ACIT, New Delhi v. M/s Discovery Communication India, New Delhi

ITA 5958/DEL/2010 | 2003-2004
Pronouncement Date: 03-03-2011 | Result: Dismissed

Appeal Details

RSA Number 595820114 RSA 2010
Assessee PAN AAACD4746K
Bench Delhi
Appeal Number ITA 5958/DEL/2010
Duration Of Justice 2 month(s) 5 day(s)
Appellant ACIT, New Delhi
Respondent M/s Discovery Communication India, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 03-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 03-03-2011
Date Of Final Hearing 03-03-2011
Next Hearing Date 03-03-2011
Assessment Year 2003-2004
Appeal Filed On 28-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH B NEW DELHI BENCH B NEW DELHI BENCH B NEW DELHI BENCH B BEFORE SHRI A D JAIN JUDICIAL MEMBER AND SHRI K. D. RANJAN ACCOUTANT MEMBER ITA NO. 5958 /DEL/2010 (ASSESSMENT YEAR 2003-04) ACIT CIRCLE 10(1) VS. M/S. DISCOVERY COMMUNICATIO N INDIA NEW DELHI 9/1B QUTAB INSTITUTIONAL AREA ARUNA ASIF ALI MARG NEW DELHI-110 067 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACD4746K APPELLANT BY: MS. SURJAN MOHANTY SR. DR RESPONDENT BY: SHRI KAPIL GOEL CA ORDER ORDER ORDER ORDER PER K. D. RANJAN PER K. D. RANJAN PER K. D. RANJAN PER K. D. RANJAN AM: AM: AM: AM: 1. THIS APPEAL OF THE REVENUE FOR THE ASSESSMENT YE AR 2003-04 ARISES OUT OF THE ORDER OF LD. CIT(A) XXIII NEW DE LHI. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDE R: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER OF THE CIT(A) IS WRONG PERVERSE ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASI DE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON A/C OF ADVERTISEMENT EXPENSES. 3) ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON A/C OF EXCHANGE LOSSES. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD .CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON ACCOUNT OF PROVISION FOR GRATUITY. 2. THE 1 ST ISSUE FOR CONSIDERATION RELATES TO DELETION OF ADD ITION ON ACCOUNT OF ADVERTISEMENT EXPENSES. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DIS TRIBUTION MARKETING AND PRODUCTION OF HIGH QUALITY EDUCATIONA L AND ENTERTAINMENT PROGRAMMES FOR DISCOVERY CHANNEL & AN IMAL PLANET I.T.A. NO. 5958/DEL/2010 2/2 CHANNEL. THE ASSESSEE HAD SHOWN INCOME ON ADVERTIS EMENT SALES COMMISSION AT ` 2.78 CRORES. THE ASSESSEE HAD CLAI MED ADVERTISING EXPENSES OF ` 2 37 57 000/- ON ITS OWN ACCOUNT. IN THE ASSESSMENT YEAR 2002-03 SUCH ADVERTISEMENT EXPENSES WERE DISAL LOWED BY A.O. BY OBSERVING THAT THE EXPENDITURE WAS INCURRED FOR GENERATING THE SAID INCOME BY WAY OF ADVERTISEMENT SALES COMMISSIO N 85% OF WHICH WAS TRANSFERRED TO DISCOVERY ASIA INC. U.S.A. (DAI) AND M/S. ANIMAL PLANET ASIA LLC USA WITH WHOM THE ASSESSEE H AD ENTERED INTO ADVERTISEMENT SALES REPRESENTATIVE AGREEMENT. THE ASSESSEE WAS ASKED TO SHOW AS TO WHY SIMILAR DISALLOWANCE SH OULD NOT BE MADE. THE ASSESSEE IN RESPONSE THERETO SUBMITTED T HAT IN ORDER TO EARN SUBSCRIPTION REVENUE THE ASSESSEE WAS UNDER T HE CONTRACTUAL OBLIGATION UNDER THE LICENSE AGREEMENT TO PUBLICIZE AND INCREASE THE REACH OF THE CHANNEL. THEREFORE FOR EARNING S UBSCRIPTION REVENUE EXPENDITURE ON ADVERTISING WAS TO BE INCURR ED. THE ASSESSEE HAD EARNED SUBSCRIPTION REVENUE AT ` 37.49 LACS @ 15% ON ` 2.78 CRORES. THEREFORE THE ADVERTISING EXPENSES OF ` 2.37 CRORE WAS INCURRED AGAINST THE ADVERTISING REVENUE OF ` 2 .78 CRORES. HOWEVER THE A.O. REJECTED THE CONTENTION OF THE AS SESSEE AND COMPUTED THE EXPENSES ALLOCABLE TO 85% OF INCOME OF ADVERTISING SALES COMMISSION AT ` 67.15LACS AND DISALLOWED THE SAME. 3. ON APPEAL IT WAS SUBMITTED THAT LD. CIT(A) IN T HE ASSESSMENT YEAR 2002-03 HAS ALLOWED THE APPEAL OF THE ASSESSEE AND SUBSEQUENT APPEAL BEFORE THE TRIBUNAL BY THE REVENU E HAS BEEN DISMISSED. HENCE THE A.O. WAS NOT JUSTIFIED IN DIS ALLOWING ADVERTISEMENT EXPENSES. IN VIEW OF THESE FACTS TH E LD. CIT(A) ALLOWED THE RELIEF. 4. BEFORE US LD. A.R. SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF ITAT AND LD. CIT(A) HAS ALLOWED THE REL IEF FOLLOWING THE DECISION OF ITAT. ON THE OTHER HAND LD. SR. DR SU PPORTED THE ORDER OF THE A.O. I.T.A. NO. 5958/DEL/2010 3/3 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ITAT DE LHI BENCH B IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 02-03 IN I.T.A. NO. 850/DEL/2008 DATED 25.09.2009 HAD CONFIRMED THE DELETION OF ADDITION BY LD. CIT(A). ITAT WHILE CONFIRMING THE ORDER OF LD. CIT(A) HAS OBSERVED AS UNDER: 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ADVERT ISEMENT EXPENSES INCURRED BY THE ASSESSEE HAVE NOT BEEN INC URRED SOLELY FOR THE PURPOSE OF EARNING COMMISSION FROM ADVERTISEMENT REVENUE EARNED ON BEHALF OF DISCOVERY ASIA INC. THE ASSESSEE WAS ALSO EARNING INCOME THROUGH SUBSCRIPTION FEE RECEIVED FROM CABLE OPERATORS WHIC H AS TO BE RETAINED BY THE ASSESSEE IN ITS ENTIRELY AND WHI CH IS ALSO A SUBSTANTIAL AMOUNT OF INCOME. THE ASSESSEE AS RE QUIRED TO PROMOTE THE CHANNEL WITH WHOM THE ASSESSEE HAS ENTERED INTO AN AGREEMENT. IT WAS IN THE BUSINESS INTEREST OF THE ASSESSEE TO PROMOTE THESE CHANNELS IN INDIA TO EARN HIGHER INCOME FROM SUBSCRIPTION RECEIVED THROUGH CA BLE OPERATORS AND MAKING EXPENDITURE ON ADVERTISEMENT T O PROMOTE THOSE CHANNELS IT CAN BE SAID THAT HT EXPENDITURES WERE INCURRED BY THE ASSESSEE WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. LD. CIT( A) HAS CLEARLY BROUGHT OUT THAT IT WAS THE OBLIGATION OF T HE ASSESSEE TO PROMOTE THESE CHANNELS. THUS THE DISALLOWANCE WAS MADE BY THE A.O. WITHOUT APPRECIAT ING THE FACTUAL POSITION. IT IS NOT THE CASE OF THE A. O. THAT THE ADVERTISEMENT EXPENDITURE INCURRED BY THE ASSESSEE WERE EITHER NOT GENUINE OR UNSUPPORTED BY VOUCHERS. IN VIEW OF THE FINDINGS OF LD. CIT(A) WHICH HAVE NOT BEEN CONTROVERTED WE SEE NO JUSTIFICATION TO INTERFERE IN THE SAME. THIS GROUND OF APPEAL FILED BY THE REVENUE I S DISMISSED. 6. SINCE THE ISSUE IS COVERED BY THE DECISION OF IT AT IN THE ASSESSEES OWN CASE AND THE REVENUE HAS NOT BROUGHT ON RECORD ANY CONTRARY EVIDENCE THAT THE FACTS ARE NOT SIMILA R TO THAT OF ASSESSMENT YEAR 2002-03. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD .CIT(A) DELETING THE ADDITION FOLLO WINGS THE DECISION OF ITAT IN THE ASSESSEES OWN CASE. I.T.A. NO. 5958/DEL/2010 4/4 7. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TION OF ADDITION ON ACCOUNT OF EXCHANGE LOSSES. IN THE YEAR UNDER C ONSIDERATION THE A.O. DISALLOWED A SUM OF ` 56 090/- ON ACCOUNT OF F OREIGN EXCHANGE LOSS ON THE GROUND THAT NO DETAILS WERE FURNISHED B Y THE ASSESSEE. ON APPEAL IT WAS SUBMITTED THAT IN ASSESSMENT YEAR 2002-03 LD. CIT(A) ON IDENTICAL FACTS HAD DELETED THE ADDITION WHICH HAS BEEN CONFIRMED BY THE ITAT IN ITS ORDER DATED 25.09.2009 . LD. CIT(A) FURTHER NOTED THAT FOREIGN EXCHANGE LOSS WAS PRIMAR ILY ON ACCOUNT OF SURRENDER OF UNUTILIZED FOREIGN CURRENCY TAKEN FOR FOREIGN TRAVEL BY THE EMPLOYEES OF THE ASSESSEE THE DETAILS THEREOF W ERE FURNISHED IN THE ASSESSMENT PROCEEDINGS. THEREFORE THE FOREIGN EXCHANGE LOSS AROSE OUT OF FOREIGN TRAVEL EXPENSES AND WAS ALLOWA BLE AS DEDUCTION. LD. CIT(A) RELYING ON THE DECISION OF I TAT DELETED THE ADDITION. 8. BEFORE US LD. A.R. SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT DELH I BENCH B FOR THE ASSESSMENT YEAR 2002-03. ON THE OTHER HAND LD . SR. DR SUPPORTED THE ORDER OF THE A.O. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDER OF ITAT. ITAT IN THE ASSESSMENT YEAR 2002-03 DELETED THE AD DITION BY OBSERVING AS UNDER: 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS BEEN PROVIDING THE FOREIGN CURRENCY TO ITS EMPLOYEES WHICH AT THE END OF BUSINESS TRIP WAS SURRENDERED AND ON THAT ACCOUNT LOSS HAS BEEN INCUR RED BY THE ASSESSEE. THE LOSS IS ON REVENUE ACCOUNT AND H AS ACTUALLY BEEN INCURRED. THEREFORE LD. CIT(A) WAS RIGHT IN DELETING THE SAME WE DECLINE TO INTERFERE. THIS G ROUND OF THE REVENUE IS ALSO DISMISSED. 10. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECI SION OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 AND SINCE THE LD. CIT(A) HAS DELETED THE ADDITION FOLLOWING THE D ECISION OF ITAT I.T.A. NO. 5958/DEL/2010 5/5 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CI T(A) IN DELETING THE ADDITION. 11. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION ON ACCOUNT OF PROVISION FOR GRATUITY. THE A.O. WHILE COMPUTING INCOME U/S 115JB ADDED THE AMOUNT OF ` 3 17 087/- ON ACCOUNT OF THE PROVISION FOR GRATUITY ON THE GROUND THAT THE AMOUNTS SET ASIDE TOWARDS PROVISIONS MADE FOR MEETING THE L IABILITY OTHER THAN ASCERTAINED LIABILITY WAS TO BE ADDED WHILE DE TERMINING THE BOOK PROFIT OF THE ASSESSEE FOR THE PURPOSE OF SECT ION 115JB OF THE ACT. 12. ON APPEAL IT WAS SUBMITTED THAT THE PROVISIONS FOR GRATUITY REPRESENTS AN AMOUNT SET ASIDE FOR AN ASCERTAINED L IABILITY ON THE BASIS OF ACTUARIAL VALUATION CERTIFICATE OF 31.03.2 003. LD. CIT(A) RELYING ON THE DECISION OF HON'BLE HIGH COURT OF BO MBAY IN THE CASE OF ECHJAY FORGINGS PVT. LTD. 251 ITR 15 OBSERVED TH AT THE PROVISION FOR GRATUITY MADE ON THE BASIS OF ACTUAL CALCULATIO N IS ASCERTAINED LIABILITY AND THE SAID AMOUNT COULD NOT BE ADDED WH ILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 13. BEFORE US LD. SR. DR SUPPORTED THE ORDER OF TH E A.O. WHEREAS LD. A.R. SUBMITTED THAT THE PROVISION FOR GRATUITY WAS DETERMINED ON THE BASIS OF ACTUARIAL CERTIFICATE. THEREFORE THE PROVISION MADE ON THE BASIS OF ACTUARIAL CERTIFICATE ISSUED BY ACTUAR Y CANNOT BE TREATED AS PROVISION FOR UNASCERTAINED LIABILITY. 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. HON'BLE SUPREME COU RT IN THE CASE OF BHARAT EARTHMOVERS VS CIT 245 ITR 428 HAS OBSERVED THAT IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACC OUNTING YEAR THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT S HOULD BE CERTAIN I.T.A. NO. 5958/DEL/2010 6/6 IS THE INCURRING OF THE LIABILITY. IT SHOULD ALS O BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTU AL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SAT ISFIED THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRA ESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE A NY DIFFERENCE IF THE FUTURE DATE ON WHICH LIABILITY SHOULD HAVE TO B E DISCHARGED IS NOT CERTAIN. IN THE CASE BEFORE US THE PROVISION HAS BEEN MADE ON THE BASIS OF ACTUARIAL CERTIFICATE. THEREFORE THE PR OVISIONS MADE CANNOT BE TREATED FOR AN UNASCERTAINED LIABILITY. THEREFORE THE PROVISIONS MADE ON ACCOUNTS OF ASCERTAINED LIABILIT Y CANNOT BE ADDED UNDER CLAUSE (C) OF EXPLANATION (1) OF SECTIO N 115JB(2) OF THE ACT. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) DELETING THE ADDITION RELYING ON THE DEC ISION OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF ECHJAY FORGINGS PVT. LTD. (SUPRA). 15. IN THE RESULT APPEAL FILED BY THE REVENUE IS D ISMISSED. 16. ORDER PRONOUNCED IN THE OPEN COURT ON CLOSE OF HEARING ON 03 RD MARCH 2011. SD./- SD./- (A. D. JAIN) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:03 RD MAR. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI