus no liability in respect of the payment of the Franchise fee for the IPL Season-2 had accrued to the assessee company during the year under consideration, viz. A.Y 2009-10. Thus, the A.O on the basis of his aforesaid conviction disallowed the claim of Rs.7,50,90,000/- raised by the assessee before him .

The CIT(A) after deliberating on the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The CIT(A) observed that the aforesaid claim of the assessee did not satisfy the matching principle of accounting, as per which the expenditure can be claimed against the income of the financial year. The CIT(A) further observed that as per Para 4.3 of the franchise agreement, the liability to pay the Franchise fee accrued on the first day of the match of the series, therefore, now when no such match of IPL Season-2 was played before 31.03.2009, the claim of the assessee that the expenditure as regards the same had accrued during the year under consideration, viz. A.Y 2009-10 could not be accepted. The CIT(A) thus approved the observations of the A.O in respect of the issue under consideration and upheld the disallowance of Rs.7,50,90,000/-.

The A.O during the course of the assessment proceeding observed that the assessee company had claimed an amount of Rs.3,50,00,000/- on account of payment to Cricket Association of Bengal (for short „CAB‟) for use of Eden Garden, Calcutta. The A.O observed that no written agreement was executed between BCCI and P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 CAB with regard to the use of Eden Garden for IPL matches. The A.O on perusing the details of the expenses observed that the same included an amount of Rs.75,00,000/- paid to Kolkata Police Family Welfare Centre. The assessee in order to buttress its entitlement towards the aforesaid expenses, submitted before the A.O that as it had deducted TDS on the entire amount of Rs.3,50,00,000/-, therefore, the whole amount was allowable as an expense. The assessee further in order to substantiate its aforesaid claim of expenditure furnished with the A.O the Income and Expenditure account of CAB for IPL Season-1 matches played at Eden Garden. The A.O observed that the income and expenditure account of CAB revealed that an income of Rs.3,50,00,000/- was credited on account of stadium use charges, while for an amount of Rs.75,00,000/- was debited on account of refreshment for police force. The A.O observed that while for on the one hand the assessee had claimed that it had paid an amount of Rs.75,00,000/- to Kolkata Police Family Welfare Centre at the instructions of CAB, however, a perusal of the Income and Expenditure statement of CAB revealed that the said amount was shown as refreshment for police force. The A.O concluded that as no written agreement was executed for the use of Eden Garden during the IPL matches, therefore, the genuineness of the payment of Rs.75,00,000/-paid to Kolkata Police Family Welfare Centre was not proved. The A.O further observed that the claim of the assessee was also not justified for the reason, viz. (i) the amount was directly paid to Kolkata Police Welfare Fund which was not a Government Authority; (ii) that since the services of police was utilized during the IPL Matches, therefore, either the amount should have been paid to the State government or the assessee should have provided refreshment to police personnel on its own instead of giving the amount to a welfare fund; and (iii). that there was no cogent reason for the assessee to P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 have paid the amount to Kolkata Police Family Welfare Centre, therefore, the same could not be treated as a bonafide expenditure. The A.O further concluded that the fact that the assessee had made TDS on the entire amount of Rs.3,50,00,000/- would not make the payment of Rs.75,00,000/- made to Kolkata Police Family Welfare Centre for refreshment for police force an allowable expenditure. The A.O on the basis of his aforesaid observations disallowed the aforesaid claim of expenditure of Rs. 75,00,000/- on the ground that the same was not allowable as a deduction under Sec. 37(1) of the Act.

The assessee being aggrieved with the aforesaid disallowance of Rs.75,00,000/- by the A.O assailed the same in appeal before the CIT(A). The assessee submitted before the CIT(A) that as the aforesaid payment being in the nature of security expense was incurred by the assessee wholly and exclusively for the purpose of its business, therefore, the same was allowable in terms of the provision of Sec. 37(1) of the Act. The assessee in support of its aforesaid claim of expense, submitted before the CIT(A), as under: 3.1 "During the FY 2008-.09, the Appellant had incurred expenditure of Rs.3)50,00,000/- towards stadium rent of its home stadium (i.e Eden Gardens, Calcutta) and had deducted appropriate taxes while making payment to CAB. 3.2 As per the arrangement between the Appellant and CAB, the Appellant was required to pay an amount of Rs.50,00,000/- per match to be played during IPL-1 at Eden Gardens. In IPL - 1, there were seven matches played at Eden Gardens, translating the total expenditure incurred by the Appellant to Rs.3,50,00,000/- (Rs.50,00,000/-). Out of this total expenditure, at the direction of CAB, the Appellant had made payment of Rs.75,00,000/- directly to Kolkata Police Department for security services to be provided at the stadium. 3.3 During the course of assessment proceedings, in support of the expense deduction of Rs. 75,00,000/-, the Appellant had submitted before the Learned AO the following details/ documentation vide submission dated 23 June 2011 (copies enclosed as Annexure 7):  Extract of the ledger account of CAB in the books of the Appellant evidencing the payment of Rs 75,00,000; P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29  Extract of the Annual Report of CAB which recognizes satisfaction of payment obligation of the Appellant towards CAB;  Relevant extract of the audited Income and Expenditure accounts of CAB. It is relevant to note that CAB had recorded the entire stadium rent of Rs 3,50,00,000/- received from the Appellant on the income side of the audited accounts. 3.4 However, the learned A.O has disallowed the expenditure based on the following reasons.  Rs 75,00,000/- has been paid directly to the Kolkata Police Family Welfare Centre on the instructions of CAB and hence since the payment has not been made to the government authority for availing the services of the police, the same is not a genuine expense incurred for the purpose of business.  The Income and Expenditure accounts of CAB reflect this amount as refreshment for police force. your Honor would appreciate that incase of cricket match in a stadium there is always a need to utilize the services of police to ensure security of the players, attendants and spectators. Under the CAB arrangement with Appellant, it was the responsibility of CAB to arrange for security in the stadium for which a fee of Rs.75,00,000/- was required to be paid by CAB to Kolkata Police. The Appellant utilized the services of police during the 7 matches scheduled in LPL 1 and the amount agreed by CAB with Police Department was then paid by the Appellant directly to Kolkata Police, at the direction of CAB.` 3.5 In support of the above contention, the Appellant wish to bring your attention to the relevant extract of the audited Income and Expenditure accounts of CAB which clearly reflects the stadium rent of Rs 3,50,00,000/- (which includes Rs 75,00,000/-) on the income side of the audited Income and Expenditure accounts. Also, it is relevant to note that CAB has also recognized its obligation to pay to Police Department on the debit side of audited Income and Expenditure accounts. Even the Annual Report of CAB recognizes that payment of Rs 3,50,00,000/- (which includes Rs.75,00,000/-) represent fill satisfaction of the payment obligation of the Appellant towards CAB. 3.6 In light of the above, the Appellant wish to submit that security expenses incurred by the Appellant is clearly a business expenditure and hence allowable as a deductible expenditure. Also, it is evident from the reasons provided in the Assessment Order that such expenditure is disallowed by the Learned AO without any valid and cogent reasons. 3.7 In this regard, the Appellant wish to draw your attention to the trivial reasons mentioned in his assessment order for disallowance of claim of expenditure:  The payment is not made to the Government authority.

The CIT(A) after deliberating on the contentions of the assessee, observed that the contentions advanced by the assessee before the A.O were found to be self contradictory, viz. (i) that on the one hand it was claimed by the assessee that the amount was paid to Kolkata Police Family Welfare Centre at the instruction of Cricket Association of Bengal, and; (ii) that on the other hand in the Income and Expenditure account of the Cricket Association of Bengal the amount was reflected as an expenditure for refreshment for police force. The CIT(A) observed that though the assessee had averred before him that the aforesaid amount was paid for facilitating providing of police services, but if that would had been so, then the said amount would had been paid to the State Government of West Bengal and not to the Police Family Welfare Fund. Thus, the CIT(A) finding himself as being in agreement with the view taken by the A.O that the assessee had failed to prove that the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 amount of Rs.75,00,000/- paid to Kolkata Police Family Welfare Centre was for the purpose of its business and thus allowable as a deduction under Sec. 37(1) of the Act, therefore, upheld the aforesaid disallowance/addition in the hands of the assessee.

The A.O during the course of the assessment proceedings further observed that the assessee had claimed an expenditure of Rs.1,28,34,490/- on account of payment to Buchanan Corporate Coaching Trust for Buchanan Discretionary Trust. The A.O on perusing the agreement entered into by the assessee with Mr. John Buchanan, observed that the same was executed on 07.01.2009, i.e much subsequent to the period in which the IPL Season-1 matches were played. The A.O observed that the IPL Season-1 matches were played in the month April and May, 2008. The A.O further observed that as per the ITT bid document and franchise agreement it was mandatory to enter into agreement for availing coaching services, however, no such agreement was entered into by the assessee with Mr. John Buchanan, as a result whereof it could safely be concluded that the amount of payment made by the assessee could not be allowed as an expenditure incurred for the purpose of the business of the assessee for the year under consideration. The A.O further held a conviction that while for the services of Mr. John Buchanan were claimed by the assessee to have been utilized during the IPL Season-1, however, as the payment was made to a Discretionary Trust, therefore, the expenditure was also liable to be disallowed on the said ground. The A.O on the basis of his aforesaid observations disallowed the expenditure of Rs.1,28,34,490/- claimed by the assessee.

