DCIT CEN CIR 2(3), MUMBAI v. KOCHI CRICKET P.LTD, MUMBAI

ITA 1433/MUM/2017 | 2011-2012
Pronouncement Date: 16-11-2017 | Result: Dismissed

Appeal Details

RSA Number 143319914 RSA 2017
Assessee PAN AAECK1049E
Bench Mumbai
Appeal Number ITA 1433/MUM/2017
Duration Of Justice 8 month(s) 16 day(s)
Appellant DCIT CEN CIR 2(3), MUMBAI
Respondent KOCHI CRICKET P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 16-11-2017
Date Of Final Hearing 24-07-2017
Next Hearing Date 24-07-2017
First Hearing Date 24-07-2017
Assessment Year 2011-2012
Appeal Filed On 01-03-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH MUMBAI BEFORE SHRI R.C.SHARMA AM ITA NO. 1433 / MUM/20 17 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CENTRAL CIRCLE - 2(3) MUMBAI - 400 020 VS. M/S. KOCHI CRICKET PVT. LTD. 504 5 TH FLOOR CHURCHGATE CHAMBER 57 NEW MARINE LINES MUMBAI 400 020 PAN/GIR NO. AAECK1049E APPELLANT ) .. RESPONDENT ) REVENUE BY MS. N. HEMALATHA ASSESSEE BY SHRI M. SUBRAMANIAN DATE OF HEARING 23 / 10 /201 7 DATE OF PRONOUNCEME NT 16 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 52 MUMBAI DATED 01/12/2016 FOR A.Y. 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 7. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE FOLLOWED THE ACCOUNTING SYSTEM WHEREIN ALL THE SIGNIFICANT ITEMS OF INCOME AND EXPENDITURE ARE RECOGNIZED TO A PARTICUL AR IPL TOURNAMENT AND THEREFORE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENSES OF RS. 48 17 840/ - WITHOUT APPRECIATING THAT THERE WAS NO CORRESPONDING REVENUE FROM IPL TOURNAMENT DURING THE YEAR.' 2. THE APPELLANT CRAVES TO ADD TO AMEND AND/ OR ALTER ANY GROUNDS OF APPEAL IF NEED TO BE. ITA NO. 1433/MUM/2017 M/S. KANCHI CRICKET PVT. LTD. 2 3. THE APPELLANT THEREFORE PRAYS THAT ON THE GROUNDS S TATED ABOVE THE ORDER OF THE CI T(A) - 52 MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND R ECORD PERUSED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROMOTION OF SPORTS AND COMMERCIALLY EXPLOITING IT AND IS A FRANCHISE OF INDIAN PREMIER LEAGUE (IPL) OF BCCI. THE COMPANY E - F I LED I TS RETURN OF INCOME ON 30/09/2011 DECLARING TOTAL INCOME OF RS. NIL. ASSESSEE HAS SHOWN CURRENT YEAR LOSSES OF RS.63 00 436/ - . THIS CASE WAS SELECTED FOR SCRUTINY AND A NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE. WHILE COMPLETING THE ASSESSMENT THE AO D ISALLOWED A SUM OF RS 63 00 436/ - BEING EXPENSES DEBITED TO THE P & L ACCOUNT THAT THESE EXPENSES WERE IN NATURE OF PREPAID EXPENSES CONSIDERING THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE AND THEREFORE THE SAME COULD NOT BE CLAIMED. THE ASSESSMENT WAS THUS COMPLETED AT NIL INCOME VIDE ORDER DATED 30.03.2014 . 5. BY THE IMPUGNED ORDER CIT(A) DELETED THE DISALLOWANCE SO MADE BY THE AO AFTER OBSERVING AS UNDER: - 6. I HAVE CONSIDERED THE FACTS OF THE CASE SUBMISSIONS AND CONTENTIONS OF THE ASSESSE E AS ALSO THE ORDER OF THE AO. THE ASSESSEE COMPANY IS ENGAGED IN PROMOTION OF SPORTS AND IS A FRANCHISEE OF INDIAN PREMIER LEAGUE (IPL) FLOATED BY THE BCCI (BOARD OF CONTROL OF CRICKET IN INDIA). ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND A LL THE EXPENSES DIRECTLY RELATING TO THE IPL TOURNAMENTS ARE DEBITED IN THE FINANCIAL YEAR IN WHICH SUCH TOURNAMENTS ARE HELD AND RELEVANT REVENUES ACCRUE TO IT. THIS IS DONE WITH A VIEW TO MATCH INCOME WITH EXPENSES ON THE BA S IS OF MATCHING CONCEPT . FROM THE BALANCE SHEET AND SCHEDULES THERETO THE ASSESSEE HAS INCURRED THE FOLLOWING EXPENSES AS DIRECT AND INDIRECT EXPENSES DURING THE YEAR: ITA NO. 1433/MUM/2017 M/S. KANCHI CRICKET PVT. LTD. 3 SCHEDULE 'J' - DIRECT EXPENSES CRICKETING EXPENSES 14 714 DAILY ALLOWANCE FOR PLAYERS & SUPPORT STAFF 605 117 FRANCHISEE EXPENSE 267 216 MERCHANTISING EXPENSE 911 430 SALARY 908 898 STAFF WELFARE EXP 28 909 TOTAL 2 736 264 SCHEDULE 'K' - OTHER / INDIRECT EXPENSES PARTICULARS YEAR ENDED 31 ST MARCH 2011 RS. PAYMENT TO AUDITORS - 30 000 10 000 4 120 - STATUTORY AUDIT FEES - INTERNAL AUDIT FEES - TAX AUDIT FEES - INCOME TAX MATTERS SERVICE TAX ON ABOVE BANK CHARGES 19 932 BANK INTEREST 42 777 CONVEYANCE 61 456 COURIER & CARGO CHARGES 6 057 ELECTRICITY EXPENSES 811 INSURANC E 500 000 ITA NO. 1433/MUM/2017 M/S. KANCHI CRICKET PVT. LTD. 4 INTERNET 13 509 IT SERVICES 111 403 OFFICE RENT 407 727 PRINTING & STATIONERY 84 389 RATES & TAXES 482 121 SALES PROMOTION EXP ENSES 304 000 SUNDRY EXPENSES 350 040 TELEPHONE FAX AND COURIER 41 319 WEB SITE DEVELOPMENT EXPENSES 439 100 OTHER EXPENSES 105 858 TOTAL 3 014 637 7. FROM THE PERUSAL OF THE ABOVE EXPENSES IT APPEARS THAT ALL INDIRECT EXPENSES ARE IN NATURE OF ADMINISTRATIVE EXPENSES ARE WERE NECESSARY TO MAINTAIN THE EXISTENCE OF THE COMPANY EXCEPT TH E AMOUNT OF RS 3 04 000/ - WHICH IS IN THE NATURE OF SALES PROMOTION EXPENSES AND IS DIRECTLY RELATING TO IPL TOURNAMENTS AND ITS PROMOTIONS. THEREFORE IN MY OPINION OUT OF THIS TOTAL AMOUNT OF RS 30 14 637/ - AS INDIRECT TAXES ONLY AN AMOUNT OF RS 3 04 0 00/ - CAN BE DISALLOWED CONSIDERING PECULIAR METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE . HOWEVER THE SAME MAY BE CLAIMED BY THE ASSESSEE IN THE IMMEDIATELY SUCCEEDING YEAR WHEN REVENUE FROM IPL TOURNAMENTS HAVE BEEN REALIZED. AS REGARDS THE DIRECT EX PENSES OF RS 27 36 264/ - DEBITED DURING THE CURRENT YEAR A SUM OF RS 9 11 430/ - RELATES TO MERCHANDISING EXPENSES AND RS 2 67 216/ - ARE RELATING TO FRANCHISEE EXPENSES BOTH THESE EXPENSES ARE DIRECTLY RELATABLE TO IPL TOURNAMENT AND THEREFORE CONSIDERIN G THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE CO ULD NOT BE CLAIMED DURING THE CURRENT YEAR. THE ASSESSEE IS HOWEVER FREE TO CLAIM SUCH EXPENSES IN THE IMMEDIATELY SUCCEEDING YEAR WHEN REVENUE FR OM IPL TOURNAMENTS ACCRUE TO IT. 8. IN VIEW OF THE A BOVE DISCUSSION OUT OF THE TOTAL AMOUNT OF RS 63 00 436 / - DISALLOWED BY THE AO THE SUM OF RS 3 04 000/ - (SALES ITA NO. 1433/MUM/2017 M/S. KANCHI CRICKET PVT. LTD. 5 PROMOTION EXPENSES) + 9 11 430/ - (MERCHANDISING EXPENSES) + 2 67 216/ - (FRANCHISEE EXPENSES) TOTALING TO RS 14 82 646/ - IS UPHELD AND REMAINING EXPENSES OF RS 48 17 ; 840/ - IS DIRECTED TO BE ALLOWED. 6. I HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 7. FROM THE RECORD I FOUND THAT WHILE ALLOWING THE EXPENDITURE THE CIT(A) HAS RECORDED A CATEGORICAL FIND ING TO THE EFFECT THAT THESE EXPENSES ARE IN THE NATURE OF ADMINISTRATIVE EXPENSES WHICH ARE NECESSARY TO MAINTAIN THE EXPENSES OF THE COMPANY EXCEPT AMOUNT OF RS.3 04 000/ - WHICH PERTAINED TO SALES PROMOTION EXPENSES AND IS DIRECTLY RELATING TO THE IPL TO URNAMENTS AND ITS PROMOTION. ACCORDINGLY HE RESTRICTED THE DISALLOWANCE T O RS.3 04 000/ - . A S REGARDS DIRECT EXPENSES OF RS.27 36 264/ - THE CIT(A) FOUND THAT A SUM OF RS.9 11 430/ - RELATES TO MERCHANDISING EXPENSES AND RS.2 67 216/ - ARE RELATING TO FRAN CHISEE EXPENSES BOTH THESE EXPENSES ARE DIRECTLY RELATABLE TO IPL TOURNAMENT AND THEREFORE CONSIDERING THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE COULD NOT BE CLAIMED THROUGH THE CURRENT YEAR. ASSESSEE WAS GIVEN OPPORTUNITY TO CLAIM SUCH EXPENSES IN THE SUCCEEDING YEAR WHEN REVENUE FROM IPL TOURNAMENTS ACCRUES TO IT. AFTER RECORDING DETAILED FINDING AT PARA 6 AND 7 THE CIT(A) CONCLUDED THAT OUT OF TOTAL AMOUNT OF RS.63 00 436/ - ONLY A SUM OF RS3 04 000/ - ON ACCOUNT OF SALES PROMOTION EXPE NSES AND RS.9 11 430/ - ON MERCHANDISING EXPENSES AND RS.2 67 216/ - FRANCHISEE EXPENSES TOTALING TO RS.14 82 646/ - IS REQUIRED TO BE UPHELD AND REMAINING EXPENSES OF RS.48 17 840/ - WAS DIRECTED TO ITA NO. 1433/MUM/2017 M/S. KANCHI CRICKET PVT. LTD. 6 BE ALLOWED. THE FINDING SO RECORDED BY CIT(A) IS AS PER MATE RIAL ON RECORD AND DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 16 / 11 /2017 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 11 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER ( ASSTT. REGISTRAR) ITAT MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) MUMBAI. 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY//