Gemini TV Pvt. Ltd., CHENNAI v. ACIT, CHENNAI

CO 147/CHNY/2013 | 2003-2004
Pronouncement Date: 21-10-2013 | Result: Dismissed

Appeal Details

RSA Number 14721723 RSA 2013
Assessee PAN AADCG3273A
Bench Chennai
Appeal Number CO 147/CHNY/2013
Duration Of Justice 2 month(s) 6 day(s)
Appellant Gemini TV Pvt. Ltd., CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 21-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-10-2013
Date Of Final Hearing 14-10-2013
Next Hearing Date 14-10-2013
Assessment Year 2003-2004
Appeal Filed On 14-08-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE DR. O.K.NARAYANAN VICE-PRESIDENTAND SHRI VIKAS AWASTHY JUDICIAL MEMBER ITA NOS. 1523 & 1524(MDS)/2013 ASSESSMENT YEARS : 2003-04 & 2005-06 AND C.O. NOS. 147 & 148(MDS)/2013 (IN ITA NOS. 1523 & 1524(MDS)/2013) THE ASSISTANT COMMISSIONER OF INCOME TAX MEDIA CIRCLE I CHENNAI - 600 034. V. M/S GEMINI TV PVT LTD. (PRESENTLY A DIVISION OF M/S SUN TV NETWORK LIMITED) MURASOLI MARAN TOWER NO.73 MRC NAGAR MAIN RD. MRC NAGAR CHENNAI - 600 028. PAN : AADCG 3273 A (APPELLANT) ( RESPONDENT & CROSS OBJECTOR) APPELLANT BY : SHRI SHAJI P . JACOB IRS ADDL. CIT RESPONDENT BY : SHRI N. DEVANATH AN ADVOCATE AND SHRI K. RAMAKRISHNAN CA DATE OF HEARING : 14 TH OCTOBER 2013 DATE OF PRONOUNCEMENT : 21 ST OCTOBER 2013 O R D E R PER DR.O.K.NARAYANAN VICE-PRESIDENT THE APPEALS ARE FILED BY THE REVENUE AND CROSS-OB JECTIONS ARE FILED BY THE ASSESSEE. RELEVANT ASSESSMENT YEA RS ARE 2003-04 2 I.T.A. NOS. 1523 & 1524/MDS/13 C.O. NOS. 147 & 148/MDS/13 AND 2005-06. THESE APPEALS ARE DIRECTED AGAINST TH E COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI AT CHENNAI DATED 12.11.2012 AND ARISE OUT OF THE ASSESSMENT OR DERS PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF INCOM E-TAX ACT 1961. 2. THE COMMON GROUND RAISED BY THE REVENUE IN BOTH THE APPEALS IS THAT THE COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT T HE EXPENDITURE INCURRED ON COST OF CABLES AS REVENUE EXPENDITURE AGAINST THE FINDING OF THE ASSESSING OFFICER THAT THE EXPENDITU RE IS CAPITAL IN NATURE. 3. THE ASSESSEE IS A COMPANY RUNNING CABLE CONNECTI ONS. THE ASSESSEE HAS INCURRED HUGE EXPENDITURE IN LAYING CA BLES FOR PROVIDING CABLE CONNECTIONS TO DOMESTIC VIEWERS. T HE ASSESSEE HAS SHOWN THESE EXPENDITURES IN ITS PROFIT & LOSS A CCOUNT FOR BOTH THE YEARS AS REVENUE EXPENDITURE INCURRED FOR THE P URPOSE OF CARRYING ON OF THE BUSINESS. THE ASSESSING OFFICER ON THE OTHER HAND HELD THAT THE ASSESSEE HAD SECURED AN ENDURIN G BENEFIT BY LAYING DOWN THE CABLES AND AS SUCH THE EXPENDITURE INCURRED WAS CAPITAL IN NATURE. HE ACCORDINGLY DISALLOWED THE C ABLE LAYING 3 I.T.A. NOS. 1523 & 1524/MDS/13 C.O. NOS. 147 & 148/MDS/13 EXPENDITURE CLAIMED BY THE ASSESSEE AND TREATED IT AS CAPITAL EXPENDITURE AND SO ALLOWED DEPRECIATION OF 25%. 4. IN FIRST APPEALS THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT THE CABLE LAYING EXPENDITURE WAS REVENUE IN NATURE AND THEREF ORE DEDUCTIBLE WHILE COMPUTING THE INCOME OF THE ASSESSEE. THE RE VENUE IS AGGRIEVED AND THEREFORE THESE APPEALS BEFORE US. 5. WE HEARD SHRI SHAJI P. JACOB LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX APPEARING FOR THE REVEN UE AND SHRI N. DEVANATHAN LEARNED COUNSEL AND SHRI K. RAMAKRIS HNAN LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE. 6. THE CABLES ARE LAID BY THE ASSESSEE UNDERGROUND OF PUBLIC ROADS OR ON THE ELECTRIC POLES. THE CABLES LAID DO WN UNDERGROUND OF PUBLIC ROADS ARE SUSCEPTIBLE TO DIGGING DAMAGE BY OTHER PUBLIC AGENCIES LAYING DOWN CABLES AND PIPES FOR SUPPLY OF WATER TELECOMMUNICATION SERVICE ETC. IN THESE CIRCUMSTA NCES THE ASSESSEE CANNOT RETRIEVE THE CABLES ONCE LAID UNDER THE EARTH. EVEN IF THE CABLES ARE RETRIEVABLE THEY WILL BE OF NO USE. THE PLACES WHERE THE CABLES ARE LAID BY THE ASSESSEE ARE NOT T HE PROPERTIES OF THE ASSESSEE BUT THEY ARE PUBLIC PROPERTIES. ASSE SSEES ARE 4 I.T.A. NOS. 1523 & 1524/MDS/13 C.O. NOS. 147 & 148/MDS/13 PERMITTED TO LAY THE CABLE ON THE BASIS OF LICENSE ISSUED BY THE CONCERNED LOCAL AUTHORITIES. THE ASSESSEES HAVE N O CONTROL OVER THE LAND UTILIZED FOR LAYING THE CABLES OR ON THE E LECTRIC POLES USED FOR TRANSMITTING THE CABLE FROM PLACE TO PLACE. IT IS TO BE SEEN THAT LAYING OF CABLE IS MORE LABOUR ORIENTED AND EVEN IF THE ASSESSEE WANTS TO RETRIEVE THOSE CABLES THE LABOUR COST INV OLVED WOULD BE PROHIBITIVE. IN THE ABOVE CIRCUMSTANCES THE COMMI SSIONER OF INCOME TAX (APPEALS) HAS CONCLUDED AS UNDER:- 8. I HAVE GONE THROUGH THE ARGUMENTS ON BOTH THE SIDES. THE CABLES ARE LAID THROUGH UNDERGROUND FOR DISTRIBUTION OF TELEVISION CONTENT TO THE DOMESTIC SETS OF TELEVISIONS. IT IS ACCEPTABLE THAT ONCE THE CABLES ARE LAID UNDER THE ROADS THE ASSESSEE WOULD NOT BE HAVING ANY CONTROL OR TITLE ON SUCH CABLES. THUS THE CABLES MIGHT GIVE ENDURING BENEFIT BEYOND ONE YEAR BUT THE CABLES CANNOT BE REPOSSESSED REUSED OR RESOLD. THE TEST OF REPOSSESSION OR REUSE OR RESALE IS THE ONE THAT DETERMINES THE CAPITAL NATURE OF GOODS. IN THIS CASE ALL THESE ARE MISSING AND HENCE THE ADDITIONS ARE FOUND TO BE NOT SUSTAINABLE. 7. WE AGREE WITH THE FINDINGS OF THE COMMISSIONER O F INCOME TAX (APPEALS) THAT EVEN THOUGH THE CABLES ARE LAID BY THE ASSESSEE FOR CARRYING ON OF ITS BUSINESS THE CABLES LAID DO WN BY THE ASSESSEE DID NOT SATISFY THE BASIC FEATURES OF A CAPITAL ASS ET. THE QUESTION OF ENDURING BENEFIT IN THE PRESENT CASE IS ONLY RELAT IVE. IT IS RELATED TO SAFEGUARDING AND PROTECTION OF THE CABLE LAID DOWN UNDERGROUND OR 5 I.T.A. NOS. 1523 & 1524/MDS/13 C.O. NOS. 147 & 148/MDS/13 DRAWN OVER THE ELECTRIC POLES. IF ANY EXTERNAL AGE NCY INTERFERES AND THE CABLES ARE DAMAGED THE ASSESSEE HAS NO COURSE OF ACTION. ASSESSEE CAN NEITHER RETRIEVE THE CABLE PROFITABLY NOR CAN IT PROTECT THE CABLES BY ITSELF. IN THESE CIRCUMSTANCES THE COST INVOLVED IN LAYING CABLES IS A SUNK COST EVEN THOUGH THE ASSESS EE MAY GET THE BENEFIT OUT OF THE CABLE FOR A PERIOD OF MORE THAN ONE YEAR. THAT LONGEVITY OF FACILITY ALONE CANNOT MAKE THE CABLE A S A CAPITAL ASSET IN THE HANDS OF THE ASSESSEE. THE ASSESSEE DOES NO T HAVE PHYSICAL POSSESSION OF THE CABLE AND ONCE LAID DOWN IT IS GONE FOR ALL. 8. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E WE HOLD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS R IGHTLY HELD THAT THE CABLE LAYING EXPENDITURE IN THE HANDS OF THE AS SESSEE IS REVENUE IN NATURE. 9. THE APPEALS FILED BY THE REVENUE ARE LIABLE TO B E DISMISSED. 10. NEXT WE WILL CONSIDER THE CROSS-OBJECTIONS FILE D BY THE ASSESSEE. 11. THE COMMON GROUND RAISED IN THE CROSS-OBJECTION S IS THAT THE CIT(APPEALS) HAS ERRED IN UPHOLDING THE REOPENING O F ASSESSMENTS UNDER SECTION 147 OF THE INCOME-TAX ACT 1961. 6 I.T.A. NOS. 1523 & 1524/MDS/13 C.O. NOS. 147 & 148/MDS/13 12. ONCE WE HAVE DECIDED THE ISSUE ON MERIT IN FAVO UR OF ASSESSEE THIS GROUND OF REOPENING OF ASSESSMENT BE COMES ACADEMIC. THEREFORE WE FIND THAT THESE CROSS-OBJE CTIONS ARE ALSO LIABLE TO BE DISMISSED. 13. IN THE RESULT THE APPEALS AS WELL AS CROSS-OBJ ECTIONS ARE DISMISSED. ORDER PRONOUNCED ON MONDAY THE 21 ST OCTOBER 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O .K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 21 ST OCTOBER 2013. KRI. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT-IV CH ENNAI 4. CIT(A)-VI CHENNAI 5. DR 6. GF.