VIACOM 18 MEDIA P.LTD,MUMBAI vs. ADDL CIT RG 11(1), MUMBAI

In view of the aforesaid decisions, we direct the AO to allow assessee’s claim of depreciation on the amount of Rs.69,53,343/-. This ground is allowed.

In ground nos. 2 & 3, the assessee has claimed allowance of distribution expenses of Rs.28,23,279/- and Rs.20,47,237/- disallowed in the A Y 2006-07 on account of non-deduction of tax u/s. 40(a)(i) in AY 2006-07. Briefly, the facts are in the AY 2006-07, the assessee had claimed distribution expenses of Rs.5,55,28,565/- on account of payment made to MTV Asia and other channels. The AO on referring to the assessment made in case of MTV Asia found that the distribution revenue received was in the nature of royalty as per India Singapore DTTA. It was also noticed that the assessee had not deducted tax at source, though it is in the nature of royalty. He therefore called upon the assessee to explain why the expenses claimed should not be disallowed u/s. 40(a)(i). In response to the query it was stated by the assessee that it had deducted tax at source on the amount, which is subject to the deduction of tax in terms of section 197. But the AO not being convinced with the submissions of the assessee held that though the assessee was liable to deduct tax at source on the entire amount of Rs.5,55,28,565/- paid towards royalty but out of which the assessee had not deducted tax on amount of Rs.2,23,04,019/- hence, same is liable to be disallowed u/s. 40(a)(i). The learned CIT(A) also upheld such disallowance. Being aggrieved of the order of the CIT(A) the assessee carried the matter in appeal before the ITAT. The Tribunal, taking note of the fact that the additional evidence brought on record by the assessee before the first appellate authority were not considered, remitted the matter back to his file for adjudicating afresh. While doing so the Tribunal directed the CIT(A) to decide whether the credit for deduction of tax can be given in the appropriate assessment year, wherein the tax was actually deducted. As far as distribution expenses of Rs.20.47 lacs in concerned, the Tribunal, considering the assessee’s submission that if the amount is disallowed in AY 2006-07, the same has to be allowed in AY 2008-09 wherein the expenses were also reversed, remitted the matter back to the file of the CIT(A) for considering afresh. The learned counsel for the assessee submitted before us that in view of the decision of the Tribunal for A.Y. 2006-07, the matter relating to distribution expenses may be remitted back to the file of the CIT(A) for deciding afresh along with A.Y. 2006-07, which is still pending before him. The learned DR has no objection if the issue is remitted back to the CIT(A).

We have considered the submissions of the parties and perused the material on record. As could be seen, the issues raised in ground nos. 2 & 3 do not directly arise out of the assessment order or impugned order of CIT(A). They are in consequence to the assessment order passed for A.Y. 2006-07. On a perusal of the order passed by the co-ordinate Bench for A.Y. 2006-07 in dated 26.11.2014, it is seen that as far as distribution expenses are concerned, at the time of hearing before the Tribunal the assessee made a specific claim that either they have to be allowed in A.Y. 2006-07 or in A.Y. 2008-09. Considering such claim of the assessee, the Tribunal remitted the matter back to the file of the AO for deciding assessee’s claim afresh by considering additional evidence brought on record. The learned counsel for the assessee had submitted before us that the amount claimed towards distribution expenses which are subject matter of ground nos. 2 & 3 are also part of the expenditure claimed for A.Y. 2006-07. The aforesaid factual aspect has not been opposed or disputed by the learned DR. Considering the fact that similar issue has arisen in A.Y. 2006-07, which is pending for adjudication before the CIT(A), we deem it proper to remit this issue to the file of the CIT(A) for deciding afresh along with similar issues pending for AY 2006-07 after due opportunity of being heard to the assessee. Grounds raised are allowed for statistical purposes.

Ground no.4 being consequential is not required to be adjudicated at this stage. Thus this ground is dismissed as infructuous.

In the result, the assessee’s appeal is partly allowed.

The only issue raised in the departmental appeal pertains to deletion of addition of Rs.2,79,26,769/- made by the AO on account of advertisement and sales promotion expenses.

Briefly stated, the assessee during the year claimed expenditure of Rs.6,06,60,269/- on account of advertisement and sales promotion. When the AO called upon the assessee to justify the business expediency for incurring such expenditure the assessee as per its reply reproduced in the assessment order justified its claim by stating that it was wholly and exclusively for the purpose of business. The AO however, was not convinced with the same. He was of the view that by incurring such huge expenditure the assessee has promoted the brand of the associated enterprise resulting in benefits to the AEs in India. He opined that there should not be any attempt on the part of the assessee to utilize the expenses to claim deduction which he would not have otherwise been eligible for. He stated that the assessee has debited advertisement and sale promotion expenses, which does not commensurate with the income. He also noted that this particular issue has been a matter of dispute from the preceding assessment year. Though he noted that the jurisdictional High Court has decided the issue in favour of the assessee for A.Y. 2003-04, the AO observing that department has preferred SLP in case of Star India Pvt. Ltd. which was followed by the Jurisdictional High Court while deciding the issue in assessee’s favour, worked out proportionate disallowance out of the assessee’s expenditure at Rs 2,75,75,739/-. Being aggrieved of such disallowance the assessee preferred appeal before the CIT(A). The first appellate authority taking note of the fact that Hon’ble Jurisdictional High Court has decided the issue in favour of the assessee deleted the addition.

We have considered the submissions of the parties and perused the orders of the revenue authorities. At the outset, the learned representatives of both the parties agreed that the issue in dispute has been decided in favour of the assessee by Hon’ble Jurisdictional High Court in assessee’s own case for A.Y. 2003-04.

In the result, the assessee’s appeal is partly allowed and the revenue’s appeal is dismissed.