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
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : G : NEW DELHI
BEFORE SHRI R.S. SYAL, AM & SHRI C.M. GARG, JM
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,
PAN : AAACH6943E
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
PER R.S. SYAL, AM:
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
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
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
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.
[C.M. GARG] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 11th January, 2016.
Copy forwarded to:
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.