The assessee assailing the aforesaid disallowance of expenditure of Rs.1,28,34,490/- made to Buchanan Corporate Coaching Trust for Buchanan Discretionary Trust, carried the matter in appeal before the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 CIT(A). The assessee supporting its entitlement towards the claim of the aforesaid expenditure submitted before the CIT(A), as under: - 4.1 “During the FY 2008-09, the Appellant had incurred an expenditure amounting to Rs.1,28,34,490/- in respect of the coaching services provided by John Buchanan to the Appellant 's cricket Team. 4.2 During the course of the assessment proceedings, a copy of the service agreement ('Agreement') (enclosed as Annexure 8) with John Buchanan was filed vide submission dated 13 December 2011. The term of the service agreement is for 3 years i.e FY 2008-09, 2009-10 and 2010-2011. 4.3 However, the Learned A.O disallowed the sum of Rs.1,28,34,490/- incurred by the Appellant towards services provided by John Buchanan for coaching the KKR team on the premise that agreement was executed on 07.01.2009 and not pertaining to IPL 1 (i.e Season 1). 4.4 At the outset, the Appellant with to bring to your notice that though the stamp paper is dated 07.01.2009, the agreement was executed documenting the commercial understanding agreed between the Appellant and John for a period of 3 years starting from IPL 1 to JPL 3 (i.e for Season 1 to Season 3). It is also a known fact that John Buchanan was the coach of KKR team for Season 1 of the IPL and then removed post dismal performance of KKR Team. 4.5 Separately, the Appellant wish to draw your attention to the relevant extracts of the Agreement to support the Appellant 's claim that the expenses has been incurred in connection with coaching services provided by John Buchanan to the KKR Team for IPL Season 1:  Definition of 'Term' on Page 3 of the Agreement “shall have the meaning in Clause 2”  Clause 2 reads as under: Duration “This Agreement shall be for the three seasons i.e. 2008-09, 2009-10 and 2010-11 and shall be effective from the date of signature until 30th June, 2011 unless terminated or extended as provided in this agreement.”  Clause 3 reads as under: 3.2 The Director: Cricket Operations is committed to be available for the Franchisee for at least 26 weeks in Season 1 (2009) and 36 weeks each in Season II and III (i.e. 2010 and 2011), out of which he shall be frilly and exclusively available for 14 weeks during the JPL and/ or Champions Trophy league and/or training camps in India as required by the Franchise...............................”

The CIT(A) after giving a thoughtful consideration to the contentions raised by the assessee before him in the backdrop of the facts available on the record, however, did not find favour with the same. The CIT(A) observed that as the agreement between the assessee and Buchanan Corporate Coaching Trust for Buchanan Discretionary Trust was dated 07.01.2009, therefore, the same was entered after the IPL Season-1 matches were held during the month of P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 April/May, 2008. The CIT(A) further observed that a perusal of Clause 2 (defining “duration”) of the agreement revealed that the same was to be effective “from the date of signature until 30th June, 2011”. Thus, in the backdrop of the aforesaid observations the CIT(A) concluded that as the agreement was signed on 07.01.2009, therefore, the same could not have been effective for the period prior to that. The CIT(A) was also not impressed by the press clippings which were relied upon by the assessee to prove that Mr. John Buchanan was providing the services before signing of the agreement, by observing that no such factual position did emerge from the material placed on record by the assessee. The CIT(A) further observed that the material placed on record by the assessee rather proved that Mr. John Buchanan had a contract from 07.01.2009 to June, 2009, when he was sacked by the assessee for the poor performance of the team. The CIT(A) on the basis of his aforesaid observations concluded that the A.O had rightly disallowed the claim of expenditure of Rs.1,28,34,490/- raised by the assessee.

The A.O further in the course of the assessment proceedings observed that the assessee had in its profit and loss account claimed certain expenses, viz. (i) food and nutrition expenses: Rs.58,53,575/-; and (ii) boarding and lodging expenses of Rs.1,90,16,944/-. The A.O observed that in course of survey proceedings which were conducted under Sec. 133A on 21.04.2010 at the office premise of the assessee at Eden Garden, Calcutta, it emerged that the assessee had incurred an expenditure of Rs.1,35,46,255/- (Room billing: Rs. 96,25,375/- and Partying bill: Rs.39,19,880/-) at ITC, sonar, Kolkata. The A.O observed that as partying expenditure was not incurred for the business of cricketing of the assessee, therefore, it was not allowable as a business expenditure. The A.O observing that the parties hosted by the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 assessee were attended by various relatives of directors, VIP‟s and celebrities, therefore, disallowed the entire partying expenditure of Rs.39,19,880/-. The A.O further observed that out of “Room billing” of Rs.96,26,375/- approximately 33% of the expense could fairly be held to have been incurred for celebrities, VIP‟s, relatives of directors etc. The A.O on the basis of his aforesaid observations, being of the view that as the boarding and lodging expenditure could not be held to have been incurred wholly and exclusively for the purpose of business, therefore, disallowed 33% of the “Room bill” expenditure and made an addition of Rs.31,76,705/-. The A.O further perusing the details of the food and nutrition expenses and boarding and lodging expenses incurred at ITC sonar, observed that the rooms were also used by celebrities along with the directors of the assessee company, as under:-

The assessee being aggrieved with the disallowance of Rs.1,08,33,592/- out of the expenses which were claimed to have been incurred on food and nutrition and boarding and lodging, thus challenged the same before the CIT(A). The assessee in order to drive home its entitlement towards the aforesaid expenses, averred before the CIT(A) that as the said expenditure towards boarding and lodging and food and nutrition was incurred for the members of the team (including visiting teams), support staff, directors and the invited guests (being celebrities and VIP‟s) during the matches, therefore, the same was allowable as per the provisions of Sec. 37 (1) of the Act. The assessee in order to fortify the genuineness and veracity of the expenses, which were claimed to have been incurred wholly and exclusively for the purpose of its business, therein placed on record exhaustive submissions before the CIT(A). It was submitted by the assessee that the observations of the A.O that the assessee had incurred expenditure on “partying” was completely untrue and without any valid basis. It was submitted by the assessee that the invoices placed on record proved that the dinner expenses were incurred only on the days when the matches were played at the home stadium. The assessee further submitted that the expenditure incurred for organizing dinners for the assessee‟s own team, visiting teams, support staff, directors and invited guests was allowable as a deduction under Sec. 37 (1) of the Act, as the same satisfied all the requisite conditions contemplated therein, viz. (i) the expenses were not of the nature defined in sec. 32 to 36 of the Act; (ii) the expenses were not in the nature of a capital expenditure; (iii) the expenses were P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 not the personal expenses of the assessee; and (iv) the expenses were incurred wholly and exclusively for the purposes of the business of the assessee. The assessee further submitted that as Sec. 37(2) which earlier placed a restriction on claiming entertainment expenses as an expenditure was no more available on the statute with effect from 01.04.1998, therefore, despite the fact that the assessee satisfied all the conditions contemplated under Sec. 37(1), the A.O had erroneously disallowed the said expenses while framing the assessment for the year under consideration. The assessee further adverting to the adhoc disallowance of Rs.31,76,705/- made by the A.O as regards the boarding and lodging expenses, for the reason that the same were incurred in respect of celebrities, VIP‟s, relatives of directors, submitted that it was customary for the organizer to invite celebrities to the event for increasing the ticket sales and gaining momentum on T.V viewership. It was rather averred by the assessee that history was a witness that the events had gained prominence and attracted sponsorships only when celebrities attended the events. Rather, it was the claim of the assessee that as inviting the celebrities for the event attracted more eyeballs/increased sales, the sponsors too would come forth with higher sponsorships for the events. The assessee submitted that under the IPL format while for all the event rights were exploited by BCCI, however, the ticketing rights and team sponsorship rights remained with the assessee. Thus, in the backdrop of the aforesaid facts it was submitted by the assessee that in order to increase its ticketing sales and sponsorships revenues, it had invited celebrities to attend their home matches and also arranged for their boarding and lodging. It was further the contention of the assessee that though the aforesaid expenditure duly satisfied all the conditions contemplated under Sec. 37(1) of the Act, however, the A.O without any valid and cogent reason had disallowed 33% of the total P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 expenditure of Rs.96,26,375/- and made an adhoc disallowance of Rs.31,76,705/-. The assessee further adverting to the adhoc disallowance of Rs.37,37,007/- made by the A.O (out of the balance expenditure on food and nutrition and boarding and lodging of Rs.1,13,24,264/-), submitted that the expenditure incurred in respect of boarding and lodging and food and nutrition expenses of celebrities who would attend the event, being prompted by business prudence to increase the revenue from sale of tickets and higher sponsorship fees, was thus allowable in the hands of the assessee.

The CIT(A) after deliberating on the contentions of the assessee, observed that on verification of the bills for food and nutrition expenses, it emerged that there was a bill of Rs.3,44,410/- for 300 snacks, 300 soft beverages and transport charges, however nothing could be gathered from perusing the same about the purpose and persons attending the party. The CIT(A) further observed that a bill of Rs.5,31,573/-, dated 30.04.2008 was though raised in favour of IPL ODC for dinner of 400 persons, however, as to how the same was payable by the assessee had remained unexplained. The CIT(A) further referring to certain other bills, viz. bill of Rs.5,31,893/- for 08.05.2008; bill of Rs.5,31,893/- for 13.05.2008; and bill of Rs.5,31,894/- for 20.05.2008, therein observed that the same included dinner, equipment rental, tobacco etc., but they too did not indicate the purpose and the persons attending the said occasion. The CIT(A) further referring to a bill of Rs.4,51,900/- which was for 400 snacks, soft drinks, transportation, equipment rental, therein observed that the same did bear a discrepancy, wherein as against the said date the amount mentioned in the submissions by the assessee was Rs.6,83,071/- which could not be reconciled. Similarly, another bill of Rs.5,31,893/- for 25.05.2008 was also stated to be of P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 Rs.6,69,698/- in the submissions and could not be reconciled by the assessee. The CIT(A) further upholding the view of the A.O observed that as from a perusal of the bills placed on record by the assessee nothing could be gathered, except for the fact that the same were paid for a party, therefore, a clear nexus of the expenditure incurred and the purpose of the business did not emerge from the same. The CIT(A) concluded that the assessee had failed to justify that the entire expenditure was incurred for the purpose of business and was allowable as per the provisions of Sec. 37(1) of the Act. Thus, the CIT(A) on the basis of his aforesaid deliberations upheld the 100% disallowance of the expenses aggregating to Rs.39,19,880/- claimed by the assessee.

The CIT(A) further taking cognizance of the room bills of Rs.96,26,375/- out of which the A.O had disallowed 33%, viz. Rs.31,76,705/-, observed that the same could safely be held to have been incurred by the assessee for VIP‟s, relatives of directors, and celebrities, viz. Shah Rukh Khan, Jaya Mehta, Mohomed Morani, Farhan Aktar, Malika Khan, Vivek Oberoi, Seema Khan, Neelam Khotari, Pradeep Dhoot, Ritesh Deshmukh and Karan Johar. The CIT(A) further observed that though the assessee had claimed that the entire expenditure was for business purposes, but however, on a perusal of a copy of letter dated 02.04.2008 written by Shri Arun Ashok of ITC-Welcome group to Mr. I.S. Bhandari Chief operations, Red Chillies Entertainment Pvt. Ltd.(wherein by way of an over writing the name of the assessee, viz. “Knight Riders Sports Pvt. Ltd.” was mentioned), it emerged that the terms and conditions of booking of rooms etc. were signed by Mrs. Gauri Khan on behalf of Red Chillies Entertainment Pvt. Ltd. The CIT(A) on the basis of his aforesaid observations agreed with the view taken by the A.O that the aforesaid P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 expenses of Rs.96,26,375/- were not incurred wholly for the business of the assessee and the element of expenditure being personal in nature could not be ruled out. Thus, in the backdrop of his aforesaid deliberations the CIT(A) upheld the disallowance of 33% of the expenses, viz. Rs.31,76,705/- made by the A.O. That on the basis of the similar reasoning for sustaining the aforesaid disallowance, the CIT(A) further upheld the disallowance of Rs.37,37,007/- (i.e 33% of the balance expenses of Rs.1,13,24,264/-) made by the A.O.

The A.O while framing the assessment observed that the assessee had claimed air fare expenses of Rs. 3,28,96,505/-, travelling expenses of Rs.12,66,462/- and vehicle hire charges of Rs.40,89,560/-. The A.O held a conviction that as the assessee had incurred expenses on food and stay of VIPs and celebrities, therefore, the aforesaid air fare expenses, travelling expenses and vehicle hire expenses must also be including expenses incurred on such VIPs and celebrities. The A.O on the basis of his aforesaid observations disallowed 25% of the expenses, viz. Rs.82,25,126/- out of air fare expenses,Rs.3,16,616/- out of travelling expenses and Rs.10,22,390/- out of vehicle hire charges, as a result whereof a total disallowance of Rs.95,63,132/- was made by him.

The assessee assailed the aforesaid disallowance of expenses of Rs.95,63,132/- before the CIT(A). The assessee in support of its claim that no part of the air fare expense, travelling expense and vehicle hire charges were liable to be disallowed, therein submitted before the CIT(A), as under: - “6.1 Further, during the subject year, the Appellant had incurred expenditure towards airfare expenses of Rs.3,28,96,505/- , travelling expenses of Rs.12,66,462/- and vehicle hire charges of Rs.40,89,560/-, for the members of the team and support staff and other dignatories.

The CIT(A) after deliberating on the aforesaid contentions of the assessee was however not persuaded to subscribe to the same. The CIT(A) observed that as the assessee had failed to produce before him any evidence, viz. air tickets, details of vehicles, name of service provider, persons utilizing the services and their nexus with the business of the assessee etc., therefore, the possibility of the expenditure having been incurred for non-business purposes could not be ruled out. Thus, the CIT(A) on the basis of his aforesaid observations upheld the part disallowance of Rs.95,63,132/- made by the A.O.

The A.O during the course of the assessment proceedings observed that the assessee had claimed security charges expenditure of Rs.60,700/- paid to Scorpion‟s and Rs.48,000/- paid to Ace Security for security charges incurred for VIPs and celebrities. The A.O after perusing the vouchers for the aforesaid expenses observed that the same were clearly marked as “Celebrity Security at Eden Garden”, “Security Executives provided to Mr. Shah Rukh Khan”, etc. The A.O being of the view that the expenses which were incurred for the security given to Mr. Shah Rukh Khan and VIPs, celebrities etc. at Eden Garden was nothing but a personal expenditure which could not be held to have been incurred for the purpose of the business of the assessee, thus, disallowed the claim of Rs. 1,08,700/- raised by the assessee.

The CIT(A) after giving a thoughtful consideration to the submissions of the assessee declined to accept the same. The CIT(A) observed that as averred by the assessee that the police was taking care of the security arrangements in the stadium, since it was the responsibility of the state government, therefore, any expenditure made for any particular person could not be held to have been incurred for the purpose of the business and was clearly a personal expenditure. The CIT(A) on the basis of his aforesaid observations upheld the disallowance of Rs.1,08,700/- made by the A.O.

The A.O further during the course of the assessment proceedings noted that the assessee had claimed expenditure of Rs. 8,85,600/- on account of payment made to Mr. Manish Malhotra in March, 2009. The assessee on being called upon by the A.O submitted that the payment was made for designing the outfits of KKR teams which were exhibited at the Lakme Fashion Week and Wills Lifestyle India Fashion Week. The A.O observed that the assessee had offered its income with respect to the revenue earned from the IPL Season-1, which took place in the month of April and May, 2008, but however, against this income the aforesaid expenses which were incurred after lapse of a substantial period were claimed by the assessee. Thus, the A.O being of the view that as no income was offered by the assessee in respect of the aforesaid amount of expenditure, therefore, the claim of the aforesaid expenses by the assessee was not in conformity with the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 matching principle of accountancy. The A.O observed that the date of the Fashion Week did not correlate with the term of IPL Season-1 matches. It was further observed by the A.O that the expenditure for designing and exhibition of player outfits for the KKR teams was even otherwise not allowable, for the reason that the said outfits had already been designed and displayed by the team during the IPL Season-1 matches which were held during the month of April and May, 2008. The A.O on the basis of his aforesaid observations concluded that as the claim of the aforesaid expenses so raised by the assessee was haunted by serious doubts, therefore, the expenses of Rs.8,85,600/- could not be allowed during the year under consideration.

The assessee being aggrieved with the disallowance of the aforesaid expenditure of Rs.8,85,600/-assailed the same in appeal before the CIT(A). The assessee submitted before the CIT(A) that it had during the year under consideration made payments amounting to Rs.8,85,600/ to Mr. Manish Malhotra in connection with participation in the Lakme Fashion Week and Wills Lifestyle India Fashion Week, both of which events were held in March, 2009. The assessee explaining the genesis of the aforesaid payments submitted before the CIT(A) that Mr. Manish Malhotra had already paid the amount of Rs.8,85,600/- for participating in both of the aforesaid events, which thereafter was reimbursed to him by the assessee in March, 2009. The assessee submitted before the CIT(A) that the underlying purpose of participating in the fashion shows was to advertise and promote the KKR team. Thus, it was the contention of the assessee that as both the fashion shows were organised in March, 2009, therefore, they were recognized as an expense for the year under consideration, viz. A.Y 2009-10. The assessee dislodging the observations of the A.O on the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 basis of which he had disallowed the aforesaid expenses, therein clarified that the same were not incurred for designing of the player outfits of the KKR team as inferred by the A.O, but rather, were incurred to advertise and promote the KKR team. It was submitted that as both the aforesaid events had taken place in March, 2009, therefore, the assessee who was following the mercantile system of accounting had booked the said expenditure during the year under consideration. The assessee further submitted before the CIT(A) that as all the requisite conditions contemplated in Sec.37(1) were satisfied, therefore, the A.O had gravely erred in not allowing the said claim of expense incurred by the assessee in the course of its business.

The CIT(A) after giving a thoughtful consideration to the contentions of the assessee, however, did not find himself as being in agreement with the same. The CIT(A) observed that the assessee in contradiction of its claim before the A.O that the expenditure of Rs.8,85,600/- was incurred for designing and exhibition of player outfits, however, averred before him that the same was an expenditure incurred towards advertisement of the KKR team. The CIT(A) thus concluded that as neither the nature of the expenditure was clearly brought out by the assessee, nor the fact as to how the expenditure incurred in March, 2009 for advertisement/publicity was going to contribute to the revenue of the assessee for events which had already been held in April/May, 2008 could be explained by the assessee. The CIT(A) on the basis of his observations, not finding force in the contentions of the assessee, therefore, rejected the same and upheld the disallowance of Rs.8,85,600/-.

The A.O while framing the assessment noted that the assessee who though had incurred website design charges of Rs.16,98,609/-, P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 had however claimed only 50% of the total expenditure i.e. Rs.8,49,305/-. The assessee during the course of the assessment proceedings requested the A.O to allow the entire expenditure of Rs.16,98,609/-.However, the A.O being of the view that the expenditure incurred on website designing was in the nature of capital expenditure and the intangible asset generated therein was not subject to any wear and tear, therefore, the assessee was not even entitled for depreciation under Sec.32 of the Act on the amount of the capitalized expenditure. The A.O on the basis of his aforesaid observations disallowed the claim of expenditure of Rs.8,49,305/- raised by the assessee in its return of income.

Aggrieved, the assessee assailed the disallowance of the website design charges expenses by the A.O, before the CIT(A). It was submitted by the assessee that as the website design charges of Rs.16,98,609/- were incurred in connection with designing of the website whose benefit was available over a period of two years, therefore, the assessee had erroneously recognized only 50% of the said expenses, viz. Rs.8,49,305/- during the year under consideration. It was submitted by the assessee that as the concept of deferred revenue expenditure was not recognized under the income tax provisions, therefore, the aforesaid website design expenses which were incurred by the assessee not for the purpose of improvisation of a fixed asset, but were incurred to facilitate its business operation, was thus allowable in toto during the year under consideration, viz. A.Y 2009-10. The assessee in the backdrop of his aforesaid contentions requested the CIT(A) to grant the additional deduction of the balance 50% of the deferred website expenses also during the year under consideration. The assessee to support its aforesaid claim as regards the additional deduction of the balance 50% of the deferred website P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 expenses, relied on the CBDT circular No. 14(XL-35), dated 11.04.1955, as per which it was obligatory on the part of the tax officials to suo motto allow an expenditure, despite the fact that the tax payer may had failed to claim the same in its return of income. It was submitted by the assessee that the A.O without according any valid and cogent reason had disallowed Rs.8,49,305/- that was claimed by the assessee towards website design charges, by holding that the same was in the nature of a capital expenditure. The assessee relying on the judgments of the Hon’ble High Court of Delhi in the case of CIT Vs. Indian Visit Com. Pvt. Ltd. 176 Taxman 164 (Del), as well as the order of a coordinate bench of the ITAT, Mumbai in the case of Radial Marketing Pvt. Ltd. Vs. ITO [ITA No. 3868/Mum/2008] therein averred that the website design charges had been held in the aforesaid judicial pronouncements as a revenue expenditure.

The CIT(A) after deliberating on the aforesaid contentions of the assessee observed that the CBDT Circular No. 14 (surpa) as was relied upon by the assessee only provided that the revenue authorities were to give guidance to the assesses, as and when the same was needed by them. The CIT(A) held that there was nothing available on record which would reveal that the assessee had approached the A.O for any such guidance. The CIT(A) further observed that as the assessee was assisted by a professional chartered accountant and a battery of legal experts, therefore, it was beyond comprehension that the assessee had remained ignorant as regards its claim of deduction of website design charges. The CIT(A) further deliberating on the nature of the expenses, observed that as the website was designed for the first time, therefore, the expenditure incurred by the assessee clearly revealed providing of an enduring benefit to him. Thus, in the backdrop of the aforesaid observations, it was concluded by the CIT(A) that the expenditure P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 incurred by the assessee on website designing was on the capital side, since in the subsequent years the assessee would only be required to update the website which was designed by him during the year. The CIT(A) on the basis of his aforesaid observations concluded that the aforesaid expenditure was rightly disallowed by the A.O by treating it as capital in nature.

The learned authorized representative (for short „A.R‟) for the assessee Shri J.D. Mistry, Senior Counsel, at the very outset took us through the facts of the case and submitted that the assessee company had entered into an IPL franchise agreement with BCCI-IPL on 04.04.2008 for franchise rights of IPL team with home ground at Eden Garden, Kolkata, which was named as Kolkata Knight Riders (for short „KKR‟). The ld. A.R submitted that though the assessee had claimed the Franchise fee paid for participating in the tournament for the subject year as a revenue expenditure, however, the A.O by characterising the same as a capital expenditure, had restricted the claim of the assessee only to the extent of the depreciation relatable to the same. The ld. A.R in order to drive home his aforesaid contention submitted that the Franchise fee paid by the assessee was in the nature of a recurring annual payment which was paid for participating in the league and operating the team for the year for which the payment was made. The ld. A.R submitted that as the payment of Franchise fee neither vested any right of participation in the matches for the subsequent years, nor did lead to creation/ownership of an asset or generation of a benefit of an enduring nature, therefore, it was rightly claimed as a revenue expenditure by the assessee, which however was wrongly disallowed by the A.O by holding the same as a capital expenditure. The ld. A.R took us through the relevant pages of the Franchise agreement between the assessee company and BCCI- P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 IPL, wherein different terms used in the agreement were defined, viz. (i) “Franchise” (Page 53) of his paper book (for short „APB‟); (ii) “Central Rights” (Page 53 of „APB‟); (iii) “Franchisee Rights” (Page 54 of „APB‟); (iv) “Territory” (Page 57 of „APB‟); and (v) “Year” (Page 57 of „APB‟). The ld. A.R drew our attention to the fact that the year under consideration which was the „first year‟ was to comprise of the period falling between the signing of the agreement till 31st December, 2008. The ld. A.R in order to fortify his contention that by making the payment of Franchise fee no enduring benefit got vested with the assessee, submitted that the same could be gathered from the very fact that in case of non staging of the league by BCCI-IPL (in whole or part), the same would not constitute a breach of the agreement and no recourse to any legal action could be taken by the assessee against the other party, viz. BCCI. The ld. A.R further to impress upon us that the payment of the Franchise fee did not lead to vesting of any absolute rights with the assessee, which thus could be construed as a creation/ownership rights of a capital asset, therein submitted that all the rights to telecast the matches remained with the BCCI, while for the assessee was vested only with the rights as that of a franchisee. The ld. A.R taking us through the limited rights as got vested with the assessee pursuant to the payment of the Franchise fee, therein drew our attention to the details of the Central licensing/Franchisee licensing forming part of the „Franchisee agreement‟ (Page 60 of „APB‟). The ld. A.R taking us through the obligations as were cast upon the franchisee in respect of the payment of the franchise consideration to BCCI-IPL, took us through Clause 7 of the Franchise agreement (Page 62 of „APB‟), which therein provided that in respect of the period 2008-17 (inclusive) the assessee was to make a payment of USD 22,52,700 equivalent to INR 9,01,08,000/- towards “League deposit” on or before 2nd January in each such year, which thereafter was to be P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 appropriated towards the annual Franchise consideration on the date of the First match of the League in the year in which the League Deposit was paid. That still further an amount of USD 52,56,300/- equivalent to INR 21,02,52,000/- was to be paid by the assessee in each such year on the date of First match in the League in each such year. The ld. A.R in order to support his claim that the payment of the Franchise fee did not lead to vesting of any enduring benefit with the assessee, and as such could not be held to be in the nature of a capital expenditure, drew our attention to Clause 10 of the Franchise agreement (Page 65 of „APB‟), which provided that the franchisee had no right to assign or delegate the performance of any right or obligation under the agreement. The ld. A.R further in order to buttress his contention that no absolute right of an enduring nature got vested with the assessee on the payment of the Franchise fee, further took us through Clause 11 of the franchise agreement, which provided that in case of a breach by the franchisee of its payment obligation under the agreement or under Clause 22, the same was to be taken as a material breach of the agreement. The ld. A.R further to impress upon us that its claim of the Franchise fee as a revenue expenditure was well in order and no right of enduring benefit got vested with the assessee, therein took us through Clause 16 of the franchise agreement, which provided that as the rights granted to the franchisee were personal to the franchisee, therefore, it had no right to either assign the agreement or to sub-contract or otherwise delegate the franchisees obligations under it without the BCCI-IPL‟s written consent. The ld. A.R further took us through Page 18-34 of the CIT(A) order, wherein the submissions of the assessee and the view of the CIT(A) as regards the issue as to whether the payment of the Franchise fee by the assessee was in the nature of a revenue expenditure (as claimed by the assessee), or a capital expenditure (as P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 held by the A.O) were recorded. The ld. A.R further submitted that the assessee had paid service tax on the Franchise fee, which thus fortified its claim that the same was in the nature of a revenue expenditure. The ld. A.R in order to buttress his contention that no enduring benefit/right got vested with the assessee on payment of the Franchise fee, submitted that the same could be gathered from the fact that in case no matches were played during the year, the assessee neither had any right to force BCCI for playing of the matches, nor could take any legal action against it. The ld. A.R. in order to support its aforesaid contention relied on the order of a coordinate bench of the Tribunal, viz. ITAT “I” Bench, Mumbai in the case of India Win Sports Pvt. Ltd. Vs. ACIT (ITA No. 5290 & 5291/Mum/2014, dated 22.07.2016. The ld. A.R taking us through Para 5-10 of the order, submitted that the Tribunal had in the aforesaid case concluded that the Franchise fee paid by the franchisee to BCCI-IPL was with the purpose of allowing participation of the team in IPL, and as the same did not vest with the assessee any enduring benefit, therefore, the same was allowable as a revenue expenditure. The ld. A.R submitted that all the aforesaid agreements were executed by BCCI-IPL on the same date, viz. 10.04.2008. The ld. A.R further relied on a similar view taken by another coordinate bench of the Tribunal, viz. ITAT Hyderabad Bench “B”, Hyderabad in the case of DCIT Vs. M/s Deccan Chargers Sporting Ventures Ltd. (ITA No. 1043/Hyd/2013, dated 28.10.2015. The ld. A.R in support of the proposition under consideration also relied on the order of ITAT “C” Bench, Chennai in the case of ACIT Vs. M/s The India Cement ltd. (ITA No. 1342/Mds/2010, dated 01.01.2016).

The ld. A.R further adverted to his claim of an amount of Rs.7,50,90,000/- pertaining to IPL Season-2 as an expenditure for the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 year under consideration. The ld. A.R submitted that the amount of Rs. 7,50,90,000/- was claimed by the assessee as an expenditure for the year, as the period of first three months (January, 2009 to March, 2009) fell within the year under consideration, viz. A.Y 2009-10, however, the same was disallowed by the A.O for the reason that the said claim of the assessee militated against the matching principle of accounting and did not pertain to the year under consideration. The ld. A.R. once again drew our attention to the definition of the term “Year”, which provided that the same was to be taken as the 12 month period (or part thereof) from 1 January to 31 December during the term, with the exception for the first year, where the same was to be taken from the date of signing of the agreement till 31 December, 2008. The ld. A.R taking us through Clause 7.1(a) of the franchise agreement (Page 62 of „APB‟), therein averred that in terms of the contractual obligation as emerged therefrom, the assessee had rightly claimed an amount of Rs.37,54,50,000/- as an expenditure under the head “Franchisee fee‟‟ in its Profit and loss account for the year under consideration. The ld. A.R took us through the observations of the CIT(A) recorded at Page 45- Para 5.4, as well as the submissions raised by the assessee before him at Page 36-39 of the CIT(A) order. The ld. A.R submitted that keeping in view the fact that the assessee was following the mercantile system of accounting, the claim of the aforesaid amount of Rs.7,50,90,000/-by the assessee as a Franchise fee for the year under consideration was well in order, placed reliance on the judgment of the Hon’ble Supreme Court in the case of Taparia Tools Ltd. Vs. CIT (2015) 372 ITR 605 (SC).

The ld. A.R in respect of its entitlement of an amount of Rs.75,00,000/- that was paid directly to Kolkata Police department for the security services to be provided at the stadium, took us through P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 the “Income and expenditure account for the Indian Premier League played at Eden Garden on 20th April to 25th May, 2008” of the “Cricket Association of Bengal” (for short „CAB‟) for the financial year 2008-09 (Page 109 of APB). The “Income and expenditure account” of CAB revealed that while for an amount of Rs.3,50,00,000/-paid by the assessee stood credited under the head “Stadium usage charges”, while for an amount of Rs.75,00,000/- was debited under the head “Refreshment for police force”. That in the backdrop of the aforesaid facts, the ld. A.R took us through the observations of the CIT(A) in context of the issue under consideration recorded at Page 49 – Para 6.4 of his order. The ld. A.R submitted that as per the arrangement between the assessee and CAB, the assessee was required to pay Rs.50,00,000/- per match played at Eden Garden Stadium. It was thus submitted by the ld. A.R that as 7 matches were played at Eden Garden during IPL Season-1, therefore, the assessee was liable to pay a consideration of Rs.3,50,00,000/-. In the backdrop of the aforesaid facts it was submitted by the assessee that as it was the responsibility of CAB to arrange for security at the stadium, therefore, at the direction of CAB the assessee had made a payment of Rs.75,00,000/- directly to Kolkata police department for security services to be provided at the stadium. It was thus submitted by the ld. AR that as the aforesaid expenditure was incurred in the normal course of the business of the assessee, therefore, the same was allowable as an expenditure in the hands of the assessee.

The ld. A.R further taking us through the disallowance of the fee of Rs.1,28,34,490/- paid/payable to Mr. John Buchanan, therein took us through the “Services Agreement- Director: Cricket Operation” (Page 113 of „APB‟). The ld. A.R took us through the relevant pages of the agreement, in order to impress upon us that Mr. John Buchanan P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 had provided coaching services to the assessee team in 2008 for the IPL Season-1. The ld. A.R submitted that the service agreement between the assessee and Mr. John Buchanan was for three seasons, i.e. 2008-09, 2009-10 and 2010-11, in terms of which the assessee as per the directions of Mr. John Buchanan was to make payments for the said services to Buchanan corporate Coaching trust. The ld. A.R in order to remove any scope of doubt as regards the fact that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in the IPL Season-1, therein took us through the downloaded extract from “Wikipedia, the free encyclopaedia”. The ld. A.R further took us through the relevant extract of “The Times of India”, Mumbai, dated April 18, 2008, from where it could be gathered that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in IPL Season-1 (Page 127 – 129 of „APB‟). The ld. A.R took us through the observations of the CIT(A) in context of the issue under consideration at Page 53 – Para 7.4. The ld. A.R submitted that the lower authorities had failed to appreciate the facts pertaining to the issue under consideration in the right perspective, as a result whereof the addition/disallowance on the aforesaid count was wrongly sustained by the CIT(A). The ld. A.R in support of his contention that as the payment made to Mr. John Buchanan was prompted by commercial expediency in the course of the business of the assessee, therefore, the same was allowable as an expenditure, relied on the judgment of the Hon’ble High Court of Madras in the case of CIT Vs. Associated Electrical Agencies and Anr (2004) 266 ITR 63 (Mad) and the Judgment of Hon’ble High Court of Bombay in the case of CIT Vs. Maina Ore Transport (2008) 324 ITR 100 (Bom).

The ld. A.R adverted to the disallowance of 25% of the air fare and travelling expenses by the A.O, for the reason that the said expenses must have been incurred on the VIPs, celebrities, relatives of directors etc. The ld. A.R submitted that as the said expenses were genuine expenses which were incurred by the assessee for the air fare, travelling expenses and vehicle hire charges for its own team, visiting teams, support staff, directors and invitee guests (being celebrities and VIPs), therefore, the same were to be allowed as a deductible expenditure under Sec.37(1) of the Act. The ld. A.R once again averred that inviting VIP guests, celebrities etc, during the matches resulted in increase of ticket sales and viewership of the matches during IPL, which thus increased the revenue of the assessee. The ld. A.R further submitted that even otherwise no opportunity of being heard was given to the assessee by the A.O while making the aforesaid adhoc disallowance.

That as regards the disallowance of an amount of Rs.1,08,000/- paid for security charges of Mr. Shah Rukh khan, it was submitted by the ld. A.R that he was a director of M/s Red Chillies Entertainment Pvt. Ltd, i.e the holding company of the assessee company. The ld. A.R further submitted that the attendance of Mr. Shah Rukh Khan in the cricket matches held at the home stadium had led to tremendous increase in ticket sales and sponsorship receipts by the assessee. It was submitted by the ld. A.R that it was no hidden a fact that when a celebrity or a VIP was invited by the assessee for the benefit of its business, the latters security remained its absolute responsibility.

The ld. A.R adverting to the disallowance of the amount of Rs.8,85,600/- paid by the assessee to Mr. Manish Malhotra, submitted that the said payment was for the purpose of design and outfits of KKR teams for the IPL Season-2 held in April-May 2009 and not for IPL Season-1 held in April- May, 2008. It was submitted by the ld. A.R that as the assessee was following the mercantile method of accounting, therefore, the expense was recognized and claimed as a deduction in F.Y: 2008-09. It was the contention of the ld. AR that for allowability of an expenditure in a particular year it was not necessary that the same must be one required for the purposes of carrying on the business or earning of profits of that year. The ld. A.R in support of his aforesaid contention relied on the judgment of the Hon’ble High Court of Bombay in the case of Mysore Spinning and Manufacturing Co. Ltd. Vs. CIT (1966) 61 ITR 572 (Bom) (Para 38 of the order).

The ld. A.R lastly in context of the disallowance by the A.O of the website designing expenses of Rs.8,49,305/-which had been sustained by the CIT(A), therein submitted that as the said expense was not incurred in connection with improvisation of a fixed asset, but with an object to facilitate the business operation, therefore, the same was to be allowed as a revenue expenditure. The ld. A.R in support of his aforesaid contention relied on the order of the ITAT, Mumbai in the case of DCIT Vs. Edelweiss Captial Ltd. (Mum) (ITA No. 3971/Mum/ 2009) and Radial Marketing Pvt. Ltd. Vs. ITO (ITA No. P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 3868/Mum/2008), and the order of the ITAT Delhi in the case of CIT Vs. India Visit.Com. Pvt. Ltd. (2008) 219 CTR 603 (Del). The ld. A.R in order to fortify his aforesaid claim, therein averred that the aforesaid web designing charges had been accepted as a revenue expenditure by the CIT(A) in the assesses own case for the subsequent years, viz. A.Ys 2010-11 to 2012-13. It was thus submitted by the ld. A.R that the aforesaid web design charges had wrongly been disallowed by the A.O.

Per contra, the ld. Departmental Representative (for short „D.R‟) at the very outset submitted that as the term of the league of the assessee was for an indefinite period, which thus vested a benefit of enduring nature, therefore, the Franchise fee paid by the assessee for acquiring the said rights and claimed as a revenue expenditure was rightly disallowed by the lower authorities by concluding that the same was in the nature of a capital expenditure. The ld. D.R in order to support his aforesaid contention drew our attention to the relevant pages of the assessment order, viz. Page 6 – Para 5 and Page 13 - Para 5.2 of the assessment order. The ld. D.R taking us through the observations of the A.O recorded at Page 19 – Para 16 submitted that the latter had rightly observed as regards the determination of the W.D.V of the intangible rights generated on the making of the aforesaid payment by the assessee for acquiring the franchise rights.

That as regards the disallowance of an amount of Rs.7,50,90,000/- which was sustained by the CIT(A), the ld. D.R relied on the order of the CIT(A). That as regards the disallowance of an amount of Rs.75,00,000/- paid by the assessee to Kolkata Police Family Welfare Centre which was upheld in appeal by the CIT(A), the ld. D.R submitted that as the assessee had failed to place on record any evidence to substantiate its aforesaid claim, therefore, the amount P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 was rightly disallowed as an expense by the lower authorities. That as regards the disallowance of the fees of Rs.1,28,34,490/- claimed by the assessee as amount paid to Mr. John Buchanan for IPL Season-1, the ld. D.R relied on the order of the CIT(A) and submitted that as the assessee had failed to establish that any such coaching services were provided by Mr. John Buchanan in the IPL Season-1, therefore, the same was rightly disallowed by the lower authorities. That as regards the adhoc disallowance of boarding and lodging and food and nutrition expenses of Rs.1,08,33,592/-, the ld. D.R relied on the orders of the lower authorities. That as regards the adhoc disallowance of 25% of air fare expenses, travelling expenses and vehicle hire charges of Rs.95,63,132/- the ld. D.R again took support of the orders of the lower authorities. That as regards the disallowance of the security charges of Rs. 1,08,700/- the ld. D.R relied on the order of the CIT(A). That in respect of the disallowance of expenses of Rs. 8,85,600/- incurred by the assessee on participation in fashion shows, the ld. D.R submitted that as observed by the lower authorities, as the said expenses were not incurred for the business of the assessee, therefore, the same had rightly been disallowed. Thus, on the basis of the aforesaid submissions, it was averred by the ld. D.R that as the appeal of the assessee was devoid of any merit, therefore, the same may be dismissed.

We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present case is sought for adjudicating multiple issues emerging from the order of the CIT(A), viz. (i) that as to whether the Franchise fee paid by the assessee to BCCI-IPL is a revenue expenditure as claimed by the assessee or in the nature of a capital expenditure as held by the lower P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 authorities; (ii) that as to whether the lower authorities had rightly concluded that as the amount of Rs.7,50,90,000/- paid by the assessee towards Franchise fee for IPL Season-2 pertaining to the 3 months (January, 2009 to March, 2009) did not satisfy the matching principle of accounting, thus could not be allowed as an expenditure in the year under consideration, viz. A.Y 2009-10; (iii) that as to whether the disallowance of Rs.75,00,000/- paid/payable by the assessee to Kolkata Police Family Welfare Centre was rightly made by the lower authorities; (iv) that as to whether the disallowance of fees of Rs.1,28,34,490/- claimed by the assessee to have been paid to Mr. John Buchanan for IPL season-1 was in order; (v) that as to whether the adhoc disallowance of expenditure incurred by the assessee in connection with a). boarding and lodging and b). food and nutrition expenses was rightly made by the A.O; (vi) that as to whether the adhoc disallowance of expenditure incurred by the assessee in connection with air fare expense, travelling expense and vehicle hire charges was rightly made by the A.O; (vii) that as to whether the disallowance of the security charges expenditure of Rs.1,08,700/- was rightly made by the A.O; (viii) that as to whether the disallowance of expenses in connection with participation in fashion shows was in order; and (ix) that as to whether the website design charges were rightly claimed by the assessee as a revenue expenditure.

We shall first take up the core issue involved in the present appeal as to whether the Franchise fee paid by the assessee to BCCI- IPL was rightly claimed by it as a revenue expenditure, or the same being in the nature of a capital expenditure was rightly disallowed by the lower authorities. We find that the assessee had entered into a franchise agreement with BCCI- IPL in April, 2008. That pursuant to the aforesaid agreement the assessee was vested with the right to P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 operate the franchise and to be a member of the league and operate a team in the city of Kolkata and participate in the IPL tournament, which was owned and operated by BCCI-IPL. The assessee in terms of Clause 7 of the franchise agreement remained under an obligation to pay to BCCI-IPL the annual Franchise fee of the following amount: (a). in respect of the period 2008-17 (inclusive), as under:- (i) a sum of USD 22,52,700/- equivalent to INR 9,01,08,000/- towards “League deposit” on or before 2nd January in each such year, which thereafter was to be appropriated towards the annual Franchise consideration on the date of the First match of the League in the year in which the League Deposit was paid. The League deposit was refundable in any year if the league did not take place at all in such year, under which circumstance the amount was to be refunded without interest; AND (ii) a sum of USD 52,56,300/- equivalent to INR 21,02,52,000/- was to be paid by the assessee every year on the date of the First match of the League in each such year. (b). that from and including the year 2018 onwards, the franchisee remained under an obligation to pay an amount equal to 20% of the franchisee income received in respect of such year, which sum was to be paid in four instalments, i.e within 60 days of 31st March, 30th June, 30th September and 31st December in 2018 and each subsequent year of the term. We further find that the term “Year” as defined in Clause 1 was to be construed as each 12 month period (or part thereof) from 1st January to 31st December during the term, except for the year under consideration, which being the first year of the league was to be P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 reckoned from the date of signing of the agreement till 31 December, 2008. We further find that the “Franchisee rights” which again is defined in Clause 1 of the franchise agreement, provides that the same shall mean all rights in respect of the team, including those rights set out in Clause 4.3, viz. (i) the shirts sponsorship rights in respect of the team; (ii) official suppliership rights in respect of the team; (iii) corporate entertainment/premium seating rights at the stadium during home league matches; (iv) right to conduct franchisee licensing; (v) right to retain all of the gate receipts in respect of the franchisee home league matches; (vi) the right to sell merchandise at the stadium on the day of its home league matches; and (vii). such other rights in relation to the team which may be identified in the commercial guidelines provided by BCCI-IPL. However, the assessee was not vested with any right in respect of the Central Rights and all rights in respect of the licensing of replica uniforms for any team in the league.

We have perused the various clauses of the franchise agreement, as per which the franchise rights had been vested with the assessee. We have given a thoughtful consideration to the nature of the rights, and find that the payment of the Franchise fee by the assessee for a year, therein vested with him a right to participate in the tournament for the said year without guarantee that in the future years it would be eligible to participate in the tournament. We find that the payment of the Franchise fee by the assessee as per the terms contemplated in the franchise agreement enabled it to participate in the tournament for the subject year and earn revenue from the same. We further find that the payment of the Franchise fee by the assessee was in the nature of recurring annual payment which was paid to facilitate participation in the league and operating the team only for the year for which the payment pertained, with neither vesting of any right of participation in P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 the subsequent years, nor leading to creation/ownership of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We further find that the year under consideration was the „first year‟, and as such was to be construed from the date of signing of the agreement till 31st December, 2008. We have deliberated at length on the rights and obligations contemplated in the franchise agreement. We find that in case of non-staging of the league by BCCI- IPL (in whole or part) the same was not to constitute a breach of the agreement, and the assessee was divested of his right to take any legal action against the other party, viz. BCCI or enforce the playing of the matches. We further find that as can fairly be gathered from perusing the details of the Central licensing/Franchisee licensing as defined in the franchisee agreement per the terms of the agreement, all the broadcasting rights as regards the telecast of the matches remained with the BCCI, while for the assessee was only vested with the rights as that of a franchisee. We further find that the assessee as gathered from Clause 10 of the franchise agreement was not vested with any right to assign or delegate the performance of any right or obligation under the agreement. That still further as per Clause 22 of the agreement, in case of breach by the franchisee of the terms contemplating the payment obligation to BCCI, the same was to be construed as a material breach of the agreement. We further while deliberating on the terms of the franchise agreement had observed that as per Clause 16 of the agreement, the rights granted to the franchisee were personal to the franchisee and had no right to assign the agreement or to sub-contract or otherwise delegate the franchisees obligations under it without the BCCI-IPL written consent.

We have deliberated at length as regards the nature of the rights as got vested with the assessee on the payment of the Franchise fee of P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 Rs.30,03,60,000/- to BCCI. We have given a thoughtful consideration to the issue before us and are of the considered view that the payment of the Franchise fee by the assessee to BCCI-IPL only facilitated participation in the league and operating the team for the year for which the payment pertained, with no vested right to participate in the events for the subsequent year/years. We are of the considered view that as the aforesaid payment of Franchise fee which facilitated the participation in the league and operating the team was restricted only to the year to which the payment pertained, therefore, it can safely be concluded that by making such payment there was neither a creation of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We find that a conjoint reading of Clause 7 of the agreement contemplating the payment of the Franchise fee and Clause 1 defining the term “year”, clearly reveals beyond any scope of doubt that the payment of the Franchise fee of Rs.30,03,60,000/- by the assessee for IPL Season-1 was only for the period 10.04.2008 (i.e the date of the signing of the agreement) till 31.12.2008. That as stands gathered from the franchise agreement, the making of the aforesaid payment of Franchise fee by the assessee to BCCI-IPL for IPL Season-1 only enabled the assessee to participate in the league tournaments for IPL Season-1 and operate its team for the aforesaid period for which the payment was made. We are unable to persuade ourselves to subscribe to the view of the lower authorities that any benefit of enduring nature was generated in the hands of the assessee by making the payment of the Franchise fee of Rs.30,03,60,000/-, which as observed by us was only for facilitating the assessee to participate in the league tournaments for IPL Season-1. We have deliberated on the nature of rights of the assessee franchisee on payment of the Franchise fee and find that while for the “Central Rights” were retained by BCCI, the “Franchisee rights” remained with P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 the assessee. We further find that though by making the payment of the Franchise fee the assessee got a right to participate in the league and operate its home team for the year for which the payment was made, but however, the non-staging of the league by BCCI-IPL (in whole or part) would not constitute a breach of the agreement, and the assessee was neither vested with any right to enforce the playing of such matches by BCCI nor had any right to take any legal action for the said failure on the part of the BCCI to stage the matches. We have further observed that the aforesaid franchise rights as per Clause 16 of the franchise agreement were personal to the franchisee and it had no right to either assign the agreement or to sub-contract or otherwise delegate the franchisees obligations under it without the BCCI-IPLs written consent. We further find that the issue before us as to whether the Franchise fee paid to BCCI-IPL is a revenue expenditure or a capital expenditure had already been looked into and adjudicated upon by a coordinate bench of Tribunal, viz. ITAT “I” Bench, Mumbai in the case of India Win Sports Pvt. Ltd. Vs. ACIT (ITA No. 5290 & 5291/Mum/2014, dated 22.07.2016, wherein the Tribunal had held as under: “The expenditure of Rs.44,76,00,000/- incurred by it for making payment of the first instalment to the BCCI-IPL in terms of Clause 7 of the agreement was not for the purpose of acquisition of any asset but for an annual right to manage the franchise. The purpose of the expenditure to be incurred under the agreement by the assessee has been stated in Clause 6 of the agreement as consideration for the right to operate the Franchise and to be a member of the league. The total expenditure of Rs.44,76,00,000/- payable in yearly instalments of Rs.44,76,00,000/- for ten years was clearly for the purpose of securing franchise right from BCCI. Thus payments made by the assessee were for the annual benefits only not extending beyond one year. Its right to operate and manage the team is subject to prior payment of annual franchise fee; if the assessee fails to make the payment, then it would not be allowed to participate in IPL. Thus, the assessee has made the annual payments to earn the annual income. The nature of transaction/payment clearly demonstrates that the assessee is neither obtaining any enduring benefit by making payment of annual instalment these payments are giving rise to any assets. These payments are mere annual payments to BCCI-IPL to give a right to the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 assessee to participate in the matches with its team. Therefore, the annual franchise payment was a revenue expenditure.” We further find that a similar view was also taken by the ITAT, Hyderabad “B”, Hyderabad in the case of DCIT Vs. M/s Deccan Chargers Sporting Ventures Ltd. (ITA No. 1043/Hyd/2013, dated 28.10.2015, wherein too the Tribunal had concluded that the Franchise fee paid by the franchisee assessee to BCCI-IPL was in the nature of a revenue expenditure. We find that the judgments of the Hon’ble Supreme Court in the case of Techno Shares & Stocks Ltd. & Ors. vs. Commissioner Of Income Tax (2010) 327 ITR 323( SC) and Jonas Woodhead And Sons (India) Ltd. Vs. Commissioner of Income-Tax (1997) 224 ITR 342 (SC) relied upon by the A.O are distinguishable on facts. We find that in the case of Techno Shares & Stocks Ltd. & Ors (supra) the issue before the Hon‟ble Apex Court was as to whether the right of membership conferred upon the members under the BSE membership card is a “business or commercial right” which gives a non-defaulting continuing member a right to access the exchange and to participate therein, and in that sense a license or akin to licence in terms of Sec. 32(1)(ii) of the Act. We find that as the aforesaid right of membership conferred upon the members under the BSE membership card an enduring benefit, which would vest with the stock exchange only on the default/demise in terms of Rules and bye-laws of BSE, therefore, it was in the backdrop of the aforesaid material facts that the Hon‟ble Apex Court had concluded that the same was an intangible right which was entitled for claim of depreciation. We may herein observe that the Hon‟ble Apex Court in the aforesaid case had as a word of caution observed that the said judgment may not be understood to mean that every business or commercial right would constitute a “licence” or a “franchise” in terms of Sec. 32(1)(ii) of the Act, by holding as under:

