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Dy. CIT-10(1), 455, Aayakar Bhavan, 4th Floor, M. K. Marg, Mumbai-400 020 Vs. Music Broadcast Pvt. Ltd. 5th Floor, RNA Corporate Park, Opp. Western Express Highway, Kalanagar, Bandra (E), Mumbai-400 051
February, 12th 2015

               .  ,                          ,                             

                    ./I.T.A. No. 6763/Mum/2012
                    (   / Assessment Year: 2009-10)

Dy. CIT-10(1),                                    Music Broadcast Pvt. Ltd.
455, Aayakar Bhavan,                              5th Floor, RNA Corporate Park,
4th Floor, M. K. Marg,                            Opp. Western Express Highway,
Mumbai-400 020                           Vs.      Kalanagar, Bandra (E),
                                                  Mumbai-400 051
     . /  . /PAN/GIR No. AACCM 4036 H
        ( /Appellant)                       :           (      / Respondent)

       / Appellant by                      :     Shri Love Kumar

          /Respondent by                   :     Shri Paras S. Savla and
                                                 Shri Hemant Wani

                         /                 :     04.02.2015
                   Date of Hearing
                                           :     10.02.2015
           Date of Pronouncement
                                   / 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
                                                   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
                                                    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
                                                    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.
                Order pronounced in the open court on February 10, 2015

            Sd/-                                        Sd/-
       (D. Manmohan)                               (Sanjay Arora)
        / Vice President                            / Accountant Member
 Mumbai;  Dated : 10.02.2015
. ../Roshani, Sr. PS
         /Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent
3.     () / The CIT(A)
4.      / CIT - concerned
5.                 ,     ,   / DR, ITAT, Mumbai
6.     / Guard File
                                                      / BY ORDER,

                                              /  (Dy./Asstt. Registrar)
                                          ,  / ITAT, Mumbai
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