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ACIT, Circle 9(1), Room No.163, CR Building, New Delhi. Vs. Sparrow Hawk India Pvt. Ltd., Formerly known as Hallmark India Pvt. Ltd., 602, Antriksh Bhawan, New Delhi.
January, 12th 2016

                       ITA No.4301/Del/2009
                      Assessment Year : 2006-07

ACIT,                        Vs.   Sparrow Hawk India Pvt. Ltd.,
Circle 9(1), Room No.163,          Formerly known as Hallmark India
CR Building,                       Pvt. Ltd.,
New Delhi.                         602, Antriksh Bhawan,
                                   New Delhi.
                                   PAN : AAACH6943E

  (Appellant)                                 (Respondent)

             Assessee By      :    Shri Sunil Mohan Buckshee, Advocate
             Department By    :    Ms Anima Bernwal, Sr. DR

           Date of Hearing           :   11.01.2016
           Date of Pronouncement     :   11.01.2016

     This appeal filed by the Revenue is directed against the order

passed by the CIT(A) on 3.7.2009 in relation to the assessment year

                                                          ITA No.4301/Del/2009

2.   The only issue raised in this appeal is against the allowing of

deduction of expenses amounting to Rs.1,45,45,673/-, which was

disallowed by the AO on the ground that the assessee had not carried out

any business activity during the year.

3.   Succinctly, the facts of the case are that the assessee company is

engaged in the business of distributing the Hallmark Channel in India.

On being called upon to explain as to why the expenses claimed by it be

not disallowed as no business activity was conducted, the assessee

submitted that it was set up in 1999 and entered into an Agreement with

M/s Modi Entertainment Ltd., for taking their services in the distribution

of Hallmark Channel in India. This Agreement was stated to have

expired in December, 2004, after which, it started negotiating with other

agencies for distribution of the Channel. The assessee further submitted

that the process of negotiations reached a crucial stage when the

assessee's parent company was acquired by a new set of entrepreneurs in

April, 2005 and the new owners took some time to settle in and process

the negotiation with different agencies in India when the business

                                                          ITA No.4301/Del/2009

activity was started. Not satisfied with the assessee's contention, the AO

came to hold that in the absence of any business carried on by the

assessee, such expenses amounting to Rs.1,45,45,673/- were not

allowable. The ld. CIT(A) overturned the assessment order on this issue

and allowed deduction for expenses by observing that the business of the

company was in continuation though at a lower level. The Revenue is

aggrieved against the allowing of deduction of such expenses.

4.   After considering the rival submissions and perusing the relevant

material on record, it is observed that the assessee company during the

year earned subscription fees of Rs.18,900/-, apart from earning rental

income and interest on bank deposits. It is apparent that the Hallmark

Channel was running as the assessee announced advertisements for

telecast of movies for 20.11.2005 for the month of March, 2006 for

which the assessee paid subscription to Cable TVs for the period

1.12.2005 to 28.2.2006 and from 1.3.2006 to 31.3.2006. The assessee

also paid decoder rent to Cable TV for the period 1.3.2006 to 31.3.2006.

The above narration of facts amply demonstrates that the assessee was

                                                               ITA No.4301/Del/2009

engaged in business during the previous year relevant to assessment year

under consideration and also earned subscription fees, even though it

was at a lower level. The view point of the AO that no deduction of

expenses could be allowed because no business activity was carried on,

in our considered opinion, has been rightly rejected in the first appeal.

We, therefore, uphold the view taken by the ld. CIT(A) in allowing

deduction of such expenses.

5.        In the result, the appeal of the Revenue is dismissed.

          The order pronounced in the open court on 11.01.2016.

               Sd/-                                           Sd/-

        [C.M. GARG]                                  [R.S. SYAL]
     JUDICIAL MEMBER                             ACCOUNTANT MEMBER
Dated, 11th January, 2016.
Copy forwarded to:
     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT
                                                    AR, ITAT, NEW DELHI.
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