We have deliberated at length on the aforesaid observations of the lower authorities, but however, are unable to persuade ourselves to subscribe to the same. We find that the veracity of the claim of the assessee that it was liable to pay a consideration of Rs. 3,50,00,000/- P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 to CAB for 7 matches played at Eden Garden during IPL Season-1 can safely be gathered from the fact that an income of Rs.3,50,00,000/- was credited on account of stadium use charges in the Income and expenditure account of CAB for IPL Season 1 matches played at Eden Garden. We find that now when the assessee in discharge of its aforesaid obligation had as per the directions of CAB made a payment of Rs.75,00,000/- directly to the Kolkata Police department for the security services to be provided at the stadium on its behalf, the veracity of the said claim of the assessee cannot be dislodged for the reason that CAB had debited the said expenditure under the head “refreshment for police force”. We are of the considered view that the booking of the aforesaid expenditure by CAB using a different nomenclature would by no means negate the genuineness of the aforesaid claim of expenditure in the hands of the assessee. We find that the assessee instead of making payment of Rs.3,50,00,000/- to CAB, had rather, as per the latters direction discharged part of its obligation by making payment of part of the amount, viz. Rs.75,00,000/- to Kolkata Police Welfare Centre. We are also not impressed by the observations of the lower authorities that as no written agreement was executed between the assessee and CAB for the use of Eden Garden during the IPL Matches, therefore, the genuineness of the payment of Rs.75,00,000/- paid to Kolkata Police Family Welfare Centre was to be held as not proved. We are of the considered view that to the extent the assessee before us is concerned, the fact that the assessee had paid a consideration of Rs.3,50,00,000/- to CAB for the 7 matches played at Eden Garden IPL Season-1, is proved beyond doubt from the fact that an amount of Rs.3,50,00,000/- was credited by CAB as its income on account of stadium use charges in its Income and expenditure account for IPL Season-1 matches played at Eden Garden. We are of the considered P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 view that now when CAB had duly acknowledged having received an amount of Rs.3,50,00,000/- from the assessee for use of Eden Garden stadium for staging of IPL Season-1 matches, therefore, as observed by us hereinabove, nothing more remains to be proved on the part of the assessee. We are of the considered view that the observations of the lower authorities as regards the genuineness of the payment and the fact as to why the said amount was paid by the assessee to Kolkata Police Welfare fund which was not a government authority, and not to the State government, or as to why the assessee instead of giving the amount to a welfare fund had not provided refreshment to police personnel on its own, are all irrelevant to the entitlement of the assessee for the claim of the aforesaid amount as an expenditure in the course of its business. We have deliberated on the facts and are of the considered view that the payment of Rs. 75 lac was made by the assessee to Kolkata Police Welfare fund, not by its choice, but as per the directions of CAB who was responsible to arrange for security in the stadium at the time of staging of the matches by the assessee. We thus not being persuaded to be in agreement with the observations of the lower authorities as regards the allowability of the claim of the amount of Rs.75,00,000/- (forming part of total expenditure of Rs.3,50,00,000/-) paid by the assessee as per the directions of CAB to Kolkata Police Welfare Fund, therefore, set aside the order of the CIT(A) to the said extent and delete the addition/disallowance of Rs.75,00,000/- sustained by him. The Ground of appeal

We have deliberated on the facts pertaining to the issue under consideration and further perused the “Services Agreement- Director: Cricket Operation” (Page 113 of „APB‟). We find that the service agreement between the assessee and Mr. John Buchanan reveals that the same was for three seasons, i.e. 2008-09, 2009-10 and 2010-11, in terms of which the assessee as per the directions of Mr. John Buchanan was to make payments for the said services to Buchanan corporate Coaching trust. We have further perused the downloaded extract from “Wikipedia, the free encyclopaedia” and the relevant extract of “The Times of India”, Mumbai, dated April 18, 2008 placed P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 on record by the ld. A.R, from where it could be gathered that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in IPL Season-1 (Page 127 – 129 of „APB‟). We have perused the service agreement which reveals that the same was executed by Mr. John Buchanan, both in his individual capacity and in his capacity as director of Buchanan success cricket coaching Pty ltd. (ACN) as trustee of the Buchanan discretionary trust, having its address at 26, Love Street, Holland Park, Queensland, Australia. Thus, in the backdrop of the aforesaid facts, the adverse inference drawn by the lower authorities as regards the genuineness and veracity of the allowability of the claim of the assessee for the reason that the amount was paid to a discretionary trust, is thus put to rest. We further find that though it remains as a matter of fact that the agreement was signed on 07.01.2009, i.e much subsequent to the period the IPL Season-1 matches were played, however, a bare perusal of the agreement reveals that the same specifically provided that it was executed for 3 seasons, viz. 2008-09, 2009-10 and 2010-11 and shall become effective from the date of signing till 30th June, 2011. We further find that Clause 3.2 of the agreement specifically provided that the director, viz. Mr. John Buchanan was committed to be available for the franchise for at least 26 weeks in Season I (2009) and 36 weeks each in Season II and III (i.e. 2010 and 2011). We further find that the Clause 4 which provided the terms of payment of fees by the assessee to Mr. John Buchanan clearly mentioned that in lieu of the services provided by him the assessee was to pay a gross fees of US $ 255,000/- for Season I (2009), which was to become due and payable in parts, viz. (i) 25% on signing of the contract (but before 30th November, 2008); (ii) 50% on 1st April, 2009 and 25% on 1st June, 2009. We further find that Clause 12 of the agreement clearly provided that the terms of this agreement was to supersede any previous P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 agreement (including agreement dated 17th February, 2008) or arrangement between the parties. We have deliberated on the various relevant clauses of the aforesaid “Service agreement” and are of the considered view that the same clearly laid down the terms and conditions in respect of the duration, availability of the coach and the fees structure for the IPL Season-1. We find that the aforesaid agreement which was in supersession of any previous agreement (including agreement dated 17th February, 2008) or arrangement between the parties, duly contemplated the terms and conditions as per which Mr. John Buchanan was to render his services to the assessee as regards the IPL Season-1 league. We have further deliberated on the relevant newspaper extracts of “Times of India” as well as the downloaded extracts from Wikipedia, the free encyclopaedia. We though are not oblivious of the fact that extracts of news paper etc. cannot on their own establish or disprove a fact, but the same can undoubtedly be admitted as a secondary or supporting evidence. We find that the news item dated 18th April, 2008 (Page 127 - 129 of „APB‟), as well as the extracts of “Wikipedia, the free encyclopaedia” (Page 124-125 of „APB‟) also evidences the fact that Mr. John Buchanan had provided coaching services to the assessee team, viz. Kolkata Knight Riders in IPL Season-1. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to subscribe to the views of the lower authorities that no coaching services were provided by Mr. John Buchanan to the assesse‟s cricket team in IPL Season-1. We further find that the revenue had neither placed on record any irrefutable documentary evidence which could persuade us to conclude that no coaching services were provided by Mr. John Buchanan to the assesse‟s cricket team for IPL Season-1, nor the material placed on record by the ld. A.R before us to fortify his aforesaid claim had been rebutted or disproved by the ld. D.R. We P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 thus being of the view that the claim of the assessee as regards the expenditure of Rs.1,28,34,490/- in respect of the coaching fees paid to Mr. John Buchanan for IPL Season-1 is found to be in order, therefore, set aside the order of the CIT(A) to the extent the latter had sustained the addition/disallowance of Rs.1,28,34,490/- made by the A.O. The Ground of appeal

We have deliberated on the observations of the lower authorities, and find that the primary reason which had weighed in the mind of the A.O while making the disallowance of expenses booked by the assessee under the head food and nutrition expenses and boarding and lodging expenses, was that the information gathered during the course of the survey proceedings conducted under Sec. 133A on 21.04.2010 at the office premises of the assessee at Eden Garden, Calcutta, revealed that the parties hosted by the assessee included various relatives of directors, VIPs and celebrities as invitees. We find that the A.O had disallowed the entire partying expenditure of Rs.39,19,880/-incurred by the assessee at ITC, sonar, Kolkata, as well as disallowed 33% of the room expenses of Rs.96,26,375/- incurred by the assessee on booking of rooms at ITC, sonar, Kolkata, and a further disallowance of 33% of the balance expenditure of Rs.1,13,24,264/-. We find substantial force in the contention of the ld. A.R that the aforesaid expenses were incurred by the assessee in the course of operating its teams, wherein the visiting teams alongwith people from show business, actors, celebrities, VIPs etc, were invited for the matches for the purpose of increasing the viewing of the matches, which thus consequently led to increase in sale of tickets and generation of higher amount of sponsorship fees. We have deliberated on the contentions raised by the authorized representatives for both the parties and the material available on record. We are of the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 considered view that it remains as a matter of fact that the game of cricket, unlike in the past, as on date had been highly commercialized. We find that the main source of income of an IPL franchisee from hosting of the cricket matches is from ticketing and receipt of sponsorships by staging the cricket matches. We are of the considered view that it remains no hidden a fact that in order to boost the ticket sales and to receive higher sponsorships the franchisees of the IPL teams leave no stone unturned, and to lure the public for buying tickets, invite actors, celebrities, VIPs etc. during the matches. We find substantial force in the contention of the ld. A.R that this is the way the assessee operates its team and carries out its business. We cannot remain oblivious of the factual reality as regards the strategical planning in the business of cricketing, and are of the considered view that now when the actors, celebrities, VIPs etc., pursuant to invitations by the franchisee, mark their presence in the matches, the same leads to substantial push to ticketing sales and higher sponsorship receipts. We are of the considered view that the visits of the actors, celebrities, VIP‟s etc. at the matches staged is strategically planned by the franchisees, which carries with it the obligation and responsibility of providing boarding, lodging, food etc. to the level of their standard. We are further of the view that the marking of presence by the actors, celebrities, VIPs etc. at the matches is strategically planned and is guided by the business prudence of the franchisee, knowing well that the same would both boost the sales of tickets as more of viewers would be attracted for such matches, as well as give a substantial push to the sponsorship receipts from the business houses. We would not hesitate to observe that keeping in view the commercialization of the game of cricket, it would not be wrong to conclude that even if the assessee would have arranged paid visits of the actors, celebrities, VIPs for the matches, being well P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 conversant with the fact that the same would substantially give a boost to his revenue collections from staging of matches, even the said payments would safely fall within the sweep of an expenditure incurred wholly and exclusively for the purpose of the business. Be that as it may, in the backdrop of our aforesaid observations, we are unable to persuade ourselves to subscribe to the view of the A.O that the expenses incurred by the assessee towards food and nutrition expenses and boarding and lodging expenses provided to the actors, celebrities and VIPs are liable to be disallowed by characterising them as expenses which could not be held to have been incurred by the assessee wholly and exclusively for its business. We are of the considered view that as the visits of the actors, celebrities and VIPs at the venues where the matches are staged is strategically planned by the assessee in the very interest of its business, therefore, expenses incurred by the assessee by way of providing them food and nutrition or arranging for their stay in hotels can safely be held to be an expenditure incurred in the course of its business. We are further of the view that hosting of parties by the assessee at ITC, sonar Kolkata or at other venues on the days when the matches were played at the home grounds of the assessee, which were attended by the assessee‟s own team, visiting teams, support staff, directors and invitee guests, which included amongst others actors, celebrities, VIPs who had marked their presence at the matches, can safely be held to be expenditure incurred by the assessee in the very interest of its business. We are of the considered view that the allowability of an expenditure under Sec.37(1) of the Act is required to satisfy the requisite condition contemplated therein, viz. (i) the expenses are not of the nature of the expenses defined in Sec.32 to 36 of the Act; (ii) the expenses are not in the nature of a capital expenditure; (iii) the expenses are not the personal expenses of the assessee; and (iv) the P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 expenses are incurred wholly and exclusively for the purposes of the business of the assessee. We find that in the present case before us the aforesaid requisite conditions had duly been satisfied by the assessee, and as observed by us hereinabove, the expenditure incurred by the assessee on food and nutrition and boarding and lodging incurred in respect of the invitees actors, celebrities and VIPs, being a part of the strategical planning of the assessee to boost its generation of revenues is thus allowable under Sec. 37(1) of the Act. We may herein observe that neither before the lower authorities nor before us it has been established by the revenue that either the expenses claimed by the assessee in respect of the aforesaid persons is found to be bogus, or the said expenditure so incurred on them were not in context of the business of the assessee. We are of the considered view that the aforesaid expenditure incurred by the assessee by hosting dinners on the days on which the matches were played at the home ground, which amongst others were attended by the aforesaid actors, celebrities etc, and arranging for their stay at the hotels of repute, can safely be held as an expenditure incurred by the assessee wholly and exclusively for the purpose of its business. We thus being of the considered view that as the expenditure incurred by the assessee on food and nutrition and boarding and lodging for the members of the team (including visiting teams), support staff, directors and the invited guests, which amongst others included actors, celebrities, VIPs, being in the nature of expenditure incurred by the assessee in the very interest of its business, therefore, in the absence of any irrefutable documentary evidence which could had established beyond any doubt that the same had been incurred by the assessee either to meet out a personal obligation or was for a purpose which could not be held to be wholly and exclusively for the purpose of the business, therefore, are unable to persuade ourselves to subscribe P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 to the disallowance of the expenses by the A.O for the reason that the parties hosted by the assessee were attended by such actors, celebrities and VIPs, as well as expenditure was incurred towards booking of rooms for their stay in hotels of repute. We are further in agreement with the contention of the ld. A.R who had rightly stated that this is the way the assessee carries out his business, and are of the considered view that as long as the claim of the assessee in respect of the aforesaid expenses satisfied the conditions contemplated under Sec. 37 (1), the entitlement of the assessee cannot be interfered with. However, while perusing the order of the CIT(A) we find that latter had referred to certain bills wherein a clear nexus between the expenditure incurred and the purpose of hosting the parties could not be established, viz. (i) bill of Rs.3,44,410/- for 300 snacks, 300 soft beverages and transport charges, wherein nothing could be gathered from perusing the same about the purpose and persons attending the party; (ii) bill of Rs.5,31,573/-, dated 30.04.2008 which though was raised in favour of IPL ODC for dinner of 400 persons, however, as to how the same was payable by the assessee had remained unexplained; (iii). That certain other bills, viz. bill of Rs.5,31,893/- for 08.05.2008; bill of Rs.5,31,893/- for 13.05.2008; and bill of Rs.5,31,894/- for 20.05.2008, which included dinner, equipment rental, tobacco, etc, but they too did not indicate the purpose and the persons attending the said occasion; (iv). bill of Rs.4,51,900/- which was for 400 snacks, soft drinks, transportation, equipment rental, which did bear a discrepancy, as against the said date the amount mentioned in the submissions by the assessee was Rs.6,83,071/- which could not be reconciled; and (v) bill of Rs.5,31,893/- for 25.05.2008 which was stated to be of Rs.6,69,698/- in the submissions which too could not be reconciled by the assessee. We are of the considered view that in the backdrop of the observations of the CIT(A) that either the assessee P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 had failed to relate the aforesaid bills pertaining to hosting of dinners, tea parties etc., with the purpose for which the same had been incurred, or the same suffered from certain discrepancies as regards the amounts mentioned therein in comparison to those stated by the assessee during the course of the proceedings and had not been reconciled, therefore, in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills, viz. (i). bill of Rs.5,31,573/-, dated 30.04.2008; (ii) bill of Rs.5,31,893/-, dated 08.05,2008; (iii). bill of Rs.5,31,893/-, dated 13.05.2008; (iv). bill of Rs.5,31,894/-, dated 20,05.2008; (v). bill of Rs.4,51,900/-;and (vi) and bill of Rs.5,31,893/-, dated 25.05.2008 pertained to expenses incurred by the assessee in the course of its business, or not. We may however clarify that the A.O shall while re-adjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications in respect of the limited issue for which the matter had been restored to his file. Needless to say, the A.O shall while re-adjudicating the aforesaid issue afford sufficient opportunity of being heard to the assessee, who shall remain at a liberty to furnish material and documents to substantiate his claim. The Grounds of appeal

We have given a thoughtful consideration to the issue before us and find that the genuineness and veracity of the payment of Rs.8,85,600/- by the assessee to Mr. Manish Malhotra had not been doubted by the lower authorities. We find that the claim of the assessee was primarily rejected by the lower authorities for the reason that as the payment was made in the month of March, 2009, therefore, it was beyond comprehension as to how the same was relatable and would go to contribute to the revenue of the assessee for events of IPL Season-1, which had already concluded in April/May, 2008. We find that there remains no occasion to go into the intricacies of the issue as to whether the aforesaid expense was in context of the outfit of the players for IPL Season-1 or IPL Season-2, as the ld. A.R had fairly conceded before us that the said payment was made for the purpose of design and outfits of KKR teams for the IPL Season-2, matches which were held in April-May 2009, and not for the IPL Season-1 matches that had already concluded in April- May, 2008. We P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 find substantial force in the contention of the ld. A.R that as the assessee was following the mercantile method of accounting, therefore, the expense which was incurred during the year under consideration was recognized and claimed as a deduction in F.Y: 2008-09. We may at this stage observe that the playing of the matches by the league had been spread over different calendar years falling between 2008-17 (inclusive), therefore, the period of first three months of IPL Season-2 (January, 2009 to March, 2009) fell within the sweep of the year under consideration, viz. F.Y 2009-10. We are of the considered view that the claim of expenses by an assessee in a particular year cannot be put in a strait jacket, and the allowability of the same be made absolutely dependent subject to the condition that the same must have been incurred for the purpose of carrying on the business or earning of profits of that year. We are in agreement with the aforesaid contention of the ld. A.R and find that the same is covered by the judgment of the Hon’ble High Court of Bombay in the case of Mysore Spinning and Manufacturing Co. Ltd. Vs. CIT (1966) 61 ITR 572 (Bom), which thereafter had been affirmed by the Hon‟ble Supreme Court in the case of CIT Vs. Mysore Spinning and Manufacturing Co. Ltd. (1970) 78 ITR 4 (SC) and the appeal of the revenue was dismissed. The Hon‟ble High Court had in the abovementioned case observed as under: “With respect, we find it difficult to accept the aforesaid contentions of Mr. Joshi. We do not find any limitation in the language of cl. (xv) to restrict the expenditure mentioned therein to an expenditure relating to the carrying on of the business in that year. All that is said is, it must be an expenditure incurred in that year and it must be an amount expended wholly and exclusively for the purpose of the business of the assessee. The limitations mentioned in this clause are, it should not be an expenditure which is covered by or which falls under cls. (i) to (xiv) of sub-s. (2) of s. 10 and it should not be an expenditure of a capital nature or personal expenses of the assessee. There is no further limitation that the expenditure must necessarily be an expenditure required for the purposes of carrying on the business of that year. There would be ample authority to show that an expenditure incurred to meet P a g e | Knight Riders Sports Private Limited Vs. ACIT-Central Circle-29 any liability of the business accruing in that year is an expenditure wholly and exclusively laid out for the purposes of the business and therefore allowable under s. 10(2)(xv)”. We thus being of the considered view that as the expenditure under consideration was incurred by the assessee to meet the aforesaid liability of the business which had accrued during the year, therefore, the amount of Rs.8,85,600/- was rightly claimed as an expenditure while computing the income of the assessee for the year under consideration. We thus set aside the order of the CIT(A and delete the addition/disallowance of Rs. 8,85,600/-. The Ground of appeal