Music Broadcast P.Ltd, Mumbai vs Department Of Income Tax

ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा के सम ।

BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM

आयकर अपील सं./I.T.A. No. 6763/Mum/2012 ( नधा रण वष / Assessment Year: 2009-10)

Dy. CIT-10(1), Music Broadcast Pvt. Ltd.

455, Aayakar Bhavan, 5th Floor, RNA Corporate Park, बनाम/ 4th Floor, M. K. Marg, Opp. Western Express Highway, Mumbai-400 020 Vs. Kalanagar, Bandra (E), Mumbai-400 051

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AACCM 4036 H (अपीलाथ" /Appellant) : (#$यथ" / Respondent)

अपीलाथ" क% ओर से / Appellant by : Shri Love Kumar

#$यथ" क% ओर से/Respondent by : Shri Paras S. Savla and Shri Hemant Wani

सनु वाई क% तार+ख / : 04.02.2015 Date of Hearing घोषणा क% तार+ख / : 10.02.2015 Date of Pronouncement आदे श / O R D E R Per Sanjay Arora, A. M.:

This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-21, Mumbai ('CIT(A)' for short) dated 19.07.2012, allowing the Assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2009-10 vide order dated 20.12.2011.

2 ITA No. 6763/Mum/2012 (A.Y. 2009-10) Dy. CIT vs. Music Broadcast Pvt. Ltd.

2. The appeal raises, in effect, three grounds, which we shall take up in seriatim. Grounds # 1 & 2 of the Revenue's appeal relate to the assessee's claim in respect of software license fee, paid in the sum of Rs.1,58,85,227/-. The Assessing Officer (A.O.) treated the same as capital expenditure, so that it was eligible for claim of depreciation, which was allowed at 25%, disallowing the balance Rs.39,71,307/-. In appeal, the assessee claiming the amount to be paid by way of recurring license fee, so that it was revenue in nature, stood allowed its' claim to the extent of Rs.50.21 lacs paid to four parties. Another amount of Rs.107.24 lacs, paid by way of annual maintenance charges for radio software, was also allowed by the first appellate authority as revenue expenditure u/s.37(1) of the Act, following his decision in the assessee's case for an earlier year, i.e., A.Y. 2006-07. Aggrieved, the Revenue is in appeal, disputing the entire allowance, vide its' grounds 1 and 2.

3. We have heard the parties, and perused the material on record.

We have perused the order by the Tribunal, to which the matter was carried in appeal by the Revenue, for A.Y. 2006-07 (in ITA No. 6842/Mum/2012 dated 30.05.2014), placed on record by both the parties. The tribunal found that even though considered by the first appellate authority, the assessing authority had not been allowed any opportunity to objectively examine the material being relied upon by the assessee towards its' claim of the impugned expenditure as being a regular license fee, paid on annual basis, with no enduring benefit, so that it is only a recurring expenditure, and that therefore the decision by the Special Bench of the tribunal in Amway India Enterprises vs. Dy. CIT [2008] 111 ITD 112 (Del) (SB) would not apply. For the current year, again, we find that the ld. CIT(A) has only followed his earlier order for A.Y. 2006-07. Further, from the sample copies of the invoices on record (PB pgs.17-18), we observe that the license fee paid is for a period of one year, which though does not match with the financial year, so that only the amount relatable to the previous year would warrant being claimed for the current year. Even as it was stated to be actually so by the ld. Authorized Representative (AR) before us, so that the amount relatable to the next fiscal had been 3 ITA No. 6763/Mum/2012 (A.Y. 2009-10) Dy. CIT vs. Music Broadcast Pvt. Ltd.

claimed only in the following year, there is no material on record to substantiate the same. Two, the findings by the ld. CIT(A) are in respect of an aggregate sum of Rs.157.46 lacs, while the disallowance made is for Rs.158.85 lacs. The nature of the balance expenditure of Rs.1.39 lacs, therefore, remained to be determined by him. These aspects, i.e., besides the aspect afore-mentioned, would also merit being examined by the A.O., to whom we remit the matter with same directions as by the tribunal in the assessee's case for A.Y. 2006-07.

Before parting, however, we may clarify, for which the A.O. is free to verify the license or other relevant agreements, that if the nature of the expenditure is annual maintenance charge or annual license fee, etc., with no enduring benefit/component, there is no question of the same being not revenue in nature or being capital in nature. The A.O. shall, in either case, i.e., where not in agreement with the assessee's claims, issue definite findings of fact per a speaking order. The assessee shall at his end extend full co- operation, with a view to prove its claims. We decide accordingly. The Revenue's grounds # 1 and 2 are decided accordingly.

4. The last and the third ground of the Revenue's appeal relates to the acceptance of the assessee's claim of the interest income of Rs.224.12 lacs being assessed as business income, i.e., as against 'income from other sources' by the A.O. The findings by the ld. CIT(A), being disputed by the Revenue, are as under:

'3.3 I have considered the facts of the case. This issue was also there in appellant's case in A.Y. 2007-08 wherein the undersigned held that the interest income earned on FDs made with the bank as margin money for obtaining bank guarantee, etc. was assessable under the head business income. Following the appeal order of A.Y. 2007-08, the A.O. is directed to assess the interest income under the head business income. Incidentally this issue is academic in nature since there is no tax implication whether the interest income is assessed under the head income from other sources or under the head business income. This ground of appeal is also allowed.'

5. The ld. Departmental Representative (DR) before us could not contest or rebut the said findings by the first appellate authority in any manner. If it is not disputed that the 4 ITA No. 6763/Mum/2012 (A.Y. 2009-10) Dy. CIT vs. Music Broadcast Pvt. Ltd.

interest is on FDRs, placed by way of margin money, i.e., to obtain guarantees, required for opening letters of credit in favour of its' suppliers, or otherwise in the regular course of its' business, by the assessee from its bankers, as is in fact the case, we find no infirmity in the finding of the said interest as imbued with the character of business income, and for which the assessee has placed reliance on the decision in the case of CIT vs. Govinda Choudhury & Sons [1993] 203 ITR 881 (SC). We, under the circumstances, decline to interfere, dismissing the Revenue's relevant ground. We decide accordingly.

6. In the result, the Revenue's appeal is partly allowed for statistical purposes.

प1रणामतः राज व क% अपील सां3यक%य उ4े5य के 6लए आं6शक वीकृत क% जाती है ।

Order pronounced in the open court on February 10, 2015

Sd/- Sd/-

(D. Manmohan) (Sanjay Arora) उपा य / Vice President लेखा सद य / Accountant Member मुंबई Mumbai; ;दनांक Dated : 10.02.2015 व.<न.स./Roshani, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ" / The Appellant

2. #$यथ" / The Respondent

3. आयकर आय= ु त(अपील) / The CIT(A)

4. आयकर आय= ु त / CIT - concerned

5. @वभागीय #<त<नCध, आयकर अपील+य अCधकरण, मंब ु ई / DR, ITAT, Mumbai

6. गाडE फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai